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Global Challenges Facing the U.S. Economy: Elements for Continued Global Pre-eminence

by
Shirley Ann Jackson, Ph.D.
President, Rensselaer Polytechnic Institute

The Global Innovation Challenge: Responses by Industry & U.S. Policy Makers (Plenary Session)
31st Annual AAAS Forum on Science and Technology Policy
Washington Court Hotel, Washington, D.C.

Friday, April 21, 2006


Good morning. I am Dr. Shirley Ann Jackson, President of Rensselaer Polytechnic Institute in Troy, New York. I am a past president of the AAAS and immediate past chairman of the AAAS Board of Directors. I am a theoretical physicist, and I chaired the U.S. Nuclear Regulatory Commission from 1996 to 1999.

Looking over the program for the 31st Annual AAAS Forum on Science and Technology Policy, I am impressed — but, not surprised — by the reach, depth, and comprehensiveness of the issues on the table at the forum. I am also gratified by your presence, here this morning, and by your attention to the critical matters which face our nation's science and engineering enterprise. Our mission is to examine the Global Innovation Challenge — especially responses by industry and by U.S. policy makers.

I have been asked to provide a contextual overview, which I will begin shortly.

Then, we will hear from four outstanding individuals who are leaders in their arenas:

  • Andrew Brown, Jr., Executive Director, Innovation and Technology, Delphi Corporation, on how United States Industry is meeting these challenges
  • Andrew Dearing, Secretary General, European Industrial Research Management Association — discussing how European industry is meeting the challenge
  • Richard Freeman, Herbert S. Ascherman Professor of Economics, Harvard University; and National Bureau of Economic Research — examining our national workforce needs, particularly in science and engineering; and
  • Robert D. Atkinson, President, Information Technology and Innovation Foundation, who will offer his view of the U.S. policy response and whether it is adequate to the task.

I will give each a proper introduction as we progress, but first, let us look at the big picture.

INTRODUCTION

As an entry point to understanding the global challenges facing the U.S. economy, one might think in terms of something both simple and enormously complex — IDEAS.

The noted Stanford economist Paul Romer offers a brilliantly simple explanation of the compounding of economic growth rates in a soon-to-be-published book. Dr. Romer contends that while we are reasonably good at estimating based on addition, when it comes to compounding which depends upon repeated multiplication, people systematically underestimate how quickly growth occurs. He uses the old legend of the king with the chess board, who asks to be paid by placing one penny on the first square, two pennies on the second, four on the third, etc. In this mathematical progression, the last square would hold some $92,000,000 billion.

Following this line of thinking, Romer examines the rates of growth of per capita income, and the amount of time it takes different nations to double per capita income.

Dr. Romer next applies the formula to the exploratory synthesis branch of physical chemistry, to demonstrate the scope of future discoveries in a single field. With the periodic table containing about 100 different types of atoms, the number of possible combinations is about 94,000,000. Now multiply these combinations — in varying proportions, at differing temperatures, and differing pressures. If laboratories could evaluate 1000 such combinations every day, it would take nearly a million years to go through them all.

This mini economics lesson, and the staggering range of possibilities to which it attests, pertains directly to innovation which, as we all know, fires the engine of economic growth in this nation, and in nations all around the globe.

This, then, is our overarching challenge — to find ways to capture and to foster the best ideas, the discoveries, the innovations, and, perhaps most importantly, the meta-ideas — the ideas about how to support the full development and distribution of ideas.

And, as we examine this challenge, let us keep in mind the speed at which things now change. Intel Corporation Chairman Craig Barrett has said, for instance, that 90 percent of the products his company delivers on the last day of each year did not exist on the first day of the year. Another way to say that is that no matter how new is the cell phone in your pocket, it is already out of date.

I have just returned from leading a delegation of researchers and scholars to India, and, last year, I led a similar delegation to China, Hong Kong, and Malaysia and can attest to how technologies are changing the world paradigm.

With the advent of fiber optics, wireless broadband, PCs, and cell phones, countries, corporations, and even individuals have gained a level of access to information, and to one another, which has leveled the playing field as never before. The development of what I call "flat world protocols" — workflow software, digitized content, and seamlessly connected Web applications, among others — has created opportunity and has opened up a universe of equality in which nearly anyone with the necessary ingenuity and motivation can compete, regardless of ideology, ethnicity, gender, or geographic location.

These new tools, combined with loosening restrictions, increased participation in the global flat world protocols, and adoption of market-based economics by many nations have led to economic expansion unlike any other in history. The resultant growth has created jobs in these nations where once there were few. It has spurred their governments to invest in research and development, and it has spurred an enormous growth in higher education especially in science and engineering.

