The Manufacturing Factor: A History of America's Economic Ascension

Pat Choate writes in March 2005 how America came to be an economic superpower and how we have gone to great lengths to un-do what was created.

By suppressing American colonial manufacturing, Britain attempts to suppress American independence

The American revolutionaries almost lost the War of Independence because they did not have the manufacturing capacity to produce the arms they required. In the 17th and 18th centuries, Great Britain had prohibited its American colonists from manufacturing virtually any type of good for either their own use or export.

When the war began in 1776, a desperate Continental Congress sent Benjamin Franklin, the most famous American of his time, to Paris, where he was authorized to buy muskets, gunpowder, sails, cannon and shot. He also ordered blankets, pants, shoes and shirts for the Army Ð items the colonists could not manufacture in great quantities.

Once Franklin had the goods, he had to get them across the Atlantic, past the British Navy's blockade, and into the Caribbean Islands. Once there, smugglers put the goods onto lighter ships and slipped them up the coastal rivers to George Washington's agents. To get a musket and gunpowder from France to the U.S. took almost six months.

The deprivations caused by a lack of war supplies seared into the minds of the American revolutionaries the need for a strong domestic manufacturing base. Never again, swore George Washington, Alexander Hamilton, Henry Knox and a generation of other leaders, would the U.S. be dependent on others for the necessities required for its national defense.

Creating a strong industrial base was top priority for newly independent United States

When George Washington became President in 1789, his top priority was to create a strong U.S. industrial base. Early on, he commissioned Secretary of the Treasury Alexander Hamilton to devise a set of policies that could help the nation industrialize. The result was Hamilton's now famous, Report of Manufactures, issued in December 1791.

Hamilton proposed that the United States establish incentives to encourage foreign investors, mechanics and inventors to come, live and work in the United States. He also envisioned that the U.S. would never be able to compete against European and other foreign manufacturers unless its infant industries had the protection provided by a wall of tariffs.

By a striking coincidence of history, Adam Smith published his book, The Wealth of Nations, in 1776, the same year the American colonies declared their independence. Smith's book electrified intellectual thought in Europe and in the United States. Leading political figures, such as Thomas Jefferson, became strong advocates of free trade.

After the Revolutionary War, Jefferson and others argued that the United States should immediately adopt a free trade policy. Ironically, the British killed the idea by refusing to enter a treaty of commerce with the new nation and by banning U.S. trade in the West Indies. Simultaneously, British manufacturers began to dump their inventories of goods in the U.S. market at prices below their cost of production, their goal being to suffocate America's infant industries.

Nonetheless, the free trade advocates continued to urge open markets. The final blow to their hopes came after the war of 1812, a conflict in which Great Britain tried to reassert its control of its lost colonies. When the war ended, the British were as wooden headed as they had been before. Again, they tried to suffocate America's infant industries by dumping goods on the U.S. market, even as they imposed high tariffs and quotas on American imports into Great Britain.

Even Jefferson became convinced that free trade was a bad idea for the United States. In 1816, Senators Daniel Webster, John C. Calhoun and Henry Clay enacted America's first protective tariffs, creating the ÒAmerican SystemÓ of trade. It was Hamilton's plan.

America responds to British attempts to cripple American industry through cheap imports

Under the American System, the United States forfeited the quick consumer benefits from cheap imports. Instead, the nation took a longer view. It promoted domestic investment over personal consumption. Simultaneously, America allowed the import of foreign products for those willing and able to pay the tariff, ensuring consumer choice.

Robert G. Ingersoll, a prominent 19th century politician and orator, captured the thinking of that era as follows:

"It is better for Americans to purchase from Americans, even if the things purchased cost more. If we purchase a ton of steel rails from England for twenty dollars, then we have the rails and England the money. But, if we buy a ton of steel rails from an American for twenty-five dollars, then America has both the rails and the money."

The American System was U.S. trade policy from 1816 until 1933, the midst of the Great Depression. During that 117-year period, America had transformed itself from a handful of sparsely populated colonies on the East Coast, where 95 percent of the people lived on the farm, into the world's richest, most powerful, most technologically advanced industrial nation.

The Great Depression marks the break point between trade eras in America. The old era ended in October 1929 when the New York Stock market experienced a financial panic. On Monday October 28, 1929, the market lost 13 percent of its value; the next day, Black Tuesday, it lost another 12 percent. The market did not hit the bottom until July 1932 with the Dow at 41 points. In that 32-month decline, the Stock Market lost almost 90 percent of its value. The market did not recover for another 22 years.

