Editor's Note: Michael McCarthy is the Managing Editor of The Globalist. The following post was originally published in that world affairs online magazine.
By Michael McCarthy, The Globalist
During the 1990s, 21 million new jobs were created in the United States. After reaching a peak of 7.8% in June 1992, the unemployment rate declined steadily to 4% by the end of 1999, and during the latter half of the decade, the economy grew at a healthy average annual rate of 4%.
In contrast, today more than 14 million Americans are out of work, the unemployment rate stands at 9.2%, and the economy is growing so haltingly that a lapse into recession is a distinct possibility. In this dismal economic environment, the country will need to create 21 million additional jobs by 2020 — duplicating the gains of the 1990s — to lower the unemployment rate to 5%, which is where it stood in 1997.
While smart, pro-growth economic policies certainly played a role in the prosperity the United States enjoyed in the 1990s, the country's good fortunes were due in large part to the Internet boom that fundamentally remade the U.S. economy.
Indeed, the tech boom of the 1990s is a prime example of what philosopher, author and investor Nassim Nicholas Taleb famously terms a “black swan” — an event that is widely unforeseen (as was the first literal black swan ever witnessed) and has profound and unpredictable impacts. While black swans often take the form of negative shocks, such as the September 11 attacks and the 2008 financial collapse, the term also encompasses nearly all major scientific breakthroughs and artistic trends.
In much the same way that the unforeseen Internet boom invigorated the U.S. economy in the 1990s, today the United States desperately needs a positive black swan that will give rise to previously unimaginable industries, create new jobs and change the way Americans live and do business.
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Possible black swans
One such breakthrough would be the rapid discovery and commercialization of nuclear fusion, the energy that powers the sun. A goal of scientists for the last several decades, it is considered the “holy grail” of energy sources because it would be essentially inexhaustible, would release no greenhouse gases and would be safe. By making fossil fuels as obsolete an energy source in the future as whale blubber is today, it would have profound economic, societal and geopolitical benefits.
Another possible black swan is the widespread commercialization of nanotechnology — science, engineering and technology conducted at the scale of nanometers. (As a point of reference, a sheet of newspaper is about 100,000 nanometers thick.) While the technology carries with it a host of environmental, ethical and societal concerns, it could conceivably have a myriad of beneficial applications.
For example, some scientists predict nanotechnology could usher in the “next industrial revolution” by enabling the manufacture of stronger, smaller and more sophisticated products. Nanotechnology could also be used to engineer human tissues, replacing conventional approaches such as organ transplants. Or it could help clean the environment via nanomaterials that would bind to pollutants in the air and water, making it easier to absorb and clean up contaminants. The possibilities are endless.
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Winning the future
The point of these admittedly fanciful, highly speculative examples is not to predict the next black swan that will remake the U.S. economy. Doing so is an intrinsically foolish endeavor, as unpredictability is one of black swans’ defining traits.
Rather, these examples emphasize the fact that as the United States enters an age of austerity, it must resist the temptation to “eat its seed corn” by slashing funding for education, research and development and other types of spending that pay long-term dividends.
As was the case with the Internet, which grew out of an experimental program begun by the Department of Defense in the 1960s, it is precisely these types of investments that will eventually give rise to seemingly far-fetched advances such as nuclear fusion or cutting-edge nanotechnology applications — game-changers that will have widely beneficial economic impacts.
In a recent interview published on The Globalist, former Federal Reserve Chairman Alan Greenspan remarked, “History tells us that it is those societies that have the most advanced cutting-edge technologies that have the highest standards of living. That’s always been the case.”
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He continued, “If the United States is now slipping in this regard, it is basically because of our increasingly dysfunctional primary education system.”
Unfortunately, in its drive to slash deficits, the country is making its public education system even more dysfunctional. For example, 70% of U.S. school districts faced budget cuts in the previous school year, and 84% are expecting cuts in the coming school year, according to the Center on Education Policy.
As far as research and development is concerned, overall federal R&D spending is actually expected to decline in 2011. Meanwhile, competitors like China, Korea, India, Russia and Brazil are quickly increasing their R&D expenditures.
The United States certainly cannot bank on a black swan like the 1990s IT boom leading the country out of its economic malaise. However, it can improve the odds of the next technological and economic breakthrough only by increasing spending on education, research and development and other long-term investments.
While luck is an integral element of any such positive black swan, luck favors the prepared.
The views expressed in this article are solely those of Michael McCarthy. Read more at The Globalist.
Education spending like all government spending, has increased way beyond inflation, population, and GDP growth. You can throw more money at the problem, but that isn't the solution. Finland has the best education system in the world. They don't spend more than we do per student, in fact they spend a great deal less. Wake up America.
America is a great country with great people with great minds. Ultimately, they will figure it out and bounce back. The govt and politicians need to get out of the way as they are keeping the country from progressing and the people from succeeding.
"Silver Bullet" for America is unceasing honesty, dignity, hard work, creativity and endurance. Immorality brings all down.
CNN, why can't I talk about American economy?
There is a silver bullet. In fact, there are several. First of all there is the Fairtax which is one of the ways the economy can be revived quickly, but more important, there are the illegal aliens. Illegal aliens cost the nation 113 Billion per year. They occupy around 7 million jobs. booting them out would not only free up those jobs, but also take 7 million people out of unemployment benefits and welfare. On top of that it would put the wage scale up to normal, because illegal aliens drive wages down. So, not only would you have more people paying taxes, spending income and so on, you would also lower government spending tremendously. It can be don fairly easy by cracking down on those that employ or support illegal aliens and hit them with heavy fines or even imprisonment. The tools are already in place. Making E-Verfiy mandatory will already do a lot, actually enforcing existing laws will do the rest.
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