Triumph of the Innovation Economy – Part 6
Over the last two and half centuries, innovation has changed human life more dramatically than in all of the previous millennia. But some are now asking if the world’s great innovation engine has broken down. Has America lost its innovation power?
Human Creativity and the History of the World
So far in this series of articles, I have provided ample evidence from the historical record that innovation is – and always has been – the fundamental driver of human progress. From the dawn of civilization onward, technological creativity has been the primary fuel for economic growth, or what economic historian Joel Mokyr refers to as “the lever of riches.”
In Part 5, we examined the European Renaissance that laid the foundation for a new society – one that was permeated with optimism about the limitless promise of technology. Join me in this next article as I continue our exciting journey through time.
First let’s focus on the miraculous era of unprecedented economic growth that came to be called the Industrial Revolution, and then on the even more amazing period thereafter – from the second half of the nineteenth century to our twenty-first century – bringing us right up to today.
The economic miracle of the Industrial Revolution
Nobody living in the eighteenth century could have possibly predicted that over the next 200 years human life would change more dramatically than in all of the previous millennia of mankind’s existence.
Yet that is precisely what happened. The productivity gains from technological progress during the Industrial Revolution were of exponential proportions, resulting in an unprecedented leap in per capita income that gave people a standard of living incomparably higher than that of previous societies.
From 1760 to 1870, a tidal wave of technological innovations swept across Britain first, then Germany and other European countries, and later the United States. It was a clustering of these macro-inventions, new ideas and insights that made it possible for all manner of industries to produce and distribute ever-more and ever-better goods, and to do so more efficiently than ever before.
The Industrial Revolution produced these key inventions:
- the steam engine
- the water turbine
- Henry Cort’s “muddling and rolling” process for turning pig iron into wrought iron
- the use of coke in blast furnaces
- the invention of crucible (or cast) steel
- Samuel Crompton’s mechanized spinning machine for producing textiles (which turned cotton into the world’s greatest-ever growth industry)
- the factory system
- the Jacquard loom for automatic weaving
- precision machine-tooling
- advanced glass making
- the Fourdrinier paper making machine
- the Leblanc process for producing soda (regarded as the basis for today’s chemical industry)
- gas lighting
- the safety lamp
- ballooning (the first serious step toward human flight)
- the threshing machine
- mechanical refrigeration
- canned foods
- vulcanized rubber
- the locomotive and the railroad
- the steamship
- the electric motor
- the internal combustion engine
- the turbine
- the mechanical reaper
- the sewing machine
- the rotary printing press
- photography, and
- the electric telegraph (along with Morse code)
It’s abundantly clear that Britain’s rise to global economic stardom between 1750 and 1850 was based primarily on its ability to generate and/or implement innovative new production techniques faster than rival nations.
In many cases, these techniques were complimentary: the solution to one challenge often unexpectedly presented the solution to another problem, so that inventions often became clustered and the productivity gains and economic impacts from innovation were compounded. However, at some point leading up to 1900 Britain lost both its technological edge and its economic preeminence.
Throughout the second half of the nineteenth century, other nations such as Germany and in particular the United States had already been rapidly rising in technological and economic status.
In 1890, the USA leaped ahead of Britain in manufacturing output to take first place globally.
This period of history that gave us world-changing inventions:
- the arc light
- the incandescent light bulb
- the telephone
- the phonograph
- the automobile
- cheap steel
- synthetic plastic
- industrialized pharmaceuticals (such as aspirin)
- the dynamo
- the transformer
- the vacuum pump
- the electric streetcar
- the screw propeller
- the bicycle
- the pneumatic tire
- mass manufacturing
- industrial fertilizers
- milk powder
- the automatic loom
- wireless telegraphy
- the typewriter, the Linotype machine (for automatic typesetting), and
- the Kodak camera.
And these amazing breakthroughs were in many ways just a prelude to what was still to come.
As the nineteenth century gave way to the twentieth century, the world was poised to enter the most profoundly innovative of all the chapters in human history.
Innovation from the twentieth century till today
It’s no exaggeration to say that the twentieth century brought more technological progress and sustained economic growth to the world than all the other centuries combined since the dawn of civilization.
The 20th century took humankind from the zeppelin in 1900 to jet aircraft just a few decades later and to the moon and back by 1969.
Over the course of a hundred years, we saw everything from:
Vacuum cleaners, toasters and safety razors to widespread electrification, mass-produced automobiles, airplanes, motion pictures, radio, television, helicopters, rockets, supertankers, antibiotics, frozen food, lasers, photocopiers, computers, ATMs, robots, cell phones, the Internet, video games, gene splicing, stem cell research, cloning, and list goes on and on.
The great majority of these innovations originated in the Unites States, making America by far the dominant economy of the twentieth century.
