Competitiveness File DDI '08 CM Lab Michael and Franklin

Competitiveness File
DDI ’08 CM Lab
Michael and Franklin

TOC
TOC.............................................................................................................................................................................1
TOC....................................................................................... ...........1
*************AFF*********.......................................................5
*************AFF*********.......................................................5
**Competitiveness High**.............................................................7
**Competitiveness High**.............................................................7
US Competitiveness High................................. ..............................8
The U.S. isn’t Losing Scientific Competitiveness......................................................................................................8
U. S. Competitiveness High............................................................9
U.S. research and development is Vibrant, success of competing Nations don’t Undermine....................................9
US Competitiveness High.............................................................10
Research and Development funding High................................................................................................................10
**Impact Extension**..................................................... ..............11
**Impact Extension**..................................................... ..............11
US Tech Leadership Impacts................................................... .....12
Tech Advantage key to stop terrorism......................................................................................................................12
**Brink Extensions**................................... ................................13
**Brink Extensions**................................... ................................13
Competitiveness Brink..............................................................................................................................................14
Competitiveness Brink........................................................ ..........14
While US still technology leader, an easily be undermined.....................................................................................14
Competitiveness Brink........................................................ ..........15
Lack of Competitive attempt, puts U.S. on the brink of lost leadership...................................................................15
**Solvency Extension**..................................................... ...........16
**Solvency Extension**..................................................... ...........16
Government Key to Competitiveness..........................................17
Federal Support Key to Technological Innovation...................................................................................................17
**Tech Competition Good**........................................................18
**Tech Competition Good**........................................................18
Tech Competition Good.......................................... ......................19
Foreign Tech Success Motivates United States and is Beneficial .........................................................................19
**Uniqueness extensions**................................................... ........20
**Uniqueness extensions**................................................... ........20
Policymaking Competitiveness................................................... ..21
Policymakers must address decrease in science work force.....................................................................................21
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Globalization causes Competitiveness.........................................22
Globalization causes rise of competitors and decrease Soft Power..........................................................................22
US Competitiveness Low.................................... ..........................23
Experts Agree United States is Lacking Innovation that is key to global advantages..............................................23
**Link Extentions**...................................... ...............................24
**Link Extentions**...................................... ...............................24
Competitiveness Politics Link......................................................25
Pelosi believes U.S. Behind in technology Innovation.............................................................................................25
Competitiveness key to Economy............................................. ....26
Lack of Technological Innovation leads to decrease in Workforce and Collapse of Economy................................26
Competitiveness key to Economy/ National Security.................27
Technology Leadership key to National Security and Economy..............................................................................27
China/India Threat to Competitiveness......................................28
China and India threaten U.S. technological Leadership..........................................................................................28
China Threat to Competitiveness................................................ .29
China purposely undermines U.S. technological Leadership...................................................................................29
Patents Competitiveness Link.................................. ....................30
Patents are key to Technological Leadership............................................................................................................30
Competitiveness key to Research and Development Workforce
....................................................................... .................................31
Lose of Technological leadership leads to decrease in research and development workforce ................................31
Globalization cause Competitiveness......................................... ..32
Globalization decrease U.S. Tech leadership............................................................................................................32
****************NEG****************................................33
****************NEG****************................................33
**Frontline**............................................................................ .....35
**Frontline**............................................................................ .....35
1NC Frontline ..........................................................................................................................................................36
1NC Frontline ............................................................... ................36
Foreign Nations Can’t compete with US.....................................36
US won’t lose tech competitiveness, diffusion proves.............................................................................................36
Tech =/= competitiveness.........................................................................................................................................37
Tech =/= competitiveness.................................. ............................37
Competitiveness hurts global econ...........................................................................................................................39
Competitiveness hurts global econ.......................................... .....39
No Solvency – social forces key...............................................................................................................................40
No Solvency – social forces key....................................................40
READ A CASE SPECIFIC NO SOLVENCY CARD HERE IF YOU WANT TO..................................................41
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READ A CASE SPECIFIC NO SOLVENCY CARD HERE IF
YOU WANT TO............................................ ................................41
**Competitiveness doesn’t exist**...........................................................................................................................42
**Competitiveness doesn’t exist**..................................... ..........42
Competition not real, Global Market........................................................................................................................43
Competition not real, Global Market..........................................43
Idea of International Competition is Flawed, technology advances don’t trade-off.................................................43
Competition not Real, Global Market.........................................44
Notion of Competition is misleading, not zero-sum.................................................................................................44
Competition Isn’t Real, Global Market......................................45
Competition doesn’t exist, there is only a global pool of technology......................................................................45
Competitiveness doesn’t exist...................................................................................................................................46
Competitiveness doesn’t exist................................................. ......46
Competitiveness doesn’t exist...................................................................................................................................47
Competitiveness doesn’t exist................................................. ......47
**No Uniqueness**......................................... ..............................49
**No Uniqueness**......................................... ..............................49
Competitiveness =/= significant...............................................................................................................................51
Competitiveness =/= significant...................................................51
India and China not real Threat to Technological Leadership..................................................................................53
AT: Low Competitiveness hurts economy...................................54
Even if Competitiveness is low, it won’t hurt U.S. economy. We draw technological innovations from global pool
...................................................................................................................................................................................54
Euro can’t replace dollar...........................................................................................................................................55
Euro can’t replace dollar............................................ ..................55
**No Impact**.................................... ..........................................56
**No Impact**.................................... ..........................................56
Competitiveness No Impact................................................. .........57
Competitive nations don’t determine U.S. Economic Success.................................................................................57
**No Solvency**....................................................................... .....58
**No Solvency**....................................................................... .....58
Private Sector Solve Competitiveness Now.................................59
The Private Sector makes up for federal slack in research and development...........................................................59
Econ can’t solve for competitiveness.......................................................................................................................60
Econ can’t solve for competitiveness...........................................60
Low competitiveness =/= low econ..........................................................................................................................61
Low competitiveness =/= low econ...............................................61
Intervention bad........................................................................................................................................................62
Intervention bad.............................................................. ..............62
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**Other**..................................................... .................................64
**Other**..................................................... .................................64
Alt Causality ............................................................................................................................................................65
Alt Causality ............................................................ .....................65
Lower dollar = higher competitiveness....................................................................................................................66
Lower dollar = higher competitiveness.................................. ......66
Foreign loans =/= instability ....................................................................................................................................67
Foreign loans =/= instability ....................................... .................67
No Confidence Now.................................................................................................................................................68
No Confidence Now................................................................ .......68
Competitiveness bad Extentions...............................................................................................................................69
Competitiveness bad Extentions..................................................69
Competitiveness kills Japanese society....................................................................................................................71
Competitiveness kills Japanese society........................................71
zero sum = bad policy
...................................................................................................................................................................................72
....................................................................... .................................72
Competitiveness = bad policy...................................................................................................................................74
Competitiveness = bad policy...................................... .................74
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*************AFF*********
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**Competitiveness High**
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US Competitiveness High
The U.S. isn’t Losing Scientific Competitiveness
Titus Galama, PhD Physical Scientist at Rand Institute, and James Hosek, PhD Director of Forces and Resources
Policy Center, RAND National Security Research Division February 2008, U.S. Competitiveness In Science and
Technology, National Defense Research Institute, www.rand.org/pubs/monographs/2008/RAND_MG674.pdf
The United States accounts for 40 percent of total world R&D
spending and 38 percent of patented new technology inventions by
the industrialized nations of the Organization for Economic Cooperation

and Development (OECD), employs 37 percent (1.3 million)
of OECD researchers (FTE), produces 35 percent, 49 percent, and 63
percent, respectively, of total world publications, citations, and highly
cited publications, employs 70 percent of the world’s Nobel Prize winners
and 66 percent of its most-cited individuals, and is the home to
75 percent of both the world’s top 20 and top 40 universities and 58
percent of the top 100.
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U. S. Competitiveness High
U.S. research and development is Vibrant, success of competing

Nations don’t Undermine
High growth in R&D expenditures, patents, and S&E employment,

combined with continuing low unemployment of S&E workers,
suggest that U.S. S&E has remained vibrant. These signs do not support
the notion that jobs are being lost at substantial rates as a result
of the outsourcing and offshoring of S&T. U.S. gains in S&T occur
against a backdrop in which R&D expenditures, S&E employment,
and patents are also increasing in the EU-15, Japan, China, Korea,
and many other nations/regions. Studies of the offshoring of high-skill
work suggest that it does not result in job losses in the originating
country, as it is increasingly driven by the need to access scarce talent,
but rather that the overall number of jobs is increasing.
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US Competitiveness High
Research and Development funding High

