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Business Trailblazer and Case Donor Tells America: “Get Competitive”

Thursday, March 25, 2010 at 9:37 PM

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A former top manager of Microsoft Corporation says that the U.S. is falling behind on the world stage of global competitiveness, and needs to make dramatic changes to keep what little competitive edge it has left. Robert Herbold delivered his markedly free market, pro-business message to students at Case Western Reserve University Thursday. Earlier, ideastream's Bill Rice queried him on what specific changes he recommends.

{Robert Herbold says the U.S. doesn’t enjoy the advantages it once had when it was the undisputed industrial powerhouse of the world.  Today, he says, other countries, especially in Asia, have emerged from economic obscurity, and are aggressively asserting technological leadership and creating high value jobs. 

Herbold:  “These other countries are producing ten times the number of engineers per year that we are, and so not only is manufacturing going to areas where it’s more efficient, lower cost with equal effectiveness, but now product development and R&D are moving to those areas as well since they have the talent.”

That’s produced a thriving middle class in Asia that’s now twice the size of that in the U.S., Herbold says, and Americans should wake up to that fact if they want to stay competitive.  He recommends several areas of change, the first being taxes on businesses.  They’re too high in the U.S., he says - 35 percent - while places like Ireland, Switzerland, Malaysia and Singapore are far lower.

Herbold:  “Most multinationals actually don’t pay a lot of U.S. taxes.  And the reason why is you leave your profits out in the hinterlands, and don’t bring them back here.”

Instead, Herbold says, you take them someplace where the tax rate is, say, only ten percent.  He points out that Congress is considering taxing even those profits - not, in his view, a good idea. 

Herbold:  “I’m on the board of a multinational company for the last two audit committee meetings.  We’ve prepared ourselves that if that becomes law we’ll move our company headquarters to Switzerland.  You just can’t put up with a 35 percent tax rate, that just doesn’t work when there are other countries willing to do better.”

Herbold also recommends big changes in education, starting with reigning in teachers unions and instituting a straightforward pay-for-performance system - an idea that’s gaining support from the Obama administration. 

Herbold:  “We should be taking the bottom 5 to 7 percent of our teachers every year and telling them they’re not suited to teaching and release them and put good talent there and continue to strengthen the core of teachers.  All that is banned by the teachers unions, and we could do something about that.”

Finally, Herbold says the U.S. Government should put far more resources into research and development.

There is one over-arching theme in Herbold’s prescription that he says Americans should take to heart:  the U.S. standard of living is, for most, too high given what they produce.  He says hard work and innovation have been the backbone of American success, and too many expect the government to take care of them at too great an expense. 

Robert Herbold is retired Vice President and Chief Operating Officer of Microsoft, and holds a PhD in Computer Science from Case Western Reserve University. He gave a lecture there Thursday titled “Does the U.S. Realize It’s In Competition? How America Can Keep Its Edge In the Age of Globalization.”

Tags

Economy, Regional Economy/Business - Analysis and Trends, Education

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