The U.S. Economy

No, innovation is the U.S. edge

By REETA SINHA

With apologies to Mark Twain, reports of the demise of the U.S. economy are greatly exaggerated. To be sure, there are some worrying signs, such as record-high fuel prices and manufacturing job losses. Small-town folk in the Northeast, in their 50s and 60s, will lose jobs when more factories close; there are no new jobs waiting for them. Continued hikes to the interest rate and the impact of upcoming elections cause concern as well. (Let’s face it: immigration reform wouldn’t be on the news so often if votes weren’t crucial.)

However, the outlook for the coming year is positive, as are recent economic indicators. Job growth is predicted to go up steadily, not just in the service sector but also in construction and manufacturing, and the stock market continues to perform admirably. Depending on the region, new-home construction continues to increase, and in recent months, prices have begun to stabilize in some of the more explosive housing markets. Really, if one’s home appreciates at 20 percent per year instead of 40 percent, is it a sign of economic doom and gloom for the United States?

Most importantly, though, the United States continues to lead in the type of investment that matters most—investing in innovation, research, and development. Business Week, in a recent issue, listed the 25 companies rated as the most innovative based on a survey of executives worldwide. Over 15 of the companies are U.S.-based (Apple and Google lead for 2006). Even when broken down regionally, those surveyed in the Asia-Pacific rank more American companies as the most innovative than those in their backyard. Go figure.

Don’t get me wrong. After decades of watching India be ignored or pooh-poohed, there’s more than a little satisfaction now watching the pundits (most notably CNN’s Lou Dobbs) froth at the mouth in angst over outsourcing and the rise of India and China. In those same decades, however, we have watched the United States regroup, reinvent itself, and rebound from hard economic times. 1981, 1992, and 2001 were rock-bottom years for the U.S. economy, but history has shown what this country is capable of when times are hard.

It’s been no different since the recession of 2001. Up is the only direction the United States is headed, its educational system’s deficiencies notwithstanding. Even there, with Indian students leading the way in foreign-student enrollment at U.S. universities (up from 2004 in 2005) it’s apparent not all Asians are staying away and, if they do go home, funny how so many join Made-in-the-USA companies.

It would be folly to write off the United States just yet. These Asian economies—not quite thoroughbreds yet—have a long way to go before they can take that victory lap. First, they have to catch up.

Reeta Sinha wrote this column from New England.

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Yes, rising Asia is the horse to bet on

By RAJEEV SRINIVASAN

The recent fuss about immigration reform was an excellent counterpoint to the annual ritual of setting limits on H-1B visas. Taken together, these two imply something startling: the United States does not want skilled, employable immigrants, but is willing to accommodate unskilled illegal immigrants: no to scientists, yes to agricultural laborers! Official America is clearly clueless about human resources.

The United States is slowly losing its appeal to educated immigrants, especially Asians. It is all very well to thunder about “the huddled masses,” but focusing on them is a luxury that only an overwhelmingly dominant world power can afford. America in the 1950s could do that, as it bestrode the world like a colossus, but in 2006 it is no longer unchallenged.

Jacques Servan-Schreiber wrote Le Defi Americain (The American Challenge) a few decades ago, warning complacent Europeans that America would leave them in the dust. Today, there is a looming defi Asienne, and the United States ignores this at its peril. There are plenty of storm signals out there: the BRIC idea from Goldman Sachs about rising Brazil, Russia, India, and China; the withering away of General Motors; the ever-rising U.S. trade deficit; and the diminishing quality-of-life advantage that the United States has always enjoyed.

Add to this the observation, “Johnny Can’t Add But Suresh Venkatasubramanian Can,” the title of a provocative article by an observer who looked at published papers and noted that there are disproportionately high numbers of Chinese, Koreans, Indians, and Jews among U.S. research personnel. Also consider an article in USA Today, May 23, 2005, which mentioned that enrollment in computer science and engineering undergraduate programs plummeted from 23,416 to 15,950—a 30 percent drop—between 2000 and 2004 in North America.

The trick, they say, is to outsource all the uncreative, low-end technical work, both manufacturing and services, to the low-cost labor in India and China, and keep the high-end R&D; and design activities in the United States. Okay, but consider that with natives not exactly flocking to science and technology, the R&D; programs are increasingly dependent on immigrant Indians, Chinese, Russians, and so on. What if the Asians go home?

Other nations are not idle, either. Australia has a clearly defined system of preferences to offer permanent residency to educated, young, English-speaking professionals. So does Canada, another quality-of-life champion. Many Asians are also staying back home as educational and professional opportunities improve. China has launched an ambitious program to create 100 world-class universities shortly. Indian software engineers now get high-end design jobs at home.

Yes, the United States still has its advantages, such as entrepreneurial clusters and venture capital. But dumbed-down schools and unaffordable housing make the United States less appealing.

Rajeev Srinivasan wrote this opinion from Pune.



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