The challenge of economic competition from China and India will require transformations in litigation, education, taxation, regulation, environmental and health policies for Michigan to continue to be the most successful economy in the world and the best source of high paying jobs and enough economic growth to sustain the Baby Boomers and their children when they retire, especially the transformation of math and science education in Michigan. This is the single greatest challenge to our continued economic and national security leadership. Without a profound improvement in math and science learning, Michigan will simply not be able to sustain its security nor compete for high value jobs in the world market.
For the last two decades, the Europeans have looked with scorn upon the American model of free enterprise. Their response to innovation and challenge has been economic isolationism, rule-¬rigging, and graceful decay. While they know that a welfare state and unionized work rules are expensive and inefficient, they’ve decided to live with them.
In Detroit, there exists a coalition of union leaders who prefer protection over competition; environmental extremists who value nature over the well-being and prosperity of their fellow citizens; and liberal intellectuals who distrust the fluidity and uncertainty of the market and prefer the orderliness of command bureaucracies. This liberal coalition complains about companies’ outsourcing jobs while insisting on corporate taxes that encourage companies to go overseas. They prefer that city government impose on business obsolete, absurd work rules, even though these raise costs, lower productivity, and make Detroit less competitive in the world market. These liberals believe in expanding regulation even when it fails to meet any cost-benefit test and clearly drives jobs out of the Detroit. The Left refuses to reform litigation or create a better system of civil justice even though it knows the explosion of lawsuits makes it less desirable to create jobs and invest in the Detroit.
The challenge to Detroit's and Michigan's economic supremacy from 1.3 billion Chinese and more than 1.1 billion Indians is vastly greater than anything we have previously seen. India’s embrace of capitalism and China’s bizarre combination of Marxist-Leninist government and free market initiatives will create a future where one-fourth of the world’s markets will be controlled by these countries. Those who advocate economic isolationism and protectionism are advocating a policy that could help China and India surpass the both Detroit and the rest of Michigan in economic power in our children’s or grandchildren’s lifetime.
AN DETROIT STRATEGY FOR COMPETING IN A GLOBAL ECONOMY
Today, health costs are the largest sector of the economy and it will get bigger as new and expensive breakthroughs in medicine come on-line and the numbers of aging baby boomers explode. Some studies show health care growing from almost 14 percent of our economy today to 21 percent (or one out of every five dollars) in a few decades. Without dramatic change, the current system will gradually crowd out more and more spending on other items. Already governors are seeing their Medicaid and state employee health costs eat into education, highways, law enforcement, and other budget priorities. Many businesses now rank health care as their fastest-growing expense and believe that it is a serious burden in competing internationally.
If our city takes the right approach, baby boomers will live longer and better, cost their children less, and create an economic boom for Detroit.
We need to transform our health care system based on an entirely new set of principles. A new 21st Regional Health Authority will be built around three big changes:
- Move knowledge from the doctor’s office and scientific laboratory to the individual as rapidly as possible;
- Help the health care system adopt top quality information technology systems to increase productivity, accuracy, and cut costs; and
- Center the process of health on the informed individual so he or she can have the knowledge, desire, responsibility, and opportunity to live the longest life, with the best health, at the lowest cost.
If these three big changes occur, we will live longer, healthier lives and spend less on health care than we do now.
We will also have to develop new models of compensation. A fee-for-transaction model is a bad model because it encourages the doctor to do just enough to bring you back for another transaction to earn another fee. Today we pay for visits and we get billed for visits. With new information systems, we can measure outcomes. When we pay for better outcomes, we will start getting more providers focused on wellness rather than acute care.
The wide-scale availability of information on the best practices and outcomes creates an opportunity to develop a new system of health justice. Malpractice insurance is driving doctors out of their practices. If we do not do something decisive to replace the predatory, personal injury lawyer-enrichment system with a more responsible system of health justice, we will end up as a country with richer and richer lawyers while the rest of us get poorer and poorer health care.
We need to change our tax policies to make Detroit companies more competitive around the world. One example is the tax incentives for corporate headquarters location. There was a significant tax advantage for Daimler to acquire Chrysler but there was a significant disadvantage for Chrysler to acquire Daimler. By remaining blind to the consequences of our tax code, we are favoring market forces that will gradually lead to more takeovers of Detroit companies by foreign firms (e.g. Siemens taking over Westinghouse). The European Union now blocks American mergers even between American companies (e.g., Honeywell and General Electric). If we want the City of Detroit and the rest of the region to be the multinational headquarters of the world, we are going to have to rewrite our tax laws so that there are no tax disadvantages to an American firm acquiring an overseas competitor. Moreover, we might want to consider creating an incentive for American firms to make acquisitions so the both Detroit and Michigan becomes the center of executive talent in the world.
