This morning's news raises fear of a double dip recession. Specifically, although corporate profits are at all time highs, they are not "trickling down" to more employing more. One explanation is automation. In other words, jobs are being replaced by more efficient technologies which don't require humans to operate.
The implication is that the purpose of innovation has been to improve the bottom line more than creating new consumption. The lesson learned: all innovation is not the same when it comes to potential for economic growth.
So as the politicians debate ways government can stimulate jobs, how about encouraging the factors effecting innovation associated with economic growth?
What would those factors be?
1) Competition: when multiple companies are competing, innovation's focus is more likely to be on better performance than lowering costs. Any government intervention which raises the barrier to entering a market or protects existing companies from new competitors will be counterproductive. This is not to rule out all regulations if it rewards those whose business model is inherently compatible with the regulation.
2) R&D: Investing in new technology to lower a company's costs should not enjoy the same tax incentives as higher risk R&D in new product or feature development to benefit customers.
3) Smarter Customers: Third party services (media, financial transactions, buying agents) which invest in information design technology to make customers smarter is more likely to create economic growth than technologies which exploit customer information to benefit other companies.
4) Capitalize on the Underemployed: Although educating the labor force is a good idea for the long run, there is a short term opportunity to apply the untapped knowledge and creativity of the underemployed.
