Tonight Mr Obama will expound on his economic theories that will restore the American economy and put everyone back to work. Word has it that he will use variations on the word 'innovate' ad nauseum – telling us that we need to out-innovate the rest of the world to prosper.
Let's take a look at 10 of the big time innovators:
Collectively they employ 607,825 people in the United States, or an average of 61,000 people per innovative company. That is slightly less than the 71,500 people who work for Dollar General. In fact, the Aramark food service folks employ more than twice as many people as the biggest innovative darling. To put it in proper perspective, there are 29 people working at Walmart for every one person working at each big time innovative company. There are two people working in a Disney park for every one at the average big innovator. These guys do a lot of things well, but they do not create jobs.
The business mode of the innovators is to create amazing technology, outsource the software work to India and the manufacturing to China where they can find desperate people who will work for nearly nothing, avoid US labor and environmental regulations, and then bring the work product back to the US at virtually no import tariff. Wall Street makes a boatload of money on the deal – good for them. But job creation? Not hardly.
If Obama wants to create jobs, rather than simply boost the Dow Jones Average, he will start listening to the privately held business community – the thousands of small to medium sized American firms that actually create jobs. They will tell him to cut taxes, put the banks back to their regional structure, equalize the tariff levels, enact fairness in environmental regulations between the US and its attackers in the trade war we are currently losing, and a host of other things.
But innovate our way to prosperity? There is absolutely no data to suggest that innovation creates jobs – just quuick wealth for a narrow group of Washington insiders and Wall Street wizards. Building an economy on innovation is pure theory – and theory unsupported by facts, history, or even sound economic theory. Obama and the eastern elite economists who dominate Washington on both sides of the aisle are quick to cite David Ricardo – the English economist who conjured up Comparative Advantage – the theory most often misapplied but applied nonetheless in justifying sending manufacturing to China. In fact, Obama made Ricardo's theories central to his latest economic report to Congress. They really ought to read Ricardo's book before they bandy his name around so freely. Ricardo said, "The first man who knew how to soften metals by fire [the innovator] is not the creator of the value which that process adds to the melted metal. That value is the result of the physical action of fire added to the industry and capital of those who availed themselves of this knowledge [the manufacturers]" In short, the real value and economic growth is in manufacturing – not innovation. What is supported by fact and history is that the United States grew its amazing economy on the one-two punch of innovation and manufacturing.
Innovation without manufacturing will not save us. So when you hear Obama expound on innovation tonight, he may well be fooling himself and the rest of the DC crowd, but don't let him fool you.