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January/February 2007

Outlook for 2007

By George McClure

As a global competitor, the United States needs technological innovation, adequate energy resources and a supportive infrastructure. Workforce is key to competitiveness. Shrinking employment benefits are a workforce concern. Other elements are worth a look, too: climate change, immigration and the economic outlook.

Professor Clayton Christensen of the Harvard Business School coined the term disruptive technology to describe developments that will affect the marketplace and the status quo, but are not properly assessed by corporations who are best at sustaining technology. When Alexander Graham Bell was seeking backing for his electrical speech machine, the sustainers could see no need for it, thinking that the telegraph was adequate for electrical communications. When John Bardeen, Walter Brattain and William Shockley at Bell Labs invented the transistor, it was a curiosity. Perhaps it could replace vacuum tubes in telephone repeaters. Who could have predicted its pervasive influence sixty years later — embedded in cell phones, laptop computers, personal digital assistants, even digital televisions? The later invention of the integrated circuit by Jack Kilby at Texas Instruments opened the floodgates.

IBM, perhaps unwittingly, gave impetus to the personal computer by opening the architecture of its product line to others and by abdicating control of its operating system, giving rise to Microsoft, Dell, Compaq and a host of other entrepreneurs. Management must have seen the PC as irrelevant to its primary markets (e.g., banks and other corporate users of its mainframe computers). Earlier, the mainframe was a disruptive technology, too — in 1943, four years before the transistor was invented, Thomas Watson had estimated famously that the total worldwide market was five or six machines [www.cs.cmu.edu/afs/cs.cmu.edu/user/bam/www/numbers.html].

With this preface, we will look at eight aspects of the 2007 outlook: technology, energy, climate change, workforce, employment benefits, immigration, infrastructure and the economic outlook.

Technology

In the financial community, the question is always: What is the next big thing? Speculators want to invest in winners. Networking, enterprise resource planning, the PC and the Internet have been among past winners.

Lightweight composite materials have made airliners more efficient and are paving the way to very light jets (VLJs) that will be sold in large numbers for air taxis and small business travel. Already certified is the 5,520-lb. Eclipse 500, priced at about $1.5 million, with a glass cockpit. Others in the pipeline include the HondaJet VLJ, a product of the joint venture of Honda Motor Co., Ltd., and the New Piper Corporation. Deliveries for Eclipse will be increasing in 2007; Honda, with more seats and a lavatory aboard its VLJ, plans initial deliveries in 2010, targeted to the jet taxi market [www.microlightjets.com]. Piper will be marketing its own PiperJet VLJ in the same time frame to the owner-operator market, with Honda offering sales and service support for both [www.palmbeachpost.com].

NASA was instrumental in the development of the VLJ through three programs: Advanced General Aviation Transportation Experiments, the Small Aircraft Transportation System and the General Aviation Propulsion (GAP) project. GAP formed a cost-sharing agreement in 1996 with Williams International, a primary producer of jet engines for cruise missiles. The goal was a light, small turbofan engine. The result was a compressor made from a single block of titanium and weighing less than one and a quarter pounds. This permits a nine-to-one thrust-to-weight ratio, while most commercial aircraft jet engines fall in a range between four- and five-to-one. Williams succeeded, paving the way for the VLJ.(1) Pratt & Whitney is providing engines for the Eclipse, with initial deliveries planned for December 2006 [www.eclipseaviation.com]. GE has teamed with Honda for its small jet engine [www.usatoday.com].

Including the time it takes to travel to an airport, get through security, and wait for the now-less-frequent flights in the commercial hub-and-spoke system, flying to a destination up to 500 miles away is no faster than driving on the highway. Productivity is held down if only one client a day can be visited. The [VLJ] sales proposition, for businessmen who don't live near a major airport but have a small public airport nearby, is: 'If you could have an airplane pick you up at that airport, fly you to the airport nearest to your client, and then fly you back, for an extra 25 to 50 cents a mile on top of what you are paying for coach, would you do it?" The inevitable answer: 'In a heartbeat."

