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Monday, August 08, 2005

Fortune Should be Ashamed of this Article

Every once in a while somebody suggests that I read an article that I find is so far off from how I believe the world works that I just shake my head in quiet and perplexed astonishment. The latest (and greatest) in a long line of such articles comes from Fortune and is titled “CAN AMERICANS COMPETE? Is America the World's 97-lb. Weakling?

The general gist of the article is that as the rest of the world gets more skilled, innovative, and productive, the United States will get poorer, unless, of course, the Federal government jumps in and does something about it. Let's look at some specific excerpts, starting with:

Respectable analysts believe it’s possible—not certain, but possible—that the U.S. standard of living, after decades of steady ascent, could stall or even begin to decline.

It doesn't say who the “respectable analysts” are (or why they're respectable), some people (even respectable ones) will believe anything, and I suppose anything is possible. Nonetheless, the concept that as other countries, via a combination of investment and technological innovation, produce more and more and even more for local and global markets, the United States will have less and less, defies not only common sense, but the basic economics of trade and comparative advantage. Sure, those other countries may become wealthier than the United States, but that process is likely to bestow economic benefits on the United States as it happens, helping the United States become wealthier in the process. Most importantly though, just because other countries develop skills in similar areas doesn't mean that there won't be plenty of jobs to go around in the United States. Which brings us to the next excerpt:

McKinsey figures that about 4.1 million service jobs will actually get offshored from high-wage countries to low-wage countries by 2008. It doesn’t make a forecast for U.S. jobs, but others have done so. Forrester Research puts the number at 3.4 million white-collar jobs by 2015.

3.4 million jobs by 2015? That's all? We're supposed to be worried about that? Consider this: the United States will likely create a net gain of over 20 million jobs during that period. Even more amazing is that every year, tens of millions of jobs are destroyed, and tens of millions more are created. Thus, between now and 2015, it's likely that over 300 million jobs will be created and destroyed. Forrester Research's 3.4 million jobs is just noise in comparison. Even Berkeley's much higher estimate of “perhaps 14 million” is just a drop in the bucket.

They [some economists] note that something extremely odd occurred in the U.S. economy last year: Average compensation, including pay and benefits, fell. That is a rare event; the last time it happened was 14 years ago.

Interesting, but there's no link or reference. I'll give a reference just for, well, reference. According to HUD, the median family income rose about 2% between 2003 and 2004 and is estimated to go up again in 2005. I reckon the stated fall in average compensation was negligible, and until I get to look at the actual numbers, color me skeptical (which I think is a deep shade of purple).

As other nations multiply their science and engineering graduates—building the foundation for economic progress—ours are declining, in part because those fields are seen as nerdish and simply uncool. And our culture prizes cool. [...]

The No. 1 policy prescription, almost regardless of whom you ask, comes down to one word: education.

So how exactly are you going to get the government to convince students that “nerdish” is “cool”. Governments are particularly bad at that. And if people aren't interested in learning, they're not gonna (well, I'll be damned - I put “gonna” in as a sarcastic, uneducated sounding slang, fully expecting the spell-checker to complain, but it turns out that “gonna” is in the dictionary – clearly I need some better edjucatin').

John Doerr, the legendary Silicon Valley venture capitalist, recommends that every foreign student who gets a Ph.D. at a U.S. university should also get a green card (granting permanent residency) stapled to his or her diploma.

Oh heavens, that's just what we need. That'll mean more immigrants from the Middle East with Ph.D.'s in Islamic studies (with concentrations in extreme Islam). How about just making it somewhat easier for a company to hire foreign engineers? Though even in that case, why not just contract to a foreign firm, rather than import people?

The Council on Competitiveness, consisting of CEOs, university presidents, and labor leaders, wants federal research spending increased substantially, to 1% of GDP—about $110 billion a year.

Not much of a surprise that a group of university presidents would want to increase federal research spending. That's sort of like a bunch of alcoholics wanting increased spending on the nation's ethanol program.

The general concept of having the government coming in and guide the country through the upcoming imagined crises is nauseating to me. Sometimes governments hit it right, as Japan's did in the 1980's, but more often they get it wrong, like Japan's after the 1980's or the Soviet Union's did during their entire existence. Just leave people free to innovate and they will.

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