[Mb-civic] No Need to Feel Threatened - Sebastian Mallaby - Washington Post Op-Ed

[William Swiggard]

No Need to Feel Threatened
<>
By Sebastian Mallaby
The Washington Post
Monday, April 17, 2006; A13

This week's visit from Chinese President Hu Jintao will inflame two 
kinds of economic pessimism. The first holds that China is forcing a 
race to the bottom: Its legions of poor workers are driving down U.S. 
wages. The second claims that China is racing to the top: It's spending 
ever more on science and engineering. Both sorts of pessimism are only 
half right. Both miss the real source of U.S. economic dynamism.

It's true that American wages are stagnant and that they cry out for 
progressive tax and social policies. But it's crazy to argue that 
stagnant wages are the main explanation for the success of American 
business. Just because Detroit's carmakers are fighting to cut union 
benefits, it doesn't follow that constraining pay is the top issue for 
most companies.

Consider a firm such as Wal-Mart, an alleged front-runner in the race to 
the bottom. Wal-Mart's employees get market wages, otherwise they 
wouldn't stay there. But even if its army of 1 million-plus hourly 
workers got a 20 percent raise, that extra cost would wipe out only 
about a third of Wal-Mart's 2005 profit. The retailer's success lies in 
something other than low wages.

Likewise, it's true that China is striving to catch up in science, 
hiring Western professors and pressing its researchers to publish in 
international journals. But there is no straight-line connection between 
scientific progress and economic advance. What matters is how companies 
deploy technology. Americans are good at that.

Again, consider Wal-Mart. Its real genius lies in analyzing consumers 
and foreseeing what they'll want; it can predict how many yellow 
crew-neck T-shirts will sell in each region of the country, so it 
doesn't waste gasoline delivering stocks to outlets that won't sell 
them. Wal-Mart achieves this with the help of a data warehouse that 
stores more information than all the fixed pages on the Internet 
combined. It's rolling out a new generation of miniature devices that 
attach to its goods, enabling it to computerize and track inventory.

What's true for Wal-Mart is also true for other companies: The most 
striking business successes have little to do with low wages or pure 
science. Google wouldn't be worth anything if it had only perfected 
search technology; its business genius is that it's become an ad agency. 
Mattel wouldn't be worth anything if it merely manufactured Barbies 
using cheap Chinese workers; its triumph lies in design, advertising, 
packaging -- and in those insidious deals that put Barbie on your 
daughter's bike helmet. Or take an example that has almost no connection 
whatsoever to technology or low pay. Starbucks has created one of the 
world's least probable brands, turning a commodity crop into a 
high-margin business.

Now consider the instructive case of DreamWorks. To create movies such 
as "Shrek 2" and "Madagascar," DreamWorks brings together artists and 
storytellers with software writers and even anatomy experts -- and 
manages this cauldron of talent so well that it's created a new 
benchmark for the industry. Innovation often springs from this 
interdisciplinary fusion. It depends on neither low wages nor science. 
It's not about a lone inventor in a lab. It's really about teamwork.

For one reason or another, American business excels at this. Our 
much-maligned education system seems to encourage people to think across 
categories and take risks. Our freewheeling and undeferential culture is 
good for interdisciplinary cooperation. And then there is the role 
played by U.S. business schools, which increasingly focus on the skills 
that make this teamwork possible.

The Harvard MBA curriculum used to teach the nuts and bolts of 
management, with an emphasis on accounting and financial skills. Now its 
faculty aspires to teach "leadership." At Dartmouth's Tuck School of 
Business, about half the grades are handed out for work that's done in 
teams; members of each team provide one another with anonymous feedback, 
and the school has hired counselors to help students absorb the lessons 
from this criticism. "In the past, you could go through business school 
and nobody would say you were coming across as a jerk," says Paul Danos, 
dean of the Tuck School. "But that might have been the most important 
factor in your future success as a manager."

China's spectacular rise causes understandable alarm, and it probably 
has harmed pay for low-skilled U.S. workers. But the right answers to 
stagnant wages include Head Start, school choice and a fix for the 
regressive payroll tax; they should not include a national descent into 
xenophobic paranoia. American business is in a golden phase right now 
because its imaginative culture fits the challenges of the 
post-industrial age. A low-wage economy that crams on science is not 
going to take that away from us.

http://www.washingtonpost.com/wp-dyn/content/article/2006/04/16/AR2006041600860.html?nav=hcmodule
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