Executive Briefings

Here's Why the U.S. Has Lost Competitiveness for Decades - and What We Can Do About It

[Editor's Note: The following excerpt is from Gardner's book No Encore: An Essay Concerning the Competitive Decline of the United States of America, available from Amazon and Barnes & Noble]

Without question ... the sub-title speaks to the essence of the entire work: how in a matter of two generations the U.S. squandered its industrial might and to the detriment of the entire economy, allowed the manufacturing skills of millions of workers to go the way of the dinosaur.

That's fairly straightforward, but what makes this portrayal of America's competitive downfall unique is that in addition to chronicling the descent, it also exposes the real reasons why it happened. As I look back on that journey of discovery and contemplation, it's clear that these self-inflicted wounds were much more damaging than originally hypothesized and of a sort that for the most part, were altogether unnecessary.

With that said, if the sub-title of this essay is so easy to understand, what is No Encore supposed to mean? What it means is this: Beginning with America's post-WWII ascent to world dominance the economy was initially driven by traditional sectors like the auto industry and thereafter, by the fortuitous and (mostly) unplanned arrival of technologies that were the personal computer, cellular telephone and Internet. Throughout the rapidly changing period from 1945-2000 neither the government, business nor academia did anything meaningful to upgrade the skills of the American workforce, and by the end of the century globalization had begun the process of relegating the United States to second-rate commercial status.

After riding the wave of growth that the above-mentioned technologies engendered it was the Internet stock bust of 2000 that brought the country back to earth. Without a new, encore technology in sight to create jobs the government, banking sector and general public all succumb to the siren of the Housing Boom, allowing low interest rates to spawn the sub-prime mortgages and massive equity cash-outs that kept the dream alive.

With the economy already destined for a meltdown, the horror that was 9/11 and the treasury-draining response that followed compelled the Bush Administration to prolong the charade of prosperity, calling upon the American people to show their resolve by brazenly returning to the country's malls and fast-food outlets. Stoked by even lower interest rates and more reckless behavior, the bonanza continued until all of those patriots had to start making the payments on their newly-adjusted loans. By the fall of 2007, the weak underbelly of the economy got outed and as the saying goes, "the rest was history."

Fast forward to 2010 and the country still has no encore technology or commercial breakthrough to revitalize the economy. Weakened by the fact that our manufacturing capacity was shipped overseas long ago and that the two main components of the service sector--banking and healthcare--are a mess, this lack of a follow-up to the personal computer, cellular phone or Internet is what makes the resolution of the country's financial problems so worrisome.

To borrow from today's urban lexicon and apply it to the current unemployment rate, we can safely say that in today's America, "Ten is the new five." This reality of the "reset economy" is precisely the scenario that No Encore presents and upon deciphering the antics that have gone on in the U.S. from 1945 to the present, predicts a permanent state of mediocrity unless long-term measures are implemented right now.

All of the above is easy to say, but how does one go about proving that the U.S. has let the competitiveness of its workforce slip away and that the pre-2007 economic boom was nothing more than a delay tactic in an inevitable fall from grace? While it may be difficult for the truly out-of-touch to even consider such a notion, No Encore substantiates these bold claims in a variety of ways, each of which is supported by historical facts, real world examples and highly plausible correlations.

The first postulate of this essay is that America's gradual descent to the competitive B-List is the result of the repeated convergence of three factors; poor foreign policy decisions by the U.S. government, blatant flaws in the Capitalist system and unrestrained human greed. Referred to as the "Convergence Equation," it will soon become clear that these elements of the country's post-WWII economic odyssey have continuously intermingled with one another to erode the industrial roots of the nation.

In spite of the long span of time under consideration and the presence of other factors that support the concept of the Convergence Equation, there are five core subjects that bring the hypothesis of No Encore to life. Treated as if they were unrelated and oft-ignored, these five "Convergence Variables" are explained in the chapters that bear their names: Communism and the Cold War, An Addiction to Foreign Oil, The Vietnam War, Corporate Structure in America, and U.S. Trade Policy.

When the components of the Convergence Equation and Convergence Variables are aligned with one another there emerges a "Convergence Matrix" that serves as the foundation upon which this story is built. Once conceptualized in the reader's mind, analysis of the Matrix uncovers a series of events that not only pinpoints the interdependencies between each of the components, but details how they joined forces to take down the world's number one economic power. It is at these moments in the narrative when disjointed events like the Vietnam War and the rise of the "Asian Tigers" become inexorably linked, and how the belief that America's corporate structure stifles innovation no longer appears to be such an absurd notion.

