This is the usual theme of any article written by Vivek Wadhwa, and I don't want to be dismissive of the idea that young people in China and in India are entrepreneurial and awesomely well prepared educationally to take on a lot of challenging technical problems. One response that the United States will eventually have to develop to this competitive environment in world trade is to build up the skill sets of young people growing up in the United States, for which school reform is still urgently needed, and to increase the entrepreneurial orientation of young people born and brought up in the United States. (I am trying to do my part, as the homeschooling parent of four children who have lived in the United States and overseas, to ensure that my children get sound primary and secondary educations and are entrepreneurial in their thinking.)
That said, another response that the United States never forgets to use in such challenges is being open to immigration and to foreign investment. If young people in another country stand out and succeed, they are always welcome to move to the United States and set up businesses here. And foreign entrepreneurs are always welcome to sell their products and services here and to set up branch offices or the main corporation headquarters here. The openness of the United States population to immigration and the openness of the United States economy to international trade allows Americans to gain most of the benefits of these trends, even if American-born persons aren't the chief drivers of these trends. The countries whose lunch is really being eaten are those like North Korea, closed both to immigration and to trade, and oppressed by dictatorial governments.
"The openness of the United States population to immigration.."
What did you mean, that the people are open to immigration? Then maybe. But if you are talking about govt. policy, this is not correct. The united states is not at all open to immigration.
> The united states is not at all open to immigration.
It's not open to all immigration, which is different.
IMHO, it would be much easier to get founder's visas and the like if they weren't tied (by their advocates) to allowing mass immigration of low-income folk.
The united states is not at all open to immigration.
Well, since I'm living with a counterexample right in my own home, I'd certainly expect you to come forward with more evidence than that to back up such a broad assertion. First of all, what example do you have in mind of a country that is much more open to immigration than the United States is? What are the rules on immigration in that country?
More to the point of the submitted article, which is an interesting restatement of the usual views of Vivek Wadhwa, where is the evidence that the United States lacks for visas to be offered to highly inventive, entrepreneurial people from China or from India? What country in the world does better than the United States in bringing in immigrants with those characteristics?
(Yes, I used to be an immigration lawyer, although I have not practiced in that area of law in recent years.)
US immigration policy isn't perfect, but it's far more liberal than most countries I know of. And I haven't looked at the numbers to verify this, but my general sense of the world would lead me to believe that the US gets a lot more applicants than any other single country, which makes its situation more difficult than theirs.
Economic expansion is not a zero sum game. If China and India are training future engineers and scientist then great for them. We can hope to learn from them in the future and use there ideas in our own way. The article says something to the tune of: Indian companies taking knowledge from U.S. outsourcers and using that knowledge to start domestic firms. If Cina and India become leaders in the future for innovation the USA and the rest of the world will benefit in the same way.
This question has been answered several hundred years ago by David Ricardo, but others as well. This is not some crazy economic theory that is debatable today, its taken as fact by almost all economists. Economics makes takes no notice of national boundaries, they have no meaning.
I would encourage everyone to learn about some basic international economic theory, trade theory specifically. Knowledge shows that this article is total BS.
Xenophobia will not take us to the land of milk and honey.
I agree. We do not compete as "Americans" vs. "Indians" or "Chinese." We compete as firms and products vs. each other. I guess it is not surprising that an article in Foreign Policy would see the world exclusively in the form of nation vs. nation, as that is surely how its diplomatic audience sees it.
Searches on "international trade comparative advantage" will turn up some more links, as will combinations of other search terms with the two words "comparative advantage." I hope these links get you started in your admirable efforts at self-education.
Those look good just glancing over them. To move beyond simple comparative advantage (if you're interested) I would recommend looking into the Heckscher-Ohlin theorem as well. It expands upon comparative advantage adding another level of complexity and more insight. Empirically the theorem has been mostly proven, something that not all economic theories are able to pass.
Nice, neat, simple equations and math, at the Macro level.
To put this in hacker terms, these simple rules are about as simple as the http protocol. Now imagine the software that implements this simple protocol. Think of all the different ways to exploit it. Now imagine all the complex systems that can be created using these simple rules. Now add hackers, DDOS, government censorship, wikileaks, peering disputes, etc.
