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Reuters
16 hours ago
- Business
- Reuters
Vatican-backed report seeks financial reform to avert decades of lost development
LONDON, June 20(Reuters) - A commission launched by the late Pope Francis has outlined financial reforms it says could help to avert decades of lost development in poor countries that face onerous repayments as global public debts reach record levels. The Jubilee Commission report is published ahead of the once-a-decade United Nations Financing for Development Conference that takes place in Seville, Spain, later in June. The environment for this jubilee-year campaign could hardly be more different from the last - 25 years ago - that yielded billions in historic debt forgiveness. Mariana Mazzucato, a University College London professor and member of the commission, said today's debt crisis was symptomatic of "a broken investment model". "The solution has to be public investment strategies that build productive capacity, domestic value added and sustainable fiscal space," she said. The report recommends measures including more debt suspension initiatives and steps to ensure money from institutions, such as the International Monetary Fund and the World Bank, does not end up flowing from countries to private creditors. It also urges legal changes in London and New York - the jurisdictions for most bond contracts - to disincentivise creditors from refusing to take part during debt restructurings. After the debt forgiveness that followed the previous jubilee campaign, many developing countries, freed of their existing debt, turned to more expensive private lending, and China's lending ballooned. As a result, countries including Sri Lanka, Zambia and Ghana slid into default. A wave of sovereign defaults unleashed by the COVID-19 pandemic - and exacerbated by the pressure of Russia's invasion of Ukraine and a global rate-hiking cycle that boosted borrowing costs - largely crested last year. But the commission said dozens of countries are still squeezing spending to repay debt - with long-term implications for development and social cohesion. Average interest costs for developing countries as a share of tax revenues has almost doubled since 2014, while 3.3 billion people - and more than half of Africans - live in countries that spend more on debt service than health. The system, the commission's leaders said, traps countries in a cycle in which private lenders send cash when times are good - but quickly shut off access when global risk re-emerges. When lenders of last resort, such as the IMF, send money, the commission said that money often goes towards repaying creditors to avoid default. Martin Guzman, commission co-chair and Argentina's ex-Economy minister, said that created a problem for both creditors and debtors. "They don't come to the table with the right conditions for engaging timely and sustainable restructurings, and that aggravates the development crisis," he said.
Business Recorder
13-06-2025
- Business
- Business Recorder
Policy issues in the EFF programme
In addition, lack of adequate regulatory capacity means that it is very likely, as has been the case in real markets, for example, agriculture, left to market forces without adequate level of governance, instead of multiple sellers competing for greater market share at the back of improved quality goods/services, a collusive behaviour is adopted where at least majority of sellers agree on same, or very similar prices, which works in favour of profit maximization, taking the prices all the more away from optimal, or true price discovery. Unfortunately, both the neoliberal-minded Extended Fund Facility (EFF) programme, and similar policy stance by public policy in general over the years – at the back of most policy makers having similar neoliberal policy stance, given their orientation in tradition of 'Chicago boys'-styled economic thinking – has meant that the misgivings of privatization, especially in the context of poor regulatory capacity of public sector, and weak economic institutional, organizational, and market conditions. Weak public sector capacity to both run itself in the first place, and then to regulate has, in addition to traditionally low investments in education, and better approach to public service, also is due to rampant recourse to outsourcing. This is all the more dangerous for the public sector, because both protecting the demos from profit-maximizing approach of the private sector, and for having the policy and implementation ability – including that of appropriately regulating markets, and privatized affairs – to deal with crisis situations like the fast-unfolding climate change crisis, and the Covid pandemic for instance, requires taking risks, and learning-while-doing approach, and outsourcing has not allowed public sector to walk that learning curve. Policy issues in EFF programme — I Economic experience, both globally and domestically, has indicated that companies that do the outsourced work, and those that provide third-party validation of their performance – since as discussed governments in general in developing countries do not have the capacity to regulate, and lack of transparency in accepting this reality, especially in terms of past below appropriate level performances also lowering trust in government's declared