Author Profile
Chen Baoming and Ding Minglei
China Academy of Science and Technology Development Strategy
Published in China Economist, Issue 4, 2017
abstract
Since the financial crisis, all major countries have been promoting structural reform with scientific and technological innovation as the core. Since the Trump Administration took office, it has not put forward a clear strategy and policy for scientific and technological innovation in implementing the "America First" strategy, but relevant policies have had an impact on scientific and technological innovation. At the same time, he also plans to significantly weaken the federal government's science and technology budget, which will also have a certain impact on the potential economic growth of the United States. Compared with the United States, China's innovation driven development strategy has been steadily implemented, its scientific and technological innovation capacity has been significantly improved, and its role in supporting and guiding economic growth has become increasingly prominent. To promote future economic growth, China should adhere to scientific and technological innovation, promote the transfer and transformation of scientific and technological achievements and innovation and entrepreneurship, enhance economic growth potential, and make full use of global innovation resources.
key word
Scientific and technological innovation; Economic growth; Structural reform
1、 Structural reform with scientific and technological innovation as the core is the key to future economic growth
The economic development is characterized by periodic fluctuations, and the replacement of old and new basic technologies is the decisive factor for the formation of economic periodic fluctuations. The Russian economist Kondratieff divided the development stages with a time span of about half a century (Kondratieff, 1925), while Schumpeter and Van Gilden first proposed that these cycles were caused by the introduction of major new technologies in the economic system (Schumpeter, 1939; Van Geldren, 1913). Schumpeter's theory of "continuous industrial revolution" is based on the qualitative transformation of the economy through new technologies (Schumpeter, 1912). No matter what is unique about each business cycle, its most important feature is innovation. Therefore, he regards innovation as the main driving force of capitalist growth and the source of entrepreneurs' profits.
Economic growth presents a cyclical change process, which is the objective law of economic growth. At present, the world economic growth is in a critical period of transformation between new and old drivers.   The key to meeting the challenges of the economic downturn cycle is the structural reform on the supply side. Obviously, the new growth cycle must be based on a new structure, that is, a new foundation and structure formed by scientific and technological innovation and the wide application of its achievements, which is the core of structural reform.
Since the G20 Hangzhou Summit, structural reform has gradually become the consensus reached by all countries, and scientific and technological innovation has become the core of structural reform. Although countries have different paths and priorities to promote structural reform, they have highlighted a clear strategic direction of scientific and technological innovation from the deployment of key tasks, as well as from the cultivation of industries and the improvement of investment methods, taking the role of scientific and technological innovation as the core path of structural reform (Ding Minglei and Chen Baoming, 2016). In order to solve the problem of excessive expansion of the virtual economy and insufficient development of the real economy, the United States has focused on promoting innovation and revitalizing the real economy. To this end, the United States has successively released three national innovation strategy documents, emphasizing that technological innovation is the core driving force of economic growth, setting off a wave of "re industrialization", which is essentially a strategy to promote the development of high-end industries and the transformation and upgrading of manufacturing industries to create new competitive advantages. Germany strives to integrate the strength of the government and industry to implement the Industry 4.0 Plan and high-tech strategy, comply with the development trend of intelligent and green manufacturing, improve the scientific and technological content of the manufacturing industry, and create a new competitive advantage for the manufacturing industry. The UK has issued the strategic document Innovation and Research Strategy for Growth, which places science and innovation at the core of the UK's long-term economic development plan. The EU's reform focuses on creating employment, improving labor productivity and reshaping Europe's competitiveness. The EU's Eighth Framework Plan continues to increase R&D investment. Japan's Comprehensive Strategy for Science and Technology Innovation, the Innovation 2025 Plan, and South Korea's Action Plan for Creative Economy all take scientific and technological innovation as the engine to promote economic regeneration. The essence of the innovation strategy adopted by various countries is to give play to the role of scientific and technological innovation in promoting economic transformation and upgrading as a strategic priority while systematically promoting scientific and technological progress.
2、 The Trend of Trump Government's Science and Technology Innovation Policy and Its Impact on Economic Growth
Since the Trump Administration took office, it has implemented the strategy of "giving priority to the United States", fulfilled its election commitments and made major adjustments to policies in all aspects. However, so far, the Trump Administration has not put forward a more clear strategy and policy for scientific and technological innovation. The relevant policies and measures introduced at present have led to hostility between the Trump government and the scientific community, Silicon Valley companies, etc. Despite this, Trump's science and technology innovation policy will still be adjusted in terms of strategies and means, with more emphasis on science and technology innovation to stimulate market vitality and promote economic growth. However, the policy direction cannot deviate significantly from the original direction and track. It can be considered that Trump's adjustment of science and technology innovation policy is a test and adjustment based on the profound science and technology innovation leadership that the United States has already achieved, and its impact on economic growth potential needs further observation.
