Sustaining Capitalism

New York, NY, November 16, 2021…Once viewed as the uncontested global leader in scientific and technological advancements, America’s position as a top innovator is eroding—and countries like China are quickly catching up. Today, the Committee for Economic Development of The Conference Board (CED) issued a new Solutions Brief, Back to Basic Research: An R&D Investment Plan to Enhance US Competitiveness, which outlines the critical need for increased public funding for basic research.

As detailed in the report—the latest in a series of Solutions Briefs on Sustaining Capitalism—the changing national and global research landscape is adversely affecting the US’ overall ability to develop new science and technology. Since 1980, what has been steadily declining is government funding of basic, foundational research—like that which inspired major breakthroughs such as the internet, messenger-RNA vaccines, and the Human Genome Project. For the first time since 2013, the US is no longer included among the top-10 most innovative countries. What’s more, American students in secondary schools rank 18^th in science and 37^th in math, compared to their international peers; meanwhile, China ranks first in both.

“If the US wants to strengthen its ability to compete in science and technology—and thus fortify its role as a global economic leader—the nation’s policymakers must invest in American ingenuity and increase public investment in basic research,” said Dr. Lori Esposito Murray, President of CED. “If we allow the nation to stay the course, we risk giving countries like China the green light to take the lead as top global innovators. If that happens, our competitors will be well-equipped to make tremendous strides in emerging focus areas such as artificial intelligence, clean energy, and quantum computing, while the US is left with outdated, obsolete technologies.”

Key insights from the new Solutions Brief include:

Overall, the United States spends the most on R&D…but China is a close second.

• In absolute terms, the US remains the global leader in total R&D expenditures. Furthermore, the quality and output value of US R&D activities remains globally superior.
• But Chinese R&D expenditures pose a significant challenge: Total R&D funding in China (ranked second behind the US) was greater than funding in the next four highest countries—Japan, Germany, South Korea, and France—combined.

America’s global share of R&D expenditure has fallen significantly. The rest of the world—especially China—is increasing R&D spending.

• The world’s innovation has become concentrated among a few key players—namely, the US, China, Japan, Germany, and South Korea. The decline in the US global share of R&D is the result of faster increases in investments in other countries, including our top competitors.
• China’s R&D output is expanding rapidly due to its large and growing talent pool, rising investments in its research and technology workforce, recent public policy shifts, and the sheer scale of its investment.

The composition of US R&D has shifted, with business R&D spending overtaking public R&D spending.

• While overall US R&D spending has increased, the role of the federal government in funding science and technology has waned over time.
• After peaking in 1964 at 1.9 percent of GDP, federal government R&D spending reached a low of 0.6 percent of GDP in 2016 and has only edged up slightly since.

As the federal government cuts back on R&D spending, basic research is increasingly funded by private business.

• The share of total US basic research funded by the federal government peaked at about 70 percent during the late 1960s and 1970s and has been on an overall downward trend since 1980, reaching a low of 41 percent in 2019.
• Meanwhile, US businesses have been investing in basic research at a faster pace since 2015 than during the previous 20 years. And yet, the private sector cannot adequately fill in the gaps left by the federal government due to intrinsic differences in how they plan to use—and, potentially monetize—new research.

 Key recommendations from the new Solutions Brief include:

 In its new Solutions Brief, CED offers three steps that US policymakers can take to reestablish the nation as a leader in science and technology:

• Increase public investment in basic research: Evidence suggests that the US has been falling short of appropriate funding of basic research by our nation’s historical standards. To find the right investment level, policymakers must consider basic research proposals across a broad range of disciplines that have the potential to ensure national security and public health, while enhancing overall economic competitiveness. Foundational areas that could seed cutting-edge technologies include biotech, power storage, AI, quantum computing, and advanced cyber networking capable of defending against digital attacks.

• Leverage the nation’s innovation model of public-private partnerships to foster the creation of new technologies and effectively diffuse investments across geographies: To do so, policymakers should collaborate with private industries, local universities, and nonprofits to prioritize viable research projects and expand the geography of R&D investments to ensure a broader growth of the capacity and gains of innovation. This could include channeling greater portions of existing research funding to potential innovation centers in the American heartland and to historically Black colleges and universities (HBCUs).

• Develop a highly skilled science and engineering workforce: Boosting K-12 science, technology, engineering, and math (STEM) education programs would be fundamental to increasing the number and diversity of students interested in science and technology and serve as a gateway to STEM majors and careers. Partnerships with industry and education to build inclusive pathways into the STEM workforce would further develop STEM-based skills and increase access to employer-connected internships and apprenticeships. Additionally, realigning immigration policy—by reforming the H1-B visa application and approval process and improving the path to permanent residence—would help build a diverse pipeline of dedicated researchers and university faculty.

The new Solutions Brief, Back to Basic Research: An R&D Investment Plan to Enhance US Competitiveness, can be accessed here.

Media Contact

Molly.Horak@tcb.org

Joseph.DiBlasi@tcb.org

About CED

The Committee for Economic Development of The Conference Board (CED) is the nonprofit, nonpartisan, business-led public policy center that delivers well-researched analysis and reasoned solutions in the nation’s interest. CED Trustees are chief executive officers and key executives of leading US companies who bring their unique experience to address today’s pressing policy issues. Collectively they represent 30+ industries, over a trillion dollars in revenue, and over 4 million employees. www.ced.org

About The Conference Board

The Conference Board is the member-driven think tank that delivers trusted insights for what’s ahead. Founded in 1916, we are a non-partisan, not-for-profit entity holding 501 (c) (3) tax-exempt status in the United States. www.conference-board.org