Dwivedi

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Thursday, February 24, 2005

Bringing economic prosperity to America

A very common question that I am asked by business leaders relates to the future and competitiveness of the United States. Analysis conducted by iProceed.com shows that there are several reasons why we might be entering a phase of moderate growth:
  1. Shift of the center of gravity of growth from the west to the east (China and India).
  2. Maturing of the US economy in terms of its appetite for consumption of low-value goods.
  3. High cost of doing business. That not only includes higher wages, but also costs of healthcare and business infrastructure.
  4. Opportunities for rapid growth with less competition in emerging economies.
  5. Availability of technology that allows corporations to do locate their resources in the most cost-effective manner.
So what can we do keep economic growth high in the US?

At a recent panel discussion that included many venture capitalists, the consensus was that as long as America continues to attract the best and brightest and provides them with education and research opportunities, we will continue to be the center of innovation, which will be the main driver of economic value in this century. Unfortunately, with our paranoia about immigration after 9/11, we might no longer be attracting the best and the brightest brains to the United States. And I see that from the number of overseas trips that my venture capitalist friends make these days. They are aggressively investing overseas. (Related article: How to drive economic growth in America?)

In his new book, The Competition Solution: The Bipartisan Secret behind American Prosperity, Paul A. London, Political economist and former Clinton deputy under secretary of commerce, explains that "non-competitive industries with soaring costs," such as health care and education, are the main culprits behind the nation's lackluster economic growth. More competition in these areas, he points out, would reduce the burden on employers, create new investment opportunities and lower costs for American businesses. (Related article: Impact of offshoring on American economy)

To get unemployment down and fuel the kind of prosperity we enjoyed in the 1990s, London asserts, we must quickly embrace The Competition Solution to modernize today's lagging sectors. Between the 1970s and 1990s, increased competition led to the modernization of diverse American industries, from automobiles and steel to trucking, telecommunications, finance and retailing. Competition produced lower prices, increased investment and innovation, improved quality and -- surprisingly -- provided more and better options for low-end customers. The result was the creation of 23 million jobs and higher living standards for most Americans. Political leaders of both parties deserve credit, London says, for opening the doors to competition in these industries despite fierce resistance from powerful status quo interests. It is time, he argues, to once again face the political heat and tackle the widely recognized problems of health care and education with the same fundamental American belief in the benefits of competition and bipartisan fortitude that made the record-setting 1990s possible.

It is no secret that we are rapidly transitioning from a knowledge economy to a wisdom economy, which can both be an opportunity and a threat for us if we do not move fast enough. Indeed Social Security reform may seem like an exciting thing to do but that does not help us in any way deal with the bigger economic challenges.

Recommended articles: Growth pendulum shifting away from US

American competitiveness threatened