Sputnik and Big Government

The post-Sputnik innovation wave was sparked by government investment, not the entrepreneurial spirit.

Kevin Drum smacks down President Obama’s account of how we won the space race:

It’s true that after the launch of Sputnik science and math education became an American obsession, but that’s not what got us to the moon. The scientists and engineers who eventually built the Apollo rockets weren’t teenagers, after all. They were grown men and women who’d been educated in the 40s and 50s. The post-Sputnik push for better technical education may or may not have paid off—remember the New Math?—but if it did, it paid off two decades later in the personal computer revolution of the 80s.

So how did we unleash a “wave of innovation that created new industries and millions of new jobs”? Obama only touched on that in his speech, but part the answer is: big government.

[…]

The microchip would have found a market eventually even without NASA, but it might have taken years longer. And this same story goes beyond just integrated circuits. The first computer, ENIAC, was originally designed for the United States Army’s Ballistic Research Laboratory. The internet was originally funded by the Pentagon’s Advanced Research Projects Agency—which had been created in the wake of Sputnik—and was based on packet switching technology invented by a professor at a public university. And today, rocket technology itself, originally designed and funded by the federal government, is starting to become a thriving private business as well.

It was the private sector that turned these inventions into multi-billion dollar businesses, but it was government that provided either the basic research, the initial market, or both.

This is exactly right.   I’m less enamored of big government programs than Kevin but there’s no denying that government is uniquely positioned to concentrate enormous resources on a problem and sometimes does so to spectacular success.

The Manhattan Project and the space program are classic examples.  Given a specific, tangible goal, the government was able to assemble the most brilliant scientists and give them every tool possible to get the job done.  And, of course, both of these projects led, sometimes accidentally, to amazing advances in spin-off technology that improved our lives and drove massive improvements in the civilian economy.

Less famously and spectacularly, the Federal government is a major driver — if not the major driver — in most of the pure research that leads to technological progress.

Kevin mentions the Internet, which was initially a Defense project.   Nobody at D/ARPA every envisioned where it would all lead, because their goals were discrete.  But it’s unlikely that the backbone would have been built by the private sector; the investment would have been too much and the profits too diffuse to make it worthwhile.  (Or, alternatively, it would have been a patented, closed system and not developed into anything like what we now have.)

Most of our pharmaceutical research and pure science is at least partly funded by government grants, if not done in government labs.

Let’s stipulate that there have been spectacular failures, most notably including virtually domestic problem against which we’ve declared “war.”  Government is less able to achieve broad, amorphous goals than finite ones like “put a man on the moon by the end of the decade.”  Then again, the private sector often has no interest at even attempting to pursue major social goals, especially if the target audience isn’t particularly affluent.

Further, the private sector is much better at coming up with the thousands of innovations that improve our lives every day than government.  Because of its massive scale, government tends to be much slower moving and able to fund fewer, larger programs.  Many if not most of the technologies that effect us on a day-to-day basis were initially built by the equivalent of an inventor tinkering around in his garage or a college kid tinkering around with some code.  The “winners” then frequently get bought out by bigger companies or get massive government contracts, but the innovation itself was bottom-up.

FILED UNDER: Economics and Business, US Politics
James Joyner
About James Joyner
James Joyner is Professor and Department Head of Security Studies at Marine Corps University's Command and Staff College and a nonresident senior fellow at the Scowcroft Center for Strategy and Security at the Atlantic Council. He's a former Army officer and Desert Storm vet. Views expressed here are his own. Follow James on Twitter @DrJJoyner.

Comments

  1. Stan says:

    Be prepared: Charles Austin is going to hate this post.

  2. sam says:

    Charles thinks it’s always capitalistic elves who come in the night with gifts of technological advances.

  3. Herb says:

    Sad to say, but it’s reassuring to read this. We should never forget how interconnected government is with industry, not because of socialism or regulatory capture, but because when they work together great things happen.

  4. Obama got his cold war history wrong. Historians of the space race now recognize that Sputnik was misperceived as evidence of Soviet technological superiority. This misperception led to an enormous and unnecessary buildup, something that Eisenhower foretold in his farewell address.

  5. JKB says:

    Well, since the early 1940s a lot of big ideas have come from government spurred and funded investment. Although, I wouldn’t consider DARPA big government but rather the conduit for the traditional military investment in innovation. War being a great focuser of men’s minds.

    But let’s not forget the man who invented the modern world, Nicola Tesla did not toil under government contract. He was, when possible, funded by evil capitalists. Perhaps, people late in the 20th century with the big dog of government at the necks, were reluctant to invest in inventions that might be declared defense related items, killing their marketability. But then, most of us are not familiar with all the cool toys invented and used in the oil patches of the world.

    Of course, let’s not forget the inhibiting effect of regulation. There’s a tool used by fire departments to penetrate a car’s hood and deliver water or extinguishing agent without opening the hood. This tool if found on a ship will result in a fine if not prosecution simply because it is not on the USCG “approved” list. Hardly a spur for innovation.

  6. EJ says:

    the problem with these things are that you dont know the counterfactual. Yeah, there is no deneying that government spending was key to solid state electronics and a host of other technologies. But what was the opportunity cost? The space program used up some of the best engineers and scientists that would have been employed elsehwere making other stuff. We have no idea what the path of technology growth would have been otherwise.

    I tend to agree that there is a roll for government in base pure research because these things dont attract much private money due to no dirrect connection to a marketable product. But end use technology, there is more than ample energy in the private sector to do so. So you cant just say look at what technology the government developed and declare it a success. What technologies would have those resources produced in its place if they were not consumed by government?

