Larry Summers and America's innovation dilemma
Larry Summers, Treasury Secretary Timothy Geithner, and OMB Director Peter Orszag look at President Barack Obama during an economic meeting in the Roosevelt Room in March.
(Photo Credit: Official White House Photo by Pete Souza)
By Neil Irwin
Larry Summers has become a deeply polarizing figure in Washington; liberals view President Obama's economic adviser as a Wall Street toadie, and conservatives view him as a closet socialist. But he gave a speech Tuesday that received virtually no media attention, in which he offered some ideas that people of both parties -- even the ones who don't like him very much -- need to grapple with for the U.S. economy to prosper in the decades ahead.
Speaking at an event on American competitiveness organized by the Harvard Business Review and consulting firm McKinsey, Summers offered a compelling description of one of the central problems for the United States: While we remain first-rate as a generator of new ideas and innovation, it is no longer a given that innovation leads to lots of solid jobs for the middle class.
"How do you channel direct innovation so that more of the work takes place near the innovation in the United States?" Summers asked. Referencing the founder of Eastman-Kodak Corp., Summers said that "When George Eastman was a profoundly successful innovator, the city of Rochester lived well for a generation. ... His innovation made him rich and enabled tens of thousands of his neighbors to live well. Is the same true today? How can we make it more the same?"
Let me phrase the same point differently. Think about arguably the most successful U.S. company of the past decade, Apple. Apple's great innovation has made Steve Jobs and a few other top executives insanely rich. It has made a few thousand educated professionals at Apple's corporate headquarters quite well-off: Engineers, finance people and the like. But given that most Apple products are made overseas, Apple's success has created few jobs for Americans with little education. Sure, there are some jobs mowing the grass at its corporate campus, working in the Apple cafeteria and driving the employee shuttle bus from Cupertino to San Francisco. But that handful of jobs pales in comparison to the tens of thousands of blue-collar jobs a company like Apple would have created in the United States in a different era.
International trade is one aspect of this shift, but there's another aspect, too -- technological advances have been better at replacing the work of factory workers than white-collar professionals. Robots are much better at assembling cars than they are at coming up with a marketing plan for those cars.
Summers called for researchers to explore these questions more fully and try to find answers that will ensure the future prosperity of the United States. With him departing the White House for his old professorship at Harvard by the end of the year, perhaps he will be one of those researchers.
| September 29, 2010; 12:25 PM ET
Categories: U.S. Economy
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