(What’s Left of) Our Economy: Inside the U.S. Research and Development Slump

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Bank for Intenational Settlements, Bernie Sanders, Elizabeth Warren, innovation, National Science Foundation, neo-liberalism, private sector, Project-Syndicate.org, research and development, science, stock buybacks, technology, William H. Janeway, {What's Left of) Our Economy

At the risk of sounding like an Elizabeth Warren or Bernie Sanders clone, I’ve just come across some data showing that stock buybacks by U.S. public companies have really gotten out of hand. That matters because it looks like they’ve been denying these firms major resources for performing the research and development (R&D) needed to keep creating new products, services, and processes, and maintain the U.S. economy’s global competitiveness.

I got interested in these trends due to a post at the Project-Syndicate.com website by William H. Janeway. According to this business and economics writer, for decades through the first half of the twentieth century, America’s industrial giants in particular spent significant shares of their profits on “Scientific research and development of technological applications,” and indeed virtually monopolized such activity in the United States up to the start of World War II.

Once the war broke out, and long after (including of course during the early Cold War), these efforts were powerfully supplemented by the federal government. And beginning in the 1960s (roughly), when for various reasons, the profits that powered private sector R&D began drying up, Washington’s funding actually was able to fill the gap pretty satisfactorily.

Yet starting in the early 1980s (and I’m simplifying terribly here), market-friendly neo-liberal national economic policies like regulatory reform and tax cutting revived corporate profits. But these measures also presented business with a less risky, more immediately lucrative, and therefore more appealing way to use this new windfall than figuring out how to provide new and better goods and services – buybacks of their own shares of stock, a practice that was legalized in 1982.

I’ve found data going back to 1995, and from then through 2019, reports the Bank for International Settlements (a grouping of the world’s major central banks) annual U.S. gross stock buybacks soared more than ten-fold – from $73.16 billion to $829.18 billion. Yearly net buybacks jumped even faster – from $34.41 billion to $605.22 billion.

And since then, annual gross buybacks have jumped still higher. Investment banking firm Goldman Sachs pegs the 2021 gross buyback total at $992 billion, and not surprisingly predicts that the number for this year will hit $1 trillion. The slow growth stems partly from a one percent excise tax on the largest buybacks that kicks in next year.

Private sector R&D hasn’t exactly stood still during this period. But the National Science Foundation (NSF) says it rose only four-fold, from $129.83 billion to $498.18 billion. (See the spreadsheet provided at the first link here.) Put differently, in 1995, annual gross buybacks were 56.35 percent of annual R&D outlays. In 2019, annual gross buybacks just over 60 percent higher.

The NSF believes that private sector R&D neared $532 billion in 2020. But even that nice increase wouldn’t change the ratio much.

During these decades, moreover, federally funded R&D hasn’t remotely filled the gap. It increased nearly 150 percent from 1995 to 2019, but in absolute terms, the latter total was only $62.80 billion. And in 2020, it’s estimated to have risen only to $65.69 billion.

Further, neo-liberalism (or market fundamentalism, or whatever you want to call it0 is just as much to blame for this sluggish pace as it is for Wall Street deregulation, for it resulted from the same, reflexive anti-government impulses.

I don’t mean to demonize private business or finance or free markets, or to lionize government. But clearly something’s gone very wrong with the incentive structures shaping business decisions, and just as clearly, lots of business lobbying has had lots to do with it. Ditto for inadequate federal funding. Without major changes, don’t expect the U.S. economy from escaping the dangerous trap of heavy reliance on debt-based growth any time soon.

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Following Up: Why the Fauci-Lied Charges Look Stronger than Ever

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Anthony S. Fauci, CCP Virus, Congress, coronavirus, COVID 19, EcoHealth Alliance, Fauci, Following Up, gain-of-function research, James Comer, Lawrence Tabak, National Institute of Allergy and Infectious Diseases, National Institutes of Health, NIAID, NIH, Obama administration, Rand Paul, science, virology, Wuhan lab

If Anthony S. Fauci hasn’t been lawyering up already to defend himself against charges that he lied to Congress in denying that he U.S. National Institutes of Health (NIH), for which he’s worked for so long, ever funded dangerous gain-of-function (GOF) research in a Chinese virology lab, he definitely should be now.

For unless he’s gotten a God complex from all the CCP Virus era adulation he’s received, and assumes he’ll never be held accountable for his actions by mere mortals’ systems of government, Fauci – who also serves as President Biden’s chief medical advisor – must recognize that the NIH just made clearer than ever to lawmakers not only that statements of his earlier this year to Republican Senator Rand Paul of Kentucky were false, but that he knew at the time they were false.

