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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 numbers) – 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 years • 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