Is Innovation the Way Out?

It’s a recession that’s never been seen before for generations ..

Is Schumpeter the long run economist ?

A theoretical analysis of


Perhaps this article makes it the “too many articles on recession”,a passive truth surfing your mind but I’m sure you’d differ your stance by the end of the passage. There are economists like Keynes and Marshall whose names we get to hear all the time and some lesser known economists like Schumpeter – but what surprises me is that Schumpeter sounds more valid in the long run economics than any other economist. Schumpeter was the man behind the formulation of the innovation theory for economic development and his theory seemed very offbeat for the economists of his time.

    Economic history reminds us of the thinkers who have specifically called in for savings as an instrument for growth, trade as an engine of growth etc, but they all have forgotten to lay emphasis where Schumpeter has laid successfully – innovation leads to economic development. Josef Schumpeter’s words were preceded by a lesser known economist from USSR, Nikolai Kondratiev. This man Kondratiev was overshadowed by Keynesian economics as he wasn’t actually living during times when we needed him the most; our present crisis– overshadowed because the Great Depression needed Keynes more than Kondratiev.


What we currently need is innovation. Our economy lacks innovation, human mind isn’t as innovative anymore in totality. Look into the basic of things, we have saturated technology and anything above the current technology that’s in our minds might be the time machines I guess. I have an analysis:
1. Technology starts with one , spreads to many and fades out to another better technology. Like the Iphone was the only kind of its like when it hit the markets, sooner there were a multitude offering substitutes of this device and is yet to fade out to a better technology over ruling them.
2. Over capitalisation and over investment in booming sectors. There is always an investment innovation ratio. If, to make a phone, we need an investment of $100, investing $150 still gives you the same phone.
                 This is what happened to our world economy. We went about doing everything too much. Copycat companies and cut throat competition failed the revealed preference to work out extensively well as it should, the companies have just went about giving the same product to a larger and even larger markets and in this administrative duel the companies have failed the innovators.
How to recover from the recession ?
 No need of the query, all we need is innovation. Henry Ford revolutionized American automobiles in the early 1900’s, Edison gave us the electricity and its already been 150 years since these news came in the newspapers.Now lets look at this thing. We had the silk route Traversing central Asia,  from China to the Europe for millennia. Caravans,  carts passing through were enough to need the consumption demands for that period. Imagine what a railway line across the silk route could have done to the economies of regions along its path. Coming back to reality,  I can surmise this is what precisely happened to the west. They have come up with such great inventions,  let us call it an Intellectual Renaissance than an Industrial Revolution, the west has literally snatched the domination of medieval India and China and it still continues till today. Look what the Pacific Railroad has done to the USA,  Trans-Siberian rail to Russia,  Trans Atlantic cables,  the telephone,  television:  when technology touches the way you behave, its the magnitude of the significance its going to create in the economy when largely employed over a period of time.
No ground breaking innovation for the last few decades apart from the computer and its offshoot- the internet, and weapon and space technology. This in relation to the investment made in developing new technologies, yes, we have just developed the existing technologies, these investments haven’t created newer technologies. Creating the technology is innovation, developing it is, Ah, guess its a child’s play before creation.
 Carlota Perez eases my job here. She has coined the terms irruption, frenzy, synergy and maturity. Irruption as the entrepreneurial initiative, frenzy- the ascendance of the economy, synergy as the build out and the completion of the cycle is maturity. Entrepreneurial importance is the highlight aspect of Schumpeterian economics. Our global economy is currently in the phase of maturity. The satiation in the innovations progress has caused the recovery to be a burdensome process.
Innovation is the only solution for Recovery.
Innovation is the only solution for Recovery.
    Getting back to innovating is the only solution of recovery. Unless there isn’t enterprise there isn’t going to be the profits coming into our pockets . We have to climb back to innovating the next gen. technologies that we did not see coming our way for a lot of generations that have preceded us. Nano-technology or teleportation, the cold wave in the global economy will see an end only when we see the corporations coming up with various life changing technologies. Possibly by 2020 or 2025, we can expect the world to be back on a total recovered curve. 
You may also like:
©The Idea Bucket, 2013. (Submitted by Mikky)



  1. Scott Locklin says:

    Tyler Cowen recently wrote a book called “The Great Stagnation” on how we’ve entered a time of stagnation of innovation. I call precidence, as I published an article on the subject two years before he did:


    1. A. M. says:

      I’l be sure to check out your articles, Scott!


  2. avastmick says:

    I think the innovation is there (a lot), but it is being overly controlled. The death rattle of the Old Days institutions. In your cycle (from Perez) it is represented as cyclical, but I see the Internet bringing a linear progression. The line is volatile, but upwards, driven by new risk models, built on organic management that allows (enjoys) frequent failure as corrective learning. The weak (non-innovative) will be swiftly culled and replaced with a more vibrant replacement that will outgrow its predecessor. Think MySpace and Facebook. Yahoo! (or Altavista) and Google.


  3. Know-All says:

    Apple is an example of a company which could create so much value because of innovation…however, its easier to be a copycat than to innovate… 🙂


Leave a Comment

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

This site uses Akismet to reduce spam. Learn how your comment data is processed.