Innovation: Boon or Diasater

 

 

Ask anyone with any sense of values; what is the biggest problem facing our country right now and they’ll tell you it’s jobs or the lack thereof. You can wail about crooked banks, taxes, the deficit, the pentagon budget or our inability to keep our noses out of foreign wars but the real problem, the most nationally debilitating one, is too much unemployment.

 

It’s obvious that putting our unemployed back to work will solve a big part of most of the above. People with good jobs, fair paying jobs, pay taxes; and in so doing they help eliminate the deficit, Those jobs also lead to demand and demand prods manufacturers to create more jobs. Demand creates jobs, jobs create demand. It’s a non-viscous circle.

 

The Republicans say that the way to create jobs is to cut back on everything, especially taxes on them and then the rich will have more money to create these jobs; but the rich already have an excess of money, that’s what makes them rich, and so far that excess of money doesn’t seem to have encouraged them to create bupkiss. They are, in fact, pulling even further back, causing more job losses but still higher bonuses for CEOs.

 

The Democrats want the government to spend money on infrastructure to create the spending and buying cycle described above and that will help drag us out of this depression, but we have to realize that, that just won’t be enough. Why? Because the world has changed since the industrial revolution and even since the post war years when manufacturing was the heart and soul of the American economy.

 

What’s interesting is that part of the plan to create employment through government financing is based on our ability to innovate and invent and yet it is that same ability that will always be a continuing cause of much of our unemployment. President Obama’s Stimulus program saved GM and Chrysler thereby saving about 1.2 million jobs in the auto industry but it might have saved over 5 million jobs if it wasn’t for our innovation which robotized that industry, causing many millions of jobs to fade into the twilight.

 

This situation is not novel to the auto industry. It exists all across the manufacturing scene. Every industry is trying to find ways to cut back on its greatest expense, labor. This isn’t because the business owners are bad guys, it’s because they realize that they must lower costs if they are to compete in the global marketplace. So no matter what happens from an economic point of view, business will continue to try to shrink from a technical point of view, because a large percent of our innovation will always be aimed at cutting labor expenses.

 

So what do we do? Well, we can start by cutting down on human reproduction. Big families were the result of a rural economy that needed a lot of kids to sustain the family farm. Kids are no longer a necessity, they will always be a joy, but right now they are a distinct burden. Even so, not having as many isn’t going to solve the problem all by itself.

 

Another area that has t be looked at is the American work, week.  US citizens work longer hours and more days in the year than just about any work force in the world. It’s a part of the American tradition to which we have always clung. Sure there are those of us who like their work and for whom their job is their life. That’s fine but many others would be much happier if they had longer vacations and shorter work, weeks the way they do in countries like France, Germany and Italy. By cutting the work, week down from five days to four we would give people more time off and create the need for more jobs. Just think how much good an increase of 20% would do for unemployment rates. It would probably drop it back to about 3% without actually creating one new job. . The problem; to do this we will be raising the cost of American production which will make manufacturers crazy. Even though you wouldn’t be raising the actual work hours you will be raising a number of other costs that are associated with extra workers. In addition you would have to offer the workers an increase in wage rate to make up for the shorter hours. The additional workers creating more demand, and possibly increasing manufacturers output could offset this. Of course the additional labor costs could also make the manufacturer non-competetive.

 

The reality is that if this ever happens in this country, it will happen on a very small scale and will never be more than a small part of the solution.

 

The solution must come from the same place that has caused the problem, innovation. This country has never needed innovation the way it needs it now, and without it we will be doomed to economic disaster. For every job that has been lost to the technical revolution there are five that can be created to replace it, if only we have the will and the energy to strap it up and get to work. The primary fields that need innovation right now are research, energy creation, the ecology, transportation, medicine, communication, drugs, climate science, etc. They are all highly technical and they all need educated people to work in them to create technologies that will lead to manufacturing new products, the services that go with them, and the constant innovation that will keep them ahead in their fields.

 

Innovation has always been an American trait but keeping the jobs created by innovation hasn’t.  Why? A couple of reasons, but the main one, has been that it is much cheaper to produce those products overseas. This process helps the international companies that manufacturer them, make greater profits, but it doesn’t help the America labor market at all. The same spirit of innovation that has created new products and services, is making jobs disappear due to increased efficiency and lower overseas labor costs.  That same spirit of innovation can be used to create new jobs here. How, you ask. Very simply, patents.

 

Business has spent a great deal of time and money lately campaigning for the strengthening of patents. Our government should acquiesce to that demand but it should also extract a price for it. Yes, Apple or GE, we can give you an iron clad universal patent and we will back it up in the international marketplace but in exchange we will demand that you manufacture it, only in this country for at least X number of years. The patent itself and US customs will protect the manufacturer from competition and from knock-off artists bringing in their version of it, allowing manufacturers to make a profit on their innovation while creating a new market for American jobs.

 

It wouldn’t be easy to push this kind of legislation through congress because the principal opponents to it wouldn’t be foreign manufacturers but our own industrial giants who have been bringing in billions through plants they have built in third world countries all over the globe.

 

Another government move that would help increase US manufacturing would be the establishment of tariffs on foreign made goods. I realize that this would create all kinds of problems, many of which, I am not even aware. I am not very sophisticated in the area of foreign trade, a disgraceful admission to be made by the son of an importer/exporter but it is sadly true.

 

What I do know is that we once had many tariffs and they were a great protection for American made goods. They worked. It seems that we should be able to work something out again. The reason many of our tariffs were eliminated was to (a) encourage foreign trade, (b) help emerging nations by providing a market for their goods in this country and (c) open certain foreign markets that had heretofore been closed to us through a quid pro quo arrangement. Some of the problems that led to the elimination of tariffs are gone now but others have emerged so we can’t just change everything on a whim. Something, however, must be done to protect our innovators and the manufacturers that feed off their genius.

 

Of course one of the biggest opponents of tariffs has become American companies that want to manufacture overseas because of the cheap labor force available. They enforce their desires through huge lobbying campaigns. This is probably the least worthy reason for not having tariffs.

 

And finally, there is the problem of innovation not only eliminating jobs in manufacturing through increased efficiency but more important; the problem of innovation making entire industries disappear. Just in the last few years there have been some devastating examples. The ability to make digital photos with both camera and cell phone has put Kodak almost completely out of business costing hundreds of thousands of jobs and turning Rochester into a ghost town. The kindle has completely devastated the book printing and publishing industries. The iPod destroyed the record manufacturing business. Email has practically eliminated the messenger business. It goes on and on and it will continue to do so as long as we maintain the ability to think. The key to these changes is that each innovation that eliminates an existing business, usually creates another one, with more jobs than have been lost. The key is to keep these jobs here.

 

Apple is a perfect example of how not to do it. Apple creates hundreds of thousands of jobs but most of those jobs are in other countries. This does not help our job force. What it does is create markets for our products in other countries, but this is not an immediate cause of jobs here.

 

As I’m writing this a friend is looking over my shoulder and he stated that, at least, we will always need someone to clean toilets. All I can think of are the self-cleaning public toilets that are now being installed around Manhattan. It seems that no job is sacred.