“(e.g. to counter foreign innovation mercantilists manipulating their currencies and stealing our IP) and to quickly enough bring forward new sectors like biotechnology.
Ultimately, Baker doesn’t engage what’s actually our key point: that it was the failure of the U.S. innovation economy that was the underlying cause of the economic crisis and now our continuing anemic recovery. Throwing trillions more of stimulus won’t solve the problem (though it may kick it to the next generation, as appears to be the wont of Washington policymakers these days). Rather, we need to get serious about addressing the underlying competitiveness challenges we face through better policies.
While Baker laments not enough patent reform recommendations, Innovation Economics includes novel recommendations ranging from introducing patent boxes to reforming the national lab system to speed bringing science to market. Also, it’s not all about shiny policies. Restoring our innovation competitiveness will also require us to do a lot of seemingly dull “blocking and tackling”—like graduating more highly trained scientists and engineers, like increasing federal investment (which has steadily decreased as a share of GDP since the 1960s), like fixing our immigration. But the point is that we’ve got to do these things—and we haven’t. Baker actually seems to agree with many of these points; it’s a shame he hasn’t used this opportunity to enroll his voice in amplifying the book’s call for the U.S. to have a more serious dialogue about bolstering the innovation-based competitiveness of its economy.
“Dean Baker suggests that the causes of the Great Recession—itself precipitated by the mortgage bust and subsequent housing decline—are cut and dried. He traces these to beginning with the “anti-worker policies of the 80s” and continuing through Greenspan’s insistence to keep interest rates low, which contributed to the inflating of a housing bubble that subsequently burst. Today, Baker’s prescription is to throw trillions more of stimulus at the economy (because the initial $1 trillion wasn’t enough) to get the economic ship of state straightened.
In essence, what Baker proposes is a massive adrenaline shot to the heart to get the economy pumping again. But the point ITIF’s book makes is that the constant resort to shots to the heart—whether Greenspan’s low rates or Baker’s stimulus (which are really just different sides of the same coin, artificially pumping up the economy)—miss the underlying problem and solution: the need to strengthen the heart muscle; the competitiveness, innovation, and productivity capacity of the U.S. economy. For fundamentally, it was our economy’s competitive weaknesses here—reflected in factors such as an uncompetitive tax code (2nd highest OECD corporate tax rate); faltering STEM/K-12 education system; a wildly counterproductive immigration policy; a poor patent policy (three-year backlog of 750,000 patents); etc.—that led enterprises to increasingly view the U.S. as a less desirable location for R&D and production activity and shift more of these activities abroad. This was exacerbated by our inability to effectively defend our trade interests...”