A look at the gritty realities of economic renewal

Those of us who have been watching the United States soil its own nest for the past 12 years feel a great surge of hope that Bill Clinton and Al Gore are at last willing to tackle technology issues outside the defense industry and face the economic realities of the 21st century.

The new administration’s technology policy, set forth in these pages, appears on the surface to be a good start. It certainly addresses what’s perceived to be “wrong” today, but its very thoroughness may miss the larger point. Spurring growth and investment in today’s industries ŕ la Clinton-Gore has obvious merit and must be done, but the policy doesn’t address the deeper, more fundamental issues raised by a society that finds itself relying upon increasingly sophisticated technology for work, play and information.

FIRST, THE GOOD NEWS: WE’RE RIPE FOR NEW INFRASTRUCTURE

Any long-term technology policy must first acknowledge the ubiquity of digital technology, and the Clinton-Gore emphasis on rebuilding infrastructure appears to do so. Computers have connected most financial institutions around the globe for many years now, and they increasingly control our factories, our office operations, and our telephone networks. Activity on the Internet, a vast global network of computers, has increased exponentially in the past five years (see Vol. 1, No. 11, p. 19). Far more people are using network technologies to conduct their personal and business lives.

One of the most compelling trends of the past five years (and the one that launched this publication) is that digital technology in mainstream America is transiting beyond basic information exchange into both the production and the distribution of all media of communication. Demand is growing for a powerful public network that can allow people to send and receive large amounts of media information across a hybrid of the existing networks, including telephone, cable, cellular and/or satellites.

Industry alliances like First Cities (see Vol. 2, No. 7, p. 3) are in the process of creating technology bridges between these separate networks, so that digital media can indeed freely flow between them, as the foundation for a new kind of commerce. Other industry groups, such as the CableLabs consortium, are also exploring ways to join networks most profitably for delivery of new services to the consumer.

WE DON’T NEED TO SPEND FEDERAL DOLLARS

This work is already under way. But the new administration’s plan intends to promote:

• Funding the establishment of key networks and demonstration projects;
• Benchmarking U.S. programs against those of other major industrial nations;
• Establishing standards and a regulatory climate that fosters private sector investment;
• Involving the federal labs, companies and universities in conducting R&D on key technical issues; and
• Providing training for users of networks and databases.

Only a couple of these suggestions are actually useful. For example, as mentioned, key networks and demonstration projects are already under way. Private industry is funding these projects itself because it has to — it is widely acknowledged that sophisticated communications are critical to growth in the next decade. It is equally in the best interest of industry to make sure that users understand how to use the networks and database products they’re creating. And certainly, any company worth its salt is already quite cognizant of what its competitors are doing in other major industrial nations.

Focus on standards. So instead of spending valuable tax dollars to fund tests and network training sites, or to “benchmark” what other countries are doing via expensive research reports (most of this information is readily available in the foreign trade press), it would be far more helpful for the U.S. government to be more proactive in the third and fourth bullets of the plan. Establishing standards and a regulatory climate that fosters investment will demand that federal labs, companies and universities work together to research and develop key technologies. The government could reward cooperation between industries via tax incentives, thus hopefully dissuading various Lone Rangers from reinventing the wheel.

As mentioned in the plan, the standards process that the Federal Communications Commission (FCC) sponsored for HDTV is an excellent example of the government’s proper role in guiding technology directions (see Vol. 1, No. 12, p. 13). By designating itself the hub in the HDTV wheel, the FCC came up with some very creative ways to make sure that the best digital HDTV standard was selected and that those that weren’t selected still were able to benefit from participating in the process.

The FCC says the process cost taxpayers nothing — only the cost of FCC staffers to review the submissions — yet established a standard outside the marketplace, where confusion over such issues often keeps consumers from making purchases they fear will become immediately obsolete.

How to foster competition. In addition, the government should immediately address one of the most significant gating issues for telephone companies that wish to upgrade their networks from copper plant to fiber optics: allow them to write off their investment in copper wiring as quickly as possible, and provide them with strong financial incentives to replace it with fiber (making sure that the cost of upgrading the network is not passed on to consumers).

Along those same lines, the new administration would do well to carry on the spirit of the work started by former FCC chairman Al Sikes. Sikes’s primary motivation in making some of his more controversial moves (such as allowing the phone companies to provide information services, including the delivery of movies via video dial tone) was to level the playing field so that telcos could compete on an equal basis with cable TV and other network providers.

The specter of intense competition where before there was none is definitely giving heebie-jeebies to the cable industry, and vendors and service providers are scrambling to keep their edge. Direct broadcast satellite services such as Hughes’s DirectTV are having the same effect, and the cellular network is also eyeing the delivery of high-value broadband services to cable’s target market.

Though some of us are disturbed by the potential conflict of interest in letting the phone companies own and provide content and conduit, the cable companies already provide both. It’s likely that most of the problems consumers face as cable customers — such as outrageous rates and inferior service — will disappear when other entities are able to provide video programming into the home.

