Investment & Financial Articles
Title: The Wages of Science - Part I
Author: Sam Vaknin
Article:
In the United States, Congress approved, last month, 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 last year, reports
the MoneyTree Survey. According to the Ernst & Young 2002
Alberta Technology Report released on Wednesday, 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 last year -
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.e. 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.
About the author:
Sam Vaknin is the author of Malignant Self Love - Narcissism
Revisited and After the Rain - How the West Lost the East. He is
a columnist for Central Europe Review, PopMatters, and eBookWeb
, a United Press International (UPI) Senior Business
Correspondent, and the editor of mental health and Central East
Europe categories in The Open Directory Bellaonline, and
Suite101 .
Visit Sam's Web site at http://samvak.tripod.com
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