<p>
[quote]
Eliminating all technological innovation from the US economy and relying only on financial “wizardry” with no regard for actual tangible productivity or manufacturing, would render the country a gigantic Enron. At the end of the day, you have to produce something tangible in order to make the money that financial professionals play around with. Without a real backbone to the economy, the US will be just smoke and mirrors. Enron taught us that mirrors crack and smoke eventually dissipates.
[/quote]
</p>
<p>I hardly doubt that the country would just be an 'Enron' - as there have been plenty of fraudulent manufacturing and technology companies also. MCIWorldcom was a tech company that was basically a fraud. Fraud can occur in any industry.</p>
<p>A far more long-standing example would be that the US would rely on providing business services, i.e. banking. What's wrong with that? Many of the most profitable companies in the country are banks. In fact, technically speaking, that you don't necessarily need to manufacture or invent anything within your borders in order to profit from them. You can just behave as a giant business services outlet. </p>
<p>Effectively, that is what Switzerland does. Switzerland is one of the richest nations in the world despite not really manufacturing anything within Switzerland (besides specialty luxury goods like watches and chocolate). Yet Switzerland is headquarters to some of the largest banks in the world, and some of the largest manufacturing companies in the world (Nestle, </p>
<p>
[quote]
The Soviet Union didn’t fall because of inferior banking, limited access to McKinsey and Company or management consulting services. The Soviet Union fell because its leaders spent the nations resources on its military and invasions of countries in western asia, instead of using those resources to raise the living standards of its people.
[/quote]
</p>
<p>Uh, well, one could say the same thing about the US, couldn't we? After all, the US hasn't exactly been shy about military spending either. I believe that the US consistently outspent the Soviet Union on military expenditures in every single year of the Cold War. You also talk about Soviet wars in Asia soaking up resources. Well, during the Cold War, wasn't the US involved in a couple of wars in Asia as well (cough cough Vietnam)? What about those expenditures? I strongly suspect that if you compared the Cold warmilitary expenditures of the US and that of the Soviet Union, it would not be a close call. </p>
<p>So that begs the question of why could the US afford to pay for all its military expenditures and still manage to greatly improve living standards, but the USSR could not? The simple answer of course is that the US had a larger economy to begin with, but that only begs the question of how the US got that larger economy in the first place? Again, keep your history in mind. The US was already the world's #1 economic power before WW1, back when relatively little of the world's top science was being produced in the US (almost all of it was being done in Europe). American history from the late 1800's to the early 1900's demonstrates that you don't need to be a science superpower to be an economic superpower. </p>
<p>
[quote]
As for being as technologically developed as the US – that’s absurd. Yes, the Soviets had great scientists but they were light years behind us in terms of civilian technologies (look at their nuclear reactors) and even in terms of thermonuclear weaponry. I don’t know where you’re getting your information, but it’s not from history books.
[/quote]
</p>
<p>You're putting words in my mouth. Did I ever say that the Soviet Union was as technologically advanced as the US? Please point to the quote where I specifically said that. Can't do it, can you?</p>
<p>What I said is that the Soviet Union was one of the top scientific powers in the world. The US was clearly #1. But the Soviet Union was a top power compared to all nations in the world, including plenty of wealthy ones. For example, I believe that the Soviet Union won more Nobel Prizes than did, say, Australia or Canada. Yet who had higher living standards? What that demonstrates is that scientific prowess does not * by itself * confer economic benefits. What you * really need * is a system that allows you to transfer the benefits of science to the greater economy. </p>
<p>
[quote]
As for Japan, you’re right to point to that country’s economic progress. To imply that this progress doesn’t depend on technological innovation is absurd. Japan is the country in the world with the highest number of patents per capita. Japanese inventors represent something like 20 % of US patent applications. Further, the Japanese economy is an essentially socialist one. To say that banking, law and management consulting are responsible for Japan’s boom is really to misunderstand the nature of the Japanese economy, the Japanese state and Japanese technological infrastructure. It’s also ironic that you cite “finance” as the source of Japanese prosperity. In fact, Japan has the highest personal savings rate of any nation in the world. Correspondingly, it also has one of the lowest personal investment rates.
