Another Perspective

Innovation Nation

That's what Romney's selling. Will the Mitten go for Mitt?

By 1.13.08

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If there is one blessing in the Republican presidential contest so far, it is that no one serious candidate has been eliminated. That means a longer debate with more emphasis on issues that matter to John and Jennifer Q. Voter. Like, say, the economy.

In no state is the economy more important than in that snowy Mitten, Michigan, which has a primary coming up tomorrow. Fortunately, one expatriate from the state, Massachusetts's Mitt Romney, still has enough capital, both venture and political, to lead the charge for the kind of economic changes that would play well there and across the country.

Why? Because globalization is going to be a serious issue in this election, with claims that China and other low wage countries are stealing everything from our jobs to our firstborn children. For the first time, this is not just a fringy Democratic issue, championed by class warfarists like John Edwards. Mike Huckabee, for one, argues that the world trading system is tilted unfairly away from the United States. Many rank-and-file Republicans, and even a few old party hands, nod their heads in vigorous agreement.

The issue isn't as simple as a binary choice between free trade and protectionism. Recent research suggests that workers do not swiftly reallocate between industries. This is a problem that, fortunately, can be addressed in a number of ways. Most candidates have come around to backing some sort of increased income and training assistance for workers who've been displaced by international competition, but those measures are only a salve.

Mitt Romney and John McCain both advocate innovation and research and development credits to supplement their defense of free trade. This seems sensible. Foreigners will buy American products only when we create the best products available at the right cost.

Given the high wages we pay to our well-educated workforce, this will only occur if America is on the cutting edge. One needs look no further than Boeing to see how this works. The company innovated, big time, and is currently backlogged with orders until 2015.

Encouraging innovation and research is a far cry from more left-leaning solutions, whether vigorously espoused by the son of a North Carolina mill worker, or slowly approached by that bass thumpin' Baptist minister. Increased trade protections, even minor ones, will only delay necessary innovation.

The current state of the U.S. Steel Industry shows how temporary protectionist measures, also known as "safeguards," have done next-to-nothing to expedite adaptation to globalization. Duties and tariffs will do nothing to bring back firms and jobs that have already vamoosed. And more serious measures, like canceling or rewriting NAFTA, would be utterly disastrous.

Superficially, McCain and Romney take similar approaches to these issues, but Romney is much more likely to actually follow through. He has made a fortune for himself by taking over organizations in financial trouble that have fallen out of favor with consumers. The U.S. comes eerily close to this description.

Innovation is Romney's motivation and his mantra. Unlike our current CEO-in-chief, he actually craves information, not opinion; analysis, not conjecture. More often than not, he has succeeded. And one Romney virtue that often goes unmentioned is that he actually admits to making mistakes and learns from them.

Mitt also has a long and credible history of improving the efficiency of organizations, and is the only candidate that intelligently advocates streamlining of government agencies and services. He advocates tax cuts, most of which are targeted at middle income and other ready to spend Americans. This is characteristically spun as an attempt to "starve" government services. The charge assumes that the process itself can't be made more efficient, and ignores basic incentives that are the catalyst for more efficient organizations. It's possible that we could provide the same or greater services subject to a lower tax burden, with the right leader to spur that change.

McCain has no background in business and tends to bridge economic issues with other issues. He recently invoked "Judeo-Christian values" as the motivation for helping struggling workers. The speech was given in the strongly religious western-half of Michigan, but it's unclear what religious values have to do with the economy. Maybe he wants to follow unemployment all the way to the gates of hell.

That approach might work for other issues, or in states in which the economy is not suffering. But will it sell in a state that demands serious solutions, against an opponent who can back up his talk with experience and proven results?

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About the Author

Alan Spearot is a Michigan native and assistant professor of international economics at the University of California, Santa Cruz.