How exactly does America stay competitive, anyways?

January 26, 2011 4:29 PM

How exactly does America stay competitive, anyways?

Watching Obama's SOTU address, I came away pretty confused (although not surprised, as I'm a pretty progressive guy). Besides the fact that this is an old canard like "cutting redundant regulations" (as the NY Times has pointed out), I'm hoping someone can point out to me how America has even the slightest chance of staying competitive and still maintaining even a semblance of a middle class.

Obama called for 100,000 new science and math teachers... except new teacher pay is terrible, they're the first fired if there are financial troubles, and very few school districts are even HIRING full time teachers. He even called for working harder, even though Americans work more hours and are the most productive in the world. The big thing he didn't talk about, however, was the effect of globalization and offshoring on US labor. How do Americans compete against people working for a few dollars a day as gas gets more expensive, food gets more expensive, and as Social Security is threatened (requiring more savings... which of course accrue virtually no interest these days)?

I know this isn't the sort of question usually welcomed on AskMeFi, but I wanted to hear what you guys had to say because I've heard literally zero answers that make any sense in regards to how America stays afloat without becoming radically isolationist/"economic nationalist".

posted by speedgraphic to society & culture (22 answers total)

How do Americans compete against people working for a few dollars a day as...

One part of the story is that not everyone DOES compete in that way, in fact a relatively small proportion of the population does, because a whole lot of people work in non-export-competing service jobs. For instance: a low-wage person in the third world cannot install your wiring, fix your pipes, serve you dinner, repair your car, or ring up your clothing purchase.

More details: Krugman's column from a few days back titled "The Competition Myth".
posted by rkent at 4:42 PM on January 26, 2011 [1 favorite]

Americans don't compete against people making a few dollars a day. We've conceded defeat in these industries, which is why there is so little manufacturing in this country, for example.

Other industries are impossible to send overseas, like construction, or too big of a risk to send overseas, like defense.

In other industries, we still have the best talent and the best jobs, and many of the best people from other countries tend to come here to seek those jobs. This is true in the software industry -- sure, some things are outsourced to India, but not the really cool things or the really hard things. Those things are still done here, even if half the people working on them have immigrated from India or China or Eastern Europe.
posted by tylerkaraszewski at 4:42 PM on January 26, 2011

So we've got domestic construction (which is in the largest slump it's ever been) and defense? And with all due respect to the hard working individuals who have slogged through the American immigration process, most of the foreign people working in software are not American citizens and have the ability to return to another country.
posted by speedgraphic at 4:46 PM on January 26, 2011

1) While teacher pay might be low, the supply of people trying to be teachers is still pretty solid. It's one of the standard fallback "what do I do with a liberal arts degree?". If the government can shore up the funding and guarantee the supply of jobs, people will voluntarily take those jobs.

2) Isolationist policies do not guarantee economic success. Fewer consumers and higher prices restricts the well-being of a country. Right now seamstresses might struggle to compete with sweatshops in China, but we can also go to Forever 21 and change our wardrobe every season. So the lower wages those seamstresses are taking are also being stretched farther.

Further, America gets a great bargain in an open economy. We headquarter a large number of multi-national corporations. So while the low-paying jobs might be shipped overseas, we get to keep the higher paying white collar jobs like accountants, sales reps and programmers.

There are some concerns of a brain drain from America that shift this power dynamic. Other countries are putting a large emphasis on engineering and other jobs that we used to expect would be handled by Americans. So it's understandable we want to try and maintain that competitive advantage.
posted by politikitty at 4:55 PM on January 26, 2011

I think America can stay competitive by developing the technologies of the future -- particularly green technologies like clean energy and electric cars. These are sectors that China is heavily investing in and that the US is setting itself up to be seriously left behind on, unless we also invest big money . . . which I think may be what this 'competitiveness' emphasis is all about. The argument for keeping the US competitive/'on top' is eventually going to be an argument for major government funding in these new technologies.

I could be wrong. But so much of what Chinese companies are doing in these sectors is due to government support and encouragement. I think the US government is going to have to provide similar incentive if we hope to be successful in these areas.

