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Has the USA lost its Competitive Advantage?
For the moment let’s zoom out and take a high level or “macro” view to help with our understanding of what is happening in the world. It is very important to understand these trends because of the impact they are having, and will continue to have, on our lives at the “micro” level. In his 2000 book, The New Barbarian Manifesto, Professor Ian Angell discusses how we have entered a “new elite cosmopolitan age” where knowledge workers would be the real generators of wealth. He continues by explaining that: “It is now abundantly clear that knowledge workers are the real generators of wealth. They always have been, only now they realize it. For their knowledge is the basis of innovation, and innovation underpins the creation of alternatives - not only alternative products but also alternative procedures. Alternatives deliver new competitive advantages, and destroy the old. …The income of these owners of intellectual wealth will increase substantially. They will be made welcome anywhere in the world, no matter what their age, race, sex, color, or creed. ” Of course, knowledge, in and of itself, achieves absolutely nothing. Knowledge, in and of itself does not produce competitive advantage. It must be applied by individuals that utilize their uniqueness and talents to add value and create wealth. “personal competitive advantage” is what allows us to create value and wealth. Formerly socialist countries all over the world have been embracing capitalism and seeing their standards of living improve dramatically. But many governments are doing this out of necessity rather than kindness. Governments, being the inherently inefficient, wasteful, and coercive institutions that they are, don’t like the idea of having to compete against one another to attract knowledge workers, businesses, jobs, and capital. But compete is exactly what they are being forced to do. Businesses are increasingly more virtual. Capital flows more fluidly around the world. Knowledge workers are now mobile, work virtually, and can live anywhere they choose. And they will increasingly choose those places that offer the most favorable environment. The United States is still a big attractor of these valuable knowledge workers, but the US is no longer rated as the most capitalistic or freest country in the world . The US is still a relatively wonderful place to live, and still has a strong competitive advantage over other countries. But it is the trends that matter, and the trends that are currently in place suggest that the US is losing that competitive advantage. It is becoming relatively more socialistic while formerly socialistic countries are becoming more capitalistic. An individual country has a competitive advantage that can be enhanced or suppressed. When a country embraces and focuses on its unique strengths and applies them to the global economy in an optimal way they develop competitive advantage, and with it higher standards of living. So in other words, one could argue that other countries,’ such as China for example, are embracing and strengthening their competitive advantage while the US’s has decreased in strength. This is why China has attracted so much capital and investment in recent years. For the most part, capital, or money, is highly mobile and quickly moves to where it will be valued the most, earns the highest returns and feels safest. We see this every day in global financial markets, as money flows to where value is being added. On an individual level the premise is the same — embrace and develop your Personal Competitive Advantage and you will prosper. To once again quote from the New Barbarian Manifesto: “(National Economic) growth has been decoupled from employment, it is created from the talent of a few knowledge workers, not from the labor of low grade service and production workers. Growth is delivered by entrepreneurs, but only if they are given the incentives, and otherwise left alone…. Companies and individuals, not countries, generate the wealth. New technology has released these organizations and k owledge workers from any geographical constraint, and they are roaming the world looking for free-thinking countries as partners.” The bar, or level of competition, is being raised everywhere, in every way. The effects of information technology, the internet, globalization, and capitalism have left no field untouched. Everything has become more competitive, and as a result standards of living are increasing for those who embrace these trends. Can we honestly say that the standard of living in the US is improving or in decline? I think the current trend is pretty clear. Although the near future does not offer much hope, there is currently a huge wave of social change building. In the short and intermediate term I am pessimistic, but over the very long term I am actually optimistic. After all, other countries have their problems as well, it’s just that right the now the US is relatively more miserable, and our financial markets and the US dollar reflect that. |
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