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First few years of this decade looking eerily similar to those of early 1970s

Economy needs something new

Posted: Wednesday, October 15, 2003

It was the early 1980s when a little-known but forward-thinking young congressman named Newt Gingrich submitted to the White House a list of ideas for the content of President Ronald Reagan's upcoming State of the Union address. Gingrich's suggestions were summarily dismissed as being a little too out of this world, and because they came from someone not in the high leadership circles of the Republican Party.

Prime among the congressman's supposedly far-out notions was for Reagan to announce federal tax credits or deductions to families who bought a new electronic gadget the personal computer.

Fast-forward to now. The latest public opinion polling numbers show that for the first time, President George W. Bush (narrowly) trails the collective pool of Democratic or other challengers in the race for president. As Bush's popularity and the lingering effects of economic recession both may be bottoming out this fall, it's becoming increasingly clear that his chances for re-election will parallel the state of the economy.

Happily for Bush, the stock market and corporate profits are both rising, consumers are showing signs of renewed retail spending, and unemployment may even be declining.

But for the long term stretching past the 2004 election, the foundations of our economy are going to hinge on what the U.S. economy has always required genuine innovation. And that's something we haven't seen in a while.

It's not hard to trace the arc of new technologies that have fueled the engine of America's economy since World War II. Most of them seemed futuristic at the time, but quickly became what greased the wheels of today's world economy. In the 1950s, it was the proliferation of household electronic appliances, especially the television set and the media-intensive culture it spawned.

In the late 1950s and early 1960s, it was advancements in aeronautics. That made commercial travel by jet airplane a part of everyday life, and triggered a new age of business among partners formerly too distant to conduct commerce with one another.

Then came the 1980s and the early rumblings of what Gingrich predicted the public's embrace of computers (and cable television) for everyday use.

By the 1990s, the phenomenon of the Internet exploded into our lives. In no time, people stopped saying they'd never heard of the Web and started saying they had to have access to it, and further, they had to invest in its technologies and applications.

Notice anything missing from this sketchy timeline of the late 20th century's key innovations? Perhaps a period noticeably excluded? It's the 1970s. And therein lies the parallel with this, the first decade of the new millennium.

Sure the '70s were full of advances. Telecommunications started exchanging analog for digital. That brought us touch-tone phones and the common but clumsy hand-held calculators. But these products couldn't seem to get past the "almost there" stage as revolutions for industry and our daily lives.

Not coincidentally, the '70s were also plagued by economic malaise. President Richard Nixon tried to end it with wage and price controls. President Gerald Ford launched his "Whip Inflation Now" campaign, which included lapel buttons to boost morale. President Jimmy Carter presided over both high inflation and high unemployment. Whether led by Republicans or Democrats, those were years Americans just couldn't find a way out of the darkness.

The first years of this decade are looking eerily similar. The early '70s were polluted by the last phase of the Vietnam War.

The past few years have been similarly overshadowed with the unprecedented battle against terrorists, including the aftermath of the war in Iraq. Serious international conflicts like these often drain capital and other resources that might otherwise be channeled toward the kind of groundbreaking public and private innovations that keep societies moving ahead.

Until we as a nation create something truly new, we will keep seeing our economy being powered by "the service industry." This economic model boils down to people endlessly handing the same dollar back and forth among themselves.

Unfortunately, the office of the president can't fairly be expected to be the source of the economic rabbit out of the hat we need to produce a "new new" product or invention. As a result, it's likely next year's election will be more about dealing with the economic and technological hand we've already been dealt.

So with modest expectations, a marginally improving economy over the next year may be enough to lift Americans' spirits and to keep Bush in office for another four years. But let's not be fooled. Ignition of the next economic boom likely depends on, well, something that most of us have yet to hear about, or even to imagine.

But take heart: The 1980s started slowly, even as many laughed at Gingrich's computer tax-break proposal. And given the unprecedented years of prosperity that soon followed, few of those amused observers will now admit their error in judgment.

Laugh at your own risk.

Matt Towery writes a syndicated column based out of the Florida Times-Union in Jacksonville.



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