Fred Block: In Tech, Reagan Had It Backwards

Government is Not the Problem But the Solution When it Comes to Developing Technology Through Its Crucial Early Stages

Ronald Reagan famously framed government as not the solution but the problem. When it comes to developing fundamentally new technologies, that line was not true in Reagan’s time, nor is it true today. Not then. Not now.

At least that is the argument of Fred Block, the editor of the book State of Innovation: The US Government’s Role in Technology Development, and the subject of the new INET video interview.

Block, a professor at the University of California, Davis, lays out a strong case that in the modern era government has provided essential support at the crucial early stages of all fundamentally new technologies – despite the rhetoric of those extolling the wonders of the free market. In Reagan’s era, government played a central role in the development of information technologies and, of course, the Internet.

But even today the central role of government in technology development is the norm. Fortune 500 companies have outsourced most core technology innovation, and almost all businesses rely on the government and nonprofit universities for supporting fundamental research, and taking on the initial risks of getting new technologies working. Even storied VC firms frequently point entrepreneurs to government funds to get their embryonic ideas to the point where the private sector can invest.

Government – both in the US and around the world - is also critical in getting many technologies from the commercialization phase to the more difficult mass production phase. This is particularly true now in clean energy technologies that require large economies of scale for large-scale adoption.

Looking forward, Block makes the case that even more sustained government investment and intervention is needed in this global era of climate change. For example, he talks about the idea of creating a national innovation fund that would spread the costs of core technology innovation across many businesses, but also have the public share in the upside that eventually comes.

This interview has many insights that are relevant today, as the United States people come to terms with mounting deficits and must decide what core government investments need to be retained if not redoubled. Investment in technology might be one area where we might need more, not less, government.

Please enjoy the interview. And you can also go to our Q&A Forum to give your own answer to our related question:

Fred Block proposes a 2% shareholding interest as a way for the public sector to share in the gain to public-private collaboration for technological innovation. What are the potential obstacles to his proposal, and how might they be overcome in practice?