Finally, Fresh Thinking on the U.S. Economy

Ever since the Great Recession, plenty has been written on the fate ofthe U.S. economy, as it naturally would be. Negative themes suddenly shot into the sky practically on the exact day Barack Obama, our firstAfrican-American president, was inaugurated. Many tomes were jeremiads painting very dark and dreary images of our future.

We are enormously in debt. Our free-spending ways are our children’s ruination. America has lost its competitive edge. Innovation is in shambles. And on and on go the deficit freaks whose Calvinistic works scatter the tables at Barnes & Noble or online. Read them and see who can outdoom the other.

So, it is a really nice respite to pick up “The Next American Economy, Blueprint for Real Recovery,” by international business journalist William J. Holstein (Walker & Company). Full disclosure: Bill has been a close friend of mine since the 1980s when we were working at BusinessWeek. I was on my way to Moscow and Bill, who had spent years covering China and was in Kabul when the Soviets invaded, was on the international desk in New York.

Bill hits themes familiar to anyone who knows his previous work, especially his 1990 explanation of how Japan’s economic bureaucrats operate. The U.S. still thrives on creative effort, has plenty of brainpower and works best when it lets in people from many different countries with many ideas so they can work together. Foreign competition is not something to fear, but rather, embrace.

As far as government policy, Bill leaves the tut-tutting about free market dogmatism to the libertarians, Baconauts and others. There is an obvious role for government help in terms of R&D funding, especially defense funding which has proved very successful. Local, state and federal governments have a role to boost geographic “clustering” of like industries, and coordinate an export offensive featuring high tech goods.

The most interetsing part of the book is not the wonkery but the reporting. Rather than sit around in a basement, reading and regurgitating think tank reports, Bill gets into the field with a vengeance. He finds there’s a lot going on:

Men originally from Venezuela and Taiwan get together to form a start-up structured around a new, self-organizing battery named the A123, which is lighter and powerful than previous batteries. Applications are endless, from Black & Decker tools to automobiles. With federal grant money from the SBA and Department of Energy, plus backing from MIT a firm named A123 took root, flourished and started to compete head on with strong Asian firms. By 2009, it had 1600 employees, a manufacturing plant in Michigan, and sales of $91 million.

In Orlando, an Iranian immigrant with a doctorate from the University of Louisville ends up in Orlando to take part in the region’s efforts to become a “cluster” for computer simulation. In that effort, Orlando had a couple of things going for it. It’s not far from NASA’s huge Cape Kennedy space port. Big theme parks run by Disney and Universal employ lots of simulation experts to make the rides more thrilling. Tapping these labor pools, the cluster was established. Money, especially defense funds, started flowing in since the armed forces need simulation to train troops.

Another immigrant, this time of Polish and Czech background, ends up in San Diego after medical school and intends to research cancer. Rather than toil in a school lab, he wants to start his own firm, which his local college resented (Some like MIT embrace professorial entrepreneurship). Long story short, the result was a genomics cluster that rivals Boston, the Maryland suburbs and the Bay Area.

Corning, the glassmaker, has been around for decades and may seem oh so Rust Belt. But the firm is one of the few U.S. companies that spends up to 10 percent of its sales on R&D (other firms skimp on R&D in the recession wash-over and to cover next quarter’s earnings). Corning scientists kept wondering about a new type of glass that had applications as millions of cell phones, iPads and other small electronic devices need a new type of tough, scratch-resistance glass for their displays. They found it with Gorilla Glass, first made at a Corning plant in Danville with production later shifting to Kentucky.

Like Virginia, North Carolina has been struggling to shift away from traditional manufacturing industries like tobacco, furniture and textiles. The state, which had the foresight to create the Research Triangle Park as early as the 1950s, came up with ways to combine state, federal and private resources to facilitate of Tar Heel-made niche products. One is nanotechnology tools from Raleigh. Another is a new type of software from the small, Eastern North Carolina city of Greenville that can be used around the world to keep up with the expiration dates of pharmaceuticals in storage.

Holstein’s bottom line is that despite the naysayers, there’s plenty of brainpower and innovation potential that should help position the U.S. far ahead of the current economic disaster. Having broad experience overseas, he’s immune from the irrational fears many conservatives have that government involvement will turn them into zombies. He says CEOs have to constantly assess their company’s innovation and changing global conditions. Chinese labor costs, for instance, are under pressure and land in places like South Carolina is cheaper than suburban Shanghai so some U.S. firms are coming back home.

But if they do, wonders Holstein, will they find an educated work force? There’s an area needing much work. Ditto immigration law since the current, emotional debate is enormously damaging to this nation of immigrants and the great, new ideas they bring here. My view is that it is absolutely pathetic that a place so rich in foreign born folks as Northern Virginia is also home to racist politicians like Corey A. Stewart and his immigrant bashing “Rule of Law” campaign.

And to his credit, Bill doesn’t bore us with how much money we’re not going to have in 2030. Ugh!

Peter Galuszka

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