The market over ten years is estimated at 35,000 VLJs. This growth points to the need for the next generation of air traffic control, extending to 'free flight" to avoid stressing further the ground-based control system [www.gao.gov/archive/1998/rc98246.pdf].

Other disruptive technologies include Web logs (blogs) [www.webcrimson.com], open source software and nanotechnology [www.washingtontechnology.com].

Nanotechnology applications in manufacturing make possible molecular manufacturing, building a wide range of products that are impossible to make today. As noted by Eric Drexler, who coined the word nanotechnology:

Molecular manufacturing will bring both great opportunities and great potential for abuse. Advanced systems could be used to build large, complex products cleanly, efficiently, and at low cost. Building with atomic precision, desktop-scale (and larger) manufacturing systems could produce the products like the following, with consequences for many global problems:

  • Inexpensive, efficient solar energy systems — a renewable, zero-carbon emission source

  • Desktop computers with a billion processors

  • Medical devices able to destroy viruses and cancer cells without damaging healthy cells

  • Materials 100 times stronger than steel

  • Superior military systems

  • More molecular manufacturing systems

Faster, cheaper, cleaner production of superior products will also be disruptive. Costs, resource requirements and economic organization will be transformed [www.eurekalert.org].

Energy

Forecasters predict an average $65-per-barrel price for oil in 2007. An unusually warm winter could cut demand for heating oil. Oil producers worry about the falling value of the dollar, but they need our market even though Chinese demand is increasing rapidly. At that price, extraction of oil from tar sands and oil shale is profitable and will stimulate production from those resources, largely in Canada.

Photovoltaic panels have fallen in price and are now being promoted as an alternative roofing material, producing electricity for operating home appliances and/or selling the excess back into the power grid. The solar energy market is estimated at $11 billion worldwide now, and the total power market $1 trillion. GE has contracted to buy the entire output of a Silicon Valley startup producer of silicon wafers for solar cells [http://money.cnn.com].

Nuclear power development languished after the initial push in the 1950s and 1960s. The last nuclear power plant built in the United States (the 104th) was for the Tennessee Valley Authority, coming online in 1996 [www.eia.doe.gov]. Almost 20 percent of power generated in the United States comes from nuclear plants. There had been a focus on the problems in long-term storage of spent nuclear fuel, but public opinion is shifting now (with higher oil and gas prices) to favoring more nuclear power [www.nei.org].

Streamlining the application approval process and developing standard reactor designs should shorten the approval process so that new nuclear plants can be operating twelve years after the initial application. Several power utilities have announced intentions to build more nuclear reactors [www.fpl.com]. Major players in nuclear power include GE, Westinghouse, Toshiba and the French Areva, the world's largest. Russia's Atomstroiexport is a smaller producer.

Climate change

Concerns for man-made effects on the earth's climate have been documented in the movie, An Inconvenient Truth, by Al Gore [www.washingtonpost.com], and in the Stern Review on the economics of climate change, commissioned by British prime minister Tony Blair [www.hm-treasury.gov.uk].

Lord Stern suggests that the global economy could be reduced by 20 percent — or $7.2 trillion — by climate change, but that acting now to avert those consequences would cost just 1 percent of global output [http://news.bbc.co.uk]. Critics of global warming have said the case is overstated, and that there are higher priorities for government spending than on offsetting possible effects of climate change.

A Wall Street Journal commentary by Bjorn Lomborg, director of the Copenhagen Consensus Center, noted in response to the Stern Report:

'The review is also one-sided, focusing almost exclusively on carbon-emission cuts as the solution to the problem of climate change. Mr. Stern sees increasing hurricane damage in the United States as a powerful argument for carbon controls. However, hurricane damage is increasing predominantly because there are more people with more goods to be damaged, settling in ever more risky habitats. Even if global warming does significantly increase the power of hurricanes, it is estimated that 95 percent to 98 percent of the increased damage will be due to demographics. The review acknowledges that simple initiatives like bracing and securing roof trusses and walls can cheaply reduce damage by more than 80 percent; yet its policy recommendations on expensive carbon reductions promise to cut the damages by 1 to 2 percent at best. That is a bad deal."

