Three Billion New Capitalists (Prestowitz)

“We have a world economy that is changing almost irreversibly,
in a transformation that is greater than the Industrial Revolution.
America and Europe are being
outproduced, outinvested, outtraded, out-exported
by the rest of the world.”

former British PM Gordon Brown

Here are several excerpts from the 2005 book
Three Billion New Capitalists:
The Great Shift of Wealth and Power to the East

by Clyde Prestowitz.
Emphasis is added.
The following uses suffixes
G = giga = billion = 109,
T = tera = trillion = 1012.

But first, before those excerpts from the book itself,
here is an 2005-06-25 Amazon.com review by Robert D. Steele
(I include the whole review, because it might be deleted at Amazon.
As to my opinion of Steel’s review,
I agree with his preferring of this Prestowitz book
to the much better known one by Friedman, The Earth Is Flat.
However some of his selections
as to what he considered important in Prestowitz’s book
are not what I found most important.)
The emphasis in the review is added.

Before writing this review,
I reflected carefully on the thoughts of those who say that
the author, who is known to me,
was wrong about Japan,
that he emphasizes the best points of the new competitors (China and India)
while neglecting our best points.
There is certainly something to what they say,
but as one who studies the entire world for our US Government clients,
with a special familiarity with Chinese operations in Africa and South America,
and a business familiarity with what is happening in India,
I have to say that on balance,
the author is more correct his critics will admit, and
this is a book that we simply cannot ignore.

His most important point is made in one line:
America does not have a strategy.
America does not have a strategy for winning the global war on terror,
it does not have an energy strategy,
it does not have an education strategy,
it does not have an economic or competitiveness strategy.
The government is being run on assertion and ideology
rather than evidence and thought--
a media cartoon has captured the situation perfectly:
as the VP [RC] tells the President [43] that we are “turning the corner”
the two walls behind them are labeled Incompetence and Fantasy.
As a moderate Republican and a trained intelligence professional
with two books on the latter topic,
I have to say that this book by this author,
a Reaganite businessman and senior appointee in the Department of Commerce
is right on target.
We *are* out of touch with reality, and we do not appreciate,
at any level from White House to School House,
the tsunami that is about to hit us.

The author makes two important points early on in the books:
first, that information is the currency of this age,
replacing money, labor, and physical resources;
and second, that the best innovation comes from the right mix of
sound education across the board,
heavy investment in research & development,
and a co-located manufacturing bases that can tinker with R&D
and have a back and forth effect.
America lacks all three of the latter,
and is not yet serious about investing in global coverage of all languages, 24/7.

There is a great deal of commonality between this book
and Tom Friedman’s
The World Is Flat: A Brief History of the Twenty-first Century
both written and published in the same time frame.
Both authors agree that
the Internet has put an end to time and space constraints,
and both agree that American labor is very much at risk
because our basic education is flawed
and we have no strategy for demanding continuing education from employers.
The author excels at drawing the connection between poor education,
“it’s been twenty years since anyone at Bell Labs received a Nobel Prize,”
and the massive increase in outsourcing of knowledge work, not just scut work.

I do have to say,
having called Friedman’s latest book a massive Op-Ed in my review of that book,
that this author
is more thoughtful,
provides more historical context,
and delves into more basic important detail that Friedman--
put bluntly, his book is more serious and more valuable than Friedman’s,

as in this is the meat, where Friedman is the sauce.
Prestowitz addresses the core issues of
the value of the dollar,
the central place of energy,
the role of demographics,
and the fundamental macro-economic and structural imbalances
that will weaken America, that are weakening America,
over the passage to of a century of time--
this is not a “snap-shot,” this is a *deep* look into the soul of America.

