A state’s success in the realm of science and technology is largely contingent on its degree of government intervention. More specifically, a country’s allocation of S&T sectors between its federal and free market structures can either foster or inhibit statewide innovation. Still, there is no “correct” degree of allocation; rather, every state exists within conditions that require a specific set of strategies in order to achieve full optimization of S&T. This is evidenced through case studies of states such as the U.S.S.R., India, and the U.S. that may follow different approaches but achieve similar results. With this, we can determine that for a state to be successful in S&T development, it must leverage existing factors such as geography, labor-orientation, and capital-orientation under an optimal degree of government intervention.
In order to dissect this argument we must first understand the advantages and limitations of both government-oriented and market-oriented economic structures. Government-oriented innovation can be exemplified through a comparison between the U.S.S.R. and the U.S. during the Cold War. Here, the Soviet’s communist structure barred the nation from naturally entering the information technology era as the U.S. did years prior (Taylor 70). As a result, Americans took the lead in vehicle, telephone, and industrial production during this time (Taylor 70). Many attribute this to U.S. advantages in efficiency and autonomy, where a free market structure enabled their seamless diffusion (Taylor 71). The U.S.S.R.’s example illustrates the notion that governments may not always be able to simulate the natural pillars of innovation that stem from market autonomy. The state’s strict regime failed to stimulate S&T as much as free competition might have. As a result, countries like the U.S. are able to maximize efficiency in order to more effectively stimulate S&T.
Yet, the debate between free-market and government-oriented structures is not as clean-cut. If it were, every state would choose to exercise a free-market in order to maximize its S&T production. In reality, the free-market structure also contains “failures” in which it might not lead to maximum S&T development. Market failures occur when rational choice theory ends up causing detrimental outcomes such as bank runs, externalities, monopolies, and other instances that may be avoided with a higher level of government intervention (Taylor 73). The free market may also under-invest in S&T knowledge, as it is a nonrival and nonexcludable entity that carries a higher risk factor than other categories of goods (Taylor 76). It might be more advantageous to leverage existing technology to squeeze margins, a side effect of the free market’s short-sighted nature. As such, in certain cases, a free-market can be just as damaging to an economy as a government-oriented one.
With the advantages and shortcomings of both systems in mind, we can now analyze how successful states fuse the two together in order to spur the highest degree of S&T. The U.S.’s slow technological growth since the 1960’s is a prime example of the need for adaptability within S&T. Since the U.S.’s dominance in S&T post-WWII, the economic playing field has shifted to favor a neo-Schumpeterian growth model in which public and private sectors are essential and have complementary roles (Tassey 561). Yet, the U.S. has been slow to accept this change, citing its “market dynamism” as a valuable asset to its democratic culture (Tassey 561). The contemporary economic landscape no longer supports the gradual change in states’ endowments that once allowed the free market comparative advantage system to reign supreme. Rather, states are developing new technologies at a much faster rate than before, meaning the U.S., or any other leading economy, cannot rely solely on automatic market adjustments to maintain its competitive edge (Tassey 563). This phenomenon can be considered a market failure of the contemporary age, where governments must be primed for S&T innovation in order to be competitive. For example, Chinese government policies make up the majority contribution to its semiconductor plants, rather than lower labor costs (Tassey 566). In a labor-intensive state like China, it was advantageous for the government to interfere in a capital and technology-rich sector such as semiconductor production. As a result, the large wage differential between Chinese and American semiconductor workers resulted in a miniscule difference in total costs (Tassey 577). This instance illustrates how different economic conditions warrant different degrees of government intervention. China, being a labor-intensive economy, was able to spur S&T with complementary public policies. If this model was applied in a capital-intensive economy like the U.S. it would have likely been unsuccessful. With this, we can determine that there is no silver bullet equation for S&T growth; rather, it varies by a country’s existing economic conditions.
Case studies of different state approaches to innovation helps us solidify a mold for successful S&T production in the 21st century. India has excelled within the information age, a period characterized by inventions such as GPS and the internet. The government has played a crucial role in this transition. India’s public sector has drawn upon cultural networks built through international education and the migration of Indian-born programmers in order to attract foreign direct investment (FDI) in its information technology sector (Braman 37). In this sense, India’s government assessed its existing economic climate and applied interventionist policies accordingly. The state’s public administration recognized software as a national priority that could not be achieved under India’s existing free market, which prompted them to create policies to spur its growth. A similar approach was taken in Estonia, where internet access was labeled a priority and inherent right (Braman 37).
Overall, states must walk the crucial line between complete state intervention and market independence. The limitations of both models can be seen in the public-oriented plight of the U.S.S.R. and the private-centered struggle of the U.S. In the modern age, states like China and India have taken advantage of their relative factor endowments in order to leverage the optimal degree of intervention in their respective economies. Champions of free-market democracies like the U.S. may be forced to reevaluate their models as the world progresses into the information age.
Works Cited
Braman, Sandra. Change of State: Information, Policy, and Power. The MIT Press, 2006. [ch. 2]
Tassey, Gregory. “Globalization of Technology-Based Growth: The Policy Imperative.” The Journal of Technology Transfer 33, no. 6 (December 2008): 560–78.
Taylor, Mark Z. The Politics of Innovation: Why Some Countries Are Better Than Others at Science and Technology. Oxford University Press, 2016. [pp. 69-179]