The United States is undergoing an approaching upheaval of their economy and it will require a drastic overhaul and economic restructuring, this is due to the pressure of globalization and the rising knowledge economy.
America’s manufacturing core, once the heart of the nation’s industrial production and wealth creation, is losing ground rapidly to cheaper foreign competitors. For many workers caught in the throes of this important sector, the future is dimming. Most local leaders have no answers and most state and federal leaders are so far removed from their constituents realities they spend little credible time trying to consummate a real plan to lead us out of this chaotic time.
At this critical moment, federal investment in U.S. competitiveness lacks a regional and local focus. Federal policy fails to recognize and thus invest in the premise that national growth is driven by integrated regional economies with the strong underlying assets and local capabilities. It is always the local innovations and risks that drive human capital and talent creation and create national prowess not the other way around. The next President should create a specific agenda for rebuilding America’s competitiveness and restoring confidence to the average American worker. In my opinion and many other experts this should include an investment strategy that focuses on regional asset and institutions that build bridges to traverse the chasm in the economy creating by globalization and thus create a transition to the knowledge economy without writing off our industrial capabilities.
The next U.S. President should greatly expand federal investment in a model of matching local economic development capacity buildings projects that are each specific to their locales but rational given today’s current economic opportunities. This joint Triad of Federal, State and Local jurisdictional collaboration should be the back bone for a Blue Ribbon leadership initiative to restore American national competitiveness.
Change has not come easily to many and most communities and citizens in the highly old industrialized states. Legacy costs of the industrial past are high, damaging prospects for successful transition to the knowledge economy or successfully rebuilding a new strategy for restoring their manufacturing capabilities within a globally cost effective business climate. These old industrial centers represent about 1/3 of the current U.S. economy or about 100 million people.
America is losing its dominance in science and engineering—and its potential to drive innovation worldwide—as India, China, Japan, Korea and other emerging economic powers begin to produce more scientists and engineers and assume positions of leadership in the knowledge economy. Much of the infrastructure needed to educate more American scientists, teachers, engineers, and mathematicians already exists in the learning institutions of the old industrialized central core of our country. Education itself has to become for risk taking and become for performance based so it can propel the U.S. human capital back to the front seat of the hot rod innovation producing societies amongst the world economies.
Recent competitiveness proposals released by the Bush Administration and the National Academy of Sciences, as well as others, call for reviving the federal commitment to basic and applied R&D, which, over the past 30 years, has dropped from 2 percent of GDP to less than 0.8 percent. I absolutely support the increase in this capacity as denoted in my book, “Who Moved My Smoke Stack?”. Rather than pick specific industry “winners and losers,” this commitment should cover the broad areas of improving health, alternative energy, basic sciences, advanced manufacturing and communications technologies, which have more often than not launched new technologies and industries. This basic focus would then justify our need to rebuild our aged and rapidly breaking infrastructure including creating a new distribution system and production plan of alternative power and cleaner more diverse non-automobile based massive capabilities to move regular commuters and business commuters alike across our country smoothly, efficiently and at a reduced cost of the current fossil fuel based strategies of highway and airways, both of which are over crowded and expensive solutions.
To enhance U.S. competitiveness, the next U.S. President should propose a long overdue increase in federal non-defense research funding, through the National Science Foundation, National Institutes of Health, and other entities.
In order for states to warrant receiving more resources, they should agree to deliver “bang for the buck” by matching federal research dollars, perhaps on a 5:1 federal-state basis. This could be accomplished by tapping bonding authority and pension funds, partnering with university endowments, and (as some already are doing) securitizing tobacco master settlement agreement monies. One advantage of this approach would be to assure that state research dollars go toward high-quality, innovative professionally vetted and backed projects, as opposed to appropriations politically steered from state capitals and our congressional leadership which is truly the best money can purchase. Demonetizing the support of our politicians from their corporate masters is important in this rebuilding process, which I espouse in my recently finished book, “Who Moved My Smoke Stack?”
Today, this legacy system of employer-provided benefits—especially health care and pensions—is an economic yoke tying older employers to outmoded and at-risk jobs, making U.S. manufacturers and other industries noncompetitive on labor costs, and curbing labor flexibility and adaptability in the fast-changing globalized economy. As a result, Canadian and European manufacturing employment has remained far more stable than that our own U.S. manufacturing base and less prone to offshoring.
