With so much bad news about the global economy, it might be time to start using alternative indicators to stock-market indexes and jobs data.
Those popular market signals do help size up the creation (or loss) of wealth and jobs. But they fail to measure what actually creates wealth.
The American obsession with monthly jobs data is particularly pernicious. July’s labor statistics, for example, showed again that the nation’s job growth is far too tepid to regain the number of jobs lost during the Great Recession.
That news resulted in yet more initiatives from the White House. President Obama announced tax credits for firms that hire vets. And in mid-August he will tour the Midwest by bus to show he’s doing something about jobs. As the 2012 election nears, expect even more such pronouncements from politicians.
While having a job is certainly important, a public emphasis on job statistics is like looking the wrong way down a telescope. What’s needed instead are ways to measure – and support – the quality and quantity of new ideas that can be commercialized into new businesses.
Take the hot market for smart phone apps (notably the game Angry Birds). Thousands of these software products are being created each day by entrepreneurs worldwide. Each innovative app provides a service, creates jobs, and generates profits.
Such a phenomenon shows that an economy is not about material things but instead the caliber of thought. Throughout history, jobs have been created when someone starts a business with such qualities as innovative vision, precise communication, long-term commitment, and integrity in relationships.
“If you have an apple and I have an apple and we exchange these apples then you and I will still each have one apple. But if you have an idea and I have an idea and we exchange these ideas, then each of us will have two ideas.”
Cities that recognize the power of ideas for business have done better than those that don’t. For example, Austin, the capital of Texas, had the nation’s highest level of job creation from 2003 to 2008 in large part because it attracted creative people and tapped into the intellectual capital of the University of Texas.
But how to measure the wellspring of ideas? Here is how the Ewing Marion Kauffman Foundation sees the possible results of innovation based on new ideas: “If the United States economy could consistently generate 30-60 new companies whose annual revenues eventually reach $1 billion, the United States would enjoy permanently a one-percentage-point increase in its growth rate.”
The usual way is to look at material inventions – the light bulb, for example. But new ideas are also possible in other areas, such as how to run a business – e.g. Wal-Mart – that can also expand wealth and create jobs.
Last year, a total of 61,900 entrepreneurial ventures received funding, an increase of 8.2 percent over 2009 investments, according to the University of New Hampshire Center for Venture Research. Each new business required someone with an idea who didn’t believe in the scarcity of ideas or of customers.
Ideas for starting businesses need wings – whether those wings come from venture capital or government support. But they also need to be better measured. Such indicators are far more telling of humanity’s potential and its future than a jobs index.