While the US has never spent more on research and development, the government’s share has never been less. That’s a risky strategy. Why rely on the scattered efforts of private firms that are beholden to quarterly profit expectations to develop the next big idea?
The balance must shift if the US is to regain its technological and manufacturing edge, some say, calling for a big, government R&D push centered around military/aerospace research. China has already displaced the US as the world’s biggest economy, if one adjusts for currency, according to the IMF. And it’s on track to displace the US as the country that spends most on R&D.
Most US R&D goes to the military now and further military funding seems likely under a Republican administration, especially with President-Elect Trump calling for “an arms race.” Meanwhile, China announced plans to be first to land on the far side of the moon. Trump has also promised corporate tax cuts, which might encourage US corporations to repatriate some of the estimated US$2.5 trillion sitting offshore and invest it in new ventures arising from a burst of scientific invention.
The inventor Henry Kressel played a key role in two of America’s biggest claims to technical fame: landing a man on the moon and the creation of the Internet. The 1969 moon landing followed the highest ever investment in R&D by government. It peaked near 2% of national income, in 1965, and is now down to about a third of that.
Kressel is one who can’t imagine breakthroughs of such consequence coming from the private sector. When he made semi-conductor lasers commercially viable – a pre-requisite for fiber optic communications and a host of applications from laser surgery to DVDs – he was a director at RCA Labs, working on a Defense Department mission to illuminate enemy fighters at night.
“Those kinds of corporate development labs no longer exist,” says Kressel, citing the now-defunct RCA and Bell Labs as examples. Now a venture capitalist, he has doubts about “what they call R&D” today in the private sector.
US companies conducted a record 69% of the country’s R&D in 2015. This is in line with international trends in developed economies. However, economist and Asia Times columnist David Goldman doesn’t believe corporations are likely to risk the time and money it takes to make real breakthroughs. “General Mills might spend a lot of money figuring out how much sugar to put on its Frosted Flakes but game-changing R&D usually comes from government. Everything that goes into a smart phone today really comes out of the Cold War.”
The US rode the ecommerce wave to its last peak in productivity, in 2005. Yet sources agree that it will take more than incremental improvements in personal computing to restore US productivity to its former heights.
Moreover, internet companies – often famously low employers- arguably add little to the economy. For example, Facebook, with almost US$333 billion in market cap and fewer than 16,000 employees, displaced a whole lot of traditional media industries and the jobs they provided.
Trump has promised to bring back manufacturing to the US, which Goldman notes will require not just ideas, but the right education and manufacturing processes. The US now typically imports items it originally invented, World Bank data shows.
Lower wages drew US manufacturers overseas, but Kressel says some manufacturing jobs can’t go offshore. “We couldn’t have the core components of the F-35 [fighter jet] being built in North Korea even if it is cheaper.”