As a result, Multinational companies — Proctor & Gamble Company, Motorola Inc., Microsoft Corporation, Novartis AG, IBM Corporation, among many — are investing in research and development in other countries as never before, in China especially, and Harley Davidson is the newest to bid to enter the fray. The number of research and development centers, there, has grown to about 750 from about 200 only four years ago.

Of course, we have been hearing, this week, about the visit here by Chinese President Hu Jintao, who dined with Microsoft Corporation Chairman Bill Gates. The visit underscores China's new research and development thrust. And, in his annual report, last month, at the National People's Congress in Beijing, Chinese Premier Wen Jiabao said the central government will increase spending on science and technology by nearly 20 percent this year, and plans to boost research and development investment to 2 percent of gross domestic product in 2010 and to 2.5 by 2020. Last year, China's total R&D spending — which does not include foreign investment — reached $29.4 billion, up from $11.13 billion just six years ago.

On the other hand, India's total domestic spending on research and development rose an estimated 9.7 percent to $4.9 billion or .77 percent of GDP in the fiscal year which ended in March 2005.

COMPETITIVENESS

This flood of economic activity is generating animated national dialogue, here, about whether or not the United States is losing its competitive edge.

The term "competition" puts one in mind of opponents or combatants, where as, in fact, all parties (countries) benefit from economic growth — in terms of expanded markets, more stable governments, international and multinational agreements based on mutuality of interests, and discoveries which can mitigate disease, improve pharmaceuticals, increase communication, reduce pollution, expand grain production, purify water, enhance security, and the like. Expanded global economic opportunity offers new opportunities for cooperation and collaboration, with mutual global benefit as the outcome.

The failure of nations to achieve improving economic levels frustrates rising expectations worldwide, which can lead to conflict and instability.

So, it is to our advantage that other nations do well, mitigating human suffering and disease, and that they raise expectations and hope — which are the elements of progress and civilization.

Nevertheless, competition is known to improve the contestant, and it is from this standpoint that I speak today.

Two years ago at this forum, we spoke about the need to bring national attention to the trends, in America, which I have spoken about over a number of years, and have dubbed the "Quiet Crisis" — the threat to the United States' capacity to innovate due to the looming shortage in the nation's science and technology workforce. The shortfall results from a record number of retirements on the horizon, and too few students in the pipeline to replace them. I have repeatedly urged that for the U.S. to maintain it's science and technology pre-eminence, and to sustain our economic prosperity, we must increase the number of people choosing to pursue careers in science and technology, and to do that, we must tap into all of the talent this nation has to offer, including women and minorities — what I call the "underrepresented majority."

One particularly glaring reason why our nation's innovative capacity is so critical is our need for energy security. Energy may be most critical issue facing the global community where 6.5 billion people are competing for the Earth's supply of fossil fuels.

By the year 2050, there will be 8 to 10 billion people, and their energy needs grow with their developing economies. Energy security may, indeed, be one of the biggest global challenges of the 21st century. The stability which true energy security would offer the world would be priceless.

I believe we understand that we can no longer merely drill our way to energy security. We will have to innovate our way to energy security. It will require major innovative advances in discovery, extractive, and transportation technologies for the remaining fossil fuel supply. It will require innovation in conservation technologies. It will require innovation and development of reliable and reasonably priced renewable energy systems. It will require innovation to develop other alternative energy technologies, including nuclear power.

But, of course, my purpose today is not to fully explore our need for energy security. This, too, is an issue for another day. Rather, it anchors national and global concerns we in the science and engineering community understand well.

National human capital, research, innovation and energy challenges all have driven the need for a conversation on National and global challenges and what to do about them.

These tasks, to be sure, require our highest creative and innovative capacities.

NATIONAL CONVERSATION

The national conversation for which we have been calling has engaged.

It is evidenced by a growing drumbeat of concern from the corporate and academic sectors. In a December op. ed. essay published in The Washington Post, Norman Augustine wrote:

"In the five decades since I began working in the aerospace industry, I have never seen American business and academic leaders as concerned about this nation's future prosperity as they are today."

A flurry of reports, issued by corporate, academic, and government entities, within the last one-to-two years, has warned of the consequences to U.S. scientific and engineering innovation and leadership preeminence if we fail to take action.

These include reports from the Council on Competitiveness, the Business Roundtable, the Center for Strategic and International Studies and the National Academies.

Abundant media attention and copious concurring commentary are moving us to action.

