On Tuesday, Intel CEO Paul Otellini delivered a speech at Brookings on long-term economic competitiveness. While there were some points with which I disagreed—specifically, his critique of the stimulus plan and his advocacy of wide-ranging corporate tax cuts—I agreed with his core thesis: We’re not investing adequately or strategically in our nation’s future, and we’ll pay a huge price if we don’t change course.
To support his argument, Otellini cited some startling statistics: Although we rank sixth among the top 40 nation’s in innovation-driven competitiveness, we rank dead last—40th out of 40—in the effort we’ve made over the past decade to improve future competitiveness. That sounded too bad to be true, so I hunted down Otellini’s source, “The Atlantic Century,” a 2009 study conducted by the Information Technology and Innovation Foundation.
The ITIF constructs an index based on 16 indicators in six different categories—human capital, innovation capacity, entrepreneurship, information technology infrastructure, economic policy, and economic performance. A few examples will make the point. We rank fourth in science and technology researchers as a share of our workforce, but only 20th in our rate of change over the past decade; fifth in corporate R&D investment, but 17th in the rate of change; fourth in government R&D investment, but 15th in the rate of change; seventh in broadband, but 22nd in rate of change; first in GDP per working-age adult, but 16th in rate of change; and so on.
While statisticians can always quibble with the report’s selection of indicators and the methodology used to weigh and assess them, it’s harder to argue with its overall thrust. Because we’re under-investing in the areas that will determine our future dynamism and standard of living, we’ll continue to lose ground relative to our competitors and may eventually lose ground in absolute terms as well. (In seven of the 16 ITIF indicators, we’ve actually gone backwards since 1999.)
To be sure, 1999 represented a cyclical peak. Still, it’s hard not to conclude that the past ten years were a lost decade. We can’t afford to lose the next one. Our challenge now is to adopt policies that build a stronger future while reining in our unsustainable budget deficits and protecting working families from the harshest consequences of disruptive economic change.
The way forward is neither obvious nor easy. But one thing is clear: Our margin for error is a lot smaller than it was a generation ago. We can no longer afford to waste resources, public or private, on expenditures that do not create economic or social value. The federal budget and tax code are honeycombed with unproductive payoffs to special interests; it’s time to purge them. And the private economy has been dominated by a financial sector that’s more interested in transferring wealth (to itself) than in creating wealth through sensible investments. Perhaps the 2008-2009 financial crash will force bright young people to stop producing complex derivatives and start working on innovations that improve our lives.
William Galston is a former policy advisor to Bill Clinton and current senior fellow at the Brookings Institution.
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I don't doubt the basic correctness of the conclusion here, but I rather weary of tech CEOs and the like pointing this out as a national failing, without stepping up to take a significant part of the responsibility for what is happening.
To put this simply: American CEOs chase cheap overseas labor - for fabrication, services, engineering, or anything else - more assiduously than the business leadership in any other country. In doing so, they effectively outsource not just production, but eventually, innovation. Why would a Taiwanese or Korean or Indian or citizen of any number of other stable, growing economies become an engineer? Because there are plants just down the road, growing in num ... view full comment
I don't doubt the basic correctness of the conclusion here, but I rather weary of tech CEOs and the like pointing this out as a national failing, without stepping up to take a significant part of the responsibility for what is happening.
To put this simply: American CEOs chase cheap overseas labor - for fabrication, services, engineering, or anything else - more assiduously than the business leadership in any other country. In doing so, they effectively outsource not just production, but eventually, innovation. Why would a Taiwanese or Korean or Indian or citizen of any number of other stable, growing economies become an engineer? Because there are plants just down the road, growing in number and size and scope of independence every year, to employ them. Why would an American? Because American businesses have unapologetically - even proudly - made it clear that they will move any tech job they possible can to India, or Korea, or Ireland, or wherever else, to save a few bucks, and left the landscape littered with closing factories and labs and underemployed engineers in doing so? Great incentive to study, or roll the dice with a startup, that.
There is this phenomenon - long term investment - that we have forgotten how to practice, and American business leadership have led in that forgetting. Here in Iowa we call the alternative - much practiced and admired in our country - "eating your seed corn."
I have a good, well compensated American high tech engineering job. I may be fortunate enough to keep it until I retire. But the people who replace me will not be Americans, and that is by design of the corporate culture in which I live.
So, yes, we need industrial policy, and education policy, and a sensible tax code. Of course. But we need leadership - business leadership - of the kind that digs in and insists on getting these things done and actually invests in doing them rather than crying about their absence, while lobbying for the starvation of American government and profiting mightily from the destruction of American intellectual leadership.
IowaBeauty: BINGO. You hit the nail on the head. Everything you said is dead on.
