America's most doctrinaire Ricardian free-trader strikes again. Of course I mean New York Times columnist Tom Friedman, but this time he makes real sense.
In a recent column (November 10) called "China: Scapegoat or Sputnik?" Friedman first offers a good one-sentence summary of his giant bestseller "The World is Flat": "Technology and globalization are flattening the global economic playing field today, enabling many more developing nations to compete for white-collar and blue-collar jobs once reserved for the developed world." He then notes that this might be correlated with "median wage stagnation" in the U.S. - wages for the vast majority of American workers (perhaps 80%) have barely increased, corrected for inflation, for 30 years (my numbers, not his). Friedman concludes with the following: "The big question for me is, how will President Bush and the Democratic Congress use China: as a scapegoat or a Sputnik? Will they use it as an excuse to avoid doing the hard things, because it's all just China'’s fault, or as an excuse to rally the country - as we did after the Soviets leapt ahead of us in the space race and launched Sputnik - to make the kind of comprehensive changes in health care, portability of pensions, entitlements and lifelong learning to give America's middle class the best tools possible to thrive? A lot of history is going to turn on that answer, because if people don't feel they have the tools or skills to thrive in a world without walls, the pressure to put up walls, especially against China, will steadily mount."
Yes. But what would it actually mean to take the Sputnik route? Throughout the first half of the 1950s, Congress had been unenthusiastic about the public funding of basic research: by 1956, its fifth year of operation, the NSF's budget was only about 13% of what federal research savant Vannevar Bush had originally recommended. American policymakers had already been provoked in 1955 when the National Research Council published a study, Soviet Professional Manpower, saying that U.S. was falling behind in training scientific and technical personnel. The NRC report helped Congress to see the wisdom of doubling at least the NSF's education budget in 1957. Sputnik was the world's first artificial satellite, and when the Soviets launched it in October of 1957 it was widely seen as confirmation that the West had lost its technological edge. By 1960, "the Foundation's appropriation for all activities was $159,200,000, almost ten times the 1956 level" and over 45 times its budget less than ten years before (figures from former NSF Director Alan T. Waterman). It's also worth noting that this Big Bang in federal funding was driven by military rather than commercial competition, and was not so much a response to market forces as a substitute for or at least supplement of them.
So treating China as Sputnik today implies two things. First, it implies some kind of research - or even industrial - policy complementing U.S. capital markets and consumers as technology agenda-setters. Second it implies exponential and not just incremental research funding growth. Both of these may be necessary for globalization to be the win-win Friedman and most other people want it to be. Are either of these in the cards?