Since World War II, U.S. scientific innovation and technological entrepreneurship have ensured the country’s economic success and national security. For most of this period, the United States enjoyed global leadership in innovation, measured in research and development spending as well as in patents, scientific paper production, and output from the technology industry. An extraordinary pool of technical and scientific talent generated numerous breakthroughs in economically and strategically important fields. GDP growth in the postwar period depended, in roughly equal measure, on labor supply and productivity growth driven by technological innovation.2 The United States was the world’s largest, most dynamic market, to which other countries and innovators looked for inspiration. Technological predominance supported military leadership, which in turn ushered in a season of unparalleled prosperity.

Today, this leadership position is at risk. The federal government makes investments in basic science that are too big and risky for the private sector to undertake, and these investments can spark discoveries. But over the last two decades, Washington has failed to maintain adequate levels of public support and funding for basic science. Federal investment in R&D as a percentage of GDP peaked at 1.86 percent in 1964 but has declined from a little over 1 percent in 1990 to 0.66 percent in 2016. Current trade policies needlessly alienate friends and allies, increase costs and unpredictability for American tech firms, and impede the adoption of U.S. technology in foreign markets, therefore threatening U.S. science and technology capabilities. The White House is raising new barriers to entry of foreign students and entrepreneurs, undermining the United States’ ability to attract and retain global talent. In addition, the Defense Department’s acquisition and development processes, designed for stability and predictability, struggle to keep pace with rapid developments in software, physical, and biological systems.

The United States has faced and responded to technological competition in the past. This time, however, developing a national response will be more difficult because of three challenges. First, the pace of innovation has accelerated, with new technologies diffusing to users and businesses much more quickly than they used to. Moreover, new technologies, particularly artificial intelligence, could redefine the nature and role of work, reshaping the economy and challenging local, national, and global political institutions and governance frameworks.

Second, many advanced technologies necessary for national security are multiple-use and developed in the private sector by firms that design and build them via complex supply chains that span the globe. The Defense Department’s access to the private sector and new technologies is essential to national security, but the United States has less ability to shape the manufacturing base through traditional policy levers. This private-sector dominance has also resulted in critical technologies’ becoming widely available to all countries, even potential adversaries. Military advantages will go to the countries that integrate commercial technologies more quickly.

Third, China is a different type of challenger (see figure below). The Chinese economy is likely to become larger than the U.S. economy between 2030 and 2040. But the size of the economy may not matter as much as Beijing’s promotion of a new model of innovation that combines strategic planning; government-led investments and spending; a permissive regulatory environment; internationally competitive technology platforms; large pools of personal, health, industrial, and other data; and growing numbers of skilled STEM talent. Both the U.S. and Chinese science and technology systems have benefited from the countries’ close ties and the flow between them of people, money, and products, but China has also taken advantage of the openness of the U.S. innovation system by engaging in the theft of American intellectual property.3 In addition, the Chinese government is devoting significant resources to converting new science and technology capabilities into military strength.

The United States needs a national security innovation strategy that ensures it is the predominant power over the next two decades in a range of emerging technologies, in particular AI and data science, advanced battery storage, advanced semiconductor technologies, 5G, quantum information systems, and robotics, as well as in critical biotechnologies, including genomics and synthetic biology. Failure to take on these challenges risks the United States’ losing the economic and national security benefits it has enjoyed over its decades of technological leadership and investment.

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