  7. sam says:

    Statement of John Pierce Vice President – Technology DuPont Applied BioSciences before the
    Committee on Science and Technology U.S. House of Representatives January 27, 2010


    We have frequently collaborated with the US Government in our efforts over the years,
    whether through collaboration with the National Labs or competing for matching grant
    funding to advance technologies serving national interests. Our scientists also contribute
    through various external engagements with Universities, the National Academies, and
    federal agencies. Our former CEO and Chairman Chad Holliday was a co-author of the
    seminal National Academies report Rising above the Gathering Storm, which originated
    the idea of an ARPA organization for energy. …

    So let me turn my attention specifically to ARPA-E [DOE’s Advanced Research Projects Agency]. Our perspective here is informed by our role as a market-driven science company. Our R&D portfolio and the prioritization of funding is driven by customer or market needs, specific product opportunities, and the prospect of returns for our shareholders, rather than more “blue sky” kinds of exploration. That is our appropriate role in the innovation economy. However, as you might imagine, the scientists in DuPont generate some pretty interesting concepts that don’t get into our innovation pipeline because we need to prudently manage the risk of investing in very early stage technologies with uncertain market opportunities. This pragmatic approach to R&D funding prioritization is an economic necessity for the private sector. While it serves near to mid term market needs quite well, it does not provide for the development of transformational technology options with broad societal relevance. This is a gap that government funding can most effectively fill. ARPA-E serves a valuable role in focusing that government effort on the critical area of energy.

    An entity like ARPA-E can act as a powerful launching pad for early pre-market concepts
    to be evaluated and pursued. Cost sharing with ARPA-E can sufficiently reduce the risk
    to enable companies like DuPont to commit R&D resources to more transformational
    technology efforts, in collaboration with the government and other partners. This
    capability complements and enhances the incredibly valuable and robust US academic
    research enterprise that already receives substantial funding through a variety of
    government programs, and provides a necessary bridge across the “valley of death”
    between scientific discovery and commercial practice.

  8. sam says:

    Yikes. Sorry for the bad spacing, pdf to html, ouch.

  9. sam says:

    ” So you cant just say look at what technology the government developed and declare it a success.”

    Of course you can. Just look.

    What technologies would have those resources produced in its place if they were not consumed by government?”

    As you say, that is an unanswerable counterfactual. We have to world we have.

  10. anjin-san says:

    > But end use technology, there is more than ample energy in the private sector to do so. So you cant just say look at what technology the government developed and declare it a success

    This is the problem with dogmatic thinking. You can go on about “opportunity cost” all you want, but you need to consider that corporations are motivated by profit. What is the opportunity cost of lost opportunites in drug research due to the fact big pharmas are driven to develop the most profitable, not the most effective or most needed drugs? How many lines of research that held potential for great benefit to mankind have been abandoned because the bottom line did not make sense in a corporate environment?

  11. anjin-san says:

    > What technologies would have those resources produced in its place if they were not consumed by government?

    Perhaps none at all. The private sector might decide to put that capital to work on something like derivatives or commodities speculation, in search of greater profit. R&D does not always have a great return.

  12. john personna says:

    @James

    Nobody at D/ARPA every envisioned where it would all lead, because their goals were discrete.

    But they did actually. Read “Where Wizards Stay Up Late.” Many were amazingly prescient.

  13. john personna says:

    Two more bits. First DAPRA worked because of its structure (via wikipedia):

    Small and flexible: DARPA has only about 140 technical professionals; DARPA presents itself as “100 geniuses connected by a travel agent.”

    Second, on research here’s by blurb:

    The answer on basic research is really easy. Universities should do basic research, and publish it all without restriction into the public domain. Companies should pick that up, do applied research, and patent their innovations.

    This creates a clear distinction, and clear incentives for each group.

    We’ll have a hard time getting there from here though, because we’ve allowed universities and other non-profits to feed at a very particular trough. They accept public monies now, they use that money to create intellectual property, and then they go into competition with private firms for licensing & etc.

    Spending less, but giving it to public-domain publishers, would probably yield more. Just because public-domain knowledge isn’t blocked waiting for a licence negotiation.

  14. ponce says:

    ” Many if not most of the technologies that effect us on a day-to-day basis were initially built by the equivalent of an inventor tinkering around in his garage or a college kid tinkering around with some code. ”

    I can’t think of a single innovation from the past fifty years that I use on a daily basis.

    I think you’re confusing repackaging products and making them smaller with innovation.

    Innovation is coming up with something new.

  15. c.red says:

    I don’t think you can invoke Tesla as a paragon the capitalism research scientist, he was pretty much equal opportunity in accepting funds – corporate, government or personal investors or even his own funds when nothing else was available.

    There is a pretty good historical record that he hated Edison as a capilistic tool and a thief and had nothing but contempt for most of the major capitalists of the time. Of course that was mostly because they wouldn’t fund his projects without some sort of a profit involved…

  16. anjin-san says:

    > Let’s stipulate that there have been spectacular failures, most notably including virtually domestic problem against which we’ve declared “war.

    Could you cite some examples?

  17. Herb says:

    “I can’t think of a single innovation from the past fifty years that I use on a daily basis.”

    How often do you use the internet? You ask me, the packet-switching network was a pretty radical innovation that whether YOU use it or not, people around you certainly are.

    On a daily basis too.

    “Could you cite some examples?”

    The drug war is probably the most obvious one.

  18. Herb says:

    Unoriginal Herb,

    “This misperception led to an enormous and unnecessary buildup, something that Eisenhower foretold in his farewell address.”

    True, but the misperception also led to the end of the Soviet Union, our main competitor on the world stage, so it wasn’t all bad, eh?

  19. john personna says:

    BTW, I see this as related and very much a good thing:

    New federal education fund makes available $2 billion to create OER resources in community colleges

    OER being Open educational resources

    If you want leverage, that’s the way to do it.

