Opinion

Don’t Panic: because American innovation will save the economy

Before you write off the American economy, consider this remark from Nathan Myhrvold, the ex-Microsoft genius who now runs an idea factory called Intellectual Ventures: “For the last few decades I’ve bought Japanese or German cars but no Japanese or German software. Only the United States can handle the thinking speed of the software field.”

We live in a country where makers of high-value-added software are hounded as antitrust outlaws, while the smoke-belching industry of making money-losing cars is lavished with government bailouts, but never mind that. US business ingenuity is so robust that not even the government can kill it.

As Gregg Easterbrook demonstrates in his engaging new book, “Sonic Boom: Globalization at Mach Speed” (Random House), the big challenge today is to accept challenge — perpetual, stressful, constant upheaval. The chances that someone in your family will suffer economic trauma — pay cut, loss of job — in a given year are up to 26%. Like the treadmill, the world economy punishes as it delivers benefits.

Where are all the new jobs to come from? From the sector in which America continues to be the global leader: New ideas. Seventy percent of goods and services sold in 2000 didn’t exist in 1900. In 2007, 85% (!) of global economic growth came from new technology and innovation, says the National Academy of Sciences.

Government notions that the way to create jobs is to borrow money and write checks to those who promise to employ lots of people is getting it exactly wrong. Venture capitalist Michael Moritz puts the matter waggishly: “The real goal of most innovative companies is to create as few jobs as possible, doing the maximum with the minimum number of people.”

Or even to destroy jobs. In a global marketplace, there never will be a time when layoffs, downsizing and outsourcing aren’t in the news. What isn’t in the news are the surprise outcomes of a world that, for the first time in history, puts butter before guns. Did you know the harbor business is growing more quickly than the Internet ad business? The Port of Long Beach, Calif., a snoozy place 20 years ago, is today (thanks in large part to Chinese imports) a monster hive of activity that is expanding as quickly as it can lay concrete.

In Camden, S.C., workers manufacture home appliances for Haier, a Chinese company that makes twice as many refrigerators and washing machines as Whirlpool. Some of its products are, in reverse outsourcing, shipped to Chinese customers — who consider American-made products prestigious. “None of this was planned,” Easterbrook writes. “No person, committee or agency said, ‘Let’s blend together China and South Carolina, then see what happens.’ ” In 2008, despite everything, US exports leveraged a weak dollar to reach an all-time high of $1.1 trillion.

Easterbrook marvels at Waltham, Mass., one of those New England mill towns that, like the peasant hit by plague in “Monty Python and the Holy Grail,” was dead but got better. Today, thanks to its proximity to Boston’s brains, it is a big bubbling chowder of tech firms, venture capital shops and startups. One Waltham firm, Global Insight, sells nearly $1 billion worth of economic analysis and is the primary marketing adviser to Wal-Mart. The town’s average wage is nearly 50% higher than the nation’s. But maybe when the textile industry was disappearing, Washington should have stepped in with a massive bailout program to save the jobs of weavers. Wouldn’t want those great gigs to go overseas.

Observing all the ways in which business proves to be an endlessly renewable resource is enough to make the intellectual heirs of Karl Marx reach for the Pepto-Bismol. Easterbook quotes one of them, the Marxist philosopher Slavoj Zizek, who notes, “Capitalism is the sole organizing structure in world history that is rendered stronger by its own instability. This is part of the genius of capitalism. Instability does not cause it to collapse.”’