"An Innovation Slump"

Though he appears to freelance for the far-right Cato institute, economist Arnold Kling insightfully points out that :

Since 2000, the economy has been in an innovation slump. The human genome project yielded less immediate benefits than expected. Progress in computer and communications technology has become evolutionary, not revolutionary. Nanotechnology is far too immature to create major new business opportunities.

Only when an innovation reaches the point where its economic impact can be felt, as happened with personal computers and the Internet in the 1990's, will lots of new businesses be created. Remember that in 1987 Robert Solow quipped that "we see computers everywhere but in the productivity statistics." That soon changed. Today, one could argue that we see genome decoding and nanotech research everywhere but in the productivity statistics.

The U.S. is a high wage capitalist country which relies on private sector investment in new technology to drive growth. We aren't exactly bringing peasants off the countryside anymore. Without innovation in new industries, leading to productivity growth, there will not be substantial new private investment. The question will be if the ruling class is functional enough to realize that public sector investment is going to be needed to explore avenues of new innovation. In the meantime, there will be weak growth and a lot money slopping around in the financial sector or funneled into emerging markets, and more crisis.

1'Why Such a Deep Recession?' - Arnold Kling