It was reported recently that many items for the first nuclear fusion test reactor will be bought from German and Japanese firms, because U.S. firms could not make competitive bids. As a result, foreign firms, not domestic ones, will be getting some of the vital early experience in wht may become a vast new market.
This is not the first indication that U.S. technological dominance is fast eroding, even in very high technology -- traditionally its area of greatest strength. From board rooms to think tanks to the White House, people are asking why. But although there is not shortage of suggested reasons, the truth is that nobody knows.
Some have pointed to the declining rate of growth in R&D spending, noting that innovation and technological growth come from advances in basic knowledge. But this seems to be one possible culprit that can be ruled out. The U.S. scientific establishment is strong and productive, with more Nobel laureates than the rest of the world combined. There has been no diminution in major breakthroughs, and if funding for basic research is not growing by leps and bounds, as it did a few decades ago, it is at least reasonably adequate.
The weakness appears in the transformation of ideas into marketable products: the process of technological innovation. Here the list of suspected villains is long: misguided tax policy and consequent lack of investment capital, too much environmental regulation, inflation, stultified corporate leadership, cumbersome patent policy, big labor, OPEC, counterproductive antitrust policy, lack of cooperation between government and industry, too much export of American ideas through foreign licensing and multinationals and practically anything else you can think of. But for every expert who points to one explanation there is at least one other who can show evidence that he is wrong.
Consider some examples. A few years ago the decline of the U.S. pharmaceutical industry (as a result of too much regulation) was widely predicted. Though that industry is among the most heavily regulated of any domestic enterprise, and is more tightly controlled than its foreign competitors, it is now booming, with record profits. And -- in the words of one company president -- "important new products in larger numbers than we have ever seen before" are about to appear.
Or take industry's favorite explanation: not enough capital. The cause of this is variously cited as a very low depreciation allowance, "double" taxation of corporate dividends or high capital gains taxes -- sometimes all three. Looking around, one can't help noticing that all four of the leading companies in today's hottest new industry -- bioengineering -- are funded with American capital and are viewed in Europe as the perfect example of the kind of thing that can only be done -- or at least can be done best -- in America. It is truue that this industry is not yet at the stage where large amounts of capital are required. But it is also true that there are billions of dollars worth of waiting investors eager for a piece of the bioengineering action.
Finally, there is the argument that government and industry are usually contending in this country instead of cooperating as they do in Germany and Japan. A consortium of five major Japanese companies, with partial funding from their government, has been formed in order to pool talent and resources for the purpose of breaking into the U.S.-dominated computer market. In this country the government's major involvement in the computer field is its endless antitrust suit against IBM, arguably one of the most innovative companies in the world. Yet there are those who have carefully studied these issues who believe that more, not less, antitrust enforcements is what is needed.
Quite possibly many, or even all, of these factors play a role in stifling innovation in the United States. It may even be true that the United States is not really declining at all, but that Europe and Japan, having completed their postwar recovery, are just now catching up. But if innovation and technological growth are declining in the United States -- and it appears that they are -- it is an alarming trend that poses a fundamental threat to the country's prosperity and security.
Given the importance of vigorous technological innovation, and the uncertainty about the cause of its apparent decline, what should government do? First must come the recognition that this country today celebrates innovation and risk-taking in rhetoric far more than in practice. Government policies are accordingly geared to handle failure better than they do success.
Patent policies, for example, remove much of the potential reward from the risk-taking innovator, while other arms of government are busy subsidizing the development of certain new technologies. Rusty corporate giants -- Chrysler, Lockheed and others -- get bail-outs, but there is no accelerated depreciation allowance for innovations that would contribute to the national welfare.
In fact, there is no atempt at all to establish priorities, to distinguish, for example, between new ways to overpackage consumer products and new designs that use energy or scarce materials more efficiently. The trick, then, and this should not be impossibly difficult, is not to try to lower the risk of innovating. It is to make innovative companies the norm, by raising the risks of not innovating.