  20. anjin-san says:

    > The drug war is probably the most obvious one.

    Not really seeing any linkage between the war on drugs and R&D spending private vs. public. Unrelated issues. Seems like a strawman – “look at where the govt. has failed bigtime”. We lost the Vietnam War too. How does it relate to investment in research? The only commonality is a large commitment of govt. resources. Very thin stuff.

  21. ponce says:

    “How often do you use the internet?”

    Haha, I’ll grant you the internet, but beyond that I’m hard pressed to come up with an “innovation” from the past 50 years I couldn’t easily do without.

    My top 5 innovations:

    1. Indoor plumbing – 1000s of years old
    2. Electric lights – from the 1800s
    3. Automobiles – 1800s
    4. TV – 1920s
    5. Computers – 1940s

  22. jwest says:

    Had the government offered a 50 billion dollar prize to private industry for the first moon landing, it would have been done 5 years sooner.

  23. Zelsdorf Ragshaft III says:

    We lost the Viet Nam War Anjin? Which battle was lost by our forces? When a democratic congress refused to financially support our ally, which was South Viet Nam, the North sucessfully invaded. I do not want to be listed as part of the “we” who lost that war. It was you and your ilk. Millions died as a result.
    You, Anjin want to end the war on drugs. You been having trouble getting your daily dose of crack or do I have it wrong? Been smokin ice recently?
    The Space Race was funded by the Government, but it was sold as defense of America.

    What an echo chamber this site has become.

  24. . magoo says:

    Remember government funding of crucial innovation is far older in America than the Manhattan project.

    Mass production was the goal of Jefferson and he started giving money to weapon makers so they could mass produce interchangeable, uniform gun parts. Simeon, Blanchard, etc – all of these
    contracts were kept up by govt money, for decades. The federal armories toiled until they achieved a mass produced gun. Again, the side benefits were enormous of the ‘american system’ of manufacturing. David Hounshell describes how Henry Ford took the infrastructure, the gauges and tools, and the know-how that was developed and added his own spin to it (the moving assembly line, etc) to mass produce cars.

    Again, govt subsidizing of pistols led to, agonizingly slowly (because mass production was an obvious virtue that was unusually hard to actually pull off), the generalized push to mass produce all goods and services.

    Don’t forget the financial and legal innovations the govt supports (the move from partnerships with unlimited liability to corporations with limited liability, joint-stock ownership, etc) – these particularly enabled the first national company structure in railroads. The railroads enabled mass markets which pushed harder for mass production, and so on.

    The govt’s role in financial, legal, and technological innovation is crystal clear in the industrialization of the 19th century. It continued in the 20th. Libertarians don’t focus on this history, but it is well known and uncontroversial.

    Jame’s points about the strengths of corporations all hold, too. The weaknesses of Big Govt and the War on Drugs, etc is also true. But pretending that the huge benefits that were generated from Big Govt’s subsidies of innovation were the result of private tinkerers is misleading and false.

  25. Wayne says:

    Every dog has his day (gets luck). The space race had a clear and very specific goal with very measurable results. Since it was a “race” they didn’t have the luxury of kicking the can down the road so they could receive even more funding.

    Many of the so called science research that the government sponsors today don’t received funding for actual science goals reached but what political propaganda they can produce for their political masters.

  26. JKB says:

    I tell you what ponce, you go back and live in the 1970s, only 40 years ago. The rest of us will stay here without our dearth of innovations. Such as lasers, scientifically proven more than 50 years ago but the innovations using the technology didn’t explode until the 1980s.

    jwest, government prizes are risky if you look at their history. More often than not, the government and “scientific societies” refuse to pay up if the right type of people don’t create the innovation. It happened with the prize for an accurate clock that could go to sea, British government welched since a watchmaker and not a member of the Royal Society solved the problem. Took years for Bessemer to get his prize since he was just a lowly artisan even though he ushered in the age of steel and made the world we live in.

    And as for innovation, well as they say necessity is the mother of invention. Here is an engineer who designed the medical innovation to save his own life. But now thousands will benefit and the technique probably has many more applications in medicine.

  27. Gerry W. says:

    I’ve been calling for investing in our country, in our people, and in the future for a number of years. Its was quite clear that the Bush trickle down was not working as we saw the factories close. Clinton signed the free trade agreements and backed up by republicans. There are many reasons why we lost jobs. Globalization, automation, monopolies and consolidations, the internet took away front office jobs, and lean principles. Other factors may be a higher tax rate and high wages towards a dollar an hour counter part. Another reason is that big government pushes out private investment.

    But the biggest fear of all was when we won the cold war and did not realize that we opened up countries in which people around the world want jobs. Today there is a glut of workers to the amount of jobs available. In the last decade we have lost over 6 million jobs, 40,000 factories are closed and that represents 30% of our manufacturing. The 30% loss of manufacturing is the biggest loss outside the loss of mfg. in England.

    There has been some foolish things done in the past and even today. To make up for loss jobs we see the fed printing money to keep interest rates down, the democrats keep extending unemployment benefits and had cash for clunkers, the republicans want more in tax cuts, and the states want casinos for jobs.

    But the big picture is globalization. Just as wrongly ‘housing’ was targeted to create jobs and home ownership, the globalists are wrongly saying ‘free trade’ is going to create jobs. What happened is that there are too many workers for too few jobs (2 billion cheap laborers). And today, one reason for riots in the Middle East is that people want jobs. I think (with all the wrongs and missteps of the past) that our world is very fragile. Many countries have spent too much and now there is no jobs and many ideologies failed.

    Many influential people like economist Veronique De Rugy-George Mason Univ., Carlos Guiterrez-former Commerce Secretary, William Cohen-former Defense Secretary have come out with erroneous answers on free trade and jobs. Today, Obama has said that he will rely on our exports. Of course, he is talking of big ticket items like Boeing and GE., but the factories in my town are closed, so exports means nothing to my community. And the best case scenario of exports is that it will produce 700,000 jobs. Well that is far short than what we need.