However, most of the increase in federally funded basic research

was in the life sciences, whereas basic research funding for the physical
sciences was essentially flat. The allocation of federal R&D dollars
presumably was based on an assessment that the potential payoffs were
far higher in the life sciences than in the physical sciences, just as physical
sciences had received the major portion of federal R&D funds in
the decade after Sputnik. Still, taken as a whole, total basic research
and federally funded basic research have increased rapidly in real terms
(constant dollars) on average, by between 3 percent and 6 percent per
year for the last three decades.
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**Impact Extension**
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US Tech Leadership Impacts
Tech Advantage key to stop terrorism

In this report, we have focused primarily on U.S. competitiveness

in S&T, without considering the implications for national security.
Past research indicates that globalization of S&T complicates national
security: The United States is less capable of denying other nations
access to advanced technology to maintain a wide military capability
gap between itself and potential adversaries. Technological capability is
more widely diffused to potential competitors and may provide adversaries
with capability to pursue nontraditional strategies and tactics
on the battlefield or through insurgency and terrorism. Nevertheless,
past research concludes that attempts to regulate or limit the diffusion
of some (but not all) sensitive defense technology might have harmful
long-term consequences and might not even be beneficial in the short
term.
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**Brink Extensions**
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Competitiveness Brink
While US still technology leader, an easily be undermined

While the United States is still performing at or near the top in

many measures of S&T leadership, this leadership must not be taken
for granted. Institutions and incentives to foster the creation of new
S&T discoveries, the education and training of new generations of
S&T workers, the nurturing of academic and industrial research centers
of excellence, the protection of intellectual property, and, at the
same time, the production and dissemination of basic scientific discoveries
have all contributed to the unparalleled S&T leadership of the
United States. Such institutions need to be sustained and, as needed,
adapted to the global economy.
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Competitiveness Brink
Lack of Competitive attempt, puts U.S. on the brink of lost leadership

“The United States is in a fierce contest with other nations to

remain the world’s scientific leader,” opens a Business Roundtable
report, “But other countries are demonstrating a greater commitment
to building their brainpower” (Business Roundtable, 2005). A journalist
in U.S. News & World Report uses more colorful language: “Over
the past century, Americans have become accustomed to winning every
global battle that mattered. . . . It was nice while it lasted. Today . . . the
land of the free is slowly, but unmistakably, yielding advantages earned
over decades to foreigners who work harder, expect less, and often, are
better educated. . . . ‘Every one of the early warning signals is trending
downward,’ frets Intel Chairman Craig Barrett. ‘We’re all fat, dumb,
and happy, which is one reason why this is so insidious’” (Newman
2006)
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**Solvency Extension**
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Government Key to Competitiveness
Federal Support Key to Technological Innovation

In this environment, arguments run, responsibility for basic

research—often the wellspring of innovation—falls primarily to the
government: “It is from investment in basic science . . . that the most
valuable long-run dividends are realized. The government has a critical
role to play in this regard” (U.S. Commission on National Security/21st
Century, 2001). But here, according to those warning of a crisis, the
federal government has fallen woefully short. Unveiling the Innovation
Agenda, then Representative Nancy Pelosi admonished, “We are
allowing [our] commitment [to long-term research and development]
to falter. Our federal support of basic research peaked in 1987, and
has been flat or falling ever since” (Office of Congresswoman Nancy
Pelosi, 2005)
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**Tech Competition Good**
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Tech Competition Good
Foreign Tech Success Motivates United States and is Beneficial

A future in which a significant share of new technologies is

invented elsewhere will benefit the United States as long as it maintains
the capability to acquire and implement technologies invented abroad.
Technology is an essential factor of productivity, and the use of new
technology (whether it was invented in the United States or elsewhere)
can result in greater efficiency, economic growth, and higher living
standards. The impact of globalization on U.S. innovative activity is
less clear. On the one hand, significant innovation and R&D elsewhere
may increase foreign and domestic demand for U.S. research and innovation
if the United States keeps its comparative advantage in R&D.
On the other hand, the rise of populous, low-income countries may
threaten this comparative advantage in R&D in certain areas if such
countries develop the capacity and institutions necessary to apply new
technologies and have a well-educated, low-wage S&T labor force.
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**Uniqueness extensions**
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Policymaking Competitiveness
Policymakers must address decrease in science work force
Fundamental steps toward ensuring that the United States

continues to benefit from its strength in S&T are to sustain U.S.
leadership in basic and applied research and to keep salaries and
job conditions competitive so that the United States remains an
attractive place for the world’s scientists and engineers to live and
work. Regular monitoring and analysis of S&T performance and
the condition of the S&E workforce will provide timely, relevant,
objective information to policymakers to aid them in addressing
adverse trends and improving U.S. S&T.
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Globalization causes Competitiveness
Globalization causes rise of competitors and decrease Soft Power

First is that the effects of globalization—including the growing

strength of other nations in S&T—will make it much more difficult
in the future for the United States to maintain a leadership position in
S&T. Advocates of this viewpoint cite the quickly rising S&T capacity
of rival powers, the heightened competition presented by white-collar
workers in S&T in lower-wage countries, the ability for new technologies
and information to be rapidly transmitted around the globe, and
changes in the nature of innovation, which is increasingly driven by
private investment and international clusters of emerging tech firms,
capital markets, and research universities (e.g., Segal, 2004), rather
than by large corporate laboratories—such as Bell, GE, and IBM.
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US Competitiveness Low
Experts Agree United States is Lacking Innovation that is key to

global advantages
For decades, the United States has boasted the world’s leading system of
science and technology. The domestic building blocks that formed the
bedrock of this system were sturdy and stable. Now, however, experts
are worried that they are slowly, but steadily, crumbling. “[T]he committee
is deeply concerned that the scientific and technological building
blocks critical to our economic leadership are eroding at a time when
many other nations are gathering strength,” reads the central finding of
the National Academies of Sciences (2006) report. “The call is clear,”
the President’s Council of Advisors on S&T declares, “we must protect
and enhance the U.S. innovation ecosystem that has put our Nation in
the global economic leadership position it currently enjoys. . . . Unless
we take action to maintain our global advantages . . . we run the risk of
losing our competitive advantage. . . . [T]his issue . . . is of the utmost
importance and failure is not an option.” (President’s Council of Advisors
on Science and Technology, 2004)
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**Link Extentions**
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Competitiveness Politics Link
Pelosi believes U.S. Behind in technology Innovation

One vital component of a strong research infrastructure is ample funding.

Those who foresee an S&T crisis warn that the total funding needed
to maintain U.S. strength in S&T is falling into short supply. First, by
some accounts, federal funding in general has waned. “Independent scientific
research provides the foundation for innovation and future technologies,”
state Democratic policymakers in their Innovation Agenda
legislation, “but U.S. federal funding for research and development
has declined steadily over the last decade” (Office of Congresswoman
Nancy Pelosi, 2005). This trend, voices claim, weakens America’s ability
to compete in S&T: “If the United States does not invest significantly
more in public research and development, it will be eclipsed by others”
(U.S. Commission on National Security/21st Century, 2001)
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Competitiveness key to Economy
Lack of Technological Innovation leads to decrease in Workforce and

Collapse of Economy
But if U.S. leadership in science and technology weakens, the

United States is at risk of losing its comparative advantage in R&D.
The consequences of this will be felt in the R&D sector, with fewer
discoveries and innovations, lower wages and employment, less capital
investment, and less income resulting from patent licenses, and
will extend to the entire economy, with U.S. firms and workers losing
their technology-driven edge in productivity and hence at risk of losing
market share, employment, firm value, and worker wages. Freeman
(2006, 2007) argues that populous low income countries such as China
and India can compete with the United States in high tech by focusing
in a specific area and by having many science and engineering workers,
even though they are only a small fraction of their workforces.
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Competitiveness key to Economy/ National Security
Technology Leadership key to National Security and Economy
Thus, capability to innovate and adopt new technologies, including

those invented elsewhere, is crucial to the employment, sales, and
profitability of U.S. firms and hence to the U.S. economy and standard
of living. Science and technology have historically contributed significantly
not only to economic growth but also to well-being (improved
public health, longer life expectancy, better diagnoses and treatments of
many illnesses, etc.), standard of living (refrigerators, cars, iPods, etc.),
and national security (atomic bomb, radar, sonar, etc.). The strength of
the U.S. economy and military provide it with the foundation for its
global leadership. If claims of diminishing U.S. leadership in S&T are
true and its future ability to compete globally is in question, the prognosis
is indeed serious. S&T is directly linked not only to America’s
economic strength but also to its global strategic leadership.
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China/India Threat to Competitiveness
China and India threaten U.S. technological Leadership