Today, the U.S. economy is still the largest and most productive in the world, accounting for a full one-fifth of global GDP with just 4.5% of the world’s population. The U.S. also leads the world in manufactured goods and is one of the largest exporters of products and services. America remains the world leader in technology, beating all other countries in tech spending levels, and is home to many of the world’s top global brands.
But over the course of the twentieth century, America’s share of global manufacturing output dropped from about 75 percent to around 21 percent.
Immediately after its victory in the Second World War, the U.S. appeared not at all worried about the possibility of losing its technological or economic position to others. At the time, the world seemed very much a unipolar place. But as the post-war period progressed, it turned out that the Soviet Union had made the advancement of technology a national priority, and the economic race was on.
In fact, at the time, the USSR was growing faster economically than the U.S., and if this trend was extrapolated the Soviet Union would actually overtake the U.S. in terms of GDP by the mid-1980s.
However, the USSR poured most of its tech capital and into bolstering military power (representing about a third of global military spending by 1975), which was simply not sustainable with a closed economy that accounted for just 3.9 percent of world trade.
In the end, the Soviet economy ran out of steam, its technology became outdated, and the USSR fell apart seemingly overnight as the 1980s gave way to the 1990s.
By that time, the U.S. had found itself competing with two formidable new economic superpowers which it had helped create, namely Japan and the House of Europe, centered principally on Germany.
The world had shifted from a unipolar to a bipolar and then to a tripolar economic game.
During the 1980s, as the Japanese took the technological lead in many industries, people were predicting that Japan’s fast-growing GDP would be the highest in the world by the year 2000.
By the 1990s, Japan’s largely “copy it and make it cheaper” innovation strategy hit a wall and its economy went into prolonged stagnation.
All of this was before China came onto the global economic map. Since 1982, China’s sweeping economic reforms have transformed the Middle Kingdom from a largely closed economy into a global player. The primary focus: having the best process technologies on earth for producing anything the rest of the world (as well as China itself) wants.
Over the last thirty years, China has expanded its share of world GDP roughly sevenfold, making it the fastest-rising economic power in all history.
Chinese innovation performance has improved noticeably in the last decades, creating a new phase of global competition between the world’s economic superpowers that will determine who is going to own the twenty-first century.
In recent years, some have questioned whether the great American innovation engine has broken down.
One famous innovator and entrepreneur, Peter Thiel, (a co-founder of PayPal, and one of the earliest investors in Facebook), summed it this view when he said:
“We wanted flying cars, instead we got 140 characters.”
In September 2014, Adam Button, managing editor of ForexLive, voiced the same basic complaint about Apple, one of the most innovative companies in the U.S.:
“They invest billions in product research and innovation and all we got was a bigger phone and a watch that monitors your pulse.”
The fact is that global innovation is still in great shape. We now have:
- artificial intelligence
- augmented reality
- cars and trucks that drive themselves
- wearable computers and embeddable implants
- aerial drones capable of delivering things to our doorsteps
- smartphones and tablets with unprecedented computing power
- 3D printers for the home
- “Iron Man”-like exoskeleton suits
- high-performance all-electric cars
- virtual supermarkets
- smart thermostats and smoke detectors that learn our behaviors
- speech recognition software for controlling our devices
- apps for almost everything
- social television
- 3D holographic displays, wireless electricity
- the “Internet of Things”
- deep data mining
- humanoid robots
- engineered stem cells
- self-diagnostic medicine
- biomaterials, and so much more.
This is no longer the stuff of science fiction. It’s the shape of things that’s already here.
Will the world’s leaders – both in large corporations and political governments – be tempted to take their eyes off the innovation imperative in the future, thinking that there are perhaps more important macroeconomic issues to worry about and invest in?
That remains to be seen. A quick glance back through human history should teach all of us that innovation power and economic power have always been inextricably linked – and always will be.
Many today rightly recognize innovation to be what The Economist magazine called “The single most important ingredient in any modern economy.” But there still appear to be a few doubters out there.
I hope that the next and final article in this series will put those doubts to rest.
Continued in Part 7 of this series
© Rowan Gibson 2015. All rights reserved.
Rowan Gibson’s brand new book The Four lenses of Innovation examines the thinking patterns or perspectives that have been catalysts for breakthrough innovation throughout human history, and shows you how to use these perspectives to infuse creativity into your own organization. Order your copy right here.
Rowan Gibson (firstname.lastname@example.org) is recognized as one of the world’s foremost thought leaders on innovation. He is the internationally bestselling author of 3 major books, an award-winning keynote speaker in 60 countries, and a cofounder of Innovation Excellence. His new book is The Four lenses of Innovation. On Twitter he is @RowanGibson.
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