Global Competitiveness of US Corporations. Need For Broader Governemnt Role in American Business.
Wednesday, Thursday April 29/30 2009
Today's Zinger:
Size Matters.
Morning Briefing:
It is beginning to feel a little like the Death Star versus the Jedi Knights. Think back to that scene in Star Wars when the large, ominous and highly protected Death Star battleship could strike terror on any planet due to its size and firepower. The small and nimble Jedis had little more than their creativity, courage and nimbleness to counter the threat. In their case, they were successful, but paid a very heavy toll in combating the giant enemy.
Historically, American corporations invented the factory and low cost production. In recent years America has become more known for being nimble and innovative. The American industrial worker has gone from the factory line to the food line in the past several years. To be competitive, the American worker has become a maverick of sorts, becoming more self reliant and changing jobs frequently. The service worker has taken the place of line worker.
Over the past ten years, third world countries have developed rapidly as they focused on educating their citizens, providing capital to business and protecting their interests through policy and taxes. Some have overlooked obvious illegal activities in the name of growth and prosperity. This has changed, in a radical way, the positioning of American industry. Routine manufacturing operations have been outsourced to foreign countries (companies) and the American worker must work for their own health care and plan their own retirement.
Looking into the 21st century, there will be more major change in just about every aspect of life. There will be a need for constant innovation and the ability to deliver products at a low cost, high quality anywhere in the world. Countries like China and Korea are dominating the manufacturing and distribution sector. Did you watch the 2008 Summer Olympics and see the perfect syncopation of the Chinese drummers and acrobats during the opening ceremony? The Chinese people are trained for consistency and direction. Their manufacturing ability is a model of their culture. The low cost labor force and support of the government in business, health care and finance make them fierce competitors.
So where does this leave the United States? Our manufacturing has migrated off shore. Our people are no longer well trained. As a matter of fact, most training as we once knew it has been eliminated. There are very few apprentice programs. Journeymen have been replaced by a demand for the expectation of instant experience on the job.
American industry is now known more for technology and innovation. Large corporations, like GE, GM and Caterpiller are having a more difficult time competing against foreign Death Stars.
How will our legacy companies (automotive, aeronautics, military) and new/emerging start-ups compete in a world where countries are willing to invest in their companies and provide the protection (legal, health care and financial) for these companies to win in the global marketplace? These countries also have a low cost and educated labor force that is outpacing the United States. If a small start-up can invent the next power source that can replace fossil fuel and this invention can be copied and manufactured overseas, and these countries are aiding the local companies to succeed, how can we win?
Is it time for the federal and local governments to take a more active role to assist companies to scale more quickly and provide the competitive cover through government policy and access to capital? In many ways this will displace aspects of venture capital but it may have a more profound impact on helping our overall economy and the future of U.S. companies. Or will government involvement just get in the way of progress which has happened in the past? Unlike other countries, our government has yet to prove they can be a partner in business versus a regulator and overseer. Interestingly, the current Presidential Administration sees its role as limiting business and compensation. I am not suggesting the government should keep hands off business but rather they need to get smart and balance oversight with enabling business risk and growth at home.
This brings us to the fundamental difference between the U.S. government and many foreign governments like China, Korea, India, Thailand, Singapore, Japan, etc. The U.S. Government sees itself as a protector of the consumer through regulation and oversight. Many foreign governments have balanced the regulatory requirements with facilitating business competitiveness.
Will the small American Jedis be nimble and fast enough to penetrate the Death Star? As a person that believes in free markets (with oversight and boundaries), it is hard for me to accept greater government involvement for companies to fairly compete. However, the global marketplace in not a level playing field. In the past, when companies competed inside the borders of the United States, or internationally with common laws, the competitive environment was fair. But as more countries adopt different rules, regulations, tax policy and assistance programs for their businesses, the competitive landscape is not fair. If our government doesn't do something to assist American business, we may be left with a lot of low paying jobs as the innovation asset is copied and taken to places that can scale and manufacture quickly and cheaply. That assistance may include changes in tax law, policies for retirement, facilitation of business versus pure regulation and oversight. We should be celebrating business success. More people know who won the Emmy than anything about business success.
What do you think? Is the free marketplace really free? Is free trade really free? With countries aiding their own industries, can American companies compete or will we migrate to a business model that requires constant innovation? This issue has extremely important implications for the future of American business but also on the income of the average American family and the role of the United States in world affairs. Maintaining our superior competitiveness and profitability is critical to our future.
It is time for the government to rethink how they can help business rather than leaving it strictly to the marketplace and enacting rules to limit business. The first step is to celebrate American business and quit demonizing business.
Today's Zinger:
Size Matters.
Morning Briefing:
- Has the world changed so much in the past six months to demand a radical shift in our economy? The answer may surprise you. Maybe it has, or at least it has in the past ten years. Maybe it is time to consider a broader role for government in core businesses and future businesses.