CIVIL LIBERTIES AND THE NET: A GAPING HOLE IN THE PLAN

A gaping hole in Clinton’s plan is that it does not acknowledge some of the more subterranean yet chilling effects of the kind of hybrid, broadband national public network that the administration would obviously like to create.

The “hacker threat” — dangers posed by computer criminals who break into banks, use stolen credit card numbers and heist military secrets from high-security databases — has been well documented over the years, yet it has often seemed a distant threat to the public at large. It boggles the imagination to consider what intelligent criminals will be able to do when most of the world’s commerce is conducted over a network that’s protected with far less sophisticated technology than are military computer systems.

Security is critical. The problems are complex and multifaceted, yet all center on the ability of citizens and businesses to secure confidential information about themselves and the conduct of their lives. We all remember the uproar when a BusinessWeek reporter was able to get a copy of Dan Quayle’s credit report. Think about the potential for abuse when a ubiquitous public network transports everything from personal bank transactions to the names of the videos we choose to watch to what we buy via our interactive TV shopping network.

The need for security cuts both ways. It’s been demonstrated repeatedly that people want to choose who gets information about them, and when, how and why. But to date, there are no laws in the United States to control what businesses do with personal information about their customers. Recall the scandal about Lotus Development’s “Marketplace” product, a database of the entire U.S. population compiled using a number of criteria including salary, number of children, etc., based on information from various credit agencies. Public outrage caused Lotus to withdraw the product.

We’re all vulnerable. Then think about what new information service providers will be able to learn about their customers without their consent, by gathering data from the selections they make in the privacy of their living rooms. How will we react if our television’s blind eye can suddenly see us — and can report back on what it has observed? Designers of these information services acknowledge that a significant amount of highly sensitive data about each customer must either be stored in a database or transmitted at transaction time to make their businesses viable. But again, to date there have been no serious discussions about security ethics or legalities around using this kind of personal information.

Protecting property. In addition, entertainment companies such as movie studios have expressed understandable reticence to provide licenses for pay-per-view movies until some kind of encryption standard can ensure that their multimillion dollar investments won’t be stolen and pirated, or altered and reused.

And needless to say, a government with a suspicious mind or a bent toward totalitarianism would be absolutely delighted with a network that would allow it to watch every move its citizens made, via their access to a network that’s considered essential to the commerce of daily life. These are not paranoid observations; court cases are already pending relating to the rights of employers to snoop through employees’ electronic mail, for example.

Why not public key? The most obvious solution to the problem is some kind of public key encryption method, which, without going into great technical detail, allows two parties to enter into a transaction across a digital network that (a) assures that only the designated party can decrypt the data (a movie, an article from a database, a digital music recording, credit card number, personal data, electronic mail message, whatever); (b) assures both parties that whatever transmission is received is not altered in any way; (c) provides a “digital signature” to further ensure that all parties involved in a transaction are who they say they are, and (d) allows those transactions to be conducted anonymously, just like cash.

Great idea — why aren’t we moving on it? Because the Federal Bureau of Investigation and the National Security Agency don’t want public key encryption in wide use. They say that it eliminates their ability to conduct wiretapping and other crime-fighting activities (see Vol. 1, No. 11, p. 7).

We certainly want our federal crime fighters to be able to do their jobs, but as Computer Professionals for Social Responsibility and other watchdog groups argue, denying us the ability to secure our communications denies us our right to privacy under the U.S. Constitution. Also it denies businesses the right to protect their intellectual property. This issue will become increasingly critical as more of us use the networks as our primary method of both communicating and conducting the commerce of our lives.

IS ‘INFORMATION ECONOMY’ AN OXYMORON?

In fact, the ongoing intellectual property debate is likely to be brought into sharp relief as this new digital network infrastructure is both developed and deployed. As we continue to lose manufacturing jobs in the U.S., America will increasingly be seen as an “information broker.” Who owns what, how they own and protect it, and for how long, will become increasingly important as we continue to place the means of digital media production and dissemination in the hands of the masses.

This raises some interesting conflicts. First and most obviously, ideas and information once considered worthless from a financial standpoint suddenly become valuable commodities. What once we thought without value — a photograph of our car or house, for example, taken by a stranger on the street — can become intellectual property to which we may be able to lay financial claim if he or she makes money from it.

However, if such a photograph is transformed into digital media — the new currency of the realm — and not somehow protected, it actually becomes worthless because an infinite number of copies can be made with no loss of quality and it can be distributed freely via optical or magnetic media or via the networks.

Open access vs. “pay per view.” Even with effective ways to protect data physically, the clash between the “information should be free” faction and those who own and/or develop intellectual property will escalate. The central conflict then becomes whether the term “information economy” is an oxymoron in a free society.

In other words, if open access to information is the hallmark of a democracy, how then does a government make sure that none of its citizens are left out as the transition to an “information age” continues its inexorable march? Where do you draw the line?

Certainly we cannot expect companies to invest millions of dollars in rebuilding infrastructure and starting new “information service” businesses, then tell them they can’t make money from their efforts. But neither can we expect our citizens to have to pay cash money every time they want to know what’s happening in the world. If we are obsoleting broadcast television, for example, which today is free to anyone with a TV and an antenna, what will we replace it with?