Chapter 12, the author’s recommendations,
is alone worth the price of the book and should be required reading
in every comparative economics and national security policy classroom.
I won’t list these recommendations but will highlight just a couple
that struck me as immediately actionable:
declaration of energy independence;
DoD as a catalyst for socio-economic recovery
by taking the lead in energy, education, and intelligence,
learning how to wage peace;
end to subsidies (the author uncharacteristically fails to note that
we can increase government revenues by $500B a year
if we not only eliminate subsidies,
but stop import-export tax fraud and demand that
corporations pay taxes on the profits they declare to their shareholders
rather than the falsified and manipulated balance sheets
they present to the IRS);
join Japan and India to NAFTA--
this is an outrageously brilliant idea.

Clyde Prestowitz is one of the most insightful, balanced, *sane* voices
on national competitiveness today.
He would make an excellent Secretary of Commerce
in the transpartisan Administration.

Now on to the excerpts from Three Billion New Capitalists.
Again, the emphasis is added.

Chapter 1
Icebergs Ahead

Section 1.4
Globalization: The Third Wave


As these developments shift the basic structure of the global economy,
they are calling into question assumptions
that have long dominated global economic policies.

Business executives, economists, and political leaders
have resisted rethinking them
even when they seemed seriously out of whack with realities.
These issues remind me of the flaws in the Titanic,
since the global system could founder on them,
absent new thinking more compatible with
the realities of the new wave of globalization:

  1. The U.S. trade deficit is now over $600G,
    or about 6 percent of GDP annually.
    As a result, the United States has swung
    from being a major creditor nation
    to having the biggest debt—now nearing $3T.
    These unprecedented amounts, however,
    have been dismissed as potential problems.
    They have even been called signs of strength by some
    who claim they just mean the U.S. economy is growing faster than others.
    This growth also supposedly makes it easy to finance them
    because foreigners will want to invest in the fast-growing U.S. economy.
    More recently, however, leaders like
    Federal Reserve chairman Alan Greenspan and former chairman Paul Volcker
    have begun to express concern that the deficits may be unsustainable,
    while the headlines included in the Prologue
    testify to the concerns of foreign lenders.
    The United States now needs a fix
    of over $2G a day of foreign money coming in.
    Without new thinking, there may be a day when it doesn’t come.
    [I think Prestowitz is being too wishy-washy here—
    that “may” should be “will”.]

  2. Behind the trade deficit lies
    the zero savings> of American households,
    the federal budget deficit, and
    the excessive savings rates and mercantilism of a number of other countries.
    None of these phenomena are sustainable.

  3. Can, and should, the dollar last as the world’s currency?
    Heretofore there have been no real alternatives;
    but with the advent of the euro and discussion of an Asian currency unit,
    that situation is changing.
    The special role of the dollar as the world’s money
    removes all financial discipline from the United States
    enables currency manipulation by other countries.
    This is the key Titanic-like flaw in the current system.
    It cannot last.
    But how and when to change are crucial questions
    not presently being addressed.

  4. Does manufacturing matter?
    In the United States,
    manufacturing has declined from 23 percent of GDP in the 1980s
    to 13 percent [in 2005].
    Europe and Japan have also seen a decline
    but smaller than in the United States.
    The conventional wisdom holds that
    the structure of an economy, what it makes, and the services
    are not terribly important

    and should not be the subject of government policy.
    According to this view,
    linkages between industries and technologies are unimportant,
    and technology development is independent of manufacturing and production.
    This view also seems to be at odds with
    the realities of the third wave of globalization.
    Beyond that is the question of balancing the trade deficit,
    which is mostly in manufactured goods.
    But the United States does not have enough physical manufacturing capacity
    to export its way to anything approaching a trade balance
    even if the dollar goes to zero value.
    Services exports can surely rise,
    but it is unlikely they can completely fill in the gap.
    Without some development in manufacturing, therefore,
    the only way out of the trade deficit is
    a significant cut in consumption.
    Thus the question,
    Does manufacturing matter?

