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Week of November 20 - 26, 2006

America’s Competitiveness Posture

When it comes to America’s economic competitiveness, we should worry – but not too much. That’s one possible take-away from the Competitiveness Index: Where America Stands, a new report from the Council on Competitiveness. In conjunction with its 20th anniversary, the Council has taken a deep look at how America stacks up in areas of innovation, education, entrepreneurship, and prosperity. The basic picture is pretty good, as the US remains the world’s most globally competitive economy. Productivity continues to grow, and the American standard of living remains high. Even some problem areas, such as current trade deficits, may not be as worrisome as some would have us believe. Because current statistics fail to capture much new economic activity (especially in service sectors), some measures may fail to accurately account for some American assets. For example, US investment in intangible assets is estimated to be as high as $1 trillion, but these figures are not tracked in official government data. While the basic picture is pretty good, potential problems areas include poor quality in K-12 education, as well as the potential impact of burdensome litigation and new regulations such as the Sarbanes-Oxley law.

To access the 2006 Council on Competitiveness report, Competitiveness Index: Where America Stands, visit http://www.compete.org/store/products.asp?cat=8 (payment required).

Who’s Global?

Succeeding in today’s economy requires more than simply having the smartest people or the most innovative companies. These factors matter, but it also matters that national and regional governments remain open to global trade and build strong linkages across the world. The annual A.T. Kearney/Foreign Policy Magazine Globalization Index assesses how countries perform in these areas. Four sets of measures – economic integration, person-to-person contact, political engagement, and technological connectivity – are tracked. This year’s study, which assesses 2004 data for 62 countries, finds that globalization is advancing at a different rate in different parts of the world. In particular, many Middle Eastern nations perform poorly on the index. In fact, Iran has occupied the last spot for the past six years. However, the general trend is that global ties are deepening and widening as technology links people, foreign investment levels rise, and international tourism continues to grow. Singapore remains the most globalized economy, followed by (in rank order): Switzerland, the US, Ireland, and Denmark.

To access the 2006 A.T. Kearney/Foreign Policy Magazine Globalization Index, visit http://www.atkearney.com/main.taf?p=5,4,1,127.

Positive Trends in Global Talent Migration? Luck? Or Both?

The latest data from the Institute of International Education (IIE) show that the drop in foreign student enrollment in the US has ended (at least for the short term). The IIE surveyed 900 American colleges and universities and found that the number of enrolled foreign students grew 8% this year, reaching a total of 142,923. The number of student visas is also up by 14% from the previous year. Finally, a separate study shows that the number of Americans studying abroad is also growing at an annual rate of eight percent. These numbers indicate that the post-9/11 drop in foreign student enrollment may be over.

A new study for the Information Technology and Innovation Foundation suggests that the positive trend may be more luck than effort. While the US lacks a coherent plan, its counterparts are making it easier for talented immigrants to enter their countries. Global Flows of Talent, highlighted in a recent session covered by NDE-news, benchmarks flows of highly-skilled and highly educated people to the United States against similar flows to seven other high-income countries: Australia, Canada, France, Germany, Japan, New Zealand, and the U.K.

To access the Institute of International Education’s Open Doors Report 2006, visit http://www.opendoors.iienetwork.org/.

To access Global Flows of Talent: Benchmarking the United States by David M. Hart, visit http://www.itif.org/files/Hart-GlobalFlowsofTalent.pdf. 

Why Move Offshore?

The reports cited above focus on the big picture of economic good news. But the big picture doesn’t really matter if your job is being outsourced to China or India. It’s also worrisome that offshoring is not just occurring because overseas operations are cheaper. A new study from Duke University’s Fuqua School of Business and Booz Allen Hamilton finds that companies are now starting to offshore because they can’t find sufficient talent here in the US. The report is based on analysis of 530 companies whose managers were asked about the strategic reasoning behind offshoring decisions. Access to qualified personnel is the number one factor in these decisions. Nearly 70% of respondents noted that they have moved overseas due to the availability of needed expertise.

To access the 2006 report, The Globalization of White Collar Work, by Vinay Couto, Mahadeva Mani, Arie Y. Lewin, and Carine Peeters, visit http://www.fuqua.duke.edu/news/offshoring-ciber-1106.html. The report is jointly produced by Booz Allen Hamilton and Duke University’s Fuqua School of Business.

A New Take on Microfinance

An interesting new Center for Global Development article on the business of microenterprise, “Microfinance as Business,” presents a tough-minded look at how microfinance funds operate on a business basis. Many casual observers think that the real “aha moment” in microenterprise was the realization that the poor could and would repay their debts. The authors contend that the real secret of microenterprise lies in the field’s long and painful discovery of key techniques and tools that work. The heavy use of credit, disproportionate lending to women, and the use of short term loans were developed in the field, but now have become institutionalized as “best practices.” These business practices, not the social commitment to poverty eradication, are the real differentiators of effective microenterprise organizations. These findings raise a number of interesting questions about the role of traditional commercial lenders as potential microenterprise lenders, and about the future of the field.

The November 2006 Center for Global Development Working Paper (No. 101), “Microfinance as Business,” by David Roodman and Uzma Qureshi is available at: http://www.cgdev.org/content/publications/detail/10742/.

State Taxes & Entrepreneurial Activity

Following all of the talk about higher taxes during the campaign season, a new SBA Office of Advocacy report – released today – examines the impact of state-level taxes on entrepreneurial activity. In addition to federal payroll taxes and income taxes at the individual and corporate level, business owners are responsible for a vast array of state taxes, including sales and property taxes. The report, State Tax Policy and Entrepreneurial Activity, suggests that the latter are actually more important than income taxes in terms of business tax burdens at the state level.

Among the findings is while top marginal state tax rates on corporate and individual income do not have statistically significant effects, states with higher sales tax rates tend to have higher entrepreneurship rates. Overall, however, the authors find that state tax policy has only a modest effect on aggregate state entrepreneurship rates.

For more information, visit the SBA Office of Advocacy at www.sba.gov/advo 

The National Dialogue on Entrepreneurship, an initiative of the Public Forum Institute made possible by a grant from the Kauffman Foundation of Kansas City. Through NDE-news, we bring you short summaries and analyses of various trends driving the innovation economy. Subscribe now to receive your weekly copy. Archived issues are available online. Links to the day's entrepreneurship stories from across the nation and around the world are posted each weekday on the NDE main page - bookmark it and stay informed about the latest entrepreneurship news.

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All stories © 2006 The Public Forum Institute
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