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America: Innovate or Die


US innovation is plummeting faster than our financial markets did during the 2008 crisis.

Editor's Note: This article was written by Gordon T. Long, who is a former senior group executive with IBM & Motorola, a principle in a high tech public start-up, and founder of a private venture capital fund. He is presently involved in private equity placements internationally along with proprietary trading involving the development & application of Chaos Theory and Mandelbrot Generator algorithms.

The future of America is presently in peril, not just because of the shadowy ways of the "banksters," but because of a sputtering innovation engine that's had the fuel choked off. It's now gone "critical," and can no longer be left to only the carping of the academic community.

The chart below from the Financial Times article "China Scientists Lead World in Research Growth" is frightening in its implications. It requires an immediate and serious Congressional public policy response. Unfortunately, most of those on the front lines are skeptical about Washington's ability to either recognize the gravity of the situation or legislate any meaningful and appropriate response.

President Obama's State of the Union address had one overriding theme: jobs, jobs, and jobs. Consider that 50% of all jobs in America are in small business and 70% of new jobs have been coming from small business in recent years, as corporate America downsized, right-sized, and outsourced.

The US has statistically been creating 30 million new jobs a year to offset 28 million jobs that disappear through the capitalist system's process of "creative destruction" (Source: Steve Forbes, Publisher Forbes Magazine in an FSN Interview 1-30-10). The job destruction element continues to advance and we're possibly witnessing even accelerating rates of obsolescence. The jobs creation element, however, is at a standstill in the US.

The State of the Union address coyly spoke of the 2 million jobs "saved," because the actual number of "new" jobs created was statistically too small and embarrassing to highlight (Sources: 2/02/10 -- Tracking; 2/01/10 -- "At Issue: Counting the Jobs Created", New York Times). Recent years have seen job creation in retail, real estate, health care, and government which economists consider "consumption" jobs. Where are our new types of work that are economically considered national "productivity" jobs and create exportable product or services that others will pay for?

The US is no longer a manufacturing-driven economy, or even a global service economy. The US has sustained itself since the dot-com bubble implosion as a financial economy, which is now seriously impaled and faces potentially years of rehab efforts. Future jobs aren't going to come from the old Corporate America, but rather from a new Small Business America -- new innovation -- creating new types of work. Ten years ago, there was no such thing as a web master or an e-Bay business. America must maintain and even challenge itself to step up the pace of innovation. The frank reality is that we're falling behind.

"The numbers of engineering graduates in China and India far outpace that of the United States. In China, it is 600,000; in India, 350,000; in the United States, 70,000, and many of these are foreign students who, more likely than not, will be returning to their home countries."
-- Senator Edward Kennedy, Testimony -- Senate Record, 10/25/05
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