Staying competitive

In "Meeting the New Challenge to U.S. Economic Competitiveness" (Issues, Fall 2004), William B. Bonvillian offers a concise statement of many of the challenges now facing the U.S. economy and especially its technology-intensive sectors. He reminds us of the concerted efforts during the 1980s of business,

This is certainly a wise prescription and one that leaders in every sector should embrace. Today, Americans are sharply divided not only on their politics but also on their understanding of the causes and consequences of current economic ills. The debate about offshore outsourcing and whether it is good or bad for U.S. jobs is only one illustration of how far we are from a shared understanding of the problem, let alone a solution. A fresh dialogue is essential to help us move forward as a nation.

2004 is not 1984, however, and it is not obvious that the old formula for dialogue would succeed today. Many more and different kinds of legitimate stakeholders need to be in the conversation. Parttime, contract, and self-employed workers, as well as the new generation of knowledge and service workers, have as great a stake as do the members of the old manufacturing trade unions. "New economy" companies view the challenges and opportunities of the global economy in quite a different light from those from an earlier era. Resource scarcity, environmental challenges, and global climate change are just as important as the balance of trade and productivity growth in defining the next American future. Any process of national dialogue must incorporate all of these perspectives, and more, if it is to succeed.

I see two highly promising pathways for a fruitful new American dialogue, in addition to Bonvillian's wise suggestion of a new "Young Commission." The first is for Congress to reassert its traditional role as the forum within which the United States openly examines its most pressing problems. During the past decade, Congress has lost much of its real value, turning from rich and open inquiry directed at solving problems to sterile partisan exercises intended to preserve the status quo or score points against the political opposition. Our country can no longer afford to squander our precious representative institution in this way. Congress must go back to real work.

The second is for the organizers of a new American dialogue to find ways to take advantage of the immensely rich Internet-based communications culture, which barely existed when the first Young Commission was doing its work in the 1980s. All the tools of the new forms of information exchangeWeb pages, email, list serves, chat rooms, blogs, data mining, and all the other new modes-offer unprecedented opportunities, not only to tap into the chaotic flow of information and misinformation that characterizes the 21st-century world but also to pulse that flow in ways that yield new insights that can help build the new competitive nation that Bonvillian and I and others like us are seeking.

CHRISTOPHER T. HILL

Vice Provost for Research

George Mason University

Fairfax, Virginia

chill2@gmu.edu

William B. Bonvillian states well the key issues related to U.S. economic competitiveness: "If the current economy faces structural difficulties, what could a renewed economy look like? Where will the United States find comparative advantage in a global economy?" After a brief review and history of competitiveness, he focuses on innovation as a major factor and discusses the appropriate role for government in support of innovation in the context of five key issues: R&D funding, talent, organization of science and technology (S&T), innovation infrastructure, and manufacturing and services.

Indeed, well-crafted government policies and programs in these areas could significantly improve the ability of U.S.-based companies to innovate and excel in the global economy. I found it particularly noteworthy that Bonvillian's proposals represent a positive agenda. His proposals for funded government programs do not have the appearance of corporate welfare, and his S&T proposals acknowledge the limits of federal R&D budgets and the need to prioritize investments. Bonvillian also avoids protectionist recommendations and emphasizes the need for U.S. companies, individuals, and institutions, including the government, to innovate in order to compete. This positive agenda is one that could muster bipartisan support within Congress and the Executive Branch.

Manufacturing is an area primed for a public/private partnership. Bonvillian mentions several public policy actions that could help our manufacturing sector, including trade, tax, investment, education, and Department of Defense program proposals. However, he identifies innovation in manufacturing as the most important element. Bonvillian calls for a revolution in manufacturing that exploits our leadership and past investments in technology. He calls for "new intelligent manufacturing approaches that integrate design, services, and manufacturing throughout the business enterprise." Such an approach is worthy of a public/private partnership.

As we embark on new public/private partnerships, we must realize that globalization has significantly altered the playing field. Consider the case of SEMATECH, which Bonvillian correctly identifies as a government/industry partnership success of the 1980s. SEMATECH was originally established as a public/private partnership to ensure a strong U.S. semiconductor supplier base (especially for lithography) in light of a strong challenge from Japan. The creation of SEMATECH, along with effective trade and tax policies, S&T investments, and excellent management in U.S. companies, helped the U.S. semiconductor industry recover and thrive. However, during the late 1990s, in response to the globalization of the semiconductor industry, SEMATECH evolved from a U.S.-only consortium working to strengthen U.S. suppliers into a global consortium with a global supply chain focus. Today, SEMATECH has members from the United States, Europe, and Asia, and works with global semiconductor equipment and material suppliers. Among SEMATECH's most significant partnerships is one with TEL, the largest Japanese semiconductor equipment supplier and a major competitor of U.S. suppliers. Applied Materials, a U.S. company that is now the world's largest semiconductor equipment supplier, achieved its growth by making large investments in R&D, aggressively pursuing global customers, and purchasing companies (hence technology) throughout the world. And though Applied Materials is the world's largest semiconductor equipment supplier, there are no longer any U.S. suppliers of leading-edge lithography. In today's global economy, U.S. semiconductor manufacturers view a diverse global supply chain as a strength, not a threat. U.S. policymakers must develop new policies and programs that acknowledge the realities of the global economy and recognize that to maximize benefit to the United States, government investments in innovation may need to include the participation of global companies and yield benefits beyond our borders.