LET’S START TALKING ABOUT THIS STUFF NOW

There is not an easy way to satisfy both sides of this debate, but for once it would be nice to see the U.S. do some deep thinking into consequences before disaster hits. We haven’t been willing to question some of the underlying assumptions of new developments such as biotechnology, for example, and we are likely to create science-fiction scenarios as a result.

We didn’t question the hazards of computers and electronics, and now we’re finding that the doomsayers were right — the use and manufacture of computers are responsible for significant health problems and, based on the privacy issues outlined above, the beginnings of constitutional questions that should have been addressed early on.

The right to privacy and the right to access are simply at opposite ends of the intellectual property debate. Before the new business models are cast, these issues should be brought to a public forum and discussed in detail so appropriate action can be taken by both industry and the government.

RETHINKING THE VALUE OF BUSINESS AS USUAL

Today we are wallowing in technology — flooded with video game machines, compact disc players, cellular phones, electronic organizers, “computers” that analyze your tennis game. Either rapid rate of innovation or complete idiocy of design makes most of these devices obsolete within a few months after they’re purchased. Who does that serve?

Rethinking value. In a world of dwindling natural resources and tightening global markets, a responsible government must at some point rethink how it supports an economy based on products of dubious or exhausted value.

One of the “laws” of technology is that at some point in the future, the computer will probably be able to do without you whatever it happens to be doing with you at the moment. In fact, computers will continue to replace the work done by humans, but we continue to pretend that there is even a possibility of full employment in a world where human labor is becoming obsolete. It doesn’t matter how smart you are or how well “retrained” you’ve been if there are only six jobs in the factory and you don’t get one of them. And then how many “tennis analyzers” will you buy?

Move away from consumption. To make any sense of the direction the world is going, we must find a way to wean our economy from its focus on gross consumerism. A courageous Clinton administration would be willing to speak the truth — for starters, can we please finally declare that the car industry is dead? If not another car was manufactured from this day forward, we would not be the worse for it.

The proper role of the U.S. government is not to bail out failing industries, but to remove them from life support. Instead of trying to find a way to appease both the unions and the car manufacturers, government should provide investment incentives to General Motors, Chrysler and Ford to redeploy a significant percentage of their engineering expertise toward new industries that require formidable brainpower, such as new, nonpolluting transportation methods, purifying toxic air and ground water, finding ways to recycle garbage. These are the growth industries of the 21st century.

PROVIDING NEGATIVE AND POSITIVE INCENTIVE

I would be particularly pleased to see manufacturers of compact discs, for example, get a big fat tax break to figure out how to recycle them before they become slag heaps of them in our garbage dumps. (I still worry about the half-life of polyester double-knit.) With sufficient financial impetus, maybe we could get the chip and computer companies to figure out how they could recycle semiconductors and gold-encrusted circuit boards, now showing up increasingly in jewelry and art after they’ve been discarded.

Healthy computing. And once the government has begun “incentivizing” electronics companies to recycle and/or reuse their waste products, it might also consider raising taxes on companies that still manufacture flat-slab keyboards that are crippling information workers in one of the most covered-up epidemics in history, as well as on companies that have not yet eliminated radiation-emitting computer screens and monitors from their product lines.

TRAINING PROGRAMS DON’T ADDRESS THE CENTRAL PROBLEM

In the same way that we need to “get real” about deadbeat American industries today, we must also face facts about the changing nature of work and workers in the U.S. Certainly no one could argue the merit of Clinton-Gore’s plan to create a high-skill workforce, but such a program misses the point.

Information industries are moving offshore at an alarming rate, just as manufacturing did in the 1980s. One recent report stated that a Unix programmer in the U.S. makes $5,000 a month; an equally skilled Unix programmer in India makes $400 a month. This disparity is a problem that no training program can rectify. As a result, as you might suspect, every high-tech company worth its salt is moving programming centers to India, including Apple, IBM, Digital Equipment, Tandem and Hewlett-Packard.

Information workers with less romantic jobs than programmers are suffering too; data-entry and desktop publishing “sweatshops” have been documented in Taiwan, among other places.

Technology eliminates jobs. Though offshore production often bears the lion’s share of blame for higher unemployment, no one has yet wanted to address directly the growing social problem of job loss based on technological progress. There has been a real loss of jobs in the banking industry, for example, because automatic teller machines have eliminated teller jobs. Computer-controlled voice mail has begun to have much the same effect, and its impact will increase as voice recognition technologies improve. Those jobs aren’t coming back, and they weren’t shipped offshore. They are jobs lost to computers, pure and simple. There are many more examples in companies all across the U.S.

This is one grim reality not addressed by the Clinton-Gore camp. We can do all the training for “high-skill, high-pay” jobs we want, but there will continue to be a growing number of un- or under-employed workers in the U.S. as other countries provide low-cost labor for highly skilled work, and as technology continues to eliminate jobs.

