Sign Up

The Greatest Competitive Threat of Our Time

What factors will determine the globalized world’s next great power?

September 8, 2005

What factors will determine the globalized world's next great power?

The current competitive threat is similar to the world-shattering economic battle between the United States, the United Kingdom and Germany set in motion by the Industrial Revolution — out of which the United States eventually emerged as the world’s economic superpower.

But this one is different — very different. And that's what makes it so perplexing and hard to grapple with. Competition today is not limited to one, two or even several great powers.

Rather, it comes from many places simultaneously, and is harder to hone in on precisely because it is so diffuse.

The most likely scenario is not that one nation will overtake the United States as the dominant power on the global stage, but that the world stage will see the rise of many more significant players.

In fact, no single country in the world is ready to emerge as the singular great power — not China, India, Japan, Germany, Canada, Australia or any of the Scandinavian nations.

While each of these has certain strengths and advantages, all suffer from weaknesses as well.

Canada and Australia are relatively open societies but lack the strong technology base and market size to dominate the global arena.

The Scandinavian nations are centers of tolerance and self-expression and have solid technology infrastructures, but are simply too small to become true world powers.

India and China have the market size and potential technology and human capital base, but are far from having the kind of openness and tolerance required to attract talent on the world stage.

Thinking only in terms of the rise and fall of great powers, though, blinds us to a more likely scenario. We shouldn't assume an impending shift in power from the United States to a single emerging great power. The logic of globalization goes against this.

Corporations are now free to locate where they want, and more importantly, people can move freely to places that offer opportunity, freedom and the ability to build the lives they choose.

The mobility of people is perhaps the most significant facet of the modem global economy — more important than the rise of new technology or the mobility of capital.

In such an environment, it is much more likely that many places will gain particular advantages and that the shape of the global economy will grow more complicated and multi-polar.

It will likely be a mosaic of competitors, each with unique abilities to attract and mobilize talent.

The key for the United States, then, is to design a strategy that enables it to prosper in this emerging multi-polar world.

To do so, it must bolster its great universities and science and technology assets, cultivate new creative industry sectors, prepare its people for the future and, most of all, remain an open society.

But much of what the United States is now doing only serves to undercut its position. For decades, the United States succeeded at attracting and growing talented people because of its creative ecosystem — a densely interwoven fabric of institutions, individuals and economic and social rights.

Attracting people does not just happen — it depends on the care and feeding of the organizations and people that make up this ecosystem. Perturb it or damage it in small ways and, like any ecosystem, it can die.

The problem is that we don't yet fully understand how this ecosystem works. We don't know which fauna feed off which flora, and what kinds of balances are in place.

The ecosystem was easy enough to understand when we assumed it was premised on the one simple credo — economic self-interest.

Now, though, the increased mobility of talent has shattered our conceptions of national and even personal boundaries.

How to adapt to the realities of this shifting ecosystem? America must start by confronting the hard fact that it is no longer as unilaterally dominant as it once was.

Peter Drucker argues that U.S. leadership in both political parties, on the left as well as the right, must get beyond the myth of the United States as an unassailable superpower.

There are many more players occupying many more niches and competing vigorously on the world stage.

When asked if the United States would lose its economic dominance at any point in the foreseeable future, Drucker replied: "The dominance of the United States is already over. What is emerging is a world economy of blocs represented by NAFTA, the EU, ASEAN. There's no one center in this world economy."

Rather than a single deathblow, the United States is much more likely to see its dominance eroded by the sting of those thousand cuts.

The United States will continue to be squeezed between the global talent magnets of Canada, Australia and the Scandinavian countries, which are developing their technological capabilities, becoming even more open and tolerant and competing effectively for creative people.

Also, the large emerging economies of India and China, who rake in a greater share of low-cost production, are now competing more successfully for their own talent.

Whether the United States suffers a long, slow decline, or rebounds to skillfully navigate this new playing field depends entirely on how willing it is to restore its creativity and openness to full capacity.

Perhaps the most troubling thing is that no one seems aware of the problem and ready and able to carry the ball. The United States today lacks the kind of collective effort that pulled it together during previous times of economic change and transformation.

Business and government working together got our economy back on track during the New Deal period, the incredible World War II mobilization and the effort to set up a vibrant framework for the postwar economy.

Business responded vigorously to the competitive threat posed a few short decades ago by Asian and European manufacturers, forming organizations like the Council of Competitiveness.

Meanwhile, the federal government undertook efforts to support greater research and innovation. Where will that thrust come from today?

Unfortunately, in recent years the powerful political forces at either end of the spectrum have tended to widen a right-left chasm that grows less and less navigable and a dichotomy between materialistic and moralistic values that grows more and more false.

At the same time that truly important issues don't even get mentioned in the public sphere, the extremes have actually become the status quo.

The end result is that people grow disillusioned with the political process and choose not to participate. The leading force for political change — the creative class — has for all intents and purposes opted out of the political process.

Instead, its members vote with their feet, looking for the city, region or country that offers the most opportunity and best reflects their values.

Here we confront a deep and insidious tension of the creative age. Unlike previous dominant classes, such as the working class, members of the creative class have little direct incentive to become involved in conventional politics.

When they get involved in broader social issues, they are likely to do it in on a local scale or through some alternative way of their own choosing rather than through either of the major political parties.

The whole basis of the creative ethos is individual creative pursuit and the shunning of traditional forms. The paradox is that this ethos is not necessarily conducive to the highly political effort needed to bring our new age to the fore.

The end result is a gaping vacuum, and nothing to fill it. We are faced with the biggest competitiveness crisis in 30 or 40 years — and no leading-edge group to take it on.

Thus the central dilemma of our time: Even though the creative economy generates vast innovative, wealth-creating and productive promise, left to its own devices it will neither realize that promise nor solve the myriad social problems confronting us today.