U.S. Competitiveness Becoming A Tale of Two Economies

Vinita Singla, |Special to

U.S. competitiveness is a tale of two economies.


The World Economic Forum ranks the U.S. fourth out of 139 countries in its competitiveness survey. Yet even as the U.S. remains strong abroad, consumer confidence is low and unemployment is high at home.

Experts say it’s because there is a skills gap within the American workforce.

“There does appear to be two different economies operating here," says Bernard Baumohl, chief global economist at The Economic Outlook Group. "But we’re talking about that part of U.S. economy that is producing leading-edge products and it requires a certain set of skills that many of the unemployed just do not have, such as sophisticated programming, software development.”

Jobs Conundrum

Many of the unemployed lack the skills that are in demand in high-tech sectors, which helps explain why the unemployment rate is at 9.1 percent.

“It’s hard to transform an elevator repairman into a computer programmer overnight,” says Baumohl.

None other than the CEO of Siemens'   U.S. unit made that point. "There’s a mismatch between the jobs that are available, at least in our portfolio, and the people that we see out there,”  Eric Spiegel told the FT.

Some of that is no doubt a reflection of the much-bemoaned decline in math and science scores of U.S. students, the status of vocational schools and a weak commitment to job training and retraining compared to some of its economic rivals in the European Union.

"One of the biggest challenges is to find a workforce that has the technical skills and the math and science skills that can operate machinery and can do technical work," Cummins Chief Executive Tim Solso recently told CNBC.  "So I think the education, particularly in vocational schools, is a long-term thing that we need to do."

On top of that, the U.S. has economy has become increasingly services-oriented in recent decades, and much of that output never leaves the country or competes on a global scale.

Has America Lost Its Competitive Edge?

In that way, there is a bit of a disconnect between the American company and the American worker — a theme that will likely be explored by corporate executives and policy experts and at the annual New York Forum meeting June 20-21   

Innovation Rules

The picture at home is much different than the picture abroad.

Solid global consumer demand, increased productivity due to company efficiency and innovative prowess are among the reasons experts say the U.S. remains strong internationally.

Apple  outsources the manufacturing of some of its product parts to Asian companies though ultimately, Apple receives the revenues.

“For all those concerns that the U.S. is falling behind, it belies the fact that the U.S. is still exporting more than ever and that we still have the largest manufacturing capability in the world,” says Baumohl.

U.S. exports recently hit a record high of $175.56 billionin April 2011, and have been surging for much of the last year.

A weaker dollar as well has increased demand for manufactured goods and specialized services have been key drivers.

“There really is almost an insatiable appetite from emerging countries as they try to modernize,” says Baumohl, citing consumer electronics, construction equipment and transportation technology.

That has shown up in the bottom line of big U.S. multi-nationals such as Caterpillar , BoeingHoneywell  3M  , United Technology  and GE, which until the recent slump were driving the string performance of the Dow Industrials.

“The US also has the deepest capital markets in the world, which can provide the financing for entrepreneurs and technology start-ups to come up with the fancy products that will drive consumer demand around the world,” says Baumohl. “If we can provide good quality products at a competitive price, that it a reflection of our innovativeness.”

Many analysts agree that innovation is America’s prime competitive advantage in the global marketplace.

“The U.S. still reigns supreme for its innovative power in,” says Baumohl.

Innovation is a key pillar in the WEF competitiveness report.

“In the long run, standards of living can be enhanced only by technological innovation,” the report states. "Firms in countries that have reached the innovation stage of development “must design and develop cutting-edge products and processes to maintain a competitive edge.”

"The U.S. has motivated entrepreneurs and a supportive financial network which promote innovation," says Richard Linowes, a professor at American University. “In Silicon Valley, Boston, there is a support structure of many players who can advise new businesses on how to get their business off the ground."

Furthermore, many foreigners adore American-designed products.

“Look at the fantastic products we have in medicine, smart phone apps, computer – really is amazing. So a lot of that [competitiveness edge] comes from a love of innovation; a love of new products; fascination with fads,” says Linowes.

That said, the U.S. faces increased competition as other nations focus more on innovation.

“General Electric  has created four major research centers worldwide and only one is in the US. The others are in China, Brazil and India, adds Linowes.

Dell  has had a R&D center in Bangalore, India since 2007.

What's more, the speed at which Americans innovate also is problematic abroad and domestically. “

“There are thirty airports being built in China right now and we can’t get one going," says Linowes.  "We have so much internal battling in the U.S. And it only takes them two years to do it and here it would be at least 15 years and there were would be lawsuits back and forth,” says Linowes. “The [U.S.] system is so open but things just don’t get done so quickly. Look how Congress is battling over the budget.”