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Beep, Beep

January 26th, 2011 Posted in Economics, International Politics by

I recall watching a cold war documentary about 15 years ago, where one of the Soviet survivors recalled Russian pride in 1957 when the launch of Sputnik 1 edged the USSR over the USA in development of Space technology. On that day he said he wandered around town cheerfully saying “Beep, beep” to anyone who would listen and yet avoided being sent to Siberia.

In the US the event precipitated the Sputnik Crisis, a series of policy responses that led to the formation of NASA, millions in investment in education, and the most earnest period of the Space Race, eventually ‘won’ by America when they put the first man on the moon in 1969. That and the effective bankruptcy of the Soviet state.

President Obama, has used this allegory in his State of the Union address to consider the USA’s relative disadvantage to India and China in many areas of technology. Like the Space Race, this is apparently a contest the world hegemon can win by outspending their rivals. Beep, beep.

The President perhaps should review the Space Race more critically. Sputnik 1 for example burnt up in orbit after 3 months. It was a Russian Millennium Dome.

The Space Race itself whilst producing many spin off innovations such as dried fruit and no-fog ski goggles, was principally about national pride. It simulated heavy investment in science programmes in schools but it is unclear today why 1,200 US high schools need their own planetarium.

The Space Race was also a narrow field. There were clear milestones and achievements where somebody could be first. It is unclear what ‘winning’ against India and China actually looks like, in which fields this is at all likely, or what it has to do with the infrastructure investment programmes launched in the same speech.

The big news in Space today is that private companies think they can deliver what governments used to do better, faster and cheaper, with fewer explosions.

It is also the case that the changing fortunes of the world’s most populous countries is largely a matter of history and trade economics. With low standards of living and cheap education systems, India and China currently have comparative advantage across a wide range of goods and services. As that advantage drives up growth and living standards faster than the rest of the world, costs will rise and the advantage will erode.

In 50 years for example we may well be discussing South Africa’s rapid development as a threat to Chinese leadership. Only 20 years ago Japan were the new kids in town who were going to end up owning California (still for sale). The economics of cost inflation and inflexibility caught up with them and they’ve been in a rut for most of the last two decades, despite large technology and R&D advantages that persist today.

It is not at all clear then that the US or any other power can seek to address those changes through policy and spending, or why it matters. 

In fact by making it a race rooted in the 1950s Obama I think misses a trick about how the world has changed. The Space Race could happen, in no small part, due to the geopolitics of fear and threat between two superpowers. Chinese growth conversely has happened, in no small part, due to the removal of that threat and opening up of world economies.

Innovation today involves global collaboration and information sharing that would have been called espionage in the 1950s. For Amercians to ‘win’, in the sense of seeing their opportunities and living standards rise, the more R&D that can happen where it is most cost effective the better. At the moment that is India and China, not Indiana and Chattanooga.

In a liberalised, globalised world, a new type of battery developed in Mumbai can create jobs in Memphis, technology nationalism becomes less important.

In the UK for example we bemoan our inability to take great British ideas such as the computer and jet engine to market, but we have still benefitted massively from American exploitation of both. We struggle with the notion that despite having the best wind and tidal resources in Europe, most of the gear is better made in Germany.

What America needs then is less another ‘Sputnik moment’ and more self-confidence in their ability to work within an open world of many winners. Being the first flag in the moondust isn’t much of a win if all you leave behind is a flag and dust.

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