In addition, it is disingenuous to lead the American people to believe that there are “high-skill, high-pay” jobs for everyone. And why should there be? To put it crudely, someone has to pick up the garbage every week, and anyone who’s lived through a garbage strike thanks God they do. As we continue to place emphasis on the upper-crust jobs, we also dishonor the people who do more simple tasks, like answer telephones and solder circuit boards.

Another wrenching transition. This is a cycle that’s as old as human progress itself. Every time a new technology moves to the fore, jobs are eliminated, often never to return. Any student of history knows about the wrenching transition between the agrarian and industrial ages. What’s different today is that digital technology moves faster, thus escalates the cycle.

Of course we want to create new jobs, and we can do so. But we must also keep firmly in mind that the almost rhythmic obsolescence of technology is likely to eliminate them in relatively short order.

Thus, the most important factor in education and training for our workforce is flexibility. No one in today’s work force can ever again expect to hold the same job for 20 years, as did many of our parents. We need to teach them modern skills, but they should be skills of the generalist: what a computer does and how to work one, how to jockey around a network. Beyond that, workers must be taught to reason and understand complexity. We must teach them how to think again, how to learn — not put them through an apprenticeship program for a job that’s likely to be replaced by a robot in five years. Such programs will be enormously expensive for whoever sponsors them, whether government or private industry.

High-pay migrant workers. In addition, the government may want to consider the new problems posed by a highly mobile work force. One software executive jokes that Silicon Valley has the highest paid migrant workers in the world. Pension funds, stock options and other benefits are often predicated on length of service, and despite their skills or talents, laid-off workers have to start retirement planning from scratch every time they start a new job. This is a rather frightening specter for baby-boomers who know that Social Security is going to be a wistful memory by the time they’re 65.

SMALL BUSINESSES ARE THE KEY TO SUCCESS

The changing structure of today’s corporations only highlights the need for a highly flexible, quick-witted work force. As anyone who’s survived a few dozen reorganizations and “downsizings” can attest, job descriptions really don’t mean much these days.

We’ve seen by the spectacular failures at IBM and the woes of other computer companies that those who want to be successful today must not just be willing, but must strive to obsolete their own products. One of the main reasons that IBM has stumbled is that for many years it was unwilling to move off of its old business — mainframe computers — and obsolete them with new technology. So others did it for them.

As digital technology blurs the distinctions between traditional businesses, virtually all companies involved in the so-called “convergence industries” — computer and consumer electronics firms, as well as the cable and telco industries, publishing and entertainment — are inventing new products, services and technologies at such an alarming rate that they can’t even keep track of what they’re creating.

Acting as if. Convergence companies today, from AT&T to Sony to Apple to Time Warner, are breaking their vast organizations into smaller, more independent operating units so they can more quickly respond to market demands and technological innovations. In other words, they are trying to act like small businesses.

Despite these efforts, truly innovative ideas inside large corporations often die young because they don’t receive sufficient corporate resources to survive. Small businesses with great ideas often suffer the same fate for much the same reason — no access to important resources. One of the reasons that California’s Silicon Valley has remained a hotbed for startup companies, despite the woes of the electronics industry, is that the region’s entire structure — from its banks to its parts suppliers — is set up to handle small business demands.

PROVIDING A PETRI DISH FOR HIGH-TECH INNOVATION

That the Clinton-Gore administration understands these issues is great news for those involved in digital technology. Certainly the stupid ideas always outweigh the great, but those who have observed technology companies for many years have seen too many fabulous and useful ideas fall by the wayside for lack of funding or tools. (The “ergonomic keyboard” story on p. 26 is a perfect example.)

The administration has the potential to do something with its manufacturing centers, its contract R&D facilities and its small business innovative research programs that large companies understandably simply cannot afford to do. It can start with a clean slate and build these facilities using state-of-the-art technology. Most of today’s semiconductors, software and hardware companies understandably can’t afford to scrap their existing systems and start with the latest of everything.

Don’t take the low bid. Those in charge of making these centers a reality should not bid them out. They should be built carefully with the very best tools, not just those the government can buy at the lowest price. Truly state-of-the-art manufacturing centers, especially, could be a tremendous boon when America’s large corporations have proven themselves mysteriously reluctant to invest in such critical improvements.

More than anything else proposed by the new administration, these programs have great potential to provide financial and moral uplift to the U.S. economy as we move away from old, dead industries and into new ones. All it takes is a few hot companies raking in a profit in a new industry to start a stampede.

THE POWER TO SHAPE THE NEXT CENTURY’S AGENDA

More than at any other time in history, the new Clinton-Gore administration is sitting at the crux of massive change. Digital technology is the power behind much of that change, and as is true with most things in life, that power is a double-edged sword. Rebuilding the infrastructure without careful attention to civil liberties will be disastrous. “Apprenticeships” that don’t take into account the changing nature of work in a digital world will cost more money than they’ll save. Providing short-term impetus to growth for today’s industries without addressing the need to move beyond them will act much like amphetamines in the nation’s bloodstream: getting high isn’t worth the coming down.

