Competitive Freedom versus National Security Regulation

(Hardback)

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Irwin asserts that the federal government, in the name of preserving national security, has imposed such additional regulation on American businesses that their competitive position in global markets has been severely compromised. In his well-written, cogently argued account of the impact of national security regulations on competitive freedom, Irwin demonstrates that federal government agencies--the Departments of State, Commerce, and Defense; the National Technical Information Services; the Federal Communications Commission; and others--all attempt to micromanage the firm's decision to sell, buy, invest, innovate, and compete internationally. In addition, Irwin shows, jurisdictional disputes among the various federal agencies for control over corporate economic activities further exacerbate the problem by hampering the corporation's ability to react quickly to market conditions. As his analysis clearly illustrates, the end result is a price/cost squeeze on U.S. firms that handicaps their ability to compete with overseas rivals. Some of the results of increased government oversight Irwin identifies directly threaten overall U.S. competitiveness abroad. U.S. corporations find that the compliance cost of regulation is privatized, thus lifting total costs. The combination of dampened revenues and inflated costs curtails the resources for future product development--a vital factor in maintaining market position. And, Irwin demonstrates, this federal policy which acts to reward offshore rivals at the expense of U.S. firms is grounded on political consensus: the political right favors export control while the political left supports import control. The effect of this dual policy emphasis, Irwin argues, is a national security policy that serves to punish the U.S. firm in an environment of increased global risk, competition, and rivalry. Students of international business and public policy, as well as government decision makers themselves, will find Irwin's study enlightening and provocative.

Reviews

Although this study presents some interesting comments about the telecommunications industry since divestiture, with several appendixes that illustrate bureaucratic efforts to maintain control over the industry, it is a testament to Irwin's faith in economic freedom rather than a balanced analysis of national security policy. In 1972, the Department of Defense sided with the Bell System in opposing the author's recommended policy in favor of divesture. Now he has made a broader study of rules and regulations adopted by various agencies of the US federal government in the name of protecting national security. While agreeing that there is some merit in controls over the export of goods that are obviously military and classified, he regrets that controls have been extended to a host of dual use' products and manufacturing know-how, with the result that US firms are put at a competitive disadvantage in the global economy. Moreover, since security concerns also add to the costs of imported goods and services, producers are subject to a double squeeze such that overseas rivals gain sales and revenues at their expense--so much so that some competing nations perceive US regulations as the coming of a second Marshall Plan. Irwin feels that most of these controls are ill advised, and urges that public policy assert that freedom to compete and innovate in the economic arena are fundamental aspects of US national interests and security. Most useful as a secondary source for upper-division students in economics and public policy.-Choice
This study attempts to grapple with two opposing forces confronting the U.S. economy. On the one hand, information technology is softening industry boundaries, multiplying the number of competitive players, and increasing the pace of product obsolescence. On the other hand, the national security argument is regulating more and more private firms, commercial products, and international competitors. It is the thesis of this book, argued in the context of developments in telecommunications, that the long-run answer to national security is economic freedom. The U.S. federal government has, in the name of national security, imposed such additional regulation on American businesses that their competitive position in global markets has been severely compromised. Federal agencies attempt to micro-manage telecommunication firms' decisions to sell, buy, invest, innovate, and compete internationally. In addition, jurisdictional disputes among the various federal agencies for control over corporate economic activities further exacerbate the problem by hampering the corporation's ability to react quickly to market conditions. The end result is a price/cost squeeze on U.S. firms that handicaps their ability to compete with overseas rivals.-Communication Abstracts
"This study attempts to grapple with two opposing forces confronting the U.S. economy. On the one hand, information technology is softening industry boundaries, multiplying the number of competitive players, and increasing the pace of product obsolescence. On the other hand, the national security argument is regulating more and more private firms, commercial products, and international competitors. It is the thesis of this book, argued in the context of developments in telecommunications, that the long-run answer to national security is economic freedom. The U.S. federal government has, in the name of national security, imposed such additional regulation on American businesses that their competitive position in global markets has been severely compromised. Federal agencies attempt to micro-manage telecommunication firms' decisions to sell, buy, invest, innovate, and compete internationally. In addition, jurisdictional disputes among the various federal agencies for control over corporate economic activities further exacerbate the problem by hampering the corporation's ability to react quickly to market conditions. The end result is a price/cost squeeze on U.S. firms that handicaps their ability to compete with overseas rivals."-Communication Abstracts
"Although this study presents some interesting comments about the telecommunications industry since divestiture, with several appendixes that illustrate bureaucratic efforts to maintain control over the industry, it is a testament to Irwin's faith in economic freedom rather than a balanced analysis of national security policy. In 1972, the Department of Defense sided with the Bell System in opposing the author's recommended policy in favor of divesture. Now he has made a broader study of rules and regulations adopted by various agencies of the US federal government in the name of protecting national security. While agreeing that there is some merit in controls over the export of goods that are obviously military and classified, he regrets that controls have been extended to a host of dual use' products and manufacturing know-how, with the result that US firms are put at a competitive disadvantage in the global economy. Moreover, since security concerns also add to the costs of imported goods and services, producers are subject to a double squeeze such that overseas rivals gain sales and revenues at their expense--so much so that some competing nations perceive US regulations as the coming of a second Marshall Plan. Irwin feels that most of these controls are ill advised, and urges that public policy assert that freedom to compete and innovate in the economic arena are fundamental aspects of US national interests and security. Most useful as a secondary source for upper-division students in economics and public policy."-Choice

Author Bio

MANLEY RUTHERFORD IRWIN is Professor of Economics at the University of New Hampshire. The author of numerous books and articles that address issues of U.S. telecommunications and public policy, he has served as consultant to the Federal Communications Commission, the Office of Telecommunications Planning, and the President's Task Force on Communications Policy