Publiceret: 18.05.2017Af Peter G. H. Madsen mail
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.”
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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.
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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.”
• 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.