The Math in the Battle for Economic Superiority Between China, USA

"Joseph Nye, the professor and former dean of the Kennedy School of Government, made an interesting point. He noted that a rising China has 1.3 billion citizens. But America at its best has 7 billion in that it draws on the world's talents, as its corporations and colleges demonstrate. Nye in general is skeptical of the "declinists."

See the full article here.

I think Nye makes an excellent point. His mind is more on strategy than economics, but, frankly, the two are hard to separate. When I speak of an "Opportunity State" I'm speaking of a replacement for the welfare state. The welfare state, of course, was a political/economic construct the raison d'etre of which was basic welfare for its citizens so they wouldn't rebel against industrial capitalism.

The goal of an Opportunity State would be quite different. It doesn't exist to promote an industrial economy; rather it exists to promote a post-industrial economy. This "new economy" is softer, relies more on creative capital, innovation, and technology. Which brings me to the 7 billion people theory: in an industrial economy 7 billion workers making industrial goods creates incredible problems of competition. Factories could not be easily retooled as comparative advantages between nations shifted. On the other hand, in a new economy the means of production are much more easily shifted; after all, in most instances they are intellectual in nature. Further, whereas in an industrial economy it's easy to saturate a market with durable goods, it's easy to imagine 7 billion people using cell phones, new apps, cures for cancer, etc.

Given these new realities, Opportunity States (notice the plural usage) must prepare their citizens for work within the global economy. Of course not all states will have the same comparative advantages. In Mexico and China, your workforce will be more industrial (industry, after all, isn't going away) at the bottom, while at the top you will have creative managers looking to connect with western firms that desire a widget to be made at cheaper prices. In the west it's more complicated. Since western countries have a comparative disadvantage in manufacturing cheap goods, they have a comparative advantage in entrepreneurship, financial services, engineering, science, medical research, and more. Western citizens will increasingly need to be prepared to commute (potentially via virtual commutes) to foreign nations; to bring back-office operations from foreign firms; to perform the sort of transparent, and vetted due diligence necessary for investment capital, etc etc. After all, their soft skills are greatly needed in the global marketplace the same as cheap goods are needed in the global marketplace.

Misdiagnosing the Ills of the Welfare State: How both the Right and Left Get it Wrong

As America's industrial economy continues its decline, at least as it relates to middle class American jobs, both the right and left in American politics search for solutions. The right swears that the issue is too much governmental spending, too much red tape, and that if we'd only unchain the economy things would improve for American workers. They're right to a degree, but not right enough. Though it's true we would see some growth from a smaller regulatory state, and should do all we can to shrink the regulatory burden, deregulation alone won't solve the problem for millions of Americans who've lost their jobs and any prospects of gainful employment in the future. What's more, there are only so many regulations that can be feasibly targeted: like or not, there's just not the political support to overturn many of the regulations in place.

The left, meanwhile, wants to double down on the welfare state: more government rationed health care, more regulations on businesses, stronger worker protection, less free trade, rules that stack the deck for organized labor, etc, etc. While such a policy arguably offers the promise of wealth redistribution from the upper classes to the middle class, it's not a prescription for growth. Worse, it runs the risk of killing the goose that lays the golden eggs!

A sensible middle course would work to increase the creative, entrepreneurial capacities of those left behind. A CNN story today highlights the challenge: 45% of Americans between 16 and 29 yrs old can't find work! And for the first time in history, credit card debt has been surpassed by student loan debt nationwide!

Consider that: the most educated group of young Americans in history, leveraged to the hilt in the process, and nearly half can't find work! Clearly, somewhere in the mix our education system is failing us!

If America is to tap the maximum potential of its citizens, it must find new ways to prepare its workforce to fill the jobs and create the businesses vital to prosperity in the 21st century. That can't be accomplished without a robust state (i.e. central government) taking the lead in new-economy policy, but simply feeding the current beast won't work either. Eventually, America's right and left wings will have to come with these realities.

The Opportunity State: Take 1

For several years I’ve had a theory on globalization. Namely, while it brings unprecedented prosperity to those who are prepared for it, it simultaneously wreaks havoc in the lives of those whose lives are geared for the industrial economy, and that we need a better governmental response to integrate those who are being left behind. To me, that response should be a transition from the state led, macroeconomic model known as the welfare state and towards a model that fosters education, training and preparedness among the masses. I call it the Opportunity State. That is, a state led economic paradigm that will replace the Welfare State.

The hallmarks of this state will be continued education, training and workforce development. With an Opportunity State, governments will transition their efforts away from ensuring a de minimis standard of living and will instead focus on developing the creative and entrepreneurial capacities of its citizens. Focus will shift from redistribution of wealth to greater distribution of the means to create wealth. When nations adopt an Opportunity State they will understand that globalization is irresistible; instead of trying to create barriers to it, they will attempt to create new means for their citizens to tap its incredible potential.

Although I have the basic workings of the Opportunity State in my head, the goal of this site is to help me sharpen my ideas, hopefully with the help of commenters. Eventually, this will allow me to better express my views, hopefully in some sort of publication form. In some ways, this project is a continuation of a theme I spent quite a bit of time on in my first blogging foray: cyberhillbilly.blogspot.com. That site was where I first articulated the term “the opportunity state.”

Although the term Opportunity State has been used in some publications since, such as here and here, so far as I can tell, I am one of the first to have used this terminology. Further, whereas others on the right and left have used this term to describe their vision of a society that promotes opportunity via the state, neither has attempted to make an all-encompassing argument about the outright replacement of the welfare state as I will here.

This is just an early snap shot of where I see this project going as of Dec. 30, 2011. I appreciate readers’ feedback and comments.