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Technology policy comes of age.

When President Clinton and Vice President Gore issued "Technology for America's Economic Growth: A New Direction to Build Economic Strength" only a month after taking office, it introduced a new period in U.S. science and technology policy. As indicated by the administration's high-profile release of the document, coupled with its supporting budget request to Congress for fiscal year 1994, technology policy is now at the center of the national economic policy agenda. Still, successfully implementing the new policy will require the administration to do some fine tuning and to explain more fully just why the policy is critical to the nation's economic future.

The administration's proposed programs and projects comprise an agenda that many people in technology policy circles have recommended for some time. These recommendations have been articulated by such broad-based groups as the Council on Competitiveness, the National Academy of Engineering, and the Competitiveness Policy Council, as well as by more specialized groups such as the Computer Systems Policy Project and the National Coalition for Advanced Manufacturing. To summarize, the basic thrust of the collective recommendations is to:

* Shift federal R&D funds from defense to civilian applications, especially those with the strongest links to industry (for example, programs in which industry shares in the planning, conduct, or funding of the R&D), and make government R&D institutions, especially federal laboratories, work more closely with industry.

* Provide tax incentives for private-sector investment in technology and equipment.

* Improve the infrastructure for technology development by helping small manufacturers to modernize, improving education and training, and improving the nation's information infrastructure.

* Use federal procurement and regulations to help create markets for innovative technologies.

These recommendations, tactical in nature, are first of all the outgrowth of changes in the nation's geopolitical environment, moving from the confrontation and containment of the Cold War to more focus on economic competitiveness. In essence, they redirect federal science and technology policy to meet the new challenge of international competition rather than the military competition with the Soviet Union. They also stem from widespread recognition that the nation lags in the transition from technology to products in the marketplace, not in the generation of discoveries and inventions. Moreover, it has become increasingly apparent that we do not sufficiently utilize our national resources and do not provide a climate that fosters investment in education, capital, and small companies.

Although the administration has proposed a credible program, its public pronouncements have been mute on explaining the underlying policies. Beyond stating that technology is important for economic growth and meeting other goals, such as a cleaner environment, the administration has neither clearly defined the problems being addressed nor explained the logic behind its proposals. Left unanswered is what the appropriate roles of the government and private sector are, and, specifically, why the actions proposed are the right ones.

Because of the fundamental nature of the change in policy, it is important to communicate the underlying reason for the changes. Indeed, in the months since the administration released its technology policy, it has become clear that implementation of the agenda is not guaranteed. Several problems have arisen. First, the proposals for many new actions and programs without an overarching strategy or rationale have made it all too easy for critics to label the programs as Democratic big spending and as pork. Second, the lack of supporting arguments has done little to expand the base of support to a broader and more diverse constituency outside of the technology policy community. Third, the proposed actions have raised the specter of "industrial policy" or inappropriate government involvement into private-sector decisionmaking--an issue that paralyzed the previous administration. In particular, although much of the private sector supports closer industry-government partnerships in technology, much of its support is tentative and even skeptical. Many in the private sector will endorse a more active government role in technology policy only if the government role is that of a catalyst, and its management role limited.

Sound foundation

Although effective communication has lagged, there is, in fact, a solid policy rationale behind the general direction of the Clinton agenda. As already noted, the programs follow from many earlier recommendations of bipartisan coalitions. We will focus on efforts by the Subcouncil on Critical Technologies of the Competitiveness Policy Council, with which we were both involved. The subcouncil's goal was to lay out a comprehensive strategy for enhancing the contribution of technology to America's economic welfare, building on the wealth of previous studies of critical technologies and technology policies. This work culminated in the report "Technology Policy for a Competitive America." Our recommendations, which were formulated before the election without regard to the likely winner, are generally in strong accord with the recommendations of the new administration. These similarities are not coincidental: They reflect the extent of the evolving consensus on technology policy as well as links between the subcouncil membership and the administration's technology team.

Despite the similarities, however, there are notable differences in goals and focus, in the rationale, and in the role of government in the actions proposed by the administration and by the subcouncil. We want to summarize our conclusions and highlight where they agree with the president's proposals and where they seem to differ.

