George Mason University
Dr. Hill opened his remarks by expressing his hope that the symposium would bring new information and insights to bear on the ATP. His task was to provide, as a basis for further discussion, some background on where the ATP came from and why it exists. Dr. Hill noted that he was involved with the program in its formative stages and that his views would represent "one man's perspective" on the ATP's origin.
The ATP arose out of a confluence of several forces at a particular point in time in the late 1980s, but whose initial causes date prior to that time. Beginning in the 1970s with the Arab oil embargo and extending into the 1980s, Dr. Hill recalled the growing sense of crisis in the United States, a sense that perhaps America's best days were behind it. There was a widespread perception that "we must do something" to restore prior levels of income and productivity growth. One defining event of that period, Dr. Hill said, was the Federal Reserve's decision in 1979 to focus on money supply growth as a means to control inflation. Although this policy successfully addressed inflation, it also caused a severe recession that saw unemployment rise to 11 percent. This triggered the great debate on industrial policy in the mid-1980s.
An additional consequence of the Federal Reserve's tight monetary policy, Dr. Hill said, was a rise in interest rates, which in turn strengthened the dollar and created a very high trade deficit. The trade deficit extended beyond traditional manufacturing goods to high-technology goods. A trade deficit in the high-technology sector had not existed since the Commerce Department began compiling figures for this sector in the 1960s. Research-intensive industries in the United States, such as electronics and semiconductors, began to see their world market shares decline.
There were some highly visible instances in which promising U.S. start-up firms were unable to procure financing domestically, and therefore turned to Japanese firms for capital to grow. This suggested that there was something fundamentally unworkable about the American system of risk capital for high-technology start-ups, and that this country had to do something about it. There was the manifest failure of U.S. firms to commercialize the videocassette recorder