America's economic development has been predicated on boom and bust cycles. First there were the railroads which contributed mightily to an economic boom that lasted well into the twentieth century. They provided a lot of jobs as well as creating a lot of rich people like Jay Gould, Mark Hopkins and Cornelius Vanderbilt. Then there were the great technological advances of the twentieth century. The automobile created a lot of wealth and provided a lot of jobs. It was the same for the radio, TV and movie industries. In each case a technological innovation created a boom, provided jobs for a period of time and then, as the industry consolidated, the number of jobs diminished. As the pace of technological development quickened, the pace of the boom and bust cycles quickened. All the many technological developments of the 1920s were followed by the Great Depression of the 1930s. Earlier technological developments were at a more primitive stage that required more human labor as an input to the manufacturing process. Later technological developments were automated sooner so they required less human labor once the various projects got off the ground and consolidated.
By the time of the personal computer and internet boom, the initial phase that required human labor and provided jobs was quite short. In fact this boom facilitated the offshoring of labor and led to an overall decline of US jobs. Also the leveraged buyout business in which a private equity fund takes over a company, lays off its workers and sells off the component parts or takes it into bankruptcy is a relatively new phenomenon. Baran and Sweezy in their book, "Monopoly Capital," have put forth the thesis that the development of American capitalism is completely dependent on technological development and entrepreneurialism, and, in fact, that is the only thing keeping American style capitalism alive. Many people are wondering what is the next Big Thing that is going to get us out of the Great Recession and start providing jobs again. Where is the next boom coming from?
All of this begs the question, what if the next Big Thing which supposedly will end the Great Recession and provide good solid middle class jobs for a time doesn't come along? Is it possible that American capitalism is so dependent on a succession of Big Things that it will just dry up and become untenable unless there is another great innovation or technological revolution? Could it be that the lack of a technological revolution will lead to a political revolution? The US has been known as a society which encourages entrepreneurialism and innovation. This has led to the creation of great wealth and in the process has provided a lot of good jobs for short periods of time. Most jobs are provided by small businesses and in fact small businesses which are recent start-ups. But recent technological developments combined with the lack of a US industrial policy have led to the destruction of good jobs as corporations have opted to increase profits by going to where labor is cheapest. And government has encouraged the process by offering incentives for corporations to offshore jobs. NAFTA and the WTO encourage this process. It's important to remember that corporations are not in the business of providing jobs. They are in the business of maximizing profits, and one way to do that is to minimize the outlay for labor. This can be done by driving down wages and eliminating workers. This in turn can be accomplished by a process of automation and outsourcing jobs to where labor is cheapest.
In an environment where there is a fairly long period of consolidation and in which there are no technological innovations on the horizon, it may turn out that American style capitalism is at a distinct disadvantage. In such a period of history a society predicated on technological innovation and entrepreneurialism may lose its economic dynamism. Less entrepreneurial societies that are better organized at the governmental level and with more focused industrial policies may be better suited for economic development. Societies which have industrial policies and which encourage industrial development on the micro level while setting parameters at the macro level which encourage not only the development of wealth but the creation and retention of jobs might just have the upper hand. In particular China, while not being known for innovation up to now, may gain the upper hand simply because it is better organized in terms of overall industrial policy and because its governing model is more direct and simplified compared to the relative chaos of American government which involves a whole host of competing self-interests and has shown signs of sclerosis and dysfunction recently. A strong hand at the tiller is preferable to a boat that is completely adrift.
In a period of consolidation compared to a period of rapid technological advance, more authoritarian governments might be better able to exploit technological developments that have already occurred rather than depending on technology yet to be invented and exploited. US capitalism is relatively unorganized. Corporations seek less government involvement because they want to maximize their ability to operate unilaterally, innovate and make quick profits. The bottom line and the stock price are more important than the provision of jobs. In fact the provision of jobs is counterproductive to the making of profits. That's why the stock price goes up when the number of workers goes down. Societies which are less innovative tend to be more organizational and to be able to exploit periods in which less technological innovation occurs. They are better able to organize overall systemic development because they are more singleminded in their approach to the economy. American capitalism is better at componental innovation as opposed to systemic development because nobody is in charge of organizing the whole of society. Corporations develop components not overall societal systems.