The panic was the first in the history of the U.S. Federal Reserve System, which Congress had created in 1913. When the panic came, the Fed first hesitated and then it did exactly the wrong thing Ð it tightened the money supply when it should have flooded the markets with liquidity. Over the next three years, the FED cut the money supply by almost 30 percent, turning a classic panic into the Great Depression.

Ironically, the two people who got the blame for the Depression were two Western politicians, not the Fed. They were Senator Reed Smoot (R-Utah) and Representative Willis Hawley (R-Oregon). Almost eight months into Wall Street's prolonged meltdown, they shepherded through Congress the now infamous Smoot-Hawley Tariff Act of 1930 that raised tariffs on about one-third of U.S. imports, which made less than 2 percent of the Gross National Product. Nonetheless, economists and politicians still blame a law created in June 1930 for creating a Depression that began in October 1929.

In 1933, Congress, fearing a backlash because of the public's false perception that the Smoot-Hawley tariffs had caused the Depression, delegated their Constitutional authority to regulate trade to the State Department and Secretary of State Cordell Hull, a former Member of both the House and Senate. Hull was a devoted free trader, but in his negotiations with other nations, he insisted on reciprocal tariff reductions.

Trade moves from a highly valued hallmark of US economic health to a giveaway concession in foreign policy negotiations

Reciprocal tariff reductions were the hallmark of U.S. trade policy until the late 1960s, when the United States negotiated the Kennedy Round of global trade negotiations. In those talks, the United States began to reduce tariffs in exchange for foreign policy and other concessions, such as military bases, and alliances in Cold War.

Trade concessions became a favored foreign policy tool. In quick succession, the Japanese negotiated policy concessions that allowed its electronics cartel to destroy the U.S. electronics industry. In the 1970s and 1980s, the U.S. destroyed its textile and apparel industries by granting other nations special quotas in exchange for their global political support. In the 1991 Iraqi war, the U.S. gave Turkey apparel quotas worth 20,000 U.S. jobs per year. In 2002, Turkey asked for even more concessions, plus $30 billion worth of aid to allow U.S. troops to cross its border and enter Iraqi from the North. Hundreds of similar examples exist.

With the end of the Cold War in 1989, billions of workers in countries that had previously been off limits to European, U.S. and Japanese companies were suddenly anxious to have foreign investment. To guarantee the safety of foreign investment in places such as Eastern Europe, China, even in Mexico, the U.S. led the world in the creation of the World Trade Organization (WTO).

The WTO witnesses willing American subordination of its sovereignty for the first time ever

The WTO sets the global rules on investment and trade. It provides a legal forum where nations can take complaints about the trade practices of other nations. It also imposes a global set of protections for intellectual properties.

The U.S. participation in the WTO is historic. For the first time in U.S. history, the Congress agreed to subordinate its powers to set U.S. trade policy to an international body. It agreed that were there a conflict between U.S. trade laws and WTO rules, the U.S. would change its laws to follow WTO rules or pay damages set by the WTO.

Under the WTO rules, it is illegal for the United States to give any priority whatsoever to American-owned companies that wish to operate in the U.S. The Buy-America laws have effectively been repealed by an international treaty.

The new WTO global regime of trade encourages corporations to shift their production, and increasingly their research and development, from the industrialized world with its high wages, benefits, and worker protections to developing nations filled with penny-wage labor and lax government regulations. Then, the WTO rules also allow those companies to bring their products back into the rich world markets duty free.

Free trade and WTO has devastated the American industry so prized by our founding fathers

The open market policies advanced by the WTO and supported by a bipartisan majority in both Houses of the U.S. Congress have led to a rapid dismantling of the American economy. Since the mid-1990s, the U.S. has accumulated a trade deficit of more than $5 trillion, the largest unilateral transfer of wealth in history. Put into context, as recently as 1970, the United States manufactured here almost 95 percent of all that it consumed. Today, it produces less than half that portion.

At the same moment, the U.S. is shifting its manufacturing base abroad; it is also outsourcing its service jobs. Forrest Research estimates that American employers can profitably ship four out of ten U.S. jobs overseas electronically.

Today, America's trade and budget deficits are so large they exceed the capacity, and willingness, of U.S. and foreign investors to provide the financing required. Consequently, most of the capital that now finances the U.S. trade and federal budget deficits comes from the central banks of four Asian Governments Ð Japan, China, Taiwan and South Korea. They are also four of our major economic competitors.

