Editor's Note: Zachary Karabell is president of River Twice Research, where he analyzes economic and political trends.
By Zachary Karabell – Special to CNN
For most of the 20th century, the United States was the undisputed leader in innovation. That could be measured not just in patents filed and products developed but also in the way in which those were adopted throughout the world. These ranged from electronics to weapons to services. There were of course other centers – Japan in the 1970s and 1980s most of all. Yet the scale of spending and an American culture that was friendly to entrepreneurs and innovation gave the United States an edge.
That edge is rapidly eroding today, and not just because spending on R&D in the United States is declining. It is also being challenged by new emerging centers, and none looms larger than China. (Watch the video above for Google Chairman Eric Schmidt on the innovation challenge posed by China.)
China does not yet rank especially high on overall spending. In fact, according to the Organization for Economic Cooperation and Development, the United States is now in eighth place spending about 2.5% of its GDP on research, with Japan, Sweden and Israel all spending more but on aggregate of course spending far less because their economies are significantly smaller.
But in its new Five Year Plan, the Chinese government is committed to the rapid development of a self-sustaining domestic economy, and that entails massive spending on both infrastructure and domestic companies and technologies that are not dependent on foreign companies or on the United States. The most notable effort to date by the Chinese government has been an effort to create a homegrown next generation wireless technology known as TD-SCMA, which would obviate the need of Chinese mobile carriers to continue paying royalties to the likes of the American company Qualcomm.
Many of these efforts are still nascent. Huawei, the behemoth and secretive Chinese telecom equipment company, was one of the global leaders in patent registration in the past two years but much of its business still derives from equipment that it has largely copied from the American company Cisco.
The central government has made innovation a priority, but the national education system still excels at churning out highly trained and extremely competent engineers who innovate in processes but whose focus remains building rather than inventing.
But simply because China has focused to date on infrastructure, exports, and reforming in domestic finances and governance says little about its future ability to become a global innovation leader. It is already spending much more aggressively on alternative energy and conservation technologies, which the government views as a national security imperative given the paucity of its oil reserves and the health and environmental costs of relying on coal. There is also considerable spending on Internet technologies, including the darker side of cyber warfare.
It’s said that the United States retains the advantages of an open society where ideas can flow freely and capital can still be raised and deployed with comparative ease. Yet, state-sponsored innovation can be potent – as U.S. military efforts have show in developing the Internet and laser and infrared technology. Also true is that the United States still spends far more, including the venture capital and startup networks of Silicon Valley and various drug development companies funded privately. But China has made such spending a national priority, and it has shown a remarkable ability to turn such priorities into realities.
China should serve as a clarion call for American innovation. The only way to meet that challenge is for Americans to focus on domestic strengths. Those are considerable but are not efficiently deployed or used with urgency. American advantages will not be eclipsed tomorrow, or next year. But China is charging ahead and only a fool will operate as if that will come to a sudden halt.
The "Global Innovation Showcase" is a special feature created by the New America Foundation, a non-partisan, future-oriented think tank based in Washington DC, and the Global Public Square. Tune in tonight at 8pm ET/PT for a special edition of CNN GPS, "Restoring the American Dream: How to Innovate."