Rising Above the Gathering Storm, Revisited Rapidly Approaching Category 5 (2010) / Chapter Skim
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4.0 The Ingredients of Innovation
4.0 The Ingredients of Innovation
Pages 43-62
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From page 43... ...
Probably not. It was innovation based on science that propelled the United States past Japan during the two decades prior to the crash of 2008.
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From page 44... ...
an environment that promotes innovation and entrepreneurship. Each of these factors is discussed, and the United States position assessed, in the succeeding sub-sections under the respective headings, "Knowledge Capital," "Human Capital," and the "Environment." .1 KNOWLEDgE CAPITAL The most fundamental building block of innovation is newly acquired knowledge, often in the form of scientific or technological advancements.
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From page 45... ...
Successful innovation requires the invention of new tools that allow for more precise measurements, the production of purer or better materials, and more effective manipulation of data. A case in point is the field of particle physics which employs high energy accelerators as a principal discovery tool.
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In that case, a competitive edge was derived by sending researchers to China rather than having them come to the United States because of the lower costs, excellent facilities and abundance of talented graduate students in China. United States industrial firms are increasingly adopting much the same strategy, build ing new research facilities outside the country.
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was first among industrialized nations in share of population with a high school diploma and first with a college degree. Today, we are ninth in high school diplomas (and)
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Nor does it overlook the fact that there is indeed a limited number of truly extraordinary public schools in America. It merely recognizes that it is difficult to dismiss evidence such as the survey that found that almost 30 percent of American adults do not know the earth revolves around the sun; 16 percent do not know that the center of the earth is very hot; almost half do not know that electrons are smaller than atoms; and only about half the population is aware that dinosaurs and humans never coexisted.16 Production of Scientists and Engineers In spite of the nation's growing population and the explosion of knowledge in sci ence and technology and its impact during the past decade, the number of recipients of bachelor's degrees in mathematics, engineering and the physical sciences from United States universities has remained virtually unchanged.17 The numbers of doctorate degrees awarded by United States universities in mathemat ics and the physical sciences have likewise remained basically unchanged in the past decade.18 In contrast, the number of engineers receiving doctorates has evidenced signifi cant growth (from about 6,000 to about 8,000 graduates per year)
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From page 49... ...
20 NSB, 2010, Appendix Tables 2-12 and 2-28; American Bar Association. See: http://www.abanet.org/ legaled/statistics/charts/stats%20-%20.pdf; and Association to Advance Collegiate Schools of Business, Business School Data Trends and 2010/List of Accredited Schools.
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It is the leverage in jobs that these individuals create for others to which their value is attributable. K-12 Education About thirty percent of United States youths fail to receive a high school diploma on time.26 The United States is now 20th in high school graduation rate among industrialized nations.27 One consequence is that, according to a recent report, 75 percent of United States youth are ineligible for service in the nation's military due to academic, physical or moral shortcomings.28 In July 2010, the unemployment rate among those of all ages who did not complete high school was 13.8 percent, whereas it was 10.1 percent among high school graduates, 8.3 percent among those with some college, and 4.5 percent among those with at least a bachelor's degree.29 Significantly, only one in 17 children from fami 26 U.S.
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A third of a century later it was 306.36 In reading, the corresponding gain in the scores was from 285 to 286.37 In the most recent test, three jurisdictions out of 51 (50 states plus the District of Columbia) showed significant improvement in fourth grade reading, while 44 showed essentially no gain and four showed marked declines.38 Among high school seniors average scores in the National 30 R.D.