capacity – have shown strong signals of collusive behaviour to support each other in terms of continuing to get such work from governments; an issue which is of global nature, and all the more in developing countries that they have suffered in the wake of the neoliberal assault of the last four decades or so. World renowned economist, Mariana Mazzucato, in her noted 2023 published book 'The big con: how the consulting industry weakens our businesses, infantilizes our governments and warps our economies' that she co-authored with Rosie Collington pointed out misgivings of an over-board outsourcing policy. In doing so the government unjustifiably reins in its footprint in terms of important functions for governance, incentivization, and market creation/regulation for adequate pricing, and by over-engaging the otherwise highly collusive in general, and otherwise much more technically sound consulting industry to allow government to call out their con, which in turn allows perpetuation of their so-called relevance for greater good of the economy; with the internal moral hazard that government's capacity diminishes over time to see through these nefarious designs – an outcome which the extractive institutional design of the politico-economic elites perhaps also desires. The book points out in this regard the following: 'The consulting industry today is not merely a helping hand; its advice and actions are not purely technical and neutral, facilitating a more effective functioning of society and reducing the 'transaction costs' of clients. It enables the actualization of a particular view of the economy that has created dysfunctions in government and business around the world. …What we call the Big Con is not about criminal activity. It describes the confidence trick the consulting industry performs in contracts with hollowed-out and timid governments and share-holder value-maximizing firms. These contracts enable the consulting industry to earn incomes that far exceed the actual value it provides – a form of 'economic rents', or 'income earned in excess of the reward corresponding to the contribution of a factor of production to value creation. …While consulting is an old profession, the Big Con grew from the 1980s and 1990s in the wake of reforms by both the 'neoliberal' right and 'Third Way' progressives – on both sides of the political spectrum.' To give an example, reportedly a certain economic advisor in the 'Economic Advisory Council' 'a non-constitutional and independent body formed to give economic advice to the Government of Pakistan, specifically the Prime Ministery', was reportedly previously working in the 'McKinsey and Company' – a company, which has reportedly strong tilt towards neoliberal thinking – has left that job, and instead is advising towards rationalization of the extent of government's footprint. Here, it is likely that government is being led by a consultant that shares the reported neoliberal view of the company he reportedly previously worked in. Under the neoliberal framework, which has come under increasingly strong criticism in the wake of the GFC 2007-08, government is seen as the problem, and needs to be reduced to the minimum, and this framework does not hold a more balanced role of government in a developing country in particular. It would have been much better if such an effort was being led by the government itself, with likely much more better understanding of local conditions, and requirements, and an effort in this regard with likely greater openness to the misgivings of the neoliberal framework. A June 6, 2025 Bloomberg published opinion piece 'Harvard, McKinsey and Davos are paying for Neoliberalism's sins' pointed out in this regard: 'Three institutions stood at the heart of the neoliberal regime that ran the world from the 1980s onward: Harvard University, McKinsey & Co. and the World Economic Forum (WEF). Harvard and McKinsey were the premier training grounds for the emerging global elite. The WEF's annual meeting at Davos was the annual meet-and-greet party for the people who had made it (and their journalistic chroniclers). All three institutions reinforced each other during the glory years of neoliberalism. And all three are currently in crisis. Their travails tell us a great deal about what was wrong with an idea that once delivered a necessary shock to a sclerotic Keynesian regime but was corrupted by its crude celebration of success. They can only recover their former vitality if they reflect seriously on what went wrong during the rah-rah years — and on their own central role in creating our current malaise.' There is sadly little understanding of local media in appropriately reflecting on the issues such as the misgivings of the neoliberal assault, practice of over-board austerity policy, and the role of outsourcing. Capacity issues of local media in this regard – an issue that is similarly present in a number of major media outlets internationally as well, perhaps also because of their collusive behaviour in the overall extractive politico-economic institutional design – are for instance highlighted in a narrow way in which discussion panels of economists are selected for reflecting on economic issues, for instance the recent discussions on recently proposed Federal Budget; where instead the panel should select economists