India - Week 2 in Perspective

A few days after last week's Friedman-like, candy post, I found myself in several state-of-the-nation discussions with friends in Bombay. One of them, the founder of a technology start-up in India, remarked that from his experience and interactions with both Indians and Americans, he found the average Indian's analytical skills and understanding relatively superior. My friend's belief in the "superior" technical understanding of the Indians speaks to the larger concern in the U.S. regarding erosion of skills and knowledge, particularly in science and technology education. However, it's also anecdotal. So, I tried to unearth some statistics in support.

A figure oft quoted in the media to emphasize the decline of science and technology in the U.S. is one published in a report by the national academies of sciences, engineering and medicine eight months ago. The report argued that China and India combined graduate 950,000 engineers every year, compared with 70,000 in America. However, a team of researchers from Duke was quick to point out the flaws in these figures and the problem in using them as shorthands for vulnerability of the U.S. They found that U.S. engineering schools graduate 137,000 four-year degree-holding engineers, India graduates 100,000 engineers a year and 351,000 engineering students graduate every year in China (The national academies has subsequently revised its report to reflect these figures). The Duke study also found that while India's and China's best is as good as our best, "the average engineer from the U.S.A. is far better than the average engineer from India and China".

However, let's not take the Duke team's word for it. Although evaluated along various subjective parameters to present a representative picture, I think facts on the country as a whole might be more illustrative. Consider these facts from recent media reports:

• Over the past 20 years, America's growth rate has averaged just over 3 percent. Productivity growth has been over 2.5 percent for a decade now, again a full percentage point higher than the European average.
• In 1980, the United States made up 22 percent of world output; today that has risen to 29 percent.
• The U.S. is currently ranked the second most competitive economy in the world (by the World Economic Forum), and is first in technology and innovation, first in technological readiness, first in company spending for research and technology and first in the quality of its research institutions. China does not come within 30 countries of the U.S. on any of these points, and India breaks the top 10 on only one count: the availability of scientists and engineers.
• In virtually every sector that advanced industrial countries participate in, U.S. firms lead the world in productivity and profits.
• The situation with regard to higher education is even more dramatic. A new report, "The Future of European Universities," from the London-based Center for European Reform, points out that of the world's 20 top universities, 18 are American. The U.S. invests 2.6 percent of its GDP on higher education, compared with 1.2 percent in Europe and 1.1 percent in Japan.
• The situation in the sciences is particularly striking. A list of where the world's 1,000 best computer scientists were educated shows that the top 10 schools were all American.
• American spending on R&D remains higher than Europe's, and our collaborations between business and educational institutions are unmatched anywhere in the world. America remains by far the most attractive destination for students, taking 30 percent of the total number of foreign students globally. These advantages will not be erased easily because while China and India are creating new institutions, "it is not that easy to create a world-class university out of whole cloth in a few decades".
• "The American economy is also particularly good at taking technology and turning it into a product that people will buy. An unusual combination of an entrepreneurial culture, a permissive legal system and flexible capital markets all contribute to a business culture that rewards risk. This means that technology is quickly converted into some profitable application. All the advanced industrial countries had access to the Web, but Google and the iPod were invented in America. It is this skill, as much as raw technological brain power, that has distinguished the American economy from its competitors".
• And then there are the demographics. The United States is the only industrialized country that will not experience a work-force or population loss in the coming decades.
• The United States' share of the global economy has been remarkably steady through wars, depressions and a slew of rising powers. It was 32 percent in 1913, 26 percent in 1960, 22 percent in 1980 and 27 percent in 2000. With the brief exception of the late 1940s and 1950s--when the rest of the industrialized world had been destroyed--the United States has taken up about a quarter of world output for about 120 years.

But, don't get me wrong. I think we still need to pay heed to what my friend said. India is confident, energetic, ambitious and desperate to move ahead and out. And she is 1 billion people strong. This represents not just an endless supply of low skilled labor but also the growth of talented, high-skilled workers and a buyer's market in brains. The Financial Times, in an article last month, stated that "innovative companies will chase 'cheap smarts' as relentlessly as today's cost-conscious multinationals pursue cheaper manufacturing and call-centre capacity. Try commanding a premium wage as a post-doctorate in that marketplace. Knowledge is not power; it is on sale". Therefore, as the economics of supply and demand pervade all aspects of the economy, the U.S. must recognize the real and daunting challenges posed by the Asian bazaar.

Fareed Zakaria, in a Newsweek article, points out that the United States' history of worrying that it is losing its edge is what prompts it to be flexible, resourceful and resilient. After all, as Andy Grove puts it, "Only the paranoid survive." But, as I denied and dismissed what my friend said, I was not really that scared. And that is the problem. Although intelligent debates rage in circles of the media, politicians and corporate executives, mainstream America is still unconcerned. We have one of the worst healthcare systems in the developed world, our public school system in turning increasingly dysfunctional, we are borrowing 80 percent of the world's savings, and our entitlement programs threaten to bankrupt. Policies could correct but they require a broader recognition and acknowledgement of their necessity. We must recognize the inevitable growth of India and China. We must recognize the grave danger of closing ourselves off from competition and collaboration. We must enhance our strengths - innovation, inclusiveness, and flexibility - to ease the growth of 3 billion capitalists and respond to new challenges as we have done in the past.

For although we're dominant now, the world is catching up.