The United States can no longer view investment in its information technologies and infrastructure as a given. In the global economy, capital and innovation are mobile. Whether investors choose to capitalize a venture in the United States, China, or Qatar depends primarily on whether investors believe the venture will produce a profit. To obtain the capital necessary to invent new technologies and build next generation networks, U.S. companies must compete with innovators around the globe.
Our buying power has traditionally given us a sizeable advantage in the global competition for investment. That advantage is rapidly eroding. For example, the largest mobile service provider in the United States has 108 million subscribers. The largest provider in China has 661 million subscribers – more than six times as many. Although the United States is approximately the same size as China when measured by geography, the largest mobile provider in the United States measured by subscribers would be a distant number 4 in China, whose economy is currently growing much more rapidly than our own. In a global economy, the notion that central planners can force international companies to make the investments planners desire is no longer a given.
Innovation-driven growth and infrastructure investment are becoming international phenomena. No country or company dictates investment criteria or technology standards in a globally connected market. China understands this new dynamic and is developing policies that promote its competitiveness in marketplaces worldwide. Policymakers in the United States are still directing their policies primarily at domestic markets. The unintended consequence of our intramural approach is the erosion of our nation’s global competitiveness in key technology markets that are critical to our future growth.
Private companies in the United States invented the technologies that define the modern world. Other countries have marveled at the ingenuity of American entrepreneurs and seek to emulate our success. Our policymakers, however, have dimmed our brightest private research facilities, yielded our best ideas to foreign competitors, and discouraged investments in our nation’s economic future.
- Bell Labs invented the transistors that made computers and other electronic devices possible; developed the world’s first communications satellite; discovered radio astronomy; created the UNIX operating system (used in Internet servers, Apple devices, and Linux) and the C++ computer programming language (the most widely used computer programming language in the world); created the solar cell; invented the technologies used in today’s 4G mobile networks; created the charged coupling device (used in digital cameras); and developed the wireless local area network. After the Department of Justice dismantled the Bell system, Bell Labs declined until Alcatel, a French company, acquired its research facilities in 2006. Two years later, Alcatel-Lucent abandoned basic science, material physics, and semiconductor research.
- Motorola created the world’s first cellular phone and built the infrastructure used by mobile service providers around the world. In 2010, Motorola sold its mobile infrastructure assets, including its R&D facilities, to Nokia Siemens Networks, a Finnish company. Huawei, a Chinese company founded in 1987, is now the world’s second largest telecom equipment manufacturer. There is no company in the U.S. today that manufactures a complete line of mobile Internet equipment.
- At its Palo Alto Research Center (PARC), Xerox invented the personal computer, the computer mouse, the graphical user interface (bought by Apple and used in the Macintosh), WYSIWYG text editors (used in Microsoft Word), and Ethernet networking. Xerox also invented the laser printer in 1969, which produced record revenues in 1973-1975. As a result of the laser printer’s success, the Federal Trade Commission brought an anti-trust suit against Xerox, and in 1975, forced it to license its entire patent portfolio – primarily to Japanese competitors. The FTC permitted Xerox to enjoy the full benefits of its creation for only three years.
- The most innovative companies in the United States today – the companies that are the most vital to our global competitive position – are facing government regulation at every turn. The Federal Trade Commission is investigating Google, the Justice Department is suing Apple Computer, and the Federal Communications Commission blocked AT&T’s attempt to purchase T-Mobile – a German company.
It should be no surprise that private investment in our research facilities and infrastructure has declined. There is little incentive to bear the risk of capital investment in visionary projects when the typical reward for success is a government lawsuit or divestiture to a foreign company. When the government limits a company’s return on investment to three years, it encourages “short-termism.” If we wish to remain the world’s largest economy in the long term, we need to renew our commitment to private investment.
America needs a 21st Century approach to global competition that spurs private investment.