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Restoring American Competitiveness - Harvard Business Review

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R esto ri g A m eri n can C o m p eti ven ess ti
by G ary P . P i o and W i l C . S h i san ly h
As the United States strives to recover from the current economic crisis, it’s going to discover an unpleasant fact: The competitiveness problem of the 1980s and early 1990s didn’t really go away. It was just hidden during the bubble years behind a mirage of prosperity, and all the while the country’s industrial base continued to erode. Now, the U.S. will finally have to take the problem seriously. Rebuilding its wealth-generating machine—that is, restoring the ability of enterprises to develop and manufacture high-technology products in America—is the only way the country can hope to pay down its enormous deficits and maintain, let alone raise, its citizens’ standard of living. Reversing the decline in competitiveness will require two drastic changes: • The government must alter the way it supports both basic and applied scientific research to promote the kind of broad collaboration of business, academia, and government needed to tackle society’s big problems. • Corporate management must overhaul its practices and governance structures so they no longer exaggerate the payoffs and discount the dangers of outsourcing production and cutting investments in R&D. T h e C om peti veness P ro b l ti em For much of the past two decades, the stunning growth of the U.S. economy was widely hailed in academic, business, and government circles as evidence that America’s competitiveness problem was as obsolete as leg warmers and Jazzercise. The data suggest otherwise. Beginning in 2000, the country’s trade balance in high-technology products—historically a bastion of U.S. strength—began to decrease. By 2002, it turned negative for the first time and continued to decline through 2007. (See the exhibit “A Sign of Trouble.”)

Even more worrisome, average real weekly wages have essentially remained flat...
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