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Fred Block, Guest Blogger

The Obama Administration and the House Republicans are engaged in an intense battle over spending that will likely lead to a shutdown of the federal government.  The immediate issue is funding the government for the remainder of the 2011 Fiscal Year that runs through September 30th.  If the two sides don’t reach an agreement, current funding runs out on March 18th.  But as soon as that issue is resolved, an even more momentous conflict will begin over spending levels for Fiscal Year 2012.  The Administration has made clear that in both cases, it wants to protect certain types of spending from Republican cuts, especially funds for infrastructure and innovation.

By making its commitment to increased innovation spending a major issue, the Obama Administration is breaking with a pattern that goes back almost thirty years. Starting in the Carter and Reagan years, Congress and the White House launched a series of initiatives to use the nation’s scientific and technological leadership to bolster the nation’s international trade. Drawing on techniques used by the Department of Defense’s Advanced Research Projects Agency (DARPA) in the early years of the computer industry, these new initiatives sought to accelerate the movement of scientific breakthroughs from the laboratory to the marketplace and to encourage the birth of new high-tech startup firms built around new technologies.  However, this active government role at the heart of the economy did not fit with Reagan-era “free market economics”, so on a bipartisan basis, these initiatives grew without public debate or discussion.  The result is what I have called “a hidden developmental state”.

Over the last thirty years, these government initiatives have matured into a highly sophisticated and complex system that funds much of the important technological innovation in the U.S. economy. This system is, however, highly decentralized; it operates through literally dozens of different government agencies, through the federal laboratory system, and through hundreds of dedicated research centers on university campuses.  This high level of decentralization makes the system difficult to study and has helped to keep its existence largely unknown.

But in a new book that I have edited with Matthew R. Keller, State of Innovation: The U.S. Government’s Role in Technology Development (Paradigm Publishers), we assemble a team of researchers to provide an overview of how this innovation system works. We provide some indication of the breadth of these efforts by analyzing the winners of a prestigious innovation award given out annually by R&D Magazine. The R&D 100 Awards recognize one hundred products that incorporate exciting new technologies. In 2006, 88 of these products were produced by U.S.-based firms.  We show that in 77 of these cases, federal dollars provided some of the funds used by the actual teams who developed these products.

Another chapter documents the centrality of the federal role in the development of new prescription drugs.  Most of the big-selling biotechnology drugs were developed with substantial federal support.  A chapter by Erica Fuchs shows that DARPA was continuing to play a central role in the computer and semiconductor industries during the Administration of George W. Bush by leading an initiative to incorporate photonics (the transmission of information on light waves) into the next generation of silicon chips.

Several of the chapters raise the critical question of whether this system can continue to flourish if it remains hidden in the shadows.  Without public engagement, the system lacks legitimacy and safeguards against being captured by business interests. But there are also grave risks in the Obama Administration’s efforts to make these government innovation programs more visible.  The Far Right, more influential than even in the Republican Party, has consistently denounced these efforts as nothing more than pork or “corporate welfare”. In Grover Norquist’s famous phrase, they would love to drown the hidden developmental state in the bathtub, regardless of the damaging consequences for business and the economy.  In short, the stakes in this particular budget battle could not be higher.

Fred Block is an economic and political sociologist at the University of California, Davis.

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