“The reason we were so successful in 19th century agriculture — more successful than any other country — was the land grant universities, which promoted research and through Extension made sure the research got out where it was needed.”

It’s no secret that the U.S. economy has been on the equivalent of life support following last year’s meltdown in the banking/financial sector.

But beyond all those problems, says 2001 Nobel laureate Joseph Stiglitz, who spoke recently at Mississippi State University, there’s a longer-term problem in our economy — the transition from a manufacturing economy to a service sector economy.

Stiglitz, an Indiana native, now economics professor at Columbia University in New York and chair of Columbia’s Committee on Global Thought, says, “It’s something of a parallel to what happened in the Great Depression, which marked the transition of the American economy from one that was agriculture-based to one that was manufacturing-based.

“In the 19th century, 40 percent to 60 percent of Americans were engaged in agriculture. But as we achieved increased productivity in agriculture — which was related to work going on in state universities and Extension Services around the country — fewer and fewer people were needed to produce the nation’s food. Today, only 2 percent to 3 percent of our people are producing not only enough food for our nation, but for a high volume of exports, a major part of our economy.”

Manufacturing has been undergoing a similar process, Stiglitz says, with “a much more rapid increase in manufacturing productivity than happened in agriculture, meaning fewer and fewer people are required to produce all the toys, computers, cars, etc.”

That’s complicated, he says, by globalization. “One of the basic principles of a global economy is that each part of that economy produces goods where it has a superior advantage. There has been a shifting of superior advantage in many manufacturing areas toward Asia, which has made adjustment in the United States all the more difficult.

“Today, only about 11 percent of America’s labor force is involved in manufacturing, a process that has been accelerated over the past couple of years — and that is part of the challenge going forward: many of the jobs that have been lost in manufacturing aren’t likely to be regained.”

In an economy based on innovation, there will need to be “some institutional changes that will be difficult,” Stiglitz says. “Most of what goes on in the corporate sector takes advantage of basic research that’s done in universities — and we have been underfunding that basic production of knowledge on which the whole edifice rests.

“You have to have an educated labor force; manufacturing is more and more complex. Government does have a role in promoting research, and some of that has to be basic research that no one will do if the government doesn’t. The reason we were so successful in 19th century agriculture — more successful than any other country — was the land grant universities, which promoted research and through Extension made sure the research got out where it was needed. We need more investment in that kind of technology and research.”

email: hbrandon@farmpress.com