The Rise of Developing Nations

I'd been thinking about this for quite some time, and this link my dad sent me spurred me to finally write about it.

There have been a lot of articles over the past year or two talking about the rise of developing nations, China and India in particular. Most of these articles focus on the potential for the United States to lose its sole superpower status. Comparisons to Great Britain 100 years ago are inevitable.

I get the sense that these writers think their audience is the arrogant American. The world revolves around us and if it ever stops, we will all be plunged into a new dark age. Or worse maybe, any new superpower will treat us the way we currently treat many other nations. George Bush's "it's our way or the highway" diplomacy.

Why don't more people look at it the other way? There are 2.5 billion people in China and India. And those countries are working very hard to raise their standard of living.

The business world already sees the potential positives in that fact. There are 2.5 billion potential new customers out there, and a growing percentage of them have the money to buy their products. It also gives them a pool of potential cheaper employees. More customers, lower costs. What's not to love?

The knee-jerk response, especially for Democrats, is to say that jobs will be lost in the U.S. That's definitely going to happen. It's basic economics. But take the scenario further. As the Indian and Chinese economies expand further, wages will rise and the economic incentive to move jobs to those countries will diminish. In fact, with so many more customers, many businesses will have to expand in order to meet the demand.

It's called disruptive innovation.

People are afraid of change, that's natural. What our national leaders need to do is illustrate the benefits as well as the risks of these changes.

But I digress...

Let's move on to something I never hear anyone talking about. At least not the way I would like to hear people talking.

People bemoan the loss of American leadership in science and technology. America has a very innovative culture. More so than perhaps any other nation. I totally agree that we need to continue to improve the country's investment in research and development. We have the greatest university system in the world. We need to maintain that status, and increase our efforts to get our students to take an interest in math, science and engineering.

While the U.S. share of patents has declined from 60% in the 1980s to about 50%, that is a remarkable number considering that we comprise only 5% of the world's population. I don't have any more facts around this, but I find it hard to believe that the decline has as much to do with lower output in the U.S. as it does rising output in the rest of the world.

I challenge people to think of things differently. Let's assume that the U.S. productivity in the realm of science and engineering stays the same as it is today. However, as India and China (40% of the world's population) produce more scientists and engineers, the number of patents they obtain per capita will increase. This explosion of knowledge will accelerate the advancement of humanity beyond the already extraordinary rate at which it is advancing today.

To me, this is an incredibly exciting thought. With so many more scientists and engineers working to solve medical, energy and technology issues, how quickly can we solve some of our most challenging problems?

The U.S. may not be the dominant nation 50 or 100 years from now. That doesn't mean we are going to be considered a second-rate power either. We can still be an integral part of the new global economy.

All this leads to a discussion of globalization versus isolation, but that's a post for a different day.