Can America Compete?

The July 25th edition of Fortune magazine features a pretty good analysis of the emerging challenges America faces from the likes of India and China. And, frankly, from our own affluence.

The article is particularly noteworthy because globalization is making it harder to seperate the wheat from the chaff when attempting to define causes and solutions. It’s not an “us vs. them” situation anymore.

Not that it ever was. But American companies now assemble American-designed products using parts manufactured offshore. Or vice versa. A foreign company will assemble their products here in the United States using parts that were manufactured by American. The Honda Accord is a good example. Is it a foreign product, or a domestic one? And while you’re pondering that one, perhaps you can tell me whether the chicken or the egg came first.

It’s tough to even define what it means to be “an American worker” anymore. Does it include only citizens? What about green card holders? And which camp do American citizens working offshore for foreign companies fall into?

I thought the Fortune article was a good read. Most analyses show either a strong bias toward protectionism or delve into some sort of connection to how the World Bank is exploiting the average worker and all governments are evil.

I’ve always felt that our main advantage over the likes of India and China comes from the fact that we have greater freedom and diversity than any emerging economy on the planet. While they didn’t come out and say it quite that way, Fortune touched on it peripherally:

If it all sounds terribly gloomy, it’s important to remember that gloominess has a very poor record in predicting the U.S. economy. Many traits that have helped us meet previous challenges are still with us: flexible labor markets, the world’s most highly developed capital markets, and a culture that moves on from failure and embraces new ideas.

No one out there thinks our diversity is going to go away. But our freedom…. that’s another story. Since 9/11, we’re less free. Ironically, economic success seems to be pushing communist China in the opposite direction. It’s this simple metric that portends the eventual top dog in the struggle for 21st century economic dominance.

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