Restarting the US Economy: The Case for Education, High Tech and Innovation – ATP Exports

Restarting the US Economy: The Case for Education, High Tech and Innovation – ATP Exports
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In the context of an economic slow down and the perspective of another recession, few options are left to restart the US economy. Last resolutions on the federal spending and the debt reduction are a first step towards the right direction. But financial rigor alone can’t compensate a decrease in consumption and goods manufacturing characterized respectively, by a decrease of the GDP’s private consumption and gross investments.

The vicious circle of economic stagnation

Consumption can’t peak up with the current unemployment rates, low job creations and fears about the future. The US job creation machine is stalled because of the same low consumption, corporate offshoring strategies, a sharp decrease in the line of credits offers and fears of the future.

Don’t look for a culprit at the federal or state level. Don’t blame the US consumer/worker for not planning the future and using too much credit cards. Don’t blame China; no one forced hundred of thousand of US corporations to off shore their activities there. Speaking frankly, greed didn’t serve the nation but if US corporations didn’t rush to get to their own shares of the Chinese market, other nations corporations would have done the same, dumping costs and winning market shares.

That being said there was probably a threshold not to be crossed when off shoring entire industry sectors like the manufacturing. The vast majority of corporations didn’t try to decrease their costs through innovation and just rushed to low cost labor countries. This was an easy move that they won’t payback at the long term.

Conversely, the idea that a country can sustain a continuous economic growth and prosperity solely through a financial industry was an illusion nurtured by the mysterious means of a relentless speculation on real estate properties and fraudulent financial investments with opaque risks. The idea of an economy based on services trimmed of its manufacturing, exporting and innovation engine was a profound mistake.

The Free markets utopia

The idea of totally unregulated markets that would organize themselves for the best of the nation is an illusion. Like any ecosysteme, Markets organized themselves to first serve their own interests, off shoring manufacturing, increasing bottom lines and laying off millions of employees. Markets, corporations and financial institutions can also be a thread to the national security. Regulations are needed to prevent the fraudulent, extreme and gambling actions that led us to the 2008 financial crisis.

Tangible value

The Made in the USA concept, along with its concrete and tangible set of inventions, goods, products made locally is probably the most reliable way of getting out of the crisis. The idea is not just to (responsibly) increase the local production but rather to increase the uniqueness of the US products in the world through high tech and innovation.

I personally don’t believe in growths sustained by low labor cost economies that endured decades of currency devaluations, underdeveloped industries or providential natural resources. In either cases, these countries are growing through the local or/and foreign investments to catch up with western economies. The average salary in China is a couple of hundreds of dollars and the size of the middle class, even growing, is still a fraction of its total population with the incurring risks of social tensions and its internal consumption sustainability.

The same paradigm holds for Latin America and the current rush on different countries where so much needs to be done to bring them up to the western standards of living. Once these levels will be achieved, sooner or later, these countries will face the same issues that their western counter parts also face; saturated internal markets, stiff competition, lower labor costs attractiveness for offshore businesses due to higher salaries and fewer “out of the box” growth generators, even if these countries enjoy today vast amounts of natural resources like Oil and Gas. It will take a while but all of them will reach this paramount if they succeed.

The case for High Tech and Innovation

A genuine growth lies in the continuous production of innovative services, goods and investments that can’t be found elsewhere. If investors go to China for its low labor costs and its growing “Middle Class”, if China buys manufacturing machines from Germany to produce the same goods that we will eagerly chop at our nearest Walmart, it because these countries offer the best service in class. The only way to generate a national organic growth is to create again tangible and sustainable differentiators that will drive the economy up.

The case for Education

In this age of information and high tech, the US must massively invest in education. I’m not talking about the $30K per year programs that are not open to the vast majority of the US students. I’m talking about the regular public education, from 1st grade to University that needs to massively train and educate a generation of young people, who probably believe that an achievement is to appear on the America got talent show.

And if a fact was needed to support this idea, here’s a new report from the National Science Foundation (NSF), which indicates that the US exports of advanced technology products (ATP) fared better than other non-advanced technology exports during the recent US recession.

This is what we need now not just for 2012.

The fact

NSF: “U.S. exports of advanced technology products (ATP) fared better than other non-advanced technology exports during the recent U.S. recession, says a new report from the National Science Foundation (NSF).

NSF’s National Center for Science and Engineering Statistics reports that ATP exports fell from $270 billion in 2008 to $245 billion in 2009. But this 9 percent drop was less than half the decline of non ATP exports.

ATP exports embody new or leading edge breakthroughs in science and technology including drugs developed from gene therapy, nuclear resonance imaging, micro integrated circuits, robotics, advanced materials, and civilian and military satellites.

The finding results from U.S. Census Bureau data taken from ATP trade in the 10 ATP technology areas defined by the agency with a focus on four technology areas: aerospace, electronics, information and communications technology and life science. Together these four areas account for 85 percent of U.S. ATP exports in 2010.

NSF’s report, titled “U.S. Exports of Advanced Technology Products Declined Less Than Other U.S. Exports in 2009,” also says U.S. ATP exports recovered in 2010 but lagged behind the growth of non-ATP exports. In 2010, U.S. ATP exports improved by 11 percent as compared to 2009, but other types of U.S. exports expanded at 23 percent, twice the rate of ATP exports.

The InfoBrief also describes U.S. ATP trade with selected major economies and regions. It says the 2009 decline of US ATP exports was steeper for Asia as compared to those destined for the European Union and the North American Free Trade Agreement zone.

Exports to Asia fell from $94 billion in 2008 to $79 billion in 2009; at 15 percent, it was the largest decline among the three regions. According to NSF’s report, the decline was driven by a drop in electronics exports to Asia, the most important export market for U.S. advanced technology products, and a drop in information and communications technology exports.

During the period of 2008-2009, U.S. ATP exports to Japan, South Korea and Taiwan declined steeply (between 19 and 29 percent), but exports to China saw little change. In 2010, however, US exports to Asia grew faster than US exports to the other two regions. For more information from this report, see the NCSES InfoBrief NSF 11-307.”

Source: NSF Foundation via EurekaNews – http://www.eurekalert.org/pub_releases/2011-09/nsf-rts090611.php

Photo Credit: MIT By imotov / FlickR