Can America Keep Up?
Why so many smart folks fear that the United States is falling behind in the race for global economic leadership
In malls and car dealerships and suburban communities across America, it might not be obvious there's a problem. But Americans are often the last to know about fast-moving changes beyond their shores, and many other foreign innovations may surprise Yanks accustomed to the premise that we're No. 1. In Hong Kong, 60 percent of homes get television service through ultra-high-speed broadband connections, which transform TVs into computers and make "video on demand," sophisticated gaming, and other futuristic services possible. Nearly two dozen cities in China are installing radio-frequency tracking systems, the most sophisticated in use anywhere, for cargo that arrives in ports and air terminals. Throughout Europe and Asia, smart cards with embedded memory chips are replacing credit cards and even cash, simplifying shopping, reducing fraud, and putting an infrastructure in place for consumers to receive real-time traffic data and other useful info. And as most Americans who travel overseas recognize, the ubergizmo known, for now, as the cellphone typically works better and does more things in many other countries than do the phones in the United States.
Connected. There's much more at stake than a few additional amusements for couch potatoes. New technologies tend to get developed in markets where there's infrastructure that supports them and consumers who demand them, which often spurs further innovation and the high-paying jobs that come with it. When Internet service provider EarthLink was looking for a partner to help launch a cutting-edge cellphone service in the United States, it didn't even consider Verizon or Cingular or any other U.S. company. Instead, it began scouting for a partner in South Korea, where the government has aggressively pushed broadband connectivity to every home, advanced cellular technology, and other innovations. "They're doing things we haven't even contemplated in the United States," says EarthLink founder Sky Dayton. Many Korean phones, for example, double as smart cards that can be waved in front of a vending machine to make a purchase. Some even get TV reception, via satellite. EarthLink ended up striking a deal with SK Telecom, Korea's largest cellular operator, to form Helio, which will start offering upscale cellular services aimed at tech-savvy Americans this spring.
The fast advance of other nations, of course, can be good for companies and workers in the United States, especially as a massive new middle class with money to spend--some of it on stuff from America--emerges in places like India and China. Nor is the United States going to cede its status as an economic, political, and military superpower anytime soon. The U.S. economy is the world's largest by far, and gross domestic product per capita remains among the highest in the world. America spends almost as much on national security as all other nations combined, with a defense budget nearly 15 times as large as that of China--the one big nation that seems willing to play geopolitical chess with Washington. America's huge defense budget also funds lots of new technologies that eventually benefit American companies and consumers.
And much is going right in America. Despite political hysteria over foreign companies like Dubai Ports World and Chinese oil giant CNOOC buying assets in the United States, overseas investment in U.S. properties like factories and buildings jumped 20 percent in 2005, to $129 billion. The Dow Jones industrial average is back over 11,000, and U.S. markets are attracting cash from all over the world. And many experts think rapid changes taking place in the global economy highlight U.S. strengths, rather than weaknesses. "What makes the United States great is the ability of people to adapt and migrate," says Dennis Nally, chairman of the consulting firm PricewaterhouseCoopers. "We need to be thinking about areas where we have tremendous strength, such as services, entertainment, and finance, and get ahead of the next curve." He also argues that the rapid spread of American companies into other countries opens new experiences to more Americans than ever: "There's a tremendous opportunity for U.S. employees to do a lot of things outside the U.S., in places with growth rates like you see in China or Brazil."
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