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Nobel Laureate: The innovative spirit must be fostered from childhood

Entrepreneurship and the innovative spirit must be cultivated already from childhood if growth in Europe and the US is to regain momentum. We need a new space mission, says Nobel Laureate Edmund Phelps.
Edmund Phelps is a staunch critic of US President Donald Trump’s economic policy, which, he argues, focuses too little on innovation and development and too much on simply getting “true” American companies to retain jobs in America.

Publiceret: 18.05.2017
Af Peter G. H. Madsen mail

The ability and the desire to develop novel and groundbreaking ideas that can contribute to growth and job creation are under pressure in both Europe and the US.

To blame are politicians who have overlooked the fact that large parts of the population no longer take pleasure in participating in the economy, nor do they receive economic gain from doing so. 

Such is the noteworthy conclusion of economist and Nobel Laureate Edmund Phelps, who is also the Director of the Center on Capitalism and Society at Columbia University in New York.

“It’s horrible. The enthusiasm and joy that comes from using one’s creativity and developing new methods, new products - indeed, simply from seeing and experiencing new things - appears to be gone. And the worst part is that politicians have not taken the problem seriously,” he says.

“I find it extremely surprising that there has not been a greater degree of sensitivity and understanding among politicians in relation to this trend. 30 and 50 years ago, there was a public enthusiasm for participating in the economy and in society. This joy is gone. This is true in the United States. And it is true in Europe.”

See also: Denmark ranked among world’s most inventive countries

European economies have hit rock-bottom

According to Edmund Phelps, one indication of the problem is that growth in prosperity has been far below the historic average in recent years. Whereas growth in the gross domestic product from WW2 and up until the start of the new millennium lay at around 3 - 4 per cent annually in the US, for the past 10 years it has been closer to 1 per cent.

“Innovation should - to put it a bit bluntly - be measured in how much it contributes to growth in prosperity. And it is now many years since prosperity has been heavily on the rise amongst the wider population,” says Edmund Phelps.
And should anyone believe that the situation is any better in Europe, they can think again.

“I’ve been crying out about the bad state of European economies for so many years now that I’ve grown tired of it. But what is new is that the US is now also showing itself to be a weak economy, dominated by oligopolies (market controlled by small number of companies, ed.) with strong connections to politicians,” he says and adds: 

“The US has caught up with Europe when it comes to maladies.”

See also: World Cup in growth - here are the winners of the future

Digitalisation is no marvel

But what about the digital revolution, the increase in new production forms, robots and Big Data? Are such developments not precisely evidence that there are plenty of new ideas and innovation taking place?

Not if you ask Edmund Phelps.

“I don’t believe that the inventions being created now will bring about a big leap forward in living standards,” he says.

According to Phelps, one of the problems is that the power in the world’s digital hotspot, Silicon Valley, is today concentrated among few very large businesses, which makes it difficult for new companies to break through and challenge the status quo. And without a challenge to the status quo, there is no competition that can spur innovation and development.

Meanwhile, according to Phelps, it is worth remembering that Silicon Valley, despite the major interest it holds, only accounts for 3 per cent of the American economy.

“Silicon Valley doesn’t create a lot of value,” he concludes.

See also: Denmark is the world's best talent developer

We need enthusiasm

The Nobel Laureate’s pessimism has not lessened with the election of Donald Trump as US president.

According to Phelps, instead of promoting innovation and competition, Trump is moving towards an old-fashioned economic policy in which policymakers determine winners and losers among businesses. This is not exactly something that contributes to innovation and competition, Phelps emphasises.

If the economy is once again to gain momentum, the education system must be prioritised much more highly, Phelps argues. Politicians must support the desire and capacities to seek out the unknown and to create novelty, not simply the ability to make a good deal.

“We need a new space mission. The last time there was a common enthusiasm and excitement about the unknown was when we sent a man to the moon.”

“What we need is an economy that is dedicated to innovation. Both politicians and economists must gain a far better understanding of ‘the economics of creation’ than is currently the case.” 

BIOGRAPHY
Edmund Phelps
• Age 84
• Professor of Political Economy at Columbia University in New York
• Awarded the Nobel Prize in 2006 for his work regarding the connection between unemployment and inflation.

Silicon Valley doesn’t create a lot of value.
NOBEL LAUREATE AND DIRECTOR OF THE CENTER ON CAPITALISM AND SOCIETY AT COLUMBIA UNIVERSITY IN NEW YORK EDMUND PHELPS
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PUBLISHED: 5/18/2017 LAST MODIFIED: 5/18/2017