Due to the reality-based approach of this essay it is difficult to ignore the observations that reveal the imperfections that are innate to a capitalist society. By no means a call for socialism, the repetition of what most people would consider overwhelming evidence is intended to help find ways to strengthen the system, not to replace it. Hopefully, this objective presentation of the facts will lead laissez faire hardliners to realize that there is nothing "free" about free-market economics and that certain adjustments have to be made to assure the future viability of capitalism.

To this end, let it be said that for the country to avoid the perpetual, greed-driven exploitation of the system and the debilitating cycle of boom and bust periods that comes with such behavior, government regulation must be a part of the business landscape. If that idea turns some people off, so be it. My only request of the reader is that she actually takes the time to contemplate the whole of this essay before turning it over for damnation by the High Priests of Divisiveness at Fox News.

Whether speaking of incompetent politicians, the imperfections of capitalism or the acts of rapacious businessmen, the impact of the Law of Unintended Consequences on U.S. competitiveness resonates across this work. Repetitive to the point of providing comic relief (that is, if the joke wasn't on us), the ability of American leadership to embark on hapless policy adventures only to act surprised when they blew up in the country's face is amazingly consistent throughout the text. Less amusing is the fact that the multiple ironies born of the Law of Unintended Consequences have made a mockery of the American worker and his ability to compete in today's global marketplace.

In addition to its indictment against foreign policy, capitalism and greed, what this work also includes is a series of ideas that are designed to channel the energy of the American people in a positive direction. Integral to that list of suggestions is the belief that each of them should be part of a thought process that results in a strategy for how this country can regain its competitive advantage. Until such a strategy is devised, explained to the American people and executed by us all, the immediate future of the United States will be much worse than its recent past.

Like any endeavor that bucks conventional wisdom, it is likely that this work will offend some people while appealing to the common sense of many others. Regardless of what side of the discussion a reader is on, if the content of No Encore stimulates a national dialogue that leads to a higher truth and ultimately, the discovery of real solutions to our problems, it will have achieved its goal. Any other result will be but a footnote to a much larger and long ignored reality. 

Source: Dan Gardner

Without question ... the sub-title speaks to the essence of the entire work: how in a matter of two generations the U.S. squandered its industrial might and to the detriment of the entire economy, allowed the manufacturing skills of millions of workers to go the way of the dinosaur.

That's fairly straightforward, but what makes this portrayal of America's competitive downfall unique is that in addition to chronicling the descent, it also exposes the real reasons why it happened. As I look back on that journey of discovery and contemplation, it's clear that these self-inflicted wounds were much more damaging than originally hypothesized and of a sort that for the most part, were altogether unnecessary.

With that said, if the sub-title of this essay is so easy to understand, what is No Encore supposed to mean? What it means is this: Beginning with America's post-WWII ascent to world dominance the economy was initially driven by traditional sectors like the auto industry and thereafter, by the fortuitous and (mostly) unplanned arrival of technologies that were the personal computer, cellular telephone and Internet. Throughout the rapidly changing period from 1945-2000 neither the government, business nor academia did anything meaningful to upgrade the skills of the American workforce, and by the end of the century globalization had begun the process of relegating the United States to second-rate commercial status.

After riding the wave of growth that the above-mentioned technologies engendered it was the Internet stock bust of 2000 that brought the country back to earth. Without a new, encore technology in sight to create jobs the government, banking sector and general public all succumb to the siren of the Housing Boom, allowing low interest rates to spawn the sub-prime mortgages and massive equity cash-outs that kept the dream alive.

With the economy already destined for a meltdown, the horror that was 9/11 and the treasury-draining response that followed compelled the Bush Administration to prolong the charade of prosperity, calling upon the American people to show their resolve by brazenly returning to the country's malls and fast-food outlets. Stoked by even lower interest rates and more reckless behavior, the bonanza continued until all of those patriots had to start making the payments on their newly-adjusted loans. By the fall of 2007, the weak underbelly of the economy got outed and as the saying goes, "the rest was history."

