What is America's advantage? America has many advantages (plural) in a
cultural or environmental sense, but what in a strictly economic sense?
That is, in treating America as though it were an economic entity? That is,
as government politicians are wont to talk -- as if they are in control of
their economies. Curiously, though, they rarely talk of national
advantage(s) in the same way that economists use the term. More
specifically, in terms of "comparative advantage".
Comparative advantage is the particular skill which a country is best at
doing more than anything else. Concentrating on this skill and exporting
its products to other countries gives that extra safety margin of currency
exchange which prevents the country going backwards. This safety margin
doesn't have to be much -- 0.5% of GDP will do the trick -- so long as the
government itself is not spending more than it's taking in by taxation. In
the case of this piece I'm ignoring the fact that American government is
deeply in debt -- like all advanced countries -- but that will sort itself
out automatically (disastrously) one way or another in due course. What
don't work themselves out automatically, however, are comparative skill
advantages.
America has superlative medical and legal skills but these don't count for
much on the balance sheet because personal skills can't be exported. At
least not much. In the medical field, foreign patients can go there for
treatment and export earnings can thus be enhanced. But this is relatively
small beer. Advanced medical equipment can, of course, be exported -- but
see below for more about that.
American skills in making consumer products are only a small fraction of
their former state because, for the past 20/30 years, American corporations
have been sending their operations offshore for cheaper labour.
America still has great skills in making medical or other scientific
equipment such as DNA-sequencers or highly sophisticated producer goods
such as machine tools, specialized machinery and nuclear power stations.
But the developing nations, such as China, soon learn to copy those in just
the same way that America copied those of England and Europe in the 19th
century. So that's only a temporary comparative advantage.
The only American comparative skill advantage I can think of is scientific
research. In both quality and quantity it is by far and away America's best
set of skills. It was seeded by the substantial recruitment of most of the
best scientific brains of England and Europe for the past 70 years and,
more recently, by thousands of brilliant post-grads from Asia, India and
China particularly. But Americans' genes are quite as capable of producing
geniuses as much as any other culture and home-grown talent is now becoming
quite thick on the ground also.
Generally, this crop of scientific talent enjoy their life in America,
particularly as there are rich concentrations of like-minds -- something
intellectuals need more than anything else. Their way of life is agreeable
and they have had plenty of funds until recently, particularly from many
private foundations that grew rich in America's prosperous past. Research
scientists don't do anything immediately for America's export trade, of
course, but their discoveries inevitably lead on to products which can be
exported. But once again, they can be copied.
But what if the countries which copy American (and European) products
decide that they, too, want to get to the forefront in the whole process of
economic development? If they do what America did, they only have to offer
pleasant housing (and schools for children) and lavish scientific funding,
then they can be recruited. Status aspirations among scientists are mainly
intellectual ones within their own subject area. They are nowhere near as
wedded to material signs of status, as business people are -- and everybody
else in their own more modest ways. Above ost other vocations, scientific
talent is footloose.
China started a green card system about five years ago. At the present
time, China is going all out to attract managerial talent in industry and
banking. But, having already copied Germany's maglev railway and America's
super-computers and IT routers, China will be after the scientific talent
of America next, whether home-grown or foreign-born. Offer enough
scientific funding (as Singapore learned to do some years ago) and
America's scientific talent could be hollowed out just as quickly as its
productive skills have been.
Keith
Keith Hudson, Saltford, England
<http://allisstatus.wordpress.com/2010/12/>http://allisstatus.wordpress.com/2010/12/
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