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Posted at 12:57 PM ET, 01/24/2011

Should America be competitive?

By Ezra Klein

Over the weekend, President Obama sent an e-mail to his Organizing for America list previewing the State of the Union. “My No. 1 focus,” he said, “is going to be making sure that we are competitive. ... I will talk to the nation about how we can win the future by out-innovating, out-educating, and out-building the rest of the world." So there it is, then: "Competitiveness." That's what American economic policy is going to be about. The question is, competitive how?

One definition of competitive refers to a level of performance. If you're a runner, you become more competitive in your next race by training harder and getting faster. That's certainly the Obama administration's agenda: They want to do a better job educating American workers and investing in American infrastructure and improving American institutions. They want us to run faster.

Things get hairier, however, if you take the other definition of competitive: The one that describes how you think rather than how you perform. A competitive mindset suggests that for you to win, others must lose. It's zero-sum, even though the economy isn't. And that's where the Obama administration's rhetoric is going.

Presenting your policies as a defense against other nations -- "we can win the future by out-innovating, out-educating, and out-building the rest of the world" -- allows you to wrap your economic agenda in a potent form of nationalism. The rise of China makes Americans very uncomfortable. More than 60 percent see China as "a threat to American jobs and economic security." Only 29 percent see it as an opportunity for investment and new markets.

These are the fears Obama is playing on when he talks about winning the future. But the future isn't something you win. It's something you share. If China's growth slows, it means the country will continue to provide an endless supply of cheap labor without ever getting rich enough to buy American goods. We may "win" in the sense of having the largest GDP. But that's a worse future than one in which China becomes a major customer, reducing our trade deficit and creating a lot of American jobs.

There's also a dark side to this sort of thinking: One way you win a race is to be the fastest. Another way is to knock out your competitors. The Obama administration, of course, isn't looking to turn America into the Tonya Harding of the global economy by shutting down trade or getting into currency wars. But there are plenty of folks out there would would, knowingly or not, push us in that direction under the misguided notion that we're locked in some struggle with China.

The White House is working hard to declare that territory off-limits. "Here’s the truth about today’s economy," Obama said in his weekend radio address. "If we’re serious about fighting for American jobs and American businesses, one of the most important things we can do is open up more markets to American goods around the world." And it's not as if talk of competitiveness is unknown in American politics: In the 2006 State of the Union, George W. Bush announced the "American Competitiveness Institute." So maybe this is just good messaging that allows the Obama administration to wrap a public investment agenda in the flag. Maybe.

By Ezra Klein  | January 24, 2011; 12:57 PM ET
Categories:  Economic Policy  
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Comments

"So maybe this is just good messaging that allows the Obama administration to wrap a public investment agenda in the flag. Maybe."

That's the likely explanation. The WH knows it needs to improve its messaging & putting things in terms of us vs them competition is easier to sell. The trick is in getting buy-in with the zero-sum imagery, while constructing policy that promotes the far more important performance improvement aspect of being competitive.

Posted by: bsimon1 | January 24, 2011 1:39 PM | Report abuse

This post and Obama's SOTU approach definitely sound like the "economic competitiveness"-economists like Michael Porter. http://www.isc.hbs.edu/econ-statesregions.htm

Posted by: Chris_ | January 24, 2011 1:44 PM | Report abuse

Nationalism is a very effective means to getting the public to support different policies. I think it's about time Dems took the "We love America and want it to be stronger!" mantle.

Posted by: will12 | January 24, 2011 1:47 PM | Report abuse

"But there are plenty of folks out there would would, knowingly or not, push us in that direction under the misguided notion that we're locked in some struggle with China."

Is the notion that misguided?

See Steve Pearlstein:

"This is the nub of the problem. With its state-controlled economy, China can force its companies to act collaboratively to achieve the country's strategic economic objectives. And that gives it a tremendous advantage in negotiating the terms of trade with a country like ours, where China can strike deals that may provide short-term profits to one company and its shareholders but in the long run undermine the competitiveness of the other country's economy. What's good for GE or Honeywell or Rockwell is, in this case, almost certainly not good for America and American workers.

