Is America Losing Its Edge?

Giving up on high-tech manufacturing could stifle innovation.

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America's dominance of the technological landscape is shrinking fast, says Richard Elkus, a longtime Silicon Valley exec (he introduced the first VCR). The problem, he argues in Winner Take All: How Competitiveness Shapes the Fate of Nations, is that by abdicating high-tech manufacturing, America handed more astute nations the tools to produce the next big technological leap forward. Excerpts from a chat with U.S. News:

What's your book's thesis?
When the Second World War ended, the United States represented basically every product and technology that existed. Over time, manufacturing that was fundamental to innovation left the country. There are just not a lot of productive assets left that offer us that same kind of economic strength.

Specifically, what makes homegrown electronics so important?
The industries I'm talking about—information technology, displays, semiconductors, and consumer electronics—infuse virtually every other product and market. If the U.S. loses its ability to be a leader in the world of information, its other goals are not possible.

Can't innovation still thrive?
Innovation doesn't come out of the ether. It takes all kinds of individual products and technologies converging before something pops up that you would've never thought possible. It comes out of understanding, technologically and otherwise, how things really work. In the U.S. now, if you have a really good idea, you'll commercialize it in Asia, so the [knowledge] benefit doesn't accrue to the U.S. We're losing the technological base to advance the state of the art.

Can America regain the lead?
It took maybe $2 million to set up a line in the 1970s to make televisions. Today, to build up a single facility to make flat-screen displays costs $3.5 billion. Now, to try and catch up, the costs are absolutely huge.

How do we fix the problem?
Management has to convince investors that it's worthwhile to keep a reasonable portion of the productive base in the U.S.

Long-term thinking isn't Wall Street's forte.
That's why you have to have a government, starting with the president, that can convince the American people—and, in particular, the investing public—that this logic really does work. It has to come from the top, because individuals invest for the short term.

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  • Kirk Shinkle

    Kirk Shinkle is a senior editor for U.S. News Money and manages the Best Funds portal. Follow him on Twitter @KirkS or email him at kshinkle@usnews.com.