July 15, 2008    Volume 15, No. 13

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'Americans Don't Get What's Going On In The World'
The View From On High:
America Can't Compete Because Americans Are Dumb

By Richard McCormack

"At the dawn of the 21st Century, the United States is the most competitive economy in the world."

So stated the narrator on the opening Department of Commerce video that kicked off the federal government's "2008 National Summit on American Competitiveness" in Chicago. Among the CEOs in attendance, the theme continued: the United States is the world's most competitive nation. On second thought, maybe not.

"By and large, America is, in my view, very competitive," said Jim McNerney, chairman, president and CEO of Boeing Co. But it's "very obvious" that there is a "huge threat" to its position "in many industries," including the aerospace industry. The dominance of American industry is threatened by its lousy educational system, said the Boeing boss, "and we better respond."

Exactly, replied Louis Gerstner, chairman of the board of IBM Corp. from 1993 until 2002. "We should be very worried," he said. The old model of achieving economic dominance through an abundance of land, capital and labor no longer works. The key in today's global economy is skills. "What it's all about is who is building a country with skilled workers that will deliver economic growth and competitiveness and the fundamental answer to that question is we are not."

Craig Barrett, chairman of Intel Corp., was next. "We're in good shape," he said and then added: "Every leading indicator shows we're going in the negative direction." Those indicators: education, tax rates that discourage investment in the United States and lack of investment in research and development. "All have to change," said Barrett.

Michael Porter of the Harvard Business School followed with a similar line of reasoning. The United States has been the "engine of the world's economic growth." Its citizens received 80,000 patents last year. "You know how many were issued in China?" Porter asked the audience. "700. That's smaller than the country of Finland." India had 500 patents, Russia had 200. The United States has a great entrepreneurial culture and universities. The fundamental challenge facing the country is a dysfunctional K-12 educational system. And for that problem "we don't have any answers, we don't have any credible solutions," Porter said.

The country has hit an economic slow patch, but 130 million stimulus checks worth $100 billion are being sent to Americans, noted Commerce Department Secretary Carlos Gutierrez. "That, combined with Federal Reserve actions as well as some of the housing actions, should have us in a lot better shape in the second half of the year," he told the opening session of the event. "Most economists agree--there is consensus--that the first half of the year will be more difficult than the second half of the year and we're right in the middle of it now. We're going to get through this housing correction. The question is how do we stay competitive for the long haul?"

The speakers at the summit--the country's "leading thinkers on competitiveness" as Sandy Baruah, head of the Small Business Administration, described them--agreed that the country is in trouble mostly because Americans, along with their politicians, are dumb, a word used throughout the CEO session.

"We are really becoming a nation of ignorant people," said Gerstner of IBM. "One adult American in five thinks that the sun revolves around the earth. Fewer than one-third -- fewer than a third of American adults -- can identify DNA as key to heredity."

Given the poor state of the U.S. educational system, there will soon be "two generations of illiterate people in the United States," Gerstner added. And when that happens "we will have huge, huge issues of class conflict. The major problems, the spread between the rich and the poor, will [be] exacerbate[d]. We will have internal tensions in this country that we haven't seen in 100 years."

Barrett of Intel said current immigration policy is "insane." The country has 12 million to 13 million illegal aliens. "So what do you do? You can't control the 13 million, so you clamp down on the 100,000 legal immigrants that we allow into the U.S. So let's let all of the poorly educated, manual-labor-type folks into the country and let's keep the Ph.D.s out. This is a policy that we can all be proud of, don't you think?" he said to laughter.

IBM hires smart people, many from foreign countries. They have been educated at the best universities in the United States, many at taxpayers' expense. "And then what do we do?" Gerstner asked. "We tell them to go home to compete with us. And it's even worse than that because what we do--because we're international companies and we hire the best and smartest in the world--we not only send them home but we send the job with them because we're going to hire them wherever they are. There's something wrong with this someplace." At least 200,000 of the smartest, best educated, foreign-born Americans have gone back to their home countries.

Gerstner told a story: "I was with a person who was a very high-level individual in his country and he came to see me. I had known him a number of years. I said, 'What are you doing now?' He says, 'While I'm here, I've got a list of 15 high-talent young people who came to the United States to study biological sciences. They're at Cal Tech, Princeton, Harvard. We're building a huge biocenter in our country and I'm here to get all these people to come back.'

"These are not students," Gerstner noted. "These are 30- to 35-year-old people who are contributing to innovation and science here. They are working in the country's best scientific laboratories. And I said to him, 'You've got a list of 15. How are you doing?' He said, 'I've met with 10 and I've got nine coming back and I think I'll get most of the other six.'

"Is that bad? No. They're entitled to do that. Just like when IBM sets up a research lab in China, we try to hire the best and brightest Chinese scientists in China; the same thing in India....We have to understand that for decades we were the magnet where all of the best and brightest wanted to come and study and work. And we have now, in a period of only perhaps a decade, allowed that to turn around with policies that are just dumb."

