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There is a growing sense of urgency for bipartisan commitment to restoring America's competitive edge through innovation. How can we find the right mix of private sector dynamism and government support, as well as the political consensus required, to stay ahead of global competition and boost long-term prosperity?
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March 10, 2011
The Race for Global Innovation Advantage and U.S. Economic Prospects
Dr. Robert D. Atkinson President Information Technology and Innovation Foundation
Presentation at: U.S. Competitiveness: A New Conversation with New Opportunities Washington, DC
Where Are We?
Is This a Conventional Financial Crisis?
To Understand, We Need to Go Back to the 1970s
The Engine of U.S. Economic Growth Then
The U.S. Had Robust Growth, Just not Everywhere
Now a Majority of Places Are Struggling
The Engine of U.S. Economic Growth Now
U.S. Manufacturing Competitiveness is Declining
-400%
-300%
-200%
-100%
0%
100%
200%
300%
400%
500%
Overall Manufacturing Grew Slower than GDP
Total manufacturing
Source: Bureau of Economic Analysis
Percentage Change in Real Value Added, 2000-2008
GDP
+5% +18%
-400%
-300%
-200%
-100%
0%
100%
200%
300%
400%
500%
And Most Manufacturing Sectors Shrank
15 of 19 manufacturing sectors shrank
Total manufacturing
Source: Bureau of Economic Analysis
Food, beverage and tobacco products Electrical equipment and appliances Chemical products Machinery Printing Wood products Motor vehicles Fabricated metal products Paper Products Primary Metals Nonmetallic mineral products Plastics and rubber products Apparel and leather Textiles Furniture
Percentage Change in Real Value Added, 2000-2008
-400%
-300%
-200%
-100%
0%
100%
200%
300%
400%
500%
Only Four Sectors Grew
Average share of manufacturing output:
72%
Average share of manufacturing output:
28%
Total manufacturing
Source: Bureau of Economic Analysis
Computer and electronic products:
+260.5%
Petroleum and coal products: +73.0%
Percentage Change in Real Value Added, 2000-2008
Manufacturing Is Down, in Part due to Increasing Goods Trade Deficit
Source: World Bank
-8.0%
-6.0%
-4.0%
-2.0%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
19
82
19
83
19
84
19
85
19
86
19
87
19
88
19
89
19
90
19
91
19
92
19
93
19
94
19
95
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
Net Trade in Goods (% of GDP)
United States China
As a Result, Capital Stock For Many Manufacturing Sectors Has Fallen
Source: Bureau of Economic Analysis
-27% -29%
-6%
-21%
-14%
-5%
-3% -2%
-7%
Primary metals
1981
Textiles
1997
Wood products
2000
Apparel and leather
2001
Paper products
2002
Electrical equipment
2002
Plastics and rubber
2002
Food, beverage and
tobacco
2002
Motor vehicles
2003
Year of Peak Capital Stock and Percentage Decline Since
Source: Bureau of Economic Analysis
-50%
0%
50%
100%
150%
200%
250%
300%
350%
400%
1959-1969 1969-1979 1979-1989 1989-1999 1999-2009
Percentage Change in Fixed Asset Investment, by Decade
Manufacturing
Total private fixed assets
Performing arts and spectator sports
Funds, trusts, and other financial vehicles
As U.S. Moved from a Manufacturing to a Financial Engineering Economy
But Surely U.S. Innovation Must be Thriving
Yet U.S. R&D Growth is Stagnating Compared to Rivals
-100%
0%
100%
200%
300%
400%
500%
600%
-60% -40% -20% 0% 20% 40% 60% 80% 100% 120% 140% 160%
R&D Expenditure Growth, 1998-2008
(constant PPP dollars)
R&D Intensity Growth, 1998-2008 (% of GDP)
China
Estonia
Portugal Turkey
Slovakia
Korea
Germany
Japan
Russia
Poland
United States
Australia
Source: OECD
U.S. Corporate R&D Declined as a Share of GDP
-50% 0% 50% 100% 150% 200%
China Mexico Korea
Australia Singapore
Spain Japan EU 10
Canada Germany
EU 25 Ireland
