World Economic Forum 2013: A Post Crisis Davos

As the global economy begins to show signs of recovery, leading economic thinkers, heads of states, and major CEOs recently met in Davos, Switzerland for the annual World Economic Forum. These VIPs attended numerous events, networked, and traversed a new global economic landscape characterized by renewed optimism. The new disposition was reflected by this year’s theme—“resilient dynamism”—which represents an important shift in the perception of the world economy from something that is weathered to a force that can provide new opportunities.

While the outlook has become more hopeful, it does not mean that we are out of the woods just yet. As Axel A. Weber, Chairman of the Board of Directors of UBS, Switzerland, and a Meeting Co-Chair, declared, “The feeling is that the worst is behind us. But the mood bordered on complacency.” Not everything pointed towards the positive, especially the WEF’s own Global Risks 2013 report which offers a pessimistic outlook, saying the global community’s ability to address significant challenges, such as global warming, were limited by economic issues like “severe income disparity” and “chronic fiscal imbalances.” The report concludes that these systemic problems must be addressed in the near future in order to both sustain global economic growth and to avoid widespread social unrest.

On an interesting side note, the WEF, working with the science magazine Nature, noted several important but relatively remote potential economic threats known collectively as “X Risk Factors.” These include: Runaway Climate Change, Significant Cognitive Enhancement, Rogue Deployment of Geoengineering, Costs of Living Longer, and Discovery of Alien Life. While these issues are currently not as tangible as “concerns such as failed states, extreme weather events, famine, macroeconomic instability or armed conflict,” says the WEF, “they capture broad and vaguely understood issues that could be hatching grounds for potential future risks.” However, it is not unimaginable that we may confront many of these issues in the coming decades, and therefore, it is prudent to prepare for these prospective threats.

Overall, while Davos may often be thought of merely as a gathering of “fat cats in the snow,” it does have real worth both through its influence in setting the economic discourse and its role as a place for global leaders to reflect on global economic challenges.

Posted by: Matthew Goldberg

Sources: WEF, CNN, Business Insider, The Information Daily

Photo Credit: World Economic Forum 2013: Microphones courtesy of flickr user World Economic Forum

Is Having the Right Skills Enough to Get Hired in Post-Recession America?

One of the most common explanations for the persistent high unemployment in America since the 2007 recession is the skills gap. An Accenture report estimates that, “about a third of employers worldwide are experiencing critical challenges filling positions due to a lack of available talent, and almost three-fourths of employers are affected by talent shortages to some degree”.  Technology and globalization processes have increased the demand for talented and high-skilled workers, and many say that the nation’s education institutions have not risen to meet the challenge effectively.

The Brookings Institute issued a report that includes eleven “new learning skills in the 21^st century” that are crucial for our students. These include: simulation, multitasking, and distributed cognition (effectively utilizing tools that enhance mental capacity). Meanwhile, the Center for 21^st Century Skills advocates six different skills: information literacy, creativity & innovation, collaboration, problem solving, communication, and responsible citizenship. Proponents of the skills gap view see unemployment as structural, a product of supply falling behind demand in the skilled labor market. A recent Wilson Center publication by Paul Vallas argues that the skills gap “poses a major threat to the United States’ long-term economic competitiveness”. The American education system is falling further behind the performance of other countries, and addressing the “massive achievement gap present within the U.S. between minority and socio-economically disadvantaged students and their more affluent peers” should be a national priority.

However, many disagree with this assessment of a skills gap as the main cause of high US unemployment, and propose a demand-side rebuttal that focuses on the drop in real household wealth associated with the recent recession. This has decreased household demand nationwide and thus crippled job growth. Research done by the Economic Policy Institute  argues that persistent unemployment at all levels of education, and in most major sectors of the economy indicates that the current high rates of unemployment are caused by more than just a skills gap. They also attribute the rise in educated labor as a percentage of the total labor force to the rapid growth in sectors that demand high-skilled labor. Other research  at the Economic Policy Institute points to record corporate profits in the past year, saying that businesses learned during the recession how to make money with lower labor costs, and now don’t need to hire as many people to make higher rates of profit. Some of this can be explained by the fact that traditionally labor intensive industries have been the hardest hit by the recession, while high-tech companies with lower labor demands have seen the most growth.