from different schools of economic thought, with the result being that mostly neoliberal-minded economists are in the discussion panels. Moreover, by pushing the government out of governing and market creation to regulating, and reacting to market failures, to the privatizing spree, and outsourcing, the government is getting all the more thrust into a 'dependency model', with diminishing capacities to both call out failures of private sector, and to take centre-stage in terms of increasing knowledge base to deal with an ever-increasing world of 'polycrisis', including existential threats. The EFF programme forwards the 'dependency model'. For too long the neoliberal framework is being thrust, with the willing reception of 'Chicago boys', without any worthwhile retrospection in the light of glaring evidence of its misgivings being ignored. This needs to be de-mystified in a much bigger way than is being done in the country currently, and the role of media and educationists/opinion makers, for instance, is indeed very important in this regard. The developed world, which did open up their economies but did not jump the gun, they rather first built the basis on protectionist, largely state-led role in economic decision-making, avoided short-termism, and targeted goals of reaching productive, and allocative efficiencies of a needed level. Even in those countries with considerable success in this targeting has suffered too quick, and too deeply following the neoliberal model. Sadly, both the leading policymakers in general in the country and those at the IMF continue to ignore these aspects that have come to the fore all the more since the Global Financial Crisis (GFC) 2007-08, and later on the Covid pandemic, and continue to push governments for neoliberal reforms. Together with practice of over-board austerity policy – the serious misgivings of which are glaringly clear in both the country's own experience of practice of this policy over the years in terms of short-lived macroeconomic stability, given poor economic institutional, organizational, and market conditions, and after giving lot of economic growth, and in turn employment sacrifice. Unfortunately, the Federal Budget that has been recently announced is totally in line of neoliberal-, and overboard austerity policy. For instance, both in the EFF programme, and the proposed Federal Budget FY 2025-26, there is no indication on providing neither any support price, or any indicative price even when poor market functioning, and highly sub-optimal regulation by government, including the likely practice of collusive behaviour, is not anywhere near leading to true price recovery. Similarly, privatization of important state-owned enterprises (SOEs) like air travel, railways, steel production, among others is being emphasized indicating their loss-making performance, but not realizing the lack of institutional focus by government over the years, and the need for government to run such important strategic affairs to safeguard the interests of the demos, both in terms of welfare aspects, but also to have greater control over investment and pricing of the goods and services, for their high level productive and allocative role in the overall economy, and especially in the situation of polycrisis, and the immense stress it produces for aggregate supply. Loss and trade-off are being primarily wrongly contextualized under both the EFF programme, and the proposed Federal Budget. Rather than internalizing the misgivings of the over-board austerity policy – as evidenced from sticky core inflation, which is more reflective of internal economic situation of the country, and not the CPI inflation that has more influence from external factors like low international commodity prices – and adopting a much more balanced aggregate demand, and supply-side policy approach, to overall see a lower interest payments related expenditure, instead strategically important role of government in seeing markets move towards optimal pricing, for instance in agriculture sector, and in the case of protecting demos, and supporting exports through SOEs, being reined in through pushing towards privatization for reducing losses, and creating greater fiscal space. The government, sadly, has not learnt much from either Scandinavian countries plus China or from the high level of misgivings of neoliberal- and over-board austerity policies. For instance, a major role in lowering poverty, attracting greater investment, and enhancing exports in a drastic way by China has to do with not coming out of the markets in the way of a sudden 'shock-therapy' style – as being pushed through neoliberal policy agenda of IMF programme and the proposed Federal Budget – of strategically important economic sectors – including those provide food security – but rather to adopt 'dual-track' pricing mechanism, and government keeping significant role in running SOEs, and adopt a gradualist approach of liberalization, while improving economic institutions, organizations, and markets, and reaching needed thresholds for proper economic functioning over an appropriate non-neoliberal liberalization curve. There is then also an inherent contradiction in the proposed Federal Budget – which as per the EFF programme conditionalities requires IMF's approval, and then reflects on both the government, and the