An official statement from the National Summit on Competitiveness

calls attention to “the resources that other countries are pouring
into building their science and technology enterprises” (National
Summit on Competitiveness, 2005). China and India are the most
notorious examples of nations on the rise: “The major development
since the mid-1990s was the rapid emergence of Asian economies outside
of Japan as increasingly strong players in the world’s S&T system.
. . . China is growing at the most rapid pace. . . . Fragmentary data on
India suggest that it is also seeking rapid technological development”
(National Science Board, 2006a).
According to economist Richard Freeman, this does not bode
well for the United States: “[A]s China and India grow and join
Europe, Japan and other high-tech competitors, the U.S. scientific
advantage ‘is going down pretty rapidly and it’s going to continue to
fall’” (Farrell, 2006).
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China Threat to Competitiveness
China purposely undermines U.S. technological Leadership

Other nations/regions certainly have ambitions to strengthen their

competitiveness as knowledge-based economies. China and the European
Union (EU) are two examples. In January 2006, China initiated
a 15-year “Medium- to Long-Term Plan for the Development of Science
and Technology.” China aims to become an “innovation-oriented
society” by 2020 and a world leader in science and technology by 2050,
develop indigenous innovation capabilities, leap-frog1 into leading
positions in new science-based industries, increase R&D expenditures
to 2.5 percent of GDP by 2020 (from 1.34 percent in 2005), increase
the contribution to economic growth from technological advances to
60 percent, limit dependence on imported technology to 30 percent,
and become one of the top five countries in the world in the number of
patents granted (Cao, Suttmeier, and Simon, 2006).
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Patents Competitiveness Link
Patents are key to Technological Leadership
Patents are one of the most commonly used indicators

to measure innovative activity. Patents are used to protect
inventions by businesses and public research organizations by providing
the inventor with the exclusive right to exploit the invention commercially
and to exclude others from using it over a limited period
of time within the country where the application is made. Thus the
number of patents issued is a useful, albeit imperfect,8 indicator of the
output of research and development and of the commercial application
of new technologies.
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Competitiveness key to Research and Development Workforce
Lose of Technological leadership leads to decrease in research and

development workforce
As a result, runs this line of reasoning, American companies can

easily and profitably ship advanced R&D overseas: “U.S. corporations
are moving sophisticated design and R&D overseas to their own subsidiaries
abroad or contracting the work to third parties. . . . Data collected
by the Department of Commerce shows that the rate at which R&D
is shifting abroad has accelerated. . . . The continued shift of corporate
R&D to overseas is a threat to our economic prosperity and national
security” (Office of Senator Lieberman, 2004). A Seattle Times columnist
states that “[b]y 2010, some U.S. companies estimate that as much
as 90 percent of their research, development and manufacturing will be
done in China and India” (Peters, 2006).
In this new innovation environment, offshoring is not the only
problem. The concern is that foreign STEM professionals who might
have formerly lent their talents to American S&T may choose to return
home. Also, highly skilled American workers are being courted by
foreign and multinational companies and are moving overseas: “The
United States . . . used to be the first and last stop for the world’s finest
talent, in areas ranging from electronics to medicine to chemistry and
physics. . . . But as fast-growing foreign companies have begun to conquer
new markets, they have been luring away top managers and scientists
looking for exciting new challenges.” (Newman, 2006) Further,
“As global competition for technical talent intensifies . . . the United
States will have a difficult time meeting its skill needs. . . . [T]he pool
of high tech labor and, therefore, the capacity to innovate in the United
States becomes more limited, threatening long-term economic viability”
(Office of Senator Lieberman, 2004).
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Globalization cause Competitiveness
Globalization decrease U.S. Tech leadership

Freeman points out, populous low-income countries such as China and

India can compete with the United States in high tech by having many
S&T workers, even though they are only a small fraction of the workforce,
and by having a low wage advantage. Even if the developing
country has somewhat lower quality scientists and engineers or lacks
some research infrastructure resulting in less productive laboratories,
it can still have a cost advantage in research and development because
of the lower wages of scientists and engineers. Freeman reasons that
this threatens to undo the “North-South” pattern of trade, in which
advanced countries dominate high tech while developing countries
specialize in less-skilled manufacturing. Loss of comparative
advantage in the high-tech sector to a low wage competitor can substantially
harm an advanced country, as it has to shift resources to less desirable
sectors and the rents from new products or innovations shift from the
advanced to the poorer country.
Freeman argues that several indicators suggest that this form of
globalization threatens U.S. technological and economic leadership.
First, major high-tech firms are locating new research and development
facilities in China and India. Second, some forms of skilled work are
being offshored, such as information technology jobs to India. Third,
indices of technological prowess show a huge improvement in the technological
capability of China, in particular. Finally, data on production
and exports of high-tech products show that the improved capability of
China in high tech has begun to appear in production and sales in the
global market. Freeman recommends that the United States develop
new ways of monitoring and benefiting from scientific and technological
advances in other countries.
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****************NEG****************
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**Frontline**
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1NC Frontline
Foreign Nations Can’t compete with US
US won’t lose tech competitiveness, diffusion proves

As mentioned, a future in which significant innovation and R&D

takes place elsewhere may benefit the United States if it has the capability
to acquire and implement technologies invented abroad. In addition,
significant innovation and R&D elsewhere may increase foreign
and domestic demand for U.S. R&D if the United States keeps its
comparative advantage in R&D. It is not clear that the United States
would necessarily lose its innovation edge (which we broadly equate
with strong performance in S&T) as a result of the globalization of
R&D. Eaton and Kortum’s (2006) model of innovation, technology
diffusion, and trade suggests that as long as trade barriers are not too
high, faster diffusion shifts research activity toward the country that
does it better (i.e., the United States). This shift in research activity
raises the relative wage there. It can even mean that, with more diffusion,
the country better at research ends up with a larger share of technologies
in its exclusive domain. The potential gains from the diffusion
of technology depend on the size and productivity of the technology
sector. Eaton and Kortum’s (2006) model suggests that policies that
promote innovation, facilitate the diffusion of technology, support payment
for intellectual property, and deter piracy of intellectual property
are helpful.
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Tech =/= competitiveness
Technology is not key to competitiveness, potato chips prove
JAY BRYAN; THE GAZETTE, June 13, 1996, Nations' competitiveness is 'silly stuff' to economist
Krugman,
http://www.lexisnexis.com/us/lnacademic/results/docview/docview.do?docLinkInd=true&risb=21_T4245548
546&format=GNBFI&sort=RELEVANCE&startDocNo=1&resultsUrlKey=29_T4245517123&cisb=22_T42
45517122&treeMax=true&treeWidth=0&csi=8355&docNo=7
Krugman further points out that many of the boosters of national"competitiveness"seem to believe that
cutting-edge technologies are the only route to prosperity, although the evidence doesn't support this view.
For example, one popular U.S. slogan is that a competitive nation should focus on producing computer chips, not
potato chips. Actually, Krugman found, workers who make potato chips add more value on average than those who
make computer chips. One reason is that potato chips benefit from the extra profitability that goes with brand loyalty
while computer chips generally don't.
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Competitiveness promotes global growth
”International competitiveness” promotes global growth
Krugman,
"Silly stuff is not that rare in this world, especially silly stuff aimed at businessmen," Krugman said, but even
by the undemanding intellectual standards of business, the obsession with national competitiveness is an
"incredibly large-scale intellectual scam."
Setting aside that a nation is incalculably more complex than a corporation and that it doesn't go out of
business no matter how poor its export performance, Krugman pointed out that if other nations' economies
grow faster than that of Canada, this in no way impoverishes Canada.
Indeed, this foreign growth actually benefits Canada by offering an even bigger global market in which
Canadian companies can sell. What's more, if other countries grow faster because they devise cheaper or
better products than Canada now has, we benefit doubly because Canadian consumers can now buy those
products.
The big fallacy - that trade is a war in which one country must lose for another to win - brings with it a
number of smaller fallacies. One is the false notion that globalization means that low-wage countries are
becoming so "competitive" that they will quickly drag all wages down.
But Krugman notes that this assumption is based on the belief that workers in Singapore and Mexico will
soon be working with the same amount of sophisticated, expensive capital equipment and infrastructure as
North America, Europe and Japan, and this belief is false.
Net capital flows to all the world's emerging economic powers totals about $ 60 billion a year, which may
sound like a lot, but is in fact just 2 per cent of the $ 3 trillion invested annually in advanced countries.
For example, one popular U.S. slogan is that a competitive nation should focus on producing computer chips,
not potato chips. Actually, Krugman found, workers who make potato chips add more value on average than
those who make computer chips. One reason is that potato chips benefit from the extra profitability that goes
with brand loyalty while computer chips generally don't.
Does this mean that government policies have no impact whatever on a nation's economic well-being? Of
course not.
Governments can substantially help business in many ways, through sensible policies on interest rates, taxation and
education, among other examples. But Krugman's point is that these things would be helpful even if there were no
such thing as international trade. That's because nations don't really compete; they simply govern themselves well or
badly.
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Competitiveness hurts global econ
International competitiveness theory is the greatest threat to the continued growth of

