Future Shock

by William Galston | February 24, 2010

On Tuesday, Intel CEO Paul Otellini delivered a speech at Brookings on long-term economic competitiveness. While there were some points with which I disagreed—specifically, his critique of the stimulus plan and his advocacy of wide-ranging corporate tax cuts—I agreed with his core thesis: We’re not investing adequately or strategically in our nation’s future, and we’ll pay a huge price if we don’t change course.

To support his argument, Otellini cited some startling statistics: Although we rank sixth among the top 40 nation’s in innovation-driven competitiveness, we rank dead last—40th out of 40—in the effort we’ve made over the past decade to improve future competitiveness. That sounded too bad to be true, so I hunted down Otellini’s source, “The Atlantic Century,” a 2009 study conducted by the Information Technology and Innovation Foundation.

The ITIF constructs an index based on 16 indicators in six different categories—human capital, innovation capacity, entrepreneurship, information technology infrastructure, economic policy, and economic performance. A few examples will make the point. We rank fourth in science and technology researchers as a share of our workforce, but only 20th in our rate of change over the past decade; fifth in corporate R&D investment, but 17th in the rate of change; fourth in government R&D investment, but 15th in the rate of change; seventh in broadband, but 22nd in rate of change; first in GDP per working-age adult, but 16th in rate of change; and so on.

While statisticians can always quibble with the report’s selection of indicators and the methodology used to weigh and assess them, it’s harder to argue with its overall thrust. Because we’re under-investing in the areas that will determine our future dynamism and standard of living, we’ll continue to lose ground relative to our competitors and may eventually lose ground in absolute terms as well. (In seven of the 16 ITIF indicators, we’ve actually gone backwards since 1999.)

To be sure, 1999 represented a cyclical peak. Still, it’s hard not to conclude that the past ten years were a lost decade. We can’t afford to lose the next one. Our challenge now is to adopt policies that build a stronger future while reining in our unsustainable budget deficits and protecting working families from the harshest consequences of disruptive economic change.

The way forward is neither obvious nor easy. But one thing is clear: Our margin for error is a lot smaller than it was a generation ago. We can no longer afford to waste resources, public or private, on expenditures that do not create economic or social value. The federal budget and tax code are honeycombed with unproductive payoffs to special interests; it’s time to purge them. And the private economy has been dominated by a financial sector that’s more interested in transferring wealth (to itself) than in creating wealth through sensible investments. Perhaps the 2008-2009 financial crash will force bright young people to stop producing complex derivatives and start working on innovations that improve our lives.   

William Galston is a former policy advisor to Bill Clinton and current senior fellow at the Brookings Institution.

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Source URL: http://www.newrepublic.com//article/politics/future-shock-0