Technology, Innovation, and American Primacy

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Technology, Innovation, and American Primacy

• James A. Lewis
• Center for Strategic and International Studies
• February 20, 2007

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Technological Leadership

• Crucial for U.S. economic and military strength.
• Depends on U.S. capacity to innovate.
• Comparative advantage?
• Globalization means that U.S. share of innovation
  will decline.
• U.S. policies reinforce this decline.
• Investment, immigration, technology transfer

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Questions for Technological Leadership

• Is there a problem?
• How can we tell?
• What should we do about it?
• And is the U.S. capable of doing it?

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1. Is there a problem?

• Another of the waves of angst that periodically
  sweep over the republic.
• U.S. decline
• Relative to past performance or some ideal.
• New International Environment
• Relative to other countries.

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New International Environment

• Strategic Competition
• Economic and technological competition.
• Economic Integration
• Diffusion of technology and research.
• Transition to an information economy
• Innovation / knowledge creation
• Asias economic ascent
• Asian nations hope to repeat their manufacturing
  success in scientific research.

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2. How can we tell?

• Historical analogies
• Metrics
• Education
• Ph.Ds, engineers
• Manufacturing
• Macroeconomic Indicators
• Trade deficit
• Research related
• Patents
• RD funding

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What Should We Do about it?

• Laissez faire, enabling or directing?
• The Keynesian myth
• US relies more on market forces (enabling) EU
  and others are more directive.
• Policy options
• Industrial policy, restrictive policies, hope,
  promotion of innovation
• Promotion of innovation as the optimal policy
  response
• New goods, services or productive techniques

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Elements of Innovation

• Human Capital
• Research universities
• Skill/resource clusters
• Entrepreneurial culture
• Knowledge Acquisition.
• Research and Development/Information Technology
• Technology transfers
• Commercialization of new knowledge.
• Venture Capital
• Supporting Infrastructures.
• hard (transportation, electricity,
  communications)
• soft (legal system, financial system,
  regulatory framework)
• Openness to competition.

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U.S. Comparative Advantage

• They dont call em BRICS for nothing....
• China
• India
• Russia
• The sick man of Europe is Europe.
• Return of the caudillo

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4. Are we (still) capable?

• Administrative/regulatory burden
• DHS as an impediment to growth
• Cultural change
• A more risk-averse society
• Ideological barriers
• Underfund public goods
• Overfund legacy programs / vested interests
• U.S. economic transition
• Services/intangible products provide greater
  value

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Transitional Dilemmas for the U.S.

• Old assumptions about security do not mesh with a
  global economy.
• Security implications
• Global supply chain
• Trusted systems
• Social Implications
• Distribution problems
• Sustainability of a service economy
• Post-industrial power

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Recommendations

• Make the promotion of innovation a goal for
  policy
• Maintain and exploit the U.S. comparative
  advantage.
• Identify where government action is appropriate
  and effective.
• Streamline and simplify the regulatory burden for
  innovation.
• Make greater use of incentives.
• Embrace international collaboration.

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Postscript

• 1957-the Presidents Science Advisor predicts
  that Soviet performance in math and science
  education will give it global leadership in a
  decade.
• 1969 - the Departments of Treasury, Commerce and
  Agriculture warn the President that the European
  Union will displace the U.S.
• 1976 - 1990, assorted pundits announce that Japan
  will dominate the global economy.
• 2006 China and India..