Friedman: The U.S. Needs to Stimulate Innovation and Invention

I’m not a big fan of Thomas Friedman but I must say I was taken by his opinion piece in the NYT Sunday. In it Friedman argues that the way out of the mess we find ourselves in is to invent and innovate. Here from the Times is the essence of what he has to say:

Russia, it seems to me, is clearly wasting this crisis. Oil prices rebounded from $30 to $70 a barrel too quickly, so the pressure for Russia to really reform and diversify its economy is off...

At the St. Petersburg exposition center, showing off the Russian economy, the two biggest display booths belonged to Gazprom (OGZPY.PK), the state-controlled oil and gas company, and Sberbank, Russia’s largest state-owned bank. Russian companies that actually made things that the world wanted were virtually nonexistent: Two-thirds of Russia’s exports today are oil and gas. Gazprom makes the money, and Sberbank lends it out.

As one Western banker put it, when oil is $35 a barrel, Russia “has no choice” but to reform, to diversify its economy and to put in place the rule of law and incentives that would really stimulate small business. But at $70 a barrel, it takes an act of enormous “political will,” which the petro-old K.G.B. alliance that dominates the Kremlin today is unlikely to summon...

China is also courting trouble. Recently — in the name of censoring pornography — China blocked access to Google (GOOG) and demanded that computers sold in China come supplied with an Internet nanny filter called Green Dam Youth Escort, starting July 1. Green Dam can also be used to block politics, not just Playboy. Once you start censoring the Web, you restrict the ability to imagine and innovate. You are telling young Chinese that if they really want to explore, they need to go abroad.

We should be taking advantage... The world’s best brains are on sale. Let’s buy more!

...We need to do all we can now to get more brains connected to more capital to spawn more new companies faster. As Jeff Immelt, the chief of General Electric (GE), put it in a speech on Friday, this moment is "an opportunity to turn financial adversity into national advantage, to launch innovations of lasting value to our country.”

Sometimes, I worry, though, that what oil money is to Russia, our ability to print money is to America. Look at the billions we just printed to bail out two dinosaurs: General Motors (GMGMQ.PK) and Chrysler.

Lately, there has been way too much talk about minting dollars and too little about minting our next Thomas Edison, Bob Noyce, Steve Jobs, Bill Gates, Vint Cerf, Jerry Yang, Marc Andreessen, Sergey Brin, Bill Joy and Larry Page. Adding to that list is the only stimulus that matters. Otherwise, we’re just Russia with a printing press.

That paragraph about bailing out our dinosaurs is pretty strong stuff for a liberal like Friedman, which probably makes me all the more appreciative of his comments.

There are some things in his article I might quibble with but on the whole, I think it is right on the mark. And that brings me to a point I think is important. Not only are we printing money to save the old economy but we are also printing money to pursue politically correct new technologies, specifically “green” energy initiatives. Now it might be a perfectly good investment in the future but it seems as if we are placing all of our bets on this one venue.

Why aren’t we channeling money to nanotechnology, robotics, genetic engineering or any of a number ofother promising technologies. The one thing that can be counted on is that the next big wave of invention and innovation is more likely to come from someplace we least expect as opposed to the technology we try to force feed.

Anyway, a hat tip to Friedman for some very good thoughts.

Comments

[Ivan Kitov:]

There are two fields, which are really driven by innovations - medical care and higher education. Both sectors demonstarte the increasing pricing power relative to other foods and services.

As seen for the figure in the Seeking Alpha post
(seekingalpha.com/insta...) for college education, the deviation from the headline CPI accelerates after every recession. Only extraordinary high investements could stabilize the process. Otherwise, supply of education and medcare does not match demand and both sectors recieve enormous profits. Innovation might be an alternative to investments.

Jun 29 12:47 PM

[303820:]

"We need to do all we can now to get more brains connected to more capital to spawn more new companies faster. As Jeff Immelt, the chief of General Electric (GE), put it in a speech on Friday, this moment is "an opportunity to turn financial adversity into national advantage, to launch innovations of lasting value to our country.”

WE NEED THE CREATION OF MORE AMERICAN COMPANIES WITH AMERICAN TAX DOLLARS...AND AFTER THEIR CREATION, CORPORATE FAT CATS CAN TAKE THE PRODUCTS WE'VE CREATED AND PRODUCE THEM WITH SLAVE LABOR, IN COUNTRIES THE LIKES OF CHINA.

