Blogs Driving the Debate

March 9, 2012

NCF curates a weekly list of blog posts that touch on emerging issues affecting the American business community.

Ryan Avent of The Economist looked at the latest jobs numbers and asked, “Is it morning in America?”

Fact: Streaming Netflix movies account for up to 40% of all Internet traffic at peak times.  That’s a colossal amount of bandwidth.  So, Netflix has chosen to invest in the global cloud computing infrastructure rather than a proprietary content delivery system.  The upside is that their investment will benefit every Internet user, regardless of whether they are Netflix subscribers or not.

Gail Tverberg at the The Oil Drum noted how high energy prices are hurting the European economy.  Indeed, the countries with the worst debt crises and highest trade imbalances are most dependent on pricier imported fuels.

With the death of the Space Shuttle and the rise of privatized space flight, we seem to be entering a new era in exploring the world beyond Earth’s atmosphere.  NASA is working hard to keep up, but popular support just isn’t there for large, expensive, publicly-funded space projects.  As Alexis Madrigal points out in The Atlantic, publicly funded space flight was never that popular, even in the heyday of the Apollo space program.

How the iPad could transform the construction industry.  The key point to me is that the iPad is becoming advance for computing, not just an evolutionary one.


The Top 10 States that Trade with China

March 8, 2012

By Michael Hendrix, Research Manager

China is the third largest U.S. export market and is expected to continue the 468% growth in exports that has marked the decade from 2000.  In 2010, America sent China goods worth some $91.9 billion.  Where exactly are these exports coming from?  According to the U.S.-China Business Council, these are the top 10 exporting states in America:

  1. California ($12.5 bn)
  2. Washington ($10.3 bn)
  3. Texas ($10.3 bn)
  4. Louisiana ($6.5 bn)
  5. Oregon ($4 bn)
  6. New York ($3.4 bn)
  7. Illinois ($3.2 bn)
  8. Pennsylvania ($2.7 bn)
  9. Georgia ($2.4 bn)
  10. Ohio ($2.3 bn)

Outside of the bordering countries of Canada and China, you’re not going to find a country where American states export more goods.  The growth in exports over the last ten years is equally amazing, as this chart shows.

Trade issues are often discussed on a national or international stage, but it is at the state level where see the real impact.  From the manufacturing hubs of Rust Belt states like Pennsylvania and Ohio to the fields of eastern Oregon, trade with China appears to be having a profound impact on the growth of states across America.


The Top 10 Global Economic Risks

March 5, 2012

By Michael Hendrix, Research Manager

What do you get when you ask 469 experts from industry, government, academia, and civil society to think up their worst dystopian nightmares?  You get the World Economic Forum’s list of the top fifty global risks.  These seeds of disaster lie in wait just under the surface, nurtured by a lack of safeguards in our increasingly interconnected world.  Excited yet?  You should be, because these are the risks that may temper tomorrow’s rewards.

These fifty risks can be narrowed down to five categories:

  • Economic
  • Environmental
  • Geopolitical
  • Societal
  • Technological

For this blog, it’s the economic risks that merit the most attention.  Keep in mind as you read them not just the probability of these events occuring, but the mechanisms by which they may occur.

Here then are the top 10 global economic risks:

  1. Chronic fiscal imbalances (likely & large impact)
  2. Chronic labor market imbalances
  3. Extreme volatility in energy and agricultural prices (large impact)
  4. Hard landing of an emerging economy
  5. Major systemic financial failure (large impact)
  6. Prolonged infrastructure neglect
  7. Recurring liquidity crises
  8. Severe income disparity (likely)
  9. Unforeseen negative consequences of regulations
  10. Unmanageable inflation or deflation

Four of these economic risks (underlined above) are so-called “critical connectors,” meaning that they have a tremendous, systemic influence on all of the other fifty risks.  All of these connectors in turn orbit around one center of gravity: chronic fiscal imbalances.  Not only that, but every gepolitical and societal risk related to the collapse of governments or of trade is affected by this one fiscal risk.

