TERRE HAUTE — Innovation is the way out of our economic downturn

 

Every day there are stories about financial crises and the real economic problems of viability of the American auto and other mainstay industries. There is plenty to scare us, and soon someone will add to our gloom by again raising the specter of Nikolai Kondratieff’s Long Wave Theory.

This Russian mathematician/economist hypothesized that about every 50 years, capitalist economies run out of steam provided by new technologies and fall into protracted decline until a new technology wave. Fifty years after the Depression of the 1930s, interest in Kondratieff cycles got revived. However, as management guru Peter Drucker has pointed out, the explosion of entrepreneurship created millions of jobs that brought the United States back to prosperity. 

Kondratieff was probably correct in believing that existing dominant industries run out of ways to prosper. However, that does not mean that the world must wait 20 years to suffer the after-effects of dying industries. Of course, new innovations are unlikely to shorten what is clearly going to be one of the worst economic downturns in most of our memories. Short-term recovery will probably depend upon massive government spending on badly needed renovation of the nation’s infrastructure.

Consumers are in no position to consume, business is in no position to invest and foreign buyers of our output are limited by their own troubles and a strengthened dollar. Hopefully, these infrastructure projects will be done right and add to future productivity. However, they are not the source of new long-term prosperity. That will depend again on the development of innovations.

Click here to read further