Fast forward to 2010 and the country still has no encore technology or commercial breakthrough to revitalize the economy. Weakened by the fact that our manufacturing capacity was shipped overseas long ago and that the two main components of the service sector--banking and healthcare--are a mess, this lack of a follow-up to the personal computer, cellular phone or Internet is what makes the resolution of the country's financial problems so worrisome.

To borrow from today's urban lexicon and apply it to the current unemployment rate, we can safely say that in today's America, "Ten is the new five." This reality of the "reset economy" is precisely the scenario that No Encore presents and upon deciphering the antics that have gone on in the U.S. from 1945 to the present, predicts a permanent state of mediocrity unless long-term measures are implemented right now.

All of the above is easy to say, but how does one go about proving that the U.S. has let the competitiveness of its workforce slip away and that the pre-2007 economic boom was nothing more than a delay tactic in an inevitable fall from grace? While it may be difficult for the truly out-of-touch to even consider such a notion, No Encore substantiates these bold claims in a variety of ways, each of which is supported by historical facts, real world examples and highly plausible correlations.

The first postulate of this essay is that America's gradual descent to the competitive B-List is the result of the repeated convergence of three factors; poor foreign policy decisions by the U.S. government, blatant flaws in the Capitalist system and unrestrained human greed. Referred to as the "Convergence Equation," it will soon become clear that these elements of the country's post-WWII economic odyssey have continuously intermingled with one another to erode the industrial roots of the nation.

In spite of the long span of time under consideration and the presence of other factors that support the concept of the Convergence Equation, there are five core subjects that bring the hypothesis of No Encore to life. Treated as if they were unrelated and oft-ignored, these five "Convergence Variables" are explained in the chapters that bear their names: Communism and the Cold War, An Addiction to Foreign Oil, The Vietnam War, Corporate Structure in America, and U.S. Trade Policy.

When the components of the Convergence Equation and Convergence Variables are aligned with one another there emerges a "Convergence Matrix" that serves as the foundation upon which this story is built. Once conceptualized in the reader's mind, analysis of the Matrix uncovers a series of events that not only pinpoints the interdependencies between each of the components, but details how they joined forces to take down the world's number one economic power. It is at these moments in the narrative when disjointed events like the Vietnam War and the rise of the "Asian Tigers" become inexorably linked, and how the belief that America's corporate structure stifles innovation no longer appears to be such an absurd notion.

Due to the reality-based approach of this essay it is difficult to ignore the observations that reveal the imperfections that are innate to a capitalist society. By no means a call for socialism, the repetition of what most people would consider overwhelming evidence is intended to help find ways to strengthen the system, not to replace it. Hopefully, this objective presentation of the facts will lead laissez faire hardliners to realize that there is nothing "free" about free-market economics and that certain adjustments have to be made to assure the future viability of capitalism.

To this end, let it be said that for the country to avoid the perpetual, greed-driven exploitation of the system and the debilitating cycle of boom and bust periods that comes with such behavior, government regulation must be a part of the business landscape. If that idea turns some people off, so be it. My only request of the reader is that she actually takes the time to contemplate the whole of this essay before turning it over for damnation by the High Priests of Divisiveness at Fox News.

Whether speaking of incompetent politicians, the imperfections of capitalism or the acts of rapacious businessmen, the impact of the Law of Unintended Consequences on U.S. competitiveness resonates across this work. Repetitive to the point of providing comic relief (that is, if the joke wasn't on us), the ability of American leadership to embark on hapless policy adventures only to act surprised when they blew up in the country's face is amazingly consistent throughout the text. Less amusing is the fact that the multiple ironies born of the Law of Unintended Consequences have made a mockery of the American worker and his ability to compete in today's global marketplace.

In addition to its indictment against foreign policy, capitalism and greed, what this work also includes is a series of ideas that are designed to channel the energy of the American people in a positive direction. Integral to that list of suggestions is the belief that each of them should be part of a thought process that results in a strategy for how this country can regain its competitive advantage. Until such a strategy is devised, explained to the American people and executed by us all, the immediate future of the United States will be much worse than its recent past.

Like any endeavor that bucks conventional wisdom, it is likely that this work will offend some people while appealing to the common sense of many others. Regardless of what side of the discussion a reader is on, if the content of No Encore stimulates a national dialogue that leads to a higher truth and ultimately, the discovery of real solutions to our problems, it will have achieved its goal. Any other result will be but a footnote to a much larger and long ignored reality. 

Source: Dan Gardner