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In his new book, The Past and Future of America's Economy: Long Waves of Innovation that Drive Cycles of Growth, Robert D. Atkinson shows that America's current economic turmoil and dynamism are part of a recurring process of transformation that has periodically reshaped the country. If we are to control our future, Atkinson argues, we must understand this process of change.

Propelled by the emergence of whole new technological systems, these transformations not only re-ignite growth after transitional periods of stagnation, they lead to a fundamental reordering of the overall economy and society, including the organization of business, markets, government, politics, work, and urban structure. Over the last 175 years, four great waves of technological change have broken over the United States, each leading to the demise of one kind of economy and the emergence of another. Atkinson examines this process and explores how institutions and people responded to them. Taking into account the implications of the historical record, the book details the contours of the latest transformation to today's New Economy, including the new information technology system and the effects on organizations, markets, and our governing system. It then critiques prevailing liberal and conservative economic doctrines and lays out a new growth agenda to maximize the inherently progressive and productivity-enhancing forces of today's New Economy. The following is adapted from the book.

Economic policy in Washington is at loggerheads. Democrats and Republicans increasingly hold radically different views of the proper role of government in the 21st century economy. Unfortunately, many on both sides embrace policy frameworks more suited to past economies than the present one.

As the economy has become more global, dynamic, and technology-driven, most liberals remain wedded to the demand-side economic policy framework of post-World War II based on mass production in the corporate era. This includes a focus on big government, Keynesian management of the business cycle, and economic regulation of key sectors. The left has reacted against creative destruction and the instability of the new global economy, trying to recreate the stability of the old economy, and thinking that the instability is a result of government policies, not of foundational changes in the economic system.

For their part, most conservatives look even further back for inspiration to the economic policy system of the early 20th century factory-based economy with its dramatically reduced role for government, less progressive taxation, and limited regulations. While these conservative supply-siders embrace the flexibility, dynamism, and competition inherent in the New Economy, they fail to see that success in today's economy requires not just vibrant markets and energetic entrepreneurs, but new kinds of public investments, business-government partnerships, and policy rules of the road.

Yet, paradoxically, the left's and the right's economic policy views are not as far apart as most would suppose. For starters, neither believes that government has much of a role in promoting productivity, the engine of growth and opportunity. The right sees any such action as industrial policy and wants to minimize the role of government, in part to support its overarching goal of enhancing freedom. The left sees productivity as the business of business and wants instead to expand government spending to support its overarching goal of enhancing equity.

Intense debate. Both liberals and conservatives want to take a shortcut to growth. Conservatives want to raise after-tax income by cutting taxestaking from public expenditures to boost private incomes, especially for the affluent. What they fail to see is that people's economic welfare is based not just on their consumption of private goods (house, car, clothes, foods, etc.) but also on public goods (clean air, parks, roads, fire and police protection). Liberals want to boost the incomes of low- and moderate-income Americans by taxing the rich more, significantly increasing the minimum wage, and increasing government spending on programs to benefit "working families." As a result, Washington has become the fulcrum of an intense debate about whether investors or low-wage workers should get more money. One side wants to cut capital gains taxes on high earners, the other wants to raise the minimum wage for low earners. Neither recognizes that the only long-term answer to improving economic well-being is to boost productivity.

Neither liberal nor conservative economics focuses on the right goal -- helping consumers and the overall economy. The conservative strategy for growing the economy is to give businesses and investors what they want: elimination of taxes on investment income, limited antitrust enforcement, and as few regulations as possible. They justify this by pointing to the fact that more Americans are investors now than ever before. But while over 45 percent of Americans are investors, 100 percent are consumers. The liberal strategy is to focus on the short-term welfare of low- and middle-income workers by pushing for trade protection, a higher minimum wage, transfer payments of all kinds, regulatory requirements on companies, and restrictions on productivity-enhancing new technologies. Once again, while 71 percent of American adults are workers, 100 percent are consumers. As much as the left is reluctant to admit it, the interests of workers are not always the same as the interests of consumers and the overall economy.

Neither liberals nor conservatives embrace fiscal discipline. Conservatives favor tax cuts, while liberals favor increased social spending, with both abdicating their generational responsibility to significantly reduce the national debt.