The U.N. Climate Panel predicts a smaller change in temperature in the year 2100 than does the Stern Report, and notes uncertainty even so in the effects of carbon emissions. Stern continued:

'Mr. Stern suggests that there is a risk that the cost of global warming will be higher than the top end of the U.N. climate panel's estimates, inventing, in effect, a "worst-case scenario" even worse than any others on the table. Therefore, the estimated damage to GDP jumps to 15 percent from 11 percent. Moreover, Mr. Stern admonishes that poor people count for less in the economic calculus, so he then inflates 15 percent to 20 percent.

'This figure, 20 percent, was the number that rocketed around the world, although it is simply a much-massaged reworking of the standard 3 percent GDP cost in 2100 — a figure accepted among most economists to be a reasonable estimate."

Even so, there is another problem: The Kyoto Protocol failed for a number of reasons, including industrial nations' concern over the reduction in their economies. And, according to Stern:

'Moreover, there is a fourth major problem in Mr. Stern's argument that has received very little attention. It seems naΓ―ve to believe that the world's 192 nations can flawlessly implement Mr. Stern's multitrillion-dollar, century-long policy proposal. Will nobody try to avoid its obligations? Why would China and India even participate? And even if China got on board, would it be able to implement the policies? In 2002, China decided to cut sulfur dioxide (SO2) emissions by 10 percent — they are now 27 percent higher despite SO2 being nationally a much bigger health and environmental problem than climate change."

Lomborg concludes:

'Last weekend in New York, I asked 24 U.N. ambassadors — from nations including China, India and the United States — to prioritize the best solutions for the world's greatest challenges, in a project known as Copenhagen Consensus. They looked at what spending money to combat climate change and other major problems could achieve. They found that the world should prioritize the need for better health, nutrition, water, sanitation and education, long before we turn our attention to the costly mitigation of global warning.

'We all want a better world. But we must not let ourselves be swept up in making a bad investment, simply because we have been scared by sensationalist headlines" [http://online.wsj.com].

Other global warming skeptics pointed out that:

'The U.N.'s Intergovernmental Panel on Global Warming had already been created when researchers retrieved the first long ice cores from Greenland and Antarctic in the 1980s. The ice cores revealed 400,000 years of the planet's temperature history — and a 1,500-year cycle that was too long and moderate to be discerned by Celtic tribes or Viking seamen. Physical evidence of the 1,500-year climate cycle has also been found by more than 100 recent peer-reviewed studies by leading research institutes — in the bottom sediments of six oceans and hundreds of lakes, in ancient relict tree rings from around the northern hemisphere, and in the cave stalagmites and glacier movements of every continent plus New Zealand. The North American Pollen Data Base shows nine complete reorganizations of our trees and plants in the past 14,000 years, or one every 1,650 years" [http://online.wsj.com].

A successful previous environmental agreement was the Montreal Protocol on Substances that Deplete the Ozone Layer (1987), ratified by 155 countries. Industrialized countries eliminated halon consumption as of 1 January 1994, and chlorofluorocarbon (CFC) consumption as of 1 January 1996. Developing countries have a grace period and must complete their phase out by 1 January 2010, though several countries will complete their phase out much earlier. For methyl bromide used as a fumigant, industrialized countries froze their consumption at 1995 levels and will eliminate all use by 2010, while developing countries were to have frozen their consumption by 2002 based on average 1995-98 consumption levels [www.foei.org].

The World Bank sees a real concern in increasing greenhouse gas emissions. According to Global Economic Prospects 2007: Managing the Next Wave of Globalization, a 50 percent increase in expected by 2030, and a 100 percent increase by 2050 [www.worldbank.org].

In December 2006, The Financial Times reported that the United States had condemned as illegal plans to include all airlines flying to and from the European Union in the European Commission's greenhouse gas trading scheme from 2012.

"The inclusion of non-EU airlines on a non-consensual basis runs counter to EU member states' legal obligations under the Chicago Convention ... and their bilateral air transport agreements, including with the United States," a government spokesman said.

