Unemployed men queue outside a depression-era soup kitchen. Photo Wikimedia Commons.

Financial frenemy

11 January 2013

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Paul Harris is Deputy Director of the HC Coombs Policy Forum and a Special Advisor on government and international relations to the Commonwealth Scientific and Industrial Research Organisation (CSIRO), Australia's national science agency. 

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Are innovation, research and development ways to get out of economic trouble, or further into it? PAUL HARRIS writes that the answer lies in doing better innovation, instead of more of it.

We’re five years on from the global financial crisis – the worst downturn since the great depression – but still the aftershocks continue. Ongoing economic and political instability in Europe has thrown into sharp relief our own concerns about long-term productivity, competitiveness and fairness.

In their responses to the crisis, governments around the world have focused on innovation policy, with major investments in research and development and other innovation programs through stimulus packages. In its 2010 Innovation Strategy, the OECD confidently asserts ‘the key to restoring long-term growth is our ability to innovate’.

In recent years, both the Obama administration and European Commission have vowed to lift total Research and Development (R&D) spending above 3 per cent of GDP, with innovation a major focus of Europe’s 2020 Strategy.

The problem with this is that we know it was innovation that got us into this crisis in the first place.

Since completing his review of the Australian ‘national innovation system’ for the government in 2008, Dr Terry Cutler has stressed that innovation is vital for productivity and sustainable growth, but also that it is not ‘morally neutral’ and, when it came to the global financial system, unchecked innovation was part of the problem.

Our present focus on innovation isn’t the first time that it has been in the spotlight. ANU historian Carroll Pursell has studied the ways in which science and technological innovation were perceived in the United States during the Great Depression in the 1920s. Pursell describes a pervasive ambivalence about the social and economic impacts of innovation which fed the movement for a science moratorium that ‘agitated the popular press’ for a decade.

In 1933, the motto of the Chicago World’s Fair trumpeted ‘Science Finds—Industry Applies—Man Conforms’. But with US unemployment reaching 25 per cent, many were not prepared to conform to a linear and triumphalist version of innovation. There was active debate between the research community, industry, unions, government and church as people grappled with ways to determine good innovation from bad.

What has changed since the 1930s? Why were there calls then for a moratorium on innovation in response to economic crisis, when now we see it as our way out of crisis? Do we honestly think we are now better at managing and guiding innovation?

In 2009, the Korean Government announced plans to lift total national research and development investment to five per cent of Gross Domestic Product, which would be the highest rate of research and development intensity in the world. This unprecedented level of innovation would support the achievement of ‘green growth’, which has been called ‘the challenge of the Asian Century’.

Paying attention to environmental as well as economic goals is a step in the right direction, but innovation policy is also social policy. Investments in research and development now will lead to long-term effects for future communities, creating winners and losers. Concerns are being voiced in the US about the spectre of ‘jobless innovation’, where broader forces of globalisation mean the benefits of US R&D are captured elsewhere.

What we don’t need now is an all-or-nothing approach. Innovation is not all good or all bad, it’s both. And it is not driven by an invisible hand, it’s driven by us. We could take a lesson from the 1930s, when there was an active discussion of these issues, which spilled out into society at large.

We know innovation is important, but we need to get better at it to get beyond endless cycles of boom and bust. Instead of aiming for more innovation, we should aim for better innovation, thinking through the societal impacts of our investments. This would be a better kind of progress.

Paul Harris is Deputy Director of the HC Coombs Policy Forum and Program Leader on the Science, Technology and Public Policy program.

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