    The private industry does not have new widgets that will fill in 40,000 closed factories. And even if they have widgets, they can be made in some other country with cheap labor. Many politicians say they support small business. But again, it means nothing in my community as the small business needs to rely on the factories which happen to be closed.

    So if the private sector cannot do it, then it will have to be the government. True, we do not know what science or what jobs are of the future. But you can invest in general science and in the infrastructure in which we are behind some 2 trillion dollars.

    The problem is that we have spent all our money whether on social programs or on a failed trickle down theory. The Bush tax cuts is spent money and means nothing today. Our money has also been spent for war; and our infrastructure, our economy, and our future was ignored.

    Today the fed is trying to stimulate, the democrats are spending, the republicans think tax cuts will spur growth, the states want casinos for jobs, and we keep sending our jobs overseas which means we cannot create jobs. We have lost all leverage to create jobs.

    So our country and our world is in a real pickle. And one answer as I have said before is that China needs to send a lot of their people back to their homes in inner China and create the jobs there and stop taking away our jobs. But whatever the case, we will need to rely on our government for investments to create jobs as the private industry by itself cannot do it. It needs not to be “big government” but programs that will create investments that will eventually go to the private sector. And those investment may be in the form of education, the infrastructure, or the financial support of incubator companies.

  28. sam says:

    “Had the government offered a 50 billion dollar prize to private industry for the first moon landing, it would have been done 5 years sooner.”

    Book of Galt, 4:27

  29. mantis says:

    Many of the so called science research that the government sponsors today don’t received funding for actual science goals reached but what political propaganda they can produce for their political masters.

    Prove it.

  30. mantis says:

    Haha, I’ll grant you the internet, but beyond that I’m hard pressed to come up with an “innovation” from the past 50 years I couldn’t easily do without.

    I notice you list computers. While computers certainly go back more than 50 years, the first microprocessors were invented in the early 1970s. No modern computer (or mobile phone, calculator, printer, automobile with computer system, or any number of other modern devices) would exist without microprocessors. Our world runs on them.

    Speaking of which, the first mobile handheld cellular phone was also invented in the early 1970s. And there have been a huge array of vehicle safety innovations over the past 50 years that anyone with newer car uses on a daily basis.

  31. george says:

    > Perhaps none at all. The private sector might decide to put that capital to work on something like derivatives or commodities speculation, in search of greater profit. R&D does not always have a great return.

    That is likely the case today – the profit margins on financial markets is much larger than on scientific or technological innovation, and the private sector has more or less been happy to leave that to gov’t funded universities. In fact, the American private sector has been quite happy to leave manufacturing to others while concentrating on financial profits.

    Even in terms of packet-switching, most of the base theoretical work was done by mathematicians, electrical engineers, and physicists working at gov’t funded universities. If it had been up to the private sector none of that theory would have existed – nor would there have been the university educated engineers who applied the theory. As nice as it is to think that packet-switching was invented by a bunch of self-educated (ie no formal schooling) guys playing around in their garage, it was largely the result of gov’t money spent on professors and students.

  32. Rob Prather says:

    Gerry,

    You say globalization is the primary problem, but how do you explain the fact that manufacturing output is at an all time high? It’s technology way more than globalization that has divorced manufacturing employment from manufacturing output. Unless you’re planning on becoming a Luddite, you should focus your energy on adapting rather than wishing other countries would stay poor for our benefit.

    You might also want to google for the “lump of labor fallacy”.

  33. Gerry W. says:

    ROB,

    So, evidently, it does not bother you when you see a factory of 17000 workers that can make irons, toasters, and microwaves that we used to make. That Apple has their products made in China. Well, so much for relying on private industry for jobs. Where I worked, we automated, we had six sigma and lean production and lean principles. None of it worked and they went to Mexico. There are many changes in the world. I have mentioned automation, monopolies and consolidation, the internet changes how you do things and it takes away jobs in the front office and at airports. But you also have an addition 2 billion cheap laborers and that is making the middle class lose jobs and/or seek jobs with lower wages.

    ***you should focus your energy on adapting rather than wishing other countries would stay poor for our benefit.***

    Adapting to what? There are no jobs here, we were told that we would have an information society or a service society. That we did not need manufacturing. So, where are the jobs? Your right wing bias is showing. Never mind that we have a global problem, “it is your problem.” Well that attitude got us here.

    And wishing other countries to be poor for our benefit is a slap in the face, since the right had the tax cuts for the rich and the middle class lost the jobs. I wish the other countries well, however, I am for fair trade and not currency manipulation, technology transfer, or using cheap labor for bigger profits by the multi nationals. It is not in our favor to destroy the middle class. As I have said, China will need to create jobs inward so that they stop taking away jobs from everyone else. But the right wing always proves how non intellectual they are. It is all ideology with the right. Have the tax cuts and if anything goes wrong “it is your fault.” Well, we saw this years ago and I have been talking about it for over 5 years when our unemployment was at 5% because we saw the undercurrent coming and we were doing nothing in our country to invest in our country, in our people, and in the future.

    The right, the globalists and those for a New World Order should come up with better answers than destroying the middle class. While some fear socialism, we see signs of an oligarchy.

  34. Gerry W. says:

    To answer specifically on manufacturing output. Does that account the amount of goods we make with 40,000 less factories and some 6 million less jobs? Is that number good to you even though that many factories are closed and that many jobs are lost? What good is the manufacturing output if you don’t have upward movement for the middle class in our nation or others? Does the citizenry mean anything to you? Or is it just numbers that “look good” and ideologies that “look good.”

