Can the US stay on top?
Is the US finished as an economic superpower, or merely on an increasingly slippery slope towards its demise? It is a question that is no longer confined to academic circles, but increasingly preoccupying business executives and political leaders.
US President Barack Obama himself in his 2011 State of the Union address urged that the US needed to 'out-innovate, out-educate, and outbuild the rest of the world' to remain competitive and 'win the future'. Such ambitions of course are more easily stated than accomplished.
Optimists assert that the US retains critical cutting-edge advantages. Adam Segal, senior fellow at the US Council on Foreign Relations has written a thoughtful book asserting that American innovation can overcome the challenges from rapidly growing Asia. He draws a distinction between what he calls, 'the hardware of innovation' - meaning the amount of spending on research and development, the number of engineers and scientists, patents and publications - and the 'software', which he terms as 'the political, cultural and social institutions and understandings that help move ideas from lab to marketplace'.
Segal acknowledges that China will eventually outspend the US in research and development. But he believes that the US retains an important lead as an innovator, able to make 'the discovery that, under the right conditions, can spark the creation of a whole new industry and drive economic growth'.
Other Americans have written whole operas on this theme - that the US encourages creativity, and the spirit of free thinking that can lead to a huge leap in the dark. China on the other hand trammels its citizens. This is clear in widely interpreted political matters, which business executives wisely steer clear of as they concentrate on making money. But even in business, the private sector suffers from the massive presence of state-owned enterprises and the banks that act as their handmaids.
Segal starts his book Advantage by drawing attention to the growing challenge from China in high technology. He singles out nanotechnology, the manipulation of molecules and individual atoms.
Nanotechnology is already important in hundreds of products, from stain resistant fabrics to camera sensors and light-emitting diodes. Some of the hopes of nanotechnology are in the still mythical land where science fiction tries to join the real world, for example the dream of creating supercomputers so small that they are invisible to the naked eye or swarms of 'nanobots' that break down the metal in enemy tanks.
Segal cites the achievements of Cui Fuzhai, professor at Tsinghua University, in creating 'nanobones' to replace metal pins that hold broken bones together. Cui's work was interrupted by the closure of hospitals during the severe acute respiratory syndrome outbreak, but he created artificial bones that dissolved as the patient's own bones hardened, with less shock or risk of infection than intrusive metal.
Nevertheless, China's spending on nanotechnology, including a Foxconn investment at Tsinghua University, is in the hundreds of millions of US dollars. The US spends billions.
In addition, says Segal, China's massive numbers of engineers mostly don't have soft skills because China's education system focuses on rote learning and examinations, and the pressure on scientists has resulted in much plagiarism and data theft. The expansion of China's entrepreneurs is in C2C - 'copy to China' - meaning taking a US model and applying it to the Chinese market.
This movement is being helped by China's determination to reduce its dependence on foreign technology and encouraging reverse engineering rather than looking to science-based product innovation. Beijing's policy to become 'an innovative nation in the next 15 years and a world power in science and technology fields by the middle of the 21st century' is also more easily said than done, even though China has outlined its 20 world-beating fields, including nanotechnology, biotechnology and new drugs, high-end generic microchips and aircraft.
But the US advantage is being eroded, as even Segal and the optimists concede. One area where they passionately plead for more sensible attitudes from Washington is visa policy. The US as the land with an open embrace for people with great new dreams and ideas is being betrayed by a visa policy that sends away thousands of foreigners with degrees from American universities in science and engineering just when they would be able to contribute to creating a new 21st century.
It would be ironic if the seeds of the next great invention were planted in Boston or Stanford but bore fruit in Bangalore or Beijing because Washington had slammed the door on the foreign scientists it had educated. The irony would be greater because Washington is worried about theft and copying of its technology, but demands that bright foreign PhDs go home with their ideas.
Segal and others applaud US government spending on blue-sky research. This should be worrying for several reasons: will the planned spending survive budget cuts? Can the US government, any more than China or Japan, successfully divine where the next great breakthrough is coming from? Why isn't the private sector the driving force?
Segal notes that the private sector has moved from funding blue-sky projects. Alcatel-Lucent, he noted at the Council on Foreign Relations last week, 'announced in 2008 that Bells Labs - responsible for six Nobel prizes as well as the invention of the transistor, the laser and numerous other communications and computer technologies - would no longer conduct basic research in material physics and semiconductors'.
In the opening lines of the film The Social Network, Mark Zuckerberg, the founder of Facebook, tells his girlfriend that there are more people in China with genius-level IQs than the entire population of the US. That is patently untrue, but it touches on a number of issues that should be worrying for the US and its claims to innovative economic leadership.
Is Facebook really the best flagbearer of US creativity? Can the US retain any sort of innovative or political or moral leadership when its best brains devote themselves to financial engineering? And to take up the other side of Zuckerberg's point, how can the US be a leader with so many high school dropouts, so many unemployed fixated on their Facebook profiles? Former Intel chairman Craig Barrett noted in 2006: 'we're all fat, dumb and happy, which is one reason why this is so insidious'.