IMF – in terms of moving towards a resilient, green economy; which is also the main objective of the other recently negotiated programme of IMF in the shape of Resilience and Sustainability Facility (RSF). On one hand a 'carbon levy' is being introduced on petroleum products to discourage the carbon footprint, while at the same time general sales tax (GST) at the rate of 18 percent is being applied on imported solar panels, which hold the majority share of supply of solar panels. The justification that domestic industry needs to be supported required subsidizing the local industry for supporting them in terms of providing competition for market share, rather than discouraging the move towards solarization, given the nascent nature of domestic production of solar panels falling significantly short of demand, especially in supporting cost burden of high energy costs from national grid for agriculture, and other industry, especially given their role in providing food security, and exports. (To be continued) Copyright Business Recorder, 2025
Mint
18-05-2025
- Business
- Mint
Industrial revival may need a brand new public sector model
Yes, we speak of things that matter With words that must be said 'Can analysis be worthwhile?" 'Is the theatre really dead?" —The Dangling Conversation by Paul Simon The answer is an unequivocal 'no'; theatre is alive and thriving across the Indian landmass. But the same question asked about India's public sector, especially public sector units (PSUs) engaged in manufacturing activity, might elicit different responses, depending on the political disposition of the person replying. As things stand, the economic situation in India may require a fresh but nuanced relook at public sector manufacturing. This suggestion will undoubtedly be met with howls of protest. And with reason too. The record of manufacturing PSUs in India, apart from a handful of companies, is downright embarrassing. Also Read: PSUs are running amok with grand ventures, with little regard for their capability or governance Often, the problem lies in governance compromises. The chief executive of a large PSU took early retirement some years ago, unable to countenance the unabashed favouring of a private-sector competitor by the minister in charge, thereby depriving the PSU of its rightful revenues. Then there is the workforce angle. This columnist visited Ranchi in 1987 to report on police firing at Hindustan Engineering Corporation, a PSU, and found over 20,000 employees affiliated to more than 60 registered and unregistered trade unions, all at odds with the management and with each other. Surprisingly, the company continues to exist even today, despite a negative net worth. But shifting economic winds indicate that it's probably time to think afresh about PSU activity, though with a difference and greater control over governance and performance. Various economists in the West are also revisiting the 1980s abandonment of public sector enterprises and questioning whether the same principles should hold true after more than 40 years. Of course, there is an unavoidable proviso: the business-as-usual public sector model must be scrapped in favour of a new operating system. Also Read: It's time to re-evaluate the utility of public sector units Economist Mariana Mazzucato has argued compellingly in her book, The Value of Everything, that while modern economic thought has relegated the government's role to only fixing market failures, rather than actively creating and shaping markets, the value-creating role of the public sector has been grossly underestimated. In a September 2024 essay for Finance and Development published by the International Monetary Fund, she wrote: 'Closed-minded perceptions of the state's role, cuts to public sector employment, and overreliance on big consulting firms have left many governments ill-equipped to implement mission-oriented industrial policy… Industrial policy requires a competent, confident, entrepreneurial, and dynamic public sector—one equipped to take risks, experiment, and collaborate with the private sector on ambitious goals yet open to how those goals are achieved." The operative phrase here is 'mission-oriented industrial policy'. The Indian government's second advance estimates show manufacturing at 14.3% of gross domestic product (GDP) in 2024-25, down perceptibly from 16.3% during 2014-15. This decline encapsulates many of the economy's current problems, including rising unemployment and stagnation in real wages. What aggravates the problem is India's uneven and patchy economic growth—including industrial activity—across states, with some states far over the median level and many far below. Take the example of Bihar. The state's manufacturing output during 2023-24, at current prices, was only ₹52,600 crore, or about 1.5% of national manufacturing output. In contrast, Odisha's share was above 4.7%. At the other end of the spectrum, Maharashtra's manufacturing contributed to 13.4% of national output. In the podcast Ideas of India, economist and Ashoka University professor Prachi Mishra cites Bihar's example—accounting for 9% of India's population but contributing to less than 2% of GDP—to highlight how divergences exist between states even after the efforts of 15 finance commissions, a former Planning Commission and a current Niti Aayog. Also