  5. Economists have held it as an article of faith that
    high-tech manufacturing and services are done in advanced countries,
    while routine, low-value work is done in developing countries.
    (See Chapter 7.)
    But China has more semiconductor plants under construction
    or about to go into operation
    than America has.
    All mobile phone makers have moved most or much of their R&D to China.
    Nor does India limit itself to mundane software development;
    it also works at the cutting edge.
    As for services work,
    radiology, heart and joint replacement surgery, and pharmaceutical development
    are regularly outsourced to India.
    U.S. and European companies emphasize that
    they do a lot of high-tech work in China and India
    because they can’t get it done as well at home.

  6. It has long been assumed that as manufacturing jobs disappeared,
    the service industries would provide secure, high-paying jobs
    to compensate for the loss of manufacturing.
    [I have always wondered just what was the justification for that assertion.
    Surely there is no empirical justification,
    and my opinion is that any attempt at a theoretical justification
    would not stand up to intelligent scrutiny.
    What does that say about those in the “elite”
    who have let that assumption go unchallenged?]

    That view, however, is pre-Internet and pre-third wave.
    It may not be sustainable in the world of 3 billion new capitalists all online.
    [He includes China, India and Russia in that class.]

  7. The view that the uniquely inventive U.S. economy
    will always maintain economic leadership by doing the next new thing
    no longer necessarily holds.
    U.S. spending on research and development has declined in critical areas,
    and its technology infrastructure is deteriorating.
    Other countries are graduating more scientists and engineers,
    while America graduates fewer and fewer.
    Most important, the leading U.S. venture capitalists and technology firms
    are taking R&D and new start-up company development to Asia
    as fast as possible.

  8. The MBA and the American business model have had great influence
    on how business is done worldwide.
    The success of U.S. business has been largely attributed to its management
    and its focus on shareholders as opposed to stakeholders.
    [He devotes Chapter 7 of his next book,
    The Betrayal of American Prosperity [2010] to this subject.]

    much of the U.S. business success has been due to
    government support and fortunate circumstances.

    The change in circumstances and the rise of strong non-American companies
    with different concepts of their purpose and objectives
    may require a whole new way of thinking about business.

  9. Although Western, particularly U.S., business leaders
    tend to disdain intervention in their affairs by they own governments,
    they frequently curry favor with authoritarian foreign governments.
    This practice may make them
    more subject to the policies of foreign governments than their own.
    Ironically this situation has been fostered by Western government officials
    who disdain the whole notion of an economic strategy.
    None of this thinking may be sustainable
    in the wake of the third wave of globalization.

  10. The level playing field concept
    is much loved by Western political leaders
    who are quick to call Asian countries trade cheaters
    while insisting that Western workers can compete with any
    on “a level playing field.”
    But the truth is they can’t.
    Advanced country workers
    with the same skills as Chinese or Indian workers
    will not be able to compete
    unless they are willing to accept Indian or Chinese wages.
    Moreover, in a peculiar way,
    the playing field will tilt toward the two new giants of the global economy.
    The potential size of their markets,
    their endless supply of low-cost labor,
    the unique combination of many highly skilled but low-paid professionals
    [cf. this and this], and
    the investment incentives offered by their governments
    will constitute an irresistible package
    that will attract investment away not only from the first world
    but from other developing countries as well.
    China, for example, could be a real problem for Mexico.
    The only sensible response is massive investment in education
    and up-skilling of the workforce.
    Only those who have capabilities no one else has
    or can work better than anyone else will be secure.

  11. Americans are likely to find themselves
    increasingly uncompetitive as individuals.
    They have never understood the extent to which their high standard of living
    has been the result of good luck rather than personal virtuosity.

    In the new world of no time and no distance
    where education will be at a premium,
    the poor quality of U.S. secondary education
    will be even more of a disadvantage than it is now.
    American students now rank near the bottom of
    all the comparative international tests.
    To have any chance of competing on a level playing field,
    the United States will have to find a way to reverse that situation.

  12. Unless China and India go totally off the rails,
    they will become the world’s largest economies
    in the middle of this century.
    The European Union is already the world’s largest economic unit
    and will remain larger than the United States indefinitely.
    Despite U.S. military might,
    the balance of international influence and power is already shifting.
    As the National Intelligence Council says,
    the international power situation is more fluid now
    than at any time in the past half century.
    The challenge for the United States will be to play its currently powerful cards
    to shape a new balance of power favorable to its interests
    in a future when it will be relatively much weaker.
    Will its pride allow it to recognize that reality?

