REMARKS AS PREPARED FOR DELIVERY - SANDY K. BARUAH , ASSISTANT SECRETARY OF COMMERCE FOR ECONOMIC DEVELOPMENT - MOLINE, ILLINOIS ECONOMIC DEVELOPMENT CONFERENCE - BLACK HAWK COLLEGE - MOLINE, ILLINOIS

FRIDAY, AUGUST 9, 2007

AS PREPARED FOR DELIVERY

Introduction by U.S. Congressman Phil Hare

OPENING
Thank you, Congressman Hare, for that kind introduction, and for the invitation to be in Moline today. And I’m pleased to be here at your alma mater, Black Hawk College, and to be in Moline, the home of one of America’s great companies, John Deere. Congressman, I applaud you for convening this economic development conference. We talked about the possibility of an event such as this shortly after you were elected, and I’ve been looking forward to being here with you. And I thank you for your long-standing commitment to public service.

Today’s conference is focused on moving this region – not just one city, not just one county – but this entire region – forward in the 21st Century economy. How regions work together as a region will be a theme of my remarks as well as my discussion with the representatives of the economic development districts here today – which I address through what I call The Five New Realities of 21st Century Economic Development.

Before I do that, however, it is useful to consider the national economic picture in which the economic regions of Illinois – and across the nation – are an integral part.

OUR ECONOMY IS STRONG AND GETTING STRONGER

Looking at the national economic context, we have good reason to be optimistic. Our economy is strong, and it is getting stronger. Our national unemployment level is at a low 4.6 %, which many economists say is lower than the full employment rate, and the economy has created about 2 million jobs over the past year.

The American economy grew at 3.4% in the second quarter of 2007, and we’ve had nearly 6 years of uninterrupted economic growth, and 47 straight months of job growth. All this shows that we have a very resilient, diversified, and flexible economy.

EXPORT GROWTH

One of the key reasons for America’s economic strength is the growth in U.S. exports – a reflection of our nation’s ability to succeed in the 21st Century world-wide marketplace. A Commerce Department report released last month showed that U.S. exports have increased by 11% to $644 billion year-to-date (through May) over the same period in 2006. And the trade deficit narrowed 7% or $22 billion compared to the same period in 2006.

Here in Illinois, exports totaled more than $42 billion in 2006, with Illinois earning the 5th highest revenues from exports out of the 50 states. Exports are vital to the Illinois economy.

Nationwide, exports are growing more than twice as fast as imports. And the jobs associated with exports have higher wages than other jobs, which helps drive our national prosperity. That’s why it is important to open world-wide markets to U.S. goods and services, such as John Deere tractors.

American workers and products are the best in the world, and with 95% of our potential customers outside the United States, we need to access these markets in order to keep our economy expanding.

The President, the Commerce Secretary and I know that opening these markets will be a “win” for our businesses, our workers, and our economy.

So, thanks – at least in part – to our strong export performance, it is clear that the American economy is resilient and strong. This is good news not just for the nation, but for Illinois as well – because a strong, growing national economy allows economic regions and individuals to tap into this expanding economic pie and share in our national prosperity. It takes both smart national policies and forward-thinking regional action in order for economic growth to occur.

THE 5 NEW REALITIES OF 21ST CENTURY ECONOMIC DEVELOPMENT

So, with a strong national economic foundation and the realization that our economy is interconnected with the rest of the world, how does the Western Illinois region move forward in the 21st Century economy? During my now six years at the Commerce Department, I have come to believe there are 5 New Realities for 21st Century economic development. I’d like to share them with you not in the hope that it will answer all the pressing questions of the day, but I offer them as a way to frame our discussion.

THE FIVE NEW REALITIES

Having just mentioned America’s strong export performance, let’s begin with New Reality #1 of the 21st Century economy: While perhaps the most obvious, it’s also the most important; and it’s the that we are truly in a Global Economy, or as New York Times columnist Tom Friedman says – the world is…say it with me….flat. In the new flat global marketplace, competition is not just from the firm down the road; our competition comes from any person in any corner of the globe with a good education, a good idea, and a good Internet connection.

Here are some examples of how interconnected our economy is today:

• We think of Airbus as a European manufacturer of airplanes – while this is true, did you know that some of the most important components for the Airbus products are built here in the Midwest – in Kansas?

• The number one selling car in America is a Toyota – and all those Camrys sold in the United States are built right here in the United States.

• Toyota’s mini-van and the Ford Mustang are both built here in America, but the Toyota has more U.S. produced part content than the Mustang.

• When people say, sure, but Toyota is based in Japan. True, but who owes Toyota? Toyota, like Ford, is a publicly traded company – on NASDAQ – and many of you may have Toyota stock in your portfolio.

• Sticking with my automotive theme, the Chrysler Crossfire is built off a Mercedes platform and assembled in Germany. The Chrysler 300 is built in Canada. The Pontiac GTO is – of all places – Australian. The new, popular Ford Fusion is built off a Mazda platform – and Mazda, by the way, is owned by Ford.

