Ian Fletcher’s Perspective on the Need for Government-Funded Innovation — and Two Simple Principles He Suggests as Justification

31 May 2011

Finding our economic way will be easier, when we actually understand where we need to go

Seeing clearly is often hard. Insight can light the correct path. Illumination often shows itself in deceptively simple formulations.

Take the following two critically important economic principles from a recent essay by Ian Fletcher, author of Free Trade Doesn't Work: What Should Replace It and Why:

To figure out how much innovation (or manufacturing) is enough for America, the quantity must be measured against how much we need to maintain our living standard. And we are, in reality, falling short in both areas.

As long as our manufacturing output is so small that we must run a trade deficit with foreign nations in order to satisfy our consumption desires, we aren't manufacturing enough.

As long as our innovation output is so small that American industry can't keep pace with its foreign rivals and continues to inexorably surrender market share and technological superiority to them, we aren't innovating enough.

These benchmarks are so obvious, that only disingenuous profiteers appear not to “get” them

Fletcher’s definitions about the appropriate benchmarks for measuring the sufficiency of American manufacturing and innovation are economically obvious. The simple principles explain why I have been constantly railing against exporting the U.S. economy to China.

Yet our government leaders, and the multi-national corporate plutocrats they subserviently cater to, either:

(a) don’t understand the most basic economic foundations of American national interest,

(b) don’t want the rest of us to, so they can continue to profit from mortgaging Working America’s future to the rest of the world.

So what needs to be done? — First, pay attention to the numbers

The first step in getting ourselves back on track is to recognize how deficient we are today in meeting the goals that Fletcher describes. If we are not keeping score, we are going to lose the economic game simply because our heads are in a dark and smelly place.

Going to Walmart and buying lots of cheap, and cheaply made, Chinese products is not the key to America’s future success. With each purchase, at some level of equivalence, an American somewhere either loses a manufacturing job, or can’t get one in a new industry.

Whoever denies this is ignoring decades of American history. Average Americans (which means everybody but the proportionately minute economic elite) are slipping economically backward.

Plutocrats and politicians want us to believe the slippage is inevitable or misunderstood. They try to convince us that new and better jobs are miraculously appearing in an equal proportion to those we are losing.

They’re lying.

If you don't believe me, start researching on the Internet. Begin here (with the Rockefeller Foundation) or here (with Slate web magazine’s investigative report).

Don’t give me the free trade at all costs nonsense that says the murderous rate of fleeing American manufacturing is inevitable, given our high wages. The Germans aren’t buying that distortion of truth, and neither should we.

The Founders did not establish this country just to give it away a couple of hundred years later.

“Okay, Pete, let’s say that I’m convinced, what does Ian Fletcher think we should do?”

We have a systemic economic problem in this country. It has to do with American capitalism’s near-sighted concentration on immediate profits.

That, incidentally, is why China’s future-oriented, authoritarian-directed capitalist experiment is such a threat to our way of life.

Fletcher points out that we need to give geographically more of the United States the innovative/manufacturing power that the handful of people in Silicon Valley have given their region.

The problem lies in the money chasm one has to jump from science (where America is still dominant, but declining) to actually profiting from manufactured, salable products based on scientific/technological discoveries.

If research will not result in patents that protect at least some future profit, then private industry is reluctant to finance the long-term research that is inevitably necessary to get anywhere. Most science, like most thinking, is too generalized, or too obvious, to be patented. But the exploration and groundwork has to be done, if we are to come up with new products to manufacture or ideas to sell.

Fletcher points out that the world economy was different in the past. American giants like AT&T (Bell Labs), Xerox, RCA, and IBM were so dominant in their fields that they could do pure research, in the knowledge that they owned the market.

That’s no longer true today. Consequently, Fletcher and I think that government has a necessary role in funding the research necessary for innovation.

I would require that discoveries reasonably linked to government funding directly and predominantly benefit American manufacturing and American workers. Otherwise our happy plutocrats will again be exporting these taxpayer-funded programs for their own profit.

Current American government efforts in funding progress toward innovation are ridiculously low. Fletcher totals two programs at $164 million annually. Germany spends $2 billion a year to keep its industries competitive.

Aside

What Fletcher does not mention is that Germany’s economy is about one-fifth the size of the United States’. That means that Germany is spending proportionately (very roughly) fifty times what the U.S. is to stay on top of its game.

Now think about what the Chinese government is investing in China’s future.

He concludes:

To get our economy back on track, we need to stop dreaming that innovation is purely a self-financing private-sector game and start paying for the innovation we need.

Either that, or we're not going to get the economy we want.

The key sentence is “we need to stop dreaming that innovation is purely a self-financing private sector game . . . .”

“Dreaming” is the bed in which brainless (because it is factually inaccurate and poorly reasoned) ideology gets in the way of American workers, manufacturing, and innovation.

Fletcher has given us the benchmarks to economic success. We just need to wake up enough to see and walk the signposts.

PeteFree.com

Ian Fletcher’s Perspective on the Need for Government-Funded Innovation — and Two Simple Principles He Suggests as Justification