Simply conjuring up risks isn’t quite enough.  We must know how they could end up shaping our future.  What you want to look for are the “pathways” through which risks manifest into reality.  Labor market imbalances, a society of broken opportunities, and chronically disrupted human and financial capital all fit that bill.  At the end of these pathways stands a decaying and uncertain global economic system.

The accumulation of massive public debts represents then the key global stress point.  All of these other risks become increasingly unmanageable the more that the piling up of debt outruns the ability to pay for it.

After looking at every possible risk nightmare square in the eye, the authors ask the all-important question:  How can fostering entrepreneurship prevent the seeds of dystopia from taking root?   This is where real leadership is needed.  Tackling chronic deficits without the means of economic growth simply means swapping one risk for another.  Our complex world will either blow out that one risk into a host of disasters or provide a resilient and global infrastructure for broad-based growth.  Entrepreneurship has the ability to thrive in risky and complex times.  It’s the pathway through which risks are mitigated into rewards, serving ultimately as a needed source of innovation and growth.

Chronic fiscal imbalances or global entrepreneurship — these are the forces that will define our future.


Blogs Driving the Debate

March 2, 2012

NCF curates a weekly list of blog posts that touch on emerging issues affecting the American business community.

Richard Florida tracked the “rise of the supercommuter” in The Atlantic Cities.

The Economist’s Schumpeter columnist thinks that the “only thing we have to fear is the lack of fear itself” when it comes to Greece’s impending default.  Greece’s default is becoming increasingly inseparable from its own exit from the Eurozone, a disastrous occurrence that people seem far too complacent about.

NCF Fellow Mark Perry wrote on the stunning decline of print newspaper advertising.

Dane Stangler at Growthology takes a close look at the “nuances of job creation.”

Fast Company’s Michael Raisanen pushed back against the increasing tendency today to make strategic decisions based on data alone, arguing that it’s a sure death knell for groundbreaking innovation.

Jon Walton profiled Azerbaijan’s $100 billion city of artificial islands.


Investing in Infrastructure Pays

March 1, 2012

By Michael Hendrix, Research Manager

Associated Equipment Distributors is out with a new report asking, in essence, how much do infrastructure investment pay back in return?

Building a new road, bridge, sewer, or runway is more akin to buying a business asset that generates economic activity and returns revenues to the investor.  For example, our researchers determined that over a 20-year period, generalized public investment generates an accumulated $3.21 of economic activity per dollar spent, which yields $.96 in tax revenues. [emphasis added]

Even in the short term,  ”a dollar spent on infrastructure construction produces roughly double the initial spending in ultimate economic output.”

The problem is that efforts to finance these infrastructure investments have consistently fallen short.  What’s the answer?

The U.S. must seek innovative new funding mechanisms that do not burden rising deficits, and likely must stimulate the private sector.  Programs like public-private partnerships [PPPs], individual and corporate contributions to road financing and user fee lanes are potential mechanisms through which public spending on infrastructure can be supplemented beyond the gas tax.

Our own recent research on public-private partnerships in infrastructure investment came to similar conclusions: “The challenge is pursing an investment strategy that can most effectively repair, upgrade, and expand America’s existing systems and, by extension, support the U.S. economy.”  Indeed, “PPPs give cash-strapped governments additional options for pursing projects that otherwise would not be possible.”

Generations of economists have debated the return on government’s investments.  If we ever see a conclusion to these arguments, the one area that we may see the most agreement on is that investing in infrastructure is worth it.  If that’s the case though, why rely solely on the public sector to finance these investments, let alone to pick who wins and loses from it?


The State of Small Business in America

February 27, 2012

By Michael Hendrix, Research Manager

What is the state of small business in America?  This is an important question to ask for the overall health of the economy and job market, especially since we know that as recently as 2007 young firms were creating two-thirds of all jobs in America.  Unfortunately, recent testimony by Martin Neil Bailey of The Brookings Institution paints a relatively bleak picture for small businesses in America.  According to Dr. Bailey, there’s been a 20% decline in new businesses since the start of the 2008 recession.  What’s more, small business optimism hasn’t really recovered from the depths of the recession, which in turn was the culmination of a seven year overall decline.  For those firms that have gotten off the ground and are hiring, they still struggle to find the right skilled workers for their business.

