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America already is in a remarkably good position to profit from these wrenching changes. Until now the U.S. economy has remained an unusually open system -- characterized by relatively uncontrolled access to capital, new-business formations, bankruptcies, and all the other messy turbulence of free-market capitalism.
This open system, in turn, has spawned a dynamic entrepreneurial culture, the nation's greatest asset in the years ahead. Even as many of the nation's largest companies have retreated before the competition from Asia, others, including many founded by immigrants from those same countries, are creating new industries and companies at an unprecedented rate. In the nation's third century, these children of America's open system represent the most crucial asset, the key ingredient for prevailing over ascendant Asia.
Despite its critical importance, there is a growing tendency among liberals and conservatives alike to urge the basic abandonment of this open system. The post-Reagan political atmosphere will likely be colored by acceptance of the superiority of role models that embrace mercantilist strategies using government policy and planning to develop and maintain trade surpluses.
Kevin P. Phillips, a leading conservative thinker, openly calls for a tough-minded "nationalist" business strategy. "American businessmen, facing foreign competition underwritten by business-government partnerships," notes Phillips, "must set aside old concepts of laissez-faire and adjust to -- even advocate -- new kinds of business-government collaboration.'
At the other end of the economic spectrum, Robert B. Reich, perhaps the most influential of the new statists, urges Americans to abandon the legend of Horatio Alger, the central leitmotiv of the American economic dream, and leave "the myth of the self-made man" behind forever. The new realities of international trade, Reich argues, have made entrepreneurs -- with their limited capital and human resources -- poor economic risks. Because they "short-circuit progress," opportunistic individuals are no longer appropriate to "our place in the world.'
To meet the challenge of world competition, Reich maintains, Americans should turn to the "stewardship" of government and business leaders. Rather than look toward the American "open system," Reich argues that the best blueprints for the future lie in ministry and corporate offices in Tokyo, Bonn, and Paris.
To a nation once certain of its historic mission, the widespread yearning for foreign models represents a major psychological watershed. To scrap the open system and rely instead on government planners and huge corporations would amount to discarding a prime source of the American economy's capacity for self-renewal.
The United States is unlikely to get the growth it needs through the large corporations that Phillips and Reich discuss. In 1968, U.S.-based multinational corporations dominated both the nation's business and much of the world's as well. Eighteen of the world's 20 largest industrial corporations were American based. European nations perceived these giants as powerful enough to threaten national independence itself. In his 1968 book The American Challenge, Jean-Jacques Servan-Schreiber warned, "We are simply letting European industry be gradually destroyed by the superior power of American corporations.'
Two decades later, however, that once overwhelming power has faded considerably. Between 1959 and 1978, the world market share of the top U.S. companies dropped between 30% and 50% in such key fields as pharmaceuticals, chemicals, electronics, and aviation. Some of America's great companies -- notably IBM, Hewlett-Packard, and 3M -- remain world leaders, but in far too many fields it is Asian competitors that clearly have seized the initiative.
In a country without America's unique renewal power, such a development could have proved disastrous. When Britain's great corporations -- such as British Steel, British Leyland, and Upper Clyde Shipbuilders -- began failing in the years after World War II, so also did the British economy. But America's experience has proved different. Although plagued by trade deficits, the American economy in the 1980s has revealed surprising strengths. Once beset by relatively high unemployment and persistently sluggish growth, the United States has recently been outperforming most of its major industrial competitors on both counts.
Behind this renaissance lies the emergence of a host of new growth companies that have risen to rapid prominence unparalleled in any major industrialized country. Even as Fortune 500 companies such as Sperry and Kaiser Steel fell from the ranks of the elite, new ones developed to take their place. Between 1979 and 1986, 9 companies from INC.'s list of the 100 fastest-growing small public companies -- running the gamut from computer manufacturers Tandem and Apple Computer to such service firms as Federal Express and Southwest Airlines -- vaulted their way to the ranks of the Fortune 500 and the Fortune Service 500.
The structure of the economy as well as the cast of characters has changed dramatically. Once dominated by a seemingly irreversible process of consolidation, the economy in the 1970s began generating record numbers of new businesses. In 1985, more than 700,000 new corporations were formed in the United States, up from 200,000 two decades earlier. Between 1977 and 1985, American companies with fewer than 100 employees generated 89% of the roughly 18 million new jobs created. In contrast, Fortune 500 companies, after increasing payrolls in the late '70s, lost 2.8 million positions between 1980 and 1986.
