PROFESSOR SAYS FEAR HAMPERING INEVITABLE WORLD ECONOMIC TIES

PROFESSOR SAYS FEAR HAMPERING INEVITABLE WORLD ECONOMIC TIES

A truly integrated world economy is inevitable, but people throughout the world are so frightened of such an evolution that they refuse to prepare for it, a University of North Carolina economics professor argues.

Jack Behrman, associate dean of the UNC School of Business in Chapel Hill, says the world is psychologically, socially and politically unprepared to accept a global economy.That reluctance to accept the inevitable expresses itself in policy decisions that reflect national boundaries as if domestic economies can be isolated from global economic forces, Mr. Behrman said last week at the 12th annual North Carolina World Trade Association conference.

Even international businesses are burying their heads, focusing more on short-term corporate strategies and individual careers than on trying to understand what is driving the economy, he said.

One of the primary problems is the fear felt by governments, corporations and individuals that in an integrated economy they could end up with the short end of the stick, Mr. Behrman said. Out of that fear come protectionist policies.

But free trade and investment is not the answer either, because no government, including the United States, will permit free trade, he continued.

What is needed is a vision that will allow the countries of the world to adjust and adapt to the inevitable changes, not the vision of the 1950s when the United States ruled the global economy, Mr. Behrman said.

As an example, he pointed to the free trade agreement between the United States and Canada, which he described as a pragmatic approach the United States just fell into with Canada and about which neither country is particularly enthusiastic. The Canadian Parliament and U.S. Congress now are debating whether to ratify the pact.

Despite its title, the agreement is not about free trade, he said. Mr. Behrman said the pact actually provides for free trade only in particular areas, and then only after trade volumes have been balanced.

Balancing those trade volumes comes about through a policy of structured investment that will lead to free trade once both trade partners are assured they will receive an equitable distribution of the benefits, Mr. Behrman said.

Every company would prefer to export rather than build plants overseas. But governments, including the United States, force companies to invest in their countries if they want to continue selling there, he said.

If it were not for such investment policies, Japan never would have built auto plants in the United States, he added.

Such investment policies, while designed to stave off a flood of imports, actually serve to further the integration of the world economy and bring out more fears, Mr. Behrman said.

But a true world economy should not be viewed negatively because integration would bring greater efficiency and productivity, he contended.

Also, he added, just as workers are more efficient when they are well- treated and well-rewarded, it could be assumed that efficiency would not suffer by equitable, not equal, distribution of trade and investment benefits.

Yet for the most part, the coming economic changes are being ignored by most governments and companies.

That includes Japan, which has had its day, had its chance (to continue as a major economic force) and in a sense muffed it by declining to take advantage of its strength in forming significant policy decisions, Mr. Behrman said.

As a result, he said, Japan will be surpassed by both the Soviet Union and China. Those nations may be as nationalistic as other governments, but they at least have recognized they cannot isolate themselves from global economic forces and are opening their economies, Mr. Behrman said.

The professor also said the United States will remain the leading economic power, but a rapidly shrinking No. 1.