This information is drawn from testimony by Dr. Baily to the U.S. House of Representative’s Committee on Small Business and the entire presentation is worth reading.  His conclusion that the “Great Recession has hit almost everyone hard” rings a little hollow in the face of overwhelming regulatory obstacles for small businesses.  One thing is true: small businesses are an important part of America’s economy, now and in the future.  Their resilience has been proven time and again, even in the face of economic stagnation.


Blogs Driving the Debate

February 24, 2012

NCF curates a weekly list of blog posts that touch on emerging issues affecting the American business community.

Max Fisher outlined the “next 5 emerging economies that will change the world“:  Turkey, Indonesia, Kazakhstan, Congo, and Mexico.  Just for good measure, he added Nigeria as a “maybe.”

Justin Fox outlined the fourteen articles contributed to the Harvard Business Review by some twenty-one authors on the future of American competitiveness.  Under the “government” header, he looks at taxes, fiscal policy, immigration, trade, and entrepreneurship and innovation.  The “business” section examines how to break Washington gridlock, better educate Americans, address the financial system, build clusters of innovation, and engage with the true costs of outsourcing.

James Hamilton at EconBrowser took a close look at oil prices to try to figure out why the price at the pump is rising.  In short, the reason for rising prices comes down to one word: Iran.

Outsourcing work from the West to the East has been one of the big stories in business for the past few decades.  Today, it seems that nearly every consumer product was made in China, a place where the cost of production is appealingly low.  Alex Tabarrok of Marginal Revolution came across a news item that seems to auger a reversal in this trend.  It appears that some Chinese firms are now starting to outsource to (of all places) Europe.  Tabarrok expects that we’ll see a lot more of this East to West outsourcing in the years to come as China grows in wealth and adapts to having a more consumer-driven economy.

Felix Salmon summarized the Greece bailout package, starting with these words: “Greece is now officially a ward of the international community.”

Whether you agree with him or not, Ryan Avent at The Economist made a series of insightful comments about the contributions that manufacturing does (or does not) make to the American economy.  He’s skeptical that the manufacturing industry is worthy of any special support other than that which would be offered to any other industry, i.e., support for R&D, a simplified tax code, and the like.  Laura D’Andrea Tyson made the equally informed counter-argument in the Economix blog for the unique qualities of manufacturing to, say, the support of general innovation in the economy.


Leaving the App Economy Alone

February 24, 2012

By Sean Hackbarth, Blogger, U.S. Chamber of Commerce

If you have a smartphone, how many apps do you have on it? Being a tech junky I have over 70 on my iPhone–including 7 different Twitter apps! Each of those apps required people to design, code, and market them. (What, you thought Angry Birds magically appeared?) Those jobs didn’t exist a few years ago, and their numbers are substantial. Michael Mandel, chief economic strategist of the Progressive Policy Institute, concluded in a study that the App Economy has created almost 500,000 jobs since 2007.

One lesson he took from his research was not to burden this growing niche economy with regulations:

The key elements in the App Economy “team”–Apple’s development of the iPhone, Google’s development of Android, the buildout of wireless networks by AT&T, Verizon and other providers–were not the object of heavy government regulation. Government did have a role in unlocking and distributing spectrum and otherwise clearing the underbrush. But no government agency was in charge of supervising the burgeoning App Economy.

Is more regulation needed? Given that App Economy companies are creating jobs and investing in the United States economy during a period of economic weakness, there’s an argument for not messing with success. Government agencies should restrict themselves to ‘light-touch’ regulation of the App Economy unless there’s real problems in the market.

If only regulators treated the rest of the economy like this.

Originally posted on FreeEnterprise.com


A Look at How Israel Invests in Innovation

February 23, 2012

By Josh Kram, U.S.-Israel Business Initiative

A modified version of this post first appeared on FreeEnterprise.com

It’s not a stretch to say that Israel is one of the most innovative places on earth.  On this tiny strip of land on the Mediterranean sits a who’s who of technology firms from around the globe, such as Microsoft, Intel, Google, IBM, AT&T, and others.  Each of these companies have opened state-of-the-art research and development (R&D) facilities.  The soil is rich for homegrown companies too.  Israel now boasts more start-up firms per capita than anywhere else in the world.

