By Hughes, Kent H.
Issues in Science and Technology , Vol. 21, No. 4
The United States today faces a new set of economic challenges. Indeed, for the first time since the end of World War II, U.S. global leadership in innovation is being brought into question.
During the past 15 years, the rise of China, reform in India, and the end of the Soviet Union have added more than 2.5 billion relatively well-educated but low-wage people to the world labor force. China, India, Russia, and Central Europe are all making significant investments in higher education, emphasizing mathematics, science, and engineering. The spread of the Internet and the digital revolution have combined to introduce international competition to a range of service occupations that were previously shielded from overseas rivals.
New competitors in Asia and the old Soviet sphere of influence as well as old rivals in Europe and Japan are making strides in adapting the U.S. model of innovation to their own economic institutions and traditions. New and old competitors are now seeking to attract the students, professors, engineers, and scientists that for years viewed the United States as the principal land of opportunity.
The United States has met and overcome economic challenges before. In the 1980s, this country struggled with severe inflation, stagnant productivity growth, and rising international competition. Driven in part by a fear that Japan was becoming the world's major industrial power, government and private-sector actors worked in tandem to forge changes that once again made the United States the world's dominant economy.
When the United States entered the 21st century, it faced yet another set of difficulties: the collapse of a financial bubble, a slowing economy, the tragic attacks of 9/11, and a series of corporate scandals. Yet a public-sector focus on stimulating the economy and a still more productive private sector combined to move the economy back toward growth by 2003.
Too many Americans see the 1980s and the country's recent return to economic health as an all but effortless inevitability, a simple demonstration of the United States' unique economic prowess. But it is a dangerous mistake to take economic growth for granted. Meeting the challenge of one major competitor does not prevent other rivals from emerging. Short-term recovery can mask longer-term challenges and lead to a comforting yet corrosive complacency.
In the face of emerging and still unforeseen challenges, the United States can find promise in the strategy that helped bring it past success. The experience of the 1980s led to public policies that helped propel the prosperity of the 1990s. At the heart of those policies was a systematic focus on innovation as the key to future growth and prosperity. Yet today the nation seems to have lost that focus. It needs to regain it and to update and broaden the types of competitiveness policies that served it so well in the past.
A competitiveness strategy emerges
The 1970s' combination of stagflation and growing international competition gave rise to a competitiveness movement that emphasized a complementary set of policies to foster long-term productivity growth. The competitiveness strategy can be traced to the 1979 and 1980 reports of the Joint Economic Committee, chaired by Senator Lloyd Bentsen. It received added definition and political support in Rebuilding the Road to Opportunity, published in 1982 by the House Democratic Caucus.
The 1985 report of the President's Commission on Industrial Competitiveness (known as the Young Commission after its chairman John Young, then the chief executive officer of Hewlett-Packard) fully embraced the focus on long-term productivity growth and also advocated a series of specific steps to be taken by the private and public sectors. The Young Commission report spelled out four complementary public policies that have set the broad outlines of a national competitiveness strategy:
Investment: Create a climate that encourages public and private investment. …