To create policy that will improve the state of the economy, it is important to understand the causal linkages for the unemployment problem in America. . For example, structural unemployment cannot be solved with demand-side economics such as stimulus packages. On the other side, education initiatives and on the job training is the answer to a skills gap.

Posted by: Ben Copper

Sources: Accenture, Brookings Institute, Economic Policy Institute, CNNMoney, Commerce Department

Photo Credit: flickr user, Dita Margarita

Techonomy Conference 2012: Objectives of Technology-Driven Economic Revitalization

On Wednesday, September 12^th business leaders, political figures, and technology experts came together for the annual Techonomy Conference in Detroit. Hosted by the Detroit Economic Club, the conference’s agenda focused on the role of technology as a vital component of achieving social progress and economic growth.  This single day program is especially committed to the issues of “reigniting U.S. competitiveness and economic growth, creating jobs, and revitalizing cities in a technologized age”. Featured speakers included Grady Burnett, the Vice President of Facebook’s Global Market Solutions, James Dougherty, an Adjunct Senior Fellow for Business and Foreign Policy on the Council of Foreign Relations, and Justin Fox, the Editorial Director of the Harvard Business Review. They addressed the crowd on topics ranging from challenges in the era of globalization to the democratization of finance and product development to the future of manufacturing and its impact on employment. Audience members were also greeted by the founder of Techonomy, David Kirkpatrick, and treated to speeches on individual entrepreneurial development and other related topics.

The conference took a local look at Michigan and Detroit’s economic struggles for revitalization and at the challenges faced auto-mobile industry. Described as the Silicon Valley of an “earlier era”, Detroit is said to represent the larger issues facing American cities, including adapting to changes in education, employment, and infrastructure brought on by an increasingly globalized market society. Some have questioned the conference’s location of Detroit due to current economic struggles. Techonomy’s founder sends a different message, citing Detroit’s troubles as emblematic of cities that have missed the opportunities of technology in the past but have the potential to resolve these issues. Even a recently hurting automobile industry, a defining characteristic of Detroit, stands to make substantial gains from strengthening its tech culture of efficiency and educational achievement.

What were the goals and expectations of Techonomy? The event sought to utilize the revitalization of industry through technological advances, entrepreneurship, and innovation as major strategies for economic recovery. A focus on the increasing globalization of business and industry practices seemed also to be an objective of the conference. Intent on keeping America pushing the technological envelope, speakers discussed the future of expanding innovation and inspiring competitive growth. Complementarily, lecturers represented a diverse background of national industry and intellectual leadership, to address the concern of declining US competitiveness in detail and tackle the issue from unique viewpoints.

What can the public expect to come from this meeting of multi-disciplinary minds? Perhaps policy-makers will be influenced by the incredible support from the business community for this technology initiative as a means of creating jobs and stimulating urban development. Another possible outcome is a renewed emphasis on education for current and future generations to establish a more highly-skilled workforce with improved techno-literacy. Finally, perhaps Americans will see more pressure for regulatory reform easing start-up business restrictions. Ultimately, conference publicity should push technology to the forefront of economic recovery initiatives as a tool for improving US competitiveness and improving urgent urban issues to speed along city development.

Forbes highlights examples of innovative entrepreneurs in the Detroit area who exemplify these aims and serve as best-practice models for aspiring start-up companies. With the help of the Techonomy and its conference speakers, the American public may be able to look forward to more success stories like these.

Posted by: Sophia Higgins

Sources: Techonomy, Forbes, CNBC

Photo Credit: 2010_08_05_techonomy_105 @ Techonomy courtesy of Flickr user dserals

 

Immigration Lessons From Our Northern Neighbor?

True or False: Canada has a higher foreign-born population, per capita, than the United States?  Surprisingly, it’s true and it speaks to the lessons the U.S. might learn on how to integrate immigrants into their economies.

While the United States has long had the image around the world as the refuge of the “tired, poor, and huddled masses yearning”, its increasingly arcane and complex immigration system is coming under fire as inefficient in a global economy where labor, just as much as capital, is flowing freely across borders.  More business leaders and policymakers are arguing that immigrants, especially those with in demand skills, are needed to fuel economic growth.

