Intangibles and National Security

This morning, President Obama released a new National Security Strategy. This Congressionally mandated report gives the President an opportunity to articulate his approach to national security. President Bush submitted two reports, in 2002 and 2006, that outlined his view of national security. According to this new report, the Obama approach takes a much broader definition of national security based on 4 major enduring American interests:

• The security of the United States, its citizens, and U.S. allies and partners;
• A strong, innovative, and growing U.S. economy in an open international economic system that promotes opportunity and prosperity;
• Respect for universal values at home and around the world; and
• An international order advanced by U.S. leadership that promotes peace, security, and opportunity through stronger cooperation to meet global challenges.

As one can see from that articulation of American interests, intangibles play a major role. First of all, traditional military strength is more and more based on the application of knowledge, as opposed to simply overwhelming firepower. And as the report notes, security also means the ability to domestic emergencies. That requires the application of intangibles assets such as organizational capital as well as knowledge.
Second, “soft power” elements of American international influence are grounded in the bedrock of our national intangible assets – such as our values and culture.
Third, the report makes the explicit link between domestic economic prosperity and international influence. As the report states, “The foundation of American leadership must be a prosperous American economy.”
In that regard, the report articulates an export-led economic strategy:

Save More And Export More: Striking a better balance at home means saving more and spending less, reforming our financial system, and reducing our long-term budget deficit. With those changes, we will see a greater emphasis on exports that we can build, produce, and sell all over the world, with the goal of doubling U.S. exports by 2014. This is ultimately an employment strategy, because higher exports will support millions of well-paying American jobs, including those that service innovative and profitable new technologies. As a part of that effort, we are reforming our export controls consistent with our national security imperatives.
Shift To Greater Domestic Demand Abroad: For the rest of the world, especially in some emerging market and developing countries, a better balance means placing greater emphasis on increasing domestic demand as the leading driver of growth and opening markets. Those countries will be able to import the capital and technologies needed to sustain the remarkable productivity gains already underway. Rebalancing will provide an opportunity for workers and consumers over time to enjoy the higher standards of living made possible by those gains. As balanced growth translates into sustained growth, middle-income, and poor countries, many of which are not yet sufficiently integrated into the global economy, can accelerate the process of convergence of living standards toward richer countries–a process that will become a driver of growth for the global economy for decades to come.
Open Foreign Markets to Our Products and Services: The United States has long had one of the most open markets in the world. We have been a leader in expanding an open trading system. That has underwritten the growth of other developed and emerging markets alike. Openness has also forced our companies and workers to compete and innovate, and at the same time, has offered market access crucial to the success of so many countries around the world. We will maintain our open investment environment, consistent with our national security goals. In this new era, opening markets around the globe will promote global competition and innovation and will be crucial to our prosperity. We will pursue a trade agenda that includes an ambitious and balanced Doha multilateral trade agreement, bilateral and multilateral trade agreements that reflect our values and interests, and engagement with the transpacific partnership countries to shape a regional agreement with high standards.
As we go forward, our trade policy will be an important part of our effort to capitalize on the opportunities presented by globalization, but will also be part of our effort to equip Americans to compete. To make trade agreements work for Americans, we will take steps to restore confidence, with realistic programs to deal with transition costs, and promote innovation, infrastructure, healthcare reform and education. Our agreements will contain achievable enforcement mechanisms to ensure that the gains we negotiate are in fact realized and will be structured to reflect U.S. interests, especially on labor and environment.

In this area, I must say I am somewhat disappointed. A strategy of “rebalancing” and increased exports is correct as far as it goes. We cannot go back to the unsustainable consumer-debt driven economy of the past. But shift demand growth to others is not enough. Sustained prosperity will only come from harnessing the economic transformation.
The National Security Strategy does include the important areas of scientific and technological research and education. It talks about clean energy technologies and industries. And the President emphasized those points yesterday during his visit to Silicon Valley.
That does not, however, add up to an innovation-driven economic strategy. Nor does it fully harness the power of intangible assets and intellectual capital.
So the new National Security Strategy is a step in the right direction — especially its broad understanding of what constitutes national security and America interests. It given us something to build upon – not the final product.

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