As a post of mine on July 22 explained, although Fauci made his denials twice this year in response to questions from Paul, facts that were undoubtedly at Fauci’s disposal stated otherwise. Principally, the public record shows that at least three research grants approved by the NIH branch headed by Fauci (the National Institute of Allergy and Infectious Diseases – NIAID) sponsored research at the Wuhan Institute of Virology that plainly fell under the U.S. government’s official definition of gain-of-function – which is the only definition that Fauci, a federal employee, should care about in connection with his official work.

More important, from a legal standpoint, in an article detailing its findings, one team of recipients explicitly described its work at “GOF.” Similarly, in a February, 2020 email exchange, both Fauci and a senior colleague showed that they were well aware that of this research. The concern stemming from the grant that they discussed was not whether this description was correct or not, but whether or not this research took place when it was still permitted by federal regulations.

That’s obviously important, but as I noted, it has nothing to do with the lying to Congress charge. For that’s not what Paul asked. He asked whether NIH had ever paid for such work in China at any time. And even more important, Fauci was surely aware both of these emails’ contents, and of the original grant. OK – it’s conceivable that he had forgotten all of this when first questioned by Paul. But it’s inconceivable that by the second appearances (at which he was given the chance to walk back his denial), he hadn’t done his homework.

It was against this background of legitimately indisputable facts that the NIH finally issued a statement that seeks to clear the air about its connection with the Wuhan lab. The statement, which came in the form of an October 20 letter from NIH Principal Deputy Director Lawrence Tabak to Kentucky Republican Congressman James Comer, doesn’t explicitly comment on Fauci’s statements. But although it does insinuate that no one at NIH is to blame for any Wuhan-related confusion on the part of Members of Congress, it keeps him in hot water nonetheless.

For not only does it leave those indisputable facts completely undisputed. It makes two relevant claims that quickly dissolve under even casual scrutiny.

The first centers on Tabak’s allegation that the contractor in question, the New York City-based EcoHealth Alliance, violated the terms of its grant by failing to notify anyone at NIH that some of the experiments it helped conduct in Wuhan created an engineered version of a bat coronavirus that infected human cells ten times faster than the natually occuring version of that virus. According to Tabak, “EcoHealth failed to report this fining right away, as was required by the terms of the grant.”

That’s on EcoHealth, of course. But if it was concealing information from NIH, then doesn’t that mean that Fauci’s denials to Paul, however inaccurate, simply stemmed from ignorance and not a desire to mislead? Unfortunately for Fauci, no. Because as NIH recently told The New York Times, EcoHealth didn’t simply fail to report these results “right away.” The organization was two years late. And since this revelation came only this past August, Fauci must have known of its tardiness this past May and July, when he expressed his flat denials to Paul. In other words, Fauci knew he lacked all the facts needed to support his statements. But he made them anyway. And the difference between such statements and a deliberate falsehood is what, exactly?

Tabak’s second Fauci-relevant claim is even more easily dispensed with. It raises the question of defining gain-of-function research once again, and emphasizes that EcoHealth’s work “did not fit the definition of research involving enhanced pathogens of pandemic potential” – and therefore wasn’t prohibited under the prevailing regulations governing GOF research – because the bat coronaviruses being used “had not been shown to affect humans.”

Yet this argument still leaves Fauci with several big problems. First, as I wrote above, recipients for one of the NIH grants for Wuhan work stated explicitly that they were engaged in GOF research. Their results were published in November, 2015 – which means that at least part of the research was performed after October, 2014, when the Obama administration ordered a three-year pause in such work.

Plainly this evidence flatly contradicts Fauci’s insistence that NIH-funded GOF research took place in Wuhan. So does a comparison of the grantees’ description of their project and the Obama administration’s definition of the kind of work that was not to be supported:

“[R]esearch projects that may be reasonably anticipated to confer attributes to influenza, MERS, or SARS viruses such that the virus would have enhanced pathogenicity and/or transmissibility in mammals via the respiratory route.”

Moreover, “The research funding pause would not apply to characterization or testing of naturally occurring influenza, MERS, and SARS viruses, unless the tests are reasonably anticipated to increase transmissibility and/or pathogenicity.”

The pause was lifted at the end of 2017, and replaced with a review process that would allow funding gain-of-function research under certain conditions. As you can see, there are lots of them. Indeed, there are so many that Fauci (who was doubtless involved in the drafting) could be forgiven strictly speaking if he concluded that he’d gotten pretty close to a green light for resuming NIH funding for all manner of GOF work.

