Monday, June 23, 2008

Has the U.S. Become Less Relevant on the World Stage?

As I was channel flipping today, I caught CNBC's Jim Cramer making a good point. He was asked whether or not coal was a good investment given the uncertainty about the development of "clean coal" technology in the U.S. His response was that coal is a great investment and what the U.S. does or doesn't do is irrelevant. He pointed out that China is no longer exporting coal and will fuel demand with or without the U.S. market.

It was later pointed out that India is currently constructing the world's largest gas refinery, which will come online before the end of the year. The U.S. may be unwilling to build more, so India is taking full advantage of the void. While we enter our third decade of discouraging domestic oil production, Brazil and Canada are developing huge new finds and using technology to exploit known reserves.

The U.S. once set the pace of progress around the globe. Now we are so paralyzed by the smorgasborg of fears fed to us by politicians and the media that we are like a very large corporation. We're able to institutionalize and tweak existing ideas at the margins, but we're losing our ability to make dramatic leaps forward. We are so afraid of making a mistake that we wont take anything but baby-steps in any direction, right or wrong. There are lots of great automobile designs being pursued by individuals and small companies across this country, but by the time they pass muster for mass production, they will likely be obsolete. Someone in some other country will have leap-frogged the U.S. market.

The only industry that the U.S. has not regulated into stagnation is information technology. At least when we officially pass the mantel of entrepreneurship to another country, we'll be among the first to know.

This is not a doomsday scenerio, just an observation. Large, non-agile entities have an important role in any economy. They preserve and extend the life of existing ideas until they are no longer viable. They ensure that we exploit things to their fullest before we dispose of them. They must be complimented however, by smaller, more agile risk takers for a robust economy of ideas to thrive. How many bad songs are produced for every great one? On the other hand, how many great songs would be produced if every piece of music had to be pre-approved by a panel of experts?

Conservatism creates demand for innovation. Innovation leads to ideas that warrant conservation. For both to exist, each must recognize the value of the other and not set out to dispense with one or the other. If the U.S. is going to be Yahoo, somebody has to be Google. If the U.S. is going to be Microsoft, somebody has to be Apple.

We will become what we become. While we do so, we should let India be India, China be China, Singapore be Singapore, Saudi be Saudi and not try to impose some kind of international economic order on the controlled chaos. That's not to say we shouldn't champion individual rights and freedoms. Free association of individuals in the absence of force is another critical component to a thriving world economy. But if we are going to progress, we have to allow risk takers to be risk takers.

Restricting the development of ideas is like restricting the gene pool. Nothing good will come from it.

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