First, government establishes an overall climate, with competitive tax rates and predictable regulations and fiscal balance. Tax rates don’t have to be rock bottom. Companies will pay more if there are other amenities to compensate. But everything should be structured to nurture new business formation.
Then government actively concentrates talent. City governments are used to thinking in this way, while national governments lag. For example, Robert Steel, the deputy mayor of New York City, gave an excellent speech on Dec. 16 on how to build a bioscience center in Brooklyn and how to build an engineering center on Staten Island or Roosevelt Island. The speech was about using government to build hubs.
Finally, the government has to work aggressively to reduce the human capital inequalities that open up in an innovation economy. That means early and constant interventions so everybody has a chance to participate.
President Obama exists because his father was drawn to study in the United States. Obama embodies America’s nascent role as the crossroads nation. Let’s see if he can describe the next phase of American greatness.