The European Commission had made the decision "despite strong objections raised by the United States and many other countries," he added, in a move that would "circumvent the appropriate multilateral body," the U.N.-run International Civil Aviation Organization [www.ft.com].

Workforce

The impending start of retirements for baby boomers has raised concerns about the adequacy of the U.S. workforce to meet future demands. But most boomers indicate a desire to continue working at least part-time in retirement, whether for pay or in a volunteer capacity. Possible legislation to permit phased retirement, in which a worker can cut back on work hours and receive a proportionate share of a retirement pension from the same employer, would help in this transition. The Employment Retirement Income Security Act (ERISA) currently prohibits this practice. Consequently, an employee can retire fully from one employer then go to work for another employer, but cannot stay in a senior role for the long-time employer, perhaps working in a mentoring capacity where the intellectual property on the job he or she has acquired over the years could be most useful.

In terms of purchasing power, engineers' median compensation has declined over the past decade, at a rate of 1.85 percent per year from 1996 to 2005. It took $1.28 in 2005 to buy what 1.00 bought in 1995.

Another factor depressing future after-tax pay is the Alternative Minimum Tax (AMT), which is stealthily descending on more taxpayers. Enacted in 1969, and originally intended to target high-income folks who arranged their affairs to avoid tax altogether, the levels at which it applies are not indexed for inflation. Therefore, more and more taxpayers will be affected if AMT remains in place at present levels. In 2006, 3.8 million taxpayers are affected. By 2007, the number is expected grow to 23 million — or one in six taxpayers. By 2010, one in five taxpayers will pay AMT, including almost every married taxpayer with income between $100,000 and $500,000. Calculation of the AMT removes tax preference items such as deductions and personal exemptions, and taxes the rest at a minimum of 27 percent. Deductions for home mortgage interest, for state and local real estate taxes, and for children are tax preference items, not credited for the AMT. Affected taxpayers calculate their taxes twice — the regular way and for AMT, then pay whichever tax bill is higher [www.house.gov].

Congress debates reduction or elimination of the AMT every year. But since it hasn't come up with another way to replace the revenue generated by the AMT, Congress does very little, other than periodically raise the threshold to which the tax applies. The AMT increase alone this year is estimated at $34 billion. To eliminate it would cost $671 billion; taken together with tax cuts, replacing the lost revenue would cost $3.3 trillion over ten years [www.cbpp.org].

The concern remains that the widespread use of H-1B guest workers discourages America's youth from studying engineering and computer science. The same firms that decry the lack of enough of our youths in the engineering pipeline press for expanding caps on H-1B quotas, thus perpetuating the downward spiral.

A small counter-trend is developing, where foreign engineers educated in the United States are returning home, perceiving greater opportunities there. Some young Americans with computer science degrees have gone offshore for better job opportunities than they can find at home.

In a report issued in December 2006, the New Commission on the Skills of the American Workforce recommends a major overhaul of U.S. public schools [www.skillscommission.org].

The commission included 26 education, labor and business leaders from both political parties, including two former federal education secretaries. In 1990, the first Commission on the Skills of the American Workforce released a different report, but with the same purpose: to examine the world economy and determine what American workers need to survive in it. Several of the original commission recommendations were enacted.

The new Commission proposed $60 billion in major changes to the public school system, including:

  • Creating required state board examinations at the end of 10th grade, allowing students to enter community college, prep for a more elite school, or remediate to pass the examination

  • Recruiting the best teachers and enticing them with higher pay, offset by lower pension benefits

  • Modifying the governance and funding structure of schools so that property taxes do not determine school funding; and creating contract-run schools managed by for-profit or not-for-profit groups
    [www.businessandmedia.org]

The timing is fortuitous for the reauthorization of the No Child Left Behind program in 2007.