The goal of our subcouncil is straightforward: leadership in the development and application of technology to promote industrial competitiveness, productivity increases, and an improved standard of living. This does not mean that the nation should diminish or replace its long-standing emphasis on science policy. Strong support of science should continue undiminished, but it should be augmented by an equally aggressive and thoughtful technology policy.

There are several fundamental realities that underlie this need. These realities may seem obvious to many people, but the existing technology policies, rooted in the Cold War rather than the need to improve economic performance, are not consistent with them.

The economic benefits of technology are almost exclusively provided by the application of technology. Technology that remains in the lab provides almost no economic benefits. Technology that is applied only to government markets, such as defense, provides much smaller economic benefits than technologies that contribute to success in the much larger commercial markets, and especially in the ever more important global markets. Conversely, national strength in technology depends on applying technology successfully in commercial markets. In the United States, slightly over half of all R&D is funded by the private sector; in Japan and Germany, 70 percent to 80 percent of R&D is funded by the private sector. It is success in commercial markets that provides the funds for this R&D.

In addition, today, in contrast to the 1950s and 1960s when our science policy was formulated, the competitive pressures of the commercial markets drive innovation. One has to consider only biotechnology, displays, or computers, which are being driven by the demands of the private sector, not those of defense. As illustrated by the difficulty that high-technology defense contractors have in competing in commercial markets (not to mention the failed technological performance of the former Soviet Union), it is nearly impossible to stay at the leading edge of technology without being successful at applying technology commercially. This means that technology policy should be focused on promoting the commercial application of technology, not just on promoting technology for government missions.

Technology has global and local aspects, and policies must recognize the distinction to be effective. Technological information is now generated in many places and moves rapidly around the globe; nations that can effectively access and apply this information can gain economic advantage. On the other hand, many key factors needed to capture the economic benefits of technology do not move quickly around the globe. Skilled researchers and workers, efficient organizations, research and testing facilities, and manufacturing infrastructure move slowly. The location of these will influence where technology is developed and deployed, and where the benefits from technology development will accrue. Technology policy must focus on building the domestic capabilities that are necessary to absorb and apply the technical information that flows around the world.

Many of the benefits of technology accrue to the places that provide the most favorable environment for private investment in technology development and manufacturing. The factors that determine this risk-and-reward equation for corporate investment are complex, involving, among other things, the cost of capital, access to markets, access to skilled people and technology, and availability of quality subcontractors. To be effective, policies must work to ensure that the combination of these factors encourages investment in the United States. To a large extent, these factors are more important than the traditional factors of production--low-cost energy, raw materials, and labor--to which public policies still pay more attention.

Other nations have demonstrated that they have learned how to prosper in this new environment. Nations such as Japan have developed sophisticated policies to encourage private-sector investment in technology and manufacturing through low-cost financing, cooperative R&D, and sheltered markets--all with less government funding of R&D than here. To a great extent, this accounts for the increasing technological strength of their companies, as evidenced by their increasing success in high-technology markets. Although we do not advocate sheltered markets, we do advocate a change from the outdated idea of a laissez-faire regime to one that demands reciprocity and symmetry in market access.

Although policies developed overseas may not be applicable here, there is strong evidence that more effective, uniquely American policies can be developed to make better use of U.S. strengths and resources. The historic U.S. policy of supporting only basic research and defense is no longer compatible with these realities. The new policies must focus more on accelerating the application of technology in the private sector and on providing the environment that encourages private-sector investment in technology development and manufacturing in the United States.

Careful consideration of these realities leads to some important recommendations that focus on improving the commercialization of technology and making the United States a more attractive place to conduct R&D and high-value-added manufacturing. The recommendations fall into four categories:

Increase R&D in areas with the greatest benefits to commercial markets. Because privately funded R&D is most relevant to commercial markets, we support and would expand tax credits for private R&D. We also recommend reprioritizing federal R&D to shift funds from programs with weak links to commercial markets (such as defense development and testing) to programs with closer links to industry and markets (such as the Advanced Technology Program at the National Institute of Standards and Technology and the National Science Foundation's Engineering Research Centers). This would result in a balance between defense and civilian technology funding. We also seek to strengthen the links between other federal R&D, especially that conducted in federal labs and industry.

