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How to Create ‘The Next American Economy’

Innovation is synonymous with Silicon Valley.

Some would call Facebook, LinkedIn (LNKD), Groupon and Apple (AAPL) the most innovative companies around today, but not William Holstein, author of The Next American Economy.

He doesn't consider the aforementioned bad for America, but he says the country needs to think about innovation differently if it's serious about recovering from the Great Recession.

"What we need are new industries that create jobs on American soil" and companies that actually make things, and make things here in the United States, Holstein tells Aaron in the accompanying interview. "What we really need is to scale up our other industries like advanced robotics in Pittsburgh and flexible electronics in Cleveland or the biotech activity that is everywhere in the country right now." (See: The Next American Economy: Made in America Alive and Well, Says Author.)

A major holdback right now is a lack of venture capital.

"Throughout the country Americans are struggling to find industries of the future, and they are starved for venture capital [and] it is a national problem," he says. "You have venture capital in Boston, New York, Austin, San Diego, the Bay Area. But everywhere else in the country, you have people with good ideas, but they are starving for money."

The Next America Economy explains why the government must play an integral role in building new industries and jobs here in this country.

"Only the federal government can take the huge risks to invest in new ideas," Holstein says. "The private sector won't do that." But it's not the government's job alone. "You have to have both the federal government and the private sector working together in these ecosystems, along with universities and research institutes to give birth to industries and to give birth to jobs."

He doesn't advocate the idea that that government should play a long-term role in these ventures, but he does believe it is "madness" to think that the U.S. can continue to be the most innovative force in the world without the backing of Uncle Sam.

And the government could be doing a much better job, he says. "Right now this is happening through 12 or 15 different agencies," he says. "It is not coordinated, [and] there is no strategy."

His advice: The government should pick a dozen or so technologies and industries -- like solar energy, lithium batteries or advanced robotics -- and make them a national priority.

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