Sweden EU 15 NAFTA France
US UK
Brazil India
Poland Russia
Corporate R&D as share of GDP, Percentage Change, 1999-2006
Source: ITIF, Atlantic Century 2009
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
1990 1995 2000 2005 2010
R&
D I
nten
sity
Chinese R&D Intensity Growth Outpaces the United States’
USA
China
Source: OECD
Bubble size = GDP
Growth in U.S. Federal R&D Investment Has Stagnated
-60% -40% -20% 0% 20% 40% 60%
Ireland Spain Korea
Russia China
Canada EU 15
Singapore EU 25
UK Australia
NAFTA Sweden France
US EU 10
India Japan
Germany Mexico Poland Brazil
Government R&D as Share of GDP, Percentage Change, 1999-2006
Source: ITIF, Atlantic Century 2009
As Has Growth in # of U.S. Scientists and Engineers
-20%
0%
20%
40%
60%
80%
100%
120%
Chi
na
Mex
ico
Kor
ea
Sin
gapo
re
Bra
zil
EU
10
Spa
in
Indi
a
Pol
and
Sw
eden
Fran
ce
Aus
tral
ia
Irel
and
Can
ada
EU
25
Japa
n
EU
15
NA
FTA
Ger
man
y
US
Rus
sia
UK
Researchers per 1,000 Employed, Percentage Change, 1999-2006
Source: ITIF, Atlantic Century 2009
While the Level of U.S. College Attainment Languishes
0%
20%
40%
60%
80%
100%
120%
140%
Persons aged 25-34 with Tertiary Degree, Percentage Change, 1999-2005
Source: ITIF, Atlantic Century 2009
As a Result, the U.S. is No Longer #1
0
10
20
30
40
50
60
70
80
Sin
gapo
re
Sw
eden
Lu
xem
bour
g D
enm
ark
Kor
ea
Uni
ted
Sta
tes
Uni
ted
Kin
gdom
Ja
pan
NA
FTA
Fr
ance
Ir
elan
d G
erm
any
Can
ada
EU
15
A
ustr
alia
E
U 2
5
Spa
in
EU
10
C
hina
P
olan
d R
ussi
a B
razi
l M
exic
o In
dia
Overall Score, 2009 Atlantic Century
The Study: comparing innovation-based competiveness of 40 nations and regions.
16 indicators: including corp. R&D, government R&D, scientists and engineers, new firms, corp. tax, productivity growth and others.
The Atlantic Century
1. China 2. Singapore 3. Estonia 4. Denmark 5. Luxembourg 6. Slovenia 7. Russia 8. Lithuania 9. Cyprus 10. Japan 11. Hungary 12. Slovakia 13. Czech Republic 14. India
15.Latvia 16.Austria 17.S. Korea 18.Ireland 19.EU-10 20.Spain 21.Sweden 22.France 23.Portugal 24.Malta 25.Belgium 26.EU-25 27.Poland
In Rate of Change from 1999, the U.S. is Behind….
28.UK 29.EU-15 30.Mexico 31.Netherlands 32.Australia 33.Finland 34.Canada 35.Germany 36.Italy 37.NAFTA 38.Greece 39.Brazil 40.United States
In Short, the U.S. is Falling Behind in the Race for Global Innovation Advantage
So What’s America’s Future?
Buffalo?
Or Boston?
To Be Boston, What Do We Do?
Recognize We Are in Competition Against Other Nations
Flickr: Holtsman
The Conventional View: U.S. Companies Compete Against Other Companies
vs.
The Reality: Boeing Competes Against AIRBUS & the European Union
vs. +
Ford Competes Against Toyota & the Japanese Government
vs. +
Cisco Competes Against Huawei & the Chinese Government
vs. +
Google Competes Against Baidu & the Chinese Government
vs. +
IBM Competes Against WIPRO & the Indian Government
vs. +
Where’s Uncle Sam?
What Should Washington Do?
Start Looking out for Number 6
Getting the 4 T’s Right
Flickr: marzzelo
Flickr: Alan Miles NYC Flickr: Nedral
Tech Talent
Trade Tax
Supported by a
National Innovation and Competitiveness
Strategy
Getting the 4 T’s Right
johnlund.com
Innovation and Competitiveness Are Not (Or Should Not Be) Partisan
This Means Policies from Both Column A and Column B
This Means Policies from Both Column A and Column B
Column A Expand public investment in
innovation Fully fund key innovation
agencies (e.g. PTO, FDA, statistical agencies) Fund STEM education
Support trade enforcement
Column B Make the U.S. tax code more
competitive Reduce drag on regulatory
competitiveness Expand high skill immigration
Expand trade agreements
America Can Win, but Only if We Choose from Both Columns
We Should Learn from George Kennan
Thank You
[email protected] www.itif.org