New public investments. Neither liberals nor conservatives focus on New Economy public investments like broadband telecommunications and new technology standards. When liberals focus on investments, all too often it's on old economy investments like physical infrastructure. Liberals do not appear to have met any infrastructure project that they do not like, perhaps with the exception of roads which they claim lead to sprawl. They support infrastructure because it provides high-wage jobs and because it is a way for government to solve a host of pressing social problems and redistribute economic resources, while being seen as supporting growth. But in an economy in which the national physical infrastructure is already largely complete and where knowledge and technology power growth, traditional bricks-and-mortar infrastructure spending does little to spur measured productivity.

For their part, conservatives believe that public spending crowds out more productive private sector spending, and they call for less of the former. But the right fails to recognize that the economic payback of many public investments is higher than from many private sector investments. Not all private sector investments benefit the economy since a not insignificant share are made for the zero-sum activity of gaining market share, not boosting productivity. It is not as if government spends and people invest -- in fact, the lion's share of the Bush tax cuts go to consumption.

Both liberals and conservatives view with skepticism, or in some cases even disdain, a key player in economic growth. Many liberals view business as the problem, and believe that what's good for General Motors is, by definition, not good for the nation. When liberals want to give the impression of being pro-business, they talk about supporting small business and small farmers, as if they are more virtuous and vital to growth than large businesses. For their part, many conservatives see government as the problem, particularly the federal government, and believe that what is good for government is, by definition, probably not good for the nation. As a result, both the left and right view with significant mistrust public-private partnerships that link the public purpose of government with the entrepreneurial and innovation capacity of the private sector.

If forced to choose between these two divergent and anachronistic economic doctrines, all too often voters will default to the conservative Republican position for a simple reason: Republicans talk about growth; Democrats talk about redistribution. Republicans tell an optimistic story, albeit an overly Pollyannish one; Democrats warn of gloom and doom (Gov. Arnold Schwarzenegger's comment of "economic girly-men" struck a note, though an off-note, for just this reason). Republicans talk about unleashing the private sector engine of economic growth; Democrats talk about shackling it. This liberal story about the economy made more sense in the old economy, when, in the words of management guru Peter Drucker, "Government became the appropriate agent for all social problems, in fact non-governmental activity became suspect." It made more sense in the old economy when businesses largely competed against other U.S. businesses. Now, in a hyper-competitive global economy, governments can no longer place excessive regulatory burdens on business without risking some negative effects on competitiveness. Most voters now instinctively understand that their livelihoods depend on a vibrant private sector economy, technological change, and the kind of dynamism that economist Joseph Schumpeter described as "creative destruction." They understand that the old liberal economic model doesn't "get it."

Progressive economics. Does this mean that Democrats should simply become Republican-lite, as the left so often accuses centrist Democrats of being? Absolutely not. But it means that Democrats need to tell a story about how their policies will first and foremost lead to higher rates of growth and innovation. It means that Democrats need to stop demonizing companies as "Benedict Arnolds," and instead recognize that U.S. companies face new global competitive realities. They should understand that the answer is to create the incentives and support for American businesses to grow high paying jobs at home. It means that Democrats need to abandon their warmed-over Keynesian economics with a focus on higher government spending, and instead embrace a progressive supply-side economics that focuses on the real supply-side factors for growth: the amount of research conducted by public and private institutions; growth in New Economy infrastructure; the skills of the workforce, and the extent of the use of digital technologies by workers, consumers, businesses, and government. It means that Democrats should stop their knee-jerk rejection of tax incentives for business just because they help business, and instead support incentives that encourage businesses to make the kinds of investments that drive growth for all Americans -- in skills, R&D, and new capital equipment.

While a progressive growth economics strategy puts growth and innovation first, it doesn't mean Democrats should not continue to reject as ineffective (and unfair) the kind of supply-side economics most conservatives embrace -- across-the-board tax cuts on business, investors, and high earners, and radical reduction of regulatory requirements. But Democrats need to base their critique on more than just the inequity of supply-side economics; they need to challenge it head on as a flawed strategy for growth. Just as importantly, Democrats shouldn't abandon traditional concerns about equal opportunity. The New Economy has become dramatically more unequal, with the wealthiest of us getting much wealthier while working Americans struggle to make ends meet. Democrats need to continue to fight for certain key goals: a more progressive tax code that doesn't penalize work, universal health insurance and a universal pension system, expanded unemployment insurance and other supports, paid leave for new parents, and expanded efforts to revitalize distressed communities.

But if Democrats are going to convince Americans to support that agenda, they must first convince voters that they are the party that has the best plan to drive growth and innovation in the 21st century.

Robert D. Atkinson is vice president of the Progressive Policy Institute and director of its Technology and New Economy Project.