Where is the United States Headed?

I heard a radio broadcast by Robert Reich this week in which he debunked the threat to the U.S. economy of outsourcing to India and China. He pointed out, correctly I think, that there had been similar fears in the past that had proven baseless, and that the amount of outsourcing to date is still very small as compared with the size of the U.S. economy.

He pointed instead to the real threat -- an undermining of U.S. innovation capacity. As the AAAS data makes clear, governmental spending on research and development has again swung heavily toward the military. Military R&D spending actually dropped in the early 1990's, until in 1995 it was 53 percent of government R&D. In the budget proposed for 2004, it is 56 percent of the total. Basic research has increased to some 22 percent of the (increasing) R&D total, which is a good thing for long term competitiveness of the U.S. economy. But I question whether the economic benefits per dollar from basic research funded through defense budgets will equal those from basic research funded through the civilian agencies of the government.

I have noted in the past that there seems to be little appreciation for the long term negative impacts of the current immigration policies that cut the flow of foreign teachers, engineers, scientists and others to the U.S.

In the past there have been severe dislocations as shifts in comparative advantage and trade have caused factories to close and jobs to be lost in the U.S. "rust belt". It has been hard to tell a 50 year old, unemployed machinist that those are the breaks, and you have to find a new career.

I think we are going to see new dislocations, and new job categories hit. New groups are going to have to leave the work they have done for years, and get new jobs in new fields. I suspect that as outsourcing hits the white collar jobs, their greater political clout will raise the profile of the issue.

I think Robert Reich is right, that if we can maintain the innovation capacity of the United States, the average end result of more trade options will be beneficial. If we fail to remain at the intellectual and technological forefront, the results will be unfortunate.

But the American workforce is going to have to be nimble indeed. Professionals, who were really not threatened in the past, are going to have to be more productive, and are likely to lose jobs to their lower paid colleagues in developing countries. U.S. professionals are going to have to be prepared to change jobs and professions in the future.

And American workers who are uneducated and unwilling to change jobs and to move to where new jobs are being created are going to be out of luck. We have to be willing to accept rapid social change to keep working and progress economically in the globalizing economy.

We also have to reconeptualize eduction. Everyone will have to be more educated. Education will be a continuing process, not something left behind after childhood school days.

The situation I describe is like that faced by immigrants, and the U.S. is an immigrant nation. Perhaps we will have to return to our roots, and display a willingness to change and learn in exchange for economic opportunity.

If the situation in the world's richest nation is challenging, so much more so that in developing nations!