Dr. Pollard, Members of the Faculty, Students, Ladies and Gentlemen:
Thank you Dr. Pollard for your kind introduction. Thank you for your leadership. You are indeed a constant source of inspiration to all of us. You are leading this college thoughtfully, responsibly and respectfully. Let us stand shoulder to shoulder with Dr. Pollard for her vision, for her values, for her passion and for her commitment.
I would like to sincerely thank all of you for coming and for your hospitality.
I appreciate your warm welcome. I have always held Montgomery College in high esteem. All of you should be thankful for the opportunity to attend and graduate from this outstanding institution.
Before I begin my speech, I would like to take this opportunity to thank Dr. Sanjay Rai, Elana Lippa, and Dean Joan Naake for inviting me to speak to you today on the global economy and on my book, “Renewing the American Dream: A Citizens Guide for Restoring Our Competitive Advantage”. I wrote this book as a citizen who is deeply concerned about the future of America and the American dream. I’m here today to tell you why and what I think needs to be done about it.
As I am sure most of you know; the American economy has been in the recovery mode since mid-2009. That’s the good news. The bad news is that economic recovery by itself will not be enough.
That’s because what we need to succeed in the future is renewal and not just recovery. To renew America we need to create a competitive advantage.
Why is creating a competitive advantage so critical. Let me address this issue by
Sharing some numbers
Reviewing where the United States stands in the global economy
Outlining some steps that should be taken to address our situation
Finally, I will share my thoughts on what role higher education and you as students can play in renewing America.
The Numbers Tell Part of the Story
Let’s begin with the numbers. Here they are: 8.3%, 11.7%, 15.1%, 35%, 61.8%, 19%, and 1.7%. These numbers take on special meaning when you put them into context. However, they only tell part of the story:
Those numbers take on meaning when you put them into context. However, even within context, they only tell part of the story.
8.3 %. That’s the most recent official unemployment rate. The real unemployment rate is almost twice that when you consider people who have fallen out of the workforce. And, when you add in people who are in undernourished jobs which have reduced wages or hours or are temporary in nature, the job-constrained number grows to between 20 to 25%.
11.7%. Represents manufacturing contribution to GDP based upon the latest available data. Just three decades ago manufacturing’s contribution to GDP was over 20%.
15.1%. Was the official poverty rate in 2010. This was the highest it’s been in more than five decades. 15.1% translates to 1 in 7 Americans. Also remember that this number does not include the working poor who are above the poverty threshold.
35%. Is the percentage of Americans who lived in middle class households in 2006. At the beginning of this century just 10 short years ago, that number was almost 40%.
61.8%. That’s the % of the total job losses in Q4 of 2010 that came from small businesses. In that same period, small businesses only created 54.1% of new jobs. That’s the first time in recorded history that small business job losses were higher than jobs created.
19%. Represents the decline in net worth of American households in 2009. 19% may not sound like a lot but it translates into a loss of over $1.5 trillion dollars.
1.7 %. Was the real GDP growth rate last year. Most forecasts are that the growth rate for 2012 will be below 3.0%. We need to get above 3.4 % to really start to prime the recovery pump.
These numbers matter to average Americans. What makes them even worse is the dramatic increase in income inequality in the United States between 1979 and 2007.
The Congressional Budget Office documented in a report released in the last quarter of 2011, in that time period the top one percent of Americans saw their incomes increase by 275 percent while the bottom fifth saw an increase of only 20 percent.
Alan Krueger, chairman of the White House Council of Economic Advisers noted `in a speech after that report came out, “…inequality in income is causing an unhealthy division in opportunities. And is a threat to our economic growth.”
Paul Ryan, Chairman of the House Budget Committee released a paper with some sentiments similar to Krueger’s. A key point in that paper was “The question for policy makers is not how best to redistribute a shrinking pie. The focus ought to be on increasing living standards, expanding economic opportunity, and promoting upward mobility for all.”
