Government Action Is Key to Driving Innovation, Entrepreneurship and Economic Growth

12/20/2011 08:25 am ET | Updated Feb 19, 2012
  • Steven Strauss John L. Weinberg/Goldman Sachs & Co. Visiting Professor at Princeton University's Woodrow Wilson School

A general theme of the Republican presidential debates is that government is a waster of resources, net destroyer of jobs, and stifler of innovation. Interestingly, these same candidates praise the private sector's innovation and creativity (e.g., Apple, Facebook, Google, etc.).

The GOP ignores that most of our excellence in scientific innovation is attributable to government support for basic research. Currently 66% of research at American universities is funded by local, state and federal governments, with most of these funds coming from the federal government. This pattern has been consistent since WW II (1).

University research should be funded by the government -- it is the classic public good. It produces broad benefits to society that no one institution can capture, has very uncertain benefits and has very long time spans, hence it is not suitable for private sector support.

Not one of the technology companies listed above (and many others not mentioned) would exist without the Internet. The Internet (and its predecessors) was originally a creation of the federal government. It was supported for the first 20+ years by our federal government before becoming commercially viable. It was 'incubated' with government support at our universities, with private sector involvement coming relatively late.

Yet, I can't think of a single time during the debates when any Republican presidential candidate acknowledged the federal government's highly important role in funding predecessors of the Internet (and other key technologies) -- when the private sector lacked the vision and initiative to make these long-term investments.

Aside from anecdotal evidence, we have statistical evidence for university's key role in economic development:

The concentration of great universities in a nation is extraordinarily closely related to its economic competitiveness. It is closely associated with economic output per capita ([correlation] .74), total factor productivity (.77) and overall competitiveness (.71) based on the Global Competitiveness Index ...
'Extraordinary Value of Great Universities', Atlantic Magazine,
Richard Florida, 2011

Higher education is an American strength. List 1 (below) names the world's top 10 science and engineering universities. All these schools are American and most are State universities. I don't know of any other global industry where all top 10 institutions are American. Significantly, the one global industry (higher education) where America retains unquestioned dominance is driven by Government and the not-for-profit sector.

America's higher education and research sector is something all Americans can take pride in. But particular credit goes to the many politicians and bureaucrats who had the courage, and insight, to fund truly long-term projects and technologies too uncertain for a risk-averse private sector.

However, as with any success, we face challenges. Just when our political leadership lacks the courage and vision to make long-term investments in science -- other countries seek to copy our success by improving their performance in higher education.

For example, it has been widely noted that China aims to significantly improve its higher education sector. On one level, we should applaud and support China's pushing back the frontiers of knowledge because it benefits everyone (e.g., if a Chinese university cures cancer, we all benefit).

On another level, if we, as Americans, want to:
(a) continue to be a frontrunner in scientific knowledge and innovation, and
(b) benefit (economically and strategically) from being at the cutting edge of innovation (e.g., jobs and other benefits that would result from curing cancer ) -- we will have to 'up our game'.

I am happy to report that the spirit of creative government and willingness to make long-term commitments is still alive in America. Mayor Michael R. Bloomberg recently created Applied Science NYC, a city-sponsored initiative to build a new top tier science and engineering campus in NYC. This week it was announced that Cornell University with Technion was selected for the initiative. According to Mayor Bloomberg,

the campus is expected to spawn 600 new companies over 3 decades creating at least 30,000 permanent jobs

This initiative is a renewed commitment to the belief that government can, and must, play a creative role -- as convener and provider of seed-funding -- to keep America growing.

Let me know if you agree about the role of government and universities in economic growth. More importantly, let me know whether you feel the Republican presidential contenders (e.g., Romney, Gingrich, et al) have shown any real vision about America's economic future.

I look forward to your comments.

List 1: Academic Ranking of World Universities in Engineering/Technology and Computer Sciences - 2010 (Source:
1. Massachusetts Institute of Technology (MIT)
2. Stanford University
3. University of California, Berkeley
4. University of Illinois at Urbana-Champaign
5. Georgia Institute of Technology
6. The University of Texas at Austin
7. University of Michigan - Ann Arbor
8. Carnegie Mellon University
9. Pennsylvania State University - University Park
10. University of California, San Diego & University of Southern California (tied).

About the Author: Steven Strauss was founding Managing Director of the Center for Economic Transformation at the New York City Economic Development Corporation (NYCEDC). He is an Advanced Leadership Fellow at Harvard University for 2011-2012. He has a Ph.D. in Management from Yale University. Follow him on Twitter @steven_strauss.

Disclosure: Applied Sciences NYC was one of the initiatives Steven Strauss helped to create while working at NYCEDC.

(1) National Science Foundation, National Center for Science and Engineering Statistics. 2011. Academic Research and Development Expenditures: Fiscal Year 2009. Detailed Statistical Tables NSF 11-313. Arlington, VA. Available at