But these are all subsets of a much larger question.
Today’s global economy is the most integrated
and it offers greater potential opportunities than ever.
Yet, in many respects it resembles the Titanic,
a magnificent machine with serious and largely unrecognized internal flaws
heading at full speed for icebergs,
armed with knowledge and assumptions significantly at odds with reality.
In the pages that follow,
I hope to explain the machine’s flaws and the true nature of the icebergs
so that the third wave of globalization can be even more successful
than the second has been.

[End of Chapter 1.]

The division of globalization into definite eras
has not (yet) been standardized.
In the earlier sections of chapter 1,
Prestowitz defines the eras (he labels them “waves”) as follows:

1: 14151914
2: 1947–2000
3: 2000–?

1914–1947, of course, contained the two world wars and the great depression,
when international trade was sharply diminished.
He associates 1947 with the establishment of the dollar
as the world’s reserve currency
and 2000 with the collapse of the dot.com bubble.

As to matters of substance,
I think Prestowitz deliberately ignores a key subject:
what may be fall under the general rubric of “compassion”:
government spending on the elderly and the sick,
and the demands of American women to be paid for work
they used to consider their female duties.

This makes an enormous difference to the competitiveness of countries.

Chapter 6
High Tech I:
America’s Baby

Last Section of Chapter 6
The Dying Tech Ecosystem

These developments have elicited warnings about U.S. technology
similar to those of the early 1980s.
The euphoric new economy of the 1990s
masked issues that were never resolved.
Today’s warnings [as of 2005, anyway] always begin by noting that
the United States
“enjoys global technological preeminence” [see, e.g., page 3 here]
with the world’s biggest concentration of technologists,
the best universities,
leadership in nearly all areas of basic research, and
an annual R&D budget that dwarfs that of any other nation or economic entity.
This is all true, but then come the caveats.
Thomas Hartwick,
chairman of the Defense Advisory Group on Electronic Devices,
told Congress that
“the structure of the U.S. high-tech industry is coming unglued with
innovation and design losing their tie to
prototype fabrication and manufacturing.”

This broken link
leaves inventions “on the cutting room floor
because they cannot be manufactured.”
In a few years, the U.S. manufacturing base may not exist
to create “mega-billion dollar industries like
microelectromechanical systems or nanotechnologies.”
Microsoft chief technologist Craig Mundi echoed that concern
in a March 16, 2004, interview with Business Week,
saying that U.S. research investment has declined and
“I think that’s producing long-term weaknesses in the U.S. technology effort.”

An example of weakness was explained to
a House Small Business Committee hearing in October 2003.
While the U.S. military proudly claims to “own the night,”
Siva Sivananthan, the inventor of
the cadmium mercury telluride semiconductor materials
that make night vision possible,
told the committee that U.S. forces won’t own it for long because
the critical materials suppliers are all in Japan.
Since the U.S. suppliers who developed the most advanced systems
have licensed or transferred their production to overseas firms, he noted,
no U.S. company is capable of producing the necessary equipment.
He had to license his own technology to a French company
that is now selling the equipment to China.
Sivananthan further explained that
research and university study in the area has ceased in the United States
due to the absence of manufacturers.
China, India, Israel, France, Germany, and Britain, however,
are all investing heavily in new systems.
Surely one or all of them will appropriate the night fairly soon.
Similarly, the twelve-member
Commission on the Future of the United States Aerospace Industry
told a Washington press conference that
“the industry is in a nosedive and if it doesn’t pull up soon
it’s going to hit the ground.”