But it’s crucial to remember that Paul never asked Fauci whether NIH had ever funded GOF research in China that was legal at the time. He asked him whether NIH had ever funded GOF research in China – period. And nothing in the post-pause GOF funding guidelines changed the 2014 official definition of GOF – the definition that was controlling for Fauci and other federal employees. All the new guidelines did was stipulate when GOF research anywhere could be legally funded.

Nor did Tabak’s letter do anything to help Fauci on this score. Although he’s correct in noting that the new guidelines don’t proscribe research with pathogens with no record of infecting humans, this qualification is contained nowhere in the still-operative official U.S. government definition of GOF – which covers enhanced infectiousness and transmissibility in all mammals.

There’s a third claim made by Tabak that actually doesn’t directly bear on Fauci’s guilt or innocence, but very nicely illustrates why the NIH deserves absolutely zero credibility on CCP Virus origins issues. That’s the claim that EcoHealth didn’t mislead anyone, either, however late it was in keeping the agency informed. That’s because the organization supposedly didn’t expect the results it got.

As Tabak wrote (though, as with the rest of his letter, he oddly he didn’t specifically link this point to th e Fauc-lied controversy), “As sometimes occurs in science, [the much greater infectivity etc of the engineered viruses] was an unexpected result of the research, as opposed to something that the researchers set out to do.”

Yet it’s obvious that the researchers – and the NIH itself – expected that they might display some enhanced capability. Why else would the agency have instructed EcoHealth to “report immediately” a ten-fold-or greater increase in its infectiousness – or any increase in its infectivity?

Tabak also apparently left on the table another suggestion that EcoHealth and NIH (and by extension Fauci) should be let off the hook on substantive grounds (in terms of conducting and supporting gain-of-function research) in addition to NIH (and by extension Fauci) should be let off procedurally (because of EcoHealth’s failure to report its results promptly: It’s the suggestion that because the gain-of-function results were unexpected, that the relevant experiments weren’t about gain-of-function in the first place.

What, however, could be more absurd? For example, scientists began trying to develop a polio vaccine in the 1930s. They didn’t succeed until 1953. Can anyone seriously believe that the failed efforts don’t qualify as polio vaccine research? Ditto for the long string of failures to develop an AIDS vaccine. Or a U.S. rocket that could lift a satellite into space. Or the story of practically every scientific discovery or progress in engineering, or for that matter in the social sciences.

It’s true that Fauci could have easily and truthfully answered Paul’s questions with a statement along the lines of the following in speaking about the post-gain-of-function pause experiments: “At the time of this work, government guidelines permitted NIH to support GOF research in China and everywhere else if its review process determined that such work was justified, and that determination was in fact made.”

That’s not, however, what he said – evidently because his top priority wasn’t factual accuracy, but ensuring that neither he nor NIH could be tainted by association with supporting potentially dangerous research in China – which would have further exposed he and NIH to charges of dreadful judgment (considering their lax attitude toward reporting deadlines and the underlying decision to work with a foreign regime with a long history of keeping secrets and spreading information.

More important from the Fauci-lied standpoint, though, is that there’s no way he could have answered the questions about the pre-pause research truthfully without admitting that NIH had indeed funded some GOF work at the Wuhan lab.

And there’s a final point that needs to be mentioned:  Is the Tabak letter the best that NIH can do to exculpate Fauci of the lying charges and all concerned of  allegations of whopping misjudgement? If so, I’m doubly convinced that Fauci specifically should be seeking legal aid. If you’re still a fan, feel free to send your suggestions to:

Dr. Anthony S. Fauci

Director

National Institute of Allergy and Infectious Diseases

5601 Fishers Lanes, MSC 9806

Bethesda, Maryland 20892-9806

(What’s Left of) Our Economy: “Joe Science” – Finally?

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Barack Obama, Biden, Bill Clinton, Congressional Research Service, defense, dual-use technologies, George W. Bush, infrastructure, National Science Foundation, research and development, science, scientists, technology, {What's Left of) Our Economy

President Biden is a champion of science – everyone knows this, right? He promises to follow it on major issues like the CCP Virus. He’s pledged to boost Washington’s funding of research and development. He’s blasted his predecessor for neglecting this responsibility. (See here for examples of the last two statements.)  And the scientific community the world over is brimming with confidence that greater respect from the White Houe and more resources are on the way.  (See, e.g., here and here.)