That’s the view from the left and the view from the right. There is a consensus. Economic inequality is a problem that threatens our competitive advantage. The question is what to do about. That’s what I am here to talk to you about today.
Sources of Competitive Advantage
The country’s competitive advantage hinges on a strong domestic economy and economic and social leadership in the international arena. The internal sources of competitive advantage include:
Ample supply of decent paying jobs
Vibrant and growing middle class
Strong manufacturing sector
Innovative and entrepreneurial small businesses
I have devoted a chapter to each of these areas in the book that I co-authored and provide a detailed analysis of where we stand and specific improvement recommendations. Because of their critical importance in restoring our competitive advantage, I will share some of my ideas on manufacturing and small businesses with you later in my speech.
What is our status in the Global Economy
Let me turn my attention now to where do we stand in the international arena today? We are running into a BRIC wall. That’s Brazil – Russia – India and China.
These nations have already become much fiercer economic competitors than any we faced in the last quarter of the twentieth century and will be even tougher competitors in the 21st century. They all have substantial populations and, with the exception of Russia, devote a minor part of their nation’s budget to security, defense and military expenditures.
They also have governments that are more hands on and directly involved in economic development than ours. They engage in state run capitalism while we here in the United States believe in and practice free market capitalism.
United States Competitive Analysis
So, we are faced with formidable competition. One of the things that you do in business when you are trying to position for future success and create a competitive advantage is to conduct a SWOT analysis. You look at yourself in terms of Strength- Weaknesses – Opportunities and Threats.
I do not have enough time to do a complete SWOT analysis on the United States and the countries constituting the BRIC wall. However, let us take a quick look at the United States and our two most likely major contenders – India and China.
Let’s start with the United States. What are our primary Strengths and Weaknesses?
Professor Michael Porter, management professor at the Harvard Business School and the foremost authority on competitive advantage did a SWOT analysis of the United States in 2009. Some of the strengths Professor Porter identified were:
Innovation, science, technology, R&D
Free and open competition
Some of the weaknesses he identified were:
Human resource challenges need to restructure public education
High health care costs
Based upon the analysis my co-authors and I did for our book which was published in 2010, we added strengths and weaknesses to Professor Porter’s list. Some of the strengths we identified were:
Our higher educational system
I’ve discussed some of our weaknesses such as the disappearing middle class earlier. Some of the other weaknesses we identified were as follows:
Our crumbling infrastructure – we have deferred maintenance of well over a trillion dollars and are quickly beginning to look like a third world country in this area
Our declining capacity to manufacture goods here – for a variety of reasons we invent it here and ship it there to be made. Over the past year, we’ve begun to correct this problem but we’ve got a long way to go to
Our dysfunctional Congress – we’ve got an upcoming national election and I’m here to tell you no matter who gets elected – Democrat or Republican – until we change the rules of the game, it won’t matter much who sits in those seats
India as a Competitor
So, that’s a partial SWOT analysis on the United States. Let us see how we stack up against India and China? Again, due to time limitations here is some top line analysis for both countries.
India is a country of over 1 billion people. India has had extremely positive GDP growth of between 6 to 8% for the past three years with GDP in 2011 estimated at 7.8.
India is the world’s largest democracy. Primary strengths of India include its capabilities in math and science, innovation and business sophistication. Its weaknesses include deficiencies in its infrastructure, healthcare, deep corruption, and extreme pockets of poverty – as depicted in the academy award winning movie Slum Dog Millionaire.
China as a Competitor
As India presents a tough challenge so too does China. Here are some facts and figures for China.
China is a country of over 1.3 billion people. China has been hitting it out of the park in terms of GDP growth over the past three years with GDP growth even higher than India’s. Its GDP growth in 2011 was 9.2.
A fact worth noting is that China is already creating incredible wealth. As reported by Forbes in 2011, there were already 146 Chinese billionaires (115 in mainland China) and thousands of millionaires.