The President’s Council of Advisors on Science and Technology (PCSAT)
made perhaps
the most balanced and comprehensive
assessment of the U.S. technology situation
in January 2004.
It emphasized that
“the big winners will not be
those who simply make commodities faster and cheaper
than the competition.
They will be those who develop talent, tools, and techniques
so advanced that
there is no competition” [Prestowitz’s emphasis].
The report then noted that
while the United States retains global technological preeminence,
its continued leadership is not assured.
While the United States may still have the best and most flexible
R&D, workforce, universities, rule of law, infrastructure,
and entrepreneurial business climate
[actually that is debatable],
along with the world’s largest market [?],
key elements of this “innovation ecosystem” are eroding rapidly.
One reason for this is that
“we are not just competing against foreign companies,
but against foreign countries.”
Overseas governments provide attractive packages of
capital grants, tax holidays, free land, worker training, and other incentives
to induce investment by foreign technology companies.

Many technology CEOs told PCSAT that
they had to move their manufacturing operations overseas
to stay competitive.

having learned to manage complex global manufacturing,
technology companies increasingly find that
the incentives make offshore manufacturing almost irresistible
even if there is no competitive necessity.

The PCSAT drew particular attention to the absence of U.S. companies
from the ranks of many industries that are heavy users of high-tech devices.
It described loss of manufacturing employment as not a problem per se
(workers might disagree),
but emphasized that
the decline of manufacturing as part of the U.S. economy
is perhaps the single most important problem.
The reason is that
the “research to manufacturing process
is not sequential in a single direction,
but results from an R&D-manufacturing ecosystem consisting of
basic R&D, pre-competitive development, prototyping, product development
and manufacturing”
all operating in such a way that
“new ideas can be tested and discussed with those working on the ground.”
The PCSAT concluded that
“locations that possess both strong R&D and manufacturing capabilities
have a competitive edge.”

In other words,
there is a link between the factory floor and the research lab.
Neither can survive without the other.
In this, the PCSAT echoed the Senate Manufacturing Task Force,
which had earlier concluded that the United States
cannot lose its manufacturing base
and still maintain its leading edge in design and R&D.
“It all goes together,” said IBM Technology Group vice president Randy Isaac.
“You can’t do effective R&D if you don’t have
the manufacturing to ensure that the R&D is actually relevant.
If the United States loses its manufacturing lead
it will lose everything else with it.”

The PCSAT, National Academy of Sciences, and Senate Manufacturing Task Force
all noted the long-term implications of
escalating capital costs combined with market absence or exclusion—
or what Richard Elkus Jr. and Akio Morita refer to as
the strategy of leverage and linkage.
If a country or a company or some combination of the two
can keep competitors out of an industry
whose capital investment requirements are steadily rising,
at some point market entry
will simply be prohibitively expensive for competitors
unless they can get help from their governments or deep-pocketed cartels.
Leaving a fundamental technology area means that
participating in technologies that evolve from it
becomes virtually impossible.
This strategy was identified as a very real threat
to long-term U.S. technological competitiveness
because of
the willingness of governments and industries in the rest of the world
to use it.

Two other elements of the ecosystem,
scientific education and overall R&D effort,
were seen as weak.
With regard to education,
the number of Americans obtaining science and engineering degrees
is small and declining.
In 1999, for example,
the United States graduated 220K students with B.S. degrees,
about the same as in 1985 and down 5 percent from ten years ago.
China graduated 322K and India 251K.
Both countries have much larger populations,
but their economies are only a fraction the size of the U.S. economy.
And the Indian and Chinese numbers are set to double in the near future.
Japan, with half the U.S. population, graduated 235K with B.S. degrees,
and the EU-15 with a population about one-third larger than the United States,
graduated 555K with B.S. degrees.
Except in the life sciences,
the U.S. number is lower now than it was in 1985.

The picture in graduate education is worse.
The proportion of university doctorates awarded to foreign students
has grown from 35 percent in 1987 to over 50 percent in 2004.
And whereas 80 percent of foreign-born graduates
stayed in the United States in 1987,
now the majority go home after receiving their degrees.