Read: India can leap from cost competitiveness to innovation-led manufacturing So, ignoring rigid views that echo the economic orthodoxy of a minimal role for the state in an economy, it might be worthwhile to consider whether new public sector manufacturing units might be able to provide a balancing factor. The Public Enterprises Survey Report 2023-24, which examined the working of 272 central operating PSUs (excluding banks and insurance companies), found that while their net profit during the year had increased by over 47%, their contribution to the exchequer (various duties and taxes, dividend payouts and interest on central government loans) at ₹4.85 trillion had increased by around 6%. There are two additional figures that explain how a new PSU could kickstart some industrial activity in Bihar. The first is that capital expenditure by PSUs has jumped by over 72% between 2019-20 and 2023-24, proving that state-owned companies have the capacity to invest when the private sector's propensity to invest remains stubbornly low. Second, the report reveals that the surveyed PSUs spent ₹77,339 crore on goods and services procured from micro and small enterprises in 2023-24 under the Centre's 2012 procurement policy; this alone could offer an opportunity for a constellation of privately-owned micro and small units to come up in Bihar. Also Read: How a manufacturing boom could help India close the gender gap This column is not advocating an indiscriminate investment binge in new PSUs, which might only help meet some temporary political and electoral purposes but fail to provide the sustainable economic stimulus that is needed. Investments in new PSUs need to be selective and strategic. The author is a senior journalist and author of 'Slip, Stitch and Stumble: The Untold Story of India's Financial Sector Reforms' @rajrishisinghal
Business Recorder
15-05-2025
- Business
- Business Recorder
Mission-oriented economic policy
There seems to be a lot of focus on the working of ministry of finance, which is not to say that its role is in any way less important than other sectors of the economy, yet given a world of polycrisis, including unwarranted belligerence from the country's eastern neighbour – which was met with overpowering but justifiably measured force by Pakistan – the role of economic policy, especially towards improving economic institutional quality – or ministries at the federal, and departments at the provincial level for subjects totally in provincial domain and underlying organizational, and market development, in particular in terms of governance and incentive structures, should serve as a much more strengthened second line of defense. Hence, economic policy-making on these lines is approached to provide much-needed enhanced support to further augment otherwise sound efforts of armed forces for ensuring national territorial independence. In addition, such economic policy is needed to improve protection against the existential threat of climate change crisis, and the related 'Pandemicene' phenomenon, the attainment of sustainable development goals, sustainably managing the debt distress, building-up ample foreign exchange reserves, managing inflation, reducing poverty and inequality, and strengthening democracy. Moreover, economic policy needs to be approached in a mission-oriented, purpose-driven way, where the best minds in economics globally, especially those who have a grip on the misgivings of neoliberal economics of the past four decades– for instance, but not limited to names like Mariana Mazzucato, Isabella M. Weber, Joseph E. Stiglitz, Clara Mattei – need to be brought together, and along with local policymakers a certain multi-year economic policy, and supportive budgetary framework needs to be developed. That such plans have required level of inclusivity for greater acumen, indigenous knowledge, international best practices, and ownership, all major political parties, all provinces, and multilateral/bilateral development partners are taken on board in these discussions. The fast-unfolding nature of climate change crisis, the related presence of high likelihood of the 'Pandemicene' phenomenon, and strengthening economy as a power house in support of national defense – which despite the economic weaknesses is very strong, something that speaks volumes of its excellent potential, and provides great opportunity to develop it further to heights that can propel it as second to none – is important to be done as a second defense to nation's territorial independence, for wellbeing of its citizens, for enhancing the quality of its democracy, and for improving its standing among economies globally. For one, a project-based approach needs to be nested in an overall programme-based approached with sector-level economic policy is formulated, and budgets – federal, and provincial – are evolved in an aligned way. Second, the civil service is replaced with 'one' public service, which represents all the economic sectors, and where performance-based streams are distinguished along the lines of 'fast-stream' and 'regular streams'. Underlying educational systems improved for better quality of labour-, and entrepreneurial segments, together with merit-, and qualitatively improved screening processes put in place for better graduation of human capital to decision-making hierarchy, and