Employers across the United States are curtailing employee benefits, with only one in five private-sector employees now participating in a defined-benefit pension plan. Existing pensions are under-funded by an estimated $450 billion. This, of course, has led to risky ventures or use of these funds by less than scrupulous corporate comptrollers. As for employer-based health insurance, the percentage of U.S. workers covered by such plans has dropped from 64 to 59 percent in the past four years—and this decline is even greater in the old industrialized states. To escape pension and health care obligations, many employers are resorting to strategic bankruptcy, setting in motion large layoffs and a heightened sense of job and benefit insecurity. This has caused the once friendly Midwestern states to become now the stressed out and paranoid states where it is kill or be killed in their job protectionism and negotiation tactics between their workers and management.
This outdated social compact with our workforce and our communities at large is one of the greatest current challenges to the overall competitive position of the United States. It is also the greatest failure of the last 20 years of state and federal leadership. Their complete lack of building a new fair and equitable social compact is the greatest travesty of the late 20th and early 21st century.
“Finding creative ways to remake our vital employee-benefits and social security systems tied to a fair tax code that creates profitable local business climates in an era of global competition, while maintaining our high quality of life, retiring our out of whack national debt structure and creating a tax code that is more logical and fair to all participants and creating a balanced and profitable foreign trade and exchange rate policy, will be one of the most pressing concerns of the next U.S. President.” Don Allen Holbrook, CEcD
As I discuss in my book “Who Moved My Smoke Stack?” If we lag at rapidly embracing this responsibility we as a nation will sail right past and over the “American Tipping Point” and start a fast slide to less than Super Power status. Much worse the resurrection of the American Dream might be beyond repair for the next 2-3 generation of Americans. A federal-state-Local partnership to transform these pillars of our society can enhance employer competitiveness, as well as worker mobility and adaptability, and state and local governments’ fiscal positions to invest in their own versions of success for their respective futures. The next U.S. President will have the opportunity, working in concert with state and local political, labor, and business leaders, to develop regional strategies to remake the social compact and restore American Capabilities to produce goods not just knowledge.
National policies set the stage for robust local innovation and productivity. The next U.S. President will lead a nation struggling to retain an innovative edge in the global economy—a nation searching for a new competitiveness strategy to renew the belief in the American Dream. A nation that is not trusting of her elected leaders to do right by her voters and fearful that our corporate royalty will continue to supplant their best interests for their own profit motives abroad and at home. A wise approach to new federal investments would recognize that the primary focus of innovative activity is within geographic regions even in micropolitan and rural areas. That is the level where companies, workers, universities, and governments form networks that drive production and the sharing of ideas. Regions serve as “laboratories of democracy,” inventing new models for industry, education, social security and workplace organization. This is where the new compact can be tested and reward those that take the bold initiative and lead by example. Placing our national economic capacity behind such examples will cause others to follow suit. Communities still have to realize they have to be willing to invest in themselves first if they desire others to do so.
The Brookings Institute recently has undertaken a couple noteworthy projects that I believe Economic Developers and concerned citizens should be interested in following. The first is the Metro Nation project, which advocates that leading America to renewal starts in our core metropolitan areas. These areas, according to Brookings experts, are the center of the vast majority of our industrial, knowledge and human capital capabilities and account for most of our nation’s Gross Domestic Product (GDP). Economic development today has to understand how to support our core urban areas as well as balance the new trends of rural renaissance as a national agenda. This will require the Feds to play an even handed and equitable role in supporting both opportunities for America to rebuild and secure the American Dream for the next century and beyond.
"In the 21st century the economies are going to be focused in the metropolitan areas of America. The 2008 election is a chance for us to have a conversation as a nation about what drives that economy and how the United States is going to be successful competitively in a global economy." — Mayor Greg Nickels, Seattle, WA
“Despite facing new and unprecedented challenges—economic, environmental, and demographic—America stands in a position of great strength. To achieve economic prosperity that is broadly shared and environmentally sustainable, our nation must leverage the key assets—innovation, human capital, infrastructure, and quality places—that principally concentrate in our major metropolitan areas.” Alan Berube, The Brookings Institute.