Promote the commercialization of technology. We support several government actions to make private-sector investments to commercialize technology more attractive. Cooperative funding of R&D by industry and government can help bridge the gap between where publicly funded university and laboratory research leaves off and private-sector investment picks up. Government regulations and procurement can be revised to provide better early markets for new technologies. And in some limited cases, the government should help finance the commercialization of technology.

Continually improve the technology infrastructure. We support several recommendations to ensure an adequate supply of well-trained people, build networks and extension systems to aid the flow of technical information, especially to small manufacturers, and improve the access of industry to specialized research and testing facilities. These are essential to making the United States an attractive place for R&D and manufacturing.

Organize for results. To make these policy changes work, it is essential to develop more effective methods of getting private-sector input to the policymaking process. It is also essential to develop better analyses of industry's needs, and better mechanisms to manage technology policy.

New role for government

We are greatly encouraged that the bulk of actions proposed by the administration are consistent with our recommendations. The administration has proposed dramatically increasing funding for industry-driven R&D programs such as the Advanced Technology Program, and has proposed steps to make the federal laboratories work more closely with industry. It has proposed expanding support for manufacturing extension centers to strengthen small manufacturers and has put high priority on improving the nation's information infrastructure. Equally important, it has resisted the temptation to radically reorganize the government's technology apparatus, which would likely take years to implement and additional years to become effective.

Nevertheless, there are several important differences between the administration's proposals and what we believe is the correct national technology strategy.

The recommendations that we outline require a new role for government. We support a strong and even activist government, but one that facilitates and does not substitute for private-sector action. Government should be active in creating an environment that allows the private sector to invest in technologies in the United States. The role is to lay the groundwork for industry to develop new products and processes based on knowledge generated here as well as abroad. The role of government should not be primarily to develop new technologies that will be magic bullets in international competitiveness.

The role of government that we recommend differs markedly from either laissez-faire economics or the stereotyped "industrial policy" model of strong government intervention. Laissez faire does not work in a world where governments around the globe are working to give their domestically based production a competitive advantage. Witness the enduring U.S. trade deficits in industries targeted by others, despite the falling value of the dollar. Industrial policy, on the other hand, meaning government channeling or resources to targeted industrial sectors, does not work well at fostering industries of the future, particularly when the country is already at the leading edge and there is considerable uncertainty about the future direction of the industry. The government in our strategy is a partner with industry, but not a dominant partner.

It is in this crucial area where the statements of the Clinton administration are ambiguous. It is not clear whether the administration's focus is on new federal R&D programs or on helping the private sector invest in technology. And it is for this reason that bipartisan support for the administration's technology policy is weak, and the private sector remains cautious and skeptical.

Several of the specific differences between our recommendations and the Clinton plan reflect the differences in the emphasis on the role of government. We propose stronger incentives to enhance private-sector R&D than does the administration. The R&D tax credit, in addition to being made permanent, as the administration proposes, should also be extended to R&D "after the first article of production"--to allow the credit for R&D on improvements to existing products and processes instead of limiting it to the completely new. We also advocate an additional credit for industry-funded university R&D, which will further strengthen bridges between industry and universities, and an additional credit to facilitate the startup of new R&D consortia. Industry-funded R&D in universities and consortia can be expected to provide broader social benefits than corporate internal R&D because the results will quickly diffuse to other companies.

The Clinton plan, by contrast, puts greater emphasis on new government technology programs and on technology for the government's use. Its major new highlighted initiatives--in information infrastructure and automotive, education, and transportation technology--look much like traditional government technology programs that have had poor results in the past. Many such programs--the supersonic transport, the synfuels program, and the breeder reactor program, to name a few--have been unsuccessful. Such programs are not doomed to failure, but can succeed only if the past failures are understood and avoided. For example, demonstration programs can succeed if the private sector is involved from the early stages, participates financially, and takes increasing leadership and makes increasing investment as the program evolves.

