Industry: Aiming at the Market Instead of the Moon

The magic word in U.S. industry is research, which has created everything from transistor radios to measles vaccine since World War II. This year the U.S. will invest a record $17 billion in research and development, or an average of $300 for every family. Businessmen, economists and scientists are increasingly worried that too great and growing a part of this enormous effort is now commanded by the Government. Last week top scientists testified before the Senate Space Committee that Government spending for space and military survival is diverting too much money and manpower away from the development of the civilian products that create new industries, new jobs and economic growth.

In the growing debate over research, U.S. businessmen are sharply divided. Some major defense contractors, such as Thompson Ramo Wooldridge Vice Chairman Simon Ramo, argue that the romantic challenge of space and missilery is likely to produce a broad base of research that will eventually benefit U.S. business. But many businessmen find themselves agreeing with President Kennedy, who admitted in his economic report to the nation this year: “We have paid a price by sharply limiting the scarce scientific and engineering resources available to the civilian sectors of the American economy.”

Much for Few. There is no doubt that the Government has become the pervasive senior partner in most research. Ten years ago, U.S. business financed two-thirds of the nation’s research; today Government finances two-thirds of it—to the benefit of relatively few industries. Of the Government’s multi-billion dollar disbursement to U.S. business for research and development this year, more than 90% will go to just five industries (aerospace, electronics, autos, machinery and chemicals), and a full 30% to just four companies (Lockheed, General Dynamics, Boeing and North American Aviation). Beyond that, so much “private” research by business is directed toward Government contracts that scarcely $3 billion will be spent in 1963 for purely commercial ends. Says Assistant Secretary of Commerce J. Herbert Hollomon: “Our big increases in science funds have not led to corresponding increases in the rate of growth of our economy.”

Many corporate chiefs complain that Government research programs suffer from the bureaucratic ills of mismanagement, wastefulness, duplication and inefficiency. And every knowing businessman realizes that it takes a long time to translate Government research into new products in the marketplace; commercial atomic power, mail-by-missile and tourist trips to the moon are still very far from reality. An even greater concern for businessmen is that Government projects are luring the best researchers away from industry and pushing up the salaries of those who remain. “Scientists and engineers are just not interested in working on a new type of washing machine,” says Herman Sheets, research chief at General Dynamics’ Electric Boat Division. While washers may seem mundane to many, they are nonetheless vital to the sort of economy that has made the U.S. prosperous. “We are a world power,” says University of Chicago Economist Yale Brozen, “as much because of our civilian productivity as because of our arsenal of guided missiles and atom bombs.”

Help for Some. The backers of great Government spending for research and development contend that the Government’s efforts have enabled the U.S. to snatch leadership in research from Europe and to produce 80% of the world’s current research. Almost all the nation’s breakthrough products of recent years—from jet planes to fertilizers to aerosol bombs—have been largely bankrolled by Washington. The only important basic products that business has devised wholly on its own are Bell Laboratories’ transistors and the picture-in-seconds cameras of Polaroid.

If the inventiveness of U.S. industry has lagged, argues Presidential Science Adviser Jerome Wiesner, it is not just because Government has monopolized the brightest minds. “We’re simply not spending the money to train more people in other areas,” he says. “If we had the will to do both, we would do both.” Hoping to stimulate that will, the Commerce Department is pressing Congress to set up a Civilian Industrial Technological Program that would establish closer links between business and universities, provide tax write-offs for private research and create other special incentives for probing into such technically backward industries as textiles, construction, coal and metal working.

Since there are few signs that Government will soon cut back on its research—the signs are quite the contrary—U.S. industry has little choice but to watch out for its own interests by building a healthy research program aimed at the market instead of the moon.