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Updated Monday, December 10, 2012 at 02:16 PM

Seattle competitive today; what about future?

By Jon Talton
Special to The Seattle Times

Once again, we place well in a gold-standard measure of competitiveness, the 2012 State New Economy Index produced by the Information Technology and Innovation Foundation.

Washington ranks No. 3 overall in a survey that examines a comprehensive set of metrics in knowledge jobs, globalization, economic dynamism, the digital economy and innovation capacity. The state fell one notch from the 2010 index.

The report says, “Washington state ... scores high due not only to its strength in software and aviation, but also because of the entrepreneurial hotbed of activity that has developed in the Puget Sound region, and heavy use of digital technologies in all its sectors.”

Like all the top performers, we enjoy a high concentration of well-educated knowledge workers, an export orientation, infrastructure to support innovation and a high quality of life, and we are a magnet for highly skilled immigrants.

Two areas where we didn’t shine were foreign direct investment (ranking 32nd) and job churning (46th).

The latter measure can be a window into startups and failures, the overall result being a more dynamic economy. But I suspect the stability of firms such as Microsoft and Boeing influences our ranking, and No. 1 Alaska is no Silicon Valley on the rise.

But hold the cheers, because the overall message from the report that accompanies the new index is somber. A section in the introduction is called “The Evidence of Competitive Decline.”

That evidence is compelling. For example, in 2010 the Boston Consulting Group ranked the United States only eighth in innovation-based competitiveness, including research and development, venture capital and numbers of scientists and engineers.

The World Economic Forum’s Global Competitiveness survey placed America at No. 7 this year.

Historically, the United States had led in these categories for a century.

The slippage is most notable since 2000, and especially in manufacturing, the most important anchor for creating the greatest wealth, high-wage jobs directly and numbers of other jobs indirectly. It’s a multiplier that can’t be matched by low-paying service jobs.

American manufacturing employment dropped an astonishing 33 percent between 2000 and 2011, a loss exceeding that of the Great Depression.

One example: In 1998, the nation held 29 percent of printed circuit-board production, but only 8 percent by 2009. American dominance in machine tools, an acme of high-end manufacturing, “has evaporated.”

Sustainable technology has fared no better. The United States controlled 30 percent of the solar-panel market in 1999 but less than 6 percent in 2008.

Entrepreneurship in this area of the economy has withered. No year since 2001 has seen more manufacturing openings than closings.

Manufacturing investment and plant relocations have also declined dramatically.

“While manufacturing is hard hit, isn’t the U.S. high- tech industry doing well? Not really,” the report states. “After running a trade surplus for decades in high-tech products, the United States began to run a trade deficit in this sector in the 2000s.”

One big hope, according to the think tank, is to make a transition from the low-pay, low-skilled jobs dominating job creation now and traditional manufacturing to “a 21st century mix of employment in high-tech fields, such as biotechnology, clean energy, information technology, nanotechnology and advanced manufacturing.”

In other words, for more states to become like Washington and more metros to become like Seattle.

It’s good aspirational stuff, with solid benchmarks. But I’m not sure it’s enough.

The Puget Sound region, for all its strengths, is only a few Chinese leaps in software, airplanes and biotechnology from becoming Akron, Ohio, with ferries.

I overstate only a bit.

Places such as Akron and Dayton once stood astride their key industries, and much of the industrial Midwest reinvented itself smartly in the 1980s and 1990s from the Rust Belt to highly advanced and diverse manufacturing.

The dragon in the room is China’s entry into the World Trade Organization but insistence on playing by its own set of protectionist rules.

We once used a similar approach, the “American System” of Alexander Hamilton, Henry Clay and Abraham Lincoln.

Thus, until we have a more intelligent response to Beijing’s trade policies, we will continue to lose high-end jobs. This will be exacerbated if D.C. pursues a destructive agenda of austerity.

Meanwhile, other places can indeed learn from our region’s many advantages. Replicating them will be hard.

Not every place can have Bill Luck (Boeing and Gates) or our amazing economic diversity. Setting up a few stalls in your town won’t create, as I have heard many times, “the next Pike Place Market.”

Yet our crown should lie uneasy. The world wants what we have and will take it unless we continue to focus on building and extending our strengths.

You may reach Jon Talton at jtalton@seattletimes.com

TOP PERFORMERS

States with the best overall scores in the New Economy Index:

1. Massachusetts

2. Delaware

3. Washington

4. California

5. Maryland

6. Virginia

7. Colorado

8. Utah

9. Connecticut

10. New Jersey

14. Oregon

24. Idaho

28. Alaska

50. Mississippi

Source: Information Technology and Innovation Foundation


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