So how do we emerge from our torpidity? It’s by waking up to what the authors assert are our four central challenges: globalization, job mismatches from the information technology revolution, global warming and budget deficits.
Their scathing accounts of baby boomers’ selfishness, the willfully dishonest debate on the budget, and political hyper-partisanship make for painful reading. But for all its priceless anecdotes, the book is frustrating because of its flawed analysis of the causes and cures. Why these four problems? Globalization is discussed as if it were a triumphant extension of the American spirit, which we should simply rediscover. “Our problem is not China,” and “Asia’s surging economic growth has made Americans better off,” the authors proclaim. Moreover, they assert, the United States is not even in competition with other nations. Not only is this wrong — the loss of 5.5 million manufacturing jobs over the last decade was in fact caused in significant part by unfair trade practices employed by nations like China. But one is left with the question: Okay, so if we’re not in competition with other nations, why is globalization a challenge?
Likewise, the authors hail information technology as linking humanity in dazzling and hopeful ways but also depict it as one of the four horsemen of our apocalypse leading to job loss and income inequality. (They know this because when Friedman goes skiing only one worker is needed to check his new high-tech lift ticket, instead of the four that used to do it.) Yet a review of the economics literature would have told the authors that higher productivity leads to more jobs (and higher incomes) and that the IT revolution has created a more prosperous and vibrant nation.
We learn that clean energy will be “the next major cutting-edge industry on which economic fortunes of the richest countries will depend.” But there’s not a scintilla of data behind this exaggeration. And the way to get there? Easy. Just impose a price on greenhouse gas emissions by passing cap-and-trade or carbon-tax legislation that would raise the price of fossil fuels like coal and gasoline — as the Dutch have done with a de facto carbon price on gasoline 20 times higher than that proposed by the U.S. House of Representatives two years ago. But with the wickedly high Dutch gas prices, where are the Dutch electric cars? We don’t see the Dutch building or driving them because a carbon price doesn’t spur clean-energy technology breakthroughs.
Self-contradiction and incomplete analysis also undermine the discussion of what the authors see as America’s formula for success: investing in education, research and infrastructure while expanding immigration and doing smart regulation.
It’s hard to argue with some of this. We are under-investing. To keep our roads from getting worse, the federal government needs to invest three times more annually than it currently does. And since the mid-1980s the growth of federal investment in research and development has been almost flat (as a share of GDP) while other nations have upped their investments significantly. To match the growth in corporate research and development since 1987, federal research funding must triple!
Again, however, the book indulges in oversimplication and exaggeration. The authors go particularly over the top on education: “The stability and prosperity of the twenty-first century international order will be maintained, or lost, in the classrooms of America’s public schools.” Why? Because we are competing with countries that combine low wages and high skills. In fact, fewer than 10 percent of Indian adults and 20 percent of Chinese adults have a high school degree. Friedman and Mandelbaum tell us we have to boost education to reduce income inequality, but then we learn, correctly, that income inequality is largely caused by a “winner-take-all” phenomenon. We see this in Friedman’s profession, where hundreds of thousands of well-educated journalists have seen stagnant incomes — not because they don’t have enough education — while a few journalists who write best-selling books and give speeches for $75,000 a pop see huge gains.
But mostly the authors declare we need better education because it lets you keep your job. If you’ve lost your job, it’s probably because you aren’t suited for this new world, where only two kinds of workers will succeed: “creative creators” (non-creative creators look out: you’re toast) and “creative servers.” If you want to survive, ask yourself, “Am I putting some extra chocolate sauce, whipped cream, and a cherry on top of whatever I do?” I guess the hundreds of laid-off New York Times employees were not putting enough chocolate sauce on their stories.
There’s almost no mention of the real solutions. No discussion of the fact that the United States has one of the highest effective corporate tax rates in the world. No acknowledgment of rampant foreign intellectual property theft, forced technology transfer, protectionist government procurement, currency manipulation, and a host of other job-stealing practices. No discussion of the rise of short-termism by our financial markets and corporations that, according to the Business Roundtable, makes it harder for U.S. corporations to invest in ways that will lead to long-term prosperity. The book also has a wholly inadequate discussion of how other nations have developed national innovation and competitiveness strategies designed to win in global competition.
In short, while “That Used to Be Us” gets us started on the path of renewal, it fails to get us to the destination. The authors quote former Utah Sen. Robert Bennett as saying, “If you are asking the wrong questions, the answers don’t matter.” Too bad they didn’t take Bennett to heart.
is president and founder of the Information Technology and Innovation Foundation and co-author of the forthcoming book “The Race for Global Innovation Advantage and How the U.S. Is Falling Behind.“