Laura D’Andrea Tyson contributed to the HBR debate with an article titled: Think U.S. Tech Isn’t Healthy? Look at the Data.
A rich comment section followed. This is my contribution:
A very constructive debate that is no doubt having a broad positive impact, so you should all be proud of your public contributions — it’s badly needed from my perch. Many leaders have been having these discussions privately for years where I fear it did little good.
I believe Gary Pisano has it correct when he focuses on the trade imbalance. If all other theories to include promoting outsourcing were valid for the U.S. as a nation — rather than just global corporations and other nations, then the disequilibrium would surely have eased long ago.
I’m afraid what we have is a classic conflict between the fiduciary responsibility of leaders in publicly traded corporations on U.S. markets, and the reality of global economics with dysfunctional global regulatory bodies that lack the structure and ability to resolve such conflicts.
Some of the questions in these comment sections reveal a deep confusion that is prevalent in our society — many don’t understand how one can embrace global trade, yet complain about the results. The truth as I see it is that although we have a global medium with few restrictions, and we certainly have an interconnected global economy; we all still live in nation states, complete with an extremely complex web of trade law, currency policy, taxation, IP law, and wildly differing enforcement levels. We also have still quite different cultures, radically different cost of living, debt levels, environmental laws, subsidies….
Taken to its logical end state — the trade imbalance reflects structural impediments to market forces; otherwise markets would correct. One can argue that we are experiencing just such a correction now, and would have earlier if not for manipulation by the FRB, but then they have no control over the currencies of others, and we have little control over the silent barriers to market access. I believe that is why we are seeing intentional downward pressure on the dollar, which is at best a temp measure.
Higher educated and better trained workers in healthcare and house building does not balance the trade deficit — alt energy can help, but until we see common policy in currency as well as subsidies, and equal access to markets, it would require a remarkable miracle indeed for technologies deployed globally to correct one nation’s imbalance, particularly when that nation has much higher costs, yet the workers use the same automation, with unequal currency values.
Competitive taxation is a no brainer — an arms race type of investment with borrowed money very risky. A trade war would be foolish and self-destructive, but is a great concern to me given the scenario. We cannot spend our way out of this situation, and I see no technology on the horizon that has the potential to reverse the imbalance, particularly given that it would surely be deployed globally almost immediately today, thereby neutralizing any nationalist affect, even when the U.S. continues to pay most of the bill for global basic research.
This is not a happy situation. I did not complete my own book on global economics and innovation precisely because I could not foresee a transition that works for the U.S. given the challenge, short of magical enlightenment by trading partners, combined with a willingness to significantly downsize U.S. liabilities, and quick transformation of our learning ecosystem and culture. Quite a bit to ask even of an optimist — even if possible.