The New Economy Proceedings
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98th Congress JOINT COMMITTEE PRINT S. PRT. 2d Session Ij 98-232 THE NEW ECONOMY PROCEEDINGS OF A CONGRESSIONAL ECONOMIC CONFERENCE ON WEDNESDAY, JUNE 6, 1984 COSPONSORED BY THE JOINT ECONOMIC COMMITTEE CONGRESS OF THE UNITED STATES SUBCOMMITTEE ON GENERAL OVERSIGHT AND THE ECONOMY OF THE COMMITTEE ON SMALL BUSINESS HOUSE OF REPRESENTATIVES AND THE CONGRESSIONAL CLEARINGHOUSE ON THE FUTURE CONGRESS OF THE UNITED STATES Printed for the use of the Joint Economic Committee U.S. GOVERNMENT PRINTING OFFICE 37-865 0 WASHINGTON: 1984 JOINT ECONOMIC COMMITTEE [Created pursuant to sec. 5(a) of Public Law 304, 79th Congress] SENATE HOUSE OF REPRESENTATIVES ROGER W. JEPSEN, Iowa, Chairman LEE H. HAMILTON, Indiana, WILLIAM V. ROTH, JR., Delaware Vice Chairman JAMES ABDNOR, South Dakota GILLIS W. LONG, Louisiana STEVEN D. SYMMS, Idaho PARREN J. MITCHELL, Maryland MACK MATTINGLY, Georgia AUGUSTUS F. HAWKINS, California ALFONSE M. D'AMATO, New York DAVID R. OBEY, Wisconsin LLOYD BENTSEN, Texas JAMES H. SCHEUER, New York WILLIAM PROXMIRE, Wisconsin CHALMERS P. WYLIE, Ohio EDWARD M. KENNEDY, Massachusetts MARJORIE S. HOLT, Maryland PAUL S. SARBANES, Maryland DANIEL E. LUNGREN, California OLYMPIA J. SNOWE, Maine DAN C. ROBERTS, Executive Director JAMES K. GALBRAITH, Deputy Director COMMITTEE ON SMALL BUSINESS PARREN J. MITCHELL, Maryland, Chairman NEAL SMITH, Iowa JOSEPH M. McDADE, Pennsylvania JOSEPH P. ADDABBO, New York SILVIO 0. CONTE, Massachusetts HENRY B. GONZALEZ, Texas WM. S. BROOMFIELD, Michigan JOHN J. LAFALCE, New York LYLE WILLIAMS, Ohio BERKLEY BEDELL, Iowa JOHN HILER, Indiana HENRY J. NOWAK, New York VIN WEBER, Minnesota THOMAS A. LUKEN, Ohio HAL DAUB, Nebraska ANDY IRELAND, Florida CHRISTOPHER H. SMITH, New Jersey IKE SKELTON, Missouri DAVID DREIER, California CHARLES W. STENHOLM, Texas GUY V. MOLINARI, New York ROMANO L. MAZZOLI, Kentucky TOBY ROTH, Wisconsin NICHOLAS MAVROULES, Massachusetts GENE CHAPPIE, California CHARLES HATCHER, Georgia SHERWOOD L. BOEHLERT, New York RON WYDEN, Oregon MICHAEL BILIRAKIS, Florida DENNIS E. ECKART, Ohio DAN SCHAEFER, Colorado GUS SAVAGE, Illinois BUDDY ROEMER, Louisiana NORMAN SISISKY, Virginia ESTEBAN EDWARD TORRES, California TOM J. VANDERGRIFF, Texas JIM COOPER, Tennessee JAMES R. "JIM" OLIN, Virginia C. ROBIN BRITT, North Carolina RICHARD RAY, Georgia CHARLES HAYES, Illinois SUBCOMMITTEE ON GENERAL OVERSIGHT AND THE ECONOMY BERKLEY BEDELL, Iowa, Chairman NORMAN SISISKY, Virginia SILVIO 0. CONTE, Massachusetts JIM COOPER, Tennessee SHERWOOD L. BOEHLERT, New York JAMES R. "JIM" OLIN, Virginia MICHAEL BILIRAKIS, Florida RICHARD RAY, Georgia DAN SCHAEFER, Colorado JOSEPH P. ADDABBO, New York HENRY B. GONZALEZ, Texas C. ROBIN BRITT, North Carolina CHARLES W. MCMILLION, Professional Staff (11) III CONGRESSIONAL CLEARINGHOUSE ON THE FUTURE BOB EDGAR, Chairman JOHN HEINZ, Vice Chairman Executive Committee MAX BAUCUS GILLIS W. LONG BERKLEY BEDELL BARBARA A. MIKULSKI THOMAS J. DOWNEY CHARLIE ROSE NEWT GINGRICH CLAUDINE SCHNEIDER ALBERT GORE, JR. TIMOTHY E. WIRTH WILLIAM LEHMAN Advisory Committee ANTHONY BEILENSON JOHN J. LAFALCE LINDY BOGGS STAN LUNDINE DON BONKER STEWART B. McKINNEY WILLIAM F. CLINGER, JR. BUDDY MAcKAY WILLIAM S. COHEN ROBERT T. MATSUI JIM COOPER STEPHEN L. NEAL ALAN CRANSTON CLAIBORNE PELL CHRISTOPHER DODD CARL D. PERKINS DANTE B. FASCELL JAMES H. SCHEUER THOMAS S. FOLEY HARLEY 0. STAGGERS, JR. WYCHE FOWLER, JR. MORRIS K. UDALL DAN GLICEMAN BRUCE F. VENTO DENNIS HERTEL HENRY A. WAXMAN JACK HIGHTOWER ANDY IRELAND LENA LUPICA, Director LETTER OF TRANSMITTAL AUGUST 7, 1984. To the Members of the Joint Economic Committee: I am pleased to transmit the proceedings of the June 6, 1984, Conference entitled "The New Economy." The Conference was sponsored by the Joint Economic Committee, the Congressional Clearinghouse on the Future, and the Small Business Subcommit- tee on General Oversight and the Economy. Its purpose was to pro- vide open and free dialog between recognized experts and Republi- can and Democratic Members of Congress on issues that affect the long-term growth and prosperity of the Nation. A global perspective was maintained throughout the Conference. Domestic and international trends in output, productivity, techno- logical change, and population were stressed in the morning ses- sion. The afternoon session addressed international patterns of in- dustrialization, multinational business development, and innova- tion, with an eye to how those trends affect America. The Conference drew upon recognized scholars, practitioners, and policy analysts in such diverse fields as economic modeling, de- mographics, international business, and innovation. Robert Premus, economist, Joint Economic Committee, Lena Lupica, direc- tor, Congressional Clearinghouse on the Future, and Charles McMillion, professional staff, Subcommittee on General Oversight and the Economy of the Small Business Committee, U.S. House of Representatives, are to be thanked for their efforts in organizing this Conference. The views expressed herein are those of the authors and speak- ers, and do not necessarily represent the views of the Joint Eco- nomic Committee or its members. Sincerely, ROGER W. JEPSEN, Chairman, Joint Economic Committee. (v) CONTENTS Page Letter of transmittal ....................................................................................................... V THE NEW ECONOMY Conference agenda and participants .................................... 