Our recommendations also put greater emphasis on creating better mechanisms for private-sector input to government policymaking in technology, such as through an expanded President's Council of Advisers on Science and Technology (PCAST) with the authority to create subcouncils to get private-sector input on detailed issues. Clinton's plan is noncommittal on this issue and the administration has tended to rely on informal communication. Informal channels of communication, while important, may not survive the changes in personnel that inevitably will occur.

The next step

The Clinton administration's technology policy has launched the country on a new course. At a minimum, it has clearly established technology policy as an element of economic policy, and has legitimized the government role in technology policy. It has also properly increased the emphasis on manufacturing as a key element in technology policy.

The agenda now is to build support for, and to implement through legislation, the actions proposed by the administration, and to work to ensure that their implementation is consistent with the correct rationale for the recommendations. This suggests a set of priorities for the administration and the private sector.

To go forward, we believe that the administration needs to do three things. First, it needs to better articulate its conception of industry-government-university relations and the rationale for its initiatives. This is necessary to build broader support for the initiatives, particularly in the private sector and among those wary of a greater role for government.

Second, it needs to push for the implementation and institutionalization of the new directions. Producing a longlasting effect will require changes in organizations to reflect the new thinking. For example, in the executive branch, the Federal Council on Science and Technology (FCCSET) played a major role during the Bush administration in planning and implementing cross-agency initiatives in critical areas such as biotechnology and high-performance computing. Unfortunately, FCCSET is ill-prepared to manage the programs, react effectively to new developments, or assess progress convincingly. It must be strengthened to give it these capabilities.

The federal government also needs to establish a more effective mechanism for interacting with industry. Business leaders have specialized knowledge that is essential to effectively implement technology policies. But because industry has a financial stake in the outcome of these policies, complex rules have been established to prevent inappropriate influence by special interests. Although these rules are well-intended, their implementation has made it almost impossible for business leaders to participate effectively in government affairs. Although this is a sensitive issue, there is no doubt that we can foster a more productive relationship between government and industry built on the understanding that they are allies, not adversaries, in promoting the nation's economic health.

The evolution toward a coherent and integrated national technology policy has highlighted the problem of fragmentation of responsibility that exists in Congress. Not only is there no way for Congress to consider the overall federal R&D program, but the R&D budget is distributed across nine appropriation bills and is the work of more than two dozen authorization and appropriation committees with a variety of concerns. The result is that trade-offs are made not among R&D programs but between R&D and housing subsidies or veterans' benefits. It is too much to hope that Congress will establish rational boundaries among its appropriation and authorization committees. But at a minimum, Congress must find a way--perhaps through a joint R&D committee or an R&D budget resolution--to pass judgment on the priorities and scope of the total R&D budget.

Third, the administration needs to demonstrate that it can make new programs work effectively and make old programs work better. Each major program needs to have specific goals and ways of measuring how well it achieves the goals. These steps are essential, not only to have effective programs, but also to build support for the programs in the private sector. The measures of success should include industry participation in terms of human resources, equipment, and financial investment. Output parameters could include patents, publications, and licensing actions. Although qualitative assessments are difficult, it is important to try to measure the effect of programs on the strength of participating industry sectors and companies. Particular attention should be paid to market share and international trade balance, as well as to new U.S. entries into specific industries.

The new agenda for the private sector is, first and foremost, to learn to be a constructive partner with government: It needs to be engaged and critical, but not antagonistic. It needs to work to ensure that government technology policy is implemented in a way consistent with industry's needs. Companies also need to learn how to cooperate with one another while still competing, as well as how to take better advantage of the resources in the federal laboratories and universities.

The Clinton administration's technology proposal is an important step forward toward creating an effective technology policy. But the hard work of implementing, refining, and institutionalizing the policy--and ensuring that it is effective--still lies ahead.
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Title Annotation:President Bill Clinton's technological policy
Author:Bloch, Erich; Cheney, David
Publication:Issues in Science and Technology
Date:Jun 22, 1993
Words:3477
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