1. THE UNITED STATES: 2

2. 2. evidence of relative economic failure and decline in economic competitiveness n Example – John Agnew, 1987. The United States in the World Economy. Chapter 4.

4. Level 1 n Increased foreign investment by U.S. TNCs n increased competition by foreign- based TNCs n increased dependence on foreign sources of raw materials n drain on U.S. economy of defense spending n priorities of domestic Keynesian policy

5. Level 2 n Decline of U.S. relative labor productivity n loss of technological leadership n increased openness to foreign competition

7. Bluestone and Harrison, 1988. The Great U-Turn.

8. Element 1: U.S.-based corporations went from a period of unparalleled growth to one of unprecedented global competition.

9. Element 2: Significant profit squeeze for American corporations U.S. corporate profitability, 1963-80 (net after tax rate of return)

10. Net pre-tax profit rates in selected industries

11. Element 3: How those corporations responded n Abandoned core businesses n invested offshore n shifted capital to speculative ventures n subcontracted work to low-wage contractors n demanded wage concessions from workers n substituted contingent labor for full-time workers

12. Example of General Electric n Through 1970s a traditional large U.S. mfg. Firm n shift in 1980s to service and high-tech – bought RCA, NBC, investment banking, financial services firms. ($10 B. acquisition spree) n eliminated housewares division & sold off 190 subsidiaries for $6 B. n eliminated >100,000 jobs (>1/4 of 1981 employment) including RCA domestic TV production--> Asia.

13. Dertouzos, 1989. Made in America. n Springboard is trends in productivity

14. International comparisons

15. Manufacturing??? BUT due in part to: DOWNSIZING--10% employment decline 1979-86 accounted for 36% of productivity growth--- and to rebound from recession.

16. Factors responsible for performance erosion n Outdated strategies (Fordist) n short time horizons – role of cost of capital due to low savings rate (< 4% of GDP) n technological weaknesses n neglect of human resources n failures of cooperation within and between firms n government-industry relationships

17. Industrial Productivity Van Ark and Pilat, 1993. Productivity levels in Germany, Japan and the U.S. Brookings Papers.

18. Comparisons of Value Added in Manufacturing per hour worked

19. Comparisons of Value Added per hour worked by manufacturing sector, 1990

20. Factor 1: Capital Intensity Effect Gross stock of structures and equipment per employee

21. Factor 2. Structural Effect n Adjusting for relative size of different sectors lowers German productivity levels relative to the U.S.

22. Technological leadership.

23. Lester Thurow, 1992. Head to Head. n Distinction between new PROCESS and PRODUCT technologies n U.S. firms make heavier commitment to new product technology; Japanese to new process technology n Why are U.S. firms reluctant? – Managerial backgrounds in marketing and finances – skill level of bottom 2/3 of labor force

24. Florida and Kenney, 1990. The Breakthrough Illusion