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Tags: capitalism | prosperity | research and development

To Restore Prosperity, Uncle Sam Must Fund Research and Development

stick figure with wadded up pieces of paper with r and d written on a sheet of paper
(Artur Szczybylo/Dreamstime)

Ralph Benko By Thursday, 07 May 2020 10:43 AM EDT Current | Bio | Archive

The Fifth Commandment of Capitalism? "The federal government shall generously fund research and development which are the foundation of the nation's prosperity, skilled jobs and material quality of life." This one is the most controversial to libertarians, who mistrust every word that government says including "and" and "the." Sometimes they go too far.

Don't get me wrong. Hardcore libertarians provide an excellent corrective to the prevailing sentimentality over government! I had the privilege of government service, spending a strange but educational thousand days as a career civil servant in the days of Reagan.

Turns out that career civil servants ("bureaucrats")  are about the same  as the rest of us. Those who work in government are not obviously smarter or nobler than you. (Nor, typically, less so.)

They tend to be constrained by an inherently risk-averse system. That said, the federal government has done some remarkable things on the R&D front. The Defense Advanced Research Projects Agency invented the internet.

Thanks, in part, to inventive genius animating DARPA you are reading this. Thank you, Robert E. Kahn. Thank you Vint Cerf. And thank you, Al Gore, who, per Kahn and Cerf, let the internet genie out of the bottle by leading the effort to deregulate it. Credit where due.

And do consider the space program. This reached its apotheosis with Apollo. NASA yielded far more than Tang. NASA was instrumental in giving us the multi-trillion dollar gold mine called Silicon Valley.

Hope Reese, author of The Code: Silicon Valley and the Remaking of America, interviewed at OneZero, reveals how the government (especially NASA) as a customer engendered American digital dominance.

"Dwight Eisenhower never declared, 'I shall build a science city in Northern California.' Yet the military spending and space program spending that started under Eisenhower was the launching pad for Silicon Valley's rocket. ... Federal contracts were Fairchild Semiconductor's bread and butter. The integrated circuit was developed at Fairchild by Bob Noyce and others which proved to be an extraordinary advance in transistor technology  —  the beginning of the microprocessor that would eventually become a computer on chip miniaturization. It was an extraordinary device, but there was no commercial market for it. Then the Apollo program becomes a customer, and when NASA orders up a whole slew of those chips, that drives down the price. Then you were able to scale it up and make it something that can be a commercial product. No one was sitting behind a desk in Washington saying, 'Oh, this is how we're going to build a tech industry.' But that is what happened."

That's by no means all. Per Christopher Mims writing recently in the Wall Street Journal:

Taxpayer-funded basic scientific research has again and again paid huge dividends to society, both in improving our quality of life and boosting our economy. Indeed, many of the industries the U.S. dominates these days, like software, were seeded in a Silicon Valley where the U.S. government was the area's first and most important venture capitalist. Since the mid 1960s, the proportion of U.S. gross domestic product spent on public R&D has gone from a peak of 2% to the present figure of 0.6%, and the U.S. went from first in the world in terms of such spending to 13th. China rocketed ahead, and has done other forward-thinking things like co-locating manufacturing with its publicly funded R&D centers, allowing a direct translation of that research into new industries and millions of new jobs.

Credit the inclusion of the Fifth Commandment of Capitalism to the greatest lawgiver since Hammurabi, the Honorable Norman Augustine. He is the holder of almost countless technology honors. Per Augustine, numerous studies including those that won Robert Solow and Paul Romer Nobel Prizes in Economics, demonstrate that as much as 85% of the long-term growth in America's economy is attributable to advancements in science and technology.

The payoffs from the successes of federal R&D dwarf the cost of the failures. This inconvenient truth is supported by abundant evidence, however horrifying to libertarians.

Augustine, a former undersecretary of the Army, later CEO of Lockheed Martin, isn't credulous about the follies of Big Government. His Law Number XVI states that "In the year 2054, the entire defense budget will purchase just one aircraft. This aircraft will have to be shared by the Air Force and Navy 3–1/2 days each per week except for leap year when it will be made available to the Marines for the extra day."  And yet, government R&D is a cause of national prosperity. 

Deal with it. Depart from the libertarian dogma. To propel America back to prosperity adhere to the Fifth Law of Capitalism: "The federal government shall generously fund research and development which are the foundation of the nation's prosperity, skilled jobs and material quality of life."

Ralph Benko, co-author of "The Capitalist Manifesto" and chairman and co-founder of "The Capitalist League," is the founder of The Prosperity Caucus and is an original Kemp-era member of the Supply Side revolution that propelled the Dow from 814 to its current heights and world GDP from $11T to $88T. He served as a deputy general counsel in the Reagan White House, has worked closely with the Congress and two cabinet agencies, and has published over a million words on politics and policy in the mainstream media, as a distinguished professional blogger, and as the author of the internationally award-winning cult classic book "The Websters' Dictionary: How to Use the Web to Transform the World." He has served as senior adviser, economics, to APIA as an advocate of the gold standard, senior counselor to the Chamber of Digital Commerce and serves as general counsel to Frax.finance, a stablecoin venture. Read Ralph Benko's reports — More Here.

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The payoffs from the successes of federal R&D dwarf the cost of the failures.
capitalism, prosperity, research and development
Thursday, 07 May 2020 10:43 AM
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