“There is no more important subject to the future of this society than innovation. There is nothing that can solve our problems in the way strong economic growth can solve our problems.” That is how The New York Times Washington Bureau Chief David Leonhardt framed the discussion at today’s Washington launch of the new book Innovation Economics: The Race for Global Advantage. From strides in curing childhood leukemia to our rivalry with China, innovation-based economic growth is critical, he observed.
With innovation so critical to tackling problems and so elemental to economic growth, it is dismaying the United States has slipped as an innovation leader in the last decade or so. But we have. The stubbornly-high unemployment and unimpressive growth are symptoms of a structural problem that is resisting cures. ITIF Senior Analyst and co-author Stephen Ezell likened it to having a weakened heart and expecting it will be healthy again with the occasional injection or pill.
In fact, we allowed the heart muscle to weaken because we began to pull back what had worked in the past. In the mid-1960s, the U.S. government alone invested more in scientific R&D than the rest of the world combined. We’re now ranked 22 in terms of government-funded university research. When we pioneered the R&D tax credit 30 years ago, it was the most generous in the world. Our credit now ranks 27th. Instead of making loans for capital equipment and machinery, Wall Street turned to housing speculation. Venture capital and IPOs plummeted. Corporate investments in R&D moved overseas. All this against a backdrop of some three dozen countries implementing national innovation and strategies designed to win the global innovation race.
“The only reason we were #1 is that we worked at it,” said ITIF President and co-author of Innovation Economics Rob Atkinson, who lamented that since the late 1990s, “We went from making things to making money. We went from making things to consuming things.”
To be sure, one challenge in overcoming these trends is getting through to those who cling to the Washington Economic Consensus and assume U.S. leadership is unassailable. But there are nuts-and-bolts challenges as well. The budget deficit is formidable and lawmakers are loath to additional pump priming. Whatever solutions the numbers would lead policymakers to are impeded by partisan gridlock and ideological rigidity on taxes and entitlements.
Is there hope? Atkinson was not exactly buoyant but he sees some positive signs. There are some corporate leaders who have spoken frankly about the need to revive our innovation-based competitiveness, among them Paul Ottelini of Intel, John Lechleiter of Eli Lilly, and Jeff Immelt of General Electric. He also cited bipartisan legislation such as the Startup Act 2.0 sponsored by Sen. Jerry Moran (R-KA) and Sen. Chris Coons (D-DE) which addresses an array of policies from taxes to immigration to bolster entrepreneurial activity and innovation success.
Of course, we need more than a few enlightened leaders to tackle the serious problems identified in their book. Atkinson said we need to rekindle the spirit and sense of mission the United States seemed to have as the Cold War dawned. Quoting diplomat George Kennan, whose “long telegram” ushered in the era of containment of Soviet hegemony, he said, “We should experience a certain gratitude to a Providence, which by providing the American people with this implacable challenge, has made their entire security as a nation dependent on their pulling themselves together and accepting the responsibilities of moral and political leadership that history plainly intended them to bear.”
“These words are as apt today with regard to the new global innovation challenge,” Atkinson concluded. Find more on Innovation Economics at globalinnovationrace.com.