Publication Date: Wednesday, September 28, 2005
Is Silicon Valley losing its competitive edge?
Is Silicon Valley losing its competitive edge?
(September 28, 2005) Powerful Leadership Group aims to turn local economy around
by Jay Thorwaldson
Silicon Valley is losing the "best place to locate your business" race with other locations around the nation and world, according to the powerful Silicon Valley Leadership Group.
While the valley and Palo Alto region are still the premier high-tech areas, other regions are rating higher in almost all "desirability" factors -- from traffic congestion, livability and affordability to education of the overall workforce, the group warns.
Education, locally and statewide, is the most critical of all, according to speakers at a Sept. 6 Palo Alto forum sponsored by the group, formerly known the Silicon Valley Manufacturers' Association. The organization represents more than 200 of the leading corporations, investment firms and businesses in the Santa Clara County region.
Some of the problems -- and solutions, if any -- require statewide mobilization and effective action, Mark Baldassare of the Public Policy Institute of California said.
"We've heard many times that population growth, repeated budget shortfalls and dysfunctional planning" are damaging the economy, Baldassare told scores of attendees.
Backed by a Hewlett Foundation grant, the Institute and SVLG in 2003 launched a depth study at facilities and resources of the region compared to other areas.
On the basis of the study, "California hasn't yet reached a crisis," but trends and events are increasingly ominous, he said.
"Some things, we've found, are not as negative as they've been painted -- for example, the population won't grow as fast as projected, and we've spent as much on infrastructure as anyone.
"But things are not that rosy," he cautioned. By 2025, "we are going to add a population the size of Ohio," and the state has an "infrastructure backload" of aging and unrepaired facilities.
The state's debt load makes it difficult to finance projects. In terms of population the state is heading for a majority of Hispanic persons by 2011, and the 7 percent of the general population will by over 65.
"We will need greater education for the workforce," he said. But of even greater concern is that "projections are that we won't be able to meet the demand for working-age college graduates" to compete in a world market for high-tech development and manufacturing.
The "major implications" of the two factors of lagging educational levels and need for more highly educated workers will be that there will be a "chronically under-employed" population requiring more social and other services.
"Where will the tax revenues come from?" he asked.
"The big question is whether the state can and will make the investment necessary" to bring California back from near the bottom of educational expenditures per student nationwide, he said.
At the same time, by 2025 traffic congestion in urban areas "is likely to increase travel time by 48 percent," according to the Institute's projections.
"We say we'd rather 'manage demand' than build roads. But do we have the political will and public consensus to make the lifestyle changes necessary?" He said both planning and transportation-improvement efforts "are hobbled by Californians' deep distrust in local or state governments."
The bottom line, he said, is the question: "Are Californians willing to ask themselves the questions about the kind of life they want for themselves and their children?"
Panelists Ned Barnholdt, chairman emeritus of Agilent Technologies, Jude Barry, former chief of staff to San Jose Mayor Ron Gonzalez, and Tom McEnery, former San Jose mayor, agreed with Baldassare's projections and had some warnings of their own.
Barnholdt warned that America's educational directions may be headed in the wrong direction of being dominated by standardized testing even if more funding could be found. While serving on a government advisory board for Singapore, he learned that officials there became concerned that their engineering graduates were well-educated technically but "were not as creative" as those coming out of China's schools -- their primary economic rival.
In response, "they introduced more studies of art and music to little kids and put less emphasis on tests. They found through their rigorous testing process they had that they were stifling the creative process in their kids," Barnholdt said.
"The scary thing is that China copies everything Singapore does, and spends a lot of effort trying to duplicate the magic that was the creation of Silicon Valley," Barnholdt said.
"That's scary," he repeated.
Baldassare cited the opposite trend in America's schools and warned that "we may have gone too far -- kids and teachers feel they are being over-tested."
There is also a shortfall in the capacity to provide higher education to more students, he said, noting that it took 17 years to get the latest University of California campus built in Merced.
McEnery said that in addressing education, the tax-limiting "Proposition 13 is like the elephant in the living room" of a dysfunctional family -- no one wants to talk about it.
"No leader in California has either the standing or the courage to address that," McEnery said.
Barnholdt said the key question is, "How do you develop a long-term financial model" to accomplish what clearly needs to be done?
"We need to concentrate on education, education, education," McEnery summed up the consensus of the panel. "That's the basis of this valley; it's the basis of our country."
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