Competitiveness Part 2: The Four Foundations

By November 16, 2006General

5is.jpgYesterday we started our mini-series on competitiveness, based on the 20th anniversary meeting this week of the Council on Competitiveness. The Council was launched in 1986 following a Presidential Commission’s report that the United States need to do more to stay internationally competitive. John Young, then-chairman of Hewlett-Packard, was the first chairman. He pointed out the other night that then-NAM president Sandy Trowbridge provided the Council with its first home and first modest contribution to get up and running.

The Council issued The Competitiveness Index: Where America Stands. We mentioned some of the highlights yesterday. It describes what underpins the U.S. economic performance of the past two decades, a time that has been positive for U.S. prosperity, according to the report. The four pillars of this prosperity are:

* Innovation. The US still leads in science and technology, but that lead is narrowing as other countries invest heavily in research and education. American companies continue to increase their R&D here at home even as they expand globally. And foreign companies do more R&D here than US companies do abroad. The balance favors the U.S.

* Entrepreneurship. Turning new ideas into viable businesses is linked to innovation and it’s something done well here in the US. Access to financial capital and a culture that encourage experimentation and risk are key elements of entrepreneurship.

* Education. Since World War II, the US has led the world in educational attainment, but little progress has been made in two decades-worth of trying to raise test scores of U.S. high school students. The US is now 17th in high school graduation rates and 14th in college graduation rates, when compared internationally. Yet this economy needs tech-skilled workers more than ever before.

* Energy. Two decades of relatively low energy prices contributed mightily to US prosperity and growth. But now other countries are outpacing the US in supply and efficiency.

Michael Porter said during the conference that he thought that the US would surely stay in the lead in innovation and entrepreneurship. But he foresees US policies toward education and energy making these two pillars weaknesses instead of strengths in the future. (If you read the Institute’s report, The Escalating Cost Crisis, you would have seen how poor Federal policies on natural gas have turned that manufacturing fuel from an advantage ten years ago into a current cost disadvantage).