Americans are uncomfortable with the idea of industrial policy. But when competing against countries that practice it skillfully and aggressively, we may have no choice but to respond in kind - if for no other reason than as a way to negotiate a more level playing field for American firms and American workers. China has already leveraged this advantage to wipe out large swaths of American industry, build up a $3 trillion dollar war chest and help to put the U.S. economy in a rut characterized by low growth, high unemployment and unsustainable trade deficits. "

Free Trade is a great thing, but that doesn't appear to be what China is actually doing.

Posted by: jnc4p | January 24, 2011 1:53 PM | Report abuse

Forgot to link the Steve Pearlstein article:

"Chinese follow same old script (and they get the punch line)"

http://www.washingtonpost.com/wp-dyn/content/article/2011/01/18/AR2011011806900.html

Posted by: jnc4p | January 24, 2011 1:55 PM | Report abuse

Hey, I know how America can win. Eliminate the minimum wage so we have lower wages than anyone else and eliminate all environmental regulations. Then all the megatransnational corporations will bring all their pollution and poverty wages here! Yeah that's the ticket! Then we will be very competitive and win the race to teh Bottom!!! WERE NUMBER ONE WERE NUMBER ONE....

Posted by: BobFred | January 24, 2011 2:35 PM | Report abuse

I hate to say this, but President Obama is hoping for political magic with more smoke and mirrors. Competitiveness and New Markets are the new Mom and Apple Pie. Who would disagree with them?

In the meantime, nothing is being done to reverse the flow of jobs to more "competitive" (for which read "cheaper") countries.

Large employers are happy to keep shipping out middle class jobs not only because its cuts direct wage costs in half. It also eliminates employers' obligatory matching Social Security taxes, not to mention their pension obligations to those laid off well before they reach retirement age.

Our competitiveness isn't suffering. It's our opportunity to do so that is. Look about and you'll see millions of Americans ready, willing and able to compete, to produce, to serve. But not in jobs that pay pennies instead of the dollars they used to receive and don't now through no "competitive" fault of their own.

Fix that, Mr. President, and you might have an administration worth remembering.

Posted by: tomcammarata | January 24, 2011 3:05 PM | Report abuse

--*The question is, competitive how?*--

Wow. Now there's two (at least!) kinds of "competitive", and the wonk has to figure out the right one.

People are naturally competitive, Klein, without fretting over neurotic absurdities conjured up by short sighted, ignorant policy wonks.

Get government out of the way. People can't compete if they aren't free to, and right now the government has hung millstones around everyones' neck. A kid can't run a lemonade stand without filling out government forms in triplicate and paying a tax.

Anyone who thinks Obama or anyone else in the government can create or proclaim or enact or legislate innovation or competitiveness is out of his or her gourd.

Posted by: msoja | January 24, 2011 3:15 PM | Report abuse

Here we go again......more neoliberal BS about how it's really great that non-union Wal-mart is innovating, and how wonderful it is that Ezra's Iphone and other toys are built with Chinse prison labor and low cost recent rural immigrants locked into the FoxCon factories and working for $2/day.

Ezra, Krugman estimates that Chinese currency manipulation alone costs the US ONE MILLION JOBS. And that doesn't count jobs lost to China due to China's policies of forced IP transfer, or due to outright, state-sanctioned IP theft, or due to Chinese government subsidies for green industries, or due to illegal dumping, or due to lax Chinese environmental enforcement, or due to China's policy of holding worker wages down to benefit state-sponsored industries.

The total is several million jobs. That's probably about 25% of our nation's U-6, all due to China.

And you say that any thoughts of this are, er, what was that patronizing phrase? "Misguided."

Why? How? Are these facts incorrect? Explain yourself! Please!

Posted by: Dollared | January 24, 2011 5:25 PM | Report abuse

I think Ezra is being too pessimistic here. To continue the analogy, if we train harder and run faster in the race, that is going to inspire the other racers to also train harder and run faster. There can only be one race winner, but everyone can go faster than they would have because they all trained harder and ran faster because of the increased competition.

There does not seem to be anything sinister about the competitive theme of the SOTU address. It might be good for the country to see other countries as a threat, it could drive us to work harder and smarter in the private sector, and be more open to government investment and innovation in education and infrastructure.