OF COURSE TO SAFE A PROVEN COMPANY (GM)WHO HAS BEEN PUTTING BILLIONS OF TAX DOLLARS IN OUR LOCAL AND STATE ECONOMIES AND CREATED MILLIONS OF JOBS...THATS A WASTE OF MONEY.

IF ANY ONE WONDERS WHY WE'RE IN THIS MESS? WONDER NO MORE!!!

Jun 29 01:40 PM

[Valley Boy:]

Any job outsourcing to other countries should be slapped with a tax penalty. A tax reduction of an equivalent amount should be given to employers who hire legal citizens within this country. The federal government should not pass high-handed legislation mandating innovation and inventions. However, they certainly should offer loans to those business for the purpose of making energy innovations and mandate tax credits to any business actually making energy innovations. These iniatives taken together should result in a more diverse, innovative and prosperous domestic energy sector and a smaller trade imbalance.

Jun 29 02:50 PM

[SouthernCEO:]

Moose- The oil thing is not as easy as you might think. As a fuel it can be replaced but most of our plastics, synthetic materials, and lots of chemicals are oil based products. In fact, many of them are by products of fuel refining and would not be economically fisable if it weren't for the fuel refining part of the business. I totally agree that we need to look past oil and all fossil fuels but at this point in time it's just not possible. Look at a wind powered plant. The blades are a carbon based material, it is painted with a carbon based material, and it is internally lubricated with a carbon based material, the insulation on the wiring is also a carbon based product all derived from oil. If you make these products by themselves without the refining part of the process the costs will be astromomical and the largest part would now be hazardous waste. What happens to all of our heavy equipment? Trucks, tractors, locomotives, etc can't run on batteries. If we reduce refining down to a point where this fuel becomes a specialty chemical it would destroy the economy as we know it. It guess the bottom line is that we need to use what we have until the technology is in place to make a rational change. Forcing change just for the sake of change just won't work. Look at Spain. Since they went full tilt for the green thing they have lost over 100K jobs, the price of electricity has risen out of control and their CO2 production is 50% higher today than in 2001. I applaud their ideas but the technology isn't available yet and all they have done is spend money that, had they waited, could have really made a difference.

Jun 29 03:31 PM

[303820:]

My friend...the Obama policies are not working because our jobs are still bleeding out of this country...because our dollars are still going in the pockets of foreign companies...the ripple effect is not yet complete..it is going to get worse a lot worse, unless we stop the bleeding.


On Jun 29 03:17 PM fro3 wrote:

>
>
> We need to stop the corruption by Goldman, bank of Amerika, and Jp
> Morgan. Stop the Geithner and bernanke. .
>
> Go to: www.bit.ly/12NCJR and read the full Rolling Stone [Taibbi]
> The Great American Bubble Machine article.
>
> Obamma,s policies may not be working as well as many had hoped:<br/>
>
> 1st 100 days - There are 2.9 million more people unemployed in May
> than there were unemployed in January. The unemployment rate went
> from 7.6% to 9.4%. Since May 2008, we have lost 5.5 million jobs.
> The biggest losers were: Manufacturing 1.5 million lost Finance &amp;
> Prof Serv 1.5 million lost Construction 1.1 million lost Retail &amp;
> Leisure 1.3 million lost
>
> good articles www.bit.ly/12NCJR recommended reading
>
> Why isnt the stock market falling when the economy is sinking? Why
> cant we get change in Washington that we really need? Why vote?

Jun 29 03:38 PM

[303820:]

"WE THE PEOPLE" NEED TO BUY AMERICAN WHERE AMERICAN IS AVAILEBLE!!!!


On Jun 29 03:31 PM SouthernCEO wrote:

> Moose- The oil thing is not as easy as you might think. As a fuel
> it can be replaced but most of our plastics, synthetic materials,
> and lots of chemicals are oil based products. In fact, many of them
> are by products of fuel refining and would not be economically fisable
> if it weren't for the fuel refining part of the business. I totally
> agree that we need to look past oil and all fossil fuels but at this
> point in time it's just not possible. Look at a wind powered plant.
> The blades are a carbon based material, it is painted with a carbon
> based material, and it is internally lubricated with a carbon based
> material, the insulation on the wiring is also a carbon based product
> all derived from oil. If you make these products by themselves without
> the refining part of the process the costs will be astromomical and
> the largest part would now be hazardous waste. What happens to all
> of our heavy equipment? Trucks, tractors, locomotives, etc can't
> run on batteries. If we reduce refining down to a point where this
> fuel becomes a specialty chemical it would destroy the economy as
> we know it. It guess the bottom line is that we need to use what
> we have until the technology is in place to make a rational change.
> Forcing change just for the sake of change just won't work. Look
> at Spain. Since they went full tilt for the green thing they have
> lost over 100K jobs, the price of electricity has risen out of control
> and their CO2 production is 50% higher today than in 2001. I applaud
> their ideas but the technology isn't available yet and all they have
> done is spend money that, had they waited, could have really made
> a difference.