  35. anjin-san says:

    Garrry W.

    I have sympathy for your position, with this is the world we are in now. yesterday is gone it isn’t coming back. why not focus on where we go from here?

  36. Rob Prather says:

    Gerry,

    How did unemployment get to 5% a few years ago if this country can no longer create jobs? As for the tax cuts, I think they were a mistake since they did nothing to help growth in the 2000s and if we weren’t so economically weak I would have wanted Obama to let them all expire.

    As for China stealing our jobs, I’ll grant you one thing: their currency manipulation needs to stop. Aside from that it doesn’t bother me that they have a labor force in the hundreds of millions. Google the “lump of labor fallacy” to see why.

    As for the factories closing in your town, when I say adapt, it might have to include moving if the economy in your area is that bad.

  37. Had a long post that got eaten. Sorry, but lack the time to regenerate now. Maybe later, maybe not, but for now you’ll just have to be happy with your certainty that you just know what I think so much that you can lampoon it and ridicule it.

  38. Gerry W. says:

    Luckily I am retired. My community is one of many. And true, yesterday is not coming back. But that is not me talking about yesterday, it is the republicans that want to be ignorant of the world. As long as they have their trickle down which never trickles down and ignores our problems then they are dealing with yesterday. I have talked of how we deal with this and what we do today and for the future. We can build our country, but it takes the government to do that. There are some people who will not be college bound. There will be some that may not know what to do. You had the uneducated that were capable of being middle class by working in a factory. While what we had is not coming back, it is a question of how we preserve the middle class as much as possible.

    In this situation you cannot create a business as you need traffic and factories with employed people. In this situation you have monopolies and consolidation. You cannot start a bakery or another store as Wal Mart and other big box stores took that away. So, some areas are in a depression. Like one economist said, “there will be clusters of prosperity where high tech thrives and other areas not so well. What the lost of factories have done is ruin the small communities as they cannot diversify or even help themselves. Hence, the democrats go with more spending, the republicans with more tax cuts, the fed printing money, and the states wanting more casinos and it is not working.

  39. Herb says:

    “Not really seeing any linkage between the war on drugs and R&D spending private vs. public.”

    Well….here’s one for ya.

    While the DEA’s been doing “R&D” on chemical herbicides to drop on national parks and Mexican hillsides (to no avail), potheads have been engineering ever more mystical breeds of bud under lights in their basements.

    Who’s been more successful?

  40. Rob Prather says:

    Gerry,

    On the manufacturing, yes, total manufacturing output minus the 40,000 factories is higher than before. As I said, technology has divorced output from labor. It’s common for industries to do this.

    I’ll give you an example. Around 1850, something like 50% of the labor in this country was devoted to farming or supporting the farming industry. By 1910 that had dropped to around 30%. Today it’s around 2% and we make more food than we can eat, with a much larger population. That’s how industries mature; they substitute capital for labor and they increase the amount of output per unit of labor. I don’t see how you can stop this, nor would I want you to. The transition will be painful but in the long run we’ll be more prosperous for it.

  41. matt says:

    Mantis : haha the good ol 4004…

    George : The Mosaic browser was developed near me back in the day at the university of Illinois. Up until recently internet explorer and a few other web browsers credited mosaic in their “about”

  42. Gerry W. says:

    Rob,

    ***How did unemployment get to 5% a few years ago if this country can no longer create jobs?***

    If you look at a graph in how our unemployment came down since Reagan took office, you will see an economy that interest came down, inflation was down, and unemployment came down. But at some point what goes down goes back up. What is up goes down again. And the 25 year run of getting unemployment ended under Bush. Now, we can count many factors, but when you have 5% unemployment, you know that is as good as it gets. And it should have been a warning that we will have to do more to keep that unemployment down. Now we can blame it on bubbles, the housing crisis, the financial crisis, or whatever else. But for the past 30 years we have ignored being energy independent. We have ignored our infrastructure. And we have ignored globalization. And our country ran on ideologies thinking these ideologies would work.

    When we had 5% unemployment, Bush would come to Ohio and talk about free trade. Our factories were closing at the same time and it did not add up. Today, Obama talks about creating jobs through exports and I see factories closed and I shake my head. Today, republicans say they support small business and I look at my community and shake my head.

    So that 5% unemployment did not mean anything to mean as I saw worse things coming. And if you trade stocks, then you know through experience what will go up or down or vice a versa.

    ***Google the “lump of labor fallacy” to see why.***

    I also hope that China has jobs of hundreds of millions, but it should not ruin our middle class. The thing is, and we have seen this done to us with Japan, is that products will be made cheap and we will buy cheap and it ruins our industry here. Our industry adapts by consolidation, laying off workers, automation, moving to a cheap labor country, or just going bankrupt. At this point the Chinese are unwilling to spend into their economy for many factors of their own.

    In any case, there is a glut of workers that we have not seen in our lifetimes. And that means cheap labor, lower wages and benefits, or lost of jobs. So, the elite in the world has the advantage and the middle class does not.

    ***As for the factories closing in your town, when I say adapt, it might have to include moving if the economy in your area is that bad.***

    So, does this solve our country’s problems? What about the city, the state, and other programs? These are not problems within our country, it is global. Funny how the governor of Texas says “we took jobs from other states.” Wow, that is real help. And others say we need to go with our constitution and yet China and other countries don’t care about our constitution. They are moving forward. That is not to say there aren’t problems. But whatever they do effects us. China can collapse, but they still have the factories over there.

    It is we, our nation, our policies have to adapt to the world and we are decades behind.

