the Vice President will hold a roundtable discussion on this Administration’s commitment to enforcing laws against the piracy of intellectual property. The Vice President will be joined by Attorney General Eric Holder, Homeland Security Secretary Janet Napolitano, Commerce Secretary Gary Locke, FBI Director Robert Mueller, USSS Director Mark Sullivan, as well as CEOs from major media conglomerates, union representatives, legal experts and other government officials. This White House meeting is the first of its kind, and will bring together all of the stakeholders to discuss ways to combat piracy in this rapidly changing technological age.
In 1984, the market value of the physical assets of the top 150 U.S. public companies – their “book value” – accounted for 75 percent of the total value of their stocks. A firm was worth nearly what its plant, equipment and real estate could be sold for. By 2004, the book value of the top 150 U.S. corporations accounted for 36 percent of the total value of their shares. Nearly two-thirds of the value of large companies now comes from what they know and the ideas and relationships they own.
With that fact in mind, it is easy to see why ensuring that our IP is adequately protected is an important priority for policymakers.
Only a slight breeze blew across the plains of Inner Mongolia on a recent afternoon, but the giant turbines at the Huitengxile Wind Power Field were spinning steadily. This facility, 200 miles northwest of Beijing, has 550 turbines churning out enough juice to power a small city, and inside a monitoring station, plant manager Zhang Jianjun points to a wall chart showing the 11 different suppliers of the high-tech windmills. Four are Chinese companies, but when Zhang is asked to pick his favorite, his nationalism is trumped by a desire for quality. "General Electric," he says, citing its reliability. "I'm excited when all of the turbines are working."
The poll says some pretty basic things: Americans think the recession has hurt innovation and both Chinese and Americans think innovation will be more important than ever to the U.S. economy. The poll however goes onto cite some interesting and curious dynamics.
Here are results asking Chinese and American parents what skills their children need to drive innovation:
This slide says a few things to me. First, the grass is always greener. Our education system is prized for its ability to teach creative approaches to problem solving, while that of China is maligned for a lack of doing so and generally prizes technical and math skills. While I certainly acknowledge that Americans could use more math and computer skills (see www.ndn.org/skills), it's clearly our creativity and ability to thrive in competition that has made us successful.
Here are results from asking Americans and Chinese how they would invest a week's pay:
Again, curious, that Chinese say they would invest, while Americans say they would save, when the behavior tends to be the opposite. I'm not sure what this means - other than perhaps people are constantly being told that behavior that they are not partaking in is desirable. I know it's hard to watch cable news without hearing that Americans have too much debt.
What the poll ultimately says to me is that the national conversation on innovation is long overdue. This poll, conducted by BSG and commissioned by NDN in 2007, shows Americans understanding the nature of innovation and the globalized economy better than some give them credit for. That said, policymakers and pundits could probably do a better job filling in the blanks.
Last week, I wrote about a David Brooks column that argued that the next great debate in American society is going to be about the best way to promote innovation in the economy. Indeed, innovation has been the lifeblood of the American economy, and it's heartening to see that much of the national conversation has turned to promoting innovation. But not all innovation is beneficial to society. Indeed, one of the sectors that has seen a great deal of innovation recently, some of which created sub-optimal results, was the financial sector. Calvin Trillin, writing in the New York Times, explains, in a sentence, why:
The financial system nearly collapsed…because smart guys had started working on Wall Street.
What Trillin goes onto explain is that smart people, instead of going into for example physics, started going into finance and started innovating. A lot - and much more than their less talented predecessors. (James Kwak at the Baseline Scenario says that this actually is probably true.) But, as Simon Johnson and Kwak have explained, much of the recent innovation in the financial sector hasn't necessarily been beneficial to anyone other than those doing the innovating. They differentiate between innovation that has made things better for consumers – the ATM for example – and innovation that involves easier access to credit, which isn't always as good:
In short, financial innovations whose sole function is to increase access to credit do not in and of themselves make the world a better place. They can help by providing the credit that people need to make the world a better place, but they can also make it possible for people to do irrational and economically destructive things. So when people say that innovation is the source of all progress, that may be true – but not all types of innovation are equal.
In the most recent Democracy Journal, which features a whole series of articles on innovation (incuding one by Johnson and Kwak), NDN's Dr. Rob Shapiro criticizes a proposal promoting the idea of utility capitalism, essentially government regulated monopolies or cartels. Michael Lind, the proponent of utility capitalism, argues that this framework would encourage innovation, which Shapiro debunks by explaining how, according to Nobel Laureate Kenneth Arrow, innovation really works:
Large, incumbent firms try to enhance the efficiency and reduce the costs of what they already do well. Younger firms have to establish a new place in the market, and since their size precludes competing on price, they have to compete in some area of quality, which often means innovation. [Cartels and monopolies, which preserve the incumbent status of large firms, therefore do not lend themselves toward innovation.]