Economists would have us believe that these simple rules are "how it is". Now imagine the millions of people it takes to actually implement these simple rules. Imagine what it takes to actually make wine in Portugal. Now add that these people want pensions. Now include that these simple rules assume currency equivalence, or something like the gold standard to mediate production disparities. Now add the governments on top of this "protocol".
To believe this "proven economic theory" you have to live in a virtual machine.
As you read these wonderful theories, remember that economist who was chosen as the best economist to run the US Federal Reserve said in 2005 that "now is the best time to get an ARM".
These genius suggested buying a house on an adjustable rate mortgage, at the peak of the market, when interest rates were the lowest they'd ever been. Bravo. Apparently, even the best economist in the USA is unable to see a bubble when its staring him in the face.
Fuck economists and their religion. Welcome to HN: where people have brains, can do math, and critical thinking.
Years ago Paul Krugman wrote one of the best explanations of international trade and why so much of it is so counterintuitive so many: http://web.mit.edu/krugman/www/ricardo.htm.
Yes, quite right. We'll benefit in the same way that countries like Equador or Nigeria benefit from the USA's innovation, wealth and power.
Which is to say, if that if we have something that a Chinese superpower wants, they'll take it by force, or by installing a puppet government, and if we don't, then good luck buying those medicines: they are 10000yn, with $10 to the yn.
The "economists" who take your statements as fact do so because they are paid to do so. The ones who advocate protectionism are dismissed as communists or marxists.
The trade theory you talk about assumes a balance of payments, required by something like the gold standard, which simply doesn't exists now. This is economic war and the USA is losing. I did some International Relations at Cambridge University. You should try thinking instead of just "accepting as fact".
In America, we need to start making structural changes to the system like eliminating bad teachers: http://papers.nber.org/papers/w16606
Doing so could produce $100 trillion dollars in gain for the U.S. (according to the paper above from HN yesterday).
I agree and am happy with the growth and flourishing of the entrepreneurial communities in foreign nations. But the picture is sometimes too rosy. I'm no expert, but this article poses some useful questions about China and India's future: http://www.bloomberg.com/news/2010-12-28/advanced-economies-...
The bearish view from the article:
"Some demographers say China and India are decades away from becoming advanced economies. “Both countries are still very, very poor,” said Jane De Lung, president of the Princeton, New Jersey-based Population Resource Center. “China is growing by leaps and bounds, but the majority of the Chinese still live in very poor and poverty- stricken areas. You don’t have widespread economic growth outside the cities in either country.”"
Ultimately, the U.S., China, and India each have their own strengths and can hopefully cooperate in a way where it's not one versus the other, but rather, together helping move innovation and the world economy forward.
From what I can see, a lot of the startups in China are just copying ideas and products that have gained traction here in the US. Look at youku.com and tudou.com, major video sharing sites in China, they seem very similar to youtube.com in layout, social network etc. Then look at baidu.com, the major search engine in China. Wow does that homepage remind you of some other search site? Hmmmm.
I am not trying to say that Chinese startups don't have good ideas. But why do they have to blatantly copy US startups that are successful? Obviously, startups inspire each other, but I will posit that what is lacking in China to a certain extent is:
1. Creativity, which leads to a strong tendency to generate knock-offs of Western companies or products. This includes both software and hardware.
2. Openess or ability for people with good ideas to step forward and actuate them. The Chinese educational system is segmented and once you are on a certain path there is not really the ability to change or reinvent oneself as easily as in the West.
Look at Twitter, Apple, and many of the other companies at the forefront of tech and business. The leaders and visionaries behind these companies were not necessarily formally trained in what they are doing cause who can be trained to be a trendsetter! No way. There can only be the right environment for innovation which needs creativity, access to resources, and lots of hard work.
I speak as someone trained in the US in philosophy and politics but learned software development as an afterthought and am building companies and products. Someone like me could not exist in China and to a lesser extent in India due to their narrow-minded educational systems.
I wish founders and developers across the world the best of luck in their endeavors, but know that me and my non-traditional founder compatriots here in the US will compete with you and compete hard!
> I am not trying to say that Chinese startups don't have good ideas. But why do they have to blatantly copy US startups that are successful?
Because the US startup had a good idea but made it US-only and/or English-only. It's like 20 years ago when Detroit was complaining that it didn't sell many cars in Japan, one factor (there were many others) was that Japanese drive one the left-hand-side of the road and the US car-makers didn't make right-hand-drive models.