Canada has already caught on to this trend and is taking advantage of gaps in the American system.  Look no further than canadavisa.com, where one of the main links is for foreigners in America on a H1-B or temporary work visa and how they can be fast tracked for Canadian immigration.  Canada, of course offers many of the same things to immigrants the U.S. does: a high standard of living, an advanced economy, rule of law, peace and safety.  In addition, Canada has made a concerted effort to use immigration to directly fill gaps in its labor force, something the US has yet to do.  To determine who is granted a permanent visa, Canada has a simple point system that awards points for things like level of education, occupational skills, language ability, and others factors relevant to productivity.  Only 22% of its immigration was for family reasons (i.e. reuniting mothers with children, brothers with sisters, etc.) while about two thirds of all permanent visas were granted for economic reasons.  In the U.S., the inverse is true: Only 13% of green cards last year were doled out for economic reasons, while two-thirds were for family reunions.

The StartUp Act 2.0, currently being deliberated in both houses of Congress, contains provisions that shift the immigration paradigm in the U.S. towards a more economic view.  The Act would create a new visa for immigrants who graduate from U.S. universities with a master’s degree or doctorate in STEM fields and also create an entrepreneur’s visa to enable immigrants with capital to start businesses and create jobs in the U,S,, rather than returning home to do it.

The U.S. faces both demographic changes (aging and shrinking labor force) and economic forces (e.g. a shortage of STEM workers) that can be solved by a smart immigration policy.  As of now, the US is educating and accepting intelligent and hard-working immigrants temporarily, who are then forced to either return home or go to a country like Canada, where they create jobs and contribute to growth.

Posted by: Sean Norris

Sources: CNN, The Christian Science Monitor, The Fort Wayne Journal-Gazette

Photo Credit: Citizenship Ceremony courtesy of flickr user mars_discovery_district

Reverse Innovation: Create Far From Home, Win Everywhere

Which way does innovation flow? Traditionally, products and services have been thought of as originating in advanced economies, which have a more suitable environment for technological development than do developing countries. Authors Vijay Govindarajan and Chris Trimble would argue that the reverse is also true.

Deputy managing editor of the Wall Street Journal Alan Murray reviewed Govindarajan and Trimble’s new book Reverse Innovation, which provides a different model of successful product innovation. Rather than taking products designed for developed countries’ demands, businesses have increasingly been doing the reverse – creating “innovative new products for developing countries” and adapting them “to satisfy demands in the developed world.” Murray provides several of the authors’ examples of “reverse innovation” in his article, including General Electric’s inexpensive compact ultrasound medical scanners that were originally developed for the Chinese market, but became successful just about everywhere.

However, “reverse innovation” is held back by the low profit margins of the developing world. To combat this obstacle, Govindarajan and Trimble promote “local growth teams,” which Murray describes as “small, cross-functional, entrepreneurial groups located in emerging markets” that can both effectively utilize advanced technologies and cater to local markets.

Indeed, finding a way to mitigate these barriers to innovation could greatly help developed countries address significant problems such as rising health care costs. Reverse Innocation authors use the example of Narayana Hrudayalaya hospital in India, which had benefited from “process innovation” – the key to lowering the cost of open-heart surgery to around $2000, about a tenth of what it costs in the U.S.

 

Posted by: Pokyee Yu

Sources: The Wall Street Journal, Reverse Innovation

Photo Credit: Reverse Innovation. By Vijay Govindarajan and Chris Trimble. 229 pages. Harvard Business Review Press. $30

Can America Restore Its Competitive Edge?

The Wilson Center hosted a panel discussion this morning focusing on what government, business, and educators can do to restore U.S. competitiveness through long-term improvements in the K-12 education system and public policy. The event brought together five experts for a dialogue led by moderator David Wessel, Chief Economic Correspondent for The Wall Street Journal.