  43. Gerry W. says:

    Rob,

    ***On the manufacturing, yes, total manufacturing output minus the 40,000 factories is higher than before. As I said, technology has divorced output from labor. It’s common for industries to do this.***

    Technology happens, but also 2 billion cheap laborers. Thirty years ago, Apple would have had their widgets made here with or without technology. Go to the store and half the products are foreign. So you can’t buy into the economy as we used to do to spur growth. So some economic models are not the same. We have globalization and we need to deal with it.

    Guess what? The stock market is down and my stock is up. Hmmmm. Numbers are deceiving.

    ***The transition will be painful but in the long run we’ll be more prosperous for it.***

    The problem is that we did not prepare for anything. We have not cut spending, we have not become energy independent, we spent money on war, we closed 40,000 factories with nothing to replace them, we did not invest in our country, in our people, and in the future. You won’t see 5% unemployment for another 20 years. And in the mean time we are losing the middle class and we have no upward movement. And it may be automation as you say and part of that is in the response to cheap labor, but it is also 2 billion cheap laborers and monopolies and consolidation.

    And speaking of farms. Monsanto, Tyson, Smithfield controls 75% of the animal market, therefore driving out the farmer.
    http://growth.newamerica.net/publications/articles/2010/who_broke_america_s_jobs_machine_27941

  44. Rob Prather says:

    Gerry,

    Consolidation is also one of the things that happens when industries mature. Most small farmers, going back decades, were run out of the business long ago because they didn’t have the scale to compete. That, along with technology, is one of the things that allowed us, over time, to go from having 50% of the work force in farming down to 2%.

    We should see 5% unemployment again in another 5 or 6 years, at least those are the projections I’ve seen. You seem to blame globalization for our current mess when it was clearly the housing bubble and irresponsible behavior from our banks.

    Since you and I have such radically different views about the root cause of the situation, we’re not likely to reach common ground.

  45. john personna says:

    @Rob/Gerry

    You say globalization is the primary problem, but how do you explain the fact that manufacturing output is at an all time high? It’s technology way more than globalization that has divorced manufacturing employment from manufacturing output.

    You have to squint pretty hard to see the obvious filtering effect. Industries which could use automation to reduce labor input stayed, those which could not, left (or were displaced by foreign competition).

    It is part of a continuing dynamic. If I invent a new widget this afternoon, my choice to place production in the US or in Asia will depend on the nature of the labor input, and whether it yields to (esp. low cost) automation.

  46. Rob Prather says:

    Gerry,

    As for energy independence we are likely never going to see that, unless someone invents a transport fuel that we can make here and that works as a substitute for gasoline.

  47. john personna says:

    (We have this filtering effect because two changes reduced costs of imports. First the shipping container was invented. Second, aggregate tariffs were reduced to something like 2% on a weighted average (Planet Money)).

    Now, if we wanted a little more revenue, and to eliminate favorites, we’d do an actual flat duty 3% on imports across the board.

    Call it almost-free trade.

  48. Gerry W. says:

    ***Consolidation is also one of the things that happens when industries mature. Most small farmers, going back decades, were run out of the business long ago because they didn’t have the scale to compete. That, along with technology, is one of the things that allowed us, over time, to go from having 50% of the work force in farming down to 2%.***

    But the fact remains is that there is no upward movement. There is not a factory to go to if you leave the farm or any other industry. You cannot have a bakery if the gas station has rolls or if Wal Mart has a bakery. You cannot support small business where factories have closed down. The carpenter has no job if people cannot work. We have run out of materials to make and services that will employ people.

    ***We should see 5% unemployment again in another 5 or 6 years, at least those are the projections I’ve seen. You seem to blame globalization for our current mess when it was clearly the housing bubble and irresponsible behavior from our banks.***

    I don’t know what world you are looking at. I was unaware of the housing bubble and the banks as that did not pertain to my area. Our politicians looked to housing for jobs and for home ownership all the while the factories were closing in the Midwest. Different parts of the country are effected by different problems.

    ***Since you and I have such radically different views about the root cause of the situation, we’re not likely to reach common ground.***

    No, guess not. I just keep seeing the factories that are closed.

  49. Gerry W. says:

    John,

    Donald Trump says to tax 25% on imports and pay of the debt that way. Don’t know if he is right or not. Don’t know what would happen.

    We had automation. They couldn’t make some of the robots work. They went to Mexico. That was a sparkplug plant and we also took over the GM AC sparkplugs, we made all of motorcraft for Ford for North America, plus other brands. We had 1300 employees at one time. Champion decided to leave Toledo and went to Iowa and the last I heard they were not doing too good. But at some point, China will produce these with cheap labor and it will all be over.

    Another plant in town of 500 is closed and made crankshafts. It closed down due to consolidation. A printing place closed down and that was about 100 people. A wood products company closed down for whatever reason. And a heat lamp factory closed down for whatever reason.
    http://www.toledoblade.com/assets/pdf/TO51488727.PDF

  50. Gerry W. says:

    Rob,

    On energy independence, I would allow deep drilling with oversight, so I disagree with Obama on that one. Boone Pickens has one that will work and that is natural gas for all big trucks and that would lower our dependence on oil. I am for nuclear and anything else except corn as fuel.

    And like Pickens said, make a plan, say we will do this and stick with it.

  51. john personna says:

    “Donald Trump says to tax 25% on imports and pay of the debt that way. Don’t know if he is right or not. Don’t know what would happen.”

    Donald is a problem, because he plays his immoderation against the other. Between free trade (which injures some subset of Americans in the short term), and full blown trade wars (which injures them again), lies moderation.

  52. Scott says:

    You know, if all these geniuses in the government just sat around getting us to Mars and creating ICBMs and making the next packet-switched network and making sure roads and bridges didn’t fall into little pieces, that would pretty much rock.

    But, they never stop there. Instead, they insist on telling me ridiculous things like how much beef to eat, how to educate my kids, how big a magazine I can have for my gun, and making sure I will get moonshine in my gasoline. None of those things are going to make America “better”, but they sure will make sure there are a bunch of people can sit around and tell us that it was Big Government that gave us YouTube.