Ask any NFL coach, they will tell you their starters play better when they feel threatened by their backups. We may have gotten too complacent with our position at the top of the global economy and that is why education, infrastructure, and policy have all slipped compared to other nations.

As far as people's fear, global macroeconomics is very complicated and that is why people are afraid of China. Most of us (myself included) do not really understand how China's growth will affect us. All most of us see is that if a U.S. company sends jobs overseas, that is bad, and it scares us, but it is much more complicated than that.

Posted by: DeanofProgress | January 24, 2011 6:11 PM | Report abuse

This is a silly post. China is a dictatorship that uses its control over its economy and politics to manipulates its internal markets and international relationships to maximize its internal economic growth, often in a manner that damages the economies of other nations, and the livelihoods of citizens of other nations. millions of US citizens are affirmatively harmed by China's behavior - some are poisoned, some lose their jobs and careers.

Ezra would like us to learn 1)to live and let live and 2) Esperanto.

Posted by: Dollared | January 24, 2011 6:43 PM | Report abuse

Talk about China "stealing" American jobs is clearly popular - so it is easy to see why politicians bat it about. Yet it's a half-truth that is incredibly dangerous when the U.S. economy – or the U.S. labor market, at least – is still incredibly weak.

At FutureofUSChinaTrade.com we looked at the facts behind the idea that American jobs have been "outsourced" or "offshored" to China. Here they are:

-Critics of economic integration argue that it hurts American workers. Yet the data refute that claim. Between 1978 and 2008, the real value of goods and services imported to the United States increased 482 percent, from $328 billion to $1.9 trillion (in 2000 dollars) – reflecting the dramatic increase in global economic integration. At the same time, people in America got much richer; real GDP expanded by 132 percent and total civilian employment rose by 49.3 million jobs.

-"Protecting" American jobs is very costly. According to the Federal Reserve Bank of Dallas, the cost of saving American jobs is nearly $100 billion a year. In 20 of the most protected industries, protectionism saves 191,764 jobs a year at a total annual cost of $44.4 billion, or $231,289 per job per year.

http://futureofuschinatrade.com/article/us-china-trade-analysis-has-china-really-stolen-american-jobs

Posted by: FutureofUSChinaTrade | January 24, 2011 8:01 PM | Report abuse

Ezra, I don't think your first definition of competitiveness is a definition of competitiveness at all. Excellence is not the same as competitiveness. Competitiveness needs an opponent, thus the second definition is the only one as far as I'm concerned.

Of course, as several commenters have pointed out, they're not mutually exclusive.

Posted by: dpurp | January 24, 2011 8:49 PM | Report abuse

Concerning the mention of Esperanto. I see that President Obama wants everyone to learn a foreign language, but which one should it be?

The British learn French, the Australians study Japanese, and the Americans prefer Spanish.

Yet this leaves Mandarin Chinese out of the equation.

I think it's time to move forward and teach common language, in all schools, and in all nations.

As a native English speaker, my vote is for Esperanto.

The study course http://www.lernu.net is currently receiving 120,000 hits per month. That can't be bad :)

Posted by: bribarker | January 24, 2011 9:25 PM | Report abuse

--*I will talk to the nation about how we can win the future by [...] out-educating [...] the rest of the world."*--

Unless he dismantles the government school system, Obama is lying, and he knows it. The current unionized regime can barely budge abysmal test scores a notch. Nothing that government can do can appreciatively change what government has spent 100 years insuring can't be changed, short of firing all the teachers and administrators and cutting the thing loose for the free market. And he ain't going to blink in that direction. That would be Hope and Change.

Posted by: msoja | January 24, 2011 10:31 PM | Report abuse

"But the future isn't something you win. It's something you share."

Ooooh, bunnies, and hugs, and butterfly kisses, Ezra!!!

Seriously, are you a simpleton? The great empires of history, Persia, Rome, Britain, post-war America... lots of sharing going on there, you figure? "[T]he misguided notion that we're locked in some struggle with China"??? We're in a struggle with EVERYONE; we always have been, but we used to win pretty handily. Nowadays, we have no stomach for toil or deprivation or war or even hardball, and those who do will win the day unless we can out-think them... and I wouldn't count on that. Go talk to your plants, pinko.

Posted by: lejardin | January 24, 2011 11:29 PM | Report abuse

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