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Renewing Globalization and Economic Growth in a Post-Crisis World The Future of the G-20 Agenda Edited with an Executive Summary by Alexei Monsarrat and Kiron K. Skinner Foreword by Jared L. Cohon and Frederick Kempe September 2009 Carnegie Mellon University is a global research university of more than 10,000 students, 70,000 alumni, and 4,000 faculty and staff. Recognized for its world-class arts and technology programs, collaboration across disciplines and innovative leadership in education, Carnegie Mellon is consistently a top-ranked university. The Atlantic Council of the United States promotes constructive US leadership and engagement in international affairs based on the central role of the Atlantic community in meeting the international challenges of the 21st century. The Council embodies a non-partisan network of leaders who aim to bring ideas to power and to give power to ideas. Copyright © 2009 by Carnegie Mellon University Press All rights reserved. No part of this publication may be reproduced or transmitted in any form or by any means, electronic or mechanical including photocopying, recording or any information storage or retrieval system, without the prior written permission of the copyright holder. The PDF file of this report on the Carnegie Mellon University Press website is the only authorized version of the PDF and may not be published on other websites with out express permission. A link to download the report from the Carnegie Mellon University Press website for personal use should only be used where appropriate. Please direct all inquiries to the publishers. Rights to individual essays revert to authors upon publication. Carnegie Mellon University Press 5032 Forbes Avenue Pittsburgh, Pennsylvania 15289-1021 Telephone: (412) 268-2861 Fax: (412) 268-8706 www.cmu.edu/universitypress Designed and typeset by Connie Amoroso Cover design by Grinning Moon Creative (www.grinningmoon.com) Printed and bound in the United States of America Contents 5 Foreword 7 Contributors 11 Alexei Monsarrat and Kiron K. Skinner / Executive Summary: Renewing Globalization in a Post-Crisis World: A New Agenda for the G-20 1. Sources of Growth and the Role of Innovation 25 Robert Atkinson / Sustainable Globalization Means Limiting Export-Led Growth Strategies 29 Serguey Braguinsky and Steven Klepper / Worker Mobility and Growth: The Goose that Laid the Golden Eggs 32 Randal E. Bryant / Data-Intensive Scalable Computing: A Transformative Information 36 M. Bernadine Dias / Technology Innovation, Emerging Economies, and the G-20 39 Erica R. H. Fuchs / Remembering Comparative Advantage: Leveraging National Differences in Technology Competitiveness 43 Klaus Kleinfeld / Globalization 2: Growth in the Post-Crisis World 46 Marcin Piatkowski / The Post-Crisis World and the New Growth Agenda for New Europe 49 William L. Scherlis / Software: The Endless Value Spiral 2. The Role of Financial Regulation and Trade in Restoring Growth 57 Lee G. Branstetter / Getting Trade Talks Going Again: A Tall Order 60 Myron Brilliant / The G-20 and the U.S. Business Path to Global Economic Recovery: Gaining Productivity and Expanding Trade 64 Baruch Fischhoff / Better Decisions, Better Lives 67 Richard B. Hoey / Political and Social Dynamics of Economic Growth 70 David McCormick / The New Multilateralism: International Economic Policy in the Aftermath of the Crisis 73 Daniel M. Price / The New Face of Anti-Globalization: Economic Recovery and Reform Efforts 77 John B. Taylor / Should the G-20 Reconsider the Decision to Treble IMF Resources? 3. The Education of a Workforce for the Twenty-First-Century Economy 83 Russell A. Berman / Rebuilding a Culture of Globalization 86 Robert H. Dugger / Investing in Early-Childhood Programs Builds Human Capital and a Solid Foundation for Economic Recovery and Growth 88 Pradeep K. Khosla / See the World Through the Eyes of an Engineer 91 Susan G. Polansky / Are We Educating the Next Generation for the Twenty-First Century? The Promising Pursuit of World Languages and Cultures 94 Arthur Rothkopf / The Challenge of STEM Education 97 Thomas Spiller / Educating for Global Competitiveness 4. Social and Political Challenges of Renewing Globalization 103 Stephen Brockman / Germany as a Global Player 106 Bruce Bueno de Mesquita / Governance, Growth, and the G-20 108 Mansoor Dailami and Paul Masson / Gauging Investor Confidence: Policy Actions in the Current Crisis 112 Kenya C. Dworkin y Méndez / The United States and Cuba: Time for a New Look at an Old Neighbor 115 Steve Forbes / The Golden Rule 117 Robert Hutchings / A Global Grand Bargain 121 Stephen D. Krasner / Failed and Badly Governed States 124 George Loewenstein / Psychological Impediments to Taking Action on Global Warming (And Implications for What Must Happen in Order for Action to Occur) 128 John H. Miller / Eight Deadly Sins 131 Kiron K. Skinner, Inyoung Song, and Emily Clise / International Institutions