integrated global economy.
Greg Ip, senior special writer for The Wall Street Journal, The Financial Post, 3-13- 1993,
Economist blasts 'competitiveness'
http://www.lexisnexis.com/us/lnacademic/results/docview/docview.do?docLinkInd=true&r
isb=21_T4244914205&format=GNBFI&sort=RELEVANCE&startDocNo=1&resultsUrlK
ey=29_T4244914208&cisb=22_T4244914207&treeMax=true&treeWidth=0&csi=10882&
docNo=1
The doctrine of ''international competitiveness'' that governments, business and academics have seized upon
is misguided and dangerous, one of the world's most prominent trade economists says.
''The greatest threat to the continued growth of the integrated global economy is the misperception that what
we have is a competitive race with a limited number of prizes,'' Paul Krugman told the Canadian Graduate
Business Conference in Toronto Friday.
The competitiveness doctrine thinks countries compete like companies and end up winners or losers, said
Krugman, an economics professor at the Massachusetts Institute of Technology, one of the founding
academics of ''new trade theory'' and an influential academic in Democractic Party circles.
''To what extent is country A's gain country B's loss? Very little. You ought to cringe when you hear
'international competitiveness.' It doesn't exist as a meaningful concept.''
Krugman said competitiveness fits neither classical trade theory, which holds countries are endowed with a
comparative advantage that makes trade mutually beneficial regardless of productivity differences, nor new
trade theory that suggests mere chance can influence trade patterns.
Competitiveness advocates, among whom Krugman includes U.S. Labor Secretary Robert Reich, usually
argue a country should compete by becoming more productive and promoting high-value industries with
well-paying jobs, Krugman said.
They believe there are good sectors and bad sectors, that manufacturing should be promoted, particularly
''sunrise, high-value industries.''
But he said in supposedly strategic industries like aerospace, value added per worker is only US$68,000 and
in electronics it's only US$64,000, while in mundane industries like cigarettes it's US$488,000 and in
petroleum it's US$284,000.
Krugman said competitiveness may create ''a tendency to protect or subsidize industries, to adopt a confrontational
attitude in trade policy where it isn't necessary.''
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No Solvency – social forces key
Social forces key to competitiveness

Michael Schrage, columnist for the Los Angeles Times, The Washington Post, 3-11-1994,
To an MIT Maven, 'Competitiveness' Is Just Clinton's Voodoo Economics,
ey=29_T4244914208&cisb=22_T4244914207&treeMax=true&treeWidth=0&csi=8075&d
ocNo=2
In fact, Krugman's analyses of competitiveness do not address the underlying dynamics of innovation,
evolving business practices or the changing culture of economic enterprises. He is simply looking at the
outputs based on rigorous econometric analysis. In fact, he freely acknowledges that the social forces
underlying productivity may well be far more important than any economic policy he and his brethren might
devise.
"It's fascinating," says Krugman. "I believe that sociology is more important than economics. I just don't
know how to do it."
So, in the wake of Krugman's unambiguous numbers, expect the competitiveness debate in the 1990s to shift from
the economic battlefield to the social battlefield. A White House Council of Sociological Advisers, anyone?
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READ A CASE SPECIFIC NO SOLVENCY CARD HERE IF YOU WANT
TO.
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**Competitiveness doesn’t exist**
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Competition not real, Global Market
Idea of International Competition is Flawed, technology advances

don’t trade-off
In work published over a decade ago, economist Paul Krugman

questions whether the notion of competition in S&T is even relevant.
He argues that the idea that nations “compete” is incorrect; countries
are not like corporations and “are [not] to any important degree
in economic competition with each other” (Krugman, 1994). Major
industrial nations sell products that compete with each other, yet these
nations are also each other’s main export markets and each other’s
main suppliers of useful imports. More broadly, international trade is
not a zero-sum game. For example, if the European economy does well,
this helps the United States by providing it with larger markets and
goods of superior quality at lower prices. Further, he argues that the
growth rate of U.S. living standards essentially equals the growth rate
of domestic productivity, not U.S. productivity relative to competitors;
and enhancing domestic productivity is in the hands of Americans,
not foreigners. Part of the reason for this, Krugman argues, is that the
world is not as interdependent as one would think: 90 percent of the
U.S. economy consists of goods and services produced for domestic
use, i.e., produced by Americans, for Americans. But this is not to deny
the importance of technological progress, and beneath it, science and
technology, as a determinant of economic progress and improvement
in the standard of living.
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Competition not Real, Global Market
Notion of Competition is misleading, not zero-sum

Given the complexity of the problem, economists and policymakers

do not know what the “right” amount of effort and investment in S&T
is for a nation; at a minimum, we can compare the United States with
other nations to learn how much they have chosen to invest and with
what results, and reflect on that in considering how much the United
States should invest. The comparison with other countries is made from
this perspective and not from the viewpoint of competition between
nations in S&T, which is the more common motivation for such comparisons.
As we discussed earlier, the notion of competition can be misleading
when applied to a comparison of countries. Neither international
trade nor S&T progress is a zero-sum game, and improvement in
one country does not necessarily imply a loss for another country.
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Competition Isn’t Real, Global Market
Competition doesn’t exist, there is only a global pool of technology

Such new foreign R&D centers can accelerate innovation and

increase the pool of new technology. As other countries increase their
capability to innovate and conduct R&D, the global pool of technology
will increase, technology will diffuse, and countries that are
capable of acquiring and implementing such technology will do so.
Technology is a major determinant of productivity, and the increased
diffusion of technology that accompanies globalization and increased
trade can enable both developed and developing nations to increase
productivity and hence economic growth relative to a world with less
trade and diffusion. The increased global pool of technology can also
help in addressing social issues that are global in scope, such as preventing
disease, improving health care, increasing the supply of food, and
solving environmental problems.
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Competitiveness doesn’t exist
”International competitiveness” promotes global growth

