MYTHS AND REALITIES OF UNITED-STATES COMPETITIVENESS

Most discussion of U.S. competitiveness misstates the problem, focusing on the trade deficit and on fears that an economy whose productivity lags that of its rivals will face economic disaster. In fact, strong automatic forces ensure that the U.S. economy will remain in business and indeed roughly balance its trade even if its productivity performance is dismal. The real issue is the effect of international competition on the mix of goods that the U.S. economy produces. In some industries high productivity is an effect as well as a cause of international competitiveness. There is an intellectually respectable but politically problematic case for government action to create or preserve advantage in such industries.