Why Obama Needs A Competitiveness Audit

President Obama is talking about ‘insourcing’…bringing jobs back into this country again. That’s great.

But can insourcing really create enough jobs to make a difference? That depends on how on whether  the U.S. is becoming competitive in a  broad range of industries, or whether it’s a limited phenomenon.

That’s why PPI has proposed a Competitiveness Audit as an essential part of a job-creation strategy.

The Competitiveness Audit will compare the price of selected imports with the comparable domestically produced goods and services. That will tell us the size of the ‘price gap’ between imports and domestic production.

The initial results of the Competitiveness Audit will enable us to identify industries that are globally competitive (domestic prices are below import prices, so the price gap is negative); industries that are currently uncompetitive (domestic prices are significantly above import prices); and industries that are ‘near-competitive’ (domestic prices only slightly above import prices).

The results of the Competitiveness Audit will enable businesses and economic development agencies to target their insourcing efforts to industries that are ‘near competitive’, where a bit of government help could make a big difference.

Why We Need A Competitiveness Audit

In a new PPI policy brief, Diana Carew and I have proposed that the government undertake a ‘Competitiveness Audit’:

In this global economy, we need to know which industries are internationally competitive, which ones aren’t, and whether the gaps are closing or widening. Unfortunately, the reality is this data currently does not exist. And what we don’t know hurts us, because it prevents us from pursuing effective strategies for boosting US jobs.

Although the government collects reams of economic data, it doesn’t measure what’s most vital to our ability to reverse America’s jobs decline: how our goods and services stack up against those of China and other competitors in terms of price.

You can’t fix what you can’t measure. We need a new national jobs strategy that begins with an accurate way of measuring America’s competitive prowess, on an industry-by-industry basis.

We suggest that at a relatively low cost, a Competitiveness Audit can be used as the basic of a carefully targeted job strategy on both the national and regional levels. If we know what industries are ‘near-competitive’, those are the ones where targeted government help can have the biggest bang for the buck.

“Implausible Numbers”: A new paper, plus charts

I’ve been busy putting together a new paper titled “Implausible Numbers: How our current measures of economic competitiveness are misleading us and why we need new ones” It’s accompanied by a Competitiveness chartbook. The two should be read together.

These are draft work-in-progress, so I’d be very interested in getting comments.