Friedman: Economy fix rests with brainpower

I was at a conference in St. Petersburg, Russia, a few weeks ago and interviewed Craig Barrett, the former chairman of Intel, about how America should get out of its economic crisis. His first proposal: Any American kid who wants to get a driver's license has to finish high school.

Hey, why would we want to put a kid who can barely add, read or write behind the wheel of a car?

What does that have to do with pulling us out of the Great Recession? A lot.

Historically, recessions have been a time when new companies, like Microsoft, get born, and good companies separate themselves from competitors. When times are tight, people look for new, less expensive ways to do old things. Necessity breeds invention.

Therefore, the country that uses this crisis to make its population smarter and more innovative — and endows its people with more tools and basic research to invent new goods and services — is the one that will not just survive but thrive down the road.

We might be able to stimulate our way back to stability, but we can only invent our way back to prosperity. We need everyone at every level to get smarter.

I still believe that America, with its unrivaled freedoms, venture capital industry, research universities and openness to new immigrants has the best assets to be taking advantage of this moment. But we should be pressing these advantages to the max right now.

Russia is clearly wasting this crisis. Oil prices rebounded from $30 to $70 a barrel too quickly, so the pressure for Russia to really reform and diversify its economy is off.

At the St. Petersburg exposition center, showing off the Russian economy, the two biggest display booths belonged to Gazprom, the state-controlled oil and gas company, and Sberbank, Russia's largest state-owned bank. Russian companies that actually made things that the world wanted were virtually nonexistent: Two-thirds of Russia's exports today are oil and gas.

As one Western banker put it, when oil is $35 a barrel, Russia "has no choice" but to reform, to diversify its economy and to put in place the rule of law and incentives that would really stimulate small business. But at $70 a barrel, it takes an act of enormous political will, which the petro-old KGB alliance that dominates the Kremlin today is unlikely to summon.

China is also courting trouble. Recently — in the name of censoring pornography — China blocked access to Google and demanded that computers sold in China come supplied with an Internet nanny filter called Green Dam Youth Escort. Green Dam can also be used to block politics. Once you start censoring the Web, you restrict the ability to imagine and innovate. You are telling young Chinese that if they want to explore, they need to go abroad.

We should be taking advantage. Now is when we should be stapling a green card to the diploma of any foreign student who earns an advanced degree at any U.S. university, and we should end all H-1B visa restrictions on knowledge workers.

They would invent many more jobs than they would supplant. The world's best brains are on sale. Let's buy more!

Barrett argues that we should also use this crisis to: 1) require every state to benchmark their education standards against the best in the world, not the state next door; 2) double the budgets for basic scientific research at the National Science Foundation, the Department of Energy and the National Institute of Standards and Technology; 3) lower the corporate tax rate; 4) revamp Sarbanes-Oxley so that it is easier to start a small business; 5) find a cost-effective way to extend health care to every American.

We need to do all we can now to get more brains connected to more capital to spawn more new companies faster.

Sometimes, I worry, though, that what oil money is to Russia, our ability to print money is to America. Lately, there has been way too much talk about minting dollars and too little about minting our next Thomas Edison, Bob Noyce, Steve Jobs, Bill Gates and Larry Page. Adding to that list is the only stimulus that matters.