Btw . . . Americans don't really work more than everyone else in the world. More than Europeans? Yes. More than Asians? No.
posted by imalaowai at 5:02 PM on January 26, 2011 [2 favorites]

Part of the story is that we have (almost) all the rich people. Best way to make money is to have money. Also, the above answers.
posted by yeolcoatl at 5:05 PM on January 26, 2011

Americans do not work more hours than everyone else in the world. They also live much better than most people in the world. But it'll be much more difficult for America to stay as competitive as it is, now that there's more competition. As a result, right now, we are witnessing a massive increase in wealth in the developing world and slow-to-stagnant growth in the developed world. This will continue, I think.
posted by smorange at 5:05 PM on January 26, 2011

I thought it was obvious but I was comparing American worker productivity and hours to developed nations as part of an apples-to-apples comparison. I am aware that most Americans don't whittle their fingers away for $1/day, 12 hours a day, and for that I'm very fortunate.
posted by speedgraphic at 5:10 PM on January 26, 2011

I thought it was obvious but I was comparing American worker productivity and hours to developed nations as part of an apples-to-apples comparison.

In that case, it's important to realize that the key to successful participation in a global economy is specialization, not attempting to compete on an apples-to-apples basis with everyone else in the global economy. There are several important things that the United States offers more effectively than anyone else. At the moment, those things include professional services, financial services, and, very importantly, a stable legal infrastructure and forum for trade, dispute resolution, and economic development. That's not guaranteed to last forever (or even for particularly long), obviously. But the key to success in the international economic market is not to try to undercut everyone's price on production of everything. The United States has reached a stage of economic development that comes after the goods-production-based economy that you see in developing countries. There's a legitimate question to be asked regarding what comes next and whether there really are further steps beyond where we are now.

But the vast majority of the United States' economic woes come not from some inability of the population to specialize in profitable economic activity. It comes from ineffective regulation of key market factors, mismanagement of government revenues, and short-sighted investment and corporate development, as well as redundant and self-defeating trade policy. Although those are very complex problems, they are precisely the sort of thing that the Federal government should be working to remedy.
posted by The World Famous at 5:18 PM on January 26, 2011 [4 favorites]

Your constant replies are teetering dangerously close to chatfilter for my tastes, but a few last suggstions:

1) The federal government is certainly capable of issuing a mandate, funded or unfunded to push k-12 schools to shift more of their resources towards math and science. Whether or not our government will follow through on this is an entirely different subject.

2) those workers don't cease to exist. But considering the number of jobs that have disappeared compared to unemployment rate, the economy is fairly decent at creating jobs in other industries for these workers. Further, if we're spending less on luxury goods, we have more money to spend on items that are getting more expensive.

3) Further, the idea that the cost of food will always be rising is short-sighted. People are voluntarily eating organic local goods that are pricier than other alternatives on the market. That's America's wealth showing, not proof of how expensive food is. And Brazil and other countries are making amazing technological progress that should diminish our concerns of a food shortage.
posted by politikitty at 5:23 PM on January 26, 2011

You stay competitive by increasing the per capita productivity of the average worker. What this means in regular speech is you educate people so they can create valuable things, and you make the process as efficient as possible. Educated people generally earn more, live longer, and work in more creative and fulfilling jobs. You get rid of the "low value" uncompetitive jobs - let someplace else where it costs less to live (for now, anyway) such as Kenya or Honduras.

There's a couple of challenges in this paradigm (who grows our food? how can ensure upward mobility continues to exist and avoid creating a permanent underclass of Wal Mart workers?), but this is an idea I have devoted most of my professional life in government over the past decade towards achieving.

I live in an extremely unproductive part of the planet - British Columbia. We cut down trees (until the American housing market imploded), we pump natural gas out of the ground (until the prices tanked due to overproduction), we fished for salmon (until the fish went basically extinct). We're always living at the whim of an ever-changing market.

We need to design things that are utterly original and can change the world.
posted by KokuRyu at 5:27 PM on January 26, 2011 [2 favorites]

My answer to this, both as advice to individual unemployed, and on a more national scale is:

Be innovative and creative.

I realize that sounds trite/glib/cliche.. but it's true. You have to take a long hard look at the places where you can't compete.. let go of those.. and focus in areas you can compete.

So for example:.. if there is already a glut of bars/restaurants in my town,.. it's probably not well advised to try opening another bar/restaurant.

If your job as a software engineer is being outsourced to another country. .then you either need to retool to a new career,.. or find a way to adapt your skills to a local need that can't be outsourced. (or innovate yourself in a way that other people can't replicate.)

