The great debate: does the United States need a technology policy?

The domestic computer industry's loss of jobs and production capacity to offshore suppliers has been punctuated by the resurfaced discussions on the merits of a national technology policy. Last week, IDC's sister company Computerworld and software giant Computer Associates sponsored a forum to examine the potential benefits of a technology policy. It may be time for the computer industry to raise it collective voice to help ensure that any technology policy that is adopted neither actually stifles innovation nor wastes huge amounts of taxpayers' money.

Can govermental intervention help companies in the computer industries? Depends who you ask. Japan's MITI was very successful in helping that country's steel and consumer electronics industries. Its Fifth Generation project was, on the other hand, a bomb.

The U.S. government's (and U.S. companies') less-than-stellar track records in industrial policy and cooperative consortia (MCC, US Memories, and George Bush's January Japan Embarassment), indicate the U.S. computer industry might be best served by flat-out capitalism. If companies can't keep up, tough luck. However, the mere difficulty of orchestrating a successful technology policy should not be reason enough to avoid doing it.

Creating an environment in the U.S. that's conducive to innovation is essential for the future of the domestic computer industry. That does not mean saying what companies must do, but it does mean helping them get into a position to decide.

If we can agree that such a technology policy is desirable, how do we make it work? Layers of government panels and commissions, forms, and arcane criteria are likely to increase the time in which industry can respond to ever-changing market conditions. That's no help.

To help, the government must act quickly. And even fast action doesn't always work. Last year U.s.-based makers of flat-panel displays asked the government to intervene when they felt Japanese manufacturers were shipping units to the U.S. at or lower than cost. The government responded quickly all right -- too quickly. Rather than talk to the country's leading PC makers like Apple, IBM, or Compaq, it slapped the incoming displays with a huge tariff.

The net result was disastrous. The PC makers stopped importing the displays, because they shifted all PC production (that used the flat-panel displays) overseas. Instead of helping the domestic display industry, government action shifted fledgling domestic notebook manufacturing offshore.

An industry policy can be composed of a dozen different proactive elements: investment tax credits, direct R&D funding, capital gains tax cuts, government-funded joint ventures and consortia. Some will work here, and some won't. To maximize the former and avoid the latter, we offer two basic (fundamental, even) guidelines to policymakers:

A SINGULAR FOCUS: Solve one, and only one, problem at a time. Politicians abhor a simple bill that isolates a problem, then fixes it. They prefer to attach riders, amendments and adjustments that advance their own (often politically motivated) agenda. The result is a mish mash of mediocrity. We don't have time for that. Fix one problem at a time. Just do it, and nothing else. To spur R&D spending, offer a 15% investment tax credit on R&D expenditures -- in one bill, by itself. When that problem has been addressed, then, and only then, look to the next problem.

INVEST IN PEOPLE: Software is increasingly the basis for competitive advantage. The raw materials for building software are bright, capable, well-trained engineers. Any American who wants to study software engineering in this country, who has demonstrated ability to study it, and who can meet acceptable proficiency standards should be given that opportunity. Give parents and legal guardians of engineering students full tuition tax credits. Now.

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