With physical businesses (like zipcar or netflix) it's hard to build infrastructure everywhere at once but don't comlain if you ignore 6.5 billion customers ( 1 billion of whom are "rich" ) to concentrate on 310 million and somebody else decides copy you.
My grandfather use to complain about "coolies" coming on board his ship (he was chief engineer) posing as customs and just making drawings. "They are just copying us" he would complain. "They'll never be any good".
In the 80s it was "the Japanese are eating our lunch".
Now it's "the Indians and Chinese are eating our lunch".
In the 30s, it'll be "the Africans are eating our lunch".
Every couple of decades the scare brigade starts clamoring in the US. The US survived the Europeans, the Japanese, etc. eating its lunch; it will survive the Chinese and Indians too.
The US has something that none of its competitors do: a free and open society, where entrepreneurs can flourish.
I have Chinese friends who went back to China and started companies in China; but they made sure that they had kids here first, so that the kids could be American citizens when they grow up. Were it not for the PRC's protectionist policies, many (most?) of the Chinese "success stories" would not have happened.
This is not to say that the US doesn't need to do more. We need to spend more on our universities, our schools and our infrastructure. We need more stress on science and math, and less arguing about "intelligent design". Keep the friggin religion out of our schools, let the kids learn.
The US has something that none of its competitors do: a free and open society, where entrepreneurs can flourish.
I'm impressed that you can say that when the US operates Guantanamo Bay and is actively trying to prosecute Julian Assange of the Wikileaks organization. Not to mention the DMCA, the Patriot Act and all these other laws/organizations designed to constrain the rights of its citizens.
Were it not for the PRC's protectionist policies, many (most?) of the Chinese "success stories" would not have happened.
Those policies work. It sounds like the US should put them into place since they work.
The US has 308 million people. A society this big will have outliers; Gitmo being one of them.
And last I checked, Assange was _not_ in the US. And the ones who are 'actively trying to prosecute Assange' are the _Swedes_ and the Brits; not the US.
The protectionist policies absolutely don't work beyond a small point. If they worked, then Baidu would be the number 1 search engine in Japan, Korea, Russia, etc. Is it?
A (protectionist) wall may keep the outsiders out; but it also keeps the insiders in....
I don't think anyone really believes the Swedes and the Brits are acting independently of the US on this one. But it all seems beside the point, since none of this has to do with business.
"A (protectionist) wall may keep the outsiders out; but it also keeps the insiders in...."
As opposed to our policy, which is to give hundreds of billions of dollars to China every year. That's working out so well! Or are you one of these people that doesnt believe that empires fall, or that an empire can fall simply because it runs out of money?
Ah yes, the "Rome will stand forever" argument. No, wait, it was the "Mongol Empire shall stand forever". No, thats not it. "The Macedonian Empire shall stand forever". Hmm. Or was it "The Holy Roman Empire shall stand forever". No wait, it was the "British Empire shall rule the waves forever".
The European Union is wealthier[1] than the US; Europe as a whole is far wealthier.
You are assuming that a free and open society is a necessary condition for entrepreneurship, innovation, and thus wealth creation. This may not be the case, certainly it has never been proven. Furthermore, you speak about free and open in absolute terms though of course these concepts are relative concepts and cut across many categories. Slavoj Zizek (a European philosopher) has questioned[2] this unspoken connection - as have many others. The idea now is that capitalism with Asian features (by which is meant a capitalist system that does not go hand in hand with multi-party democracy) might actually be more efficient and more voracious than Western style capitalism.
Given the laws passed by congress in the last 10 years you would have to be deaf and blind not to have noticed the increasing hostility[3] towards liberty and openness in the US. In no particular order you have: pervasive wiretapping, the USA PATRIOT act, humiliation at the border, the executive assassination program (of US citizens!), largest prison population in the world in percentage and absolute terms, to name but a few off the top of my head.
I think the US needs to do a little bit more than just rearranging deck-chairs on what ostensibly looks like a ship in danger of sinking.
Between China and India there are over two billion people. If there weren't successful businesses and new inventions coming from them in the future, I would be deeply saddened.
Could we do something about this? Yes. Will "we", and by "we" I mean the government run by rich folks? Never.