Prototypical U.S. Industry in Ten Years (if all goes well)


Source: The New Commission on the Skills of the American Workforce

Forecasts of workforce demand through 2014 are made by the Bureau of Labor Statistics [www.bls.gov]. The fastest growth is seen for jobs requiring doctoral degrees; the next fastest is for associate degree jobs. Productivity improvements and offshoring will reduce the demand for manufacturing workers, with many of those workers who are displaced competing with less-skilled workers for available positions. Vocational training will also be needed to meet growing demand in construction and maintenance fields not vulnerable to offshoring.

A concern with the loss of manufacturing to offshore facilities is that the R&D supporting manufacturing technology often goes with it. Some 90 percent of patents awarded are connected to manufacturing technology, so this becomes an issue in competitiveness and innovation. Technology applications account for as much as one-third of long-run economic growth and two-thirds of productivity gains [www.nam.org].

Other workforce issues to watch for in 2007 are an increase in the minimum wage and some efforts at making health care affordable. One initiative for the latter is standardized electronic health records [www.nam.org].

For health insurance, the number of uninsured continues to rise — now estimated at more than 46 million [www.cbpp.org]. However, skeptics of that number point out that the number of those who are without coverage for more than a year is closer to 21 million. The rest are between jobs, healthy young workers who don't want to pay for coverage or students. See Tales 20-25 at www.cdc.gov/nchs/data/series/sr_10/sr10_229.pdf.

Employment benefits

The Pension Protection Act (PPA), signed into law in 2006, sounded the death knell for defined benefit pensions by tightening funding requirements for employer-run pension funds. The trend already underway, to change to either a cash balance pension plan (still considered a defined benefit plan) or to move totally to a defined contribution plan (e.g., 401(K), 403(B) or 457 plans) accelerated. In addition, the Financial Standards Accounting Board (FSAB) tightened its requirements for pension funds as well, with FSAB Statement Number 158, which also provided for more transparent reporting [www.fasb.org]. What PPA did do was provide safeguards intended to save the Pension Benefit Guaranty Corporation, but which may not accomplish even that if large numbers of healthy pension plans, that have been paying premiums into PBGC, exit the system in the wake of the stricter reporting requirements.

Employers, who have already capped their contributions to employee health plans, may push for a government-run program that will eliminate their obligation entirely. Automakers establishing assembly plants in Canada stand to benefit from the state health plan for their employees residing there.

The move to more personal responsibility for retirement planning comes at a time when there is more movement between employers and shortened tenure for the workforce. The state of Ohio has lost 32,337 manufacturing jobs and 93 plants over the past 12 months, according to the 2006 Ohio Manufacturers Directory [www.manufacturersnews.com]. The losses may have aided Representative Sherrod Brown in his successful bid for the Senate, replacing Senator Mike DeWine in the 2007 110th Congress. Brown made innumerable floor speeches about the hollowing out of the industrial base in Ohio.

There may be movement by Democrats to shore up Social Security in 2007, but the inclusion of Personal Savings Accounts is highly unlikely. The bigger problems of funding for Medicare/Medicaid will likely be left until after the 2008 presidential election.

Immigration

It is likely that something will be done to fix immigration in 2007, since voters in November considered it a priority issue. The House had focused on protection of the borders before the election, while the Senate wanted a path to citizenship as a reward for good behavior by illegal aliens. It was estimated that the Senate bill would add 100 million new citizens in 20 years, to the 300 million we have now [www.heritage.org].

There was no joint conference in 2006, so the bills died. Estimates are that our population is swelling by 2 million per year from immigration, half of it legal. But under the Senate bill it, was estimated that 28.3 million immigrants would join our ranks over ten years, including current legal quotas and expanded ones [www.heritage.org].

In 2007, the use of U.S. passports will be extended to include returns to the United States from Canada, Mexico and the Caribbean. Since this new policy will include cruise ship passengers, a flurry of passport applications is expected in early 2007. A common way for non-citizens to remain in the United States is to overstay a tourist or visitor visa, thus becoming an illegal alien [www.usimmigrationsupport.org/visa_b2.html]. The Department of Homeland Security created the US-VISIT program to provide a database of such visitors. [www.immihelp.com/visas/usvisit.html].