One of the most promising areas of growth comes in the life sciences arena, consisting of advanced biotechnology firms and pharmaceutical companies.  Just six years ago, Israel had all of two publicly-listed life sciences companies.  Today, there’s an entire index devoted to this category of stocks.  Indeed, of the currently 702 companies in the life sciences arena in Israel, 56% were founded during the last decade, according to the Israeli Life Sciences Industry Association (ILSI).

This phenomenal growth in the life sciences is taking place in a collaborative ecosystem between academia, the government, and the marketplace.  Just last month, Israel’s Office of the Chief Scientist — an agency responsible for developing government policy in support of industrial R&D – announced the creation of a new program targeted at fostering international partnerships around the life sciences.  The hope is that, just as the existence of foreign companies in Israel’s Silicon Wadi helped spur even greater innovations in the country, creating some of the first life sciences R&D facilities in the Middle East will be a boon to the industry around the world.

The Israeli Government is currently seeking input from foreign multinational life science companies on the basic approach of this new program, which includes two unique tracks for private sector engagement.  Working closely with the Government of Israel, the U.S.-Israel Business Initiative (USIBI) is laying the groundwork to ensure that U.S. companies heed this call for increased investment and development.

On March 25-27, the Chamber will lead an elite delegation comprised of top-tier U.S. companies on a Life Sciences Mission to Israel to explore these opportunities. Participants will meet with key government agencies, including the Ministry of Health, Ministry of Industry, Trade, and Labor, Ministry of Finance, Office of the Chief Scientist, and Offices of the Prime Minister and President. Additionally, those attending the mission will participate in tours of medical, biotech, and pharmaceutical facilities across the country and participate in roundtable discussions on key policy and programmatic issues with Israeli stakeholders.

Expanding our private-sector collaboration with Israel will help to ensure that the strong alliance our nations share can continue for years to come. The Initiative, which propels our alliance into one of the world’s strongest innovation-based commercial relationships, is an important voice, advocate, and platform for this bilateral business relationship.

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For more information regarding the life sciences mission or USIBI, please contact Josh Kram at jkram@uschamber.com or visit usisraelbusiness.com.


For Your Consideration… the NCF App Video

February 22, 2012

By Rich Cooper, Vice President, Research & Emerging Issues

If it weren’t for the fact that there are so many award shows on television, it would be hard to tell it was winter given the incredibly mild weather we’ve had of late.  From Grammys to Golden Globes, sparkling awards are being handed out left and right this season to deserving and memorable performances.  For me though, I’ve always been a fan of the late entrant to these contests.  There always seems to be one performance that sneaks in under the radar and just “wows” the audience.

Once again, I’ve found that performance.  This year’s unheralded, late entrant comes courtesy of the U.S. Chamber’s think tank, the National Chamber Foundation (NCF), with its short form film, “App Auditions.”

Directed by the Chamber’s own underground video artiste, Erik Sulcs, it features a compelling story and screenplay written by NCF’s own Jackie Carl and the acting abilities of NCF’s Michael Hendrix.   This moving piece of cinema brings to light the challenges and benefits of using an iPad app, and through its driving narrative inform users everywhere of what’s happening on the emerging issues front of free enterprise.

I can honestly say that I’ve never seen anything like it (and I’m in it).

Recent reviews are coming in from all corners:

  • Former Bush Administration Domestic Policy Advisor and Education Secretary, Margaret Spellings called the film, “Funny…”
  • A DC public relations firm even called it “Hilarious.”
  • Even my wife and kids thought it was compelling and that for me is the toughest audience of all!

Never has iPad instruction been more meaningful than in this 2 minute, 40 second video.

I hope the Academy leaves just a little room on their ballots (and in their hearts) for this late entrant.

My tux is already laid out and I promise upon winning that coveted Oscar that my acceptance speech will be very short.  After all, the NCF team and I have to be back to work early Monday morning.  You just never know what we might do next.