The American economy has a growth problem.
Total factor productivity (TFP) growth has substantially slowed since the end of World War II, from an average of 2.1 percent during 1948–1973 to an average of 0.7 percent during 1974–2015. Falling total GDP growth also reflects this phenomenon, trending from 4 percent per annum in the postwar years, to less than 3 percent from the mid-1970s, and to under 2 percent since 2000. This slowdown has been dubbed The Great Stagnation.
Not to mention government research and development spending has fallen and wage inequality has risen. John Van Reenen, a professor in Management and Economics at the Massachusetts Institute of Technology, proposes an idea on how America might tackle these issues in this research paper for the Brookings Institution’s Hamilton Project.
The ambitious proposal is a self-described “moon shot” — a permanent $100 billion per year Grand Innovation Fund that would allocate 30 percent of those dollars to direct R&D grants, 25 percent to tax credits, 20 percent to increase the STEM workforce, and 25 percent to exposure policies to improve the quality of a new generation of U.S. inventors.
This would direct research towards central concerns such as pandemics, climate change, or other problems where science and technology are crucial and where innovation is lacking.
Implementing such mission-oriented policy is essential, he writes, in order to “benefit from long-term investments that generate both technological advances and good, high-wage jobs.”
Given Canada’s own growth problem, perhaps similar “moon shot” solutions should be considered here.