Jun 29 03:44 PM

[303820:]

SORRY...THE REPLY WAS FOR ...FRO3!!!


On Jun 29 03:44 PM 303820 wrote:

> "WE THE PEOPLE" NEED TO BUY AMERICAN WHERE AMERICAN IS AVAILEBLE!!!!
>

Jun 29 03:46 PM

[SouthernCEO:]

303820- You can't blame businesses for moving jobs to China. We, the American public, made this decision. We wanted cheaper products and business gave us what we asked for. Wal-Mart is number one because we the people shop there. Wal-Mart had to pull out of Germany. The prices were less but the Germans didn't shop there so they had to close up. I buy American when I can but as long as the consumer doesn't care jobs will still be moving over seas. With that said we still have to compete. I will pay more for a better product but I will not buy inferior stuff just because it is made in America.

Jun 29 03:57 PM

[303820:]

The decision to move jobs to slave labor countries was and is made by corporate america...I've never heard of an American company asking its consumers,f a choice of a JOB or a CHEAP product...most of the big thicket item that we import from cheap labor countries do nothing for the consumers...they just fatten-up the wallets of walls street profiteers... the cost to build a $15,000 car in Korea is less then $1,500..it still cost the American consumer $15,000....A $200 three peace suit cost $9 to make in China, it cost the American consumer $200...a $100 pair of Nike shoes cost under $5 to make in China ...it cost the American consumers $100...We import 1.5 million tons of steel pipes a year from China..to compete with the manufacturing of those pipes in this country we would have to work for free...The steel industry in this country moved operations to Brazil, China, Poland and Mexico and blamed the unions for the jobs we lost...WE CAN'T COMPETE WITH THOSE COUNTRIES... EVEN IF WE WORK FOR FREE!
"WE THE PEOPLE" DON'T HAVE A CHOICE WHEN WE'RE FORCED TO COMPETE WITH THE UN-COMPETEBLE!


On Jun 29 03:57 PM SouthernCEO wrote:

> 303820- You can't blame businesses for moving jobs to China. We,
> the American public, made this decision. We wanted cheaper products
> and business gave us what we asked for. Wal-Mart is number one because
> we the people shop there. Wal-Mart had to pull out of Germany. The
> prices were less but the Germans didn't shop there so they had to
> close up. I buy American when I can but as long as the consumer doesn't
> care jobs will still be moving over seas. With that said we still
> have to compete. I will pay more for a better product but I will
> not buy inferior stuff just because it is made in America.

Jun 29 04:18 PM

[Old Trader:]

This is such a weighty and complex issue, its hard to know where to start. One place would be with our educational system. Too much time, money and effort is being spent on "soft", "feel-good" so-called sciences, at the expense of actual knowledge. When I think of the literacy of the majority of the population, I'm not certain whether I should laugh, or cry. I'm not merely referring to inner city gang bangers, but graduates of some the top colleges/universities in the country. Where is it written that a college degree is a "right"? As I understand it, the only "right" is the chance to EARN one.

As has been pointed out here at SA by countless commenters, entirely too large a percentage of our population devotes their efforts to creating "paper", and then pushing it from place to place. I'm not merely talking about the "financial engineering" that swept through Wall Street, over the last decade, or so. For a decade, or so, I ran a small business designing and fabricating metal furniture. From time to time, I was approached by "designers" who needed someone to actually make their designs. Despite their degrees from RISD, the School of the Art Institute, etc, invariably, they were totally clueless when it came to things like the properties of materials, construction/fabrication techniques, etc. But HEY!!!! they sure could draw some pretty lines on paper!

I'll stop ranting now; I think all catch my drift.

Jun 29 06:07 PM

[Tony Petroski:]

Don't get too excited about Friedman. He is right, we could use all the innovators we can get. But he writes of "minting" the next Edison etc., statism at its worst, and I assume he would like to set up a Department of Innovation or some such thing to force-feed capital to those applicants with whom he finds favor.

Milton Friedman called this the tyranny of the status quo. "Hope and
Change" is really just taxing the winners to bail out the losers or the dinosaurs. Real innovation comes from freedom and is often found in unexpected places. It often comes in the wake of failure.

Jun 29 06:30 PM

[austrian63:]

Why would you assume that central planning can stimulate innovation?

