I have a competition in me

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25 January 2011

"I have a competition in me. I want no one else to succeed." - Daniel Plainview, There Will Be Blood (2007)

The word out on the street is that the theme for President Obama's State of the Union address this year will competitiveness. Paul Krugman and Ezra Klein are not impressed, and their critiques are legitimate. A sample from Krugman:

It’s true that we’d have more jobs if we exported more and imported less. But the same is true of Europe and Japan, which also have depressed economies. And we can’t all export more while importing less, unless we can find another planet to sell to. Yes, we could demand that China shrink its trade surplus — but if confronting China is what Mr. Obama is proposing, he should say that plainly.

Furthermore, while America is running a trade deficit, this deficit is smaller than it was before the Great Recession began. It would help if we could make it smaller still. But ultimately, we’re in a mess because we had a financial crisis, not because American companies have lost their ability to compete with foreign rivals.

Fair enough. America can win without other countries — like China — losing. In fact, as both Krugman and Klein point out, if China does better, America will too. If the Chinese get richer, they can start buying more stuff which would help address the imbalance between savings and consumption in the developed world and the developing world. Economics isn't always a zero sum game, and it works best when it's not.

So that's the critique. Is Obama mistakenly getting the nation prepped for a crushing battle that will see America trying to slay the Chinese dragon? To mix up the metaphors, is Obama trying to turn America into Daniel Plainview, drinking everyone else's milkshakes?

It doesn't look like it. As Klein acknowledges, there's another type of competitiveness nations can engage themselves in:

One definition of competitive refers to a level of performance. If you're a runner, you become more competitive in your next race by training harder and getting faster. That's certainly the Obama administration's agenda: They want to do a better job educating American workers and investing in American infrastructure and improving American institutions. They want us to run faster.

Klein doesn't think that's where the Obama administration is pushing the discussion, but in my view, and in the view of the Republicans pushing back against it, that's exactly the type of competitiveness Obama is talking about. He's not suggesting a trade war with China or increased protectionism for American goods — both terrible ideas. He's talking about investing in America's infrastructure to improve its future capacity.

That's a necessary goal. While America's short term economic problem derives from a lack of demand, its long term interests require it to expand its capacity by building modern infrastructure and creating a better educated population. This will be a hard enough sell as it is, what with Republican concerns about spending that isn't on defence or tax cuts. But it's a pitch worth selling.

I've discussed previously the depths of American paranoia about China. The thing to understand about this is that while those of us in the rest of the world are pleased to see our economies producing jobs and growth, America is used to being number one. Merely being well off is something it is not used to; this is a country that is used to being a superpower, and any hints that might change is threatening to its self image. Talk about being uncompetitive focuses American minds and triggers thoughts of its exceptionalism; America, by definition, is meant to out-compete the rest of the world.

Talking about competition isn't, as Krugman sees it, is not "sad commentary on the state of our discourse." It is just that competition comes in many forms. Obama is not urging the country to drink everyone else's milkshake; he's calling on it to hit the gym and get in shape.

Below: Obama's State of the Union preview video:

Tags: China, Competitiveness, Daniel Day Lewis, Daniel Plainview, Economics, Ezra Klein, Infrastructure, Paul Krugman, State Of The Union, State Of The Union 2011, There Will Be Blood