Foreign Relations of the United States, 1981–1988, Volume I, Foundations of Foreign Policy

284. Information Memorandum From the Director of the Policy Planning Staff (Solomon) to Secretary of State Shultz¹

Washington, December 3, 1986

SUBJECT

• The Meaning of the Post-Industrial Age

Attached at Tab 1 is a paper that investigates the meaning and economic consequences of the Post-Industrial Age.² (At Tab 2 is a list of recent articles on the same topic.)³ The paper holds policy implications for Administration initiatives over the next two years that could have profound ramifications for America’s future economic competitiveness in the international marketplace.

Key features of the Post-Industrial Age will be:

— new industrial materials,

— biotechnology and agricultural production,

— revolutionary industrial production processes,

— dominant role of communications and information, and

— globalization of the financial economy.

How effectively economies handle the interrelationships among these various new characteristics will determine whether countries will be on the cutting edge of the world economy.

How well U.S. policy makers and the private sector understand the fundamental changes these relationships imply for U.S. trade and finance will shape how the U.S. economy responds to the opportunities of the Post-Industrial Age.

Over the next two years, the Administration could make a major contribution toward ensuring U.S. leadership in this new era. We believe that the following initiatives hold particular promise for strengthening America’s competitive position in the world economy:

— Assess the impact of SDI development on continued U.S. leadership in the non-military information and communications areas.

— Analyze the competitive impact of biotechnology developments on U.S. agricultural exports, and our approach to agricultural subsidies. Convince the EEC that the present subsidy system pushes the LDC agricultural producers against the wall just when technological breakthroughs may increase global agricultural production.

— With the traditional determinants of competitiveness now of diminishing importance (e.g. labor costs representing a declining proportion of total costs), we could develop a policy framework for supporting production-enhancing industrialization. In particular we should encourage the SEC (perhaps through Secretary Baker) to examine changes in accounting standards that will be needed to encourage U.S. business to have a longer time horizon for investment and research.

— Assess whether the IMF and the GATT institutional frameworks for trade and finance are capable of handling the demands of the Post-Industrial Age, especially the globalization of financial markets. Discuss with Baker and Volcker whether they should meet with their foreign counterparts on the impact of highly integrated global financial markets.

— Redefine our energy, raw materials, and strategic minerals policies in light of developments in new industrial materials.

— Analyze the gains from freer trade in the context of the changing nature of greater global competition.

1. Source: Department of State, Executive Secretariat, S/P Files, Memoranda and Correspondence from the Director of the Policy Planning Staff to the Secretary and Other Seventh Floor Principals: Lot 89D149, S/P Chrons DECEMBER 1986. Confidential. Drafted by Kauzlarich on December 1; cleared for information by Negroponte.
2. Attached but not printed is an undated paper drafted by Kauzlarich entitled “The Meaning of the Post-Industrial Age.”
3. Attached but not printed is an November 24 paper entitled “Recent Articles Relating to the Post-Industrial Age.”