Brace yourselves for massive change, as the financial crisis leads to a major redesign of the US economy and a significant recession. The recession is an almost certainty but the shape of the new economy is not. We are sharply moving away from the Chicago-School anti-regulation, pro-market set of rules and practices of the past 30 years toward a much more government-run economy. That should provide more safety but will it also generate the kind of innovation economy and growth that we also need for the 21st century? I don’t know.
At the moment, it appears that Washington is using the 1930’s as a template to solve the problems of the oughts and that can’t be a totally good thing. The US may need a huge government takeover of risk and financial assets to stem the crisis, but then what? Hopefully, it will restore calm and the willingness of venture capitalists to lend and take risks once again.
I talked with Craig Barrett, chairman of Intel recently and he said the US needed a huge capital infusion into k-12 education, infrastructure and IT just to stay globally competitive. The US is falling behind very fast, according to Barrett. Then there is the need to move off a carbon-based economy onto green technology. Again, that requires a big slug of government money to get the basics right in batteries, broadband, solar and wind.
I am going to end this on a positive note. There is amazing stuff in our universities that could be the basis of a creative, innovative economy. I saw some of it today at The New School. More of it later. We need to find it, fund it, and scale it.
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