Over the last several months we have seen members of both the U.S. House of Representatives and the U.S. Senate, from both sides of the aisle, introduce more than a dozen bills designed to improve America's ability to compete in the global economy.

Furthermore, President Bush proposed his own spending and legislative proposal, the American Competitiveness Initiative (ACI) in his January State of the Union address. He has been speaking to the initiative, this week, at Tuskegee Institute and at a Maryland middle school where he announced a National Math Panel of experts in mathematics, cognitive science, and education to determine the most effective ways to teach mathematics and to provide mathematics tools for teachers.

The common themes include increasing federal research funding, improving K-12 science education, and encouraging undergraduate and graduate students to study science, mathematics, engineering, or technology.

In addition, many of the bills address the research and development (R&D) tax credit, immigration and visa issues, energy security, and other issues affecting American corporations.

In December, Senators John E. Ensign and Joseph I. Lieberman introduced the National Innovation Act (NIA). The NIA would implement many of the recommendations found in Innovate America, the Council on Competitiveness report. The Senate Commerce Committee has held two hearings on the NIA.

Senators Lamar Alexander, Jeff Bingaman, Pete V. Domenici, and Barbara A. Mikulski have introduced a trio of bills called the Protecting America's Competitive Edge (PACE) legislation. PACE is based on the recommendations in Rising Above the Gathering Storm, the National Academies report.

Of the three bills in the PACE package, only the Energy bill has been voted on by a committee. PACE-Energy may be debated by the full Senate in June, and elements of other innovation legislation could be added to the bill by amendment at that time.

A group of about ten Senators met with President Bush two weeks ago to discuss a strategy for getting these bills coordinated and passed.

No consensus has been reached on innovation legislation in the House, where competing Democratic and Republican innovation proposals have been introduced. A number of House committees have held hearings on topics related to innovation, particularly mathematics and science education. However, no action has been taken on legislation. The House Science Committee has announced that it is preparing its own legislation, which it expects to introduce soon.

Several components of the ACI were included in the FY 07 Presidential budget request, and are likely to remain in the FY 07 budget. These include increased research funding for the National Science Foundation, National Institutes of Standards and Technology, and the Department of Energy's Office of Science. Money is allocated in the Department of Education budget to improve K-12 mathematics teaching, train teachers to teach Advanced Placement and International Baccalaureate classes, and evaluate mathematics and science education programs conducted by federal agencies.

I, personally, would emphasize the following components of a comprehensive innovation agenda: support for basic research across a broad disciplinary front, investment in enhanced K-12 science and mathematics education, and direct funding for students pursuing degrees in science and engineering at the undergraduate and graduate level.

It requires a permanent R & D tax credit, together with an expanded definition of R & D, which would include training, research, and internship opportunities for young people pursuing degrees in science and engineering.

It requires a comprehensive review of intellectual property rights in light of global competition. It requires many things — not all of which I can discuss this morning. I refer you to the myriad reports I referenced earlier.

This new national focus is encouraging, but we must see that it is followed by effective programs to recreate the excitement and the financial commitment that the nation exhibited after the launch of Sputnik.

The Administration and the Congress must link the policy proposals to the budget, ensuring real investment in the components of an innovation agenda that are so critical to our nation's economic and national security. In other words, we must link rhetoric to reality.

States, and even cities, are not waiting for federal action, but moving ahead with their own plans. New York City, as an example, will offer housing subsidies of as much as $14,600 to mathematics and science teachers, who agree to teach in the city's most challenging schools.

We must remain watchful, too, of the new proposals so that every new program embraces the young women and ethnic minority youth who comprise the "new majority" of our new demographics.

GLOBAL PERSPECTIVE AND OVERARCHING CALL TO ACTION:

We cannot just think domestically.

The 20th and 21st Centuries have brought a number of seminal shifts in the global landscape, the emergence or acceleration of trends that will continue to shape our current concepts of security, development, and, in some cases, even national sovereignty. I would like to discuss three of these trends because of their relevance to international cooperation, particularly in this context.

The first trend is the emphasis on technological superiority as an asset to national security. Technological superiority is a function of multi-sector cooperation.

This idea is based on the fundamental principles Vannevar Bush espoused in the post-World War II period.

First, the results of scientific research could be adapted readily to shifting national needs, and could accelerate the pace of innovation — relevant not only to national security, but also to economic growth and societal benefit.

Second, the three principal research sectors — government, industry, and academia — could accomplish far more in partnership than in isolation. The fact that each sector brought differing needs and priorities to a project would enhance, rather than hinder, the pace of innovation.

The second trend is that Socio-Political Alliances provide a formula for mutual protection.

