How to Keep America Competitive

The Memorial Day holiday offers an opportunity to assess our future in a very competitive global economy.

The National Summit on American Competitiveness, held this past week in Chicago, brought together panelists including current and former corporate chairmen, government officials and top academics to discuss ways to keep America competitive in a world that is changing quickly.

As former IBM(IBM - Cramer's Take - Stockpickr) Chairman Lou Gerstner commented at the outset: "America should be very worried, because economic strength is at the heart of America's future. Our freedoms depend on our economic strength. Now other countries understand how to build competitive, knowledge-based economies."

In other words, there was a general recognition that the global competition is heating up. And, a general agreement that the U.S. is falling behind in some key areas, mostly revolving around the need for a skilled work force.

Here are the top issues recognized by the conference -- and some proposed solutions.

Building an Educated Work Force

If America is to compete, we need a skilled work force. There was agreement on the sorry state of K-12 education, which is failing to turn out high-school graduates who have the basic skills to work in the knowledge-based industries of the future. In fact, 30% of our children don't even graduate from high school.

Remaking our educational system to compete with other countries is a huge national challenge. Some suggestions:

Create and measure national educational standards, and take power away from local school districts to create the curriculum;

Increase compensation and incentives for teachers, while doing away with union restrictions that protect ineffective teachers;

Create competition in our school systems, much as it exists in higher education;

Establish a national "skills strategy" to make sure that there are workforce paths to jobs of the future.

Clearly, these ideas would require a public outrage over our current educational system. Craig Barrett, chairman of Intel(INTC - Cramer's Take - Stockpickr), suggested we'll be on the right track when state governors decide not to give out drivers' licenses without a high school diploma!

Fostering Innovation

This is America's strong suit as we move into the new global growth century. We create new stuff: products, processes, technologies and uses for those inventions. Last year, America had 80,000 patents granted, while China had only 700, and India only 500, according to Harvard professor and author Michael Porter.

Our ability to innovate is critical, said Boeing(BA - Cramer's Take - Stockpickr) Chairman James McNerny, Jr.: "In today's world, innovation is our only fundamental source of competitive advantage."

The government has a key role in innovation. After all, many technological and scientific advances were made possible by government-supported research at NASA and the National Institutes of Health. But while innovation can be fostered by government, most innovation does not take place within government.

For that, we need the entrepreneurship of the private sector, which brings new products to market and creates new jobs to boost economic growth. And, in turn, that spirit of entrepreneurship requires a financial and regulatory climate that rewards risk-taking and innovation.

Sensible Immigration Policies

America needs to be the preferred location for the world's smartest people so that innovation and growth can be fostered. Yet many of our current policies, as well as the public opinion trend, are moving in the opposite direction.

For example, we allow students to be educated here in the highest levels of science, applied mathematics and technology -- but then refuse to give them green cards to work here. So they return to their homelands and create businesses there!