TCS Daily

A High-Tech Workout

By Dominic Basulto - July 28, 2005 12:00 AM

Is America really the 97-pound weakling that is getting sand kicked in its face by the likes of China, India and South Korea? Thats the premise of a recent -- and highly provocative -- cover story in Fortune, in which editor Geoffrey Colvin paints a dire picture of American economic and technological competitiveness. The idea of portraying the worlds preeminent technological and economic power as a powder puff crybaby is nothing new -- the Fortune article was only the latest in a long line of articles, essays and publications that have bemoaned Americas sliding status in the global technology arena. The intent of the Fortune article was to goad American entrepreneurs, educators and policymakers into action -- but the unfortunate result may actually be the creation of a false belief that the U.S. federal government needs to play an active role in pumping up Americas tech sector.

"Listen here, I'd smash your face -- only you're so skinny you might dry up and blow away."
Illustration: R. Sikoryak

Certainly, it is easy to see why alarmist characterizations of America as a weak, atrophied economic power have led many to champion greater government intervention in the tech sector. Wasn't this the same knee-jerk reaction when Japan seemed to be on the verge of eclipsing the U.S. in the 1980s? With both China and India attempting to ascend the global economic hierarchy through a mix of industrial policy and government involvement in all facets of economic development, it's tempting to think that the U.S. federal government can also play an analogous role in jump-starting a national technological fitness program.

These calls for greater government intervention in the technology sector have taken different forms. The "strong" form of this argument calls for the U.S. federal government to take an active hands-on role in allocating resources, coordinating innovation across different industries, and re-engineering the educational system. In April, for example, CIO Magazine floated the idea of a national "technology czar" who would be responsible for coordinating tech policy across the various arms of the government, developing a strategic plan for technology and serving as a portfolio manager for government-funded R&D projects. The U.S. government would also create a centralized agency along the lines of a Department of Homeland Technology.

As the Competitive Enterprise Institute has pointed out, though, such an approach would only lead to increased bureaucracy and a weakening of the national innovation ecosystem. When push comes to shove, do we really want to entrust the future of American innovation to a guy like Tom Ridge? In terms of a technological fitness program, the U.S. federal government would be thrust into the role of choosing our diets, selecting our workouts, and telling us exactly which lifestyle choices are desirable. In short, the government would be able to pick winners and losers and determine which technologies to support.

The "weak" form of the argument calls for the U.S. government to create the proper incentives for private market participants and to lay out a vision of future success, perhaps through something like a National Innovation Policy. Instead of playing an active role, the U.S. government would function much like a personal trainer -- making sure that financial markets allocate capital efficiently to the most promising new ideas; re-calibrating spending programs to emphasize the importance of basic research and R&D; and guiding educators in preparing the future math, science and engineering leaders of tomorrow.

At some level, the U.S. has to recognize, that in terms of numbers, it will be playing a game of catch-up with China and India. Already, these two Asian nations produce massive numbers of new graduates in the sciences and engineering -- at a time when U.S. enrollment in areas like computer science are nearing record lows. Thus, any strategy predicated only upon spending more dollars and educating more students from a (theoretically) unlimited federal treasury is bound to fail.

The U.S. has to work smarter and faster, not just longer. Borrowing an analogy from the world of physical fitness, the U.S. needs to develop lean muscle mass, not simply bulk. This is not an impossible task: consider how Japan -- a small island nation with a paucity of natural resources -- became an economic giant that almost toppled the U.S. Sure, Japanese business received high-level support from government institutions like MITI -- but there was also a fundamental re-thinking of the modern firm. By tapping into ideas like "just-in-time" production and six-sigma quality, Japanese corporations became more efficient -- not necessarily bigger or better -- than their competition. This time around, U.S. firms will need to tap into ideas like "global innovation networks" if they hope to remain competitive.

It's tough to start a fitness program of any kind, but it's necessary. In the May/June issue of Foreign Affairs magazine, Thomas Bleha offered a withering critique of the Bush administration, claiming that a lack of vision by President Bush in areas like broadband deployment and mobile phone technology was responsible for the U.S. losing its lead in Internet innovation. Get ready for similar complaints -- and more stories about America as a 97-pound weakling -- if key players within the U.S. economy do not embark on a rigorous technological fitness program.

Dominic Basulto writes about technology, business and venture capital markets for TCS.


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