Judging from his remarks unveiling his big new infrastructure plans, it looks like Mr. Biden will indeed bolster the federal government’s support for science and technology. And that’s great news, because such efforts will be crucial to meeting any number of big public policy challenges and seizing equally important opportunities. Dealing with enviromental threats, beating back the China challenge, and boosting the nation’s productivity – its best hope for raising living standards on a sustainable basis – are just a few that come to mind.

And if you’re one of those who believe the Feds can’t do anything right, you need to learn some history. Washington has a formidable record both on the basic research and applied research sides. (Here’s an impressive list from America’s National Laboratories system, and it doesn’t even include major advances fostered by other agencies in medicine, agriculture, aerospace, and information technology – some of which are summarized here.)

Mr. Biden also is unmistakably right about America having fallen behind on these fronts. But what he hasn’t told you, and what his scientific backers seem to have forgotten, is that in the last roughly quarter century, federal science and technology spending in toto never stagnated as much as during the administration he served as Vice President.

The data below are calculated from the annual research and development budget requests made by U.S. Presidents going back to the Clinton years. (For the data from 1998 through 2015, see the National Science Foundation reports archived here.  For the later data years, see the annual Congressional Research Service reports here, here, here, here, here, and here.)

Since Congress has the authority to raise or lower these requests, these figures don’t measure actual federal research and development spending by year. But they do shed light on how much various Presidents sought to spend, and by extension how greatly they valued nurturing such activity, how much they believed they could convince Congress actually to appropriate – and, by implication, how hard they were willing to push to achieve these goals.

In this vein, during his second term, Bill Clinton’s overall annual federal research and development budget requests rose by a total of 15.54 percent.

During the eight years of George W. Bush’s presidency, such Executive Branch requests increased by 43.91 percent.

For the eight years of Barack Obama’s administration? These requests climbed by 6.56 percent.

And under supposed science denier Donald Trump? They were up 20.82 percent.

Some important qualifications need to be made here. The big Bush increases were driven by major new asks for defense-related R&D (think “September 11,” “Global War on Terror,” and “Iraq”). Indeed, during his administration, such spending grew from 52.47 percent of total federal research and development spending to 58.97 percent. And when you draw this distinction, the Obama (-Biden) record looks better if you value civilian research over military. Here’s how recent Presidential requests compare on that score.

Clinton civilian requests: +25.67 percent

Bush civilian requests: +24.24 percent

Obama civilian requests: +34.26 percent

Trump civilian requests: +19.07 percent

But the Obama-(Biden) record doesn’t look that much better, especially than the Trump record. After all, that 34.26 percent increase took place over eight years, not four. And the Obama-Bush comparison, and other Obama comparisons, need to take into account the ever-blurring line between defense and non-defense-related research and development, because so many new technologies can be used in both fields and spur progress in both. That is, advances in defense knowhow can and do produce spin-off effects in the civilian world, and vice versa.

It still remains to be seen how the Biden infrastructure plan translates into specific research and development budget requests. But for now at least, Americans can be grateful that the Joe Biden of 2021 seems to be much more of a science and tech enthusiast than the administration he worked for a decade ago. 

By the way, special thanks to Rafal Konapka, who first brought the recent federal research and development trends to my attention.

 

Our So-Called Foreign Policy: The U.S. and its Universities Remain Asleep at the Switch on the China Tech Threat

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Argonne National Laboratory, China, higher education, Hoover Institution, John Pomfret, Lawrence Berkeley National Laboratory, National Institutes of Health, National Science Foundation, national security, Our So-Called Foreign Policy, science, technology, technology transfer, universities

The word “blockbuster” has been so overused and misused by the national media during the Trump era that it’s impact has been watered down. Yet a new report by the California-based Hoover Institution definitely deserves that description – for it details the shocking and dangerous extent to which the U.S. government’s science and technology research arms, along with many of America’s top universities, have in recent years been merrily working, and no doubt sharing crucial defense-related technology, with individuals tightly connected with China’s military.

You can read an excellent summary of the report here by John Pomfret, a former longtime Washington Post China correspondent who’s turned into a full-time scholar of U.S. relations with the People’s Republic. But there are six points that I think deserve special attention.

First,even anyone who didn’t know that the Chinese institutions from which the Chinese researchers have come are called by China’s regime itself “Seven Sons of National Defense,” two of the names alone should be kind of a giveaway: Beiing University of Aeronautics and Astronautics, and Nanjing University of Aeronautics and Astronautics. Unless anyone at any of the American universities involved doesn’t know that any activity in China with an aerospace component isn’t largely military in nature?