The third trend is that the emergence of several countries from Colonialism has pushed a drive toward self-sufficiency.

The resulting New World Order is flat, asymmetrical, and unstable. Globalization and globalizing technologies have led to a flattening world.

But there is asymmetry causing and reflecting a social divide — which can create instability. And we all know that instability leads to conflict and terrorism.

Finally, we have the arrival of giants: India and China. Few countries have had more spectacular success in harnessing their human capital in recent years than India and China — although the hurdles both countries still face in this regard are, to say the least, daunting.

Together, India and China hold 40 percent of the world population; India alone has more people than the U.S. and Europe combined. It is not too soon to assert that the nearly simultaneous arrival of China and India as major economic players on the world stage will be regarded, in years to come, as a pivotal event in the history of the 21st Century.

About six months ago the Brookings Institution joined with the Global Market Institute at Goldman Sachs (GMI), the Centre for Economic Policy Research, the Lee Kuan Yew School of Public Policy at the National University of Singapore, the School of Economics and Management at Tsinghua University, and the Financial Institutions Center at the Wharton School at the University of Pennsylvania, bringing leading global authorities together to examine the top ten financial risks to the global economy.

They are:

  1. The Dollar and the Twin Deficits
  2. Environmental Accords
  3. Geopolitical Conflicts
  4. Globalization in Emerging Nations
  5. Global Terrorism
  6. Growth in China
  7. Hedge Funds and Derivatives
  8. Trade Liberalization
  9. World Health Conditions
  10. World Oil Supply

But, as the conference concluded, organizers identified several cross-cutting themes.

The identified risks:

  • are complex, unseen, and evolving,
  • will have severe consequences,
  • are closely inter-related, and
  • will require globally coordinated responses.

These themes apply equally to our topic this morning. But, a final cross-cutting theme is particularly telling:

  • The mitigation of these risks requires education of political leaders and the public, as well as policy makers, regulators, and market participants.

I seized upon these themes because I believe they offer an entry point to understanding our situation and because this last one, in particular, may comprise our marching orders.

We have taken these issues from the identification of converging trends, through national dialogue, to sector agreement, to leadership at the highest levels of our government, where now we have achieved bipartisan support. It is critical that this opportunity not slip through our hands.

We need public and private partnerships, corporate, academic, and governmental collaborations, and active boardroom interest, directed at inclusive solutions, at every level of government — local, state, regional, and national — and through our corporate and academic enterprises.

We must find ways, collectively and individually, as a multifaceted community, and through our individual professional societies, to join policy and budget commitment. And, we must monitor closely to assure that programs for the inclusion of women and the groups traditionally underrepresented in science and engineering — the new majority — are part of the package. Because we have bipartisan support and the issues are urgent and ripe, the national election this year provides an opportunity to continue the dialogue among our leaders as important to our future.

CONCLUSION

As we begin our discussion this morning, we must remember the fact that the United States is not in imminent danger.

Clearly, we still lead in science and technology. The United States has the sustaining essentials needed:

  • the most sophisticated educational system in the world;
  • a well-developed science infrastructure;
  • a long tradition of investment in entrepreneurial projects;
  • a financial system providing ready access to venture capital;
  • government structures designed to support and invest in the scientific enterprise, and government policies which encourage investment and entrepreneurship;
  • a history of collaboration between the public and the private sector;
  • a thriving, diverse culture of risk takers — a culture tailored to innovation, where a variety of ideas are welcomed and viewpoints sought — embedded in a tradition of taking great risks for great rewards; and,
  • a certain ease with change.

Yes, the United States is not in imminent danger — and, herein, precisely, lies the danger: because it is not imminent, it is easy to ignore — hence, I coined the term "Quiet Crisis" to describe the threats to our intellectual security, which fires our economic wellbeing, our national security, our global preeminence, our multi-lateral opportunity, and our leadership.

And yet, we may be sure of two things:

  • the nation which secures the best method for producing and realizing meta-ideas will assume the lead in the 21st century,
  • new meta-ideas will be found.

So I leave you with questions:

  • How do we turn rhetoric into reality?
  • What does national competitiveness mean in a global context?
  • How can international cooperation be harnessed to best advantage?
  • What are the pitfalls?
  • What do we stand to gain?
  • What roles are there for universities, and for other players?
  • And how do we ensure that our diverse strengths are multiplied for mutual benefit?

Thank you.


Source citations are available from the division of Strategic Communications and External Relations, Rensselaer Polytechnic Institute. Statistical data contained herein were factually accurate at the time it was delivered. Rensselaer Polytechnic Institute assumes no duty to change it to reflect new developments.

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