Another Homeland Security program expected in 2007 is an expansion of a Treasury Department system to create a risk profile for travelers to and from the United States, providing for a wealth of personal data to be retained for up to 40 years. The data on travelers would be classified to allow inspectors to determine a risk assessment [www.insightmag.com].

Look for the expansion of programs globally under the banner of 'managed migration," as the cost of travel is reduced and mobility is enhanced. GATS Mode 4, which sets rules for 'temporary movement of natural persons," is a controversial topic for the World Trade Organization. Expansion could supersede guest worker limits for signatory nations. It is being promoted by developing nations.

Infrastructure

The American Society of Civil Engineers updates the Report Card for America's Infrastructure biannually [www.asce.org]. You can look at the report for your state. Among the current (2005) findings:

  • Commuters spend 46 hours per year stuck in traffic — 5.7 billion gallons of gasoline are wasted

  • 27 percent of highway bridges need repair or replacement

  • 350,000 contamination sites must be cleaned up in 20 years

  • Federal funding for drinking water provides for less than 10 percent of the national need

The last major road building program in the United States produced the 41,000 mile interstate highway system some 50 years ago. Maintenance costs have soared and some of those roads are crumbling. One proposal for dealing with the crisis in roads is to sell them or lease them to private interests, who will promise to maintain them, make payments to the states that can reduce their debts, and, in exchange, are given the right to set and increase tolls (within limits).

Is selling off turnpikes and sections of interstates the new wisdom? Goldman Sachs thinks so, with the leasing of the Chicago Skyway and the 157-mile Indiana Toll Road starting the groundswell [www.infowars.com].

Rights to the Indiana Toll Road cost foreign interests $3.8 billion, with their return over 75 years estimated at more than $11 billion. A 99-year lease for the connecting 7.8-mile Chicago Skyway cost the same operators $1.83 billion

New Jersey Governor John Corzine (formerly with Goldman Sachs) is weighing the sale of the New Jersey Turnpike (part of I-95) to private interests. He says the sale could be a central element in plans to offset 20 percent of homeowners' property tax bills, costing $2 billion per year. It would also permit paying down some of the state's massive debt. He promises a decision by the end of April, according to the Newark Star-Ledger. The going rate for sale of a toll road seems to be 40 times annual revenues.

In Texas, Governor Rick Perry would have public-private partnerships build a $184 billion, 4,000-mile toll road network(2). His administration has signed a $1.3 billion contract for a toll road between Austin and Seguin (on I-10) to be operated by Cintra, a Spanish firm.

Not everyone thinks this is a good idea [www.motherjones.com].

Another prospect for privatization is the air traffic control system. The existing system could be overwhelmed by the addition of 5,000 very light jets to the existing load of commercial passenger and freight flights plus general aviation [www.casa.aero].

In the Next Generation Air Transportation System Integrated Plan, published in December 2004 by the Joint Planning & Development Office, a range of outcomes is seen by 2025 that could include increases in demand to a level of up to three times the number of operations in today's current National Airspace System [www.jpdo.aero].

Impending retirements of many existing air traffic controllers add to concerns [www.gao.gov].

While the United States continues to assign the operation of its air traffic control system to the Federal Aviation Administration, many countries, including Canada, have privatized this function. The Reason Foundation is a strong proponent for doing the same thing in the United States [http://rppi.org/air.html].

Economic outlook

Bankers are calling this the 'Goldilocks economy" — just right. Housing is on a downturn, but that trend is not expected to last more than six months. There is a large inventory of unsold cars to be worked off. The Institute for Supply Management, issues a monthly index of manufacturing activity, based on purchasing activity. In November, the index slid to 49.5 in from 51.2 in October. Readings below 50 indicate contraction [www.ism.ws].

The conclusion: the decline in manufacturing activity ended a 41-month expansion period. However, labor costs are contained; interest rate spreads, between short-term and long-term issues, are narrow, indicating little expectation for inflation; and the next interest rate move by the Federal Reserve is expected to be downward.

