Economic Hopes Linked To Gains In World Markets

March 31, 2008
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HOLLAND — America’s days as a dominating economy are numbered if the country does not change its business philosophy.

That was the message of University of Texas at Austin professor John Doggett, who spoke recently on the relationship between the U.S. and emerging markets such as China, India, Russia and Brazil at the Haworth Inn & Conference Center in Holland. Doggett is a former lawyer with an MBA who teaches courses in global competition, international entrepreneurship and sustainability.

Speaking to the Business Journal prior to appearing at an Energy Week event sponsored by Holland WEST (Windmill on Every Steeple Team), Doggett stressed this country’s need to change its focus to innovation in order to stay competitive on the global scene.

“If we focus on trying to protect the industries of the 20th century instead of creating industries for the 21st century, it’s not going to be fun,” said Doggett.

As the economy grows in areas with large populations, like China, so does the need for energy. Doggett quoted a report by the International Energy Agency saying the demand for new power will exceed $20 trillion in the next 30 years.

Supply is in high demand for new energy sources such as wind turbines, and he believes Michigan can capitalize on that opportunity by manufacturing parts and products for the new energy sources. He pointed to the state’s long legacy of heavy manufacturing as being ideal for these industries.

Another new source of energy that Doggett feels holds potential is “ocean power”: harnessing the power of the tides to create energy. Doggett refers to this new energy as “free energy,” meaning it is not dependent on sunlight or wind, but on the consistent relationship between the moon and ocean that will always create a tide.

Harnessing ocean power would create a massive new demand for manufacturing, according to Doggett. He also believes upkeep of renewable energy equipment and the increasing efficiency of solar and wind power will help provide longer-lasting opportunities in the industry. He used solar panels as an example, stating that consumers are likely to replace what they are currently using with more efficient panels.

However, Doggett sees the production of renewable energy as just one way the U.S. can gain ground in the global economy. As the economy goes up in these emerging markets so does the standard of living. China has seen dramatic increases in its middle class. In 1980 the average monthly income for a Chinese citizen was $15, but “we saw people driving Bentleys, Ferraris and Porsches,” Doggett said, referring to a recent trip he and his students took to China.

According to Doggett, one way the new “middle class” of emerging economies shows off its social-economic status is through buying brands, particularly foreign brands. He noted Wal-Mart plans to have more stores in China than in the U.S., that 40 percent of all iPhones are sold to buyers outside the U.S., and that Cadillac dealers are seeing significant growth in China. He believes the success of Apple and Cadillac is largely due to the creation of innovative products with high performance and intriguing design.

“We have to create products that are so exciting to the market that people say, ‘We want it’ — period, end of conversation, and create products that are hard to imitate.”

Although these emerging economies appear to have come from nowhere, Doggett said, the economic development began many years ago. For China, it was in 1978, when the country moved away from a communist approach and toward capitalism. For India, it was in the early 1990s, when the country was about two weeks from going bankrupt, he said.

Doggett feels China has experienced more success than India, Russia and Brazil because it has made the most change. He said China followed the lead of Singapore and Chile by releasing government’s hold on business and supporting companies to be as successful as possible. In return, business is not allowed to get involved with politics.

For many years the U.S. has experienced so much success that it has been lulled to sleep, said Doggett, but these emerging markets provide a loud wake-up call. Doggett compared the relationship between emerging economies and the U.S. to the University of Michigan’s loss to Appalachian State during the past football season: “Think about what it did to Michigan’s sense of complacency when Appalachian State came into the Big House. It was a wake-up call that nobody can ignore. What’s happening with China, what’s happening in India is the same thing. They’re like Appalachian State on steroids. Instead of being a small school in the middle of nowhere, they’re a country that has four in a half times more people than we do.”

In the same way U-M changed its philosophy and hired a new coach, said Doggett, the U.S. needs to change its economic approach.

“We have a great chance to continue to grow our economy, but we’re going to have to be innovative.”

In order to plan for the future, he believes U.S. citizens need to be excited about new industries rather than fearful. They need to be more aware of what is going on outside of America, and the educational system needs to be altered, he said.

“We need to understand that innovation requires education, and it has to be education for thinking,” he said. “Standardized tests only teach us how to memorize things. There are a whole lot of (Appalachian) States at the door. They’re a lot larger than we are, and they want to win.”

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