Book Provides Sound Prescription for Economic Growth

Published April 25, 2011

Review of The Comeback: How Innovation Will Restore The American Dream, by Gary Shapiro (Beaufort Books, 201 pages, $24.95)

The title of this book is somewhat erroneous. It should have read The Comeback: How My Prescription for Innovation Can Restart The American Dream. Indeed, in this easily readable, 200-page narrative, Gary Shapiro, the CEO of the Consumer Electronics Association, hits every chord necessary to maintain U.S. leadership in the world.

Few are more qualified to discuss innovation than the man who has managed the annual Consumer Electronics Show for two decades. The show draws tens of thousands of people to see the latest in often mind-blowing electronic innovations. He is so right in observing America’s greatness has been based largely on our thirst for freedom to make new and better contributions to society, combined with individual liberty, constitutional democracy, limited government, free enterprise, social mobility, intellectual freedom, immigrant assimilation, property rights, and rule of law unbridled by government red tape which has long stifled the rest of the world and has now galloped into our nation.

He’s not perfect. Shapiro spends a little too much time patting himself on the back for successfully supporting Sony in its battle with the motion picture industry over videotaping. In a single phrase he shows some affinity for global warming, and in Chapter 14 he shows he knows little about energy issues. But despite those minor weaknesses he has written a brilliant book with the help of some 50 friends and acquaintances he credits in his five-page acknowledgement.

Understanding Innovation
Shapiro understands that innovation includes not just inventions but also new business models presented by the likes of Starbucks, eBay, and Staples, and he understands these things must benefit the public in order to succeed as businesses. He also refutes the notion of American workers as being spoiled and pampered, noting that we work harder than those of most industrialized nations.

On average, Americans work 1,776 hours (you have to love that number) per year, 467 more hours than Germans, 307 more than the French, and even 43 more than the Japanese.

Shapiro also documents the amazing contribution immigrants have made to our economy through innovation. He fears a reverse brain drain if we do not allow the best and brightest of our foreign graduate students to easily remain in our country. They come here because they know we have the best advanced education programs; why should we send them back to benefit their home countries?

Benefits of Trade
Shapiro describes how free trade is the conduit through which the world’s citizens can improve their standard of living. Free trade, he observes, “lowers the costs of goods for everyone and opens markets where none before existed.”

Shapiro notes that major opponents of free trade, the labor unions, have impeded economic progress, and he lists policies the government should follow:

  •  Pass free-trade agreements with Panama, Columbia, and South Korea.
  •  Encourage and enter worldwide trade negotiation and agreements.
  •  Eliminate Buy America provisions.
  •  Encourage foreign investors and businesses to do business here.
  •  Encourage and enforce clear, strong intellectual property policies.

Shapiro blames teachers unions for our poor showing in international testing programs—behind 29 countries, for instance, in math scores.

Innovation requires an education system that prepares the next generation of innovators. This is why many companies want looser immigration standards—they cannot find enough scientists and engineers here. Fixing our education system would alleviate this concern.

Reckless Government Spending
Shapiro explains how the nation’s government spending is divorced from economic reality. In 2009 our federal government spent $3.5 trillion, compared with $2.5 trillion in 2005, a 40 percent increase. Yet in 2009 tax revenues were only $2.1 trillion, resulting in a budget deficit of $1.4 trillion, with trillion-dollar annual deficits for the foreseeable future. State debts also total $3 trillion, and there’s $106 trillion in unfunded Social Security liabilities.

Americans see top government officials repeatedly failing to lead on matters of fiscal responsibility and integrity. They see it when the President travels to another city on Air Force One for dinner and a show, and when the First Lady takes her daughter to Europe for a vacation costing taxpayers $1 million. They see it when the Commerce Department pays $2 million for a 30-second Super Bowl ad about the Census.

Healing Prescriptions
Shapiro believes the cream can rise to the top if the government will lower corporate income tax rates and taxes on private enterprise investment, eliminate irrational business regulation, limit class-action lawsuits, require every law passed by Congress to be analyzed for its cost-benefit impact on the economy, change our legal system to loser-pays, and embrace other commonsense ideas that could heal our economy over time.

We need to reduce government for more new businesses to be created, new investment to occur, and innovation to be unleashed. Shapiro says our growing sense of entitlement is destroying America’s innovative culture, the true engine of economic growth.

Privately funded, entrepreneurial, technology-driven companies are the key to economic growth, increased standards of living, and full employment. Government never has been and never will be “capable of rationally growing our economy and jobs. Its primary role should be to promote policies that enable the private sector to prosper and realize our ever changing economic potential,” writes Shapiro.

Jay Lehr ([email protected]) is a senior fellow and science director at The Heartland Institute.