On Monday, Senator John McCain gave a major economic speech to the Economic Club of New York. While the speech focused on the standard macroeconomic issues of the Federal budget and trade issues, there were a few lines at the end that really caught my eye:
My friends, in the course of my lifetime our economy has undergone unbelievable changes. When I was a kid, our economy grew by producing more and more of the same. We now have an “ideas economy” where growth comes from making new things, not larger quantities of the old things.
If you walked into my house when I was twenty years old, my parents would have proudly displayed the same appliances they had when I was ten years old. Today I walk into my own house and am awestruck by the marvels my family uses – flash drives, Ipods and Tivos, things we never could have dreamed of, have become part of our every day lives.
Close, but not quite. Senator McCain, like most of Washington, is still thinking of innovation and ideas as making new things — not as solving problems better and doing things in new ways. In this I-Cubed Economy where much of our innovation comes in the services and intangible goods area, the focus on “new things” misses the point. Unfortunately, this gadget mentality still plagues our policy debates.
However, I am extremely heartened by the Senator’s understanding of how the economy has changed. And I do heartily agree with him when he stated, “as our economy has changed, too often, Washington has not kept pace.” I may not agree with some of his solutions – which imply that all we have to do is get government out of the way. But that is the debate we should be having. Hopefully the Senator’s remarks will help start that debate.