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The Wages of Science

In the United States, Congress approved, In February 2003, increases in the 2003 budgets of both the National Institutes of Health and National Science Foundation. America is not alone in - vainly - trying to compensate for imploding capital markets and risk-averse financiers. In 1999, chancellor Gordon Brown inaugurated a $1.6 billion program of "upgrading British science" and commercializing its products. This was on top of $1 billion invested between 1998-2002. The budgets of the Medical Research Council and the Biotechnology and Biological Sciences Research Council were quadrupled overnight.

The University Challenge Fund was set to provide $100 million in seed money to cover costs related to the hiring of managerial skills, securing intellectual property, constructing a prototype or preparing a business plan. Another $30 million went to start-up funding of high-tech, high-risk companies in the UK. According to the United Nations Development Programme (UNDP), the top 29 industrialized nations invest in R&D more than $600 billion a year. The bulk of this capital is provided by the private sector. In the United Kingdom, for instance, government funds are dwarfed by private financing, according to the British Venture Capital Association.

More than $80 billion have been ploughed into 23,000 companies since 1983, about half of them in the hi-tech sector. Three million people are employed in these firms. Investments surged by 36 percent in 2001 to $18 billion. But this British exuberance is a global exception. Even the - white hot - life sciences field suffered an 11 percent drop in venture capital investments in 2002, reports the MoneyTree Survey. According to the Ernst & Young 2002 Alberta Technology Report released in March 2003, the Canadian hi-tech sector is languishing with less than $3 billion invested in 2002 in seed capital - this despite generous matching funds and tax credits proffered by many of the provinces as well as the federal government. In Israel, venture capital plunged to $600 million in 2002 - one fifth its level in 2000. Aware of this cataclysmic reversal in investor sentiment, the Israeli government set up 24 hi-tech incubators. But these are able merely to partly cater to the pecuniary needs of less than 20 percent of the projects submitted. As governments pick up the monumental slack created by the withdrawal of private funding, they attempt to rationalize and economize.

The New Jersey Commission of Health Science Education and Training recently proposed to merge the state's three public research universities. Soaring federal and state budget deficits are likely to exert added pressure on the already strained relationship between academe and state - especially with regards to research priorities and the allocation of ever-scarcer resources. This friction is inevitable because the interaction between technology and science is complex and ill-understood. Some technological advances spawn new scientific fields - the steel industry gave birth to metallurgy, computers to computer science and the transistor to solid state physics. The discoveries of science also lead, though usually circuitously, to technological breakthroughs - consider the examples of semiconductors and biotechnology. Thus, it is safe to generalize and say that the technology sector is only the more visible and alluring tip of the drabber iceberg of research and development. The military, universities, institutes and industry all over the world plough hundreds of billions annually into both basic and applied studies. But governments are the most important sponsors of pure scientific pursuits by a long shot. Science is widely perceived as a public good - its benefits are shared. Rational individuals would do well to sit back and copy the outcomes of research - rather than produce widely replicated discoveries themselves.

The government has to step in to provide them with incentives to innovate. Thus, in the minds of most laymen and many economists, science is associated exclusively with publicly-funded universities and the defense establishment. Inventions such as the jet aircraft and the Internet are often touted as examples of the civilian benefits of publicly funded military research. The pharmaceutical, biomedical, information technology and space industries, for instance - though largely private - rely heavily on the fruits of nonrivalrous (i. public domain) science sponsored by the state. The majority of 501 corporations surveyed by the Department of Finance and Revenue Canada in 1995-6 reported that government funding improved their internal cash flow - an important consideration in the decision to undertake research and development. Most beneficiaries claimed the tax incentives for seven years and recorded employment growth. In the absence of efficient capital markets and adventuresome capitalists, some developing countries have taken this propensity to extremes. In the Philippines, close to 100 percent of all R&D is government-financed.

The meltdown of foreign direct investment flows - they declined by nearly three fifths since 2000 - only rendered state involvement more indispensable. But this is not a universal trend. South Korea, for instance, effected a successful transition to private venture capital which now - even after the Asian turmoil of 1997 and the global downturn of 2001 - amounts to four fifths of all spending on R&D. Thus, supporting ubiquitous government entanglement in science is overdoing it. Most applied R&D is still conducted by privately owned industrial outfits. Even "pure" science - unadulterated by greed and commerce - is sometimes bankrolled by private endowments and foundations. Moreover, the conduits of government involvement in research, the universities, are only weakly correlated with growing prosperity. As Alison Wolf, professor of education at the University of London elucidates in her seminal tome "Does Education Matter? Myths about Education and Economic Growth", published in 2002, extra years of schooling and wider access to university do not necessarily translate to enhanced growth (though technological innovation clearly does). Terence Kealey, a clinical biochemist, vice-chancellor of the University of Buckingham in England and author of "The Economic Laws of Scientific Research", is one of a growing band of scholars who dispute the intuitive linkage between state-propped science and economic progress.


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