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When It Comes to R&D, the Sky Isn't Falling

But haven't we heard these dour warnings before? Only instead of our falling behind other countries because of slack R&D spending, it used to be our shortsighted fiscal policies and naive free-trade principles that doomed us to second-class citizenship in the global economy.

In the 1980s and early '90s, the state-orchestrated industrial economies of Asia--led by the manufacturing prowess of Japan and the feistiness of "tigers" such as Singapore and South Korea--were to supplant the United States as the center of economic activity. What happened? While U.S. entrepreneurs (many of them from abroad) went on to forge an unprecedented, technology-led economic expansion, Asia's bureaucrats were still figuring out where to place their bets.

Because they're slow to mobilize and beholden to political interests, governments are notoriously bad at picking the industries, companies and technologies of the future. Innovation remains an entrepreneurial phenomenon. Even the Internet--one of the biggest government-funded success stories of the past century--didn't emerge from obscurity until thousands of private companies and institutions invested their money and know-how.

Fact is, R&D spending is down in countries worldwide, just as it was in the early '90s, because of short-term economic uncertainty. A recent report from China's Jiusan Society, for instance, is highly critical of R&D budgeting among Chinese enterprises, which it compares unfavorably to levels in the United States. The report goes on to call for more--and more structured--government support for private R&D.

Likewise, one critic of the state of U.S. R&D spending, Robert Atkinson of the Progressive Policy Institute, proposes that the federal government create a National Innovation Corporation, at a cost of $10 billion a year, to manage a range of investment initiatives. Atkinson also wants billions more government dollars for university research, and even billions more in matching funds for research consortia. Assuming the government is any good at selecting the right university and commercial interests to back, how would we pay for it all?

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