Bonvillian has established an excellent framework for a reasoned debate on meeting new challenges to U.S. economic competitiveness. And as he asserts, it is time to go from analysis to action.

GILBERT V. HERRERA

Director, Manufacturing Science and Technology

Sandia National Laboratories

Sandia, New Mexico

herrergv@sandia.gov

Gilbert V. Herrera is the former CEO of SEMI/SEMATECH, a consortium of U.S. semiconductor equipment and material suppliers.

William B. Bonvillian spells out a series of challenges to long-term U.S. competitiveness. The response to those challenges will go a long way toward determining America's 21st-century prosperity and capacity for international leadership.

In the past 15 years, China, India, and the former Soviet Union have brought 2.5 billion people into the global economy. China is already producing technologically sophisticated products, and India is a growing force in providing information technology and other services. Korea has emerged as a power in advanced electronics, and Brazil is the third largest manufacturer of civilian aircraft.

The digital revolution continues to change the playing field for many occupations that were formerly shielded from international competition. Europe, Japan, and much of the world are seeking to emulate the successful U.S. model of innovation and are actively recruiting students and scientists that used to think of America as the preferred destination.

What then must the United States do to retain its leadership in the global economy? First, we need to move past the debate on government versus the market and focus on developing the right mix of public policies and private initiative to ensure an innovative future.

Second, we must establish the right macroeconomic context. That means reducing the fiscal deficit without endangering needed investments in R&D. It also means striking a global bargain with the world's major economies to gradually reduce the size of our current account deficit that has helped erode the country's manufacturing base.

Third, we need to adjust our national research portfolio to ensure adequate funding for the physical sciences and to help bridge the gap between the private sector and basic research.

Fourth, we must adopt an aggressive strategy to prepare Americans for the careers of the future and continue to welcome international students and scientists.

Finally, we need to forge a durable political consensus that supports a strategy for 21st-century innovation. National security played that role in the 1960s and 1970s, and international competition was an added force in the 1980s. We need to articulate a national mission that will galvanize popular support and, like the space program, excite young Americans about careers in science and technology. The president's proposed mission to Mars might be the answer. I would suggest two others: new forms of energy that will reduce and eventually end dependence on the Middle East while better preserving the environment, and renewed U.S. leadership in making a global attack on tropical and other threatening diseases.

Hats off to Bonvillian for clearly spelling out some critical American choices. Working on Capitol Hill, Bonvillian is in a position to help turn good ideas into timely legislation. We all need to wish him well.

KENT HUGHES

Director

Project on America and the Global Economy

Woodrow Wilson Center

Washington, D.C.

hugheske@wwic.si.edu

Kent Hughes was an Associate Deputy

Secretary of Commerce in the Clinton administration.

Like Tom Paine demanding attention for "Common Sense," William B. Bonvillian makes a persuasive and eloquent argument that the U.S. economy faces grave and unprecedented threats-a situation that cries out for an immediate creative response.

He argues cogently that we've never been able to measure our ability to remain at the forefront of innovation with any precision. It's hard to attract attention to problems you can't see. It's fair to ask whether, at the end of the 19th-century, Britain could have seen signs that it was about to blow a twocentury lead in innovation. Alarm bells did not ring, even as huge amounts of capital flowed to upstart projects in the United States, nor as Americans started dozens of universities that were admitting smart American rustics and granting degrees in "agricultural and mechanical arts" and other topics not considered suitable for young gentlemen. Politics in Britain focused on the burdens of empire, not on whether local steel mills were decades out of date.

The recent presidential campaign was particularly disappointing in that the debate on the United States' declining status in innovation was scarcely joined. This was painful. Federal research investment is essential because these investments provide a stream of radically new ideas and the sustained investments needed to engage in bold projects such as sequencing the genome. It is outrageous that this investment continues to decline as a fraction of the nation's economy, and it is vulnerable to even more dramatic new cuts when post-election budget writers face the reality of ballooning defense costs and declining revenues. As the long knives come out, it will be a battle to see who screams the loudest, and it will be hard for the arguments of the research community to be heard in the din.

As Bonvillian points out, the success of the federal research investment depends not just on its size but on the skill with which it's managed. We can only succeed if federal managers find a way to move adroitly to set new priorities and ensure that investments are made where they are most likely to yield results. They must also ensure that the process rewards highrisk proposals whose success can yield high potential impacts (the old DARPA style). Many of these concepts will not come with familiar labels but will operate at the interface between disciplines such as biology, mathematics, physics, and engineering. Bonvillian's insight that technical innovation must now be coupled with "an effective business model for using the technology" means that many innovations will involve both products and services. And his observation that "a skilled workforce is no longer a durable asset" demands that we find new, more productive ways of delivering education and training.

Loss of technical leadership is an enormous threat to our economic future. It cripples our ability to meet social goals such as environmental protection or universal education at an affordable cost. It undermines a central pillar of national and homeland security. What I fear most is that instead of being remembered as Paine, Bonvillian will be remembered as Cassandra-completely correct and completely ignored.

HENRY KELLY

President

Federation of American Scientists

Washington, D.C.