This new administration has the opportunity and the power to shape the next century. If it is willing to move beyond platitudes to address the reality of life in the U.S. today, it can frame the issues, set priorities and do the right thing. If it does its job well and with integrity, we can emerge from a painful rehabilitation program clear-eyed and clear-headed, with vibrant new industries, smart, challenged workers and enlightened executives to manage them. If not, we can just expect more of what we’ve seen for the last decade. It’s really not a hard choice.

Denise Caruso

A TECHNOLOGY POLICY FOR AMERICA:
Six broad initiatives from Bill Clinton

The policy statement below (reprinted verbatim) was released to the public during Bill Clinton’s presidential campaign in September 1992. Clinton’s emphasis on infrastructure, as well as other matters directly relating to technology policy, investment and job creation, is likely to affect deeply and directly what we call the “convergence industries” (i.e., consumer electronics, telecommunications, computers, cable TV, print publishing and entertainment, etc.). Thus it seems prudent at the time of his inauguration to allow our readers both to examine the policy and to get a somewhat de-politicized analysis of it, too. Our analysis begins on page 3. —Ed.

The Clinton-Gore technology policy consists of six broad initiatives that together will restore America’s technological leadership.

Building a 21st century technology infrastructure. Infrastructure has traditionally been the responsibility of federal and state governments. Investing in infrastructure means more than repairing bridges, harbors and highways. Today, the United States faces a new series of communications, transportation and environmental needs for the 21st century. The creation of a 21st century infrastructure program would serve as a critical technology driver for the nation. It would stimulate major new national R&D efforts; create large, predictable markets that would prompt significant private sector investments; and create millions of new jobs.

A 21st century infrastructure would address many practical problems. For example, the government can serve as a catalyst for the private sector development of an advanced national communications network, which would help companies collaborate on research and design for advanced manufacturing; allow doctors across the country to access leading medical expertise; put immense educational resources at the fingertips of American teachers and students; open new avenues for disabled people to do things they can’t do today; provide technical information to small businesses; and make telecommuting much easier. Such a network could do for the productivity of individuals at their places of work and learning what the interstate highway of the 1950s did for the productivity of the nation’s travel and distribution system.

Each year, I plan to devote a significant portion of my four- year, $80 billion Rebuild America fund to laying the groundwork for the nation’s infrastructure needs in the 21st century. Federal funding for the National Research and Education Network is one example of how the federal government can serve as a catalyst for private sector infrastructure investment. We will also provide additional funding to network our schools, hospitals and libraries.

As part of the effort to assess U.S. needs and develop appropriate programs, the federal government must monitor, or “benchmark,” what foreign governments are doing. For example, the Japanese government has committed to invest over $120 billion by 1995 to develop a digital broadband communication infrastructure called the Information Network System, and plans to invest another $150 billion to establish model programs for business and residential users.

A comprehensive infrastructure program must also include effective standards and regulations. By establishing reasonable standards and a constructive regulatory environment, the government can send clear signals to industry about important, emerging markets and spur private sector investment. For example, the digital standard that the Federal Communications Commission (FCC), in cooperation with industry, established for high-resolution television provides an excellent indication of the future technical direction of the industry and will do much to facilitate private sector R&D.

A 21st century infrastructure program should consist of the following five elements:

• Funding the establishment of key networks and demonstration projects;
• Benchmarking U.S. programs against those of other major industrial nations;
• Establishing standards and a regulatory climate that fosters private sector investment;
• Involving the federal labs, companies, and universities in conducting R&D on key technical issues; and
• Training users on networks & databases.

Establishing education and training programs for a high-skill workforce. The U.S. education system must make sure that American workers have the requisite skills. The focus should be not only on the top American students who measure up to world-class standards, but also on average and disadvantaged students. It must also take into account the need to upgrade workers’ skills and help people make the difficult transition from repetitive, low-skill jobs to the demands of a flexible, high-skill workplace. Unlike Germany, the United States does not have a sophisticated vocational education program, and unlike Japan, U.S. firms do not have a strong incentive to invest in the training and retraining of their workers. We need more of both, geared to meet the needs of the mobile U.S. workforce.

I will implement the following programs to strengthen the skills of America’s workforce: Establish tough standards and a national examination system in core subjects like writing, communication, math and science; level the playing field for disadvantaged students; reduce class sizes; and give parents the right to choose the public schools their child attends.

• Establish a national apprenticeship program that offers non-college-bound students training in a marketable skill.
• Give every American the right to borrow money for college by establishing a National Service Trust Fund. Students can repay their borrowing as a percent of their earnings over time, or by serving their communities for one or two years doing work their country needs.
• Stimulate industry to provide continuing, high skills training to its front-line workers.

For small manufacturers to compete today, it is not good enough simply to have access to new equipment and new technologies if their workers do not have the skills and know-how to operate them efficiently, and engage in truly flexible production. Yet, too much of our training is for only top executives or workers after they have lost their jobs.

My plan calls for companies with over 50 employees to ensure that 1.5 percent of their payroll goes to training throughout the workforce — not just for the top executives. But we must do more for smaller companies who cannot afford to set up the training programs. These companies need to adapt to new technologies and new equipment and the constantly new demands.

