Innovation and Economic Growth
Abby Joseph Cohen, president of Goldman Sachs Global Markets Institute, describes the critical role that innovation has played in contributing to economic progress in the United States.
The role of innovation has been critical to economic development as the nation has evolved over the decades. There is a clear statistical link between innovation and gains in the standard of living.
Abby Joseph Cohen is a member of the White House-appointed Innovation Advisory Board, charged with examining the state of innovation and economic competitiveness in the United States. In January 2012, the board issued a comprehensive report to the U.S. Congress, analyzing a range of issues – including education, worker productivity, research and development investment, and government policies – and offering specific recommendations for action.
In serving on the Innovation Advisory Board, Abby Joseph Cohen drew on previous work by the Global Markets Institute focused on these critical issues. The following article synthesizes some of that work. It should not be viewed as a summary or preview of the work of the Innovation Advisory Board.
INNOVATION AND ECONOMIC GROWTH
Scientific and engineering advances have spurred new products and processes since the founding of our nation. Once a largely agrarian economy, the US advanced from emerging nation status in the mid-19th century to an industrial powerhouse by the First World War. Vast improvements in agricultural productivity released workers for other activities. Massive investment – both public and private – in transportation infrastructure such as seaports, inland canals and rail systems, opened new markets in commerce.
Importantly, conscious government policy helped ease the difficult transition for workers through these dramatic changes. Significant investment in public education led to formation of the world’s largest literate workforce by the early 20th century. A comparable shift occurred in the workforce following the Second World War. Public policies, such as the GI Bill of Rights and the expansion of the great state university systems throughout the country, solidified the nation’s workers as the best educated. For example, the US had the largest number of college graduates and the highest percentage of adult population with post-secondary education of any nation. This public investment reaped dramatic returns as US workers were consistently the most productive and highly paid.