Jun 29 07:30 PM

[inthemoney:]

> Why would you assume that central planning can stimulate innovation?

Exactly. Just look at the USSR and their weapons. Consumer goods were awful but not because they didn't have enough innovation, it is because the government wasn't intrested in the consumer goods and so this is not where they put their resources.

US education system is sub-par and that is that. If it wants to stay competitive kids need to learn that failure is not ok, they need to learn accountability early on. There need to be schools for talented kids and public college education needs to be free for at least top 10% of students to drive them to excel.

Jun 29 11:45 PM

[THofler:]

Sarbanes Oxley has probably cost our economy $1T in lost IPO opportunities for small innovative companies. Has anyone investigated whether John Thain provided honest accounting to BofA? This is precisely the issue that Sarbox was meant to address and criminalize. Yet no one seems to care about putting Sarbox to work.

Sarbox was always a mix of upsides and downsides. Now that the economic tide has gone out, we know that Sarbox has zero impact on those who swam naked. There is no upside. Any venture capitalist will tell you the Sarbox downside for the economy is massive. Time to junk Sarbox!

Jun 30 02:03 AM

[lorddarley:]

Why is history a dusty pastime that we never learn from? I don't think there has been an economist since Adam Smith who really understood what makes a country prosperous, and what improves the lot of the great mass of its citizens. From his Wealth of Nations (coincidentally 1776):

1. Make something that people in other countries want to buy (i.e. nurture exports).

2. concentrate on making and selling high value products.

3. import the raw materials and produce from other countries made by cheaper labor.

4. don't be embarrassed by success.

Smith knew that not everyone becomes "middle class" overnight, and it didn't trouble him. He recognized that there are divsions of labor.

We have deluded ourselves in the US into thinking that Adam Smith is wrong headed, and that running a positive balance of trade, or recognizing that divisions of labor are natural, is sinful.

Smith's economic principles are unavoidably correct. I wouldn't be surprised if there is a dog-eared copy or two in Peking.

Jun 30 08:07 AM

[303820:]

Mr.lordarley: What can we make that Mexican can buy with$1.90hr paycheck? what can we make that the Chinese can buy with their $.33hr pay check? what can we make that the Koreans can buy? and the rest of the slave labor country...those people CAN NOT AFFORD THE PRODUCTS THEY MAKE.
Canadians can afford our products...how ever...even there our products become some what uncompetitive because of their nationalized health care.
Stop questioning our ability to make quality products...stop blaming the unions...stop blaming the working stiffs of this country.


On Jun 30 08:07 AM lorddarley wrote:

> Why is history a dusty pastime that we never learn from? I don't
> think there has been an economist since Adam Smith who really understood
> what makes a country prosperous, and what improves the lot of the
> great mass of its citizens. From his Wealth of Nations (coincidentally
> 1776):
>
> 1. Make something that people in other countries want to buy (i.e.
> nurture exports).
>
> 2. concentrate on making and selling high value products.
>
> 3. import the raw materials and produce from other countries made
> by cheaper labor.
>
> 4. don't be embarrassed by success.
>
> Smith knew that not everyone becomes "middle class" overnight, and
> it didn't trouble him. He recognized that there are divsions of labor.
>
>
> We have deluded ourselves in the US into thinking that Adam Smith
> is wrong headed, and that running a positive balance of trade, or
> recognizing that divisions of labor are natural, is sinful.
>
> Smith's economic principles are unavoidably correct. I wouldn't be
> surprised if there is a dog-eared copy or two in Peking.

Jun 30 08:49 AM

[Mayer Amsch...:]

Let's have a government program designed to make American women think that Chinese men are sexy. China has millions more young men than women; they should be easy to lure over here and we won't even have to pay them a cent.

Jun 30 12:39 PM

[cameroni:]

Hello 303820,

Lordarley was pretty much on the mark with his comments.

Admittedly I am an Adam Smith adherant. His ideas tend to have more resonance at just such a time as we are going through now. When we start to look at the underpinnings of economic functions, why it works and how we can prosper using the basic mechanics of trade then Adam Smith's old fashioned ideas start to look brilliant.

But what I want to address is your idea that others cannot afford our products. I will list several examples and hopefully you will change your view of our technological advantage and see why our prosperity lies in homegrown manufacturing, R&D, invention and new ideas.

Let's talk aviation first. Boeing, one of our flagship corporations sells aircraft into almost every country on earth. The people individually may not be be able to afford these aircraft but the National Carriers that fly these craft can.

