We have only two ways out of our current global economic mess: innovation and inflation. And as the saying goes, we should hope for the best (more innovation) and prepare for the worst (higher inflation).
I agree with this simply because I try to read a lot on this topic and I haven’t come across a third way.
The problem is that innovation / productivity growth isn’t obviously happening anywhere. The bigger problem is that there is a lag between when innovation ‘happens’ and when it results in real economic growth.
As others have pointed out, our economy is increasingly dominated by services, simply because we’ve gotten pretty good at manufacturing stuff efficiently. Forget about the China crap, that’s a red herring. We were going to hit this wall eventually (think about 3d printing as eventually displacing even the cheapest Chinese labor).
And the thing with services is that, in an information economy, we get people handling and processing lots of data. And people are bad at handling and processing data. They make datapiles not datasets.
The problem with training people to be better at using machines is that you either need to teach old dogs new tricks (how many CEOs are this enlightened?) or you need to wait until the slow march of demographics increases the IT IQ of corner offices around the world.
The point is this: if innovation needs to reform the services sector, the people in that sector need to become better programmers. And that ain’t happening soon.