In the midst of our deepening recession, the United States faces another economic crisis that is less visible but may be more important than house foreclosures, bank failures, plant closings or stock market avalanches: the systematic under-investment in technology and innovation. Our global economic leadership may be at stake because of it.
But with only a little bit of extra funding, foresight and determination, it may be possible to kick-start an innovation revival. Especially at the federal level, we see an opportunity for a modest investment to create a whole new generation of idea-growing, job-creating technology hubs all across the country–perhaps even an “automotive Silicon Valley” in otherwise moribund Detroit.
This revival would not just be about investing more heavily in research and development. In troubled times like these, we need to remind ourselves that innovation has always been a crucial part of the American patrimony. It is as much a byproduct of our political system and cultural norms as of our business and scientific practices.
This patrimony is now at risk, not only because of our failure to invest but also because of our failure to reward and honor scientists, technicians, engineers and inventors above lawyers, bankers and hedge fund managers. We need to recognize the central role that real innovation of all kinds has always played in the American story.
For more than a century America has led the world in innovation. This has been true not only in science and technology but also in business management practices, the design of new approaches to service delivery, political institutions and civil rights. A consistent track record of ingenuity and invention, complemented by heavy investments in education and science, has contributed mightily to America’s leadership role in the world economy, to our democratic culture and the prosperity of our people.
Most students of economic growth now agree that technical innovation’s contribution to US national wealth has been at least as important as that of so-called “natural” resources like abundant farmland, labor, capital, and energy.
In the post-globalization economy, where access to such resources is being commoditized, innovation has become an even more important source of competitive advantage. In principle, this should be good news for the United States. Innovation-based competition is a “win-win” scenario: over time, every player in the competitive game stands to benefit from the discoveries made by others.
But if the United Stakes stakes its future on resource-based competition–the kind of low-innovation, “big houses/big debts/big cars” model favored by automakers, Wall Street and the oil industry–the competitive game becomes “win-lose.” Long-term competitive advantage shifts to countries with the largest supply of cheap resources, the lowest taxes and the cheapest, most oppressed workers–not a formula for vibrant democracies either at home or abroad.
Unfortunately, our global leadership in innovation has been placed at risk in the United States by years of failure to invest adequate resources in R&D.
Virtually every analysis of the “social returns” of R&D investments–private profits and social benefits, like job creation–finds these returns to be from 30 percent to 50 percent per year or more in real terms. This compares with the meager 5 percent to 7 percent returns typically generated by the US stock market, and the minus-46 percent returns earned by a US stock portfolio over the last year.