U.S. Innovation and Economic Recovery

Source: The Council on Foreign Relations
Adam Segal, Ira A. Lipman Senior Fellow for Counterterrorism and National Security Studies
Rodney W. Nichols, President and CEO Emeritus, New York Academy of Sciences
Robert E. Litan, Vice President, Research and Policy, Ewing Marion Kauffman Foundation
James P. Dougherty, Adjunct Senior Fellow for Business and Foreign Policy
Interviewer(s): Aimee Rawlins, Production Editor

News of rising unemployment and the threat of a Moody's downgrade puts the lagging economic recovery into sharp focus and puts pressure on the United States to spur innovations that boost global competitiveness. President Barack Obama's 2011 State of the Union address stressed the need to "out-innovate, out-educate, and out-build the rest of the world" to remain competitive and "win the future." While U.S. funding of research and development (R&D) has remained consistent at around 2.5 percent of GDP over the last thirty years (WSJ), sharp increases in spending by emerging markets such as China and India--as well as the global financial crisis and a need to sharply curtail U.S. debt-- has put the United States in a potentially disadvantageous position.

While most economists agree that the federal government must spur innovation to remain competitive, experts are divided over the best policies to achieve this. Adam Segal emphasizes the federal government's role in funding high-risk, high-return R&D, especially as business shifts away from research not geared toward commercial usage. Rodney W. Nichols echoes Segal, but also calls for reducing regulatory and environmental hurdles and improving science and math education. Robert Litan focuses on research within the academic community, arguing that universities should not be able to monopolize the licensing of faculty members' innovations. James Dougherty argues for improving the high-skilled visa system and using the Small Business Administration to encourage entrepreneurship and risk capital.

Adam Segal, Ira A. Lipman Senior Fellow for Counterterrorism and National Security Studies

R&D is the starting point for innovation--the discovery that, under the right conditions, can spark the creation of a whole new industry and drive economic growth. The government's role in funding basic research has become even more important as business has shifted away from funding "blue sky" projects with uncertain immediate commercial use but with the promise of big breakthroughs. Alcatel-Lucent, for example, announced in 2008 that Bell Labs--responsible for six Nobel Prizes as well as the invention of the transistor, the laser, and numerous other communication and computer technologies--would no longer conduct basic research in material physics and semiconductors, but instead would focus on networking, high-speed electronics, wireless, software, and other commercial applications.

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Published: May 27, 2011, www.highlighthealth.com