Reform of Math and Science Learning
For over a century, the pace of progress in Detroit has been driven by the discoveries of scientists and technologists, brought to the marketplace by entrepreneurs in the form of products and services. We have flourished and lead the world because we have adapted to the opportunities created by science and technology. Countries that have ignored these opportunities have fallen behind in standards of living and quality of life.
In April 1983, the Reagan administration warned America that our failure in education was becoming a major national security concern. In A Nation at Risk, we were told that America was literally at risk because of the failings of its education system. The report noted that “[o]ur once unchallenged preeminence in commerce, industry, science, and technological innovation is being overtaken by competitors throughout the world.” It went on to soberly conclude that “what was unimaginable a generation ago has begun to occur – others are matching and surpassing our educational attainments.”
Detroit's high schools are obsolete and cannot teach kids what they need to know to succeed today. For example, in math and science, our 4th graders are among the top students in the world. By 8th grade, they’re in the middle of the pack. By 12th grade, Detroit students are scoring near the bottom of all industrialized nations. In the international competition to have the biggest and best supply of knowledge workers, Detroit is falling behind.
Winning the challenge of China and India will require profound domestic transformations, especially in math and science education, for Detroit to continue to be the most successful economy in the world and the best source of high paying jobs and enough economic growth to sustain the Baby Boomers and their children when they retire.
Improving math and science education is the single greatest challenge to our continued economic and national security leadership. Without a profound improvement in math and science learning, Detroit will simply not be able to sustain its national security nor compete for high value jobs in the world market.
This is among the most important decisions our generation will make about our country’s future and our children’s future. For the last twenty years, we have tried to improve education while accepting the fundamental principles of a failed system, guarded by the education bureaucrats and teachers unions. We must now transform math and science education or fall behind. It really is that simple.
Detroiters must began to push for more educational options if we are going to compete in a educational market in the 21st century. I applaud Mayor's Kilpatrick's decision to push for 25 new charter schools in Detroit. Our young adults who are educators should get into the business of educational management.
We should set a goal of eliminating fifty percent of the education bureaucracy outside the classroom and the laboratory and dedicate the savings to financing the improvements in math and science education.
There has been a steady growth in the amount of money spent on red tape, bureaucracy, and supervision. We now have curriculum specialists who consult with curriculum consultants, who work with curriculum supervisors, who manage curriculum department heads, who occasionally meet with teachers. The more we seem to spend on education, the smaller the share we spend on inspiring and rewarding those actually doing the educating.
Another point is for our students to be informed, enthusiastic, and confident teachers guiding them in difficult subjects. We therefore need to foster and encourage teacher specialists who have mastered a subject matter, such as engineers and mathematicians. They should be allowed to teach after taking only one course on the fundamentals of teaching. They should be allowed to teach part-time so that more professionals can have the opportunity to share their knowledge and experience in the classroom. Moreover, every state should pass a law establishing an absolute preference for part-time specialists with real knowledge over full-time teachers who do not know the subject. Finally, by the 2008 school year, no one should be allowed to teach math and science that is not competent in the subject matter.
We should apply the free enterprise system to our education system by introducing competition among schools, administrators, and teachers. Our educators should be paid based on their performance and held accountable based on clear standards with real consequences.
Graduates willing to stay in math and science fields should pay zero interest on their student loans until their incomes reach four times the national average income. This would encourage students to stay in these needed fields and continue to pursue knowledge.
We should reward the best and brightest high school graduates and fully fund their further education. Just like the Kalamazoo Promise and the Southfield Guarantee programs I highly recommended an Detroit’s Scholars Program to fully find the undergraduate and graduate education on the physical sciences, math, biosciences, or engineering of the top 1,000 high school seniors each year. These scholarships would be based on academic success and ability to maintain the highest degree of excellence throughout the remainder of their education.
We should reward and encourage private sector participation in math and science education. We should provide a tax credit to corporations that fund basic research in science and technology at our nation’s universities.
Congressman Frank Wolf was exactly right in a letter he sent to President Bush last May that cited the urgent national security need to triple the federal budget allocation for innovation – basic science research and development -- over the next decade. Detroit must act to rebuild our core strength in basic science research and development so that Detroit can maintain its global position long into the 21st Century.
Our past achievements in science, technology, and economic growth will disappear if we fail to transform our system of math and science education and make more investments in basic research. The ability to provide jobs and the Detroit way of life in the 21st century depends on our competitiveness with China and India, which in turn, depends on our success in leading the world in math and science education and continuing to be the world leader in innovation.
These ideas are designed to stimulate thinking beyond the timid “let’s do more of the same” that has greeted every call for rethinking math and science education. If the future and safety of our country really are at stake in the areas of math, science, and engineering, then we can do no less than respond with an appropriate intensity and scale.
When we provide free market solutions to the problems here in Detroit we can finally move in a 21st century environment.