FOSteRING PRODUCtIVItY GROWtH tHROUGH INNOVAtION AND tRADe

A mericans have always believed in building a better future. each generation has strived to pass on higher standards of living to their children than they themselves experienced. And for most of American history, this goal has been realized. Per capita income has risen strongly for most of the past two centuries. Such economic growth stems from a number of factors. Investment in skills and education, or human capital, is a key determinant. the United States has a long history of investing in people, and this has enabled American workers to be among the most productive in the world. Investment in physical capital is also important. the tremendous accumulation of machines, buildings, and infrastructure has been a source of America's prosperity, and times of particularly great investment, such as the 1950s and 1960s, have been times of particularly rapid advances in standards of living. Because investing in people and capital is important to the maintenance and growth of standards of living, the President has fashioned an ambitious agenda of improvements in education, incentives for investment , and financial regulatory reform to ensure that we have the financial system needed to support such investment. these initiatives have been described in detail in earlier chapters. But as important as investments in labor and capital have been and will continue to be, they are not the only sources of growth. A third, more amorphous factor has also played a central role in American economic growth: advances in the overall productivity of that labor and capital. One need only think of a few of the technological changes of the past century— the airplane, antibiotics, computers, fiber-optic cables, and the Internet—to see that technological discovery and innovation are central to improved standards of living. Such innovations not only make us richer as a country, they have the potential to fundamentally alter the very way we live our lives and interact with one another.