Krugman,
"Silly stuff is not that rare in this world, especially silly stuff aimed at businessmen," Krugman said, but even
by the undemanding intellectual standards of business, the obsession with national competitiveness is an
"incredibly large-scale intellectual scam."
Setting aside that a nation is incalculably more complex than a corporation and that it doesn't go out of
business no matter how poor its export performance, Krugman pointed out that if other nations' economies
grow faster than that of Canada, this in no way impoverishes Canada.
Indeed, this foreign growth actually benefits Canada by offering an even bigger global market in which
Canadian companies can sell. What's more, if other countries grow faster because they devise cheaper or
better products than Canada now has, we benefit doubly because Canadian consumers can now buy those
products.
The big fallacy - that trade is a war in which one country must lose for another to win - brings with it a
number of smaller fallacies. One is the false notion that globalization means that low-wage countries are
becoming so "competitive" that they will quickly drag all wages down.
But Krugman notes that this assumption is based on the belief that workers in Singapore and Mexico will
soon be working with the same amount of sophisticated, expensive capital equipment and infrastructure as
North America, Europe and Japan, and this belief is false.
Net capital flows to all the world's emerging economic powers totals about $ 60 billion a year, which may
sound like a lot, but is in fact just 2 per cent of the $ 3 trillion invested annually in advanced countries.
For example, one popular U.S. slogan is that a competitive nation should focus on producing computer chips,
not potato chips. Actually, Krugman found, workers who make potato chips add more value on average than
those who make computer chips. One reason is that potato chips benefit from the extra profitability that goes
with brand loyalty while computer chips generally don't.
Does this mean that government policies have no impact whatever on a nation's economic well-being? Of
course not.
Governments can substantially help business in many ways, through sensible policies on interest rates, taxation and
education, among other examples. But Krugman's point is that these things would be helpful even if there were no
such thing as international trade. That's because nations don't really compete; they simply govern themselves well or
badly.
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Paul Krugman, professor of Economics and International Affairs at Princeton University,
From Foreign Affairs, March/April 1994, Competitiveness: A Dangerous Obsession
http://infoshako.sk.tsukuba.ac.jp/~takasaki/Teaching_U/IEU/Krugman(1994).pdf
THE THRILL OF COMPETITION
THE COMPETITIVE metaphor -- the image of countries competing with each other in world
markets in the same way that corporations do -- derives much of its attractiveness from its
seeming comprehensibility. Tell a group of businessmen that a country is like a corporation writ
large, and you give them the comfort of feeling that they already understand the basics. Try to tell
them about economic concepts like comparative advantage, and you are asking them to learn
something new. It should not be surprising if many prefer a doctrine that offers the gain of
apparent sophistication without the pain of hard thinking. The rhetoric of competitiveness has
become so wide-spread, however, for three deeper reasons.
First, competitive images are exciting, and thrills sell tickets. The subtitle of Lester Thurow's huge
best-seller, Head to Head, is "The Coming Economic Battle among Japan, Europe, and America";
the jacket proclaims that "the decisive war of the century has begun . . . and America may already
have decided to lose." Suppose that the subtitle had described the real situation: "The coming
struggle in which each big economy will succeed or fail based on its own efforts, pretty much
independently of how well the others do." Would Thurow have sold a tenth as many books?
Second, the idea that U.S. economic difficulties hinge crucially on our failures in international
competition somewhat paradoxically makes those difficulties seem easier to solve. The
productivity of the average American worker is determined by a complex array of factors, most of
them unreachable by any likely government policy. So if you accept the reality that our
"competitive" problem is really a domestic productivity problem pure and simple, you are unlikely
to be optimistic about any dramatic turnaround. But if you can convince yourself that the problem
is really one of failures in international competition that -- imports are pushing workers out of highwage
jobs, or subsidized foreign competition is driving the United States out of the high valueadded
sectors -- then the answers to economic malaise may seem to you to involve simple things
like subsidizing high technology and being tough on Japan.
Finally, many of the world's leaders have found the competitive metaphor extremely useful as a
political device. The rhetoric of competitiveness turns out to provide a good way either to justify
hard choices or to avoid them. The example of Delors in Copenhagen shows the usefulness of
competitive metaphors as an evasion. Delors had to say something at the Ec summit; yet to say
anything that addressed the real roots of European unemployment would have involved huge
political risks. By turning the discussion to essentially irrelevant but plausible-sounding questions
of competitiveness, he bought himself some time to come up with a better answer (which to some
extent he provided in December's white paper on the European economy -- a paper that still,
however, retained "competitiveness" in its rifle).
By contrast, the well-received presentation of Bill Clinton's initial economic program in February
1993 showed the usefulness of competitive rhetoric as a motivation for tough policies. Clinton
proposed a set of painful spending cuts and tax increases to reduce the Federal deficit. Why?
The real reasons for cutting the deficit are disappointingly undramatic: the deficit siphons off
funds that might otherwise have been productively invested, and thereby exerts a steady if small
drag on U.S. economic growth. But Clinton was able instead to offer a stirring patriotic appeal,
calling on the nation to act now in order to make the economy competitive in the global markets
with the implication that dire economic consequences would follow if the United States does not.
Many people who know that "competitiveness" is a largely meaningless concept have been
willing to indulge competitive rhetoric precisely because they believe they can harness it in the
service of good policies. An overblown fear of the Soviet Union was used in the 1950s to justify
the building of the interstate highway system and the expansion of math and science education.
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Cannot the unjustified fears about foreign competition similarly be turned to good, used to justify
serious efforts to reduce the budget deficit, rebuild infrastructure, and so on?
A few years ago this was a reasonable hope. At this point, however, the obsession with
competitiveness has reached the point where it has already begun dangerously to distort
economic policies.
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**No Uniqueness**
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Competitiveness =/= significant
Industries relating to international competitiveness are not significant
ocNo=2
Krugman takes no economic prisoners. He apologizes for what he says was an out-of-context quote
criticizing Tyson in the New York Times and in the next breath statistically demolishes a competitiveness
argument Tyson recently put forward in the Wall Street Journal.
"Laura Tyson had an article about expanding the Japanese market for American goods," recounts Krugman,
"so that we'd have not just more jobs but better jobs. She said, at best, we could sell another $ 20 billion
annually. Now, let's suppose all of these new jobs are high-tech. We know that average value-added for these
jobs is about $ 80,000 per year.
"With that volume of trade, we're talking about creating 250,000 high-tech jobs [as opposed to non-high-tech
jobs]. In essence, we're talking about giving 250,000 people an extra $ 6,000 a year. That's just over $ 1.5
billion a year. A billion and a half dollars a year is 1/40th of a percent of GNP.
"So," Krugman concludes, "if we get everything we want from trade in Japan, we will get an increase of
1/40th of 1 percent in our national income. Now, suppose I'm wrong at each stage of my calculation by a
factor of 2. We're still only talking about one-tenth of 1 percent of GNP. Is that what we really want in our
relationship with Japan? What's so shocking about 'competitiveness' is, when you go beyond the rhetoric and
see what's at stake, you find the stakes are absurdly low."
The clear policy implication?
"I think we should talk about the productivity of the whole U.S. economy," says Krugman, "not just the parts
of the economy that happen to be in competition with foreign rivals." This administration's focus on global
competitiveness, he fears, is undermining the far more vital issue of stimulating productivity.
"Where I disagree with Paul Krugman is that the international reference point is really important," maintains the
Competitiveness Council's Burton. "To ignore the impact of the quality movement, the push toward lean
manufacturing and reduced cycle times is to underestimate competitiveness's profound impact on American
business... . Reducing it to numbers is to miss the point. Adjusting to world markets is how a lot of American
enterprises are getting organized."
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**No Link**
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India/China Not threat to Leadership
India and China not real Threat to Technological Leadership

Among scientifically proficient nations, China will fall below

these top seven countries; however, it will lead the group of scientifically
proficient nations, with a high level of S&T capacity and many
drivers. India, Poland (representing Eastern Europe), and Russia—the
other three scientifically proficient countries—will be less capable than
China of implementing the applications they can acquire. In these
countries, although the S&T capacity will be high, in the authors’ estimation
the number of barriers will slightly exceed the number of drivers,
making it more difficult to introduce and sustain the full range of
possible technology applications.
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AT: Low Competitiveness hurts economy
Even if Competitiveness is low, it won’t hurt U.S. economy. We draw

technological innovations from global pool
The large and increasing foreign share of S&E degrees suggests

that, while S&E degrees have grown in line with other degrees, S&E
careers have become less attractive to U.S. citizens, or, alternatively, that
U.S. citizens who apply to S&E academic programs have become less
attractive relative to the foreigners who apply and so are less likely to be
admitted (or admitted with aid). The latter possibility suggests that the
United States is drawing from an international rather than domestic
pool of talent, and, as we discuss below, many of these foreign students
find work in the United States after graduation, thereby supplying top
talent to the S&E workforce. We discuss the United States’ ability to
retain foreign S&E talent further near the end of this section.
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Euro can’t replace dollar
Euro can’t replace the USD, at least, not before food and gas prices soar / No fiat currency can solve if the
USD loses confidence, gold standard inevitable
Alex Stanczyk, editor of Your Financial Future and CEO of a Publicly Traded US Company, 7-26-
2008 “The Domino Effect: When Foreign Capital Stops, Do the Lights Go Out?”
http://www.istockanalyst.com/article/viewarticle%20articleid_2439127.html
I have written on several occasions in the past in regards to how the US is currently “borrowing” up to $2
billion a day to keep the government running. I have also suspected, that when the foreign funding stops, our
government and financial system will run a real risk of hyperinflation.
Today, we find ourselves one step closer to the funding stopping. The day that the world loses final
confidence in the credit worthiness of the US, is the day foreign governments stop buying US paper
instruments.
When China and other major trade partners make this decision, be prepared for a huge slide in dollar value,
and many overseas USD coming back to US shores. The effects of this will be higher food and gas prices,
and higher prices of all commodities for not just Americans, but people the world over as dollar denominated
goods that are required for basic life will see dollars flood into those markets. There are Trillions of USD
now currently held in national reserves of China, Opec, Japan, Russia. The time will come when the holders
of those reserves will no longer be willing to sit on them and watch them burn as the dollar devalues at 12%-
18% a year.
Governments the world over will be looking for a safe harbor as the value of USD plummets. They will likely turn
first to the Euro, but over time as they realize it has no true strength behind it, and that it is just one more fiat
currency, may eventually find their way back to gold.
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**No Impact**
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Competitiveness No Impact
Competitive nations don’t determine U.S. Economic Success

