In Samuel Beckett’s famous 1953 play, Waiting for Godot, two desperate characters, Vladimir and Estragon, wait by a leafless tree for a character whom they are convinced will arrive and presumably help them. But, of course, Godot never arrives and the two are left trapped in an absurdist comedy.
In many ways, it seems macroeconomists today are waiting for their version of Godot. Six years ago this month, the American economy officially began to “recover” and although unemployment has declined and the stock market has soared, it has been a disappointing run for millions of Americans. Economists at the Federal Reserve and elsewhere speak hopefully of how a “V-shaped” recovery or a “lift-off” is imminent, meaning a rather sharp burst of growth is at hand. Other economists say they are looking for an “acceleration” that will put the economy “back on the path” to what it was in the good old days, before the financial bubble burst with such pain in 2007 and 2008.
Yet the evidence is that it’s not happening. Recent headlines proclaim, “Recovery Stumbles Yet Again” and “Winter Shudder for Economy.” Tealeaf readers say it might be because of severe winter weather, or a West Coast port strike, or the Greek crisis or a slowdown in China’s overheated growth rate. But the fact remains that U.S. Gross Domestic Product shrank in the first quarter of 2015, the third time in the six years of recovery that the economy hasn’t, well, recovered in a particular quarter.
What if the economists are wrong in insisting that if Americans simply wait long enough and if the Federal Reserve starts raising interest rates at the right moment, the bit of magic that we’ve all been waiting for will suddenly occur?
The reality is that Americans are making a serious mistake by continuing to wait for something that is never going to happen. We are not going to return to the go-go days of the early 2000s or even the 1990s because the hot money that fueled consumer spending, housing, tourism and so many other forms of economic activity has gone away. Macroeconomists may understand the coming and going of ordinary business cycles, but there has been a permanent structural shift in the economy that they don’t recognize—and they don’t understand how the United States should seek a genuine recovery.
That’s why the United States needs to launch a real debate about how high-quality jobs are created and what are the skills sets necessary to get them. We need a set of conscious strategies. The key is unleashing technologies that are struggling to be born all across the country. The United States has an unparalleled ability to invent new things such as lasers, transistors and the Internet, but, outside the realm of social media and related Information Technology fields, we have lagged in recent years in commercializing them, partly because of fierce ideological gridlock in Washington over anything that resembles “industrial policy.” The bitter political fight over solar energy company Solyndra was just the latest episode that makes this discussion toxic at the federal level.
By default, states, cities and regions have been attempting to lead the charge to create technology clusters—Nevada wants to be the hub for lithium ion batteries, Cleveland is pursing flexible electronics that can be worn, Pittsburgh is pursing advanced robotics and autonomous driving, New York state is building a semiconductor and nanotechnology cluster around Albany, and Denver is trying to craft itself as a leader in environmentally friendly technologies, to name just a few examples. Silicon Valley attracts an enormous percentage of precious venture capital and investor imagination, but it is hardly alone in bursting with ideas that should be commercialized.
But state and city efforts are often politicized. Governors and mayors may wish to score big wins by paying large incentives—more than $1 billion in the case of Nevada for Elon Musk’s lithium ion battery factory—but they often don’t have the patience to build the supporting infrastructure, supplier base and educational resources that represent a healthy ecosystem. The best economic development executives know that true wealth is best created by concentrations of activity by multiple companies of all sizes, not just one plant that has been lured in from out-of-state. A well-calibrated federal role seems essential.
If the politicians assembling themselves for another season of national campaign inanity are serious about high-quality jobs, they must understand how and where those jobs can be created. Certainly it should be possible to create bipartisan agreement that 12 or 15 technologies are critical to the future.
This debate has flared in U.S. policy circles ever since the 1980s. But now the emergence of China as the world’s second largest economy gives it added urgency. Americans may not believe in agreeing on economic strategies, but the Chinese and all other major industrial powers absolutely rely on it. China is seeking to dominate solar energy, semiconductors, and biotechnology and genomics. It is, for example, the largest purchaser of DNA sequencing machines made by American companies. Japan, now No. 3 in the world, is targeting a doubling of its already impressive capacity in robotics. Germany continues to pour technology from its advanced scientific institutes into its small and medium-sized Mittelstand companies, who dominate their niches globally. If the United States wishes to retain its geostrategic leadership, it must also lead by example and dominate at least some of the higher reaches of advanced industries.
The knowledge about how to do it exists. Austin and San Diego stand out as excellent examples of cities that studied what happened in Silicon Valley and replicated the success strategies in semiconductors, wireless communications, biotech and now genomics. It did not happen by accident. They studied how ideas flow from universities and research institutes and are commercialized in a rich mix of entrepreneurship, angel and venture capital, incubators, large company involvement and other key ingredients.
Any such strategy must include a renewed push to create the human capital that advanced industries rely on. With the near failure of the private for-profit college model, community colleges should be at the epicenter of a strategy to train and retrain workers. The creation of new industries will not directly help displaced and underemployed Americans, either urban or rural, who have 20th century skills sets. Advanced industries do have a high multiplier effect, meaning every dollar that is earned has a cascading wealth-creation effect for large numbers of people. But the millions of low value-added jobs that have disappeared are almost certainly never coming back. It’s time to stop pretending otherwise.
