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The U.S. economy's success in recent years has been attributed to its leadership in what is widely dubbed the "information revolution." In this article, the author asks: What has made the United States so attractive to high-tech, New Economy industries compared with technologically advanced Europe? The author discusses the theories of economist Joseph Schumpeter (1883-1950), who contended that economic growth is impelled by innovations introduced by entrepreneurs, and clusters of innovations have brought about long waves of economic activity. In light of this thinking, the author cites the size of America's domestic market, but most important, its cultural emphases on ambition over security, and on social fluidity including its openness to immigration, as reasons for the disparity between the U.S. and Europe. He concludes, however, that while Europe must change to avoid becoming no more than a beautiful museum, the American course has incurred costs in terms of inequality and consequent social problems that require increased attention.

Originally published in: The Milken Institute Review, First Quarter 2001, pp. 81-87.

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