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 fact, there appear to be few areas across the business landscape where American dominance is immune to plucky foreign competition. At General Electric, a similar pattern has emerged among several of its varied product lines: In lighting, appliances, power generators, and other products, the plunging price and improving quality of foreign-made goods have forced GE to move work overseas, where costs are lower. Now, the company goes abroad to take advantage of the multitudes of skilled workers, too, according to Vice Chairman Calhoun: "When we have to look for deep technical talent, not just 10 or 20 people--especially in high technology--the places you can go and know you can hire somebody every day are India and China."
Calhoun and other American executives stress that they see the United States as a massive ship that is slowly losing its steam--not a distressed vessel rapidly taking on water. And many economic advantages still reside within America's shores: a razzle-dazzle financial system, ready capital for new businesses, world-class management expertise, and entrepreneurial free-thinkers, not to mention the world's biggest consumer market. "The creative empowerment is here," says Lakshmi Narayanan, CEO of the outsourcing firm Cognizant, which is co-located in India and the United States. "You start the chain. Pharmaceuticals, medical equipment, the iPod--you create all that." And many foreigners coming here to study remain mightily impressed. Jun Wang is founder and president of the Dalian Changhai Fengyi Aquatic Co., a seafood business in Dalian, China. He spent four weeks last summer on an exchange program at the State University of New York's Levin Institute, in New York City, learning how U.S. companies operate. "When we saw the financing, how the U.S. system supports its companies ... it's huge compared to what the Chinese can provide," he says. Still, not every impression was favorable: Jun found the New York subway system old and dirty. "The subway in Shanghai is much better," he boasts.
In some ways, it is America's very success that holds the nation back now. Since the United States long had the world's best system of telephone land lines, there has been less urgency about creating a state-of-the-art cellular network, such as those in South Korea, Japan, and parts of China and eastern Europe, which are now leapfrogging U.S. capability. American retailers and banks have invested so much in credit-card equipment that the cost of switching to smart cards, packed with much more capability, is higher than in places that never enjoyed widespread credit. "Other countries, where there's less credit infrastructure, went straight to smart cards," says Paul Beverly, head of North, Central, and South America for the French smart-card company Axalto. "The U.S. has lagged behind significantly."
The United States also used to be the first and last stop for the world's finest talent, in areas ranging from electronics to medicine to chemistry and physics. That alone helped generate cutting-edge start-ups like Intel and Google. But as fast-growing foreign companies have begun to conquer new markets, they have been luring away top managers and scientists looking for exciting new challenges. Gregory Lee, for instance, spent most of his 23-year career scaling the corporate ladder at white-shoe American firms like Procter & Gamble, Kellogg, and Johnson & Johnson. But when Samsung, which has carved out a leading position in memory chips, semiconductors, and consumer electronics, asked him to be its chief marketing officer in 2004, he turned down an appealing new post at J&J and packed his bags for Seoul. "There are not that many companies in the world that are large and growing and doing exciting things," he says. To accomplish those exciting things, he adds, Samsung has been aggressively recruiting hundreds of the world's most capable workers from graduate schools and other companies--many in the United States. And the Chinese government has been aggressively wooing home Chinese nationals working in science, technology, education, and other leadership positions abroad. Cheng Li, who runs the Asian Studies program at Hamilton College in Clinton, N.Y., estimates that in recent years China has persuaded more than 200,000 foreign-educated students living abroad--many in the United States--to return. More than 600,000 others are still abroad. "They constitute a potentially enormous source of talent and human capital for China," Li wrote in a recent paper.
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