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1820sto the 1920s; the result was a much higher capacity to mass-producecon- sumergoods and services. There were many times when the element serving one functional need lagged behind those serving others (e.g., the development of a national financial system lagged behind the increase in the labor force, and be- hind education in general and vocational education in particular), but in general, thesedifferences triggered effective efforts to narrow them. (b) After two "inter- ruptions," the Depression and World War II, during which this productive ca- pacity was first in part idle, then used for war, the golden age of massconsump- tion set in (1950-1975), encompassingmassive increasesin private, public, and social consumption. (c) In the golden age of consumption, not only did the pub- lic sector grow and politicization of the private economy increase(these develop- ments are sometimes referred to as intervention in private decision-making and the revolution of entitlements), but also, insufficient resourceswere dedicated to the sevenelements serving the functional needs of economic development, both to maintain specific items and adapt them to changing environments. Deferred maintenance is illustrated by deteriorating bridges and railroads. Lack of adapta- tion is apparent in lack of response to changing markets in automobile produc- tion, and above all, to the drastic change in the cost of energy. The result: inabil- ity to maintain the system, i.e., underdevelopment. The following paragraphs provide a quick overview of the sevenneeds, the items which, historically, met them, and their recent condition.

Researc and Development,Innovative Capacity


Economicgrowthis propellednot merelyby larger"inputs," increase in the availableamountsof the productiveelements,but alsoby combiningthem in new, moreefficientmanners.Hencetherole of innovation,which in turnis fed by researchand development,is central. The shifts from both hand tools to mechanization,andfromtheuseof musclepowerto high-energ inputsrequired technologicalinnovations.Indeed, some leading researcherssuchas Edward Denison(1974)and JohnKendrick (1980)havepointedout that newknowledge outweighsall other factorsin contributionto economicgrowth.

Historical Illustration

The cotton gin, the powerloom, andthe sewingmachinecontributedto the developmenof the NewEnglandtextile industry,a factorysyste thatwasfully developedbeforethe Civil War. The steamboaopenedup the GreatLakesre- gion, and adaptatio of the steamenginewasthebaseof therailroads.Thepro- cessdevelopedby Henry Bessemein Englandand,independently,by William Kelly in the United States,madelarge-scalesteelproductionpossible.A rough measureof America's growth in innovative capacityis the numberof patents

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