Most of us can agree that for America to maintain its economic standing, our edge in innovation and the modern idea-based economy is crucial. Unfortunately, maintaining an edge in something so inherently dynamic as generating the ideas that create new and powerful companies, products, and services is difficult, and our ability to innovate is certainly not unlimited.
Most would agree that it was a mistake in recent years to focus so much innovation on the financial sector as opposed to science, medicine, and making people's lives better, and Trillin's point paired with Shapiro's are crucial: America needs to create the incentives that move talented people into socially useful professions (like center-left Washington think-tanking) and create the economic incentives to produce socially useful innovation.
Recently, President Obama announced a strong committment to America's community colleges in the form of the American Graduation Initiative. NDN, a long-time proponent of harnessing the resources of community colleges to upgrade worker skills, has been collaborating with House Democratic Caucus Chairman John Larson on H.R. 2060, the Community College Technology Access Act of 2009. Here's what Larson had to say about the President's new program and H.R. 2060:
President Obama once again displayed his gift for transformational leadership when he announced this morning an innovative initiative to strengthen community colleges across the country so they can build the American workforce of the future. I am a strong believer that community colleges can be a hub for technology and job training in our communities if they are given the resources that our schools and students need.
I've introduced The Community College Technology Access Act, developed with the support of the NDN, which will open the doors of community college technology labs and training opportunities to the public in order to provide workers who are lacking key computer skills the opportunity to attain them. By broadening their mission, community colleges have the potential to be a hub to train our workforce for the jobs of the future. My legislation helps them fulfill their potential and boosts local economies around the country. I commend the President’s leadership on this issue and look forward to working with him on it.
H.R. 2060 continues to gain support in the House of Representatives, and now has 46 cosponsors:
Rep Miller, Brad [NC-13] - 4/23/2009 Rep Hare, Phil [IL-17] - 4/23/2009 Rep Wu, David [OR-1] - 4/23/2009 Rep Edwards, Donna F. [MD-4] - 4/23/2009 Rep Honda, Michael M. [CA-15] - 4/23/2009 Rep Himes, James A. [CT-4] - 4/23/2009 Rep Murphy, Patrick J. [PA-8] - 4/23/2009 Rep Ehlers, Vernon J. [MI-3] - 4/23/2009 Rep Sestak, Joe [PA-7] - 4/23/2009 Rep Kilpatrick, Carolyn C. [MI-13] - 4/23/2009 Rep Sablan, Gregorio [MP] - 4/23/2009 Rep Napolitano, Grace F. [CA-38] - 4/23/2009 Rep Markey, Betsy [CO-4] - 4/23/2009 Rep Ross, Mike [AR-4] - 4/23/2009 Rep Matsui, Doris O. [CA-5] - 4/23/2009 Rep Bordallo, Madeleine Z. [GU] - 4/23/2009 Rep McGovern, James P. [MA-3] - 4/23/2009 Rep Smith, Adam [WA-9] - 4/23/2009 Rep Grayson, Alan [FL-8] - 4/27/2009 Rep Castle, Michael N. [DE] - 4/27/2009 Rep Costello, Jerry F. [IL-12] - 4/27/2009 Rep Kennedy, Patrick J. [RI-1] - 4/28/2009 Rep Reyes, Silvestre [TX-16] - 5/4/2009 Rep Polis, Jared [CO-2] - 5/6/2009 Rep Ros-Lehtinen, Ileana [FL-18] - 5/18/2009 Rep Grijalva, Raul M. [AZ-7] - 6/2/2009 Rep Pierluisi, Pedro R. [PR] - 6/2/2009 Rep Langevin, James R. [RI-2] - 6/2/2009 Rep Sires, Albio [NJ-13] - 6/3/2009 Rep Schwartz, Allyson Y. [PA-13] - 6/4/2009 Rep McIntyre, Mike [NC-7] - 6/8/2009 Rep Blumenauer, Earl [OR-3] - 6/9/2009 Rep Gutierrez, Luis V. [IL-4] - 6/11/2009 Rep Roybal-Allard, Lucille [CA-34] - 6/11/2009 Rep Lofgren, Zoe [CA-16] - 6/24/2009 Rep Courtney, Joe [CT-2] - 6/25/2009 Rep Ryan, Tim [OH-17] - 7/8/2009 Rep Filner, Bob [CA-51] - 7/8/2009 Rep Conyers, John, Jr. [MI-14] - 7/8/2009 Rep Price, David E. [NC-4] - 7/9/2009 Rep Olver, John W. [MA-1] - 7/10/2009 Rep Tonko, Paul D. [NY-21] - 7/13/2009 Rep Eshoo, Anna G. [CA-14] - 7/15/2009 Rep Cohen, Steve [TN-9] - 7/21/2009 Rep Schauer, Mark H. [MI-7] - 7/21/2009 Rep Wexler, Robert [FL-19] - 7/24/2009
Today President Obama is conducting a town hall meeting in New Mexico focusing on the issue of credit card debt. This is a welcome turn in the national economic conversation from the plight of big institutions and the financial system to what is perhaps the most important part of the story of the Great Recession still not adequately understood - the weakened state of the American consumer prior to the recent recession and financial collapse.