11........................... Introductory remarks of: Edgar, Hon. Bob, a U.S. Representative in Congress from the 17th Con- gressional District of the State of Pennsylvania, and chairman, Con- gressional Clearinghouse on the Future .......................................................... 2 Bedell, Hon. Berkley, a U.S. Representative in Congress from the Sixth Congressional District of the State of Iowa, and chairman, Subcommit- tee on General Oversight and the Economy, House Committee on Small Business.................................................................................................................. 3 Heinz, Hon. John, a U.S. Senator from the State of Pennsylvania, and vice chairman, Congressional Clearinghouse on the Future ........... ............ 4 Lungren, Hon. Dan, a U.S. Representative in Congress from the 42d Congressional District of the State of California .................... ....................... 60 Roth, Hon. William V., Jr., a U.S. Senator from the State of Delaware ....... 89 Remarks of: Gordon, Ted, president, the Futures Group ........................................................ 6 Forrester, Jay, professor, MIT Sloan School of Management .......................... 36 Schweke, Bill, program director, Corporation for Enterprise Develop- ment ................................................................ 60 Freeman, Orville, chairman, Business International Corp .............................. 69 Hormats, Robert, vice president for international corporate finance, Gold- man, Sachs & Co ................................................................ 90 APPENDIX Article entitled "Global Consequences of Improving Productivity," by Theo- dore J. Gordon and John Stover, from Technological Forecasting and Social Change 24 (1983) ................................................................ 103 Paper entitled "Managing the Next Decade in the Economy," by Jay W. Forrester, June 6, 1984 ............................................................... 121 Paper entitled "The New Frontier of Job Creation," by William Schweke, June 6, 1984 ............................................................... 133 Paper entitled "The Global Environment for U.S. Multinational Companies," by Orville L. Freeman, June 6, 1984 ............................................................... 156 Research study entitled "The Effects of U.S. Corporate Foreign Investment, 1980-82," undertaken by the Business International Corp., June 1984 ............ 178 (vui) THE NEW ECONOMY WEDNESDAY, JUNE 6,1984 Conference Agenda and Participants Introductory Remarks of HON. ROBERT EDGAR AND HON. JOHN HEINZ 1:00 p.m. Room B-352 Rayburn House Office Building Held on the eve of the London Economic Summit, The New Econo- my conference explores issues that will be the heart of internation- al summit meetings for years to come. MACRO TRENDS Introductory Remarks of HON. BERKLEY BEDELL 1:10-3:30 p.m. Room B-352 Rayburn House Office Building Speakers: TED GORDON, President, The Futures Group; JAY FORRESTER, Professor, MIT Sloan School of Management. Reaction and Comment: HON. JOHN HEINZ; HON. BOB EDGAR; HON BERKLEY BEDELL; HON. DANTE FASCELL; WARREN BROWN, Senior Editor, Washington Post. How will worldwide social, technological, political, and economic trends influence the U.S. economy in the future? This session con- siders international demographic shifts, technological develop- ments, energy availability, and other trends as driving forces for global economic changes. Recent findings from the MIT computer- ized global model will be presented and the impact on key Ameri- can economic concerns (i.e., government deficits, immigration, and technology transfer) will be discussed. INDUSTRY TRENDS Introductory Remarks of HON. DAN LUNGREN 3:40-5:00 p.m. Room B-352 Rayburn House Office Building (1) -I 2 Speakers: ORVILLE FREEMAN, Chairman, Business Internation- al Corporation; BILL SCHWEKE, Program Director, Corporation for Enterprise Development. Reaction and Comment: HON. DAN LUNGREN; HON. CLAUDINE SCHNEIDER; HON. STAN LUNDINE; MONROE KARMIN, Senior Editor,