[/quote]
</p>
<p>Nobody is saying that the Japanese (or any other system) is perfect. But see below. </p>
<p>
[quote]
By the way, I speak Japanese, married a Japanese woman and worked at the University of Tokyo in applied science for two years. That institution is one of the world’s premier centers for scientific research. Japan also has one of the world’s three synchrotron radiation facilities (for solid state physics) and has more nobel prizes than any other asian country.
[/quote]
</p>
<p>Well, if you claim to understand Japanese history and culture so well, then you should also be quite familiar with the Japanese history of copying, and in many cases, stealing Western technologies. For example, Japan now has one of the largest computer industries in the world - Hitachi, Fujitsu, Toshiba, and so forth are some of the world's most prominent computer companies. But how exactly did Japan build this industry? By internal innovation and research? Not really. To a large extent, it was by reverse-engineering and then stealing IBM's patents (IBM being by far the world's dominant computer firm at the time). They finally got caught in a special FBI sting operation in the 1980's, but industry observers agree that the Japanese had been pilfering IBM's intellectual properties for decades before that. </p>
<p>"The most notorious form of software imitation figuring in US-Japan trade relations centers aroudn the technology of IBM's long-dominant mainframe computer product line. For years, Japanese makers of IBM-compatible mainframe computers purchased new IBM computers and reverse engnieered the hardware and software in order to maek better clones. Apparently, such reverse engineering was not enough because in 1982 two firms - Hitachi Ltd. and Mitsubishi Electric Corporation - were caught in a joint IBM-FBI stin operation seeking to buy the secrets of IBM's mainframe computer architecture. After admitting that it had agreed to pay more than $500,00 of confidential IBM information, Hitachi pled guilty in a U.S. district court to a charge of conspiring to transport stolen IBM computer secrets, and both companies settled with IBM. " - Joel West, Asian Survey, Vol 35, #12 (Dec. 1995), p.1118-1139. </p>
<p>I see that you have also reversed cause and effect. Sure, Japan is a highly advanced scientific nation * right now *. But I'm not talking about right now, I'm talking about the past, during Japan's rise to power. That rise basically started in the 1950's, starting off as a recovery to WW2, but culminating into the wealth of today. Again, if you know Japanese history, you should know that Japan was FAR from a highly scientific nation back in those days. Sure, they have a highly productive patent system * right now *. But what about in the past, during their rise to power? Not so much. Yeah, Japanese universities are great centers of reseach * right now *. But again, what about 40-50 years ago? Was the University of Tokyo a highly respected world research center back then? It was not. But that's really the time period of interest because that is when the Japanese 'economic miracle' began to take flight. </p>
<p>In fact, one might argue that reverse causation is what is being demonstrated - that rather than strong science creates a strong economy, rather it's that a strong economy creates strong science. This would be consonant with what happened in American history, where the US became the top economic power of the world in the mid 1800's and early 1900's back when the US had little scientific research of note. At that time, the top scientific superpower was the UK, who USED to have the top economy in the world, but was now being economically overshadowed by the US. For example, prominent British scientists at the time included Faraday, Maxwell, Joule, Thomson, Bragg (father and son), and so forth. So one might ask - if the British were producing so many scientific advances, why couldn't they stay on top economically?</p>
<p>
[quote]
You’ve obviously never heard of patents or intellectual property, which is surprising. Each of those inventions I listed in my previous post (transistor, laser, etc.) is patented to ensure that the discovery is profitable.
[/quote]
Trust me, pal, I am highly knowledgeable about the subject, and your response is ironic on so many levels. If you've ever studied the relationship between patents and technological progress, you should know that it is quite a complicated relationship indeed and that intellectual property laws are a deeply flawed method of protecting your IP. This is particularly so when you're talking about predatory firms located in foreign countries that are attempting to create economic growth. As stated above in the IBM/Hitachi/Mitsubishi case demonstrates, whatever protection patents might give you might be brazenly violated by a foreign firm anyway.