New production technology should be worker-centered and skill-based, not skill-eliminating. In the high-performance workplace, workers have more control over production and worker responsibility is increased. Some companies that have invested billions in new capital equipment have found that genuine employee involvement and good labor-management relations are ultimately more important. Therefore we need to undertake the following:

• Manufacturing training centers: We need to promote private sector-led efforts to set up training for small companies. These can be done by building off community colleges training and should be an integral part of the network of Manufacturing Extension provisions. These would also be integrated with my Apprenticeship initiative so that young people will have the opportunity to learn specific skills needed for specific manufacturing jobs or industries. Councils including private sector and academic leaders as well as workers would help decide generic areas for training.
• Certificate of training guarantees: In order to be eligible for federal funds for manufacturing training centers, such centers would have to provide all future employers with a Certificate of Guarantee. This would ensure that, when workers do not pick up the necessary skills the first time, these centers would provide additional training — at no additional cost to the employer.
• Best practices on worker participation: An integral function of the Manufacturing Extension Centers will be to collect and disseminate information on “best practices” with regards to worker participation. Increasing worker productivity is one of the keys to increasing overall manufacturing productivity.

Investing in technology programs that empower America’s small businesses. A healthy and growing small-business sector is essential to America’s economic well-being. America’s 20 million small businesses account for 40 percent of our GNP, half of all employment, and more than half of the job creation. My technology policy will recognize the importance of small and medium-sized business to America’s economic growth with:

Market-driven extension centers: Creating 170 manufacturing centers will put the best tools in the hands of those companies that are creating the new jobs on which the American economy depends by helping small and medium-sized manufacturers choose the right equipment, adopt the top business practices, and learn cutting-edge production techniques. In order to enhance U.S. industrial competitiveness, public policy must promote the diffusion and absorption of technology across the U.S. industrial base. Some state and local governments are already involved in technology diffusion using manufacturing centers. They are helping small businesses improve the productivity of their existing machinery and equipment, adopt computer-integrated or flexible manufacturing techniques, and identify training needs.

The Commerce Department has five Manufacturing Technology Centers across the country and has plans for two more. Unfortunately, these efforts are only a drop in the bucket compared to those of our major competitors. Germany has over 40 contract R&D centers (Fraunhofer Gesellschaft) and a broad network of industry associations and research cooperatives that effectively diffuse technology across industry. In Japan, major government-sponsored research projects, 170 kohsetsushi technology support centers for small businesses, and tight links between companies and their suppliers serve much the same function. There is no comparable system in the United States.

A Clinton-Gore Administration will build on the efforts of state and local governments to create a national technology extension program, designed to meet the needs of the millions of small businesses that have difficulty tracking new technology and adapting it to their needs.

The involvement of workers is critical to developing and executing successful industrial extension programs. In technology, as in other areas, we must put people first. New production technology should be worker-centered and skill-based, not skill-eliminating. In the high- performance workplace, workers have more control over production and worker responsibility is increased. Some companies that have invested billions in new capital equipment have found that genuine employee involvement and good labor-management relations are ultimately more important.

No less than 25 of these new manufacturing centers will be regional technology alliances devoted to regions hit hard by defense cut-backs. These alliances could promote the development of dual-use technologies and manufacturing processes on a regional basis.

Extending the Small Business Innovation Research Program (SBIR): In addition to creating a national technology extension service for small and medium-sized businesses, I will also expand the Small Business Innovation Research Program. By requiring that federal agencies set aside 1.25 percent of their R&D budget for small businesses, this program has helped create billions of dollars of new commercial activity while improving the research programs of the federal government. Given this track record, the SBIR program should be doubled over a period of four years to 2.5% to accelerate the development of new products by innovative small businesses.

Funding private sector-led training centers: We also need a fundamental change in the way we deal with R&D and technology if we are to lead a new era of American manufacturing. Currently, our R&D budget reflects neither the realities of the post- Cold War era nor the demands for a new national security. At present, 60% of the federal R&D budget is devoted to defense programs and 40% to non-defense programs. The federal government should aim to restore a 50-50 balance between defense and non-defense R&D. That is why I have called for a new civilian research and development program to support research in the technologies that will launch new growth industries and revitalize traditional ones.

This civilian technology program will:

• Invest in private-sector-led consortia: When the private sector creates consortia to share risks, pool resources, avoid duplication and make investments that they would not make without such agreements, government should be willing to do its part. Support for consortia such as the SEMATECH, National Center for Manufacturing Sciences and the Advanced Battery is appropriate. By requiring firms to match federal contributions on at least a 50:50 basis, the government can ensure that we are leveraging public dollars and that they are market-led and market-oriented. Often major companies are reluctant to invest in their suppliers and assist them in quality management techniques, because they fear they will go to another company. Private-sector-led consortia allow the major companies to cure that problem by coming together and agreeing on industry-wide efforts to invest in smaller suppliers. Some of these consortia will be funded by the Advanced Technology Program.
• Inward technology transfer: While we must strengthen the links between American R&D and American jobs, we must also develop a strategy for acquiring, disseminating, and utilizing foreign technologies. Our Government must increase the collection, translation and dissemination of foreign scientific and technical information.