China’s strengths include its public investment in infrastructure development and its international investments (such as US treasury bonds, Australian iron ore and African farmland). Its weaknesses include undereducated and underdeveloped rural areas and a lack of innovation.
That’s the tale of the tape for the United States, India and China. The competitive analysis clearly demonstrates that we are in a real battle and that if we want to remain pre-eminent, we are going to have up our game and get better.
We cannot accomplish that just by reducing the budget deficit or debt, scaling back government, or pointing fingers and placing blame on others. We need to get all hands on board, develop a common vision and create a winning game plan, and then prepare and execute it to perfection.
My recommendation for accomplishing this is that we look at the United State as our Enterprise. Enterprise USA must become the citizen’s business. We need to ensure that we don’t just cut costs but that we also build capacity and competence. We also need to be sure that the country not only grows GDP but that it also builds IEW – individual economic well being. If this does not happen we will continue down this slippery slope to becoming a country of a few haves, many have-nots and many, many more that have a lot less.
Enterprise USA should be a shared venture among government, business, nonprofits and us as 21st century citizens. To make Enterprise USA a reality I recommend that we establish a National Global Competitiveness Commission. In my opinion, that Commission is far more important for the future of America and the American Dream than the National Commission for Fiscal Responsibility and Reform was. America needs a strategic turnaround plan and we need it now.
21ST Century Competitive Advantage Plan
The Commission should draft a 21st Century Competitive Advantage Plan for the United States to drive that turnaround and the transformation of the United States. That plan should set out broad goals and meet the following minimum requirements:
Address the strength-weaknesses- opportunities and threats (SWOT) analysis
Provide the framework for Enterprise USA
Define an innovation and re-industrialization policy
Promote Individual Economic Well-being
In addition, our 21st Century Manufacturing Plan should include recommendations for renewing manufacturing but also for renewing small businesses.
Manufacturing and Competitive Advantage
America was built on manufacturing and it is still a major contributor to the economy. Manufacturing is an economic engine and a jobs machine. Consider the following:
-The United States is the world’s mightiest manufacturing economy, producing 21 percent of all goods made globally, Japan produces 13 percent and China 12 percent.
-For every dollar U.S manufacturers spend directly, they foster another $1.40 in economic activity.
-Exports of goods accounts for three fifths of all U.S sales abroad.
-Manufacturing still employs more than eleven million workers in the U.S. and still accounts for more than 11 percent of GDP
-Manufacturing workers have higher pay and more generous benefits – about 20 percent higher – than those in non-manufacturing jobs.
-Manufacturing jobs have a “direct linkage” to high level service jobs (as many as 5 per job) and create 5 to 10 “indirect” jobs for each direct manufacturing job
-Manufacturing accounts for the preponderance of the country’s R& D investments which stimulates future growth and economic development
-Manufacturing enables the maintenance of a strong national security and balanced trading relationships
Manufacturing in the United States has recovered significantly since the economic collapse of 2008. The Institute of Supply Management reported that as of March of 2012, the industry had experienced 32 consecutive month of expansion and has been generating some new jobs stateside for 30 consecutive months. That’s the good news.
The bad news is that the industry rebound has not translated into significant reinvestment, job creation or economic stimulus here in the United States yet. American manufacturing has lost more than a million jobs and over thirty percent of its total work force in the period from 2000-2009.
We need to have a comprehensive plan to put manufacturing front and center again in our economy. In our book, we present 11 recommendations for renewing manufacturing. We supplemented those recommendations with an additional eleven recommendations in a white paper that we wrote in June of last year. That’s a total of 20 recommendations.
Let me briefly highlight a just a few of those recommendations for you. The first and most important is that we need “To develop and fund an industrial and innovation policy focused on driving research and development and the rapid growth and restoration of manufacturing in targeted sectors.”
The Obama administration has put a strong emphasis and dollars into innovation and in a June 2011 report the President’s Council of Advisors on Science and Technology called for a “coherent innovation” policy but stopped short of recommending an “industrial policy.” If we are going to turn things around, we need a full-throated and definitive industrial and innovation policy with major investment dollars behind it that is clearly targeted on growing manufacturing and creating jobs for American workers.