  53. matt says:

    Oh noes I apparently haven’t been complying with the beef consumptions laws.. So quick before I get arrested how much beef should I be eating as required by law?

  54. Ok, here goes. What James said is largely true, but not quite as relevant as you might seem to think. Of course there are some things that only government can do and sometimes they do them reasonably well. I am very happy that the US government initiated the space program and the Manhattan project, not to mention the Interstate Highway System, and many other infrastructre projects. But let’s take a look at James’ two classic examples a little more closely, shall we?

    It is virtually unimaginable that any private enterprise or consortium of private enterprises could have thought seriously about going to the moon in the 1950’s. Not only wouldn’t they have had enough money, but there is no way they could have acquired the talent necessary to do what exactly? Go to the moon? Really? For what commercial interest? Teflon and some moon rocks? Where’s the ROI? For the amount of time and energy, I sure hope the government did something good with the space program, and I’m very happy they did. I’m just trying to point out that comparing the government to private enterprise in this case is a little like comparing apples to bicycles. And FWIW, look at the space program now. Despite its proud legacy, legendary resources, and budget, NASA seems as though its getting kicked in the nuts by several entrepeneurs who are getting into space a whole lot cheaper and quicker than anything NASA has envisioned. Sadly, it seems that losing the space monopoly is making some in the government unhappy. Wel, too bad. Now having said that, I’m all in favor of spending more money on space and would love to see it. I wouldn’t advocate more deficit spending, but I would happily do away with a lot of wealth redistribution to fund the space program with some big league goals. We’ve got to get off this paltry planet eventually, and to my mind it’s one of those long term historical mistakes, if not crimes, that we just sort of gave up on space. Imagine what we might have been able to do if we had spent all the Great Society money on space instead.

    As to the Manhattan Project, well, once again, it is inconceivable that any private enterprise in the early 1940’s, in the midst of World War two could possibly have thought about trying to build an atomic bomb, and again, why would they unless they were something along the lines of SPECTRE? I mean, what are you going to do with an atomic weapon to get a return on your investment? And let’s not forgot the legacy of Rocky Flats, Hanford, St. Louis, Alamagordo, Savannah, and Oak Ridge. I can only imagine what you might think of a private enterprise that left those messes behind, with not so much as an apology. This represents a serious downside to the government doing these great deeds that you must include if you are going to argue that the government should be doing these great and good things, because, um, because they can!

    And after all that, there’s another perhaps more salient point. It wasn’t government per se that went to the moon or built the atomic bomb. A couple of governments tried to do both of things and only one succeeded. If it was “government” that did these things, how come the others failed? The failing governments had just as many resources and arguably even more power to do it, not to mention the advantage of stealing an awful lot of research and groundwork from the US government, but it turns out that’s not quite enough. Yes, the Soviet Union, China and others eventually got the bomb, but hard to say how long it might have taken them — if ever — had they not been able to rely on the results of the Manhattan Project. And none of them have got to the moon yet. Forty years on, the Chinese are making noises about going to the moon, but that’s only possible for them now because of the immense advances made in technology since 1969.

    Sorry to disappoint sam and stan. Did good things come out of the space program and the Manhattan Project? Of course. Did we get a good return on our “investment.” Yeah, almost certainly so, but it’s still more of a mixed bag than is presented here if it is a question of private vice public investment. And you cannot ignore the many great failures of the government or extend the government’s expertise in what was largely two scientific and engineering endeavors into all manner of other things the government tries to do. Honestly, I’m extremely happy to support more government spending on research and science without reservation. Please note, science does not include antyhing outside the hard sciences. I’d like to support more government spending on technology, except that our experience with the government doing that really isn’t very good. Too much political wishfulness and picking winners to suit my taste, but YMMV.

    I may choose to disagree with James on some specifics, but there is no doubt that the government spending large sums of money can generate results. But the question remains, did it generate enough results to justify it? DARPAs support of the Internet os always brought up, but have you ever looked at all the other projects DARPA has spent money on? And who’s to say the Internet or something very much like it wouldn’t have sprung up in some of the same labs a few years later?

    Anyway, enjoy.

  55. anjin-san says:

    > For what commercial interest? Teflon and some moon rocks? Where’s the ROI?

    Do a little research on the computers they had on the Apollo missions. Computers used to be the size of railroad cars. To use them for manned space missions, they had to get… smaller.

    Ever notice how the computer you use is not the size of a railroad car?

  56. anjin-san says:

    Some information on the computers developed for the Apollo program. Computer weekly says “Much of this knowledge gleaned from the Apollo programme forms the basis of modern computing.”

    Yea, where is the ROI in that? Good argument Charles. You will be welcome with open arms at any tea party meeting in America.

    http://www.computerweekly.com/Articles/2009/07/17/236650/Apollo-11-The-computers-that-put-man-on-the-moon.htm

  57. sam says:

    @Charles

    I’m just trying to point out that comparing the government to private enterprise in this case is a little like comparing apples to bicycles.

    But I suppose that’s the point some of us are trying to make, Charles. There are some projects that private enterprise simply will not take on. To do so would violate the fiduciary responsibility management has to the shareholders. If you go back upthread to my quote of Mr. Pierce of Dupont’s testimony, he flat says that. Consider the Large Hadron Collider at Cern. “What, you want us to invest in a machine that you hope will detect something called the Higgs Boson. How much? $9 billion. Are you nuts?”

    And FWIW, look at the space program now. Despite its proud legacy, legendary resources, and budget, NASA seems as though its getting kicked in the nuts by several entrepeneurs who are getting into space a whole lot cheaper and quicker than anything NASA has envisioned.