Present U.S. trade policies are unsustainable. Unfortunately, our President and a majority in Congress do not understand the dangers created by the loss of the American manufacturing base nor do they realize how their policies are leading us to a financial calamity equal to the one that produced the Great Depression.

What is vital is that Americans understand that their country cannot be a superpower without its own manufacturing base. Nor can we maintain our standard of living or retain an assured national defense.

However, costly and however painful, this nation must eventually locate here the industries that produce most of the goods we need and consume, including those required for our defense. In sum, we must replace the ideology of free trade with the pragmatism of nation building. Our Founding Fathers would have understood.

Clearly Todd seems to not be able to see that the trees comprising his forest are on fire...this clipped article from US News is pretty fair:

Can America Keep Up?-- Why so many smart folks fear that the United States is falling behind in the race for global economic leadership
U.S. News & World Report 03/27/2006
Author: Richard J. Newman

The next time there's a moon shot, don't expect the United States to take the prize.

Over the past century, Americans have become accustomed to winning every global battle that mattered: two world wars, the space race, the Cold War, the Internet gold rush. Along the way, Americans have enjoyed unprecedented prosperity and lived lives that were the envy of the rest of the world.

It was nice while it lasted. Today, while unemployment remains low, home values continue to surge, and fearless American consumers keep spending beyond their means, the land of the free is slowly, but unmistakably, yielding advantages earned over decades to foreigners who work harder, expect less, and, often, are better educated. Taken piecemeal, these shifts are virtually imperceptible to most Americans. But business leaders, top academics, and other experts--especially those who travel abroad frequently--increasingly see America as a nation that has pulled into the slow lane, while upstarts in a hurry outhustle Americans in the race for technological, industrial, and entrepreneurial supremacy. "Every one of the early warning signals is trending downward," frets Intel Chairman Craig Barrett. "We're all fat, dumb, and happy, which is one reason why this is so insidious."

In academics, America's mediocrity is a familiar story, one factor in President Bush's call, in this year's State of the Union address, for rigorous new training for 70,000 high school teachers. The reading literacy rate for 15-year-olds in the United States is barely above the average for western countries. American eighth graders rank ninth worldwide in science scores--and 15th in math, behind students in Estonia, Hungary, and Malaysia. And for years, U.S. students have been migrating away from hard sciences--which tend to be the source of cutting-edge new products and other innovations--toward business, law, and liberal arts degrees. "We had more sports-exercise majors graduate than electrical-engineering grads last year," lamented General Electric Chief Executive Jeffrey Immelt in a January speech. "If you want to be the massage capital of the world, you're well on your way." While the United States still boasts many of the world's premier universities, world-class schools are taking root in India, China, South Korea, and other nations--often under the tutelage of academics at top American institutions.

Losing ground. Vaguely worrisome long-term trends are finally becoming today's problems. General Motors, America's biggest industrial company, is a poster child for America's waning influence, as it staggers toward possible bankruptcy. Japan's Toyota Motor Co., meanwhile, is likely to overtake GM as the world's largest carmaker as early as this year. The job toll at GM: 30,000 and counting. And while GM's woes may represent an "old economy" hangover, the same patterns are emerging in modern technological areas, too. Many of the leading breakthroughs in semiconductor development, telecommunications, nanotechnology, and Internet services--once dominated by U.S. companies--are steadily migrating overseas. American businesses are seeking legions of talented technical specialists abroad, partly because they're cheaper there but also because they're far more plentiful than in the United States. "What's happening now with cars is working its way up to higher technology," says David Calhoun, General Electric's vice chairman. "I hate to see a market as big and strong as the U.S. market growing weaker."

In malls and car dealerships and suburban communities across America, it might not be obvious there's a problem. But Americans are often the last to know about fast-moving changes beyond their shores, and many other foreign innovations may surprise Yanks accustomed to the premise that we're No. 1. In Hong Kong, 60 percent of homes get television service through ultra-high-speed broadband connections, which transform TVs into computers and make "video on demand," sophisticated gaming, and other futuristic services possible. Nearly two dozen cities in China are installing radio-frequency tracking systems, the most sophisticated in use anywhere, for cargo that arrives in ports and air terminals. Throughout Europe and Asia, smart cards with embedded memory chips are replacing credit cards and even cash, simplifying shopping, reducing fraud, and putting an infrastructure in place for consumers to receive real-time traffic data and other useful info. And as most Americans who travel overseas recognize, the ubergizmo known, for now, as the cellphone typically works better and does more things in many other countries than do the phones in the United States.