But as the rich destroy the social fabric of the USA, they will get their due. The USA is as small to India and China as Britain is to the USA. Britain ruled the world just 70 years ago. It lost its wealth in a massive transfer to the USA industrial machine in WWII. The USA is managing to transfer its wealth quite happily without a war. The difference is, the rich Brits fit in quite well in the USA. Good luck with that in China, rich americans!
What can we do? Protectionism. The rich can show you all sorts of reasons why this doesn't work. Just add "for the rich" on the end of everything they say and its true: "protectionism doesn't work for the rich". I'm not sure we can manage IT protectionism (unfortunately, since this is what I do), but we can manage protectionism for manufactured goods. That's basically our only hope.
If we can get a manufacturing industry going again, we can have a genuine middle class, not funded by debt. That, in turn, can fund education and innovation.
Or we can do what Britain did: "We don't need manufacturing because we have our science, services and financial services". But manufacturing funded our R&D. "Well we don't need science, because we have services and financial services". But our services can be run from India. "Well we dont need a service industry because we have the city of london." So know if you live outside of the spending radii if the 20yr olds earning $5m then you're fucked. Hooker or coke-dealer is the most promising profession for a young brit.
While this is of course sensational all I hear and read supports this.
(California department of corrections outspending department of education, etc, etc).
I think the problem in most of the western world is more general. We cultured societies of "individualists" the flipside of egoists. Most people just do not care what happens one or two generations down the road, they want their services, their money NOW.
32 comments
[ 3.4 ms ] story [ 75.8 ms ] threadThat said, another response that the United States never forgets to use in such challenges is being open to immigration and to foreign investment. If young people in another country stand out and succeed, they are always welcome to move to the United States and set up businesses here. And foreign entrepreneurs are always welcome to sell their products and services here and to set up branch offices or the main corporation headquarters here. The openness of the United States population to immigration and the openness of the United States economy to international trade allows Americans to gain most of the benefits of these trends, even if American-born persons aren't the chief drivers of these trends. The countries whose lunch is really being eaten are those like North Korea, closed both to immigration and to trade, and oppressed by dictatorial governments.
What did you mean, that the people are open to immigration? Then maybe. But if you are talking about govt. policy, this is not correct. The united states is not at all open to immigration.
It's not open to all immigration, which is different.
IMHO, it would be much easier to get founder's visas and the like if they weren't tied (by their advocates) to allowing mass immigration of low-income folk.
Well, since I'm living with a counterexample right in my own home, I'd certainly expect you to come forward with more evidence than that to back up such a broad assertion. First of all, what example do you have in mind of a country that is much more open to immigration than the United States is? What are the rules on immigration in that country?
More to the point of the submitted article, which is an interesting restatement of the usual views of Vivek Wadhwa, where is the evidence that the United States lacks for visas to be offered to highly inventive, entrepreneurial people from China or from India? What country in the world does better than the United States in bringing in immigrants with those characteristics?
(Yes, I used to be an immigration lawyer, although I have not practiced in that area of law in recent years.)
This question has been answered several hundred years ago by David Ricardo, but others as well. This is not some crazy economic theory that is debatable today, its taken as fact by almost all economists. Economics makes takes no notice of national boundaries, they have no meaning.
I would encourage everyone to learn about some basic international economic theory, trade theory specifically. Knowledge shows that this article is total BS.
Xenophobia will not take us to the land of milk and honey.
> _international economic theory, trade theory specifically_
Do you have any good resources for this? Preferably free? Trying to expand my brain here ;)
http://iang.org/free_banking/david.html
http://www.netmba.com/econ/micro/comparative-advantage/
http://www.econlib.org/library/Topics/Details/comparativeadv...
http://www.econ.umn.edu/~lepetyuk/Econ1101/lecture12.pdf
http://www.flatworldknowledge.com/pub/international-trade-th...
Searches on "international trade comparative advantage" will turn up some more links, as will combinations of other search terms with the two words "comparative advantage." I hope these links get you started in your admirable efforts at self-education.
The Wikipedia page looks like a good overview: http://en.wikipedia.org/wiki/Heckscher%E2%80%93Ohlin_model
Most insights into the benefits of trade can be seen in the Ricadrian comparative advantage model (see post above).