innovation-led economy. Third, broad economic policy contours thus reached as a consequence of this mission-oriented economic policy should see the interconnectedness of economic policy, with environmental, and epidemiological policy; not to mention a document reached on these lines, with profound consensus behind it will most likely, and at least in terms of its broad framework, have enough strong status as a convention to safeguard against decisions made on whims by changing political regimes over time. To illustrate some important motivational, and inspirational streaks that perhaps should define the manifestation of the mission-oriented nature of such a policy framework, the purpose-driven, mission-oriented spirit could be understood further from the herculean task of landing man on the moon in just one decade taken upon by former US President John F. Kennedy. Speaking at the Rice University on September 12, 1962, he said in this regard 'We choose to go to the moon. We choose to go to the moon in this decade and do the other things, not because they are easy, but because they are hard, because that goal will serve to organize and measure the best of our energies and skills, because that challenge is one that we are willing to accept, one we are unwilling to postpone, and one which we intend to win, and the others, too.' We saw the success of the 'all of state' approach while fighting against India recently, and it is this approach that should be taken in economic policymaking with high ambitions, and strict timelines – small dents will not make needed headway, when what is needed is a one big push, and within-it number of small pushes from all sides are made, and all that is done in a challenging timeframe. The burden of past sub-optimal decisions with regard to economy, for instance, requires this. We need to challenge ourselves, because the economic problem at hand is a really challenging, made all the worse by lack of course correction – for instance, and very importantly not moving away enough from neoliberal policy mindset, and in many ways sadly, such policy framework continues to get perpetuated because it serves the extractive politico-economic institutional designs of the elites. That economic policy will need to imbibe the spirit of Franklin Delano Roosevelt's 'New Deal Policies' of a more responsible financial system, and a meaningfully caring, welfare-natured government, which will also have a strong grip in terms of its own capacity – and not majorly reliant on 'outsourcing', neither just there to fix market failures, or only exist as only a facilitator of private sector – to deliver safeguard the interests of its demos, through playing a significant role in regulation, and market creation as an equal partner to private sector. After more than four decades of rein of Neoliberalism, there is some shift away from it, and which includes pushing towards bringing protectionism in the US – with consensus on this policy on both sides of the political spectrum, and the only difference is the degree of intensity – for enhancing productivity of the agricultural and industrial sector. Pakistan should learn from this approach, and move away from Neoliberalism. That mission-oriented economic policy needs to be established as 'Green New Deal Policies' in view of the fast-unfolding of climate change crisis. In this, it has a lot to learn from China as a leader in renewable energy. Like Nordic countries, it has a meaningfully strong government sector on the lines indicated above. Among other important things to learn from China in the field of mission-oriented economic policy – given its exceptional path to success in reducing poverty in just a few decades – is its strong emphasis on escaping the price shock therapy, and instead adopting the 'dual-track' pricing framework for achieving sustainable macroeconomic stability, including efficiently-managing inflation, and laying an important basis for bringing fast-paced development of especially heavy industry, and enhancing the productivity of the agricultural sector in overall improving domestic production, and export competitiveness. So, while it is important to carry forward the projects under the China-Pakistan Economic Corridor (CPEC), it is also important to learn from the economic policy approach of China. Moreover, it needs to be pointed out that while India has excelled in terms of economic growth for a number of years now overall, that growth nonetheless has strong elements of neoliberal policy, which means that it has enhanced the gap between rich and poor, and has also weakened democracy in the process. On the contrary, China has adopted non-neoliberal policies – for instance, not going for outright privatization, and instead in most cases adopted innovative ways to keep government's check through coming up with mixed-ownership model for running state-owned enterprises, and also did not follow price 'shock therapy' policies, and also has meaningful capital controls, and reasonable level of significant protectionist policy – to make unprecedented dent to poverty as not seen before at least in recent human history, which should serve as important learning for Pakistan economic policy framework. Copyright Business Recorder, 2025
Forbes
20-03-2025
- Business
- Forbes
Will DOGE Cuts Threaten US Leadership In Innovation?
