The Boom and Burst of Empires – Is America in Innovation Decline?

 

Welcome the Chinese. It is very interesting. The very nation that invented transistor and integrated circuit now imports nearly all its major computer hardware from China.  That nation is America. The storied IBM ‘innovated’ and moved into services and sold to Lenovo.  IBM would not have done that if there is no Wall Street pressure. That is why what matter is the firm and not the nation.

 

And the whole argument that when you outsource, you create better paying jobs in America could make sense, but there are strategic positions that cannot be replaced. Manufacturing, producing, assembling real things in America was vital to developing a generation of technical leaders that improved upon those processes. When those processes are outsourced, Americans lose that edge because many new minds never get to work on them. They lose competitive edge. No wonder, China was able to shrink a century old of innovation into about 20 years. How? US gave them all, easily and freely and prevented their own citizens from advancing.

 

Understand this: the fact that there are few plants where many boys could do internship on computer assembly in US means many will never experience the real thing. Compared to their colleagues in China, they are disadvantaged in this area for the next generation innovation.

 

These observations are intangibles and cannot be replicated.  I have estimated that America loses $100b in form of these intangibles yearly as its companies continue to outsource and globalize while denying the experience opportunity to new generation of Americans.

 

Why not? You will read some analysis promoting service industry, saying that it employs more people than the manufacturing sector.  But nations do not exist for creating today’s job. You can create 10 jobs by trading on silica, the sand that is used to make microprocessor. And that silica can sell for $1. The person that makes that microprocessor can have a factor of 2000 profit on it. Not having the plants at home will hurt this nation.

 

It is not a permanent problem. America is still the world leader. But it has lost its total independence in leadership to act because of unusual kind of politics. Its military power is nothing but its economic power. Its dollar is nothing but its economy. Any day it loses this economic power, it will lose all.

 

This nation invented solar energy technology, but now China dominates that in the world. This shows that inventing an idea without leading the innovation does not make much sense. While America gives us great technologies at near zero benefits, it focuses on services where they get marginally nothing. All we read today is emphasis on services, without anyone understanding that without factories, there is no service.

 

Africa should learn some key issues from what has put America at the point of losing the torch to China. In the last few decades, America has pursued a system of consumerism, where the more the citizens can consume, the better is the country. I was shocked when I came to the country as I saw real efforts by governments to entice people to buy, spend, and buy and spend without actually encouraging them to save. The problem is that there is a culture where kids like malls over libraries, in most cases and can spend a whole day in malls shopping with money they do not have.

 

This contrasts to the old America where production was seen as a pathway to wealth and prosperity. I recalled an article I wrote as an undergraduate student for a topical issue in a local radio station. That was in 1998, and I was Editor-in-Chief and Publisher of FUTO Bubbles- a campus newsmagazine I founded in college. I was naïve them, but I articulated a case that production over consumption will always result to a great nation.

 

While American capitalism is excellent, it cannot exist without regulation. The US has lost so much steam through the boom and bust as it tends to hurt them more whenever it happens. Lack of strong regulation hurts US than it helps them. Without regulation, you accumulate cents, but when there are problems, you lose dollars.

 

Worse still, the nation has this illusion that packing debt in dollars has no major consequences. After all, they control the dollar. Unfortunately, if the global currency changes from dollar, US could be under severe stress. It is not a great strategy to allow China to mortgage the future of your kids. It is bad for national security and financial strength.

 

In all and all, I have wished I can manage a ministry in Africa. Africa has the best window to develop now as I predict within twenty years, US will get out of many of the free trade agreements it has entered. This trade has made US a nation of companies and not of country as it benefits its firms and not the country in most cases.

 

Those treaties have burnt America badly as we all know free trade is not a win-win. Then it will be very difficult to trade with US. Unfortunately, it may not matter much as China will be the centre of the universe then.

 

We love America because it does one thing to Africa no nation has ever done: it trains the highest pool of Africa’s best leaders. From Nnamdi to Nkrumah to Sirleaf, America has offered Africa a lot and we want US to continue to lead the world because it pays us most. Go to Harvard, MIT and their best schools and you will be amazed on the number of Africans on scholarships. In Britain, you must pay; in US, your brain buys you a scholarship. That is why we want US to do well because we get most out of it.

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