The panel discussion highlighted the importance of manufacturing in U.S. competitiveness. Norm Augustine, former CEO of Lockheed Martin, pointed out that advanced manufacturing is not only essential for the U.S. economy, but also for national security. Deborah Wince-Smith, president of the Council on Competitiveness, added that stimulating the growth of manufacturing hubs and clusters will help spur innovation and progress within the industry. Two of the most significant problems that need to be addressed are outsourcing and the shortage of skilled labor.

Combating outsourcing can be done through changes in corporate tax policy, Business Roundtable President John Engler asserted, such as simplifying and reducing it. This will give businesses more incentive to stay in the US. Paul Vallas, former superintendent of schools in Chicago, Philadelphia and the Recovery School District in Louisiana, adds that not only do changes need to be made at the federal level, but also at the state and local level, especially with entitlements and tax policy.

Jan Rivkin, a professor at Harvard Business School, explained that a less restrictive immigration policy can bring in a large influx of skilled laborers that many firms need. Engler pointed to heightened partisanship in politics during the last few years for keeping a comprehensive immigration policy from being pushed through Congress.

The panelists also agreed that reforms in the education system can address the shortage of skilled labor. Vallas asserted that the K-12 education system in the U.S. has failed to evolve, and identified two major issues – the school days and year are too short, and the teachers are not good enough. As such, the education system needs to be modernized and given more flexibility to adapt to changing demands. He suggested that we bring a “free enterprise system” to education; pay STEM teachers more, pay excellent teachers more, pay mediocre teachers less, and fire incompetent teachers.

A full webcast and podcast of the event is available on the Wilson Center event page.

Posted by: Pokyee Yu

Sources: The Woodrow Wilson International Center for Scholars

Photo Credit: David Hawxhurst/WWICS

Harvard Survey results shows low expectations for future of U.S. competitiveness

The Harvard Business School recently released the results of a survey that attempted to answer the questions “What ails the American economy?” Harvard surveyed almost 10,000 alumni in the U.S. and abroad this past fall, all of whom are important actors in the global economy. HBS asked the alumni how they thought the U.S. would compare in the next few years and what they found was a lot of pessimism.

Two-thirds of the alumni polled agree that the U.S. is falling behind the emerging economies of Brazil, India, and China and is only just keeping up with other advanced economies. Of the numerous disadvantages the complex tax code, the political system, and weak K-12 education stood out as blockades to growth and competitiveness.

Overall, 71 percent of alumni expect U.S. competitiveness to decrease over the next three years, even though 57 percent say that the current business climate in the U.S. is above the average set by other advanced economies.

This is Harvard’s first “Survey on U.S. Competitiveness” – part of the school’s ongoing “U.S. Competitive Project,” a multi-year project, which aims to lay out the facts and realities of international competition and the implications for the U.S. in a nonpartisan way.

Posted by: Devon Thorsell

Sources: Reuters, The Washington Post, Harvard Business School Survey on U.S. Competitiveness

You Are Invited:Emerging Global Trends in Advanced Manufacturing

The Program on America and the Global Economy (PAGE) Presents an Institute for Defense Analyses (IDA) Report Launch:

 Emerging Global Trends in Advanced Manufacturing

Monday March 26, 2012

4:00 – 5:30 p.m.

Joseph and Claire Flom Auditorium, 6^th Floor, Woodrow Wilson Center

_______________________________________________________________________        

Sallie Keller, Director, IDA Science & Technology Policy Institute

Authors:

                 Stephanie Shipp, Bhavya Lal, Nayanee Gupta, Justin Scott,  Chris Weber, and Michael Finnin,                    Emerging Global Trends in Advanced Manufacturing, IDA Science & Technology Policy Institute

 Commentators:

Carl Dahlman, Henry R. Luce Associate Professor School of Foreign Service, Georgetown University

Jim Turner, Senior Counsel, Innovation and Technology and Director, Energy Programs, Association of Public and Land-grant Universities

 Moderator:

Kent Hughes, Director, Program on America and the Global Economy

                                                                                                                     _____________________

The Office of Director of National Intelligence, National Intelligence Manager for Science and Technology asked the Institute for Defense Analyses to identify emerging global trends in advanced manufacturing.  This study identifies key worldwide, emerging trends in advanced manufacturing. Over the next 10 years, networking will drive advances in manufacturing.  In 20 years, manufacturing is expected to advance to new frontiers, resulting in an increasingly automated and data-intensive manufacturing sector that will likely replace traditional manufacturing as we know it today. Potential developments in advanced manufacturing could help sharply strengthen the American presence in manufacturing.  To make the most of expected advances in manufacturing, the United States will need to make a major commitment to develop, maintain, and upgrade workforce skills.

