Ignore the Slowing Flywheel at Your Peril

Reported in a Financial Newsletter, January 28, 2010

“Less often discussed is China’s rapidly growing middle class. Estimates are that as many as 25% of Chinese -- more people than the entire U.S. population -- fall into this category now, with a doubling possible within the next decade. While most dramatic in China, it is also under way in India, Brazil and elsewhere…

In only 10 years, China has gone from being the world’s 20th largest oil consumer to No. 2, behind the United States, as a result of its accelerating shift from the bicycle to the car.

Quotes from The World is Flat by Tom Friedman

It is this triple convergence—of new players, on a new playing field, developing new processes and habits for horizontal collaboration—that I believe is the most important force shaping global economics and politics in the early twenty-first century. Giving so many people access to all these tools of collaboration, along with the ability through search engines and the Web to access billions of pages of raw information, ensures that the scale of the global community that is soon going to be able to participate in all sorts of discovery and innovation is something the world had simply never seen before.

Said Barrett [Intel CEO], “You don’t bring three billion people into the world economy overnight without huge consequences, especially from three societies [like India, China, and Russia] with rich educational heritages.”

…once the world has been flattened and new forms of collaboration made available to more and more people, the winners will be those who learn the habits, processes, and skills most quickly—and there is simply nothing that guarantees it will be Americans or Western Europeans permanently leading the way.

[W]e Americans, individually and collectively, have not been doing all these things that we should be doing and [ignoring] what will happen down the road if we don’t change course.

The assumption that because America’s economy has dominated the world for more than a century, it will and must always be that way is as dangerous an illusion today as the illusion that America would always dominate in science and technology was back in 1950. But this is not going to be easy. Getting our society up to speed for a flat world is going to be extremely pain[ful]. We are going to have to start doing a lot of things differently.

The sense of entitlement, the sense that because we once dominated global commerce and geopolitics—and Olympic basketball—we always will, the sense that delayed gratification is a punishment worse than a spanking, the sense that our kids have to be swaddled in cotton wool so that nothing bad or disappointing or stressful ever happens to them at school is quite simply, a growing cancer on American society. And if we don’t start to reverse it, our kids are going to be in for a huge and socially disruptive shock from the flat world.

I would simply add: The crisis is already here. It is just playing out in slow motion. The flattening world is moving ahead apace, and barring war or some catastrophic terrorist event, nothing is going to stop it. But what can happen is a decline in our standard of living, if more Americans are not empowered and educated to participate in a world where all the knowledge centers are being connected. “A crisis is a terrible thing to waste.”

...the first thing they need to do is engage in some brutally honest introspection. With China and the other nine flatteners coming on strong, no country today can afford to be anything less than brutally honest with itself.

The Point

America is becoming less and less competitive. There are many reasons but as Friedman in “The World is Flat” concludes, our poorly performing education system is the biggest problem we face. He makes the point well that our standard of living is in danger of a permanent reduction if we don’t start embracing the truth and begin immediately to change the way we educate our kids.

This shouldn’t be a surprise as the warnings have been coming for many decades now.

Just to revisit a few along the way.

• Over a third of a century ago, Robert Kennedy called the achievement gap between minority and disadvantaged kids a stain on our national honor. In the meantime we have spent billions on finding a solution but the problem is demonstrably worse now than when RFK made his observation.

• In 1983, the A Nation at Risk report bemoaned a rising tide of mediocrity and said that if a foreign power had imposed our education system on us we would consider it an act of war.

• In the 2007 report Tough Choices or Tough Times they point out, “While our international counterparts are increasingly getting more education, their young people are getting a better education as well. And “American students and young adults place anywhere from the middle to the bottom of the pack in all three continuing comparative studies of achievement in mathematics, science, and general literacy in the advanced industrial nations.”

Thus, the flywheel that represents our economy is inexorably slowing. This has masked the problem because the changes have been slow and difficult to become concerned about in any one year but cumulatively they have already taken us from the largest creditor nation (they owe us money) to the largest debtor nation (we owe them money) in the space of only about 4 decades. We have maintained our lifestyle basically by borrowing as individuals and as a nation.

Can we continue to count on increased borrowing to make up for our lack of competitiveness? For a while it seems, but we are closer to the ultimate breakdown than to the past healthy state of our economy. Remember though if we fixed education tomorrow, that it would take 13 years to begin to see the result of students through the whole system. China has already been openly questioning our increasing deficits and ability to pay back the bond holders of whom China is one of the largest. When they and other fast growing economies reach the tipping point where they don’t need us to buy their stuff because their own populations are far larger and growing in wealth while we are shrinking, they will stop buying our government debt which will make interest rates go up dramatically. This will make the cost of financing the huge debt we have incurred unaffordable and drastic reductions in lifestyle are very likely. As Freidman and many others point out, we must face the crisis and take action. It won’t be easy and it will be harder than if we had heeded the earlier warnings over the decades but it must be done if we hope to hand our kids and grandkids a better or equal future to ours.

I have mentioned before that our public education system is a fiefdom. That is, it is characterized as defensive, delusional, insular and inbred. But most of all it is anti-change. The system has been perfected over the last 5 to 6 decades to resist change of any kind. All of the education power groups work in cooperation to maintain the status quo. In the meantime our kids are more and more often facing the fate mentioned by Friedman,

“I know a high-paying job requires one be able to produce something of high value. The economy is producing the jobs both at the high end and low end, but increasingly the high-end jobs are out of reach of many. Low education means low-paying jobs, plain and simple, and this is where more and more Americans are finding themselves. Many Americans can’t believe they aren’t qualified for high-paying jobs. I call this the ‘American Idol problem.’ If you’ve ever seen the reaction of contestants when Simon Cowell tells them they have no talent, they look at him in total disbelief. I’m just hoping someday I’m not given such a rude awakening.”

People tend to dislike change especially if it requires them to learn and do new things as a common practice in their jobs. However, we can’t ignore the problem. We must be able to start to improve our performance versus the competition or our country will fail to be a great place to live in time.

Thus, it is time for the public to become very impatient and demand positive change. Those politicians who stand in the way need to be voted out. We must search out and face the too often hidden or ignored truth of our education failures. If we do, it will be natural to be motivated to express dissatisfaction with the status quo and demand that the kids and the country be served at a much higher level by our educators.

It is past time to wake up and take action. Only the public can force the necessary reforms.