Connected. There's much more at stake than a few additional amusements for couch potatoes. New technologies tend to get developed in markets where there's infrastructure that supports them and consumers who demand them, which often spurs further innovation and the high-paying jobs that come with it. When Internet service provider EarthLink was looking for a partner to help launch a cutting-edge cellphone service in the United States, it didn't even consider Verizon or Cingular or any other U.S. company. Instead, it began scouting for a partner in South Korea, where the government has aggressively pushed broadband connectivity to every home, advanced cellular technology, and other innovations. "They're doing things we haven't even contemplated in the United States," says EarthLink founder Sky Dayton. Many Korean phones, for example, double as smart cards that can be waved in front of a vending machine to make a purchase. Some even get TV reception, via satellite. EarthLink ended up striking a deal with SK Telecom, Korea's largest cellular operator, to form Helio, which will start offering upscale cellular services aimed at tech-savvy Americans this spring.

The fast advance of other nations, of course, can be good for companies and workers in the United States, especially as a massive new middle class with money to spend--some of it on stuff from America--emerges in places like India and China. Nor is the United States going to cede its status as an economic, political, and military superpower anytime soon. The U.S. economy is the world's largest by far, and gross domestic product per capita remains among the highest in the world. America spends almost as much on national security as all other nations combined, with a defense budget nearly 15 times as large as that of China--the one big nation that seems willing to play geopolitical chess with Washington. America's huge defense budget also funds lots of new technologies that eventually benefit American companies and consumers.

And much is going right in America. Despite political hysteria over foreign companies like Dubai Ports World and Chinese oil giant CNOOC buying assets in the United States, overseas investment in U.S. properties like factories and buildings jumped 20 percent in 2005, to $129 billion. The Dow Jones industrial average is back over 11,000, and U.S. markets are attracting cash from all over the world. And many experts think rapid changes taking place in the global economy highlight U.S. strengths, rather than weaknesses. "What makes the United States great is the ability of people to adapt and migrate," says Dennis Nally, chairman of the consulting firm PricewaterhouseCoopers. "We need to be thinking about areas where we have tremendous strength, such as services, entertainment, and finance, and get ahead of the next curve."

He also argues that the rapid spread of American companies into other countries opens new experiences to more Americans than ever: "There's a tremendous opportunity for U.S. employees to do a lot of things outside the U.S., in places with growth rates like you see in China or Brazil."

But if American firms and their workers don't keep up with tenacious foreign competition, American prosperity won't keep up either. And a few shingles may already be falling off the American dream. The median net worth of an American family rose just 1.5 percent after inflation between 2001 and 2004, according to the Federal Reserve.

That's a significant slowdown from growth rates in the 1990s--and it occurred while the economy was expanding, unemployment was low, and home values were soaring. More startling, average wages actually fell 3.6 percent after inflation, a reversal of rising incomes in the 1980s and 1990s.

And while wealthier households got richer, those in the lower rungs got poorer--effectively weakening America's middle class. "You should be worried," Nicholas Donofrio, IBM's No. 2 executive, told a gathering of colleagues and clients earlier this month. "We have no right to the standard of living we have. It can disappear as fast as it came."

America's changing status in the world is partly a historical correction. "We had an unusual share of global economic power after World War II, with China and Russia under Communist systems," says former CIA Director Robert Gates, now president of Texas A&M University.

Progressive governments in India and China have helped harness the talents of millions of well-educated, industrious workers, increasing their standard of living and spending power. And economic strength begets geopolitical and military strength. China is particularly emboldened, aggressively competing with the United States for everything from arms deals to oil and gas fields. "China could be a truly global superpower within a few decades," predicts Stapleton Roy, former U.S. ambassador to China. "Terrorism will turn out to be far less significant than China's burgeoning economic growth."

To the victor... But for the foreseeable future, the battles will be over technology, jobs, and money. Telecommunications is emerging as a particular U.S. weakness, especially as phone, TV, and Internet services--still largely separate here in the States--merge into a single universe. "We had an absolutely dominant position in communications technology for a century," points out Dave McCurdy, president of the Electronic Industries Alliance. "Now we're losing our edge." The newest standard for cellphone services--"3G," which allows the high-speed Internet-like transmission of data and video to cellphones--is widely available in much of Europe and Asia and is likely to be the dominant standard in China by the time of the 2008 Summer Olympics in Beijing. But it won't become commonplace in the United States until about 2010.

