Space for innovation is the true test of a strong, free society9 January, 2015 / Articles
An economic historian in the year 2050 talking to her students about the most consequential innovations of the early 21st century — the Model Ts and Wright flyers and Penicillins of our time. What would make her list?
Surely fracking — shorthand for the combination of horizontal drilling and hydraulic fracturing that is making the US the world’s leading oil and gas producer — would be noted. Surely social media — the bane of autocrats like Turkish President Recep Tayyip Erdogan and of parents like me — would also get a mention. Mobile apps? Check. The emerging science of cancer immunotherapy? Hopefully, with fingers tightly crossed.
After drawing up this list, our historian would then observe that each innovation had “Made in USA” stamped all over it. How strange, she might say, that so many Americans of the day spent so much of their time bellyaching about the wretched state of their schools, the paralysed nature of their politics, their mounting fiscal burdens and the predictions of impending decline.
Perhaps because I grew up as an American living abroad, I’ve always been struck by the disconnect between American achievement and self-perception. To this day I find it slightly amazing that, in the US, I can drink water straight from a tap, that a police officer has never asked me for a “contribution”, that my luggage has never been stolen, that nobody gets kidnapped for ransom, that Mao-esque political purges are conducted only in the editorials of TheNew York Times.
Try saying the same thing about everyday life in Brazil, Russia, India, China or South Africa — the so-called Brics countries once anointed by a Goldman Sachs guru as the economies of the future.
But back to our future historian. Why, she might ask her students, did the US dominate its peers when it came to all the really big innovations?
Fracking would make a good case study. The revolution happened in the US not because of any great advantage in geology — China, Argentina and Algeria each has larger recoverable shale gas reserves. It didn’t happen because America’s big energy companies are uniquely skilled or smart or deep-pocketed: take a look at ExxonMobil ’s 2004 annual report and you’ll barely find a mention of “fracturing” or “horizontal” drilling.
Nor, finally, did it happen because enlightened mandarins in the federal bureaucracy and national labs were peering around the corners of the future. For the most part, they were obsessing about the possibilities of cellulosic ethanol and other technological nonstarters.
Instead, fracking happened in the US because Americans, almost uniquely in the world, have property rights to the minerals under their yards. And because the federal government wasn’t really paying attention. And because federalism allows states to do their own thing. And because against-the-grain entrepreneurs like George Mitchell and Harold Hamm couldn’t be made to bow to the consensus of experts. And because our deep capital markets were willing to bet against those experts. “When I talk to foreigners, they’re even more impressed than many Americans by this renaissance,” says my colleague Gregory Zuckerman, author of The Frackers. “They understand that it only could have happened in America.”
Fracking has now up-ended energy markets, pommelled petrodictators, confounded OPEC, forged deeper North American economic ties, slashed US greenhouse-gas emissions to their lowest level since 1995, and sunk a nail into the coffin of most renewable-energy schemes (though there will be no slaying that zombie, as our future historian would also know).
Fracking is one industry. In time, the advantages it has given the US will fade as the technology is more widely disseminated. Then it will be on to the next thing. Which, it is safe to say, will also be of American origin and design.
Here, then, is the larger lesson our future historian will draw for her students: innovation depends less on developing specific ideas than it does on creating broad spaces. Autocracies can always cultivate their chess champions, piano prodigies and nuclear engineers; they can always mobilise their top 1 per cent to accomplish some task. The autocrats’ quandary is what to do with the remaining 99 per cent. They have no real answer, other than to administer, dictate and repress.
A free society that is willing to place millions of small bets on persons unknown and things unseen doesn’t have this problem. Flexibility, not hardness, is its true test of strength. Success is a result of experiment not design. Failure is tolerable to the extent that adaptation is possible.
This is the American secret, which we often forget because we can’t imagine it any other way. It’s why we are slightly shocked to find ourselves coming out ahead — even, or especially, when our presidents are feckless and our policies foolish.
We are larger than our leaders. We are better than our politics. We are wiser than our culture. We are smarter than our ideas. Enjoy the holiday.
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