___________                                                                                                                  ______________

 A copy of the report can be found here.

Please RSVP acceptances only to page@wilsoncenter.org

Directions to the Wilson Center: www.wilsoncenter.org/directions

 

America on the Rebound?

The United States has been boasting economic growth and stabilization over the past few weeks. The dollar is at a multi-week high, and retail sales in February showed the largest gain in five months. The jobs report, released by the Bureau of Labor Statistics, announced that the private sector added 233,000 jobs in February 2012 and the labor force participation rate recorded the largest increase in two years. Economists say that these trends are the real deal. “HIS Global Insight is projecting that all 50 states will see employment increases this year,” said the Weekly Standard. Additionally, American families and households are seeing positive results as well; during the last quarter of 2011, average household net worth rose by $1.2 trillion. The Obama administration also has good news for homeowners. Bank of America will be reducing mortgage balances on approximately 200,000 homes to avoid paying $850 million in penalties.

In trade news, U.S. domestic oil production is at its highest since 2003 (5.6 million barrels/day).  The United States is currently importing 45 percent of its petroleum, down from 57% in 2008. The Obama Administration says that these statistics show that the United States is on track to meet the administration’s goal of reducing oil imports by 1/3 in the next 10 years.  According to a recent Gallup poll, most Americans think Obama and Congress can do more to reduce gas prices, which have been steadily increasing over the past year. Together with the recovering economy and high prices at the pump, a record number of Americans are choosing to take public transportation: 10.4 billion trips were taken in 2011.

Combined with the news that China is posting its first trade deficit in a decade ($31.5 billion), and the euro is a at a one-month low against the dollar – things are looking up for the United States economy.

Posted by: Devon Thorsell

Sources: Weekly Standard, Boston Herald, Reuters, Wall Street Journal

2012 Global Innovation Policy Index

Earlier this month, The Information Technology & Innovation Foundation, in conjunction with the Ewing Marion Kauffman Foundation, published The Global Innovation Policy Index. The report emphasized the value of having an “innovative advantage” in an increasingly globalized world arena of fierce competition. The authors believe that in crafting a nation’s policies for maximizing innovative capacity, policymakers should embrace “thoughtful and constructive” strategies that boost competitiveness without disrupting the health of the globally-beneficial innovation environment.

To accomplish this, the index identified seven core policy areas that constitute their framework for determining fifty-five nations’ innovation capacity.

• Trade, market access and FDI
• Science and R&D
• Domestic competition
• Intellectual property rights
• Governance over information and communications technology
• Government procurement and transparency
• High-skill immigration

The United States ranks in the “Upper Tier” category, alongside other developed nations – such as Australia, Canada, France, Germany, Singapore, and Sweden – on overall innovation policy capacity. Notable countries residing within the “Upper-Mid Tier” include Israel, South Korea, and Spain. The BRICS countries ranked in the “Lower-Mid Tier” and the “Lower Tier.”

While the U.S. sits comfortably in the realm of the “Upper Tier,” it falls short behind several others in the categories of science and R&D and of high-skill immigration. Countries such as Chinese Taipei, Denmark, and Singapore all rank above the U.S. in science and R&D, while Brazil, China, Hong Kong, and Russia were given the same “Upper-Mid” ranking. The index identified three areas within this category that the U.S. could improve upon: R&D tax incentives, government R&D expenditure, and higher education R&D performance. The U.S. falls behind Canada, Chinese Taipei, Hong Kong, Israel, and Singapore in high-skill immigration policies. The index suggests that an immigration policy combining both the points-based and the employer-led selection systems may be the most conducive to bringing in high-skill immigrants that contribute to sustainable innovation capacity.

 

Posted by: Pokyee Yu

Sources: The Information Technology & Innovation Foundation

Photo Credit: Information Technology & Innovation Foundation