People like Picasso weren't famous because of the paintings they produced. They were famous for their ABILITY to produce fresh new paintings.

Same thing is true for jobs like software programmers. You COULD outsource those tasks to some 3rd world digital-sweatshop... but by doing so you're losing sight of the real value. The real value isn't the code produced... its the ability to produce code.

Set yourself apart by your innovative ability to produce new ideas/solutions... not by simply producing another widget.
posted by jmnugent at 5:29 PM on January 26, 2011 [1 favorite]

Are you asking how we still drift along or how will we proceed from here? If the former, recall the coyote in the road runner cartoons after he has run off the cliff. If the latter, well, that's a subject.

Notice that Mr O's first public appearance after the speech was a start up small business. Now he's Mr Entrepreneur. Small business make the most jobs. So now he's getting all sweetness and nice with Small Business. Fair enough as far as it goes, which remains to be seen. People I know trying to get start ups started up are having a hell of time getting investment money, not least because people are still uncertain about the demands of health care coverage. (However you feel about Obamacare, it is something that start ups have to take into account, and are having a hard time doing.) These same people are discovering that federal grant money tends to go to established companies - again, arguably right or wrong, but not necessarily what one had been lead to believe would be the case.

Cures you want? Get the rocket scientists the hell out of Wall Street and back into engineering. Get the engineering schools to admit more citizens. Get the foreign engineering grads green cards. Good luck getting through human nature and politics with any of these.

The federal government is certainly capable of issuing a mandate, funded or unfunded to push k-12 schools to shift more of their resources towards math and science.

Mandate all you like, you can't just order up math and science teachers like an order of french fries.
posted by IndigoJones at 5:44 PM on January 26, 2011

Indigo, starting a business always has uncertainty. There is no reason why the health care law should cause uncertainty. They can just not offer insurance and pay their people more.
posted by gjc at 6:04 PM on January 26, 2011

One needs to distinguish between relative difference in living standard and absolute difference. I think the relative dominance of American living standard compare with the world will go down. It's possible to maintain 100:1 income ratio with Chinese and Indian when they were doing manual farming and light industry. It's impossible to maintain the same ratio when they are doing electronics and software. In fact, in term of high tech industry, Chinese and Indian companies enjoy some distinct advantages that Western firms don't have: a lax enforcement in IP laws, environmental law and labor law. Their products are selling in Western countries, but their production at home is operating under a completely different constraints. It's also quite difficult for Western firms to compete in China and India too. Besides the visitor disadvantage and local government discrimination, they also are restricted by 2 sets of law, from their home country and abroad. Look at how Yahoo is sued when a Chinese dissenter was arrested.

However, we should feel better than on the absolute scale, American living standard are still improving. We have good infrastructure here which outclass those in China and India; and a social safety net which protect citizen from government abuses, lawlessness, pollution, even hunger. These are good things, which a large section of Indian and Chinese population aspire to. So, while they are catching up to us in relative term, in absolute terms, its still great here.

I believe that there will be an equilibrium between Western world and the developing countries. The current situation is the result of single-mindedness application of mercantilism on the part of the developing countries, and negligence from us. This recession is a loud wake up call, and I think many Americans will see and face the present challenge. Adjustment is a slow and painful process; and changing the world view of a generation is difficult; but we have an excellently adaptable and flexible system in place. The solution lies in the change in each of us; not from any one person, or in a particular direction (even if that person is Obama). I'm hopeful and I would not bet against the U.S in the long run.
posted by curiousZ at 6:40 PM on January 26, 2011 [1 favorite]

Um. Service jobs are being imported -- for instance, wages in Aspen have stagnated as the Ski Company has brought in hundreds/thousands from far off lands on three month work visas. Furthermore, the imports are willing to violate building codes and live four/room.
posted by mmdei at 7:36 PM on January 26, 2011 [1 favorite]

How? For centuries, it had maintained a society that is more open to economic and social climbers than others, has welcomed foreigners who want to study here, and retained many who then work for American companies.

In other words, we're good at recruiting talent.

Historically, we also have many of the resources we need: food/farmland, fuel, minerals, plus friendly neighbors on our land borders.

What percentage of US citizens descend from immigrants in the past 100 years? I don't know, but I guarantee it's higher than most other nations.

