November 3, 2005
Democrats' Opportunity
By Bernard L. Schwartz
Too much of the conversation among Democrats concerns our party's
failure to project an optimistic message. A reporter for The
New York Times has pointed out that the language of the Democratic
Party is defeatist. In the face of the serious issues that define
the world today, Democrats succumb to an epidemic of pessimism that
doesn't do the party or our country any good.
The war in
Iraq, galloping twin deficits, a decaying infrastructure, a failed
social safety net, heated global competition, and a perceived
decline in our economic and technological superiority have clouded
our vision, dampened our confidence as a nation, and, apparently,
tongue-tied Democrats. The media haven't helped. In fact, along
with the think tanks, they fuel the pessimism. A good example
is Fortune magazine's July 25 cover depicting Uncle Sam
as a 97-pound weakling unable to hold his ground in the emerging
global economy. The press is full of articles about, among other
things, competition from China, the terrible consequences of outsourcing,
and the impact of immigration.
I think we
should take a different approach. Against this backdrop of doom
and gloom, the Democrats have an opportunity to be heard. We should
demystify the issues and define America by its strengths instead
of by its weaknesses. There is truly much to be optimistic about,
and we need to get that message out.
The Republicans,
of course, try to make it sound simple. People will thrive with
less government intervention, they never tire of saying. Citizens,
not government, will manage their own retirement programs, spend
their own after-tax income as they wish, and get more out of the
private schools they control. Our citizens will have a future
arranged by the people and for the people. No matter that things
are getting worse for all (except the rich). The Republicans are
optimistic, and it sells.
Thomas L.
Friedman's recently published book, The World is Flat,
suggests that human development periodically experiences quantum
leaps in technology that change the world forever and that the
growth of information technology during the last 30 years is such
an event. He has it right when he describes the remarkable changes
enabled by the information revolution. Not only will all peoples
have equal access to all information, but they will also have
access to advanced technology and intellectual property, he says.
Knowledge will enrich and democratize all the inhabitants of the
globe. This is what Friedman means when he claims that the world
is flat.
But, here
is where I part ways with Friedman. Regardless of the advances
he describes, not all societies or all economies are equal. Having
equal access does not mean that all participants have the same
starting place, or, more important, have the same vision of where
the finish line is. No, Mr. Friedman, the world is not
flat.
The concept
of flatness implies that data, knowledge, people, and capital
flow freely, of their own momentum, leveling out many advantages
presently enjoyed by advanced nations. These advantages include
an industrial infrastructure; a broad knowledge and technical
skill base; universal access to education; advanced techniques
of distribution; a culture of mobility for people and goods; highly
developed, efficient, and abundant capital markets; the largest
base of invested capital; a tradition -- indeed, an expectation
-- of equal opportunity; and, most particularly, the imbedded
intellectual capital, the know-how to convert pure science into
affordable and easy-to-use products, and the ability to insert
new development into manufacturing or consumer markets.
I am talking
about the free enterprise system, supported by the rule of law,
a stable currency, a judiciary that enforces contracts, transparent
financial reporting, accountability, governance, and regulatory
oversight. In the United States, we operate in a stable and free
environment -- socially, economically, and individually free,
in which all citizens benefit from economic growth and all have
equal opportunity for advancement. These qualities are America's
unique strength. They should not be undervalued.
Now, the
notion that we should better prepare ourselves to be overtaken
or surpassed by China because U.S. industry is outsourcing various
backoffice services and computer software functions is just a
notion. Most problematic is the idea that the current challenge
will cause permanent employment dislocation in the United States
or, perhaps, lower our standard of living. This thesis totally
ignores our strengths.
Outsourcing
and globalization are not new. They have been on the scene for
about 30 years in their present form, and yet, the U.S. economy
has pros- pered, unemployment is low and stable, and job recycling
is robust. There is no evidence that our businesses are not up
to the challenges, or that our adaptability and inventiveness
are failing.
