New York Times columnist Thomas Friedman and Microsoft’s Bill Gates discuss globalization’s effects on poverty and economic development. Daniel Vasella, chairman and CEO of IAMC member company Novartis.Copyright by World Economic Forum swiss-image.ch/Photo by Remy Steinegger

Daniel Vasella, chairman and CEO of IAMC member company Novartis. Copyright by World Economic Forum swiss-image.ch/Photo by Remy Steinegger

The recently concluded World Economic Forum in Davos, despite the celebrity gloss, featured many sessions of more than passing interest to corporate real estate decision-makers. One, "Governance and Globalization in the 21st Century: A Conversation with Tom Friedman and Bill Gates," focused on how quickly developing countries have turned into leaders in both productivity and innovation. Gates noted that the U.S. may be falling behind in new product development, and that the rich countries no longer necessarily have the edge in markets. But he also said companies like his and Intel will always be based on U.S.-grown talent.

Another session, "Global Business — Saviour or Scapegoat?" featured discussion of how a few scandals may be unfairly tainting all multinationals and big business as untrustworthy or corrupt. "Business is a precondition to any healthy society," said Michael E. Porter, Bishop William Lawrence University Professor, Harvard Business School. But he added, "Companies haven't done a good job at building the trust. They have not done a good job at understanding how their impact on communities where they work affects long-term prosperity." Daniel Vasella, chairman and CEO of IAMC member company Novartis, said calls for increased transparency are a good thing: "We need to make an effort to communicate what we do and how we do it."

Proof of Bill Gates’ warning that the U.S. is falling behind in innovation may be found in "U.S. Manufacturing Innovation at Risk," a report issued Feb. 1 by the National Association of Manufacturers and economist Joel Popkin. "The rapid growth in overseas manufacturing is creating new global centers with the critical mass necessary to build their own innovation machines," Popkin said. "If the innovation process goes offshore, America will lose much of its capacity to generate wealth and a decline in long-term economic growth is assured." "We need a bold action agenda to develop human capital, revitalize fundamental research and encourage productivity-enhancing investments in order to maintain a critical mass of production and a viable innovation process in this country," added Jerry Jasinowski, president of The Manufacturing Institute, the research and education arm of NAM.

A new survey of 300 U.S CEOs released in January by Grant Thornton finds that their Business Optimism Index has fallen to its lowest level (67.2) since being introduced in May 2002. More than half (51 percent) plan to hire more employees in the next six months. But, the number of those who say they will decrease headcount has increased from 8 percent six-months ago to 10 percent in January.

The annual R&D forecast from Battelle, released in January, says total funding for U.S. R&D will increase by 2.9 percent in 2006, to $329 billion. While federal funding is expected to rise by only 1.8 percent to $96.6 billion, Industrial expenditures on R&D are expected to reach $211.9 billion in 2006, an increase of 3.5 percent over the $204.8 expended in 2005. "While earlier data showed a favorable ‘balance of trade’ in the funding of R&D — with foreign company support of R&D performed in U.S.-located facilities outdistancing the amount of R&D funded abroad by U.S. companies — the gaps had been narrowing over the past few years," reported the Columbus, Ohio-based organization. "Recent studies reveal that the total amount of foreign direct investment is shifting heavily toward India and China, and that the R&D component of this investment is increasing as well. In addition, Eastern Europe is expected to be a growing actor in this field."

If all this sounds like a gathering storm, consider the findings of a National Academies report released in October 2005 called "Rising Above the Gathering Storm: Energizing and Employing America for a Brighter Economic Future." U.S. Senators Pete Domenici (R-NM), Jeff Bingaman (D-NM), and Lamar Alexander (R-TN) met with President Bush at the White House on December 15 to discuss the findings, as they prepare to introduce legislation based on the report’s recommendations. "Our lag in science and technology is reflected in our growing dependence on other nations for energy," said Domenici after the meeting. He also said the lag was evident in "corporate America's growing interest in foreign workforces." "I believe this would be a fine centerpiece for President Bush’s State of the Union address, and I hope he makes it the focus of his remaining three years in office," said a prescient Lamar Alexander. Among the report’s findings: Chemical companies closed 70 facilities in the United States in 2004 and have tagged 40 more for shutdown. Meanwhile, of 120 chemical plants being built around the world with price tags of $1 billion or more, one is in the United States and 50 are in China.

New business location rankings by Chief Executive magazine reinforce findings from business climate and new plant research conducted by IAMC official publication Site Selection, finding Texas, Nevada, North Carolina, Florida and Georgia (in that order) to be the best states in which to conduct business. The most important attributes affecting their choice of where to do business were work force quality (20.6 percent weighting), total labor costs including healthcare and worker’s comp (18.3 percent) and taxes (15 percent).

2005 data on foreign direct investment was released in late January by UNCTAD, showing a 29-percent jump in total FDI over the preceding year’s total, to $897 billion. The United Kingdom led the world in FDI for the first time since 1977. Meanwhile, the globe’s biggest year-over-year gainers by growth rate were all in the "developing economies" category, led by South Africa (803 percent), Indonesia (242 percent) and Egypt (226 percent).