I heard Otellini's predecessor, Craig Barett, bemonaing not enough American students would go into engineering a year or so ago. A few days after his speech I read that Intel was opening a new design center in India, laying off in the US. Talk about a two-faced SOB. These guys just want cheap labor, period. Why go into the engineering or sciences, to have your brain twisted into shreds during college, to get a job that pays a fraction of what a finance with the big risk of being outsourced anyway? These kids are not dumb but the CEOs are.
Pfizer recently shed a lot of US R&D positions to move them to, ... view full comment
IowaBeauty: BINGO. You hit the nail on the head. Everything you said is dead on.
I heard Otellini's predecessor, Craig Barett, bemonaing not enough American students would go into engineering a year or so ago. A few days after his speech I read that Intel was opening a new design center in India, laying off in the US. Talk about a two-faced SOB. These guys just want cheap labor, period. Why go into the engineering or sciences, to have your brain twisted into shreds during college, to get a job that pays a fraction of what a finance with the big risk of being outsourced anyway? These kids are not dumb but the CEOs are.
Pfizer recently shed a lot of US R&D positions to move them to, ahem, India. I've seen the same in my previous employer, Texas Instruments. The lists are endless.
I'm sick of American executives bemoaning our lack of competitiveness. It's their fault to begin with. I switch off whenever I hear these guys open their stupid mouths.
American's aren't good at collective problem solving; and American politicians, who seem driven by the loudest if obviously uninformed (or unintelligent) voices, are even worse at changing government policy and public spending priorities. I agree that the absence of leadership is central, but it's not for lack of leaders; rather, leaders are dispersed and attend to tasks that have little consequence to America's future economic well-being. America devotes an enormous amount of resources, including human resources, to the military. That such resources could be employed to build rather than destroy is considered pollyanish, for every patriotic American knows that our freedom is but one unm ... view full comment
American's aren't good at collective problem solving; and American politicians, who seem driven by the loudest if obviously uninformed (or unintelligent) voices, are even worse at changing government policy and public spending priorities. I agree that the absence of leadership is central, but it's not for lack of leaders; rather, leaders are dispersed and attend to tasks that have little consequence to America's future economic well-being. America devotes an enormous amount of resources, including human resources, to the military. That such resources could be employed to build rather than destroy is considered pollyanish, for every patriotic American knows that our freedom is but one unmet threat from disintegration. It's conventional wisdom that Americans are subject to low rates of taxation as compared to most other developed nations, but have no toleration for additional taxes for public projects. Is that surprising, when such a large percentage of current taxation funds our military ventures. Would Americans have such an aversion to taxation if it were associated with benefits enjoyed by all Americans, from better public schools and transportation, to more affordable colleges and universities, to better and more efficient health care, to a more secure retirement after a lifetime’s work. America is trapped, spending more than it can afford on programs that will provide little if any future return. Much like the homeowner living in a house with a mortgage he cannot afford and with a job in an industry that suffers from a declining income.
Ray I disagree that we're not good at collective problem solving. The Mercury/Gemini/Apollo space programs say we can *when we want to*. Problem is we don't want to tackle big problems anymore as they're "too expensive" or can easily be outsourced, ie, the lazy short-term mentality/MBA-think way.
Ray I disagree that we're not good at collective problem solving. The Mercury/Gemini/Apollo space programs say we can *when we want to*. Problem is we don't want to tackle big problems anymore as they're "too expensive" or can easily be outsourced, ie, the lazy short-term mentality/MBA-think way.
Not only that, tn, but the kind of national focus and collective determination we need doesn't sit well with a culture, especially among conservatives, that has come to prefer resentment, paranoia, and ignorance rather than generosity, openness, and knowledge.
Not only that, tn, but the kind of national focus and collective determination we need doesn't sit well with a culture, especially among conservatives, that has come to prefer resentment, paranoia, and ignorance rather than generosity, openness, and knowledge.
Good point IR. It reminds me of a column in our local newspaper (News and Observer, Raleigh NC):
http://www.newsobserver.com/2010/02/10/329808/lifting-off-with-better-go...
This fellow is one of the more intelligent conservative columnists I've read but he often slips back onto the right-wing "script", ie, lower taxes, less government, etc. etc. I like a lot of what he says but as usual it often collapses into the same ol' same ol'.
My retort nowadays to those that gripe about high taxes is "Move to So ... view full comment
Good point IR. It reminds me of a column in our local newspaper (News and Observer, Raleigh NC):
http://www.newsobserver.com/2010/02/10/329808/lifting-off-with-better-go...
This fellow is one of the more intelligent conservative columnists I've read but he often slips back onto the right-wing "script", ie, lower taxes, less government, etc. etc. I like a lot of what he says but as usual it often collapses into the same ol' same ol'.
My retort nowadays to those that gripe about high taxes is "Move to Somalia. They don't have intrusive government nor any taxes". The Chinese have a heavy-handed government but they are poised to surpass us within 10 years the way things are going. CEOs like the ones at Intel had a huge hand in helping it along by going the 'cheaper is better' route and gutting a lot of domestic R&D.