Saturday, November 1, 2008

The Need for an American Economic Strategy

The lead article in this week’s Business Week (November 10, 2008) is by Michael Porter, the Bishop William Lawrence University Professor at the Harvard Business School. Porter is calling for the next President to formulate an economic strategy for the United States.

Formulating and promoting such a strategy will help the country in two ways. First, it will start to provide some leadership to the country in economic affairs…leadership that has been sorely missing in recent years. Second, it will provide a framework that “embodies clear priorities” and will lay out an understanding of the strengths that the United States needs to preserve and the weaknesses that threaten the prosperity of the United States the most. Porter strongly argues that the “United States lacks a coherent strategy for addressing its own challenges.”

I could not agree more that the new President needs to provide strong leadership in establishing the goals and objectives to be strived for in the area of economic strategy and needs to direct everything that he does to reflect the effort to attain these goals and objectives. In my experience running companies or leading organizations I felt it was my responsibility as the leader of the organization to make clear what we were striving for and then back up this vision with my performance: that is by being consistent with this vision in all my actions and in all my statements.

Let me now highlight what I think are the most important things in Porter’s list of what should be included in the economic strategy. I can’t argue with the general thrust of what Porter says, but, of course, I have my own priorities. I will discuss three specific areas: education, innovation and entrepreneurship, and global integration.

This country was founded upon the spread of information and the role that education plays in this spread. To me, the modern world really started when moveable type was invented because this allowed for the printing of books and pamphlets and newspapers and all sorts of other things. With this invention, information spread and people got to read things they had never seen before and compare ideas in a way they never had a chance to do before. With this new knowledge they could debate different theories, see and compare different data sets, and argue and debate and dialogue. The result was the Reformation, the Counter-Reformation, the Enlightenment, Modernity, and even Post-Modernity along with many other less well known movements.

The founding of America was also a result of this spread of information and early on it was argued that a democracy such as this should have an educated people so that they could be aware of the issues being faced by the country and could intelligently elect their leaders. Being able to read was also considered to be very important in establishing the type of moral climate that would support a democratically elected government. Being able to read meant that citizens could read the Bible for themselves and interpret it for themselves…something that was not always allowed in the Old World. Schools…and colleges were important…education was stressed. And so major institutions of higher learning were established…Harvard, Yale, Columbia, Princeton, the University of Pennsylvania, and William and Mary, to name a few.

Americans found out later that having schools and colleges contributed to the expansion of knowledge and the expansion of knowledge was good for innovation and the expansion of trade. Technical schools and colleges evolved. And, this allowed for information to continue to spread and for new ideas to circulate and for new things to be tried…and the country grew and prospered.

The American success story hinges to a great deal on the creation, evolution, and enhancement of higher education in the United States. But, Porter writes, “America now ranks 12th in tertiary (college or higher) educational attainment for 25- to 34-year-olds. We have made no progress in this vital area over the past 30 years, unlike almost every other country.”
He goes on, “All Americans know that the public education system is a serious weakness….In the global economy, just being an American is no longer enough to guarantee a good job at a good wage. Without world-class education and skills, Americans must compete with workers in other countries for jobs that could be moved anywhere.” Early in this decade I spent four years taking classes in Princeton. I was amazed to see who populated the Firestone Library. I could not argue that Americans were even a significant minority in attendance there. I have also noticed a similar situation at Penn State’s main campus. Education is not a major priority of Americans these days, yet Americans will be the first to decry the movement of jobs elsewhere in the world.

Innovation and entrepreneurship have been the workhorses of the American economy. Porter writes, “The United States has an unparalleled environment for entrepreneurship and starting new companies.” He adds, “United States entrepreneurship has been fed by a science, technology, and innovation machine that remains by far the best in the world.” We have this engine as the primary driver of American growth and prosperity. Yet, “America’s belief in competition is waning.” Also, there is resentment and fear directed at new ways of doing things and new directions of research. People on the edge of their professions or fields of study are referred to as “elites”, as “celebrities”, as “anti-religious.” Change threatens people. New ideas threaten people. People that others don’t understand threaten people.

America is facing a split, as are other areas of the world. See my post, “The Split in America,” October 29, 2008, We cannot allow the environment of innovation and entrepreneurship that has existed in the United States to fall away. The next President of the United States must work hard to ensure the continued presence of an environment that is receptive and encouraging to those that want to step out and take chances.

Finally, the next President must work to encourage a feeling of trust and partnership within the world community when it comes to economics and finance. For too much of the past eight years or so, America has tended to act unilaterally when it comes to policies and programs related to international trade and finance. The United States can no longer continue to do this. The current world crisis, if it shows anything, shows that the world is too integrated and nations are too dependent upon one another to act in any other way than in partnership with one another.

People believed at one time that other major economies could “disconnect” from the United States if the United States wanted to continue acting independently of them. This has proven to be a fallacy. Somehow, someway nations and the leaders of nations are going to have to work together to begin to build, even the most elemental and rudimentary parts of, a world system. We can all retreat into our own little shells like the nations did after World War I. But, like they found out then, this can only lead to further conflict and possibly an even worse war. American, even though it remains the largest economy and the most powerful nation in the world, must act as a partner and help to build up other nations, not ignore them or put them down.

The next President has a lot of business already on his plate. But, if America is going to move forward, the next President is going to have to show some leadership. Porter writes that “America’s political system, especially as it has evolved in recent times, almost guarantees an absence of strategic thinking at the federal level. Government leaders react to current events piecemeal, rather than developing a strategy that unfolds over years.”

The next President can deal in this little area or that little program or with this little disturbance if he wants to. What America really needs, however, is for the next President to give us a vision…something we can get behind…so that we, at least, know what direction he is trying to move us in.

“Now is the moment when the United States needs to break this cycle,” Porter cries. Now is the moment for some leadership.

Mr. President-elect…go for it!

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