The head start could allow alliances of Asian nations like Japan, China, and South Korea to set some of the world's standards for telecom and Internet-based products. "The second Internet revolution won't be North American-centric," predicts the Gartner consulting firm. That means some of the richest spoils will go to companies like LG and Samsung in Korea, closest to the epicenter of change, just as U.S. businesses like IBM, Microsoft, and Intel benefited for decades from the predominance of U.S. products and standards around the world.

Those dynamics have already been playing out in the market. Lucent Technologies--home of the storied Bell Labs--and the Canadian company Nortel, which together wired much of North America for phone service, are struggling to stay above water, with weak stock prices and few new jobs in the United States. Meanwhile, Chinese telecom firms that few Americans have ever heard of, like Huawei and ZTE, are gobbling up business in Asia and developing countries and eyeing the industrialized world--the same pattern that made upstarts like Samsung and Chinese appliance maker Haier successful. American firms are moving aggressively into fast-growing overseas markets, too. Half of IBM's 190,000 engineers and technical experts now reside overseas, for instance. And while Big Blue is still hiring modestly in the United States, it has 30,000 Indians on its payroll and plans to add thousands more.

In fact, there appear to be few areas across the business landscape where American dominance is immune to plucky foreign competition. At General Electric, a similar pattern has emerged among several of its varied product lines: In lighting, appliances, power generators, and other products, the plunging price and improving quality of foreign-made goods have forced GE to move work overseas, where costs are lower. Now, the company goes abroad to take advantage of the multitudes of skilled workers, too, according to Vice Chairman Calhoun: "When we have to look for deep technical talent, not just 10 or 20 people--especially in high technology--the places you can go and know you can hire somebody every day are India and China."

Calhoun and other American executives stress that they see the United States as a massive ship that is slowly losing its steam--not a distressed vessel rapidly taking on water. And many economic advantages still reside within America's shores: a razzle-dazzle financial system, ready capital for new businesses, world-class management expertise, and entrepreneurial free-thinkers, not to mention the world's biggest consumer market. "The creative empowerment is here," says Lakshmi Narayanan, CEO of the outsourcing firm Cognizant, which is co-located in India and the United States. "You start the chain. Pharmaceuticals, medical equipment, the iPod--you create all that." And many foreigners coming here to study remain mightily impressed. Jun Wang is founder and president of the Dalian Changhai Fengyi Aquatic Co., a seafood business in Dalian, China. He spent four weeks last summer on an exchange program at the State University of New York's Levin Institute, in New York City, learning how U.S. companies operate. "When we saw the financing, how the U.S. system supports its companies ... it's huge compared to what the Chinese can provide," he says. Still, not every impression was favorable: Jun found the New York subway system old and dirty. "The subway in Shanghai is much better," he boasts.

In some ways, it is America's very success that holds the nation back now. Since the United States long had the world's best system of telephone land lines, there has been less urgency about creating a state-of-the-art cellular network, such as those in South Korea, Japan, and parts of China and eastern Europe, which are now leapfrogging U.S. capability. American retailers and banks have invested so much in credit-card equipment that the cost of switching to smart cards, packed with much more capability, is higher than in places that never enjoyed widespread credit. "Other countries, where there's less credit infrastructure, went straight to smart cards," says Paul Beverly, head of North, Central, and South America for the French smart-card company Axalto. "The U.S. has lagged behind significantly."

The United States also used to be the first and last stop for the world's finest talent, in areas ranging from electronics to medicine to chemistry and physics. That alone helped generate cutting-edge start-ups like Intel and Google. But as fast-growing foreign companies have begun to conquer new markets, they have been luring away top managers and scientists looking for exciting new challenges. Gregory Lee, for instance, spent most of his 23-year career scaling the corporate ladder at white-shoe American firms like Procter & Gamble, Kellogg, and Johnson & Johnson. But when Samsung, which has carved out a leading position in memory chips, semiconductors, and consumer electronics, asked him to be its chief marketing officer in 2004, he turned down an appealing new post at J&J and packed his bags for Seoul. "There are not that many companies in the world that are large and growing and doing exciting things," he says. To accomplish those exciting things, he adds, Samsung has been aggressively recruiting hundreds of the world's most capable workers from graduate schools and other companies--many in the United States. And the Chinese government has been aggressively wooing home Chinese nationals working in science, technology, education, and other leadership positions abroad. Cheng Li, who runs the Asian Studies program at Hamilton College in Clinton, N.Y., estimates that in recent years China has persuaded more than 200,000 foreign-educated students living abroad--many in the United States--to return. More than 600,000 others are still abroad. "They constitute a potentially enormous source of talent and human capital for China," Li wrote in a recent paper.