This is not
just an academic debate. Many policymakers and economists seem
to have bought into this notion that America is losing its edge,
its superiority. They spout the rhetoric, adopt an attitude of
"let's pack it in -- it's all over for us." They crank
up the pessimism, which in turn leads to the development of such
bad policies as protectionism and high tariffs.
Unfortunately,
many Democrats seem to have signed on to this defeatist theme,
too. They are hooked on what they've identified as the twin forms
of disaster -- a disastrous domestic economic policy that will
destroy our prosperity and wealth, and disastrous international
competition that will steal our edge and erode our standard of
living. But this excessive pessimism is unwarranted.
Take China,
as an example. It is important to keep in mind that, while it
has made many important advances, China does not have an easy
road ahead. Remember that China is not a free and open society.
It faces an almost unfathomable challenge in converting 1 billion
unskilled laborers into an industrial skill base, while urbanizing
its population. Remember that it took the United States 100 years
to relocate 70 million agrarian Americans from the farms to the
cities, at enormous human and financial cost. We have not yet
fully absorbed the resultant costs of urban blight and overburdened
educational and social institutions.
Will China
be able to maintain civil order while facing the challenge of
relocating 600 or 700 million people? This is the reality: China
is a statemanaged economy that does not have a modern banking
system, a robust market mechanism, or a mobile society. China
is also heavily dependent on the United States for growth capital,
innovative technology, and regional stability, and for a large
and prosperous consumer market.
The world
is not flat economically, socially, militarily, or politically
-- in large measure because of America's comparative strengths
and the emerging countries' many weaknesses.
And the United
States will continue to maintain an edge over other nations. The
technologies that will drive economic growth in the future are
medical technology and biotechnology, aerospace technology, oceanography,
agricultural science, next-generation information systems, and
environmental and energy technology. These are the sweet spots
of American scientific capability. The United States will lead
in the further development of all the vital technologies and will
uncover other applications where our inventiveness and entrepreneurism
will give us the advantage. After all, these qualities have been
the engine of our economic dominance for more than 200 years.
It's our American genius.
So, in this
context, where will the Democratic Party position itself on globalization,
on outsourcing, on competitiveness? Will it choose pessimism or
hope?
Despite the
media's constant drilling on fiscal and trade deficits, the low
level of savings, the potential bursting of the real estate bubble,
the dependence on foreign loans -- our economy continues to perform
well. We suffer no inflation. We're experiencing a 3.5 percent
growth rate this year. We have good corporate earnings and balance
sheets. Our interest rates are low. Unemployment is only 5 percent.
We have highly available money and credit.
I'm optimistic.
Maybe the pessimists have it wrong; maybe it's not a zero sum
game. I believe every player wins with globalization. The pie
gets bigger; there's more to share. After all, the predicted creation
of 700 million Chinese and Indian middle-class consumers cannot
be bad for America. But to realize the promise of continued prosperity
and growth, we must have good policies.
Surely the
United States will resist protectionist policies. And the Democratic
platform will advocate tax reform that lightens the burden for
the middle class, while encouraging savings and reducing the deficit.
We also must pursue policies that shrink the number of families
who live below the poverty level and stimulate income growth for
low-wage earners.
We must enforce
education reform, encourage and support advanced studies, and
broaden tuition-financing programs. The Democrats must support
scientific programs that face declining budgets. These include
the National Aeronautics and Space Administration, the National
Institutes of Health, the Jet Propulsion Laboratory, and the Defense
Advanced Research Project Agency.
We must strengthen
investment in the environment and alternative forms of energy.
The successful development, production, and deployment of energy
alternatives will increase American manufacturing jobs, decrease
dependence on foreign oil imports, rebalance trade deficits, and
help the environment.
There is
much to be done. And therein lies the opportunity and the challenge
for Democrats. The solutions lie in American ingenuity, our entrepreneurial
tradition, our genius for invention, our can-do spirit, our optimism,
and our adaptability.
This must
be the Democratic program -- positive, hopeful, realistic, and
a big idea.
Bernard
L. Schwartz is chairman and CEO of Loral Space & Communications
and chairman of Blueprint's
advisory board.
