How to Combat China’s Rise in Tech: Federal Spending, Not Tariffs

At the heart of the trade war between the United States and China lies a profound and unsettling question: Who should control the key technologies that will rule tomorrow?

These advances could alter everything about how we live and work. Shouldn’t some other entity, like maybe a democratically elected government, have some input in their rollout?

Here is a crazy idea. The United States could outline a plan for and put money behind an alternative vision for the global technology industry. If executed carefully, such a plan could stimulate wider competition in tech, and allow for broader economic and social gains. Perhaps a whole set of new companies, rather than just the giants you are used to, could plan a role in the future.

Does this sound un-American? It should not. Not long ago, when Americans faced the possibility of being left behind by other countries’ advancing tech, the federal government stepped in with nearly endless resources to stimulate the creation of vast new industries.

Thanks to government funding, we got the nuclear industry, the space program, the aviation industry and the internet, which was initially sponsored by the Defense Department. Just about every key component in a smartphone, from the battery to GPS, is based on research first done for the U.S. government. It is not an understatement to say that, for better or worse, the U.S. government invented the modern world.

But today in the United States, venture capitalists and multinational corporations lead the development of — and will own — tomorrow’s technologies. Meanwhile, the Chinese government is playing the role the United States once did. Over the past decade, China has pushed an aggressive series of plans meant to gain dominance in technological areas it considers crucial to the global economy.

One program, Made in China 2025, outlines a road map for China to become a world leader in advanced manufacturing (things like robotics, aircraft and machine tools). Another plan calls for China to achieve dominance in artificial intelligence. Based on similar initiatives, the Chinese have already seen big wins. Americans invented the modern solar power industry, but thanks to Chinese government intervention, China’s solar industry leads the world. So does its high-speed rail system.

The Trump administration objects to China’s tech visions. It has cited Chinese government support for tech as a primary reason for imposing tariffs on Chinese goods. But its objections only put the disconnect in stark relief. If the United States is worried that the Chinese will win the future because they are actually spending money to win the future, why aren’t we doing the same?

“It is a waste that we are not using the rise of China as a galvanizing cry to invest more in science and technology in America,” said Yasheng Huang, an economist who studies Chinese politics and business at the Massachusetts Institute of Technology’s Sloan School of Management. He has argued that rather than imposing tariffs to respond to programs like Made in China 2025, Americans should respond as we did in 1957, when we sharply increased government spending on science after the Soviet Union launched the world’s first man-made satellite, Sputnik 1.

You might argue that the modern world bears little resemblance to the Sputnik era. Today, we have vibrant tech industry. Amazon, Apple, Google, Facebook, Microsoft and lots of venture capitalists are already investing heavily in the future. Why should the government step in?

But that is a shortsighted view. Huang points out that the established tech industry is mainly funding the most immediately applicable technologies. “Life science and software get a lot of money,” he said.

More speculative technologies that don’t offer any obvious payoff are not as lucky. “Everything else is underfunded,” Huang said, noting that as a percentage of the overall economy, federal spending on research and development has fallen since the 1970s. I reached out to Michael Kratsios, President Donald Trump’s deputy assistant for technology policy, to ask about the role the president ascribes to public funding in the advancement of tech. His office declined an interview, but a spokesman noted that the omnibus budget deal that Trump signed in March outlined a significant increase in federal spending on research and development.

That is true; the deal called for the biggest increase in federal research spending since the Obama administration’s 2009 stimulus bill. It is worth noting, though, that Trump signed the bill under duress — he tweeted that he would “NEVER sign another bill like this again” — and that in most areas the White House’s initially proposed budget called for far less.

Other aspects of Trump’s agenda are putting American tech at a disadvantage, too. While China is investing in solar power, we are propping up industries that are politically important toTrump, like coal and, perhaps soon, soybeans. Funding the past while your adversary invests in the future is probably not the best way to stay ahead economically.

But beyond simply opening the spigot to more money, we should push the U.S. government to create an alternative to China’s vision for tech dominance for another reason: It would be a way to develop a more accessible tech industry.

One huge problem with today’s tech business is the unequal way it distributes its gains. Tech advances have created immense wealth, but much of the money has gone to just a small number of people clustered around two cities on the West Coast. Now — as we are suddenly realizing the power that tech giants can exercise over politics, news, our psyches and other basic aspects of democracy — there is a real question about whether they face any meaningful challenge to their rise.

Government spending can help there, too. When the government creates tech, its gains tend to be spread widely. The internet is the open system it is today because it was sponsored by the government, not private telecom giants like AT&T. The GPS satellite system is available to anyone who wants to use it because taxpayers paid for it. The same can be true of much of what we invent tomorrow. If the U.S. government decided to plan for the future, rather than sit on the sideline as it came to pass, it could spur the development of the same kind of decentralized, open tech infrastructure that fostered today’s miracles.

It is a matter not just of access but of agency, too. Many of the technologies that will dominate the future could change life in substantial ways. Artificial intelligence and robotics could reshape labor markets and much else about how Americans work. Energy technologies might transform your city. Yet we really have no good way to prepare for these changes. For several decades, in the United States, we have been in the mode of reacting to technological change rather than anticipating and planning for it. As I have argued before, this puts us in a constant state of what the futurist Alvin Toffler called “future shock” — a state of ever-present unease about what technology has wrought, which is the truest emotion of 2018.

A federal plan to win this or that industry is not guaranteed to work. But at least it will prompt us, as a country, to think about what is coming.