To put this in hacker terms, these simple rules are about as simple as the http protocol. Now imagine the software that implements this simple protocol. Think of all the different ways to exploit it. Now imagine all the complex systems that can be created using these simple rules. Now add hackers, DDOS, government censorship, wikileaks, peering disputes, etc.
Economists would have us believe that these simple rules are "how it is". Now imagine the millions of people it takes to actually implement these simple rules. Imagine what it takes to actually make wine in Portugal. Now add that these people want pensions. Now include that these simple rules assume currency equivalence, or something like the gold standard to mediate production disparities. Now add the governments on top of this "protocol".
To believe this "proven economic theory" you have to live in a virtual machine.
These genius suggested buying a house on an adjustable rate mortgage, at the peak of the market, when interest rates were the lowest they'd ever been. Bravo. Apparently, even the best economist in the USA is unable to see a bubble when its staring him in the face.
Fuck economists and their religion. Welcome to HN: where people have brains, can do math, and critical thinking.
Which is to say, if that if we have something that a Chinese superpower wants, they'll take it by force, or by installing a puppet government, and if we don't, then good luck buying those medicines: they are 10000yn, with $10 to the yn.
The "economists" who take your statements as fact do so because they are paid to do so. The ones who advocate protectionism are dismissed as communists or marxists.
The trade theory you talk about assumes a balance of payments, required by something like the gold standard, which simply doesn't exists now. This is economic war and the USA is losing. I did some International Relations at Cambridge University. You should try thinking instead of just "accepting as fact".
Here's a positive view on U.S education standing: "The amazing truth about PISA scores: USA beats Western Europe, ties with Asia." http://super-economy.blogspot.com/2010/12/amazing-truth-abou...
I agree and am happy with the growth and flourishing of the entrepreneurial communities in foreign nations. But the picture is sometimes too rosy. I'm no expert, but this article poses some useful questions about China and India's future: http://www.bloomberg.com/news/2010-12-28/advanced-economies-...
The bearish view from the article:
"Some demographers say China and India are decades away from becoming advanced economies. “Both countries are still very, very poor,” said Jane De Lung, president of the Princeton, New Jersey-based Population Resource Center. “China is growing by leaps and bounds, but the majority of the Chinese still live in very poor and poverty- stricken areas. You don’t have widespread economic growth outside the cities in either country.”"
Ultimately, the U.S., China, and India each have their own strengths and can hopefully cooperate in a way where it's not one versus the other, but rather, together helping move innovation and the world economy forward.
http://en.wikipedia.org/wiki/Programme_for_International_Stu...
I am not trying to say that Chinese startups don't have good ideas. But why do they have to blatantly copy US startups that are successful? Obviously, startups inspire each other, but I will posit that what is lacking in China to a certain extent is:
1. Creativity, which leads to a strong tendency to generate knock-offs of Western companies or products. This includes both software and hardware. 2. Openess or ability for people with good ideas to step forward and actuate them. The Chinese educational system is segmented and once you are on a certain path there is not really the ability to change or reinvent oneself as easily as in the West.
Look at Twitter, Apple, and many of the other companies at the forefront of tech and business. The leaders and visionaries behind these companies were not necessarily formally trained in what they are doing cause who can be trained to be a trendsetter! No way. There can only be the right environment for innovation which needs creativity, access to resources, and lots of hard work.
I speak as someone trained in the US in philosophy and politics but learned software development as an afterthought and am building companies and products. Someone like me could not exist in China and to a lesser extent in India due to their narrow-minded educational systems.
I wish founders and developers across the world the best of luck in their endeavors, but know that me and my non-traditional founder compatriots here in the US will compete with you and compete hard!
Because the US startup had a good idea but made it US-only and/or English-only. It's like 20 years ago when Detroit was complaining that it didn't sell many cars in Japan, one factor (there were many others) was that Japanese drive one the left-hand-side of the road and the US car-makers didn't make right-hand-drive models.
With physical businesses (like zipcar or netflix) it's hard to build infrastructure everywhere at once but don't comlain if you ignore 6.5 billion customers ( 1 billion of whom are "rich" ) to concentrate on 310 million and somebody else decides copy you.
