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Advances in science and
engineering have spearheaded 50 to 80% of US GDP growth for many decades. The
lack of investment in R&D, education, higher overheads and labour costs are the
new realities with only about 4% of the US workforce consisting of scientists or
engineers. Everybody knows that 20 assembly workers in Vietnam equal the price
of one in the US or that Starbucks spends more on healthcare than on coffee or
General Motors spends more on healthcare than on steel.
A report titled America’s
Competitiveness was presented to the Democratic Steering and Policy Committee of
US House of Representatives last year. It stated that “The more our children are
exposed to our educational system, the worse they perform on international
tests.” The report also found that “The private sector has all but abandoned
basic research due to market pressures to produce next-quarter profits. The
federal government’s investment in the physical sciences has been stagnant for
over twenty years. Investment in the biosciences, after a five-year period of
significant growth, is again declining.”
Alan Greenspan had stated
“If you don’t solve (the K-12 education problem) nothing else is going to matter
all that much.” An exasperated Chairman and CEO of General Electric, Jeffery
Immelt, has said : “We had more sports exercise majors graduate than electrical
engineering grads last year. If you want to be the massage capital of the world,
you’re well on the way.” China’s President Hu Jintao, on the other hand, feels
“The worldwide competition of overall national strength is actually a
competition for talents, especially for innovative talents.”
The bank closures in the US,
unemployment, inability to honour credit card or mortgage payments have turned
Goldilocks into Cinderella. Around 78 million ‘baby boomers’, born in the US
between 1946 and 1964, acquired extravagant spending habits. This “Baby Boomer
Spending” constitutes between 25 and 50% of the consumption in the US, which is
driven by consumer spending. Their divorce rate and inadequate funding for
retirement benefits is going to severely curtail their future spending and,
therefore, US GDP growth. From 2008 onwards, 10,000 additional social security
seekers are being added everyday.
Greenspan and the then
comptroller general David M. Walker had warned before the recession that not
only will US be unable to fulfil promises to retirees but will have to double
federal taxes or cut federal spending by 50%. President George Bush had declared
that social security is “headed towards bankruptcy”. The budget deficits are
likely to increase as, according to pre-recession estimates, in terms of net
present value, medicare was running $ 63 trillion short and social security $ 8
trillion short, with expenditures surpassing payroll tax receipts from 2018
onwards. Ronald Dahl, children’s author, has pointed out that Goldilocks is a
‘brazen little crook’ stealing porridge, breaking chairs and living in a
borrowed home. Cinderella, let us remember, is a hardworking young lady. Her
virtues and hard work are rewarded, even after midnight. The global economy
needs the virtues of yesterday’s Cinderella economies like India — hard work, no
frills, no needless product obsolescence, value delivery at reasonable price,
and even commonsense ethics like truth, which are much needed in preparing
healthy balance sheets of companies and nations.
(Source : The Times of India, dated 15-2-2010)
