How Can America Stay Great? Embrace the Innovation Economy

History teaches us that it is unlikely one country will remain a superpower forever. To say nothing of military strength, America’s economic power is shrinking as other countries have quickly emerged as competitive forces in economic might, technology prowess and cultural influence.

The World Economic Forum recently released its annual report on global competitiveness rankings. The United States slipped as Switzerland took the lead. Meanwhile, Brazil, India and China – emerging markets that are quickly becoming fierce challengers in the global economy – improved their rankings.

Lingering over the global competitiveness rankings is the fear that things will get worse before they get better. After all, the Obama administration is now projecting that unified federal budget deficits will total $9 trillion over the next 10 years. There is also the trillions of dollars in government loan guarantees to Fannie, Freddie, FDIC, FHA, the Federal Reserve and others that bring a dark cloud of uncertainty. We’re also looking at pending spikes in federal medical expenditures.

• The Business of Innovation A CNBC Special Report

It seems as though our children may inherit a United States less prosperous and powerful than the one bequeathed to us.

Every major empire falls. Rome, England and France all reigned supreme before falling to arrogance, false entitlement and bad choices. Are we on such a path? The evidence abounds. Our economy slows. Our debt grows and suffocates. Major countries shift from the dollar. Investment flows elsewhere. We no longer dominate the stock exchanges or gather most of the investment capital.

To emerge from this gloomy economic climate as a better America, we need to invest in our innovation infrastructure, promote entrepreneurship and embrace public policies such as trade, broadband, alternative energy and H1B visa reform that support the innovation economy.

Technical Workers in Clean Room

President Obama’s Innovation Agendaannounced last month places R&D, technology innovation and entrepreneurship at the center of revitalizing the U.S. economy.

This is certainly a good start. But now we must use these ideas to inspire public policy changes.

Let’s look at a few areas of improvement where government action is needed to boost the innovation economy:

International Trade

The Obama administration has made it clear that the U.S. economy thrives when U.S. companies export their products. Yet Congress has failed to move stalled U.S. trade agreements with Colombia, Panama and South Korea that would boost the U.S. GDP by billions of dollars and open up new markets to American companies. Those agreements would also eliminate costly tariffs that U.S. businesses now must pay to export to those countries. And while our competitors — including the European Union — are quickly signing trade deals to fill the void.

Similarly, “Buy American” provisions in the American Recovery and Reinvestment Act have inspired retaliation from our key trading partner and neighbor Canada. In today’s tough economic climate, Buy America sounds as warm as apple pie but many economists predict it would kick off a trade war. Already, other countries have followed suit with their own government incentives to buy their products rather than U.S. exports.

H1B Visa Reform

The United States has succeeded for decades in attracting the best and brightest from around the world to attend American universities and seek jobs in American companies.

But today America’s immigration system is broken.

Our H1B visa laws make it exceedingly difficult for foreign-born entrepreneurs to work in specialty occupations (such as science and engineering jobs) in the United States. Of the 163,000 applications for H1Bs received in 2008, the law allowed for just 65,000 approvals.

Duke University researcher Vivek Wadhwa reports that immigrants founded more than half of all Silicon Valley start-ups created in the last decade. These immigrant-founded companies employed 450,000 workers and generated $52 billion in revenue in 2005. However, according to a recent study by Wadhwafor the Kauffman Foundation, many foreign-born entrepreneurs educated in the United States are deciding to return to their home countries to work owing to challenges with their H1Bs.

Bailouts

When the government bails out failed companies such as those in the auto, housing, insurance and financial industries, it makes it exceedingly difficult for entrepreneurs to compete. Government intervention sounds comforting when a prominent American brand is facing demise, but rescuing companies that have failed to innovate and adapt to market changes for years is not a sustainable national strategy. And recent reports that the American taxpayers will lose money on these bailouts make such spending on corporate welfare a particularly poor investment in our future.

• Wall Street - Boom, Bust & Blame

Bailouts create a business environment where strong, entrepreneurial companies must compete head-to-head with government-subsidized behemoths. Innovation will slow as it will take longer for products and services to come to market. Consumers will be faced with higher prices. The United States will continue to lose its competitive edge to rising global powers.

The Consumer Electronics Association wants to encourage constituents to embrace these ideals and appeal to government for change. Our national grassroots campaign, the Innovation Movement, has more than 35,000 members fighting for the future of the U.S. innovation economy.

Washington needs to have faith in our innovation economy and support public policies to foster innovation and entrepreneurship in the free-market system. Together, government and the private sector can build a better business environment where entrepreneurship can thrive, U.S. jobs will be created and innovation will help restore the U.S. economy to greatness.

_________________________
Gary Shapiro is the President and CEO of the Consumer Electronics Association. The trade association represents more than 2,000 U.S. technology companies including Google, Apple and Microsoft. It also hosts the International CES, the world’s largest gathering for consumer technology held each January in Las Vegas.