Corrective Action

What should we do so that we do not repeat the error of Great Britain in the 1950s? Both the changing global environment and increasing foreign competition should focus our attention on four actions to ensure that our economic performance can meet the competition.

First, we must make people—including well-educated scientists and engineers and a technically literate work force and populous—the focus of national policy. Nothing is more important than developing and using our human resources effectively.

Second, we must invest adequately in research and development.

Third, we must learn to cooperate in developing precompetitive technology in cases where costs may be prohibitive or skills lacking for individual companies or a even an industry.

Fourth, we must have access to new knowledge, both at home and abroad.

Let me discuss each of these four points.

Human Resources

People are the crucial resource. People generate the knowledge that allows us to create new technologies. We need more scientists and engineers, but we are not producing them.

In the last decade, employment of scientists and engineers grew three times as fast as total employment and twice as fast as total professional employment. Most of this growth was in the service sector, in which employment of scientists and engineers rose 5.7 per cent per year for the last decade. But even in the manufacturing sector, where there was no growth at all in total employment, science and engineering employment rose four per cent per year, attesting to the increasing technical complexity of manufacturing.

So there is no doubt about the demand for scientists and engineers. But there is real doubt that the supply will keep up. The student population is shrinking, so we must attract a larger proportion of students into science and engineering fields just to maintain the current number of graduates.

Unfortunately, the trend is the other way. Freshman interest in engineering and computer sciences decreased during the 1980s, but it increased for business, humanities, and the social sciences. Baccalaureates in mathematics and computer science peaked in 1986 and have since declined over 17 per cent. Among the physical and biological sciences, interest has grown only marginally.

In addition, minorities and women are increasingly important to our future work force. So we must make sure these groups participate to their fullest in science and engineering. But today only 14 per cent of female students, compared to 25 per cent of male students, are interested in the natural sciences and engineering in high school. By the time these students receive their bachelor's degrees, the number of women in these fields is less than half that of men. Only a tiny fraction of women go on to obtain Ph.Ds.

The problem is even worse among Blacks, Native Americans, and Hispanics at every level—and these groups are a growing part of our population. Look around the room and you can see what I mean.

To deal with our human-resources problem, NSF has made human resources a priority, with special emphasis on programs to attract more women and minorities. At the precollege level, our budget has doubled since 1984, with many programs to improve math and science teachers and teaching. At the undergraduate level, NSF is developing new curricula in engineering, mathematics, biology, chemistry, physics, computer sciences, and foreign languages. And we are expanding our Research for Undergraduates Program.

My question to you is, how good are our education courses in computer science and engineering? How relevant are they to the requirements of future employers? Do they reflect the needs of other disciplines for new computational approaches?

R&D Investment

In the U.S., academic research is the source of most of the new ideas that drive innovation. Entire industries, including semiconductors, biotechnology, computers, and many materials areas, are based on research begun in universities.

The principal supporter of academic research is the federal government. Over the last 20 years, however, we have allowed academic research to languish. As a per cent of gross national product, federal support for academic research declined sharply from 1968 to 1974 and has not yet recovered to the 1968 level. Furthermore, most of the recent growth has occurred in the life sciences. Federal investment in the physical sciences and engineering, the fields that are most critical for competitive technologies, has stagnated. As a partial solution to this problem, NSF and the Administration have pressed for a doubling of the NSF budget by 1993. This would make a substantial difference and is essential to our technological and economic competitiveness.

We must also consider the balance between civilian and defense R&D. Today, in contrast to the past, the commercial sector is the precursor of leading-edge technologies, whereas defense research has become less critical to spawning commercial technology.

But this shift is not reflected in federal funding priorities. During the 1980s, the U.S. government sharply increased its investment in defense R&D as part of the arms buildup. Ten years ago, the federal R&D investment was evenly distributed between the defense and civilian sectors. Today the defense sector absorbs about 60 per cent. In 1987 it was as high as 67 or 68 per cent.

In addition to the federal R&D picture, we must consider the R&D investments made by industry, which has the prime responsibility for technology commercialization. Industry cannot succeed without strong R&D investments, and recently industry's investment in R&D has declined in real terms. It's a moot point whether the reason was the leveraged buyout and merger binge or shortsighted management action or something else. The important thing is to recognize the problem and begin to turn it around.

Industry must take advantage of university research, which in the U.S. is the wellspring of new concepts and ideas. NSF's science and technology centers, engineering research centers, and supercomputer centers are designed with this in mind, namely, multidisciplinary, relevant research with participation by the nonacademic sector.

