Industrial Competitiveness and Productivity
Americans may not be inclined to believe or accept it, but a Georgia Institute of Technology study released four months ago indicates that China has equaled and surpassed the United States as the worldwide technological competitiveness leader and driver of the world’s economy. Called the High Tech Indicators (HTI) study, it ranks 33 nations as competitive producers and exporters of technology products. Four major factors contributed to the assessment and derive a Technological Standing (TS) figure of merit – national orientation toward technological competitiveness, socioeconomic infrastructure, technological infrastructure and productive capacity.
Statistics from 2007 show China with a TS of 82.8 compared to 76.1 for the U.S., 66.8 for Germany and 66.0 for Japan. Eleven years ago, China’s TS was 22.5, while the U.S. peaked in 1999 with a TS of 95.4. The increasingly integrated European Union, if considered as one entity instead of 27 separate countries, would exceed the 2007 U.S. performance. Regarding China, there is no sign of leveling trends or interruption of advances. In light of China’s emphasis on engineering and science and the U.S. lagging in education, according to study authors at the Technology Policy and Assessment Center (TPAC), “The future clearly does not look good for the United States.”
A look at factors contributing to TS is enlightening. National orientation (NO) derives mainly from expert opinion, so it can be suspect as not objective, except that results have been consistent over the 21-year period of study updates. Japan’s NO (75.7 in 2007) drifted downward from 1993-2005 but has rebounded. In years 2005 through 2007, NO was led by Ireland (83.4) and Israel with strong improvement trends in Russia and Indonesia and moderate decline in China (62.0), Australia and Italy.
In socioeconomic infrastructure (SI), the U.S. continues to lead while China ranks 24th among nations evaluated. In technological infrastructure (TI), the U.S. dominates with relative advantage over number-two Japan. A prominent feature of TI measure is the ascendancy of China, which now stands between Germany and the United Kingdom. Changes between 2005-2007 include modest ascendancy of Indonesia, Spain, Mexico and Russia and declines by Singapore, Philippines and Sweden. In productive capacity (PC), China now ranks third in the world behind the U.S. and Japan and is rising the fastest of any nation in this category.
These Georgia Tech findings create and color the fabric of what drives national wealth and poverty and what threatens global stability – a thing called productivity. The Power of Productivity, a new book by William W. Lewis and published a few weeks ago, is based on studies performed over about 18 years, primarily by McKinsey Global Institute. This work delves into relationships of these TS components affecting productivity and goes a long way to explain how and why the HTI ideas have merit and importance.
Lewis believes that it is necessary to evaluate issues at the sector level of individual industries (auto, steel, banking, etc.) for real factors affecting economic performance. Also, policies governing competition in product markets are as important as macroeconomic policies. His summary of contributing factors includes: the importance of a “level playing field” and how it is enacted; the need for appropriate education, which is not the same as high levels of education; methods by which nations organize and deploy labor and financial capital that improve productivity; ill-advised mixing of social objectives into industrial policy (import tariffs, subsidized loans, minimum wages and disallowance of layoffs) because they are deemed “good,” which limits productivity; high taxation of business; elites who promote unaffordable big government and reward themselves richly; protectionism; and a true understanding that producer interests must be secondary to consumer interests.
It is not my role to advocate the completeness or accuracy of interpretations by TPAC or Lewis. Nonetheless, these are imperative studies to evaluate and wise counsel to consider. These two treatises on industrial productivity and competitive superiority in a worldwide market of high-technology products and performance are mandatory reading for those who expect to live and survive in this changing world. Know that societies with high productivity inevitably replace those with a lower measure, and it is these national differences that reveal how globalization will proceed. An admonition to the U.S. government is that political motivations that distort competition and result in lower productivity will ultimately kill our nation. Tell your government representative that you understand this, and instruct them how not to proceed. IH