Even more disturbing is the declining performance of
U.S. grade school students.
It appears that the longer they stay in school,
the worse they do.
International tests show U.S. fourth graders
in the eighty-fifth percentile in science
and the fifty-fifth percentile in math.
By the twelfth grade, however, they have slipped to
zero in science and the tenth percentile in math.
But never mind, the same tests show that they rank first
in the students’ assessment of their own performance—
making the Americans number one on the feel-good scale.
[The educational establishment some decades ago
made building “self esteem” a goal.
That’s how the combination of left-wing thinking and psychology
can attack and destroy a healthy society.]

As for R&D, while the United States is the biggest spender,
its rate of investment has been lagging
and is skewed toward the life sciences.
At $295G, the U.S. R&D budget is about double that of Japan
and about a third more than that of the EU as a whole.
In terms of purchasing power parity (ppp),
it is just about equal to China’s $60G.
(China’s prices are much lower, so that $60G there
buys as much as $300G in the United States.)
But the U.S. budget is only 2.7 percent of GDP,
as opposed to the 3 percent level at which it stood in 1960.
This compares with Japan’s 3 percent level,
Singapore’s 3.2 percent, and Korea’s 3 percent.
Europe as a whole is at 1.9 percent,
but Sweden and Finland are in the 3–4 percent range
while Germany is at 2.6 percent.
[I.e., the most successful European economies also spend the most on R&D.]

There are two important points.
First, of the U.S. spending,
industry R&D in 2004 accounts for about 66 percent and government the rest.
These rations are the reverse of the 1960s.
Because industry does mostly D and not R,
the shift in ratios means less R is being done in the United States,
relative to GDP, than in the past.
Second, although government spending has been rising for several years,
the increase is almost entirely in biotech.
The physical sciences have actually been cut by 37 percent since 1970.
total U.S. government spending on physical science is less than
the $5G Intel spends annually.

The result is declining U.S. performance.
Last year the only American company among the top ten U.S. patent recipients
was IBM.
All the rest were foreign firms.
Similarly, EU scientists have topped Americans in
the numbers of articles published and cited over the past several years.
Until the late 1990s,
U.S. publications outnumbered the rest of the world combined.

the grand old industrial labs like Bell Labs
have been turned into mere husks.

[Also there was
Xerox’s Palo Alto Research Center,
RCA’s David Sarnoff Research Center,
IBM’s Thomas J. Watson Research Center, and
GE’s General Electric Research Laboratory,
among whose founders were such luminaries as
Thomas Edison, Charles Steinmetz, and Elihu Thomson.
The IBM and GE research centers at least
still have a viable corporation giving them some support;
Xerox and RCA have melted away
(RCA, even after its takeover by GE, left the commercial electronic field),
while Bell Labs is now a branch of Alcatel-Lucent.]

It has been twenty years since anyone at Bell Labs received a Nobel Prize.
[Maybe not: this shows one in 1998.]
In times past, this was an annual event,
but as its budget and staff have been slashed,
some of its scientists have been doing consumer expectations research
instead of studying basic physical problems.

[As of 2010-12-29, the following appeared in the Wikipedia article:
“On August 28, 2008, Alcatel-Lucent announced it was pulling out of
basic science, material physics, and semiconductor research,
and it will instead focus on more immediately marketable areas including
networking, high-speed electronics, wireless networks, nanotechnology and software.”]

If you want to see the future, you won’t find it at Bell Labs anymore.
You’ll have to take a long plane ride to Asia
or cross the Atlantic to the European Union.

[End of chapter 6.]

Chapter 7
High Tech II:
The World’s Baby

Last Section of Chapter 7
The Future of the United States in Global Technology

Conventional Remedies Won’t Work

The remedy normally prescribed is a combination of
increased spending on education, engineering, and the physical sciences,
reform of K-12 education,
granting more visas to talented foreign students,
more incentives for U.S. entrepreneurs,
and better protection of intellectual property.
But these measures are probably insufficient to reverse the trends.
During a week of interviews
with leaders of venture capital and technology firms in Silicon Valley,
I found that
the tech company executives are moving R&D out of the U.S. base
as fast as they can,

not only for reasons of cost and quality
but also because of the link with manufacturing,
which is increasingly being done abroad.
The head of one major semiconductor manufacturer quipped that the only reason for staying here is because some of the top execs like the neighborhood.
Extra funding and more science graduates will not change this trend.
One Santa Clara University professor told me
enrollment in engineering is falling by 30 percent a year
because the kids have figured out that
there won’t be any jobs in those disciplines.
They’ll all be in Asia.