• The Pontiac Vibe and the Toyota Matrix are essentially the same vehicle – assembled side-by-side by American workers in joint U.S.-Japan owned factory in California.

So, yes, our competition is indeed global, but with global competition comes opportunities for global partnerships – opportunities to expand our markets and increase our competitiveness. And, with 95% of potential customers for American products outside the United States, this reality becomes more important every passing day.

New Reality #2: Competition is intense, and the pace of change will continue to accelerate. It took 55 years for the automobile to spread to one-quarter of the U.S. population. It took 35 years for the telephone to do the same thing. The personal computer accomplished the same level of market penetration in 16 years, 13 years for the cell phone and only 7 years for the Internet.

Every day it seems the gadget we bought yesterday becomes outdated as the new and improved version hits the marketplace. There are good jobs that exist today that we couldn’t even dream up two years ago: Podcast manager…Blog writer…I-Pod accessory manufacturer…Satellite radio host.

Even the nature of innovation itself is changing: Innovation is becoming multidisciplinary as different technologies converge, creating new fields. Fields that didn’t even exist just a few decades ago. People smarter than me debate where bioinformatics or nanotechnology will take us, but all agree that they will become major drivers of the U.S. economy.

This new reality where cycle times for products and ideas continue to shrink will require all institutions – public, private, educational, and non-profit – to continually adapt and change. Those that don’t are at risk. Those that do have the opportunity for reward.

New Reality #3: Yes, the world becomes a bit more complicated every day. In order to respond to this increased complexity, we must realize that we have reached a point where the components of competitiveness can no longer be pursued separately. Just as technologies are converging to create new fields of innovation, so are the components of competitiveness merging to shape economic growth in the 21st Century. This reality holds two important lessons for the local and regional level:

First, the idea of workforce development, community development, economic development, and educational programs occurring in separate silos can no longer be tolerated. The interconnected challenges of these components of competitiveness must be tackled in concert.

Second, in our new 21st Century global economy, we must acknowledge what we all learned on the school playgrounds of our youth, that we are stronger when we stand together than when we stand alone.

Standing together means that we need to look beyond traditional political jurisdictions – the city boundary, the county line, even the division between States – and work together. Because the competitiveness of America’s companies is in large part tied to the competitiveness of the economic regions in which they do business.

New Reality #4: Public-Private partnerships become more critical every day. While governments at all levels, universities and other non-profit institutions are important players, let’s not forget that the private sector is the most important element of any successful economic development strategy. Unless the private sector is ready, willing and able to invest in a community, economic growth simply will not occur, regardless of how much government spends. The private sector should not just have a seat at the table, but should actively be engaged as full partners in strategies for economic growth.

The private sector should be helping to shape – within the parameters of public accountability, of course – the development strategies that will lead to more higher-skill, higher-wage jobs.

New Reality #5: At the end of the day, it is the ability to innovate that is the only possible sustainable competitive advantage in the 21st Century. It’s not location. It’s not even the cost of doing business. Factors such as these will continually shift in a dynamic worldwide economy. But if a nation can maintain its edge in innovation, it will grow and prosper.

America is clearly the world’s leader in innovation. The spirit of discovery is one of our national strengths. From Edison's light bulb to Jarvik’s artificial heart to the iPod to the frozen pizza, we have brought more technological breakthroughs to the marketplace than any other nation – and this has made not just America, but the world, safer, healthier, more productive and more prosperous.

The 20th Century undoubtedly belonged to the United States. Our leadership in the 20th Century was founded on our ability to foster new ideas and bring them to fruition. And, at the dawn of the 21st Century, we must not be complacent in our prominence. More than ever, international competitors are more rapidly commercializing technological advances, educating highly skilled workforces, and offering world-class research opportunities.

Companies – by necessity – must continually innovate to stay one step ahead of these their global competitors, especially as the pace of change in our global marketplace continues to accelerate. If they don’t, they will cease to exist. There are no pit stops in this race. And the challenge will not go away by ignoring the reality or by closing off America to the rest of the world.

Meanwhile, government and nonprofit leaders at all levels have the same responsibility to adapt their approach to fit the changing times. Government – by design – moves slowly, and that can be a problem in our fast-moving economy. Unless government can offer flexible and innovative programs and tools to economic regions, we risk putting these areas that we are responsible for at a competitive disadvantage in the global marketplace. Innovation is just as important in the public and nonprofit sectors as it is in the private sector.

So, these are some of the “new realities” of 21st Century economic development:

• We are in a global economy.

• The pace of change will continue to accelerate.

• The components of competitiveness can no longer be pursued separately – and we must work collaboratively.

• Partnership with the private sector is critical.

• And innovation is the only sustainable competitive advantage.

We need to continually advance the art and science of innovation and competitiveness in not just the private sector of our regions, but in our own approach as leaders of government and non-profits. It’s difficult and important work, and I applaud you for coming together today in order to address your shared challenge – and opportunity – of how this region works together to build sustained prosperity in the world-wide marketplace.

Thank you for your kind attention this afternoon, and I once again thank Representative Hare for the invitation to be here today.

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