（1） The Trump government has not yet formed a systematic scientific and technological innovation strategy and policy, which may eventually become a policy without policy
Historically, the scientific and technological innovation strategy of the United States has become increasingly clear. In particular, during the Obama administration, the United States has issued three versions of the national innovation strategy document, focusing on promoting innovation and revitalizing the real economy. Through the comprehensive use of political, military, diplomatic and financial means, the United States has formed a combined support tool serving the development of the innovative economy, making the innovation strategy a core strategy for the economic development of the United States. The U.S. innovation strategy promotes scientific and technological innovation by increasing support for innovation in key areas, supporting priority areas that promote long-term economic growth in the United States, and leading the third wave of innovation and entrepreneurship in the United States. It can be said that scientific and technological innovation has strengthened the core driving force and laid a solid foundation for the recovery and improvement of the U.S. economy, but history has not left it enough time to continue to practice. The economic difficulties, the gap between the rich and the poor and the political impasse pose a huge risk that the US economy will remain stagnant for a long time.
Before Obama, all governments continued to pay attention to and invest in scientific and technological innovation, and after a long period of accumulation, the United States has formed a comprehensive leading position in science and technology. These policies can be roughly classified as: First, investment policies. The U.S. government adheres to large-scale investment in scientific and technological innovation and strengthens accumulation. The U.S. investment in R&D accounts for 27% of the world's total (NSF, 2016), which has been at the highest level in the world for a long time. The second is the talent policy. The United States attaches great importance to talent training and introduction. It is precisely by gathering the world's outstanding talents that we can achieve such brilliant scientific and technological achievements. By the end of 2015, 320 Americans had won Nobel Prizes, accounting for about half of all the winners. The third is the technology transfer policy. The United States has increasingly attached importance to the transformation and industrialization of scientific and technological achievements. Through deregulation and the introduction of the Bidu Act, it has encouraged the industrialization of scientific and technological achievements. Fourth, attach importance to basic research and cutting-edge science and technology. Every year, a large part of the government's financial science and technology funds are used for basic research and cutting-edge technology development, and attach importance to the development of emerging technologies and industrial cultivation.
After Trump came to power, he took solving the gap between the rich and the poor and strengthening infrastructure construction as the first priority of his administration, but he has not yet formed a clear strategy and policy for the role of scientific and technological innovation. In March 2017, Trump announced the establishment of a new White House institution called the "American Innovation Office", which is composed of former enterprise executives. It is expected to promote the modernization of the federal government's technological infrastructure, change the labor training plan, and possibly transfer some government services to new private companies. From its performance, Trump is very difficult to launch new innovation strategies during his tenure, and the science and technology innovation policy will also be a continuation of the previous policy. With the introduction of policies in all aspects, the policy system related to science and technology innovation will eventually form.
（2） The Trump government's investment in scientific and technological innovation faces challenges in the short term, which may cause a certain rebound in the scientific and technological community
The United States has long pursued a market economy system of free competition, which is the basis for the vitality and competitiveness of the American economy. The government's support management system for scientific and technological innovation was gradually solidified after the Second World War. In recent years, due to the needs of international competition, the role of the government in scientific and technological innovation has been increasingly strengthened, and the overall R&D investment has always maintained a high level, in a state of continuous high investment. During the Obama administration, the US R&D investment also maintained a steady growth trend. According to the 2016 Science and Engineering Indicators released by the National Science Foundation of the United States, from 2008 to 2013, the US R&D investment increased by 0.8% annually on average. The United States always ranks first in the world in terms of total R&D investment, accounting for about 30% of the world's total R&D investment in 2014. The intensity of R&D investment increased from 2.37% in 2004 to 2.62% in 2015.
After Trump took office, he took increasing military strength and ensuring employment as priorities. In the first budget for fiscal year 2018 since he took office published in March 2017, in order not to expand the fiscal deficit, but to significantly reduce government spending and foreign aid, most federal departments and institutions will face cuts in research and development funds. Although the Trump government's financial budget has reduced the R&D expenditure to the federal government, it does not represent an inevitable decline in the R&D expenditure of the whole society. The overall R&D investment of the United States will remain at a high level, and the status of the world's largest R&D investment will remain unchanged. However, due to the reduction of financial R&D funds, the investment in some government affiliated R&D institutions and R&D fields may decline, which causes some scientific researchers to rally and protest against the Trump government's reduction of research budget of scientific research institutions. Although the scale of these protests is small, due to the public status of scientists themselves, they are more likely to attract social attention and pose a certain pressure on Trump's own scientific and technological innovation policy.