and Sound Reasoning ing to the emergency and its immediate causes. As a result of the meeting, work- ing groups were formed to investigate new mechanisms to enhance regulation and strengthen transparency, bolster economic cooperation and financial integrity among Foreword states, reform the International Monetary Fund, and provide better guidelines for the full range of policy instruments steer- ing the World Bank and other multilateral development banks. The G-20 agreed to meet again to review the findings of the Leaders of the world’s twenty most impor- working groups, to measure the success of tant economies are meeting in Pittsburgh government actions, and to assess any new on September 24-25 for the third time in damage. less than a year to evaluate their collec- By the time of the second G-20 meet- tive efforts to combat the worst economic ing on April 2 in London, it was clear crisis since the Great Depression. Despite that the ship would go under if it were their best-laid plans, what we have already not quite literally bailed out. So the G-20 learned is that economic and political reali- leaders turned their attention to priming ties shift so quickly that government lead- the pumps by demanding fiscal stimulus ers, more often than not, find themselves packages and financial measures to save playing a game of catch-up. For the mo- the banks and restore confidence in the ment, having averted the worst, they are Global Economy. While celebration of the breathing a sigh of relief and now can talk ship’s rescue may be premature, it seems about recovery and beyond. Yet before clear that early damage assessment and growing too optimistic, they should not rapid repairs have kept it afloat, even if it forget the famous answer of British Prime is not yet steady. Minister Harold Macmillan, when asked At the risk of straining this metaphor, it by a reporter what was most likely to blow seems that now the G-20’s purpose must be governments off course: “Events, dear boy, to help create a new, more reliable engine. events.” What will be the drivers of the good ship The initial purpose of the G-20 was to Global Economy, where will they origi- save a storm-struck vessel called the Glob- nate, what incentives can sustain them, al Economy from shipwreck and sinking. and what rules should govern them? G-20 As water poured over the sides of the ship, leaders in Pittsburgh will likely have no governments rapidly improvised to make more important task than taking on these repairs and to reassure passengers. Thus questions even as they nervously remain the G-20 meeting on November 15, 2008, in on the watch for unexpected storms and Washington, D.C., had to focus on attend- leaks in the ship’s hull. 5 Carnegie Mellon University To present a vision for a new global globalization. We have therefore brought economy that will determine the future together authors who write authorita- G-20 agenda, the Atlantic Council, Carne- tively on a range of issues, including the gie Mellon University, and the U.S. Cham- role of technological and managerial ber of Commerce have gathered top minds innovation in sparking new growth, how from academia, business, and the policy the financial regulations being designed by community for a one-day conference in the G-20 will affect financing for innova- Pittsburgh. A number of these individuals tion, the challenges in educating the work- were commissioned to write brief policy force of the twenty-first century, and how papers to identify the central goals and political forces are likely to shape global- challenges in designing a new global econ- ization. These illuminating and thought- omy, and the measures needed to meet provoking essays—and the debate and them. Their essays address the topics cov- discussion they will surely engender— ered by the G-20 working groups but also contribute to this vital task. identify social, cultural, economic, politi- cal, and technological components of glo- balization that the G-20 must consider in Jared L. Cohon the years ahead. These recommendations President, Carnegie Mellon University are presented in the Executive Summary to this report. Frederick Kempe The task ahead is complex, constitut- President and CEO, Atlantic Council ing nothing less than charting the future of Carnegie Mellon University 6 Randal E. Bryant is University Profes- sor and Dean of the School of Computer Science, Carnegie Mellon University. Bruce Bueno de Mesquita is Julius Silver Contributors Professor of Politics and Director of the Alexander Hamilton Center for Political Economy at New York University, and Senior Fellow, Hoover Institution, Stan- ford University. Emily Clise Robert Atkinson is President of the Infor- is Research Fellow in the mation Technology and Innovation Foun- International Relations and Politics Pro- dation. gram at Carnegie Mellon University. Jared L. Cohon Russell A. Berman is Walter A. Haas is President of Carnegie Professor in the Humanities at Stan- Mellon University.