Increasing dramatically the percentage of federal R&D for critical technologies. I will view the support of generic industrial technologies as a priority mission. The government already spends $76 billion annually on R&D. This funding should be refocused so that more resources are devoted to critical technologies, such as advanced materials, information technology and new manufacturing processes that boost industrial performance.

At present, 60% of the federal R&D budget is devoted to defense programs and 40% to non-defense programs. This level of support for defense R&D is a holdover from the massive arms build-up of the 1980s. At the very least, in the next three years the federal government should shift the balance between defense and non-defense programs back to a 50-50 balance, which would free-up over $7 billion for non-defense R&D. Having achieved this balance, the government should examine whether national security considerations and economic conditions warrant further shifts.

I will also create a civilian research and development program to support research in the technologies that will launch new growth industries and revitalize traditional ones.

This civilian technology program will:

• Help companies develop innovative technologies and bring new products to market;
• Take the lead in coordinating the R&D investments of federal agencies; and
• Cooperate and consult with industry, academia and labor in the formulation and implementation of technology policy and R&D programs.

Advanced manufacturing R&D: The United States is currently underinvesting in advanced manufacturing R&D. The federal government should work with the private sector — with the private sector taking the lead — to develop an investment strategy for those technologies critical to 21st century manufacturing.

Following the lead of my running mate, Al Gore, and several of his colleagues, we must do more to support industry’s efforts to develop the advanced computer-controlled equipment (“intelligent machines”) and the electronic networks that will enable American factories to work as quickly and efficiently as their Japanese counterparts. These technologies also include flexible micro- and nanofabrication, simulation and modeling of manufacturing processes, tools for concurrent engineering, electronic networks that allow firms to share business and product data within and between firms, and environmentally-conscious manufacturing. According to industry experts, the United States has an opportunity to capitalize on the emerging shift from mass production to flexible or “agile” manufacturing.

Leveraging the existing federal investment in technology to maximize its contribution to industrial performance. R&D conducted at the federal labs and consortia should be carefully evaluated to assure that it has a maximum impact on industrial performance. Furthermore, cooperation between universities and industry should be encouraged.

America’s 726 federal laboratories collectively have a budget of $23 billion, but their missions and funding reflect the priorities that guided the United States during the Cold War. Approximately one-half of their budget is directed toward military R&D. By contrast, the budget for the National Institute for Standards and Technology (NIST) — the only federal agency whose principal mission is to assist industry — accounts for less than one percent of the total federal lab budget. Despite several years of legislative reform and many new directives, the labs still do not have the autonomy or funding to pursue joint ventures and industry aggressively.

These labs and other private non-profit research centers are national treasures because they house large, multi-disciplinary teams of researchers who have honed the skills of balancing basic and applied research for long-term, mission-oriented projects. It would take years to match these special capabilities elsewhere. Today, the labs and industry cooperate on defense needs; we need to change regulations and orientation to get this cooperation on technology development for commercial usage.

To remedy these problems, I propose the following:

• The budget of the National Institute of Standards and Technology should be doubled. Federal labs which can make a significant contribution to U.S. competitiveness should have 10 to 20 percent of their existing budget assigned to establish joint ventures with industry.
• Private corporations should compete for this funding through review by panels managed by the labs and made up of corporate and academic experts. Lab directors should have full authority to sign, fund and implement cooperative R&D agreements with industry. Some labs, such as NIST, already have this authority, but others do not.
• Industry and the labs should jointly develop measures to determine how well the technology transfer process is working and review progress after 3 years. If these goals have not been met, industry and the labs should reevaluate their involvement, and funds should be redirected to consortia, universities and other organizations that can work more effectively with industry for results.
• University research accounts for a large part of the federal basic research budget. Funding for basic university research should continue to be provided for a broad range of disciplines, since it is impossible to predict where the next breakthrough may come.

While maintaining America’s leadership in basic research, government, universities and industry must all work together to take advantage of these new breakthroughs to enhance U.S. competitiveness.

Cooperative R&D programs represent another opportunity. Consortia can help firms share risks, pool resources, avoid duplication, and make investments that they would not undertake individually. By requiring that firms match federal contributions on at least a 50:50 basis, the government can leverage its investments and ensure that they are market-oriented.

Many industries are demonstrating a new-found willingness to cooperate to meet the challenge of international competition: SEMATECH has proven to be an important investment for the industry and the Nation. It has helped improve U.S. semiconductor manufacturing technology, helped reverse the decline in world-wide market share of U.S. semiconductor manufacturing equipment companies, and improved communications between users and suppliers. U.S. automakers have recently formed the United States Council for Automotive Research to develop batteries for electric cars, reduce emissions, improve safety, and enhance computer-aided design. The Michigan-based National Center for Manufacturing Sciences, which now has 130 members, is helping to develop and deploy the technologies necessary for world-class manufacturing. The Microelectronics Computer Technology Corporation (MCC) is developing an information infrastructure which will enable businesses to develop, manufacture, deliver and support products and services with superior speed, flexibility, and quality. U.S. steel-makers are cooperating to develop manufacturing processes which would use less energy, create fewer pollutants, and slash the time required to turn iron ore and coal into steel.

