States Seizing the R&D Reins

By: - April 8, 2005 12:00 am

Last November, California voters approved a 10-year, $3 billion referendum to fund human embryonic stem cell research. Over the last several months, a number of other states have considered similar initiatives. Maryland, for instance, now has legislation moving through Annapolis calling for $23 million for stem cell research.

At first glance, these investments seem to be out-of-step with the long-held theory that basic research and development (R&D) is the primary responsibility of the federal government while more applied research falls under the purview of the private sector and, to a lesser extent, the states.

To some degree, the fact so many states are willing to make these investments reflects the diminishing importance with which the federal government values R&D. Viewed in a much broader context, however, states, seeing a need, have stepped up to the plate to take on this new responsibility. For states, the stakes are too high to ignore. America’s economic leadership in the global economy and our long-term standard of living may be at stake.

Two factors drive this conclusion: U.S. leadership in technology and innovation is now eroding, and the federal government — with its national defense commitment, rapidly growing entitlements, and a growing deficit — will continue the recent trend toward reducing its financial support to strategic investments. These investments range from education to infrastructure to basic research-and-development initiatives.

From academic journals to daily newspapers, recent articles reflect a growing concern regarding the decline of the nation’s competitive position in the international marketplace. This threat is not only from a rejuvenated Europe and Japan, but also from China, India, South Korea and other emerging Asian countries. In a recent Los Angeles Times piece, David Baltimore, a Nobel laureate and president of the California Institute of Technology, astutely noted: “We no longer have a lock on technology as Europe is increasingly competitive and Asia has the potential to blow us out of the water.”

During the 1970s and 1980s, European and Japanese firms improved upon American technology by enhancing quality and reducing product costs. This incremental approach was economically damaging to the United States, but now it has been replaced by a much more threatening strategy in which countries are simply adopting the American model for innovation. U.S. regional clusters of innovation — such as California’s Silicon Valley and North Carolina’s Research Triangle Park — were created by decades of federal investment in research and development, closer links to public and private universities, financial reforms that allow venture capital to flow freely, and immigration laws providing incentives for the world’s most creative talent to come to the United States. Other countries that have adopted this model over the last decade are now beginning to reap the economic rewards.

From mobile phone technology to nanotechnology to alternative energy sources, countries are beginning to level the playing field with the United States. A recent President’s Council of Advisors on Science and Technology report on nanotechnology is a case in point. The report indicates that the United States remains a world leader in investments, patents and scientific articles, but warns that Europe and Asia show evidence of gaining on us.

There are a number of signs confirming this threat. For example, after leading the world for decades, the United States now ranks behind Finland, Japan, South Korea and Sweden in percentage of gross domestic product dedicated to basic research. The number of scientific articles published peaked in 1992, and not only is the United States trending down, but Europe has overtaken us, as well. If we lose our position of leadership in the technology and innovation sectors, the implication could be dramatic since our manufacturing base has already been remarkably reduced.

While other nations have been increasing their commitment to research and development, the U.S. government has been lowering hers. For example, during the last 10 years, federal spending for non-defense, general science, and basic research as a share of federal spending went from 1.21 percent to 0.9 percent of the federal budget. Given the size of the federal deficit and the growing percentage of the federal budget going toward Social Security, Medicare and Medicaid, the outlook for additional funding is gloomy to say the least.

In the meantime, states have begun to fill this leadership vacuum by greatly increasing their investment in this area. For example, states are spending about $400 million annually on basic R&D for nanotechnology, equal to about 40 percent of existing federal spending.

Out of necessity, states will need to take on the responsibility for basic research and development — and, thankfully, they have. Already states are helping to create innovation clusters by linking university research, higher education and corporate America. Reflecting the newfound importance states are putting on R&D, governors are increasingly chairing so-called cluster panels to oversee these new clusters of innovation.

While funding basic R&D may not be a traditional state role, it is a challenge that states — cognizant of the growing international and economic threat — are increasingly embracing given the reluctance of the federal government. States must accept this challenge. So, the next time I read an article about a state-sponsored research and development initiative, I will applaud the state’s leadership rather than lament the federal government’s latest unfinished promise.

Raymond C. Scheppach, Ph.D., is the executive director of the National Governors Association. The views expressed here are his own and do not necessarily reflect those of the National Governors Association.

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