- The United States is known for innovation, yet innovation is mimicked and copied by emerging countries with cheaper labor and capital. This implies our advantage is only as good as the international protection of copyrights and patents.
- Emerging countries offer special incentives (policy, taxes and capital) to help developing industries and to sustain competitiveness of large employers. Can a small start-up company in the United States compete against the likes of China or India? Can American business, with its innovation and the ability to be first to market, remain competitive against the overwhelming power of these countries in the marketplace? Size does matter as it creates economies of scale.
It is beginning to feel a little like the Death Star versus the Jedi Knights. Think back to that scene in Star Wars when the large, ominous and highly protected Death Star battleship could strike terror on any planet due to its size and firepower. The small and nimble Jedis had little more than their creativity, courage and nimbleness to counter the threat. In their case, they were successful, but paid a very heavy toll in combating the giant enemy.
Historically, American corporations invented the factory and low cost production. In recent years America has become more known for being nimble and innovative. The American industrial worker has gone from the factory line to the food line in the past several years. To be competitive, the American worker has become a maverick of sorts, becoming more self reliant and changing jobs frequently. The service worker has taken the place of line worker.
Over the past ten years, third world countries have developed rapidly as they focused on educating their citizens, providing capital to business and protecting their interests through policy and taxes. Some have overlooked obvious illegal activities in the name of growth and prosperity. This has changed, in a radical way, the positioning of American industry. Routine manufacturing operations have been outsourced to foreign countries (companies) and the American worker must work for their own health care and plan their own retirement.
Looking into the 21st century, there will be more major change in just about every aspect of life. There will be a need for constant innovation and the ability to deliver products at a low cost, high quality anywhere in the world. Countries like China and Korea are dominating the manufacturing and distribution sector. Did you watch the 2008 Summer Olympics and see the perfect syncopation of the Chinese drummers and acrobats during the opening ceremony? The Chinese people are trained for consistency and direction. Their manufacturing ability is a model of their culture. The low cost labor force and support of the government in business, health care and finance make them fierce competitors.
So where does this leave the United States? Our manufacturing has migrated off shore. Our people are no longer well trained. As a matter of fact, most training as we once knew it has been eliminated. There are very few apprentice programs. Journeymen have been replaced by a demand for the expectation of instant experience on the job.
American industry is now known more for technology and innovation. Large corporations, like GE, GM and Caterpiller are having a more difficult time competing against foreign Death Stars.
How will our legacy companies (automotive, aeronautics, military) and new/emerging start-ups compete in a world where countries are willing to invest in their companies and provide the protection (legal, health care and financial) for these companies to win in the global marketplace? These countries also have a low cost and educated labor force that is outpacing the United States. If a small start-up can invent the next power source that can replace fossil fuel and this invention can be copied and manufactured overseas, and these countries are aiding the local companies to succeed, how can we win?
Is it time for the federal and local governments to take a more active role to assist companies to scale more quickly and provide the competitive cover through government policy and access to capital? In many ways this will displace aspects of venture capital but it may have a more profound impact on helping our overall economy and the future of U.S. companies. Or will government involvement just get in the way of progress which has happened in the past? Unlike other countries, our government has yet to prove they can be a partner in business versus a regulator and overseer. Interestingly, the current Presidential Administration sees its role as limiting business and compensation. I am not suggesting the government should keep hands off business but rather they need to get smart and balance oversight with enabling business risk and growth at home.
This brings us to the fundamental difference between the U.S. government and many foreign governments like China, Korea, India, Thailand, Singapore, Japan, etc. The U.S. Government sees itself as a protector of the consumer through regulation and oversight. Many foreign governments have balanced the regulatory requirements with facilitating business competitiveness.
Will the small American Jedis be nimble and fast enough to penetrate the Death Star? As a person that believes in free markets (with oversight and boundaries), it is hard for me to accept greater government involvement for companies to fairly compete. However, the global marketplace in not a level playing field. In the past, when companies competed inside the borders of the United States, or internationally with common laws, the competitive environment was fair. But as more countries adopt different rules, regulations, tax policy and assistance programs for their businesses, the competitive landscape is not fair. If our government doesn't do something to assist American business, we may be left with a lot of low paying jobs as the innovation asset is copied and taken to places that can scale and manufacture quickly and cheaply. That assistance may include changes in tax law, policies for retirement, facilitation of business versus pure regulation and oversight. We should be celebrating business success. More people know who won the Emmy than anything about business success.
What do you think? Is the free marketplace really free? Is free trade really free? With countries aiding their own industries, can American companies compete or will we migrate to a business model that requires constant innovation? This issue has extremely important implications for the future of American business but also on the income of the average American family and the role of the United States in world affairs. Maintaining our superior competitiveness and profitability is critical to our future.
It is time for the government to rethink how they can help business rather than leaving it strictly to the marketplace and enacting rules to limit business. The first step is to celebrate American business and quit demonizing business.
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