Interesting article from IDB:
Spending Cuts By U.S. Defense Have Hurt Tech
Date: 3/17/98
Author: Michael Tarsala
In the mid-'80s, economists feared Japan's booming economy would overtake that of the U.S.
Foreign firms - especially Japanese companies - were beating U.S. companies in key manufacturing industries. And observers noted that the U.S. was losing its lead in emerging technologies.
Today, U.S. technology leadership is unquestioned. U.S. firms have taken the lead in software, telecommunications, networking and microprocessors - all drivers of an economic resurgence.
But is U.S. global dominance assured?
''Not by any means,'' said William Perry, former U.S. secretary of defense. ''We face very tough competition. Whenever the basis of competition is innovation, we do very well. When it's manufacturing skills, usually Japan wins. That may be true in the future as it has been in the past. Maybe not.''
Perry is concerned that the U.S. isn't doing enough to preserve its technology lead. There needs to be more research and development of technologies that will be used in tomorrow's products, he says.
Much of this R&D used to be funded by the U.S. Department of Defense, Perry says. But because of cutbacks, companies no longer can rely on this, he says.
Perry recently spoke with IBD about the future of U.S. technology.
IBD:
How did the U.S. beat Japan to emerge as the technology leader?
Perry:
Japan had a detailed plan to dominate technology. They invested in three areas they thought would give them an unbeatable advantage. The first was memory chips - which has turned out to be a commodity market. The other two were high-definition television and artificial intelligence - two markets that have yet to emerge.
Simply, Japan bet on the wrong horses. Most of the fundamental Japanese strategy was laid out by their government. Here in the U.S., it was laid out by individual entrepreneurs. The role of the U.S. government was providing support for the technology base - not individual products.
IBD:
What does the U.S. need to do to stay ahead?
Perry:
It all comes down to about five issues. We must increase the talent pool. We have to make sure there's plenty of capital available. It's important we continue to push for access in international markets. We must set good policy to keep the vitality of the economy. And we have to increase the research-and-development base.
IBD:
Technology long has been partially supported by the government, particularly the Department of Defense. How significant have defense cuts been?
Perry:
Consider that communications satellites and the first supercomputers, for example, were funded directly by the Department of Defense. The defense budget in the last 10 years has decreased by 40%. The part that deals with the technology base has decreased proportionally. But that's only half the story. The amount the DOD buys from its contractors has decreased 70% in that time. As a result, government-supported independent research and development also is down 70%.
IBD:
Has the government simply shifted its R&D spending away from defense?
Perry:
Presidents Bush and Clinton have tried to shift some of the funding to the National Science Foundation. But most of that is given for medical research - not for the information technology field.
IBD:
Has responsibility for R&D fallen to the private sector? If so, is that wrong?
Perry:
There aren't too many companies willing to put their profit dollars behind developing underlying technologies. For most companies, R&D spending is for product development. Any one company has a hard time rationalizing this kind of underlying technology spending to the bottom line. It's very expensive, and has to be done somewhat on faith or with a long-term view.
Plus, there are numerous examples of companies developing wonderful technology, then getting nothing out of it. Or worse, their competitors have taken the ball and run with it. This type of spending is best handled by the government.
IBD:
Can companies make up for the government's lack of spending by pooling resources with researchers?
Perry:
That's one solution. Some of the most successful partnerships have leveraged the brainpower of companies and universities -and have been partly funded by the government.
One of the best examples is the Xerox Palo Alto Research Center. It does some of the best fundamental research in software. There are many other partnerships. Some charge corporations a fee, then give them full technology rights.
But we still must be concerned that government funding for technology is down. Defense spending is a critical part of tech investment.
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(C) Copyright 1998 Investors Business Daily, Inc.
Metadata: XRX I/1003 E/IBD E/SN1 E/TECH |