This happens not just with foreign firms. Nowadays, even many domestic firms will often times just blatantly violate patents, particularly those held by small inventors/small businesses, and basically daring the patent holders to assert their rights. That's because the big boys know that there are numerous ways to invalidate an existing patent, i.e. by arguing in court that the patent should never have been granted in the first place because it copies existing work (hence violates the 'prior art' clause), or that the patent itself infringes on another patent that the big guy holds. The big guys have Dream Teams of star patent lawyers. It's rather intimidating for a small patent owner to go up against that. </p>
<p>And even if the law isn't technically 'violated', competing firms might just approach the line of violation, without actually crossing it. Arguably the most famous example in history of this was Compaq's reverse-engineering of the IBM BIOS, launching the PC-clone market. IBM had outsourced the PC OS to Microsoft and the microprocessor to Intel, but figured that holding intellectual property on the BIOS would be sufficient to maintain proprietary control. They were completely wrong. IBM sued Compaq and lost, as the courts ruled that Compaq's method of reverse-engineering was legal, and clones proceeded to take over most of the market. Hence, Compaq and the other clones basically got a free ride from all of IBM's R&D dollars spent on the PC. Now, IBM doesn't even sell PC's anymore (having sold its PC division to Lenovo). Similarly, Microsoft was able to essentially steal Apple's Macintosh GUI for Windows, and when Apple sued, Microsoft won (basically because the courts ruled that prior cross-licensing deals between Apple and Microsoft also included the GUI). </p>
<p>But the point is, intellectual property law is a very very thin reed to rely upon to defend your profits. First off, you may not even be able to catch other firms stealing your property (unless you are going to involve the FBI like IBM did). And even if you do, you may not be able to obtain redress in the courts. You never know what's going to happen in court. IBM sure thought they would mainain control of the PC market via their proprietary BIOS. Oops. </p>
<p>Even to this day, many US high tech firms refuse to manufacture their most sensitive and proprietary technologies in China. Why? They are afraid of having their IP stolen. Piracy and IP theft happen * all the time * in China. Why? Because China's IP laws are extremely weak. Yet who can deny China's economic growth in the last 30 years? </p>
<p>But there is one lasting shining irony in what you said. You said that you could rely on intellectual property law (specifically patents) to protect the fruits of scientific advances. The irony is simple. Intellectual property law is * itself * a socio-economic construct! It is a body of law that is created and modified by economists and public policy experts. There is nothing "scientific" in a patent system (in the sense that you don't "discover" a patent system by doing experiments in a lab). A patent system is whatever a society decides that it should be, and that decision is ultimately predicated on a sound economic and business system. National patent systems get changed all the time, in response to social and economic forces, and yes, that includes plenty of business consultants and bankers who you decry. For example, the landmark extension of US intellectual property law to digital media in 1999 was a notion that was pushed not by scientists but by businessmen. Heck, much of the scientific community actually opposed this extension of the law. </p>
<p>
[quote]
Even if it weren’t, it’s not like unpatented technology contributes no advantages to those who come up with it first. What about the polio vaccine or the internet? Were those instantaneously adopted by the industrialized world seconds after they were introduced? </p>
<p>If the answer to my last question is 'no' then, in your mind, did these contributions not matter? Or, do you simply maintain that they matter much less than the contribution made by the banker who came up with ATM usage fees or the supposedly “brand new idea" of interest free checking?
[/quote]
You've twisted my words. I never said that they "don't matter". I simply said that your nation does not require to develop these things itself in order to enjoy economic growth. </p>
<p>You talk about the polio vaccine. So let's talk about it. The US wasn't the only country to benefit from the polio vaccine. THE WORLD benefitted. What that means is that the vast majority of countries didn't pay a dime to develop these vaccines. But they benefitted anyway. The same thing is true of the Internet. The US government (and by extension, US taxpayers) paid a lot of money to develop the Arpanet (which later became the Internet). But THE WORLD benefitted from the Internet. Now, I agree that the US benefitted disproportionately. But the rest of the world still benefitted, despite not having paid a dime. </p>
<p>That's PRECISELY the problem with public goods like scientific research. It induces free-riding. The economically rational thing to do with a public good is to simply get somebody else to pay for it, while you reap the benefits for free. Hence, the US could do the same thing. In fact, the US basically did. During the US's rise to economic glory, the US was basically free-riding off the scientific advances that had been made in Europe. It was Europeans who actually invented the car, but it was Americans who built the world's largest auto companies. </p>
<p>Don't get me wrong. I'm not saying that I * like * the situation. Look, I wish that a way could be found to capture all the gains from scientific advances. I wish we could devise a better world intellectual property system. I think the world should probably be paying the US for all the scientific advances made in the US. I wish scientists really could be paid the true economic value of their discoveries. But that's all wishful thinking. At this time, science is a public good and as such, the economic rational thing really can be just to sit back and leech off the advances of others. Sad but true.</p>