Bruce Nussbaum’s take – Why The World Economic Forum Is Wrong About US Competitiveness.
Despite conventional economic wisdom, which believes this stuff, there has been no tight correlation between interest rates/dollar strength and the twin deficits. I should know because I wrote about this for a dozen years when I ran the editorial page of Business Week.
The fact is that the innovative/entrepreneurial prowess of the US attracts as much capital is it needs from around the world and its deep capital markets allow China and others to recycle their surplus dollars. We get their goods, they get our paper–and jobs and growth. So far, this has worked out. It could end, sure, if a political crisis occurred but it hasn’t yet.
I do think that US competitiveness is eroding and it is because Brand USA is eroding. However you think about the Iraq war, it has generated the worst anti-Americanism around the world in many decades. The Pew polls show horrendously high percentages of people really mad at the US and not just in the Middle East but in major markets in Europe, Asia and Latin America. Are they likely to take our their anger in their buying decisions? You bet. In their investment decisions? You bet.
If you want really want to worry about US competitiveness, worry about our visa policy since 9/11 that keeps out many of the best and brightest students, scientists and immigrants. This is the very lifeblood of our innovative
I hate to disagree with Bruce, but on this one he has a good point – but is wrong on the others. His good point is that Brand America is in trouble – something I have been righting about for awhile. But the twin deficit – dollar/interest rate linkage still exists. Just because we haven’t crashed yet doesn’t prove we haven’t fallen off the cliff (of course it doesn’t prove we have either — but the signs are beginning to look worse, see the data on investment incomes.
And I have to disagree that the most important thing is our visa policy. Yes, it is a problem. But I can think of a dozen more — including a federal government the refuses to invest in innovation, an education system based on a 19th Century model and a patent system that has been described as “sand in the gears.”
Oh and by the way, while attracting talent from outside is good, educating the talent we have is better – see my next discussion.