Is the United States losing its competitive edge in the world market? A recent report presented to the U.S. Congress in October argues that we are. In “Rising Above the Gathering Storm: Energizing and Employing America for a Brighter Economic Future” we learn that America is losing the global innovation race, despite the strength of our university system, which continues to train and educate many of the world’s brightest scientists and engineers.
How serious is the situation? Did you know that, according to the report, for the cost of one engineer in the U.S., a company can hire eleven in India? Or were you aware that China had fifty multinational research centers in 1997, but today there are over six hundred? But what about the technology revolution: the Silicon Valley miracle? In fact, it’s fading fast, if you believe the authors of the report. In fact, the U.S. has become a “net importer of high technology products … America’s trade balance in high tech manufactured goods shifted from a positive $33B in 1990 to a negative $24B in 2004,” according to the study.
Why is this happening? The authors of the report argue that our educational system is to blame. By not emphasizing mathematics and science fundamentals in primary education, we are permanently handicapping our ability to compete in a global economy. This manifests itself later, at the college level, where 5% of U.S. undergraduates earn engineering degrees (versus 50% in China).
Clearly, this report is sounding some much warranted alarm bells. But are any of them misleading? If you look back at the history of technology innovation in the U.S. in the past two hundred years (which is really the history of manufacturing innovation worldwide during the same time frame) you’ll find an indirect correlation between education and innovation at best. Henry Ford, who pioneered the assembly line modem production system in 1913, never attended a university. More recently in the late twentieth century, Michael Dell and Bill Gates dropped out of college to pursue their dreams. One wonders what the global economy would look like without these three innovators (who shunned the rigors of a formal education). Now certainly, for the same reason that domestic manufacturers and farmers pushed west looking for access to cheaper labor and land in the late 19th and early 20th centuries, it makes sense for the Dells and Microsofts of the world to employ engineering and production talent in low cost regions. But even these efforts, as Dell has learned, can backfire (Dell recently ended a contract with an Indian call center because of customer service complaints).
Clearly, we should take seriously the recommendations and analysis in the Congressional report. For example, except for the teacher’s union who has a vested interest in maintaining the status quo, most of us can agree that our primary and secondary educational system could do with a significant overhaul. But as long as we maintain a system of government that affords those who succeed to keep the fruits of their labor (at least in large part), and preserves their chances of success by providing stable laws that provide intellectual property protection, it’s likely that we will continue to remain a country at the center of global innovation. At the same time, maintaining a healthy dose of paranoia is probably a good thing. But not at the expense of xenophobia policies such as placing indirect limits on the number of foreign graduate students who study in our universities (by providing a new set of scholarships to domestic applicants) that the report hints at. Rather, we believe that the key to maintaining our edge is to make this a country that innovators and entrepreneurs aspire to do business in.