There has been a lot of discussion recently about the impact that the newly formed US Department of Government Efficiency (DOGE) will have on the federal workforce and overall US budget. Whatever your views on DOGE may be, one thing is certain: Depending on how the cuts are made, longer-term US innovation will likely suffer. Even though we may not recognize it, US government funding continues to fuel innovations that shape our daily lives. While we give Apple credit (and it is well deserved) for creating the iPhone, one of the most ubiquitous devices we use, its creation was only possible because of research backed by various federal agencies. Mariana Mazzucato's book The Entrepreneurial State highlights this. Almost everything that made the iPhone special (the multi-touch screen, GPS technology, the full web browser, the technology behind Siri, the Internet technology, its storage, display, and processor, and many other elements essential to the phone) were funded through the Department of Defense, the Department of Energy, the National Institutes of Health, the National Science Foundation, CERN (the European Organization for Nuclear Research) and other government agencies. Even though it took an innovative private company to create the iPhone, its invention would not have been possible without the components the US government helped build. Even more impactful than the iPhone is the Internet itself, the creation of which would not have been possible without government funding. You can easily google the origins of the Internet to read about the role of the Department of Defense and other federal agencies in its creation. While on the subject of Google, it is relevant to note that even the algorithm that helped launch the internet giant Google originated from research funded by the National Science Foundation. That is precisely how basic research, or research focused on expanding scientific knowledge without a specific application, is supposed to work. It is the foundation for innovation, providing ideas and opportunities to companies that build consumer applications from this research. Most of the innovations you enjoy today have their roots in scientific research that likely would not have been possible without federal funding. And beyond the innovations, this funding also helps create the vast pool of highly trained scientists and the scientific infrastructure that has led the US to be the global innovation leader for decades. In 2022, the federal government funded approximately 40% of the basic research conducted in the US. This includes research in almost every area, such as medicine, smart cities, cybersecurity, autonomous vehicles, sustainable energy, artificial intelligence (AI), agriculture, housing, transportation, education, space exploration, etc. This basic research, which has been done over the decades, has spawned countless products that shape how we travel, communicate, fight diseases, live, and use many comforts. For example, NASA, which is rumored to lose approximately 50% of its science budget, is responsible for countless innovations we use on Earth every day, including cordless vacuums, memory foam mattresses, enriched baby food, LEDs, artificial limbs, infrared ear thermometers, robotic surgery, and countless others. While the obvious impact of cutting NASA funding is preventing or delaying space missions, the other casualty is inhibiting the creation of innovations we could use daily in our homes. Or take the National Science Foundation (NSF), another likely victim of significant federal budget cuts—the NSF funds scientific research programs nationwide in over 2,000 colleges, universities, and other institutions. Research funded by the NSF has helped develop 3D printing, AI, doppler radar, kidney matching, LASIK eye surgery, MRI, and countless other innovations. Other countries have been steadily gaining ground in scientific leadership. In 2020, China had more research output than the US, with 744,000 scientific publications in English, while US scientists produced 624,000 papers, followed by the UK with 198,000, and India with 191,000 papers published. Between 2010 and 2020, China's scientific and engineering publications grew by 117% compared to the US publication growth of 11% during the same period. China also has more scientists working on AI than the US, the area most likely to impact our lives over the coming years. While the US is in a cost-cutting mode, in 2024, the Chinese government increased its funding for science and technology by 10%, underscoring the importance of basic research and the development of top-notch innovative talent. Cutting funding for basic research programs is easy because they don't often show immediate payback. But this work drives global economic leadership; once lost, rebuilding takes decades. As research funding moves to other countries, so will the highly trained scientists, leaving the US with a smaller and perhaps less talented pool of innovators. To be sure, there are always inefficiencies in any organization, especially one as large as the US government, and removing inefficiencies is prudent. However, when looking for budget cuts, we need to ensure that we don't throw the baby out with the bathwater because if that happens, we will be watching the next wave of innovation from the sidelines instead of leading it.