Lands of opportunity. Lots of other overseas companies are luring the best and brightest away from America, especially students who have come here to study. David Heenan, author of Flight Capital, estimates that several hundred foreign-born professionals leave the United States every day--"exactly the kinds of people we should be keeping our hooks into." Many are lured back home by exploding opportunity, high incomes, and generous government support for scientific research. Singapore, for instance, has set up a huge government-funded biotechnology R&D complex that has drawn leading experts from the United States and elsewhere--partly because it supports stem cell research, which gets little U.S. public funding on account of political battles over the use of fetal tissue, highly controversial among conservatives. "We have no incentives at the national level," says Heenan. "We're losing our glow to some of these folks." Iceland has become a hub for genetic research, buoyed by government policies that permit the collection of anonymous DNA data from every citizen. The South Korean government's push to equip every home with a broadband connection is producing one of the most Net-savvy populations on the planet. "The U.S. used to be the mecca for the innovative technology of the future," says John Mullen, stateside CEO of DHL, the global shipping company. "Now the rest of the world is developing that capability. It's weakening the whole power base of the U.S."

Compared with activist governments in China, India, South Korea, and other countries, which generously subsidize technology and innovation, America's policymakers have generally taken a laissez-faire approach. Some think it's time to take a more aggressive tack. "We like to let market forces prevail," says Bob Cohen of the Economic Strategy Institute, a Washington, D.C., think tank, "but that doesn't assure we have better access to services and technology." Even some corporate leaders, typically wary of government intervention, agree. Yahoo!, for instance, is interested in generating webcasts and other educational services featuring some of the world's best instructors, so that lectures and presentations now offered to a privileged few could reach a much bigger audience. But it probably won't happen in the United States--at least not first--since the country ranks 12th in the number of broadband subscribers per 100 inhabitants. South Korea, Singapore, and several European countries would make better test beds. "The U.S. is not in a leadership position as it relates to broadband," Yahoo! CEO Terry Semel said at a conference in New York last fall. "If it were a government priority ... what it could do in terms of jobs, healthcare, and other things we could do for our country."

President Bush's "competitiveness initiative," supported by several bills pending in Congress, is designed to improve public education, encourage more students to pursue science degrees, and goose technology research. Specific proposals include doubling the budget of the National Science Foundation, offering stipends to graduate students who specialize in math and science, and establishing a permanent federal R&D tax credit for U.S. corporations. But even if millions of dollars of funding materializes, that would do very little to address other major shortcomings. "Everything we're doing is the status quo," argues Ron Hira, author of Outsourcing America and a professor at the Rochester Institute of Technology. "Investing in K-12 . ... How does that help a 43-year-old displaced worker? China and India, meanwhile, are playing a very smart game of industrial policy."

Complacency. Besides, many people see deeper problems--widespread American complacency, an entitlement mentality about jobs, and a pure lack of awareness about how tenacious some foreign companies and their employees have become--that can't be fixed by a few federal grants. "When you're in college drinking beer and watching the Super Bowl, your counterpart in China is on his fourth book," says Roy Singham, CEO of ThoughtWorks, a software consultancy with offices in the United States, India, China, and elsewhere. "I'm not predicting the end of American entrepreneurship, but we will lose 10 to 30 percent of our high-end start-ups."

For all the talk about what to do--which is likely to get louder in the years ahead--it may simply take a national dose of humility before America musters its famed resolve and strives once again for global leadership. "The attitudes I see in Estonia, Mexico, Brazil, China, Latvia--they're hungrier than we are," IBM's Donofrio says. That's one reason, he explains, that IBM is "reallocating" many of its jobs to vibrant new markets. When enough of those jobs have migrated to other countries, maybe Americans will get hungry, too.

Estimated amount U.S. companies spend annually on R&D: $194 Billion

Estimated amount U.S. companies spend annually on tort litigation: $205 Billion

Rank of American eighth graders in science proficiency among 45 countries: 9

Rank of American eighth graders in math proficiency among 45 countries: 15

Percent of engineering Ph.D's awarded in the United States that go to foreign-born students: 56

Number of the world's Top 25 information-technology companies based in the U.S.: 6

Number of the world's Top 25 information-technology companies based in Asia: 14

U.S. trade balance in high-tech manufactured goods, 1990: $33 Billion

U.S. trade balance in high-tech manufactured goods, 2004: -24 Billion

With With Carol S. Hook and Allegra Moothart

Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.