He passed away before he had to see this: http://www.flickr.com/photos/jimmyspics/420430027/
Every couple of decades the scare brigade starts clamoring in the US. The US survived the Europeans, the Japanese, etc. eating its lunch; it will survive the Chinese and Indians too.
The US has something that none of its competitors do: a free and open society, where entrepreneurs can flourish.
I have Chinese friends who went back to China and started companies in China; but they made sure that they had kids here first, so that the kids could be American citizens when they grow up. Were it not for the PRC's protectionist policies, many (most?) of the Chinese "success stories" would not have happened.
This is not to say that the US doesn't need to do more. We need to spend more on our universities, our schools and our infrastructure. We need more stress on science and math, and less arguing about "intelligent design". Keep the friggin religion out of our schools, let the kids learn.
I'm impressed that you can say that when the US operates Guantanamo Bay and is actively trying to prosecute Julian Assange of the Wikileaks organization. Not to mention the DMCA, the Patriot Act and all these other laws/organizations designed to constrain the rights of its citizens.
Were it not for the PRC's protectionist policies, many (most?) of the Chinese "success stories" would not have happened.
Those policies work. It sounds like the US should put them into place since they work.
The protectionist policies absolutely don't work beyond a small point. If they worked, then Baidu would be the number 1 search engine in Japan, Korea, Russia, etc. Is it?
A (protectionist) wall may keep the outsiders out; but it also keeps the insiders in....
As opposed to our policy, which is to give hundreds of billions of dollars to China every year. That's working out so well! Or are you one of these people that doesnt believe that empires fall, or that an empire can fall simply because it runs out of money?
No, I got it, its "The USA shall rule forever!"
Some things to think about:
The European Union is wealthier[1] than the US; Europe as a whole is far wealthier.
You are assuming that a free and open society is a necessary condition for entrepreneurship, innovation, and thus wealth creation. This may not be the case, certainly it has never been proven. Furthermore, you speak about free and open in absolute terms though of course these concepts are relative concepts and cut across many categories. Slavoj Zizek (a European philosopher) has questioned[2] this unspoken connection - as have many others. The idea now is that capitalism with Asian features (by which is meant a capitalist system that does not go hand in hand with multi-party democracy) might actually be more efficient and more voracious than Western style capitalism.
Given the laws passed by congress in the last 10 years you would have to be deaf and blind not to have noticed the increasing hostility[3] towards liberty and openness in the US. In no particular order you have: pervasive wiretapping, the USA PATRIOT act, humiliation at the border, the executive assassination program (of US citizens!), largest prison population in the world in percentage and absolute terms, to name but a few off the top of my head.
I think the US needs to do a little bit more than just rearranging deck-chairs on what ostensibly looks like a ship in danger of sinking.
[1] https://www.cia.gov/library/publications/the-world-factbook/...
[2] http://topdocumentaryfilms.com/living-end-times-slavoj-zizek...
[3] http://www.historycommons.org/timeline.jsp?timeline=civillib...
But as the rich destroy the social fabric of the USA, they will get their due. The USA is as small to India and China as Britain is to the USA. Britain ruled the world just 70 years ago. It lost its wealth in a massive transfer to the USA industrial machine in WWII. The USA is managing to transfer its wealth quite happily without a war. The difference is, the rich Brits fit in quite well in the USA. Good luck with that in China, rich americans!
What can we do? Protectionism. The rich can show you all sorts of reasons why this doesn't work. Just add "for the rich" on the end of everything they say and its true: "protectionism doesn't work for the rich". I'm not sure we can manage IT protectionism (unfortunately, since this is what I do), but we can manage protectionism for manufactured goods. That's basically our only hope.
If we can get a manufacturing industry going again, we can have a genuine middle class, not funded by debt. That, in turn, can fund education and innovation.
Or we can do what Britain did: "We don't need manufacturing because we have our science, services and financial services". But manufacturing funded our R&D. "Well we don't need science, because we have services and financial services". But our services can be run from India. "Well we dont need a service industry because we have the city of london." So know if you live outside of the spending radii if the 20yr olds earning $5m then you're fucked. Hooker or coke-dealer is the most promising profession for a young brit.
(California department of corrections outspending department of education, etc, etc).
I think the problem in most of the western world is more general. We cultured societies of "individualists" the flipside of egoists. Most people just do not care what happens one or two generations down the road, they want their services, their money NOW.