After the near-total collapse of the US economy two years ago, the economy has recovered to the point at least that it has crawled its way out of recession, albeit with little being done for unemployment. Now we get a pretty regular stream of advice on how the US can improve this situation and avoid a second recession and perhaps a deflationary spiral.
Along those lines, I came upon this recent article over at MarketWatch that urges a huge government investment in 21st Century technologies, including nanotechnology, that will fundamentally restructure the US economy and will reindustrialize, if you will, the US economy.
I do get the argument and I am a sympathetic with much of it. We do need to look to new technologies, including nantechnology, for creating new sources of wealth in the US economy.
However, I think the real problem is that governments have so conditioned businesses, industry and the investment community to expect government to do all the heavy lifting in the funding of research, they have neglected even their own interests in actual wealth generating activities and have preferred to sit back and enjoy the high yields from derivatives or profits from products that they had little hand in actually developing.
At some point in the innovation processes, private capital instead of public funding has to pick up the torch and bring technologies to market. Sadly, we have seen less and less of that recently and in the last two years practically none at all despite banks and other similar institutions experiencing enormous growth in their wealth.
As a result, we have seen a real lag in the government strategy types realizing that industry is not government’s partner anymore but instead just their fatted-up dependant, greedily waiting for their next gift. This lack of recognition means that government strategists still think they can pick technologies off a tree and apply them to the world’s problems. They can’t. It won’t work.
As things currently stand, we will continue to see new advancements in nanotechnology for attractive applications like solar energy, which seem to promise real commercial success, languish in the in-between world of a government grant and commercial products. The answer is not for the government to apply more funding but for there to be some new structure to the innovation process in which private industry and financing takes on some of the risk of bringing a new technology to market.
It’s time for some arm-twisting and a reading of the riot act to the overly dependent and apathetic private investors that makes it clear that the current state of affairs is not sustainable, and not even in their long-term interests. But getting the investment community to look beyond a three-month horizon, never mind a seven to ten year one, has become nearly impossible. Fixing that may be the real restructuring that the US economy needs.