The global fight for top talent

I saw the headline for this story on the CNN Business page, and was of course immediately struck at how LANS is demonstrating the exact opposite of this philosophy. The by-line of the article is

From the United States to Saudi Arabia, countries are finally recognizing that human capital is crucial.

Wrong again. But when you consider what caliber of employee is required to run a Plutonium pit factory, LAN's treatment of staff makes perfect sense.

-Gus

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(Fortune Magazine) -- Three scenes from the new battle for global economic supremacy:

1. King Abdullah of Saudi Arabia, the country that sits on 25% of the planet's oil, knows that oil is not his country's future. That's why he's spending $12.5 billion to found a graduate research university, which he'll endow with $10 billion - as big an endowment on day one as MIT has built in 142 years. The point of this project, on a grand scale even by Saudi standards: to attract the best researchers in science and technology.

2. The European Union has proposed new rules to attract the world's most highly skilled workers. If they can show that they're well educated and hold an offer of a lucrative job in Europe, they can get a two-year renewable permit to live there. The problem Europe is trying to solve: 85% of emigrating unskilled workers from developing countries go to Europe, but only 5% of skilled workers do so.

3. HCL Technologies, an Indian infotech services firm, has noticed a major change in its best young employees. Until two or three years ago, few of them would work for it unless they were promised an overseas assignment. Now it's just the opposite: They see India as the most compelling source of excitement and opportunity, and they don't want to be sent away.

We've known for a long time that this day was coming, and now it's here: Countries are finally realizing that their future prosperity depends not on natural resources or even on financial capital, but on human capital. Companies have been battling for years to attract and keep the best people. Now countries are engaging in the same fight.

The contenders

It wasn't much of a scrap until recently. Only the United States, Western Europe, and Japan - for a while - were even contenders. They didn't beat up on one another too badly vying for the best talent because there was enough to go around. Their economies weren't sufficiently info-based to make talent as critical an advantage as it has become, and the economy wasn't sufficiently global for human-capital supremacy to be crucial. Now all those factors have changed; many countries are in the hunt, and they're all after the same thing.

Since this is a fundamentally new fight, no one is sure what will win it. But we can already identify some fairly deep and difficult questions the fight raises. How countries answer them will help determine national wealth and power.

How long will any country tolerate Info Age protectionism? Notice that Europe's new proposal to attract highly skilled workers is pretty pathetic. It doesn't really offer any attractions; it just scales back rules that keep those workers out.

We have similar rules in the United States, such as our skinflint distribution of H-1B visas and immigration rules that favor family connections over skills. Why do such rules exist at all? In the Industrial Age we protected manufacturing workers with tariffs and quotas, but we can't put duties on bits and bytes, so in the Info Age we protect knowledge workers by restricting immigration.

No country can have world-class workers if it continually protects them from world-class competition. Cisco CEO John Chambers, who is passionate on this subject, says, "Anyone with a college degree should be welcome to come to our country, with appropriate security checks."

The U.S. may be rich, but we hardly have the best education system

Why isn't the United States more serious about the key competitive advantage of the Info Age, education? How to make human capital more valuable is no mystery, yet the world's richest country still has nowhere near the world's best education system. That means trouble that will only get worse.

Stephen Roach, former chief economist of Morgan Stanley and now head of the firm's Asian operations, says, "In the U.S. we've squandered our advantage by not investing in educational reform."

What, ultimately, is a national economy? Is it good for a country if its companies prosper by offshoring high-value intellectual work? What if a nation's high-value employees are working in that nation for other nations' companies? Or if highly skilled immigrants perform high-value work and send their earnings home? The answers aren't obvious, but they are important.

This international fight for talent will get much more serious. With luck, it will lead to something new: a free market in brainpower. That may not come to pass- but wise nations will prepare for it.