There is no reason to believe that the globalization of S&T and

the rise of other nations affects the capability of the United States to
absorb and apply new technology directly, as this capability is to a large
extent determined by business incentives, consumers’ willingness to
try new technologies, and the legal and regulatory framework. Some
technology applications may not require much S&T capacity, or much
knowledge of S&T within the user community or the general public.
For example, solar collectors or filters for water purification can significantly
enhance the productivity of workers in a developing country
without the need for workers to understand their workings.
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**No Solvency**
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Private Sector Solve Competitiveness Now
The Private Sector makes up for federal slack in research and

development
On first glance, the private sector has seemingly picked up some of

the slack. A report of the Task Force on the Future of American Innovation
(2005) observes that “U.S. private sector investment in R&D
now far exceeds federal investment in R&D, providing over 68 percent
of all R&D.” But that change is not without considerable problems.
“Private funding tends to cycle with business patterns and focus on
short-term results” (Task Force on the Future of American Innovation,
2005), causing companies to favor development over basic research.
Increasingly, notes Senator Joseph Lieberman, “R&D activities conducted
in private industry largely consist of the development phase of
innovation. For example, in 2000, 71 percent of the industrial R&D
funds were used to develop products and services rather than conduct
basic research” (Office of Senator Lieberman, 2004).
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Econ can’t solve for competitiveness
Social forces key to competitiveness, not economics policies

ocNo=2
In fact, Krugman's analyses of competitiveness do not address the underlying dynamics of innovation,
evolving business practices or the changing culture of economic enterprises. He is simply looking at the
outputs based on rigorous econometric analysis. In fact, he freely acknowledges that the social forces
underlying productivity may well be far more important than any economic policy he and his brethren might
devise.
"It's fascinating," says Krugman. "I believe that sociology is more important than economics. I just don't
know how to do it."
So, in the wake of Krugman's unambiguous numbers, expect the competitiveness debate in the 1990s to shift from
the economic battlefield to the social battlefield. A White House Council of Sociological Advisers, anyone?
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Low competitiveness =/= low econ
Economic Woes can’t be attributed to loss of competitiveness

http://www.foreignaffairs.org/19940301faessay5094/paul-krugman/competitiveness-a-
dangerous-obsession.html
Summary: The view that nations compete against each other like big corporations has become pervasive
among Western elites, many of whom are in the Clinton administration. As a practical matter, however, the
doctrine of ?competitiveness? is flatly wrong. The world?s leading nations are not, to any important degree,
in economic competition with each other. Nor can their major economic woes be attributed to ?losing? on
world markets. This is particularly true in the case of the United States. Yet Clinton?s theorists of
competitiveness, from Laura D. Andrea Tyson to Robert Reich to Ira Magaziner, make seemingly
sophisticated arguments, most of which are supported by careless arithmetic and sloppy research.
Competitiveness is a seductive idea, promising easy answers to complex problems. But the result of this
obsession is misallocated resources, trade frictions and bad domestic economic policies.
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Intervention bad
Eurozone about to bust, emp proven / efforts to stabilize prices hurts economies
Edward Chancellor, The Financial Times, 7-27-2008 “Central banks’ policies can wreak havoc: The pursuit
of price stability by central bankers around the world lies at the root of the current financial crisis.”
The trouble isn’t with stable prices in themselves. Rampant inflation is an obvious curse. And a deflationary
bust is a very painful thing. Rather, it comes from the attempt by the monetary authorities to achieve price
stability in the face of countervailing forces. This policy led to the US and UK housing bubbles. It is now
threatening to wreak destruction on certain countries in the Eurozone.
Economists and central bankers generally associate falling prices with the Great Depression and Japan’s
lingering economic malaise. As a result, they seek at all times to prevent the general price level from
declining. This is misguided. There are times when the economy benefits from improvements to the supply
side. Technological advances, rising productivity and the removal of impediments to global trade all
constitute supply shocks. If left to their own devices, they also lead to falling prices. The public has nothing
to fear from this outcome. In fact, people are better off when consumer prices decline because their
purchasing power is enhanced.
Nevertheless, central bankers resist the “good deflation” by lowering interest rates. This policy has
unintended consequences. Low interest rates induce people to spend more and save less. They also send a
signal to firms to raise their level of investment. As a result, a credit boom develops and asset prices start to
inflate.
Over time, the boom puts pressure on scarce resources and prices start to rise. The central bank is forced
belatedly to raise rates. Later, it becomes apparent that there has been over-investment in certain areas of the
economy.
When the good times end, households and companies find themselves left with too much debt relative to
their incomes. Defaults erode banks’ capital and bankruptcies soar. Both borrowers and lenders become more
risk averse and less willing to transact. As the credit crunch worsens, the money supply contracts and prices
start to fall.
This is the “bad deflation”, or more properly the “debt deflation” to use Irving Fisher’s phrase. However, this
deflation doesn’t appear out of the blue. As we have seen, it follows directly from the central bank’s attempt
to stop prices from falling during the preceding boom.
There is nothing new in this analysis. Several years before the Great Crash of 1929, the Austrian economist
(and future Nobel laureate) Friedrich Hayek argued that the Federal Reserve’s pursuit of price stability had
created a credit bubble that would end in disaster. More recently, officials at the Bank of Japan have
acknowledged their responsibility for creating the bubble economy of the 1980s. Inflation was quiescent at
the time, so the BoJ kept interest rates low and allowed bank credit to escalate and property prices to soar.
Once again debt deflation appeared after Japanese banks suffered enormous losses while companies and
consumers became reluctant to borrow.
The last decade or so has witnessed another powerful supply shock, which followed from the information
revolution and the growing role of China and India in the global economy.
Yet prices weren’t allowed to fall. Instead, the Fed under Alan Greenspan responded to the decline in
inflation by keeping interest rates lower than otherwise.
This policy resulted in the tech bubble and later the US housing bubble. If the Bernanke Fed wasn’t doing
everything in its power to shore up the financial system, the US would face a severe debt deflation.
The Federal Reserve isn’t the only culprit among central banks. The Bank of England has been shackled with
an inflation target since achieving independence in 1997.
While inflation remained in check earlier this decade, UK interest rates were kept low. Consumer debt soared
and house prices climbed far higher than in the US. Britain now faces a painful hangover from its housing
bust.
The Fed, at least, has a dual mandate to seek to achieve both stable prices and economic growth. The
European Central Bank has a narrower focus. Its primary aim is to achieve price stability. The ECB’s
monetary policy has inflated several housing bubbles this decade. Irish house prices nearly tripled over the
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last decade, while Spanish homes more than doubled. In both countries, there was substantial over-building.
Now the Irish and Spanish economies are on the verge of collapse.
They can expect no succour from the ECB, whose governor Jean-Claude Trichet, reiterating his commitment
to head off inflation across the Eurozone, raised rates in early July. In recent years, both Irish and Spanish
labour costs have risen relative to German costs. They face a painful squeeze.
Not for the first time, a central bank’s mistaken pursuit of price stability threatens to end with a bad case of debt
deflation.
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**Other**
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Alt Causality
Society reform is key to Japan recovering from economic disaster
By Michiyo Nakamoto, July 9 2008, Poverty widens the crack in Japan’s façade,
http://www.ft.com/cms/s/0/b35f70e2-4dcc-11dd-820e-000077b07658.html
There is growing concern that spreading poverty is leading to an increase in suicide, crime and the divorce
rate and even aggravating Japan’s falling birth rate. “Poverty is not just a situation of low wages but isolation
from society, from family, friends and workplace,” says Tsuyoshi Takagi, president of the Japanese Trade
Union Confederation. “Japan’s silent public is reaching the limit [of its patience],” he says.
As public frustration has grown, the finger is being pointed at past policies of deregulation, particularly of the
labour market. There are calls for tighter regulation, higher taxes on the rich and a redistribution of wealth. In
a bid to placate a worried public, the government has responded with plans to ban – in principle – the
contracting of unskilled day labourers.
But in an era of global competition, turning back the clock on labour reforms would be a simplistic response
to a complex problem. A labour contract based on lifetime employment and seniority, coupled with
companies hiring straight out of college, rewards those already in the system with stable employment, pay
and benefits, no matter how unproductive they may be, says Naohiro Yashiro, professor of labour economics
at the International Christian University. It also penalises those who have slipped through the cracks,
regardless of their potential.
Many of the working poor are those who, having failed to secure a place within the system to begin with,
become destitute as they grow older and their chances of finding even part-time work decrease. Many
freeters, for example, cannot find full-time work because Japanese companies are reluctant to hire anyone
who has not been in stable employment. The system also discourages much-needed venture businesses, since
the opportunity costs for anyone who dares opt out of it are prohibitively high, Prof Yashiro says.
Japan, no doubt, needs to rebuild its social safety net, with greater security for its ageing population and measures to
improve conditions for those outside the regular workforce. But unless Japan can also find a way to promote labour
mobility and allow those who have fallen out of the employment system to come back in, it may not be too far-
fetched to conceive of the social unrest witnessed in Nishinari spreading to other parts of the country.
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Lower dollar = higher competitiveness
A weakening dollar, makes American goods more competitive and boosts employment
Alex Stanczyk, editor of Your Financial Future and CEO of a Publicly Traded US Company, Duncan Cameron,
precious metals analyst, Affiliate of Anglo Far-East Bullion Company, and an accomplished businessman, writer,
public speaker, and investor, 10-8-2007, “Charge-it America”, http://www.rapidtrends.com/blog/2007/10/08/charge-
it-america/ blog
Meanwhile, our weak dollar supposedly makes American goods more competitive and keeps employment here
strong as we export products and services to dollar-laden customers. In any case, despite European trade surpluses in
the last few years, the U.S. economy has outperformed the European Union’s, and our standard of living remains
much higher.
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Foreign loans =/= instability
Foreign loans does not cause instability
Alex Stanczyk, editor of Your Financial Future and CEO of a Publicly Traded US Company, Duncan Cameron,
precious metals analyst, Affiliate of Anglo Far-East Bullion Company, and an accomplished businessman, writer,
public speaker, and investor, 10-8-2007, “Charge-it America”, http://www.rapidtrends.com/blog/2007/10/08/charge-
it-america/ blog
The annual budget deficit is shrinking but still will come in this fiscal year at about $160 billion. Economists
and government officials, of course, attempt to explain away all this red ink. Creditor nations, they remind
us, simply lend us back money at relatively cheap interest to keep buying their goods. So they can’t really
call in their debts without ruining their own best market.
Where else will Japan and China bank their profits but in the politically stable, transparent and honest United States
— an atoll of security in a world of political upheaval and corruption — in Africa, Latin America and Asia?
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No Confidence Now
US investor confidence low now.
Jamil Anderlini, Charles Clover, Krishna Guha, Kathrin Hille, Song Jung-a, Michiyo
Nakamoto, James Politi, Saskia Scholtes and Henny Sender, The Financial Times, 7- 24- 2008
“The Credit Rating of America: Steps taken to calm investor fears over agency debt”
http://www.ft.com/cms/s/0/1abb233e-5918-11dd-a093-000077b07658.html
Last Thursday the Kuwait Investment Authority, the world’s sixth-biggest sovereign wealth fund, received a
call from the US embassy to reassure them that bonds issued by Fannie Mae and Freddie Mac were sound,
according to one person with knowledge of the matter. The call came after Kuwait’s minister of finance
announced that the KIA was not planning to invest in their debt in future.
The Treasury was unable to comment on the specific episode but said US officials had been in contact with
other governments throughout the market turmoil as part of their regular responsibilities.
“This certainly includes providing information on the steps we’ve proposed to provide temporary authorities
to give confidence to markets and create a strong, independent regulator for the government-sponsored
enterprises (GSEs),” said the Treasury.
Foreign investors - particularly in Asia and Russia - have been among the biggest buyers of so-called agency
debt, which they viewed as a safe investment. In recent years this debt served as an important conduit for
recycling global trade and petrodollar surpluses into US housing investment.
A key objective of the rescue plan winding its way through Congress is to calm global nerves shaken by the
plunge in Fannie and Freddie stock prices. The plan appears to be succeeding for now, but an undercurrent of
unease remains.
“Two weeks ago there was nothing more stable than Fannie Mae and Freddie Mac. These were not
considered risky assets. In the last 1½ weeks we have seen this view corrected,” Alexander Vinokurov, chief
executive of Kit Finance, a Russian investment bank, told the Financial Times.
Executives at many sovereign wealth funds believe the Federal Reserve and US Treasury have lost credibility
with international investors in recent months.
If foreign governments were to scale back their buying of GSE paper, even at the margin, it could have a
significant effect on US mortgage rates.
A senior Fed official told the FT: “Central banks are asking themselves, ‘Where is the upside?’ They are
increasingly thinking about and questioning the size of their holdings and the rationale behind those
holdings.”
Still, most financial officials contacted said they were reassured by the strengthened promise of government
support for Fannie and Freddie. Chinese officials and government economists said Beijing was satisfied with
the moves to prop up the agencies. China may hold as much as $400bn to $600bn in Fannie and Freddie debt,
most of which is held by the State Administration of Foreign Exchange.
Bank of China has an estimated $20bn in Fannie and Freddie debt, according to investment bank CLSA. Li
Lihui, the bank’s president, said the bank “will be able to fully manage the risks related to this matter”.
Kang Sung-kyung, head of the Bank of Korea’s reserves management planning team, said: “We don’t think
that we are exposed to big credit risks with our investment in the agency papers.”
Meanwhile in Japan the Financial Services Agency denied reports that it was discouraging banks from
investing in Fannie and Freddie debt.
“Generally speaking, we have been encouraging banks not to invest in products simply on the basis of a triple A
rating, but we do not tell financial institutions what they should or should not invest in,” an FSA representative told
the FT.
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Competitiveness bad Extentions
Competitiveness wastes resources