But on a broader scale, the High Performance Computing Initiative developed under the direction of the Office of Science and Technology Policy requires not only the participation of all concerned agencies and industry but everybody's participation, especially that of the individuals and organizations here today.

Technology Strategy

Since World War II the federal government has accepted its role as basic research supporter. But it cannot be concerned with basic research, only. The shift to a world economy and the development of technology has meant that in many areas the scale of technology development has grown to the point where, at least in some cases, industry can no longer support it alone.

The United States, however, has been ambivalent about the government role in furthering the generic technology base, except in areas such as defense, in which government is the main customer. In contrast, our

foreign competitors often have the advantage of government support, which reduces the risk and assures a long-term financial commitment.

Nobody questions the government's role of ensuring that economic conditions are suitable for commercializing technologies. Fiscal and monetary policies, trade policies, R&D tax and antitrust laws, and interest rates are all tools through which the government creates the financial and regulatory environment within which industry can compete. But this is not enough. In addition, government and industry, together, must cooperate in the proper development of generic precompetitive technology in areas where it is clear that individual companies or private consortia are not able to do the job.

In many areas, the boundary lines between basic research and technology are blurring, if not overlapping completely. In these areas, generic technologies at their formative stages are the base for entire industries and industrial sectors. But the gestation period is long; it requires the interplay with basic science in a back-and-forth fashion. Developing generic technologies is expensive and risky, and the knowledge diffuses quickly to competitors.

If, at one time, the development of generic technology was a matter for the private sector, why does it now need the support of government?

First, it is not the case that the public sector was not involved in the past. For nearly 40 years, generic technology was developed by the U.S. in the context of military and space programs supported by the Department of Defense and the National Aeronautics and Space Administration. But recent developments have undermined this strategy for supporting generic technology:

• As I already said, the strategic technologies of the future will be developed increasingly in civilian contexts rather than in military or space programs. This is the reverse of the situation that existed in the sixties and seventies.

• American industry is facing competitors that are supported by their governments in establishing public/private partnerships for the development of generic technologies, both in the Pacific Rim and in the EEC.

• What's more, the cost of developing new technologies is rising. In many key industries, U.S. companies are losing their market share to foreign competitors—not only abroad but at home, as well. They are constrained in their ability to invest in new, risky technology efforts. They need additional resources.

But let's be clear . . . 

The "technology strategy" that I'm talking about is not an "industrial policy." Cooperation between government and industry does not mean a centrally controlled, government-coordinated plan for industrial development. It is absolutely fundamental that the basic choices concerning which products to develop and when must remain with private industry, backed by private money and the discipline of the market. But we can have this and also have the government assume a role that no longer can be satisfied by the private sector.

Cooperation is also needed between industry and universities in order to get new knowledge moving smoothly from the laboratory to the market. Before World War II, universities looked to industry for research support. During and after the war, however, it became easier for universities to get what they needed from the government, and the tradition slowly grew that industry and universities should stay at arm's length. But this was acceptable only when government was willing to carry the whole load, and that is no longer true. Today, neither side can afford to remain detached.

Better relations between industry and universities yield benefits to both sectors. Universities get needed financial support and a better vantage point for understanding industry's needs. Industry gets access to the best new ideas and the brightest people and a steady supply of the well-trained scientists and engineers it needs.

Cooperation also means private firms must learn to work together. In the U.S., at least in this century, antitrust laws have forced companies to consider their competitors as adversaries. This worked well to ensure competition in the domestic market, but it works less well today, when the real competition is not domestic, but foreign. Our laws and public attitudes must adjust to this new reality. We must understand both that cooperation at the precompetitive level is not a barrier to fierce competition in the marketplace and that domestic cooperation may be the prerequisite for international competitive success.

The evolution of the Semiconductor Manufacturing Technology Consortium is a good example of how government support and cooperation with industry leads to productive outcomes.

International Cooperation

Paradoxically, we must also strengthen international cooperation in research even as we learn to compete more aggressively. There is no confining knowledge within national or political boundaries, and no nation can afford to rely on its own resources for generating new

knowledge. Free access to new knowledge in other countries is necessary to remain competitive, but it depends on cooperative relationships.

In addition, the cost and complexity of modern research has escalated to the point where no nation can do it all—especially in "big science" areas and in fields like AIDS, global warming, earthquake prediction, and nuclear waste management. In these and other fields, sharing of people and facilities should be the automatic approach of research administrators.