The Need for a Technology-Based Growth Strategy
Washington, DC: Facing the worst economic slowdown since the Great Depression, efforts to reestablish acceptable growth rates in both Europe and the United North America are relying to a great degree on short-term "stabilization" policies.
In a structurally sound economy, the neoclassical growth model states that appropriate monetary and fiscal policies will enable price signals to stimulate investment. The subsequent multiplier effect will then drive sustainable positive rates of growth. However, these macrostabilization policies can do relatively little to overcome accumulated underinvestment in economic assets that create the needed larger multipliers. This underinvestment has led to declining U.S. competitiveness in global markets and subsequent slower rates of growth—a pattern that was underway well before the "Great Recession."
However, the massive monetary and fiscal "stimulus" applied since 2008 in the United States has had only a modest impact on economic growth. The reason is that the prolonged current slowdown is a manifestation of structural problems. Thirty-five years of U.S. trade deficits for manufactured products cannot be explained by business cycles, currency shifts, and trade barriers, or by alleged suboptimal use of monetary and short-term fiscal policies.
High rates of productivity growth are the policy solution, which can be accomplished only over time from sustained investment in intellectual, physical, human, organizational, and technical infrastructure capital. Implementing this imperative requires a public-private asset growth model emphasizing investment in technology.
This paper assesses the limitations of monetary and fiscal policies for establishing long-term growth trajectories and then describes the basis for a technology-based economic growth strategy targeted at long-term productivity growth. This growth model expands the original Schumpeterian concept of technology as the long-term driver of economic growth where technology is characterized as a homogeneous entity that is developed and commercialized by large-firm dominated industry structures. Instead, the new model characterizes technology as a multi-element asset that evolves over the entire technology life cycle, is developed by a public-private investment strategy, and is commercialized by complex industry structure that includes complementary roles by large and small firms. Click here to download the paper.
