Friday, October 28, 2005

How Flat is the World?

In his best-selling book, The World is Flat: A Brief History of the Twenty-first Century , author Thomas Friedman argues that globalization and demographics are conspiring to doom the United States to eventual surrender of its economic lead to burgeoning economies in India and China. I won't get into his implicit argument for a neo-con-like American economic hegemony, but one of Friedman's key arguments in support of his thesis revolves around the explosion in the numbers of highly educated Indians and Chinese in the science and engineering fields compared to stagnant numbers in the US. Friedman's book has become either emblematic of the conventional wisdom that we're "losing our edge" or has contributed mightily to it. Reminds me of Robert Reich's 1992 contribution The Work of Nations : Preparing Ourselves for 21st Century Capitalism, when we were told that we needed to be more like Germany and Japan. Remember that? Right on the brink of the 90's economic miracle? Ahhhh, the good old days.

Anyway, Daniel Drezner once again helps to disabuse us of the weaknesses in the conventional wisdom's argumentation in citing some deeper research.

But others told me that the 600,000 figure for China in 2003 included engineering graduates who had received less training than their U.S. counterparts. Richard Freeman, a professor of economics at Harvard University who has studied the issue, told me in an email that the Chinese numbers include graduates of two-to-three-year programs who would be comparable to engineering technicians in the U.S. (recipients of an associate's degree). "The number getting full course degrees is around 350,000, which is what we would compare to U.S. graduates in a year," Dr. Freeman said.

His editor's note from McKinsey Quarterly is also interesting.

Despite this apparently vast supply, multinational companies are finding that few graduates have the necessary skills for service occupations. According to interviews with 83 human-resources professionals involved with hiring local graduates in low-wage countries, fewer than 10 percent of Chinese job candidates, on average, would be suitable for work in a foreign company in the nine occupations we studied: engineers, finance workers, accountants, quantitative analysts, generalists, life science researchers, doctors, nurses, and support staff.
Consider engineers. China has 1.6 million young ones, more than any other country we examined. Indeed, 33 percent of the university students in China study engineering, compared with 20 percent in Germany and just 4 percent in India. But the main drawback of Chinese applicants for engineering jobs, our interviewees said, is the educational system's bias toward theory. Compared with engineering graduates in Europe and North America, who work in teams to achieve practical solutions, Chinese students get little practical experience in projects or teamwork. The result of these differences is that China's pool of young engineers considered suitable for work in multinationals is just 160,000—no larger than the United Kingdom's. Hence the paradox of shortages amid plenty.

So maybe we shouldn't get too far ahead of ourselves in declaring ourselves screwed. Certainly, we need to do a better job in math and the sciences. We need to incent teachers in those fields, revitalize curriculums and to encourage more of our young people in those directions. In time, the current trends are problematic for retaining our lead as an industrial power, and consequently our standard of living. All true. All worthy of serious consideration and action. But China's enormous population and growth trends are not the sole determinants of economic success.

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