It’s not just about renewing manufacturing enterprises, however. We need to ensure the job creation linkage. Specific recommendations that we have made in that regard include the following:
-Implement targeted jobs tax credits for new “high value” jobs (high skill/high wage jobs) created by a manufacturing company
-Create a “re-shoring” tax incentive for United States companies with “high value” jobs to bring those jobs back to the United States
-Create a blended set of incentives, working in collaboration with states and local governments, to bring high tech, advanced manufacturing companies from around the world to make the United States their location of choice
-Make the R&D Tax credit permanent and consider increasing it but by tie it to jobs created and provide additional credits for commercializing and producing goods here in the United States
-Allow the repatriation of profits made overseas but tie that repatriation to a pledge of a specific number of jobs to be created stateside with those profits.
Small Businesses and Competitive Advantage
Let me move from manufacturing to small businesses. I am an entrepreneur and I have been an owner of a small business that created 2000 jobs. Entrepreneurs see an opportunity where others see only challenge. Entrepreneurs play a pivotal role in creating jobs.
If we are going to renew the American Dream, we are going to need to think small to win big. Small business constitutes 99 percent of the total businesses in the US and account for more than 50 percent of the nation’s GDP. Significantly, small business job creation plummeted by 23 percent between 2007 and 2011.
In large part, that’s because they are having difficulty in getting access to capital to expand operations or to hire new employees. They are the engine that drives our economy. We should once again become hot bed for small business.
The administration and Congress understand the importance of small businesses. President Obama has elevated the head of the Small Business Administration to be a member of his cabinet. In September of 2010, he also signed the Small Business Jobs Act of 2010. Just last week he signed the JOBS Act – that stands for Jumpstart Our Business Start-ups – which was passed as a bi-partisan piece of legislation by the current Congress.
The Small Business Jobs Act provides more money to financial institutions to make loans and creates incentives for investors to support small businesses. The JOBS Act is focused on raising capital and taking companies public. These bills are a good start but I believe they are insufficient to the scope of the problem.
They are part of what I would call a “trickle through” approach. I think we need to do more to put money directly in the hands of small businesses without the intermediaries. Two recommendations that I would make in this regard are establishing a National Industry-Infrastructure and Innovation Bank and expand the governmental financial and technical assistance that is available to small businesses and entrepreneurs.
Senators Kerry, Warner and Hutchinson have filed legislation to create a national financial infrastructure bank. I support the establishment of such a bank but recommend that its scope be expanded to include industry and innovation with a specific focus on providing “seed” and start-up funding for new ventures and innovative businesses in early stages of their life cycles.
On the governmental side, I think the SBA should implement a program to enable small businesses to participate more fully in exporting. This program could include: direct “bridge” loans as well as loan guarantees and a comprehensive consulting export assistance package. I would also recommend development of a program targeted at attracting and retaining talented and educated immigrants and entrepreneurs. Paul Krugman, a Nobel Prize winning economist suggests: The United States should offer green cards to every foreign- born graduate of America’s top colleges and universities. By allowing the world’s most brilliant foreign born graduates, America can spur technological progress and maintain the youthfulness of its workforce.
Higher Education’s Role and Contribution
What should be higher education’s role and responsibility in all of this? Higher education helps create higher aspirations. Higher aspirations propel individuals and nation’s forward. It was the access to higher education for veterans after World War II that took the United States to new heights and established our competitive advantage for the last half of the twentieth century.
We are fortunate here in the United States to have the greatest higher educational system in the world. People come from all around the world to study in our institutions of higher education because they are the best. I am a prime example of this. I came here from India and stayed and became a citizen to pay back on the investment that this country had made in me.
We need to make sure that other immigrants have the same opportunity that I had. Darryl West of the Brookings Institution refers to that as “The Brain Gain.”
