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Can Americans Compete?
• U.S. not building human capital as before
– Primary and secondary schools falling behind rest of world
– Universities still excellent, but foreign students increasingly
taking education back home
– Science and engineering grads increasing elsewhere,
declining here
• Many iconic U.S. firms already do most business and
employ most workers outside U.S.
– Conversely, some quintessential American brands (e.g.,
Jeep) owned by non-U.S. cos***
– Many products of U.S. cos made outside U.S. while many
non-U.S. cos make products here
• Dell laptop may have been assembled in Malaysia from parts
made by American cos in Thailand
Can Americans Compete?
• Large cos transcended nationality long ago – globalization
creates opportunities as well as challenges
• For American workers, globalization is dicier proposition—vast
numbers exposed to global labor market competition, contest
many cannot win at this time
– Global economy increasingly based on information
– Cost of handling information in free fall
– Low-cost countries turning out large numbers of well-educated
workers fully-qualified to work in information-based economy
• China reported to be producing 600,000 engineering grads in 2005,
India 350,000, U.S. 70,000 (note considerable issues re: these
– Outsourcing no longer threatens only mfg and lower-level
knowledge work
• McKinsey estimates 52% of engineering jobs amenable to offshoring,
31% of accounting jobs
– Downward pressure on U.S. wages
Can Americans Compete?
• Question is whether there can be economic dominance wo/
technology leadership
– Until scientific revolution began in 17th century, virtually everyone
lived on verge of subsistence
– Three centuries of technology breakthroughs are root of today’s
abundance in developed world
• Those w/ technological edge have highest standard of living
– Key to competitiveness is maintaining technological superiority –
continually creating high-value new jobs that workers in rest of world
can’t do yet
• #1 policy prescription: education
• That’s a problem for America today
– As America changed from agricultural to industrial economy, high school
movement swept U.S.
» 8th grade education no longer enough
– European model, which prepared small minority of young people for college,
was rejected
» Morrill Act of 1862—land-grant universities
– By 1940, U.S. was world’s best-educated nation
Can Americans Compete?
• U.S. spending on R&D will have to increase
– 71% of industrial R&D is on development, not
basic research
– Federal funding of research in physical sciences as
percentage of GDP has been declining for 30
• How can American workers be worth what
they cost?
– Greatest challenge will be changing a culture that
neither values education nor sacrifices the present
for the future as much as it used to – or as much
as our competitors do
– Challenge to business, government, and society