Restructuring the Economy Through Investment in Innovation
Innovation and the
Internet have given the United States a unique window of opportunity to
distance itself from the rest of the world. There’s plenty of opportunity left,
but we must take advantage of this window before it closes.
Edward Conard, former manager of Bain Capital, LLC, Unintended
Consequences: Why Everything You’ve Been Told about the Economy is Wrong, (Portfolio/Penquin,
June 3, 2012 - It’s
Dark Saturday after Black Friday for the Obama administration. Yesterday economic figures showed a rise
of unemployment to 8.2% (virtual unemployment
14.8%) and a drop in GDP growth to 1.9%.
Critics on both sides of political aisle were quick to
pounce on the bad news, as indicated by these Saturday commentaries.
Down for Third Month,” Shalah Dewin, New York Times
“Obama’s Economic Model Is a Failure,” Larry
Kudlow, National Review
“Black Friday: Has Time Run Out?”,
“The 5th Avenue to Serfdom, “ Holman
Jenkins, Wall Street Journal
“Rotten May Jobs Report Underscores Weak
Recovery, “ Jim Schlesinger, CBS News
Journalists are ringing the obituary bells for the Obama
administration. This reminds me of
a nursery rhyme
Born on Monday,
Christened on Tuesday,
Married on Wednesday ,
Took Ill on Thursday,
Worse on Friday,
Died on Saturday.
Buried on Sunday.
Such hand-wringing is premature. The Obama adminstration will not be buried soon. However, American attitudes toward Obama’s economic policies
may be down-shifting . Obama’s
now leads Romney by 2.0% in national polls, but he trails Romney in Rasmussen and Gallup
tracking polls by 4% and 1%.
always thought of Americans as pragmatic capitalists rather than dogmatic
progressives. They look at thier pocketbooks, not at ideologies.
What do Americans to think about economic policies of bigger
government, higher taxes and more regulation vs smaller government, lower
taxes, and less regulation? We shall see in November.
Meanwhile, it may worth looking at what others are saying
In a just released book, Unintended
Consquences, Edward Conard, former Bain Capital Partner, says we ought to
return to past practices – investing heavily in high risk ventures, lowering marginal tax rates, cutting capital gains taxes, fostering
entrepreneurship, and using the Internet to bolster productivity.
From 1990 to 2008, this strategy led to much
faster U.S. growth than in Europe and Japan.
U.S. Productivity grew from 1.2% to 2.0%, a 70% spike, and U.S. worker output
grew by 13.6%, far faster than 8.2% to 9.5% in Europe and the U.K. America,
says Conard, “went to work,” U.S.investment in innovation topped out at 15%,
way above foreign counterparts. Companies
like Facebook, Google, Microsoft, Intel, Apple, Adobe, Oracle, Wikipedia,
Twitter, Amazon, and EBay spread like wildfire, while “the rest of the world
Conard adds, controversailly, “the
U.S. high wage economy had done more for the poor at home and abroad than any
One can dispute the merits of Conard’s argument that rich
have grown richer and so the poor are better off by appealing to class envry by showing the gap has grown wider. But there is little doubt that Internet technologies
have transformed and improved American productivity, sometimes at the cost
of jobs shed through enhanced efficiencies.
Innovation has apparently not cost jobs in the health care
sector, the most robust job creator in the U.S. economy. Innovation has changed
medicine. In 1955, when President Eisenhower
had a heart attack, he was sent home on
bed rest with a bottle of oxygen. Today
he might receive a triple bypass, coronary artery stents, a pacemaker, a
regimen of cholesterol-lowering,
blood-thinning, and blood pressure-regulating drugs, even a heart transplant.
Will these and other innovations - such as mobile software to end
paperwork, monitor diseases from afar,
and facilitate patient-doctor interaction – continue to restructure medicine. Will it reduce its costs and mortalities. Will it change our behavior and encourage wellness? It
might, but according to Scott Gottlieb and JJ Kleinke of the American
Enterprise Institute, federal
regulations and taxes on the medical supply chain could suffocate or snuff out
innovation (“There’s A Medical App for That – Or Not,” Wall Street Journal, May
Tweet: Black Friday
unemployment figures of 8.2% and a stalled economic growth of 1.9% could be a death knell for the
Today he might obtain a multiple avoid, heart stents, a pacemaker, a strategy of cholesterol-lowering, blood-thinning, and system pressure-regulating medication, even a heart implant.
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