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Can U.S. Still Compete?

The modest federal increases for basic research are cheering those worried about the United States’ innovation capacity.

The buzzword “competitiveness” is back in the air, with President Bush proposing an American Competitiveness Initiative in his State of the Union address this month, and bipartisan legislation on a parallel track in the U.S. Senate. Both proposals would boost funds for basic research at agencies such as the Department of Energy and National Science Foundation.

The Senate legislation was based on a National Innovation Initiative, produced by a Washington think tank called the Council on Competitiveness, which is led by CEOs, university presidents, and labor leaders. Their initiative was chaired by Craig Barrett, chairman of Intel, and Bill Brody, president of Johns Hopkins University.

Deborah Wince-Smith, president of the council, says these federal proposals are a critical step toward responding to foreign competition. She talked with Technology Review about the pressing need to stay competitive through innovation – and how the private sector can partner with government to improve the nation’s “innovation capacity.”

Technology Review: “Competitiveness” covers a lot of ground. What’s the core issue today?

Deborah Wince-Smith: The core point is that today, America finds itself at a unique and delicate tipping point, characterized by two unprecedented shifts. First, the world is becoming dramatically more interconnected and competitive, and second, innovation itself – where it comes from and how it creates value – is changing.

TR: In other words, the United States faces stiff new technology competition?

DWS: We can’t compete on low wages or standardized commodity products or services. The only way we can succeed in the future is through innovation – creating the high-value products and services that people are willing to pay for in global markets. Luckily, America still has the world’s strongest innovation “ecosystem.” We have the building blocks for innovation – talent, investment, and infrastructure – but there are many things we must to do to keep this innovation ecosystem alive and productive. At the same time, countries like China and Korea and Brazil are realizing they also have to invest in this capacity. The rapidity with which other parts of the world are investing in innovation makes this a race that has no beginning and no end.

TR: What should we be worried about?

DWS: Countries around the world are increasing their production of science and engineering students, ramping up R&D spending, building world-class infrastructure, and focusing on niche areas where they can compete. In many respects, this is great – it increases our global capacity to innovate and to meet the challenges we face in areas like health care and energy. But there is a risk that some of the resources that the United States has come to depend on – the best and brightest students in the world, corporate R&D investment, new startup companies – will choose to locate overseas rather than in the United States.

TR: How has the federal government performed?

DWS: Over the past decade or so, we as a nation have tended to under-invest in the physical sciences and engineering – the very disciplines that underpin the innovations and technological advances from which we benefit today. What we have to read into this going forward is very clear: we need an extremely robust R&D portfolio – in the physical sciences and engineering and the health sciences. We must, as a nation, invest in the frontiers of science, technology, and engineering. We’re talking about the imperative of the federal government getting back as a growth investor.

TR: Is the president’s budget and his American Competitive Initiative enough?

DWS: It was fantastic when the president talked about nanotechnology and supercomputing. These are capabilities that will have a transformational effect, cutting across so many sectors. And if this budget goes through, there will be a doubling of the National Science Foundation budget, and a significant increase for the Department of Energy’s Office of Science and the National Institutes of Standards and Technology. This doubling of the DOE’s science budget is long overdue. They maintain the most advanced computing research facilities in the world and provide critical infrastructure for many of our university researchers.

TR: But aren’t the actual dollar amounts still pretty low? For example, the proposed increase for NIST amounts to about $75 million and the National Nanotech Initiative would get an extra $30 million or so. Are numbers like these really meaningful and commensurate with the problem?

DWS: The specific numbers are less important at this stage than the critical message the president is sending that innovation is a national priority. Even as we focus on cutting our budget deficits we need to ensure that we continue to invest in areas like education and R&D that over the long term will provide benefits to the nation far in excess of their costs. With the Senate legislation and the president’s State of the Union address, we see a convergence on this as a first-tier economic imperative for our country.

TR: Meanwhile, the National Institutes of Health was flat-lined in the president’s proposed budget, with cuts in cancer research.

DWS: While the physical sciences and engineering have been underfunded relative to the health sciences, we do not think that increases in one area should come at the expense of another. Given the multidisciplinary nature of modern science and technology, innovation depends critically on advances across fields. For that reason, we need to maintain a balanced approach to R&D funding.

TR: Presumably, government can only do so much. What must corporations do to solve the problem, and what must academic institutions do?

DWS: All governments invest in R&D to some extent. Some even invest more than we do as a percentage of GDP. What really distinguishes the U.S. from other countries is the strength of the private sector contribution to our innovation system. American companies are among the most innovative in the world and our universities are consistently ranked the highest. The strong linkages we have between companies, universities, and national laboratories put us in a very good position to capitalize on federal R&D spending.

TR: You note that the United States finds itself at a “tipping point.” In what way is the Council on Competitiveness responding?

DWS: Coming out of the findings in our National Innovation Initiative report [called “Innovate America: Thriving in a World of Challenge and Change”], we’ve identified several critical issues on the horizon that, if addressed strategically, could position the United States and all Americans for a bright future. Let me highlight two: First, we will focus on understanding the role of manufacturing in the 21st century – we contend that we are too quickly writing off manufacturing as dirty, dumb, dangerous, and disappearing. Innovation tools – like high performance computing, where we are a world leader – can help transform our entire manufacturing and services economy.

Second, the council will also continue to catalyze regional innovation strategies – as we build out our concept of regional innovation hotspots. While there are many innovation hubs across the country, our contention is that many regions and regional leaders have a lot to learn about how to simultaneously leverage workforce training and economic development investments, education strategies, and entrepreneurship to bolster their own productivity growth and prosperity.

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