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Doug Koelemay


 

Technology's Long Wave

Robert Atkinson's discussion of technology-powered growth highlights the policy choices ahead for Virginia.


 

The good news is that at least one economist predicts another decade or two of solid growth with technology-driven economies, such as that now advancing in Virginia, in the lead. The better news, except for neo-Calvinists, is that there could be more rewarding work ahead and less of it, thereby making possible a better balance between work, leisure, family and civic action. Such are the conclusions of Robert D. Atkinson in his new book, The Past and Future of America’s Economy: Long Waves of Innovation That Power Cycles of Growth (2004, Edward Elgar Publishing).

As the Vice President and Director, Technology and New Economy Project, at the Progressive Policy Institute in Washington, D.C., Dr. Atkinson has spent more than a decade attempting to find better explanations as to why the U.S. economy has worked the way it has, particularly over the last 150 years. Traditional theories of the business cycle offered him incomplete explanations, as did policy strategies, such as John Maynard Keynes’ prescription to use government tax and fiscal policies to smooth out those cycles. Prices and interest rates turn out not to explain much at all, for example, about the slow growth between the mid-1970s and mid-1990s. And then there are the questions about whether the
information age is here to stay.

Atkinson found the roots of a better explanation about the New Economy and its place in economic history in Joseph Schumpeter’s concept of “creative destruction.” The last decade of information and telecommunications innovation is just the latest of the four great waves of technological change that have fueled fundamental transformations from one kind of economy to another since the mid-1800s.

Steel, machine tools and electricity replaced the agrarian economy with a manufacturing one. Electronics, chemicals and mass consumer goods replaced the manufacturing economy with a corporate, mass production economy. Now, powered by microprocessors, telecommunications, the Internet and software, we find ourselves in a global, entrepreneurial, knowledge-based economy. Each of these economies, Atkinson argues, have changed the nature of work, the organization of enterprises, the role of government, the shape of urban form and even social attitudes and structure.

Dr. Atkinson builds a very readable case for each of these transformations, including his observation that “technology is a skeleton upon which an economy is formed.” But his greatest value is in adding knowledge to the traditional economic inputs of Adam Smith -- land, labor, capital -- and exploring how what we know and what we can know in a timely fashion will make all the difference to the future. In the process he illustrates just how useless traditional types of liberal and conservative thinking are in the New Economy. Many liberals, Atkinson suggests, remain in a reactive mode defending the old economy’s Keynesian, Great Society framework, while conservatives are even more backward looking, seeking through supply-side economics to resurrect factory-era economic policy.

For Virginia or any other economic unit, therefore, Atkinson would argue that neither a fixation on distribution of wealth nor tax cuts for their own sake are substitutes for increased productivity and increased standards of living, i.e. economic growth, as real goals of the New Economy. Further, because knowledge workers armed with information and communications technologies will be able to work from anywhere, a higher quality of life, not just wealth, will be necessary to attract and to keep them in certain firms and certain communities. More satisfying work, more time off and more livable communities will result.

Government must start with fiscal discipline -- controlling spending and providing new revenues where necessary, then move forward according to a new kind of centrist politics organized around problem-solving, not around certain disciplines, ideologies or institutions. Emphasizing partisanship, Atkinson points out, is the opposite of organizing around problem-solving. And he argues that governments can no longer rely on the traditional fiscal and monetary tools it has used in attempts to manage the business cycle. Boosting productivity and economic growth in the New Economy now require “policies that support the digital revolution, boost technological innovation, enhance workforce skills, promote entrepreneurship and ensure competitive and open markets.”

Atkinson has made many of these arguments before. With leadership from private sector executives, such as Mark R. Warner before he became governor, the Progressive Policy Institute has laid out an ambitious role for the public sector as catalyst for private action in boosting economic growth. What gives this discussion of “long waves of innovation” importance now is that it occurs precisely at a time when communities and political leaders need to seize upon the transformations underway, both to grasp more fully the benefits and to develop the precursors of the next technological explosion. The two decades of slow growth between the mid-1970s and mid-1990s, Atkinson concludes, was a time when the United States didn’t do either very well.

What kind of changes ultimately are we talking about? Government, for example, can develop a better rationale about where it locates its own jobs and give public workers remote work and flexible work hours -- and it can encourage private companies to do the same. Government, Atkinson suggests, can increase its direct investment in research at the same time it fosters new partnerships with universities and knowledge-based firms, particularly small and medium-sized firms. Phasing out farm subsidies in favor of investments in a National Rural Prosperity Corporation is one specific new twist Atkinson suggest to reinvigorate community redevelopment. Rural areas and small towns, he points out, have to meet twin concerns in the New Economy: the concerns of firms that they can find the number of workers they need, and the concerns of workers that there are other jobs available should they choose to change careers or pursue new skill sets. There are a raft of other suggestions.

Ultimately, Dr. Atkinson argues, understanding the way progressive knowledge-based firms and knowledge workers function -- and moving policy-making away from fixations on land, labor and capital -- will allow the United States and its technology-driven economy to produce more wealth and a higher quality of life. But it takes a new societal enthusiasm to embrace change. Yelling “Get a horse!” at the automobile didn’t work a century ago and stubbornly questioning the need for broadband or stem cell research doesn’t work now.

 

-- April 11, 2005

  

 

 

 

 

 

 

 

 

 

 

 

 

 

Contact info

 

J. Douglas Koelemay

Managing Director

Qorvis Communications

8484 Westpark Drive

Suite 800

McLean, Virginia 22102

Phone: (703) 744-7800

Fax:    (703) 744-7994

Email:   [email protected]

 

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