    Uh, yeah, well the Spaceport in New Mexico was built with state assistance, see Stars were aligned for New Mexico’s spaceport:

    [Governor Bill Richardson of New Mexico] landed Virgin Galactic as the spaceport’s anchor tenant, persuaded the legislature to appropriate $140 million and led the campaign that resulted in two adjacent counties approving a 25-cent sales tax on every $100 to build Spaceport America

    New Mexico, like most states, is going through a budgetary rough patch, and it’s not clear that state support of the spaceport will continue, at least at the former levels. If the spaceport folds because of diminished state support, well, that will only go to show that there are some projects that private enterprise cannot sustain on its own.

    [T]here is no doubt that the government spending large sums of money can generate results. But the question remains, did it generate enough results to justify it?

    The problem is, we have no way of answering that question in advance of the project.

    Finally, I apologize for my snark upthread. But in mitigation, I can’t think of anything you’ve posted here prior that last long post that would have indicated to me that you support this kind of government spending. I am happy to have been shown to be wrong.

  58. john personna says:

    Related: I’m not sure I’m a Scott Sumner fan, but his prescription at the end of this piece is very good:

    FWIW, here are my policy suggestions for the Great Stagnation:

    1. Most important by far; end the war on drugs. Big pharma can’t cure cancer, but they can end the pain. But our government won’t let them. Here’s a government “torture” problem 10,000 times bigger than waterboarding, which is tragically under-reported. (Although Matt Yglesias has a nice post.)

    2. Adopt Houston zoning laws everywhere. There’s plenty of land around Boston, no reason for houses to be so expensive.

    3. Singapore-style HSAs, pensions and tax regime (including carbon taxes.)

    4. Education vouchers. It won’t improve tests scores, but it will save boatloads of money

  59. Gerry W. says:

    ***2. Adopt Houston zoning laws everywhere. There’s plenty of land around Boston, no reason for houses to be so expensive.***

    Was in Houston one time and sort of odd from what I recall. I tend to favor the European centralized cities. At some time and even now, we are having a problem with urban sprawl. Everyone keeps building out and abandoning buildings. And it requires more city funding and more operational expenses for buses, etc. And googling one article, people become more dependent on cars.

    I think many cities lack a city planner.

    Case in point is my town of 14,000 and we have factories closed. Many small businesses and the downtown area is abandoned. The Bush tax cuts alone, instead of going to individuals, could have revitalized the downtown area and we could have kept some small business. It would have been a gathering place for people. I would have made a deal with K mart on the edge of town to come downtown to have people come down. Also have walking trails and a park setting.

    In Toledo, the Reynolds Road area is becoming abandoned, even though a lot of times you have bumper to bumper traffic. It is not making any sense. The Southwycke shopping mall was torn down. Abandon is a 13 theatre complex, Fazolies, an auto dealer, Holiday Inn, and a Hyatt. Also many other restaurants and businesses. The Holiday Inn was just bought to become a home for the elderly. But at the same time as all this, General Development built a hugh shopping area in a corn field west of Toledo. As we stretch out more, places become an eyesore. You do not see this in Europe.

    Another good example of city planning is Toronto. Land owners first griped about costs going up if they put a shopping mall downtown, but now it has drawn tourism and you can walk downtown and you have an underground called The Path of 16 miles of stores and restaurants and all of the downtown high rises are connected to it and the shopping mall. Toronto still spreads out but they saved their downtown. Rush hour, as for any city like that, is a nightmare.

  60. john personna says:

    For what it’s worth, Marginal Revolution says it is a myth of “no zoning” in Houston.

  61. anjin-san, I have a degree in Mathematics and Computer Science from the University of Illinois. As it happens, I do know quite about about the history of computing, but go ahead and keep your prejudices and juvenile caricatures. Wouldn’t want to upset your carefully constructed pigeonholes.

  62. george says:

    > Yes, the Soviet Union, China and others eventually got the bomb, but hard to say how long it might have taken them — if ever — had they not been able to rely on the results of the Manhattan Project.

    The ‘ – if ever -‘ is vastly overstating your case. Its inherent in atomic physics, to the point where anyone with a post-graduate degree in nuclear physics could achieve what was done during the Manhatten project if given the backing of a major country. That is the nature of science – what was once the work of genius becomes a generation or two later a matter for craftsmen.

    The hardest part (once you’ve obtained the materials) is some of the machining required, but that too has become fairly easy with modern robotics – which a large number of countries have.

    Its the same reason undergrad physics students can solve physics problems that one of the all time physics greats (Isaac Newton ) wouldn’t even be able to start on.

  63. anjin-san says:

    > As it happens, I do know quite about about the history of computing

    Funny, your remarks about the ROI on the Apollo program don’t reflect that at all. Moon rocks and teflon, was it? Your words, not mine. Either you slept through class, or you are deleberiatly misstating the historical record to support a dogmatic position. Which is it?

    You are the one who is making public statements that are obviously factually incorrect. Please don’t whine because I point out the obvious, IE that you are factually challenged. It’s kinda, you know, juvenile,

  64. anjin-san says:

    > NASA seems as though its getting kicked in the nuts by several entrepeneurs who are getting into space a whole lot cheaper and quicker than anything NASA has envisioned.

    As another poster pointed out, the entrepeneurs have enjoyed government support, and of course there it is very clear that they would never have gotten to square one had not the government done the work involved in making space travel a reality in the first place. They are piggybacking on the work that has already been done.

    It may be time for the torch to be passed from NASA to the private sector. Perhaps it is time for a more active public/private partnership. The fact that things have changed in no way invalidates what was accomplished in the “space race” era.

  65. anjin-san says:

    Damn. I was hoping Charles would come back and tell us more about Nixon’s Veep run in 1960…