During the 1950s, fear of the Soviet Union induced the U.S. goverment to spend money on useful
things like highways and science education. It also, however, led to considerable spending on
more doubtful items like bomb shelters. The most obvious if least worrisome danger of the
growing obsession with competitiveness is that it might lead to a similar misallocation of
resources. To take an example, recent guidelines for government research funding have stressed
the importance of supporting research that can improve U.S. international competitiveness. This
exerts at least some bias toward inventions that can help manufacturing firms, which generally
compete on international markets, rather than service producers, which generally do not. Yet
most of our employment and value-added is now in services, and lagging productivity in services
rather than manufactures has been the single most important factor in the stagnation of U.S.
living standards.
Competitiveness causes trade conflict

A much more serious risk is that the obsession with competitiveness will lead to trade conflict,
perhaps even to a world trade war. Most of those who have preached the doctrine of
competitiveness have not been old-fashioned protectionists. They want their countries to win the
global trade game, not drop out. But what if, despite its best efforts, a country does not seem to
be winning, or lacks confidence that it can? Then the competitive diagnosis inevitably suggests
that to close the borders is better than to risk having foreigners take away high-wage jobs and
high-value sectors. At the very least, the focus on the supposedly competitive nature of
international economic relations greases the rails for those who want confrontational if not frankly
protectionist policies.
We can already see this process at work, in both the United States and Europe. In the United
States, it was remarkable how quickly the sophisticated interventionist arguments advanced by
Laura Tyson in her published work gave way to the simple-minded claim by U.S. Trade
Representative Mickey Kantor that Japan's bilateral trade surplus was costing the United States
millions of jobs. And the trade rhetoric of President Clinton, who stresses the supposed creation
of high-wage jobs rather than the gains from specialization, left his administration in a weak
position when it tried to argue with the claims of NAFTA foes that competition from cheap
Mexican labor will destroy the U.S. manufacturing base.
Competitiveness causes bad policy

