Whither Comparative Advantage?

Washington Monthly

“We no longer have a lock on technology,” David Baltimore, a Nobel laureate and the current president of the California Institute of Technology, wrote recently in the Los Angeles Times. “Europe is increasingly competitive, and Asia has the potential to blow us out of the water.”

What worriers like Baltimore are beginning to grasp is that these changes are emerging just as the American economy is being made more vulnerable by the movement of manufacturing and service jobs overseas. As a result, we've become increasingly dependent on maintaining our edge in discovering the new technologies and applications that create whole new industries—just as other countries are closing that gap.

This is an excellent read. And here's a nice comaparative reason why...

On an overcast day in mid-December, President Bush assembled a group of CEOs at the Reagan Building—a behemoth of a federal office complex that has become the favorite venue for small-government conservatives—for a conference to promote his economic agenda. The tone of the conference, so soon after a winning election, was upbeat, cheery, back-slapping, the happy Chamber of Commerce banter of executives who have recognized a problem that they know how to fix. At the end of the day, the president himself took the stage. He said the economy was fundamentally strong and that government's role would be to “create an environment that encourages capital flows and job creation through wise fiscal policy.” To do this, he said, he would ask for Congress to privatize Social Security and make his tax cuts permanent. He compared himself favorably to Franklin Roosevelt. He left the stage.

During the same conference, two floors up in the very same building, a group called the Council on Competitiveness held another event for the press, in which it laid out a very different vision. This group, comprised of 400 blue-chip business executives (the CEOs of IBM, Pepsi, and General Motors, among others) and university presidents—as rough an approximation of the American establishment as you could fit in a single room—was nearly as downbeat as the president was buoyant. The astonishingly fast rise of international competitors, they warned, has meant that the American economy has reached an “inflection point,” a “unique and delicate historic juncture” at which America, “for the first time in our history…is confronting the prospect of a reverse brain drain.”...

Lots more here. Go check it out. Funnily enough, covered this syndrome a year ago January. Aww, what the heck, I'll quote myself....

The Creative Class rises, then emigrates to Bondi beach.

From How the GOPs Anti-elitism could ruin America's economy:

...the lion’s share of benefits from The Lord of the Rings is likely to accrue not to the United States but to New Zealand. Next, with a rather devastating symbolism, Jackson will remake King Kong in Wellington, with a budget running into upwards of $150 million.

Peter Jackson’s power play hasn’t been mentioned by any of the current candidates running for president. Yet the loss of U.S. jobs to overseas competitors is shaping up to be one of the defining issues of the 2004 campaign. And for good reason. Voters are seeing not just a decline in manufacturing jobs, but also the outsourcing of hundreds of thousands of white-collar brain jobs—everything from software coders to financial analysts for investment banks. These were supposed to be the “safe” jobs, for which high school guidance counselors steered the children of blue-collar workers into college to avoid their parents’ fate.

But the loss of some of these jobs is only the most obvious—and not even the most worrying—aspect of a much bigger problem. Other countries are now encroaching more directly and successfully on what has been, for almost two decades, the heartland of our economic success — the creative economy.

Very good article encapsulating the folly of traditional economic and business thinking in the face of a world fast learning the lessons of growth and ambition--and in many cases, walking the talk better than we do. Read it, it's about much more than the movie business.

Richard Florida is an Economic Development specialist whose 2001 book, Rise of the Creative Class, factually and in great detail finally took the knees out from under the traditional urban revitalization view: Build it and they will come.

They didn't, don't, can't, won't come.

You've seen the syndrome: Big stadia, gallerias, Biotech parks and incubators, big-box blackfields (Wal-Mart-ish aircraft hangars for retail, surrounded by acres of asphalt desert with shopping cart tumbleweeds).

These, and similar Frydeas* are the embodiment of the shortsighted "crown-jewel", "silver bullet" mentality of urban politicians and developers without opposable thumbs. And they fail with depressing regularity while siphoning off tax revenue and small business bases, thereby strangling community viability. You might call them the ultimate triumph of ego over any understanding of the food chain that is economic systems: Lions get the pampering. Gazelles, rabbits, mice and ants get bupkis because they aren't "sexy" [and can't roar]. In the end, the lions die of starvation too....

Okay, on second thought, go read the Washington Monthly article. It has fewer goofy analogies.