The falling dollar favors exports over imports and is not worrisome as long as it doesn't fall too far causing other countries to lose confidence in the dollar as the reserve currency of choice, and pull out some of their funds. We have been living beyond our means (the national savings rate has been negative for months now) and the interest payments on the national debt are our collective equivalent to running a balance on a credit card.

The euro, pound sterling, and Canadian dollar have all risen against the dollar, encouraging visitors to travel to the United States for shopping tours. Airbus is shifting its supplier contracts to have them denominated in U.S. dollars rather than euros, seeing an advantage in doing so. We would like to see the Chinese raise the value of their yuan (around 8 to the dollar), but they don't want to reduce the level of their exports to the United States by making them more costly. They will be buying nuclear power plants from the west — Westinghouse and/or GE. Westinghouse is now owned by Toshiba, which bought control in October from British Nuclear Fuels.

By 2020, China expects to spend some $50 billion on 30 or more new reactors, adding to the nine from the 1970s now operating. Toshiba-Westinghouse won a $5.3 billion contract in December to build four nuclear power plants in China. A condition in the contract was sharing the technology with the Chinese [www.msnbc.msn.com]. Two units will be built at Sanmen, in Zhejiang province, and two at Yangjiang, in Guangdong. They will be AP1000 units with capacity of 1100MW each, and should start operating by 2013. Westinghouse, which has the world's largest installed base of operating nuclear power plants, said the contract will create or sustain nearly 5,000 well-paying jobs in the design, engineering and manufacturing sectors in the United States [www.earthtimes.org].

The development in emerging countries could change the economic rankings, with only the United States and Japan still among the top six economies in 2050. Goldman Sachs coined a term for the fast-growing economies — BRIC — for Brazil, Russia, India and China. Its report on BRICs is found at [www2.goldmansachs.com].

Citigroup has issued its outlook for 2007, largely benign [www.national-economists.org](3).

It is increasingly hard to single out the United States in the global economy. For example, the title as the world's largest automaker will likely pass to Toyota in 2007, as the Japanese automaker surpasses Ford and General Motors [www.theautochannel.com]. But GM sells a transmission to BMW for one of its luxury cars. And Freightliner, now a subsidiary of DaimlerChrysler, will open a second factory in Mexico in 2007, taking advantage of NAFTA. The $300 million plant at Saltillo, Coahuila, in northern Mexico, will have a capacity of 30,000 trucks annually, employing up to 1,600 workers [http://fleetowner.com].

In 2002, DaimlerChrysler agreed to construct a delivery van manufacturing facility in Pooler, Georgia, near Savannah. The $754 million facility, the largest in the state, was scheduled to be in production in 2006. In addition to the approximately 3,300 new plant jobs, it is estimated that another 700 new jobs will be created by the location of automotive suppliers near the new plant. Economic impact studies indicate that as many as 10,000 additional jobs would be created as a result of the plant's location.

Projections indicate that Georgia's financial commitment of slightly more than $220 million to the project will be recouped in new revenues to the state in less than 10 years. The total incentive package, including local commitments, was approximately $320 million.

At the outset of this survey, the role of Bell Labs in innovation was mentioned. After the breakup of AT&T, Bell Labs was spun off as Lucent Technologies which in November was acquired by Paris-based Alcatel SA. IBM has transformed itself into a services company.

The question remaining to be answered: Can the U.S. survive as an information/management/finance economy, without manufacturing?

References

  1. James Fallows, Free Flight: From Airline Hell to a New Age of Travel, New York: Public Affairs, 2001.

  2. World Bank, Public-Private Partnership Units: Are they needed and what should they do? [http://rru.worldbank.org/Discussions/topics/topic76.aspx]

  3. Lewis Alexander and Colleagues, Citigroup, 'A Year of Transitions: Market Implications for 2006 and Beyond," [http://www.fullermoney.com/content/2005-12-08/StephenMillerCitigroupProspectsFinancialMarkets2006.pdf]

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George McClure is a member of IEEE-USA's Communications Committee, a member of the IEEE-USA Career and Workforce Policy Committee, and technology policy editor for IEEE-USA Today's Engineer. Comments may be submitted to todaysengineer@ieee.org.


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