It would be unthinkable that private enterprise without governmental oversight could have developed the interstate highway system, for example. Government was largely involved in the development of railroads after the Civil War by providing incentives for private corporations. Private enterprise can do economic development based on technological developments and at the component level, but overall systemic development is best organized by government which can set parameters and provide incentives and public private partnerships. The development of components like automobiles, TV sets and personal computers was best carried out by private enterprise, but the development of infrastructure like the highway system, the assignment of the electromagnetic spectrum and the internet are areas where the government needs to play a role. High speed internet can be compared to high speed rail in terms of infrastructure and in both areas the US lags behind due to the fact that government has not played its proper role.
For example, green infrastructure development, which is one of the looming innovations, is better organized on a societal level rather than on the component level. Individual corporations can develop and manufacture the components such as solar panels and windmills, but only government can organize all these components into an overall energy system which efficiently provides energy when and where it's needed. This requires an electrical distribution network, transmission system or backbone and the dimensions and blueprints for this can only be done at the societal level. No corporation is capable of determinig or mandating the overall systemic parameters and infrastructure. In fact corporate development would lead to a hodge podge of nonstandard, non-interrelating components which would compete with each other producing a mish mash at the system level. Therefore, more authoritarian, less innovative societies are in a postion to better exploit technology when it comes to infrastructure.
The same reasoning applies to other aspects of infrastructure. Corporations are notorious for externalizing costs while internalizing profits. This means that they exploit existing infrastructure while not maintaining it. If government does not mandate that they repair or maintain infrastructure that they use or does not step in and do it itself, eventually corporations will not be able to function due to outdated or malfunctioning infrastructure. Societies that have an overarching vision of economic and infrastructure development are better suited to see to it that infrastructure development occurs simultaneously with technological advancement and that jobs are created and maintained rather than workers exploited and their jobs exported. Societies with industrial policies will seek to create and maintain jobs while they export products and import raw materials. Societies without industrial policies will export jobs and raw materials and become dumping grounds for other societies' manufactured exports as citizens are increasingly persuaded to become passive consumers and nonunionized workers.
It's not hard to see areas in which the US has fallen behind other societies due to lack of infrastructure development because corporations have insisted on lower taxes and smaller government. Their lobbyists and campaign donations have created a society that reflects their own short term interests. High speed rail, common in other advanced industrialized societies, is almost completely non-existent in the US. High speed internet is more advanced in South Korea and other societies than it is in the US. Again that is a function of lack of infrastructure in the supposedly "freer" US. A modern electrical transmission grid is lacking in the US nor is there any political impetus for developing it. And then the older infrastructure technologies of water develoment, sewers, roads and bridges have largely been neglected. A concomitant of lack of infrastructure development in the US is the lack of jobs that all that infrastructure development and maintenance could provide. But again infrastructure development is something that is not profitable for US corporations and would have to be pursued by government, and the prevailing philosophy in the US is not to give government the resources it would need to provide the jobs to do this. This is considered to be socialism and as such is anathema in the US. Other societies, though, do not have American hangups and phobias about socialism and are better suited to pursue infrastructure development side by side with technological component development. Research budgets and educational systems in other societies are now beginning to outstrip similar developments in the debt ridden US so that, even in the area of technology, the US is falling behind. Education is free and proliferating in most other advanced societies while in the US education budgets are stagnant or diminishing. And the most talented, instead of going into science and engineering, go into the financial sector where much more money is to be made in financial engineering and the development of financial products.
An industrial policy considers the best ways that government and private enterprise can work together to develop society, create wealth, distribute it somewhat equally and create and maintain jobs. All these elements need to be in balance and work together harmoniously in order for an economic system to function in a healthful manner. The US with its emphasis on component level development and lack of government oversight has created a society in which job creation and preservation is of little value. Long term goals by society at large give way to short term profits by private corporations. Private corporations dominate government instead of the other way around. When new consumer products at the component level such as the automoble, the TV and the personal computer are not brought forth in rapid succession and infrastructure is left to languish, societies predicated on individual components will falter and societies focused on a harmonious balance between component level development and overall societal development including the provision of a stable job infrastructure will prevail in the creation of not only individual but also societal wealth and well being.