A Clinton-Gore Administration will work to build a productive partnership between government, research labs, universities, and business.

Creating a world-class business environment for private sector investment and innovation. Changes in America’s tax, trade and regulatory policies are also needed to help restore America’s industrial and technological leadership. In a global economy in which capital and technology are increasingly mobile, we must make sure that the United States has the best business environment for private sector investment. Tax incentives can spur investment in plant and equipment, R&D and new businesses. Trade policy can ensure that U.S. firms have the same access to foreign markets that our competitors enjoy in the U.S. market. Antitrust reform will enable U.S. firms to share risks and pool resources. Strengthening commercial sections of our embassies will increase our ability to promote U.S. goods abroad. Streamlining export controls will reduce the bureaucratic red tape which can undermine competitiveness. And an overhaul of cumbersome defense procurement regulations will strengthen both our civilian and defense industrial bases.

Permanent incentives for private sector investment: Too many federal incentives meant to spur innovation are on-again-off-again programs that industry views as unreliable. As a result, they have not realized their full impact. Several permanent tax measures should be put in place immediately to stimulate commercial activity. They include the following:

• Make the R&D tax credit permanent to provide incentives for U.S. companies that invest in developing new technology.
• Place a permanent moratorium on Treasury Regulation 1.861-8: This regulation increases the effective rate of U.S. taxation of R&D and creates a disincentive for companies to conduct R&D in the United States.
• Provide a targeted investment tax credit to encourage investment in the new equipment that we need to compete in the global economy, and ensure that depreciation schedules reflect the rapid rate of technological obsolescence of today’s high-tech equipment.
• Help small businesses and entrepreneurs by offering a 50% tax exclusion to those who take risks by making long-term investments in new businesses.

An effective trade policy: The Bush-Quayle Administration has failed to stand up for U.S. workers and firms. We need a President who will open foreign markets and respond forcefully to unfair trade practices. I will:

• Enact a stronger, sharper Super 301 to ensure that U.S. companies enjoy the same access to foreign markets that foreign companies enjoy to our market.
• Successfully complete the Uruguay Round. This will help U.S. manufacturers and high-tech companies by reducing foreign tariffs, putting an end to the rampant theft of U.S. intellectual property, and maintaining strong disciplines against unfair trade practices.
• Insist on results from our trade agreements. Although the U.S. has negotiated many trade agreements, particularly with Japan, results have been disappointing. I will ensure that all trade agreements are lived up to, including agreements in sectors such as telecommunications, computers and semiconductors. Countries that fail to comply with trade agreements will face sanctions.
• Promote manufactured goods exports by small and medium companies: To promote exports of manufactured goods, I will strengthen the commercial sections of our embassies abroad so that they can promote U.S goods, participate in foreign standards-setting organizations, and support the sales efforts of small and medium-sized businesses. We should also provide matching funds to trade associations or other organizations who establish overseas centers to promote U.S. manufactured goods exports.

Streamline exports controls: Export controls are necessary to protect U.S. national security interests and prevent the proliferation of nuclear, biological and chemical weapons. Nonetheless, these controls are often overly restrictive and bureaucratic, creating a mountain of red tape and costing the U.S. tens of billions of dollars in exports — while undermining the competitiveness of the high-tech industries on which our national security depends. The United States should:

• Further liberalize East-West export controls that are unnecessary given the end of the Cold War.
• Avoid unilateral export controls and controls on technology widely available in world markets. Unilateral controls penalize U.S. exporters without advancing U.S. national security or foreign policy interests.
• Streamline the current decision-making process for export controls. While our competitors use a single agency to administer export controls, the United States system is often characterized by lengthy bureaucratic turf wars among the State Department, the Commerce Department, the Pentagon’s Defense Technology Security Agency, the Arms Control and Disarmament Agency, the Department of Energy, and the National Security Agency.

Antitrust reform: Increasingly, the escalating cost of state-of-the-art manufacturing facilities will require firms to share costs and pool risks. To permit this cooperation, the United States should extend the National Cooperative Research Act of 1984 to cover joint production ventures.

Civil-military integration: Department of Defense procurement regulations are so cumbersome that they have resulted in an unnecessary and wasteful segregation of our civilian and defense industrial bases. The military specification for sugar cookies is 10 pages long. Government procurement is so different from private sector practices that companies now set up separate divisions and manufacturing facilities to avoid distorting the commercial part of their business. The U.S. must review and eliminate barriers to the integration of our defense and civilian industrial base. These barriers include cost and price accounting, unnecessary military specifications, procurement regulations, inflexibility on technical data rights, and a failure to develop technologies in a dual-use context.

Taken together, the six initiatives discussed above comprise a technology policy that will restore economic growth at home, help U.S. firms succeed in world markets, and help American workers earn a good standard of living in the international economy.