Smart people come here and stay to make things.
posted by zippy at 8:14 PM on January 26, 2011 [1 favorite]

[folks, this needs to not be a debate on the topic but people answering a question. OP, please don't turn this into a debate.]
posted by jessamyn at 8:17 PM on January 26, 2011 [1 favorite]

I think you're working under the assumption that everyone needs to be educated, well-paid, etc for a nation to be successful. No, only enough of a critical mass to keep business, innovation, etc going need to be. The rest just need enough education or training for them to maintain their jobs and work in these new industries.

I can't think of any successful nation that works with such an egalitarian model that demands everyone be super-smart, super-educated, have equal opportunity, etc. In fact, all attempts to build a artificial level playing field have failed miserably (Soviet Union, Cuba, North Korea). Please note that this isn't an argument against regulation or social programs, but the argument that not everyone needs to be a special snowflake. Nations easily tolerate 20-40% high school drop out rates, low college graduate rates, etc.

The US's economic success depends on a lot of things but the formula that seems to work the world over is easy entrance into new markets with easy access to investment dollars and a large population with expendable income. Things like talent can be purchased/imported.

Foreign wages aren't that big of a deal. The US is still the largest manufacturer in the world. Those people working for 2 dollars a day work for us. They make shoes/computers/ipods/etc for American companies, designed by Americans, and marketed by Americans to the rest of the world. The profits come back here, or at least back into the coffers of the big multinationals.

As far as healthcare/Medicare goes, its the same as any social service. You need to balance services with what you can pay for via taxes.

Also, I'll add that just because Obama gives a feel-good speech about teachers as the solution to all our ills, that doesn't mean he's right. Obama is probably a near genius-level political intellectual and he knows how to work a crowd. Arguably, the bigger detriments aren't the lack of teachers but too strong of teacher's unions, parents not involved in their children's lives, a strong anti-intellectual culture, and how schools are funded. Saying "more teachers = more smarts" is like saying "more drug war = less drug abuse." At a certain point throwing money at a problem becomes a suboptimal approach. I personally consider this fetishizing of teaching to be one of our bigger problems. Teachers arent messiahs. Wanna be smart? You got to get off your ass and make yourself smart.
posted by damn dirty ape at 8:53 PM on January 26, 2011 [1 favorite]

Speculation, mostly cribbed from more informed speculators than me:

1) Lots and lots and lots of capital -- in developing countries, getting the money to start even a promising business is impossible while this is unheard of in the US. (A friend of mine is an economist and ran headlong into this problem when she tried to start a restaurant in South Africa....).

2) Relatively streamlined regulatory system -- it takes less paperwork to start a business than most other countries. Unlike countries with centralized government, states compete with each other to have the best environment for business.

3) Bribery and kickbacks are unheard of

4) Huge market, with a large number of people speaking the same language demanding the same goods -- China has this, Europe probably never will

5) Long-term population growth -- both Europe and China are projected to have decreasing populations in the next 50-60 years, which wreaks havoc on an economy. Investors are acutely aware of this.

6) Long-term political stability -- remember that the big European countries and Japan all had enormous political upheavals as late as 30 years ago, we haven't for a good 150 years now. It's a lot easier to imagine a populist regime change in, say, France than it is in the US.

7) World's best science R&D -- sustained for the last 50 years through huge federal grants

8) Very low taxes compared to the rest of the developed world, especially for wealthy people

9) High cost of labor, which forces companies to invest in technology rather than bring in more poor workers

10) My pet theory: good education at the top -- sure the average quality of education is pretty damn poor, but the best schools are really, really good. And you don't need 300 million people with great educations to run all the businesses and do all the science, you need 10 or 20 million.
posted by miyabo at 10:09 PM on January 26, 2011 [1 favorite]

I think this attempt to compare the level of corruption in different countries is relevant.

The US isn't the best on the list but it's a long way from the bottom.
posted by compound eye at 1:29 AM on January 27, 2011

How exactly does America stay competitive, anyways?

Automation. The advice I've heard on outsourcing to China, for example is that to get a cost savings, you have to dramatically change your process to include less machinery. So if you have access to large amounts of money to buy equipment with, it's not as clear that higher wages are necessarily a problem. And if you already have the equipment, low wage workers are less attractive.

Incidentally, this means the pain of low wage labor outsourcing is more broadly felt than you would imagine. It not only affects the workers, but the people who made tools those workers used, and the people who made the robotics the workers worked alongside.
posted by pwnguin at 7:22 AM on January 27, 2011