Saturday, January 29, 2011

Innovation and Jobs

One of the core themes in this last week's State of the Union address was the call to innovate and create our way out of the sinkhole into which City-On-A-Hill-America is slowly sliding.  The idea, I think, is pretty classically American.  We grow by seeking the new frontier, chasing our Manifest Destiny right up until we prang into the Pacific.  We improve our lives through new products and pharmaceuticals that suddenly make everything better

But I just don't buy it.  Not any more.  Innovation is no longer the engine by which American jobs are created.

Nifty new electronic gizmos and doodads to clutter our rec room?  Sure.  Remedies for ailments we never knew we had?  Absosmurfly.  But jobs?  No.  I don't see it, not in the context of our globalized capitalistic economy.

Let me offer up three examples from innovative, successful American firms.  If you had to think about what American company would be consistently described as cutting edge, profitable, and successful, Apple would be at or near the top of every list.  While not without flaws, the company has created products that are aesthetically pleasing, boundary shifting, and that people want to buy.  My own home has a rather large number of iPods and iPhones and iPads, and I'm composing this on an iMac.

Apple is an innovator.  But jobs?  Yeah, his name may be Jobs, but they mostly ain't American.  Apple maintains a stable of about 25,000 American employees, in design, engineering, retail, and corporate.  But when it comes to actually making the iPods and iPhones and iPads and iMacs, that gets done by  Chinese subsidiary Foxconn, which employs 250,000 workers to make products for Apple.  A generation ago, those would have been a quarter-million American wage-earners, enough to fully fuel the economy of a mid-sized city.  Now?  Nope.

Globalized industry is a game changer.

That painfully neglected reality was reinforced recently by an announcement from Evergreen Solar.  That company, in the event you haven't heard of it, is the third largest manufacturer of solar panels in the United States.  Or rather, it was.  After many millions of dollars of public funds and tax breaks were given to it's leadership to develop renewable energy production, the suits did what suits are obligated to do.  They chose to remain competitive in a global economy.  Evergreen Solar is folding up shop in the U.S., and will now produce solar panels only in it's new Chinese factory.

In a globalized economy, where production chases the region with the lowest possible wages, innovation does not mean jobs.  Not here, anyway.

But innovation poses another threat.  It takes jobs away, particularly as more efficiencies are discovered in production.  Take, for instance, Amazon, another successful innovator.  I buy stuff from Amazon plenty, and the success of their Kindle ebook platform has surprised me...I still like paper for my bookish moments...but I'm apparently now in the minority.  Amazon recently announced that sales of books on the Kindle now exceeded their sales of paperback books.  That's good for the trees, but it's an ill wind if you work in retail.  Virtualized products, be they books or videos or games, well, they don't require bricks and mortar or paper.  If the people who read are increasingly content to read electronically (as you are, dear reader), then there's no need for book stores.  The scores of I.T. jobs that are required to maintain that business model don't counterbalance the tens of thousands of jobs that will be lost as Borders and Barnes and Nobles start to fold.

I wish I could share Obama's optimism about innovation and jobs.  But I think that industrial-era horse has left the stable.