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McKinsey & Company, the management consultant, concluded in a recent study that disparities in U.S. K-12 education compared to those of many other nations "impose the economic equivalent of a permanent national recession -- one substantially larger than the deep recession the country is currently experiencing."41 The average student intending to major in education in United States universities ranks in the 42nd percentile of all students taking the college boards in Critical Reading, in the 41st in mathematics and in the 46th in writing.42 An international test in mathemat ics content knowledge at the lower secondary level, involving teachers nearing the end of their college education, ranked United States future teachers in seventh place among the 15 nations that participated.43 Forty-six percent of teachers abandon their profession within five years of first enter ing the classroom.44 Yet, according to The New York Times, when the city of New York invested $2 million in additional lawyers to assist in discharging teachers considered to 39 National Center for Education Statistics, Science 2005: National Assessment of Educational Progress at Grades 4, 8 and 2, May 2006.
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It probably would not be an overstatement to assert that America's science and engineering enterprise would barely function without these talented contributors. Of the PhDs in the United States science and engineering workforce under the age of 45 -- considered to be the most productive years in science -- 35 percent are foreignborn.47 Thirty-five percent of United States engineering faculty is foreign-born and 57 percent of "post-docs" in this country are temporary residents.48 Forty-six percent of the members of the United States physics team and 65 percent of the top United States scorers in the Mathematics Olympiad are the children of immigrants.49 45 J
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A strong multiplier effect exists when creative scientists and engineers are provided an innovation-friendly environment. Yet, United States immigration policy in many cases discourages qualified individuals from studying in the United States or remaining here after graduation.
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Prominent among these is the situation where a product, not yet free of significant risk but offering considerable promise, demands substantial additional investment to take the next (costly) step towards the marketplace.
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This legal process often consumes years or even decades to arrive at a resolution to a dispute, yet many businesses are born, prosper and sometimes fail in five years or less. Tax Policy The United States has the second highest corporate tax rate among industrialized nations, exceeded only by Japan, backed by 17,000 pages of regulations and interpreta tions.55 Although the United States once offered the most generous R&D tax credit in the world, it now ranks 17th of 30 OECD countries.56 It is not uncommon for United States firms to be attracted abroad by highly preferential tax rates that are offered to relocating firms.
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60 The United States still accounts for about two-thirds of global venture investments, but venture investing in China, India, and elsewhere in Asia is growing rapidly. See Dow Jones Venture Source, Global Venture Investment Rises 13% in First Quarter of 2010-Press Release, April 29, 2010.
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It is noteworthy that in 2009 the United States ranked 19th in the world on Transparency International's Corruption Perception Index, where the higher the rank the less corruption is perceived.62 The index includes such practices as bribery, price-fixing, employee theft, and misrepresentation of financial condition. Sanctity of Law In general the United States system for enforcing contracts, resolving disputes, assur ing human safety, protecting property, caring for the environment and dealing with related issues is widely considered to be superior to that of many nations, particularly developing nations.
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The penalties for failure to comply with these relatively arcane laws can be severe. Several independent reviews have suggested that the export laws be rewritten and focused upon that smaller set of potentially highly sensitive issues (such as nuclear weapon technology, toxins, and the like)
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Likely increases in the cost of transportation due to energy price increases -- attributable to market conditions, carbon taxes or recovery costs -- may motivate firms to conduct manufacturing activities closer to their customer base. China is projected by some to become the largest consumer market in the world in the next decade.68 By 2025 India's middle class is expected to grow from today's 50 million citizens to just under 600 million.69 Employment Policy The United States has more intrusive employment policies pertaining to such mat ters as termination rights, minimum wages, unionization, etc., than most developing nations, but considerably less demanding than those of Europe.
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.71 However, as previously noted, this is not the case in broadband telecommunications where, in terms of density, the United States ranks 22th among the world's nations.72 Market growth Potential As discussed elsewhere, there can be important business advantages -- although decreasing as global mobility increases -- to be derived from locating factories near potential customers; engineering facilities near factories; and research laboratories near engineering facilities. Given the huge United States consumer market throughout most of the twentieth century, this has been a fundamental competitiveness discriminator possessed by United States firms.
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Dragusanu, The Expanding Middle: The Exploding World Middle Class and Falling Global Inequality, Goldman Sachs Global Economics Paper No.
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