Page 62 - Accelerating out of the Great Recession

THE NEW REALITIES

through the provision of investment-related tax breaks and
training programs designed to develop skills—a trend reinforced
by some subtle protectionism that is already starting to emerge.
As Lord Mandelson, when serving as the United Kingdom’s sec-
retary of state for business, enterprise, and regulatory reform, put
it, the country should have “less financial engineering and more
real engineering.” 3
The adjustment to wages driven by the Great Recession will
support this trend toward reindustrialization because lower
wages in Western economies make labor more affordable.
Indeed, companies have already begun to take advantage of this
newly affordable labor pool. According to BusinessWeek, IBM
has decided to set up outsourcing centers in low-cost states of
the United States instead of establishing more of them in India. 4
Some 71 percent of the executives in our survey expect gov-
ernments to push reindustrialization policies. The figures are
relatively higher for executives in the United States (83 per-
cent), France (79 percent), and the United Kingdom (66 per-
cent) and lower for those in Germany (59 percent) and Japan
(52 percent).
It seems likely that governments will—as they promote a pol-
icy of reindustrialization—focus particularly on emerging high-
skill and high-tech industries such as nanotechnology, biotech-
nology, photonics, material science, and green technology. These
young industries offer the lure of extremely high growth poten-
tial. Supporting them would be a medium- to long-term invest-
ment, and the end result could be creation of the leading indus-
tries of the next Kondratiev wave of economic development.
(See Chapter 1 for a discussion of Kondratiev waves.)
For example, the global market for nanotechnology (the
development of incredibly small structures and particles of

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