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| Government funded science leads to huge economic gains. Trump is cutting funding for science. China will gain |
Mark Blyth (professor of political economy at Brown University):
There is a trade in finance known among some as the "Chomsky trade", after the linguist and social critic Noam Chomsky. Mr [sic] Chomsky once pointed out that, if you want to know what's worth investing in, look at what US federal research funding organisations such as the National Institutes of Health (NIH) and the Defence Advanced Research Projects Agency (Darpa) are investing in today, and then go long 30 years.
- In the 1950s, the big thing was transistors, which gave us the microelectronics revolution in the 1980s.
- In the 1960s, it was digital processing, which gave us personal computers in the 1990s.
- In the 1970s it was biotech, which started to come on line in the 2000s.
- And in the 1980s, it was the beginnings of machine learning and big data, which will transform much of the world of work in the 2010s and beyond.
Despite the ill-informed claims of politicians, the US government and the US taxpayer are the critical investors in basic scientific research, not the private sector. Private foundations fund only 6 per cent of US research and development. The federal government funds 55 per cent.
As the economist Mariana Mazzucato has shown, most of the stuff inside an iPhone was made by the US defence department. TCP/IP, which gives you internet connectivity, was developed by Darpa. The touch screen was made for the US Air Force. GPS, which makes half your apps work, was a navy project. Add to this the fact that about 40 per cent of the basic biomedical research needed to power not just biotech, but the drugs keeping the elderly alive and well today, comes not from companies, but from labs in universities funded by the NIH, and you begin to see how important public funding of science is.
This is what keeps America on the cutting edge. However, the Trump administration seems determined to destroy it. Not only has it pledged massive cuts to the NIH and other funders as part of its budget proposals to "Make America Great Again", it is now going after the support infrastructure that makes research possible in the first place.
Doing basic research, in a world where talent must be trained and retained, sensible regulations adhered to, conflicts of interest avoided, and money spent transparently, requires a supporting infrastructure. Research institutions construct and maintain the physical spaces where research is conducted and provide the resources. These, provided by the host institution, are usually referred to as "indirect costs".
At a private institution such as Brown University, for example, a charge of 62.5 per cent included in the grant would cover such costs, but the effective rate at Brown, given government caps and cost sharing, is about 33-38 per cent. Brown spends just over one dollar out of three supporting research. That is reasonable, given the cost of doing research placed upon us by the federal government itself. Public institutions typically have lower indirect cost rates, due in part to support they receive from the state.
Enter the Trump administration. Someone there noticed that private bodies, such as the Gates Foundation, pay only 10 per cent in indirect costs. Why then should the taxpayer pay any more than 10 per cent?
At a private institution such as Brown University, for example, a charge of 62.5 per cent included in the grant would cover such costs, but the effective rate at Brown, given government caps and cost sharing, is about 33-38 per cent. Brown spends just over one dollar out of three supporting research. That is reasonable, given the cost of doing research placed upon us by the federal government itself. Public institutions typically have lower indirect cost rates, due in part to support they receive from the state.
Enter the Trump administration. Someone there noticed that private bodies, such as the Gates Foundation, pay only 10 per cent in indirect costs. Why then should the taxpayer pay any more than 10 per cent?
But there is a deep problem here. Precisely because the government pays such costs, private funders can pay less, which incentivises foundations to invest in basic research. If foundations had to pay the real cost of research support they would not be able to. If you cut federal indirect costs to 10 per cent, foundations will not suddenly fill in the gap. Basic research will be crippled.
While actual cuts to federal funders such as the NIH needs congressional approval, the administration can reduce the indirect rate on grants to universities unilaterally, and it looks like they are going to do it. This threatens to bring that decennial research cycle that keeps America on the cutting edge to a halt. With the attention of both Democrats and Republicans on Capitol Hill focused elsewhere, this is exactly the type of policy that passes unchallenged.
The irony is that if it goes through, the likely winner will be China. The Chinese would love to take over America's technological edge. But doing so is hard. What kind of gift is it, then, to give it away in a feat of short-sighted penny pinching? Certainly not one that would make America great again.
If US politicians really care about the future of their country they will invest more, not less, in the Chomsky trade. If they want to hand global technological leadership to China, they should keep going down the path they have chosen.
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