The Quiet American Revolution

The Quiet American Revolution

Roopen Roy

(Views expressed are personal)

A quiet American revolution has been underway in the last few years. It is a process not an event. The four components of this transformation are : a shift in foreign policy, new energy sources, robotics in manufacturing and an aggressive approach to talent acquisition.

America has been systematically disengaging from military battlefields which are continents away from home. President Obama has exercised considerable restraint and has not committed his nation in new conflict zones. This has had an impact on his resource allocation strategies.

Apart from the foreign policy shifts, the US has one more compelling reason to look inwards. It has found new sources of energy inside its borders or just outside----- in abundance. The shale gas boom alone is rewriting the rules of geo-politics. In the strategic retreats of OPEC, the Arab leaders, while sipping sparkling Perrier water are staring at the writing on the wall. In one of the most likely scenarios, the US is going to produce more petroleum in a decade than Saudi Arabia.

If you are the ruler of a major petroleum exporting country, that prospect should scare the living daylights out of you. What a nightmare scenario: your biggest buyer will turn into your biggest competitor ? It is a change which no Arab fortune-teller could have predicted.

The US is expected to overtake Saudi Arabia as the world’s top oil producer by 2017 amid a rise in its shale oil and gas production, the International Energy Agency (IEA) said in November, 2012. “Energy developments in the United States are profound and their effect will be felt well beyond North America - and the energy sector,” the IEA said.

“The recent rebound in US oil and gas production, driven by upstream technologies that are unlocking light tight oil and shale gas resources, is spurring economic activity - with less expensive gas and electricity prices giving industry a competitive edge,” it added.

Another new source of energy: the bituminous sands. Canada has huge natural bitumen deposit reserves. Almost 80% of the world’s estimated 250 billion barrels is in Canada. There are some proven deposits in the US as well but mostly in the state of Utah.

President Obama is unwavering in his belief that shale energy will radically transform America . However, he believes that neglecting renewable energy and postponing climate change measures will not be a smart policy choice. In a recent speech, he has argued in favor of the creation of an Energy Security Trust. His administration wants to set aside $2 billion from new leases over 10 years for research into batteries for electric vehicles, biofuels, fuel cells and natural gas vehicles.

Harvard Business School has been pursuing a US competitiveness project led by Professors Michael Porter and Jan Rivkin. The study is focused on improving competitiveness of the USA and includes options like” reshoring” of manufacturing. In an interview with the Harvard Magazine, Michael Porter has pointed out, “And you can add another wild card: the whole energy situation. The U.S. suddenly has a potential surplus of energy through the production of oil and especially natural gas trapped in shale. This development is a potentially transformational asset, and major activities in chemicals and other industries can move back to the U.S. because we now have low-cost energy.”

The Hay Group has displayed on its website the following excerpt from an article in The Economist , “The crucial change that has taken place over the past decade or so is that wages in low-cost countries have soared. According to the International Labour Organisation, real wages in Asia between 2000 and 2008 rose by 7.1-7.8% a year. Pay for senior management in several emerging markets, such as China, Turkey and Brazil, now either matches or exceeds pay in America and Europe, according to a recent study by Hay Group, a consulting firm.” (http://www.haygroup.com/ww/press/details.aspx?id=35389)

Then you have advanced robotics. Drones are not just helping fight terrorists in the SWAT valley. Robotics in manufacturing and the developments in 3 D printing can change the world. Coupled with cheaper energy costs, dramatic improvements in productivity and a rising labor costs in China, Brazil and India, disruptive technologies in manufacturing open up entirely new possibilities of reversing the trend of offshoring and begin an era of “reshoring”.

The last initiative is an aggressive approach to acquisition and retention of highly skilled talent in the USA. The US is a country of immigrants. It has always been a magnet for talent. Now, the US will be overhauling its immigration policy to retain US University graduates in Science, Engineering, Technology and Mathematics (STEM) by granting them H1B visas and Green cards liberally.

In a letter to President Obama and lawmakers , a number of high-profile CEOs, including Facebook's Mark Zuckerberg and Yahoo's Marissa Mayer, have asserted that being able to hire more high-skilled workers and retain foreign students enrolled in US schools is key to keeping American companies globally competitive.

Not that this President needs any prodding. He has already strongly supported the proposal that would "staple" green cards to the passports of foreign students with advanced STEM diplomas. The rest of the world will now have to wake up and smell the coffee. They have to find new answers to old questions to compete innovatively with the transformed and reinvigorated United States of America.