While they lament these trends,
the CEOs and venture capitalists find themselves in the peculiar position
of being pushed to move jobs and transfer technology.
American thinking eschews economic strategy
and offers no countervailing pressures.
On the contrary, it embraces whatever the companies do
as by definition the best outcome.
Thus Cisco CEO John Chambers says
China will become the information technology center of the world
sometime between 2020 and 2040,
and Cisco is trying to develop a strategy for becoming a Chinese company.
[I find that both astounding and sickening.]
Another top CEO says
although he is concerned about the drift of things as an American citizen,
he has a fiduciary responsibility
to do what is necessary to keep Agilent healthy
and has to depend on the guys in Washington to take care of America.

One venture capital manager urges all the biotech start-ups he funds
to move as much research and development as possible to China and India.
When I asked how he felt about the long-term implications of that
to the U.S. economy,
he acknowledged some concern, but then said,
“Look, I’m a loyal citizen but
what happens to the United States is not my job.
I have a fiduciary responsibility to my investors.
The guys in Washington as supposed to be worrying about the United States.”
This is a logical assumption.
Americans hold elections and send people to Washington
to worry about the nation.

no one in Washington is minding the store
American economic doctrine holds that
worrying about this sort of thing
is not Washington’s job either.

[Too simplistic an answer.
A more accurate and complete answer would take account of
the points Eammon Fingleton and Pat Choate have repeatedly made:
that foreign money has flooded into the American political and media elite
and has, literally, corrupted them
to argue in favor of the interests of their paymasters,
the big advertisers, donors, and funders,
whose interests are most certainly not the same as
those of ordinary American citizen.
Of course, various subterfuges, smoke screens, and rationalizations are offered
to make policies which actually will harm the American national interest
sound appealing or inevitable.]

If you asked leaders in Washington about these issues,
they would respond by asking what the business community thinks.

Nobody is taking an interest in
the health of the long-term economic structure of the country
because America’s economic ideology says
it is wrong to do so.

Sometimes those worried about what they see as negative trends suggest that
business leaders are “Benedict Arnold CEOs.”
This puts the CEOs in a difficult and unfair position.
They are being pushed offshore by an alignment of forces
[Examined and described in detail in Offshoring America by the Hiras.]
American business doctrine and law holds that
their primary responsibility is to their shareholders.

No one in Washington is concerned.
It might be heroic for the business leaders to resist these forces,
but it could also be suicidal.

Thus the logic
that is moving manufacturing to China and services to India
is moving R&D to those countries as well.
I have spoken with hundreds of
American business, government, media, and academic leaders
on the topic of long-term competitiveness over the past twenty years.
Their advice is always the same as Marc Andreesen’s:
America has to invent the next new things.
This response assumes that
the next new thing invented by Americans
will also be commercialized in the United States
and thereby create high-wage employment for ordinary Americans.

This is what Andreesen assumes ....
The problem for Americans is that the assumption is only half right.
Surely there will always be the next new thing
waiting somewhere in the wings.
But it won’t necessarily be waiting in America,
and even if it is,
it almost certainly won’t be commercialized in America
and won’t provide jobs for ordinary Americans.

Intel’s Barrett captured the situation perfectly when he commented that
“Intel will be okay no matter what.
We can adjust to do our R&D and manufacturing
wherever it is most economically advantageous to do so.
But in addition to being chairman of Intel,
I am also a grandfather, and I wonder what my grandchildren are going to do.”

[End of chapter 7.]

Labels: , , ,