How about Pharmaceuticals, medications and vitamin supplements that treat everything from the common cold to AIDS and Cancer. Again these are sold around the world. How about software. Windows is just one single example. It is global too.

The list is almost endless. From packaging to the sattelite mapping of the earths surface for resource discovery to nano-technology and back to good old basics like GPS seeding equipment on farms.

The whole world is buying our products now and we will keep our competitive edge by building on our existing base of good companies. We will grow faster by importing knowledge and ideas where we can find them.

We make a lot of the "stuff" that the world uses every single day.


On Jun 30 08:49 AM 303820 wrote:

> Mr.lordarley: What can we make that Mexican can buy with$1.90hr paycheck?
> what can we make that the Chinese can buy with their $.33hr pay Hi check?
> what can we make that the Koreans can buy? and the rest of the slave
> labor country...those people CAN NOT AFFORD THE PRODUCTS THEY MAKE.
>
> Canadians can afford our products...how ever...even there our products
> become some what uncompetitive because of their nationalized health
> care.
> Stop questioning our ability to make quality products...stop blaming
> the unions...stop blaming the working stiffs of this country.<br/>

Jul 01 12:17 AM

[303820:]

Cameroni: I don't have a problem with innovations and inventions...I don't have a problem with trade.
I have a problem with free trade...its a free pass for corporate America to take away American's jobs...manufacture their products in countries for which wages we can not compete with and expect those who's jobs have been taken away to buy those products...we need fair trade not free trade!

Boeing was selling aircrafts to other countries before the trade agreements...however now they them selfs import from cheap labor a lot of what they put in their aircrafts.

Pharmaceuticals? we have the best... if the world wants them they'll buy them. BTW the pharmaceutical industry is also using slave labor countries the likes of China and Puerto Rico to manufacture a lot of our medicines.

We have huge trade deficits with every country we trade with...in my book "DEFICIT" means we're losing!!!



On Jul 01 12:17 AM cameroni wrote:

> Hello 303820,
>
> Lordarley was pretty much on the mark with his comments.
>
> Admittedly I am an Adam Smith adherant. His ideas tend to have more
> resonance at just such a time as we are going through now. When we
> start to look at the underpinnings of economic functions, why it
> works and how we can prosper using the basic mechanics of trade then
> Adam Smith's old fashioned ideas start to look brilliant.
>
> But what I want to address is your idea that others cannot afford
> our products. I will list several examples and hopefully you will
> change your view of our technological advantage and see why our prosperity
> lies in homegrown manufacturing, R&amp;D, invention and new ideas.
>
>
> Let's talk aviation first. Boeing, one of our flagship corporations
> sells aircraft into almost every country on earth. The people individually
> may not be be able to afford these aircraft but the National Carriers
> that fly these craft can.
>
> How about Pharmaceuticals, medications and vitamin supplements that
> treat everything from the common cold to AIDS and Cancer. Again these
> are sold around the world. How about software. Windows is just one
> single example. It is global too.
>
> The list is almost endless. From packaging to the sattelite mapping
> of the earths surface for resource discovery to nano-technology and
> back to good old basics like GPS seeding equipment on farms.
>
> The whole world is buying our products now and we will keep our competitive
> edge by building on our existing base of good companies. We will
> grow faster by importing knowledge and ideas where we can find them.
>
>
> We make a lot of the "stuff" that the world uses every single day.
>

Jul 01 10:51 AM

[austrian63:]

I would disagree somewhat by saying that Mises and Hayek probably had an even better understanding of what makes a modern economy prosper.


On Jun 30 08:07 AM lorddarley wrote:

> Why is history a dusty pastime that we never learn from? I don't
> think there has been an economist since Adam Smith who really understood
> what makes a country prosperous, and what improves the lot of the
> great mass of its citizens. From his Wealth of Nations (coincidentally
> 1776):
>
> 1. Make something that people in other countries want to buy (i.e.
> nurture exports).
>
> 2. concentrate on making and selling high value products.
>
> 3. import the raw materials and produce from other countries made
> by cheaper labor.
>
> 4. don't be embarrassed by success.
>
> Smith knew that not everyone becomes "middle class" overnight, and
> it didn't trouble him. He recognized that there are divsions of labor.
>
>
> We have deluded ourselves in the US into thinking that Adam Smith
> is wrong headed, and that running a positive balance of trade, or
> recognizing that divisions of labor are natural, is sinful.
>
> Smith's economic principles are unavoidably correct. I wouldn't be
> surprised if there is a dog-eared copy or two in Peking.

Jul 01 11:23 AM