（3） Stimulating private sector investment may become the focus of US science and technology innovation policy
During the Obama administration, the structure of US R&D investment began to change significantly. The private sector R&D investment grew rapidly, while the proportion of the federal government declined. In 2015, the proportion of US private sector R&D investment in GDP reached an all-time high of 1.7%, while the proportion of federal government R&D investment in GDP fell from about 0.75% in 2008 to about 0.6% in 2015. On the whole, the total R&D investment of the U.S. federal government has not increased rapidly in recent years. In 2015, it only increased by 2.3 billion dollars compared with 2008, reaching 129.4 billion dollars. However, the proportion of basic research investment of the federal government in the R&D investment of the federal government in the same period increased from 21.3% in 2008 to 24.7% in 2015 (The Council of Economic Advisers, 2016). It can be seen that the rapid growth of private R&D investment is the main reason for the continuous growth of R&D investment in the United States, while the federal government's R&D investment will pay more attention to basic research and cutting-edge technology fields with insufficient private investment after experiencing the stage of driving the private sector.
In the budget proposal of the Trump government for fiscal year 2018, the National Science Foundation (NSF) of the United States was not included in the list of funding reductions, and the funding reduction of the National Aeronautics and Space Administration (NASA) was not much (200 million dollars), but most other federal departments and institutions will face the reduction of R&D funding. The budget also proposed to reduce the funding to the United Nations, including the cancellation of funds for climate change. The budget calls off the Advanced Energy Research Program of the Ministry of Energy (ARPA-E) and related projects. ARPA-E is a department dedicated to research on new energy that can replace traditional energy. The budget believes that research in this area should be led by the private sector. The federal funding for the "Manufacturing Expansion Partnership (MEP) Program" was terminated. MEP has established an innovation service network covering the United States. About half of its operating capital (US $124 million) comes from the federal budget. The budget proposal believes that MEP agencies should operate completely on the market without government funding (Lanzhou Document and Information Center, Chinese Academy of Sciences, 2017). It can be seen from the adjustment of Trump's budget that the Trump government's science and technology innovation policy will focus on stimulating private sector investment to make up for the decline in government R&D investment.
（4） The structure of financial investment in science and technology focuses more on the direction of bringing effects to the short-term economy, while relatively neglecting the basic, public welfare, and difficult to achieve short-term results
On the premise of not increasing the government's fiscal deficit, as more funds are invested in national defense, infrastructure, social security and other emergencies, such important but difficult to achieve short-term results in science and technology research and development is relatively weak in the budget expenditure arrangement, especially in science and technology research and development, which is considered that the United States will not need or even is considered to have a strong spillover effect in the short term, is in a reduced position. The budget of the National Institutes of Health (NIH) of the United States was substantially reduced in the budget proposal of the US government for fiscal year 2018, making it almost impossible for NIH to fund new scientific research projects in fiscal year 2018. A substantial reduction in the budget of the Science Office of the Ministry of Energy will directly affect the support for cutting-edge projects and research institutions, including the Exascale (10 billion times) computing project 1 under the "National Strategic Computing Plan". The scientific research projects of the Science Office of the Ministry of Energy are also an important source of funding for dozens of scientific research institutions managed by the Ministry of Energy to carry out research and development in materials, nuclear energy and batteries. The Disaster Reduction Assistance Program and the National Energy Program were terminated. The Environmental Protection Agency (EPA) was cut by nearly 1/3 of its funding, and the Clean Energy Program, the International Climate Change Project, the Climate Change Research and Partnership Program were terminated. Therefore, after the introduction of the budget, it was criticized by some American media and academia as "killing off the American science and high-tech industry", "turning off the 'engine of science' in the United States", etc. (Feng Weiwei, 2017).
NIH has achieved the highest increase in financial allocation in more than ten years during the Obama administration.
From the perspective of structural adjustment, the Trump government pays more attention to short-term economic effects, while there are views on basic and applied research. Some opinions in the United States believe that the United States is trying to invent new technologies, while China and other countries are taking the ride of American investment (Paul Davidson, 2017). It remains to be seen what strategies the United States will adopt in areas with strong spillovers such as basic and applied research.
（5） Support for industrial scientific and technological innovation may pay more attention to the improvement of infrastructure and other conditions, providing space for industrial cultivation and development
Since the Obama period, many measures have been taken to promote the development of industrial science and technology in order to promote industrial scientific and technological innovation. Including the promotion of emerging industries, starting from improving the basic conditions. In order to promote the development of robots and network communication technologies, which are two key directions for improving labor productivity in the United States, the Labor Innovation and Opportunity Act was introduced, the labor force was trained, new broadband infrastructure was invested, and the "Link to High Speed Network" program was launched (The Council of Economic Advisers, 2016).
Trump's policy of strengthening infrastructure construction may also promote the rapid development of science and technology infrastructure. Trump has taken the active infrastructure construction plan as a priority policy, calling it a "golden opportunity to accelerate economic growth". Among them, transportation, Internet and other infrastructure may develop faster, and the demand for skilled workers will also increase significantly, which will create space for improving the development foundation of American industries and promoting the development of emerging industries.
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