Deborah Wince Smith, president of the Council on Competitiveness, also commented about the preponderance of American dummies: "One of the shocking deficiencies now is the lack of knowledge that our young people have in what we call traditional geography," she relayed. "I mean, apparently the statistics from the National Geographic Society are absolutely shocking of how many kids can't even place Afghanistan on a map."

Michael Porter of Harvard University had his own moment of social derision. The current "political conversations," he said, are about the "insecurities of, let's call it the average citizen--concerns about health care, concerns about higher energy costs, concerns about housing and credit. The political debate right now is about incremental fixes to these immediate small problems..."

The CEO of Boeing said something has to be done "to break the logjam" of a poorly educated workforce. "It's going to take some kind of mandate that gets at a much bigger idea than keeping everybody at a subsistence level," said McNerney. Boeing is spending $100 million a year to educate employees. "We have a responsibility to educate folks because they're not showing up at our companies as educated in the same quantities as they have historically relative to our competition."

The United States doesn't have any more time to waste on improving the intellectual capability of Americans, McNerney added. Eventually, the United States will be forced to respond, but "the reason we will is because our standard of living will be down, unemployment will be high, the dollar will be twice as weak as it is today and there will be a clarion call for a new deal and education," said the Boeing CEO. "Unfortunately, in a democracy, new deals tend to come after disastrous events and so the challenge is--is there some political leadership that can raise the issue before that day happens?"

Keeping on the America-is-dumb theme, Barrett said that the K-12 educational system is broken because "we dumb our expectation levels down to the lowest common denominator." The educational system should set much higher standards for students to meet. They will meet them if it is required. The educational system has been studied to death, said Barrett. "Every study comes out with exactly the same conclusion. Every study goes on to the bookshelf and not a damn thing happens to it."

Americans don't seem to get it, added former Commerce Secretary William Daley who is now vice chairman of JP Morgan Chase. "The way our political discourse happens is you can spend two weeks on Paris Hilton or some other movie star. What coverage comes out about an honest discussion like this of people who have interest and knowledge? Very little."

Next on the list of American idiots: politicians. The politicians and policy makers have been aptly warned about meager federal investments in science and technology, research and development. The National Academies of Sciences pushed for, Congress passed and President Bush signed the America COMPETES Act, which was to provide enough funding to double the federal budgets for the physical sciences and engineering over the next five years. But Congress in the latest 2008 "omnibus" appropriations bill did not fund the America COMPETES Act.

"How easy was it to give away $180 billion in $500 checks to make the U.S. economy strong?" Barrett asked. "It took a week. That's the mentality in Congress, instant gratification or nothing."

Gerstner was equally as incredulous. On energy, health care, education, R&D, social security "we have solutions to all of these problems, but we just don't seem to be able to decide that we're going to go fix them. We'd rather spend money on pork, build bridges to nowhere, give grants to colleges to study meaningless subjects, and do a whole lot of other things that are not reflective of the priorities of this country."

Barrett told attendees that politicians in Washington, D.C. have no idea of what's happening elsewhere in the world. "There should be a prerequisite" for all politicians, Barrett said: "You need 25 visits in your passport. All of Washington, D.C., [has to get] out of Washington, D.C."

American politicians need to see for themselves the educational systems and industries that Americans are competing against overseas. "Washington hasn't a clue what the U.S. is going to be competing with over the next 10 to 20 years," said Barrett. "They need to see on the ground what's happening in China, Vietnam, Brazil and India. If you see what's happening there you can't come back and say we're okay, all we need to do is cut the gasoline tax. It's not that simple. I'm not clear that Washington is there."

That prompted former Commerce Secretary Daley to say that "it's worse than the politicians--it's the vast majority of the American people not knowing it or even those who travel the world and know it still take positions that seem irrational. I think the real concern is Americans don't get what's going on in the world."

American ignorance about globalization is leading to a scary period of economic protectionism, said Caterpillar CEO James Owens. "This is about re-engaging the public because we can't win the politicians unless the people that vote for them understand." Owens said he is chairing the "Trade Investment" committee of the Business Roundtable, the largest 160 firms in the country. "We spend a lot of time there talking about what we have to do to reengage the public" and get Americans to understand the importance of the free trade agenda. Even smart liberals know how important the current free trade agenda is to the nation's economy, Owens said. "Ninety-five percent of academic economists believe in free trade. Most are liberal democrats." But they have "somehow been divorced" from the mainstream Democratic politicians. "What's wrong with this picture?" Owens asked.

Porter said it's about time for the United States to re-ignite the competitiveness debate of the late 1980s. "We have to get off of this terrible period we've been in where we really can't tackle any of the obvious challenges," he said. "We just aren't willing to take on any of the obvious challenges."

For Sec. of Commerce Gutierrez, Washington isn't going to solve the innovation challenge. "Innovation does not take place in Washington, D.C., nor is it going to happen by legislating it or assuming that somehow new products are going to be launched or designed in Washington," he said.

But as they did on the stimulus checks, the panelists rebuked their host. "I think we have evidence that our federal government's been very important to scientific discovery in the last 50 years and we better start allocating some more of this trillion-dollar economy to this issue and not let it fall off like we've been doing," said Gerstner.

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