Second, the research projects themselves being conducted by teams of scientists from these U.S. and Chinese institutions haven’t been given names with obvious military implications. But any American authorities with a tech background should be aware of this dimension. Take “Effect of gallium addition on the microstructure and micromechanical properties of constituents in Nb-Si based alloys.” Gallium is a metal used mainly in micro-electronics manufacturing. Among its properties: It can “produce laser light directly from electricity….” Nothing military to see there! Ditto for the role played by gallium arsenide its role in making semiconductors for pressure sensors for touch switches.

“Nb” is niobium, another metal, is useful for making “superalloys for heat resistant equipment” – and therefore is handy for producing items like jet engines. And of course “Si”, or silicon, is a core building block of semiconductors themselves.

Nor is that work the only research that should have raised eyebrows. In 2018, an entity called the China-US International Cooperation Project (about which a Google search turned up squadoosh) and the Harbin Institute of Technology jointly funded a Master’s thesis on the “Modeling and Analysis of Energy Characteristics and Equivalent Carbon Emissions of CNC Centerless Grinding Machine.”

These types of machine tools are critical for defense manufacturing – including in aerospace – because they can make sure that metal surfaces of parts and components of complex manufactured devices have smooth enough surfaces to operate friction-free – an especially important goal to achieve when producing weapons that need to be highly reliable even in the most challenging situations. Indeed, when these grinders get advanced enough, their overseas sale is regulated for national security reasons by the U.S. government. Why on earth would that same government be helping the Chinese find out anything new about them?

Possibly most obvious – and therefore possibly most maddening – of all: Why did a researcher at the University of Virginia co-author with three colleagues affiliated with Nanjing University of Aeronautics and Astronautics a 2018 article titled “Research Progress of Adaptive Control for Hyper-Sonic Vehicle in Near Space”? Did he and the University of Virginia think we’ve arrived already at the United Federation of Planets phase of human history?

Third, as indicated above, the list of American universities involved in these potentially dangerous activities is as long as the inividual schools are highly regarded. It includes Virginia, MIT, Stanford, Columbia, the University of Pennsylvania, the University of Michigan, the University of Texas, the University of North Carolina, Purdue University, Arizona State University, the University of Minnesota, George Washington University, the University of California-Irvine, and Georgia Tech.

Fourth, the list of U.S. government agencies involved is impressive, too. It includes the National Institutes of Health, the Lawrence Berkeley National Laboratory, Argonne National Laboratory, Oak Ridge National Laboratory, and the National Science Foundation.

Fifth, U.S. universities aren’t close to getting a handle on making sure that the research they sponsor in various ways doesn’t strengthen the Chinese military – and therefore undermine U.S. national security. As the Hoover authors point out:

“Only now is the US research community awakening to the intensity and scope of [the China challenge] and its military or dual-use dimensions. However, in the absence of external regulatory or policy mandates, US research institutions have been slow to adapt their due diligence and risk management frameworks. Weak institutional reporting mechanisms and compliance cultures have permitted some collaborations to go unknown, unreported, or underreported. Even among vetted collaborations, conflicts of commitment, unreported or misreported elements, or other activities that undermine the integrity of US scientific research and exceed the scope of collaboration agreements occur. In short, prevailing due diligence and risk management practices for screening and tracking potential collaborations with PRC entities fall far short of what circumstances require.”

Sixth, as must be obvious, the U.S. government isn’t doing much better. Specifically, according to the Hoover study, official U.S. responses (as with those of universities) focus too tightly on whether current laws and regulations aimed dealing with these threats are being violated, without considering whether these restrictions are still adequate. Moreover, Washington seems to view its processes of granting visas as the predominant way to fend off the Chinese threat. As noted by the Hoover authors, however, “collaborations with US partners may move online or to sites outside of the United States.”

So although the Trump administration is far more keenly aware of this problem than its predecessors, clearly is still has a very long way to go.

The Hoover authors are very careful to say that they’re not urging a complete ban on U.S. scientific and technological cooperation with China, and fully acknowledge that the nation has enjoyed major benefits from its academic and research-related openness. Indeed, they lay out a strategy for the research community to avoid handing China many of the keys to America’s scientific and technological kingdoms – in hopes that a heavier government hand can be avoided. Unfortunately, they make such a strong case that both the public and private research communities have been so far behind the eight ball in this respect, that it’s hard to see how anything short of sweeping official measures can deal adequately with the kind of systemic threat posed by China.