NCPA - National Center for Policy Analysis

COOLING OFF ABOUT KEEPING UP

August 9, 2006

Every 15 or 20 years we experience a competitiveness panic with an accompanying outpouring of worried reports and articles.  But through it all, the United States has remained the dominant global economy, representing about one-fifth of the world's total output, says columnist Robert Samuelson.

One problem with these debates is that competitiveness is a vague term.  What does it mean?  If it means keeping the lead in every industry where we once led, we're doomed, says Samuelson:

  • As other countries develop, they create larger and better industries to meet their needs; steel is an example.
  • Textiles, consumer electronics and automobiles are other industries where we've lost ground to countries that have greater local needs, lower costs or better management.
  • In many cases, U.S. multinational companies have relocated plants abroad to cut costs.

Similarly, if competitiveness requires the United States to maintain its present share of the world economy, we are also probably doomed, says Samuelson:

  • We have recently maintained our share only because Europe and Japan have grown more slowly than the United States.
  • But if China and India continue to grow rapidly, the U.S. share will shrink.
  • The U.S. economy is now about $13 trillion; China's is about $2.2 trillion, says economist Nicholas Lardy of the Institute for International Economics.
  • China's growth is 9 to 10 percent annually, while the United States' is 3 to 4 percent; at those rates, China might pass the United States in 20 or 30 years, says Lardy.  (However, per capita incomes in China would still be much lower.)

The point: Global economic growth -- something the United States encourages -- erodes America's dominance. Technology, talent and wealth spread everywhere, says Samuelson.

Source: Robert J. Samuelson, "Cooling Off About Keeping Up: What's 'Competitiveness'?" Washington Post, August 9, 2006.

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