Innovation

Innovation drives the economy, as amazing new products and services create value that improves or enhances our lives, and people with at least some disposable income (hopefully not debt) buy those products and services. A large portion of the country - the middle-class in particular, as they are the largest group - must have disposable income or innovations fail to be bought and entrepreneurs of innovation are unsuccessful. That's why income inequality matters, it hurts the middle-class' ability to spend. And current GOP orthodoxy that gives tax credits to the already rich, and already cash-rich corporations, and forces higher costs (and thereby lowers disposable income) on the middle-class matters enormously as well.

Innovation literally drives the economy. My spending pays part of your salary when I buy your innovations or those of your employer, and your spending pays part of my salary when you buy my innovations or those of my employer. In this virtuous feedback loop, we each, by our innovation and consumption, contribute to positive upward momentum in our economy.

One of the big problems with our current economy is that too many get insanely rich creating nothing of any real value and innovating things (like credit default swaps) that benefit few, and worse harm everyone else. For example, Wall Street "innovations" (let's call them "sinnovations", shall we?).

One such clever ruse was a scheme to:

1. Place huge bets on giant bundles of thousands of (usually questionable) mortgages aggregated together (Lehman Brothers and all of the big Wall Street firms in 2007, and some still today) 
2. Then hedging (literally trying to win big and also betting you'll lose and win some anyway, meaning you can't really lose) with even more questionable insurance plans (AIG)
3. And then counting on the fact that, if you fail and your insurer hedge fails because you overwhelm them (as happened to AIG), your company being too big for the federal government to allow failure, means you get bailed out by taxpayers - you and I.

ZERO risk, huge reward, and nothing. absolutely nothing gets created, except riches beyond your imagination for a small number of clever people who get their rewards from tax payers. Experts left and right of the political spectrum agreed, we had allowed these financial firms to become so large, to hold so much of our nations' wealth on their books, that we had no choice but to bail them out or risk losing the entire economy for a generation. But we are literally enriching those who game the system, innovate not at all, and the cycle of decline of everyone else (you, and me, and the entire middle-class - the so-called 99%) continues.

Even when these risky Wall Street deals succeed, nothing of any real value gets created - and that's a problem.

Rewards of this sort, where nothing gets created must end, and the disincentive of being too big to fail - allowing, even encouraging massive risk taking where failure means taxpayer loss - must also end.

Perhaps the most interesting consequence of income inequality, that the GOP routinely ignores, is that when you lower the buying power of the middle-class, which GOP policies continually succeed in doing, you greatly increase the risk to entrepreneurs who innovate. If the middle-class has limited buying power, entrepreneurs have a limited market for their innovations. That's bad for entrepreneurs, bad for investors, and very bad for the economy. Economies are ecosystems, and just like natural ecosystems, shocking seemingly unimportant parts of the ecosystem can decimate the entire system. The shock causes it to collapse from one of it's key pillars, in this case middle-class disposable income, being harmed - and the entire ecosystem comes crashing down. Protecting the middle-class and keeping their earning power, and spending power in line with inflation is not only good social policy, it's good economic policy.

We have not kept middle class earning power in line. If we had, the average middle-class person would earn almost $45k/year more. Imagine how different the market for entrepreneurs' products would be then!

So innovation is amazingly important, and so are protecting the buying power of consumers of that innovation.

For more inspiration on innovation: Here is an amazing NY Times site on coming innovations that will change our lives in the next few years.

And here's an innovative CEO who is about to reap his reward. Watch him give thanks.






And here's a very cool video of some very talented musicians innovating a great song, on a single guitar, played by 5 people.

Innovation is everywhere. Can you afford to buy it?