We've told this story many times - despite robust growth in the Bush Era, incomes for a typical family fell. Most measures of consumer health during the Bush went in the wrong direction. We saw an increase in those without health insurance, in poverty, incomes fell. The lack of income growth - coupled with a flood of cheap money - helped drive increased consumer indebtedness - mortgages themselves, credit cards, home equity loans. People borrowed to maintain their lifestyles, and to keep up with the Jones. The continued consumption and borrowing was justified in the minds of consumers by the power of the wealth effect brought about the rapidly increasing value of homes and stocks. But we know what happened next. Assets fell. Incomes did not appreciably rise. The debt remained. People lost jobs. The already very weakened balance sheet of a typical family grew much much worse.
And then the inevitable happened - consumption plummeted. Repeatedly throughout this crisis the "experts" have been surprised by the weakness of the typical American consumer. They are not acting like consumers in a typical recession because for consumers the recovery they just experienced was not a typical recovery. Typical Americans have been in their own "recession" for almost a decade. Look at the Post headlines today: "More Homeowners Getting Aid, But Demand Keeps Rising," and "Weak Retail Sales Dash Recovery Hopes."
The reason that this matters so much is that consumer spending in the US is 70 percent of GDP, and it has been the mighty American consumer who has been fueling the recent global expansion. The length and depth of the current Great Recession will be driven to a great degree by the ability of consumers to start buying things again. We maintain that given their weakened home balance sheet that this could be a while. Which is why the next stage of our recovery will not be so much about liquidity or confidence. It will be about actually improving the financial position of the typical American consumer, which inevitably lead us to discussions of "deleveraging," or reducing the amount of debt on the balance sheets of American families.
Which is why what the President is doing today is so important. He is beginning a conversation now about what is happening with American families. What is best for American families now - to spend or save? Do we really want, as a matter of national policy, Americans to spend, to take on more debt? Or is it best for them to save, pull back, spend less, pay down their debts, get their own balance sheets in order? The answer to this question - being put on the table by the President today - will have a lot to do with how the current global recession ends.
My own view is that just as we have tried to figure out how to get the debt off the balance sheet of the banks so they can resume their work, we will have to talk about how to reduce the indebtedness of American consumers, and encourage those nearing retirement to save much more to replenish the losses in their retirement savings. This may mean a period of slower growth and less consumption of course - but what other choice do we have?
Update: Just found this Christina Romer quote from an interview earlier this week:
The economic recovery, Ms. Romer said, will be driven by business investment in sectors like renewable energy rather than consumer spending. She echoed the views of other economists who expect a long-term economic shift.
“The chance that consumers are ever going to go back to their high-spending ways is not very plausible, nor do I think they should,” she said. “We were a country that needed to start saving more.”
In the now oft-quoted and talked about David Leonhardt interview of President Barack Obama in this weekend's edition of the New York Times Sunday Magazine, Obama made an argument about worker skills that we here at NDN quite enjoyed:
I think everybody needs enough post-high-school training that they are competent in fields that require technical expertise, because it’s very hard to imagine getting a job that pays a living wage without that — or it’s very hard at least to envision a steady job in the absence of that.
And so to the extent that we can upgrade not only our high schools but also our community colleges to provide a sound technical basis for being able to perform complicated tasks in a 21st-century economy, then I think that not only is that good for the individuals, but that’s going to be critical for the economy as a whole.
President Obama has a long track record of supporting such proposals. During the presidential campaign, then-Senator Obama endorsed the idea as part of his platform, and we're pleased to see that the idea of community colleges as a crucial resource for improving worker skills is in his agenda for creating economic prosperity.
This proposal is part of a broader argument that NDN has been making for some time, that in the globalized, interconnected, technology-dense 21st century economy, facility with and connectivity to the global communications network is central to the life success of any worker or child. The 21st century economy is idea-based, in that most of the value of the large companies at the center of U.S. economy is now determined not by their physical assets, but by their intellectual property. Thriving in such an economy requires 21st century skills.
This argument is expounded upon in a paper written by NDN President Simon Rosenberg and Alec Ross, then with the One Economy and now a Senior Advisor on Innovation to Secretary of State Hillary Clinton, that would put A Laptop in Every Backpack of American sixth graders. Additionally, Tom Kalil, now Associate Director for Policy of the White House Office of Science and Technology, continued this narrative, authoring a paper entitled, Harnessing the Mobile Revolution, for NDN’s affiliate, the New Policy Institute. This paper argued that the explosive growth of mobile communications can be a powerful tool for addressing some of the most critical economic, political, and social challenges of the 21st century.
Stay tuned to NDN's Globalization Initiative for additional work on 21st century skills and technology. We believe, just as President Obama started to spell out in his recent interview, that tapping the resources of America's community colleges, putting a laptop in every backpack, and ultimately connecting all Americans and the rest of the world to the global communications network can and must be a hallmark of the economic agenda going forward.