The rapid development of the Asian economies provides numerous examples of methods to develop job growth, incubate new technologies and new products, scale-up to production and manufacture of the new product, and develop a strong economy. In a study of the industrial development of East Asia, Robert Wade in his book Governing the Market: Economic Theory and the Role of Government in East Asian Industrialization found that Asian economies performed at record numbers over the 1970s and 1980s in large part because of the effective involvement of the government in targeting the growth of manufacturing industries. As Tom Blair, in his book Poorer Richard’s America: What Would Ben Franklin Say?, “the government of China spends their money to build industry and sell products, and the USA spends money to make the world safe.” If the USA wants to continue to be the world’s superpower and leader for peace, and indeed we should, for think about the world rife with tyrannical governments and militaristic groups causing anarchy, killing, raping, and torturing if we are not there to lead, then we must regain our economic might in order to support our world leadership role.

Consider the USA where recently the mantra has been “free market” and the US government viewed as “the problem.” Not long ago in California, and in particular the Silicon Valley, the most dynamic economy on the planet was in place, thanks, partly, to local, state, and federal government, where a tremendous incubation of new companies and new technologies was occurring. Those companies went on to produce their products in California, realizing great job growth and bolstering the economy. The birthplace of semiconductors and biotechnology, this area has thrived with the incubation and then the scale-up to production and manufacturing of new technologies. Seated next to one of the world’s wealthiest communities with much disposable income, packed with venture capitalist, ringed by three of the great universities on the planet (UC Berkeley, Stanford, and UCSF), and many other institutes providing a vast quantity of intellectual assets and intellectual property, loaded with entrepreneurs, supported by federal dollars, and even supported by state initiatives such as the 1980s California Commission on Industrial Innovation instituted by then Governor Jerry Brown ( a noted fiscal conservative, but proponent of high-tech industry and education), the Silicon Valley has long been the champion of the world economy.

However, something is changing and the change is not good. Iconic to this change, witness where the birth of the world’s first silicon chip happened in Mountain View, CA, where now that seminal site of the chip industry is a nice place to pick up some fresh produce. This produce stand once was the world’s first semiconductor lab, established by the American physicist William Shockley and where the founders of Fairchild and Intel first worked. However, nowadays just a couple of marks on the sidewalk indicate a glorious past of America’s chip making industry, among all the fruits and veggies.

Unemployment in the Bay Area is about 10%, which is higher than the national average. Clearly, the great Silicon Valley innovation machine hasn’t been creating many jobs lately in the USA. Instead, those jobs are headed to Asia.

The underlying problem isn’t simply lower costs in Asia. Rather we face a number of problems that are self-inflicted.  To paraphrase Tom Blair, American companies eat their young, often for a few years of heightened profits, then they disclose and transfer their expertise and technologies to China. Another words, we give away our know-how and hence the long-term survivability of our US companies for the sake of several years increased income for the short term gain of entry into the Chinese market. Further, we have our own misguided belief in the power of startups alone to create new technologies and U.S. jobs. Americans love the idea of the guys in the garage inventing something that changes the world. We all think of the Apple Computer start-up in a garage somewhere in Northern California back in the 70s or the more recent version of Google with a beautiful campus where innovation runs rampant. Often I hear businessmen espouse the view that we are living in a country where we create ideas but not products, and this is exactly what the US should be doing. Recently New York Times columnist Thomas L. Friedman