Global Crisis/Innovation Blog

America: Face the Brutal Facts:  Linking Libya, Shenzhen and the Congress

By Shlomo Maital



 Costly nuclear powered

 aircraft carrier  Nimitz

   There is a clear causal link between an on-line Harvard Business School Working Knowledge  publication issued today, a New York Times column by James Carroll, a former Catholic priest, and the US-led ‘no fly’ operation in Libya. 

   HBS Profs. Gary Pisano and Willy Shih, in Working Knowledge,   make the following arguments, that readers of my blog know well:   “There’s still a manufacturing base in the United States, and it’s quite large even though it’s a small percentage of the economy. But if things continue the way they’re going, I’m more doubtful. Manufacturing capability takes a while to erode. But the damage is almost irreversible; that’s the concern. So now is the time to be doing something about it before we get to the point where the answer is no. …. exporting manufacturing ultimately drains away American innovation.  That’s the heart of our argument. …For any individual company, it is often better, in the short or intermediate term, to outsource production to an overseas supplier. The company can buy manufacturing services at a much lower rate if it goes to China or elsewhere, depending on the industry.  But if everybody is doing that, you get a general erosion of the economy, which could lead to a decline in the standard of living.  One of the issues in developing a national economic strategy has been confusion with the term “industrial policy,” which has been anathema in Washington. “Industrial policy” involves some degree of central planning.  What we’re talking about is a discussion about strategic capabilities that need to reside within the country.  Unlike other nations, we don’t have a national economic strategy.  There’s this big debate about whether we should have one. My answer is absolutely yes.    If you look at the United States in the postwar period, there was a very strong national economic strategy around using science to drive economic growth. We created the National Science Foundation and the National Institutes of Health, among others, and the government invested dramatically in building a scientific and technical infrastructure needed to fuel growth. That was the national strategy, but it was not industrial policy. There’s an important need today for having a coordinated national strategy at the policy level.

    James Carroll argues: America can slash its defense spending to ‘only’ twice that of its nearest competitor – and still be a military superpower.  The savings in resources will be immense – the State Dept. budget is only $50 b., compared with a Pentagon defense budget  of $1 trillion ! And the Tea Party Republicans want to slash…the State Dept. budget.

    When France’s Sarkozy and Britain’s Campbell pressed for a ‘no fly’ zone operation over Libya,  the actual military operation was dominated by American aircraft and cruise missiles and still is, because, for example, America has eleven aircraft carrier battle groups, while no other country has more than one (Britain has none, because it has decommissioned its carriers, a few days before the Libya operation).   So, while foreign countries shape policy and use America’s military might to implement it, America pays the bills, which it can ill afford. Because today America desperately needs those ‘aircraft carrier’ investments to re-industrialize and bring home its manufacturing from Shenzhen to Schenectady.

  Those are the hard facts. Thanks to Profs. Pisano and Shih for again reiterating them.

   But, hello Congress? Hello, Obama?  Is anybody listening?