We also have to ensure that higher education is playing a role in developing our leaders and citizens of the future. We need to have an emphasis on STEM – Science, Technology, Engineering and Math – but we also need higher education to focus on developing citizenship knowledge and skills and to promote civic engagement.
Earlier this year, an event was hosted at the White House launching the American Commonwealth Partnership, a new collaboration between colleges and universities. The Partnership is undertaking a yearlong initiative called “For Democracy’s Future” to promote higher education as an agent of democracy and a force for public good. I am an enthusiastic supporter of initiatives like these.
Our higher education system has flourished because of our democracy and in return our democracy has flourished because of our higher education system. Our success as a nation and as a people is in large part attributable to this interdependence.
Your Role and Contribution
Before I talk about your role and contribution, let me say a few words about Community Colleges. I firmly believe Community Colleges are pivotal to the future of America by providing the skilled workforce that we need to compete in a global economy. The most important function of the Community College is to equip students with the skills required to productively enter the workforce, to earn a good living and to make their contributions toward sustaining the American dream. Community College should become the gateway for entry, and re-entry, into the workforce and in well-paying jobs. In order to be that gateway, they must have the capacity and competence to do the job properly.
As a student at Montgomery College, you have an enormous opportunity to be an active participant in higher education and contributor to renewing America and our nation’s competitive advantage. My advice to you as you engage in this process is:
Be a life-long learner.
Never give up
Be a 21st century citizen and get engaged
Be a life-long learner. Study hard but remember that life’s lessons are taught inside and outside the classroom and they are never ending. So, commit to learning at least one new thing everyday.
Never give up. Winston Churchill said to the school boys at Harrow School in 1941 near the beginning of World War II “Never give in. Never give in. Never, never, never, never – never give in, except to convictions of honor and good sense.” That was good advice more than seventy years ago. It is good advice today.
Be a 21st century citizen and get engaged. Our citizens are losing confidence in government and politics. Realize that it is up to us to change things we don’t like. We can’t just complain or place blame. We need to be: informed – get all the facts; independent – exercise our personal judgment as opposed to taking totally partisan positions; and be involved – active on the issues that matter the most to us.
In closing, let me leave you with these thoughts. The past decade has been one of serious decline for the United States. In point of fact, we have been slipping economically for almost thirty years.
While GDP was growing or holding relatively steady the economic insecurity of our citizens was increasing year after year. Our GDP growth masked the serious deficiencies in areas that matter for competitive advantage for the country and its citizens.
An MIT Professor, Daron Acemoglu, and a Harvard Professor, “James A. Robinson, have written a new book title, Why Nations Fail. In their book, the professors say nations thrive when they have “inclusive” political and economic institutions and decline when they have “extractive” institutions which concentrate power and opportunity in the hands of a few.
In an interview with Thomas Friedman of the New York Times, Professor Acemoglu said about the United States today, “The real problem is that economic inequality when it becomes this large, translates into political inequality.”
We are in the decisive decade. The decisions we make and the actions we take will determine the future of the America and the American dream.
The future is promised to no one. Let me repeat that, the future is promised to no one.
That is why we need to look forward and not backward. It is why we need renewal rather than recovery. It is absolutely why we need to create a competitive advantage. Renewal and competitive advantage are the keys to success for America in the 21st century.
Thank you for you time. All of you have a role and responsibility to shape our country’s fate and future. I firmly believe that it is imperative for all of us to take a more pro-active and prominent role in the quest for America’s future. We have to recognize that the American dream is a continuous journey. That journey began, and is sustained, by the contributions of individual citizens. Remember, as long as we believe in ourselves, the future will always be ours. We must renew people’s faith in the promise of this country.
I agree with President Obama statement: We must out-innovate, out-educate, and out-build the rest of the world to win the future”. The President also said “it is a future that is ours to decide, ours to define, and ours to win.”
Thanks for the opportunity to share my ideas with you. If you would like a copy of my speech, please visit my website www.frankislam.com.
Thank you and God bless