[A2k] New York Times- Editorial Observer-America's Underappreciated Entrepreneur: The Federal Government

Thiru Balasubramaniam thiru at keionline.org
Mon Mar 24 04:41:42 PDT 2014


http://www.nytimes.com/2014/03/24/opinion/americas-underappreciated-entrepreneur-the-federal-government.html
The Opinion Pages <http://www.nytimes.com/pages/opinion/index.html>

America's Underappreciated Entrepreneur: The Federal Government

MARCH 23, 2014

Editorial Observer

By TERESA TRITCH

Imagine a world in which the United States government -- not the private
sector -- is the economy's indispensable entrepreneur, innovating at the
frontiers of science and technology, able and willing to take risks and to
persevere through uncertainty.

That is the world depicted in "The Entrepreneurial State," a recent book by
Mariana Mazzucato <http://entrepreneurialstate.anthempressblog.com/>, an
economist at the University of Sussex <http://www.sussex.ac.uk/spru/> who
specializes in innovation. And it is, in fact, the way the United States
has operated since World War II. Through the National Institutes of Health,
the Defense Advanced Research Projects Agency and other agencies and
departments, the government has for decades gone beyond financing research
and creating the conditions for innovation to occur; it has also envisioned
the future, engaged in the riskiest experimentation and overseen the
commercialization process.

Professor Mazzucato documents the leading role of the government in, for
example, "all the technologies which make the iPhone smart," including the
Internet, wireless systems, global positioning, voice activation and
touch-screen displays. That is not to detract from Apple's role, but to put
it into context. Without government, the technological revolution that has
allowed iProducts to exist would not have happened.

Ditto the leading role of government in aviation and space technologies,
pharmaceuticals and biotechnology, and more recently, in nanotechnology,
which could be the next "general purpose" breakthrough, akin to electricity
or computers.

The private sector never has been and never will be up to tasks like that.
Even in the bygone heyday of Bell Labs, corporate investment was alongside,
not in place of, government investment. Today, the scope, duration and cost
of breakthrough research is either beyond the private sector's corporate
and philanthropic resources or outside its profit model. A salient point in
"The Entrepreneurial State," amplified in a
review<http://www.ft.com/intl/cms/s/2/32ba9b92-efd4-11e2-a237-00144feabdc0.html#axzz2wd7uaqcO>by
Martin Wolf, the chief economics commentator of The Financial Times,
is
that corporations today often spend surplus cash on share buybacks rather
than on fundamental innovation.

In brief then, it is an essential role of the federal government -- in the
interest of tomorrow's prosperity -- to invest and engage in scientific and
technological discovery. And it is a role the government has played well,
until now. After rising steadily for decades, federal financing for
research and development peaked in 2009, at $165.5 billion, bolstered by
that year's stimulus spending. It has since sunk to levels last seen almost
a decade ago, falling to $133.7 billion this fiscal year.

That roughly $32 billion drop is even greater when adjusted for inflation,
and it encompasses both defense- and nondefense fields, including health,
energy, the environment, climate, technology and electronics. One key area,
basic science, received about $40 billion in the peak year 2009. Since
then, it has fallen, to $30 billion last year, one of the sharpest declines
ever. The future does not look much brighter. Constrained by
austerity-induced budget caps, the research and development budget recently
proposed by President Obama for fiscal year 2015 was only $135.4 billion,
the lowest request of his presidency. Chances for more money on top of the
budget caps, as Mr. Obama has called for, are virtually nil. And given that
Congress invariably enacts less than the president asks for, the trend is
all downhill.

Worse, the direction is unlikely to reverse as long as prevailing rhetoric
reinforces the notion of an inefficient government sector versus a dynamic
private sector. To win budget battles going forward, Democratic policy
makers and administration officials must also win the debate in favor of
entrepreneurial government. The fact that they have not successfully made
that case in recent years is a result of both implacable Republican
opposition and their own tendencies to exalt the private sector while
ignoring its many roots in public spending.

Correcting that misimpression is crucial to building and sustaining support
for public involvement in science and technology. Equally important is
developing ways to ensure that taxpayers share in private-sector profits
that ensue from government efforts. Fair and adequate corporate taxation is
the obvious way, but that is currently a political non-starter. Non-tax
models also need to be considered -- for instance, requiring recipients of
federal grants to pay a portion of subsequent profits to the government or
establishing a federally backed innovation fund that lets the government
retain an equity stake in companies that use the fund.

The goal, as expressed by Professor
Mazzucato<http://www.ft.com/intl/cms/s/0/738da524-08f2-11e3-8b32-00144feabdc0.html#axzz2wQztp1Gl>,
is not for taxpayer-provided research to spare the private sector from
risks, but for government and the private sector to take risks together and
enjoy the rewards as one.



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