Perhaps the most serious risk from the obsession with competitiveness, however, is its subtle
indirect effect on the quality of economic discussion and policymaking. If top government officials
are strongly committed to a particular economic doctrine, their commitment inevitably sets the
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tone for policy-making on all issues, even those which may seem to have nothing to do with that
doctrine. And if an economic doctrine is flatly, completely and demonstrably wrong, the insistence
that discussion adhere to that doctrine inevitably blurs the focus and diminishes the quality of
policy discussion across a broad range of issues, including some that are very far from trade
policy per se.
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Competitiveness kills Japanese society
Global competitiveness is destroying Japanese society
By Michiyo Nakamoto, July 9 2008, Poverty widens the crack in Japan’s façade,
http://www.ft.com/cms/s/0/b35f70e2-4dcc-11dd-820e-000077b07658.html
Not long before representatives of the world’s richest nations convened in Toyako for the glitziest event in
the history of this remote Japanese fishing community, a very different scene unfolded just a few hundred
kilometres south. Angry day labourers in Nishinari, Osaka, threw stones and firebombs at riot police,
overturned a car and set fire to garbage, venting their frustration at their inability to find work.
The violence, which involved an estimated 200 people and went on for two days last month, was a long way
from the serene facade that Japanese society normally presents to the world. But the riots were just one
extreme manifestation of the social cracks that are appearing in a country that has often, if half-jokingly, been
referred to as the world’s most successful socialist state.
Following more than a decade of economic stagnation, Japan is no longer the gentle place it used to be for
the weaker members of its society.
In a relatively short time, the world’s second largest economy has been transformed from a cohesive,
egalitarian society to one saddled with the ills of the neo-liberalist model: a growing underclass, social
alienation, widening income disparities and simmering discontent. The country’s once-vaunted social and
labour contracts have failed to keep up with the changes wrought by globalisation, leaving a large number of
people barely managing to survive.
Although unemployment in Japan, at about 4 per cent, is by no means high, the number of so-called
“working poor”, who earn less than Y2m ($18,600, €11,800, £9,400) annually – a level considered to be
close to, if not at, the poverty line – has risen at an alarming rate. In 1997, 5m workers fell in that category
but by last year the number had doubled to 10m, according to a government survey.
The rise in working poor stems largely from a sharp increase in non-regular workers as Japanese companies
restructure their workforces to cut costs and remain globally competitive. Non-regular workers, including
part-time workers, temporary workers and others, comprise more than a third of the total workforce,
according to government statistics. In addition, there are at least 1.8m “freeters”, who take on whatever
temporary jobs they can find and generally have no benefits. Thousands of freeters, in their 20s and 30s,
sleep in internet cafés and are unable to find stable employment because they lack a permanent address.
Japan’s minimum wage, at Y687 an hour, is in danger of falling to the lowest level among Organisation for
Economic Co-operation and Development countries once the US implements legislation to raise its minimum wage.
Japan is still, relatively speaking, an egalitarian society, where income disparities are nowhere near as large as they
are in many western societies. But the old social and labour contract – which promised income stability, assured that
hard work would be rewarded, healthcare would be within everyone’s reach and people could retire knowing that
their pensions would keep them off the streets – no longer applies to a considerable proportion of the Japanese
public.
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Viewing economics as a zero-sum causes poor policy decisions
Tan Kim Song, The Straits Times, 9-19-1994, “Global competitiveness: Just a load of rubbish?”
PAUL Krugman, a professor at the Massachusetts Institute of Technology in the United States, is not your
usual run-of-the-mill economist.
As one of the profession's brightest stars and an author of best-selling books, he commands a large audience
both within and outside the academic community.
So when he wrote, not once, but repeatedly, that it was totally meaningless to extend the notion of
"international competitiveness" from a company to the entire economy, you can bet that the message will not
go unnoticed.
His arguments are, as usual, uncannily simple. Unlike corporate rivalry such as that between Coca-Cola and
Pepsi, he said, competition between two economies is not a "zero-sum" game.
While Coca-Cola might make its fortune at the expense of Pepsi (and vice-versa), most economies usually
sell to and buy from one another at the same time.
This means that a boom in one economy, which enhances its purchasing power for imports, might actually be
a boon for another.
To equate the two types of competition blindly, Prof Krugman warned -both in articles which appeared in
recent issues of Foreign Affairs and in his other writings -is not only wrong, but highly dangerous too.
At best, the pervasiveness of the zero-sum mentality could lead to a policy of "picking winners" by
individual governments which, given their dismal records on the matter, usually ends up as a wasteful
misallocation of resources.
At worst, it could result in debilitating trade conflicts.
"What if, despite its best effort, a country does not seem to be winning, or lacks confidence that it can?" he
asked.
Chances are, he said, that it would resort to some protectionist policies to prevent the loss of high-wage jobs
in its own economy.
Such a view, needless to say, will not endear Prof Krugman to many people.
International competitiveness, lest one forgets, is the buzzword in town these days, embraced widely by
politicians and businessmen alike.
Rare are the days, indeed, when one does not hear exhortations on the need to "stay ahead in an increasingly
competitive global economy".
But whether one agrees with Prof Krugman or not, he has certainly shown that there is more to the word
"competitiveness" than meets the eye.
He has also helped focus the readers' minds on an important question: To what ends is an economy's
"international competitiveness" geared?
When politicians urge their people to stay ahead in international competition, for example, are they asking
them to go forth and grab a bigger share of the global product market?
Or are they simply talking about raising the standards of living?
It is important to clarify these issues. How else does one justify the use of public funds "to improve an
economy's competitiveness"?
Unfortunately, few people, including those in charge of formulating economic policies, seem to have
provided a clear vision on this matter.
Even among international think tanks that undertake regular studies on the subject, the interpretations of
competitiveness are hardly uniform.
The Organisation for Economic Cooperation and Development, for example, defines competitiveness as "the
degree to which a country can, under free and fair market conditions, produce goods and services which meet
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the test of international markets, while simultaneously maintaining and expanding the real incomes of its
people over time".
Which is not exactly the same as the more corporate-oriented definition adopted by the Switzerland-based
World Competitiveness Report: "The ability of a country or a company to, proportionally, generate more
wealth than competitors in the world."
Now, one could argue that such differences are inevitable as they reflect the unique agenda that each
organisation, or each economy for that matter, is pursuing.
Criteria that prove useful in measuring the competitiveness of an economy that depends heavily on the inflow
of foreign investments, for instance, are not necessarily suitable for others that are keen to relocate their
domestic companies abroad.
In fact, even within the same economy, measures of its competitiveness have to be reviewed as it develops
and matures, and its policy objectives change accordingly.
All of these imply one thing: that it is imperative for each economy to assess its own developmental needs
and spell out its own definition of competitiveness.
But if this were the case, then it is quite pointless to compare and rank different economies using a single
index, nor is it necessary to see them as adversaries, just as Prof Krugman has contended.
It follows then that whether an economy is ranked the world's most competitive, or second most competitive,
may not be such a life-and-death matter.
What is more important is that a country excels in those areas that it deems crucial to the realisation of its
own objectives.
If the end result of all these is greater awareness that international trade and investment could be treated as a "win-
win", rather than a "zero-sum", game, it will be a bonus.
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Competitiveness = bad policy
Global competitiveness screws policy
ocNo=2
An American economy that cares a great deal about boosting domestic productivity requires policy makers
who care very little about global competitiveness.
A Zen koan for the nationalistic '90s? The sound of one Keynesian clapping? A lyric for aspiring autarkists?
None of the above. It's the startling pronouncement of MIT's Paul Krugman, one of the country's most
brilliant young economists, a nonpartisan academic with a reputation for intellectual honesty and a cruel
tongue. You might recall that Krugman was widely quoted criticizing industrial policy economist Laura
D'Andrea Tyson's research when President Clinton named her chairman of his Council of Economic
Advisers.
Alternating between statistical scalpels and macroeconomic machetes, Krugman bloodily eviscerates
"competitiveness" as a policy doctrine without any kind of economic validity. What supply-side "economics"
was to Reaganomics, Krugman asserts, competitiveness has become to Clintonomics: a sort of pseudo-
rational pastiche that Nobel Prize-winning chemist Irving Langmuir once described as "pathological science"
-- that is to say, no science at all.
"To make a harsh but not entirely unjustified analogy," he says in his essay "Competitiveness: A Dangerous
Obsession" in the current issue of Foreign Affairs, "a government wedded to the ideology of competitiveness
is as unlikely to make good economic policy as a government committed to creationism is to make good
science policy, even in areas that have no direct relationship to the theory of evolution."
"Gee, we must be making progress," smiles Dan Burton, president of the Council of (sigh) Competitiveness,
which was formed by frustrated high-technology executives after the Reagan administration's rejection of its
own presidential commission on the topic. "In 1987, competitiveness was dismissed as a buzzword. Today,
it's graduated to being a dangerous obsession."
Might Krugman be the one with the dangerous obsession? You wouldn't think so after seeing the numbers.
His arguments would command respect even without his impeccable credentials. They're important because
he takes global competitiveness champions such as Tyson, U.S. Trade Representative Mickey Kantor, Labor
Secretary Robert B. Reich and health care guru Ira Magaziner on their own terms, impatiently redoes their
arithmetic for them and makes a strong case that competitiveness issues amount to little more than a rounding
error in the $ 6 trillion U.S. economy.
"It's a dead end of a type we've seen before," says Krugman, who is comparably harsh in his assessments of
Reagan's supply-siders and former British prime minister Margaret Thatcher's monetarists. "You take
something with a grain of truth and some people seize on it... . Here, some characters have taken small
conflicts of interest between countries and decided to build an economic policy around them."
But why do so many hard-headed business people find "competitiveness" so alluring?
"Because people generalize from their own experience," Krugman asserts. "The experience that a CEO gets is one of
global competition, but even the CEO of a large multinational has a worm's-eye view of world trade."
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Competitiveness File

DDI ’08 CM Lab

Michael and Franklin

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Michael and Franklin

The U.S. isn’t Losing Scientific Competitiveness

The United States accounts for 40 percent of total world R&D

spending and 38 percent of patented new technology inventions by

the industrialized nations of the Organization for Economic Cooperation

Michael and Franklin

U.S. research and development is Vibrant, success of competing

High growth in R&D expenditures, patents, and S&E employment,

Michael and Franklin

Research and Development funding High

However, most of the increase in federally funded basic research

Michael and Franklin

Michael and Franklin

US Tech Leadership Impacts

Tech Advantage key to stop terrorism

In this report, we have focused primarily on U.S. competitiveness

Michael and Franklin

Michael and Franklin

While US still technology leader, an easily be undermined

While the United States is still performing at or near the top in

Michael and Franklin

Lack of Competitive attempt, puts U.S. on the brink of lost leadership

“The United States is in a fierce contest with other nations to

Michael and Franklin

Michael and Franklin

Government Key to Competitiveness

Federal Support Key to Technological Innovation

In this environment, arguments run, responsibility for basic

Michael and Franklin

**Tech Competition Good**

Michael and Franklin

Tech Competition Good

Foreign Tech Success Motivates United States and is Beneficial

A future in which a significant share of new technologies is

Michael and Franklin

Michael and Franklin

Policymakers must address decrease in science work force

Fundamental steps toward ensuring that the United States

Michael and Franklin

Globalization causes Competitiveness

Globalization causes rise of competitors and decrease Soft Power

First is that the effects of globalization—including the growing

Michael and Franklin

Experts Agree United States is Lacking Innovation that is key to

Michael and Franklin

Michael and Franklin

Competitiveness Politics Link

Pelosi believes U.S. Behind in technology Innovation

One vital component of a strong research infrastructure is ample funding.

Michael and Franklin

Competitiveness key to Economy

Lack of Technological Innovation leads to decrease in Workforce and

But if U.S. leadership in science and technology weakens, the

Tech Competition Good