Race for the new

Bursting technologies

A robot performs tai chi at a trade fair in Germany, March 20, 2017

Innovation is the most powerful force behind material progress; it increases productivity of people and resources, and introduces new products and techniques. Advanced countries have relied greatly on it for growth; both their firms and governments give high priority to innovation. The pioneer innovator was Britain; Germany followed, and the United States of America dominated during the 20th century. After World War II, Japan concentrated on industrial leadership, and became a highly successful innovator. In the past quarter century, China has invested in innovation. Where do they stand today? The Organization for Economic Cooperation and Development has taken a close look.

Technological change should lead to the rise of new industries and decline of old ones; but jobs in few industries were lost, and those too in only a few countries. Greece lost jobs in all industries; Spain and Portugal came next. Southern and Eastern European countries also lost some jobs. The job losses were in manufacturing, agriculture and construction; job gains were in services. But in general, job losses were limited because productivity grew very slowly in OECD countries. Between 1995 and 2015, its growth exceeded 1 per cent a year only in Korea, Ireland, Finland and the US; it was negative in Spain and Italy.

The information and computer technology industry also saw a radical relocation. The top manufacturing nations in 1995 were the US, Japan, Germany, Britain and Singapore; in 2015, they were China, the US, Korea, Germany and Japan. In ICT services, the leaders in 1995 were the US, Germany, Italy, Britain and France; in 2015, they were the US, Germany, Britain, Ireland and India.

Women earn less than men in all countries covered by the OECD. Part of the difference is due to skill levels. Holding skills constant, the least discrimination against women is in Israel, Turkey, Denmark, Ireland and Germany. Women's relative wages are lowest in Japan, Estonia, Korea and Lithuania.

It is common for workers in advanced countries to train themselves for better jobs; 60-75 per cent of workers take such training in Scandinavia, the US and New Zealand. Their proportion is under 50 per cent in Eastern Europe and Turkey. Workers are also trained by their employers, but the practice varies a good deal between countries: over 70 per cent receive training in Scandinavia, New Zealand and Holland, whereas in Russia, Greece and Turkey less than 40 per cent receive it.

The US continues to lead in research and development expenditure. China comes second; Japan, Korea and Germany follow. As a proportion of the gross domestic product, Korea and Israel spend over 4 per cent on research and development. Korea has increased its ratio from 2.2 to 4.2 per cent in the past two decades; China from 0.6 to 2.1 per cent. Then come Russia and India. That is in terms of expenditure; of citations of scientific publications, the US accounts for a quarter, China for an eighth, Britain, Germany and Italy 3-6 per cent each. Amongst published scientists, outside funding support was acknowledged by more than 20 per cent of Chinese, Korean, American and Canadian authors; the proportion was less than 10 per cent amongst scientists from India, Italy, Greece, Turkey and Indonesia, who probably relied only on routine support from the institutions that employed them.

Scientists often travel abroad; but few countries are major net exporters or importers of scientists. Switzerland, the US, Australia, and China attracted more than 5,000 foreign scientists each in 2002-16; Japan, France, Britain, India and Italy sent out more than 5,000 scientists abroad.

Information and computer technology developed rapidly from the 1980s onwards, and gave a strong stimulus to the US economy; India did well out of it by training and exporting thousands of programmers. The share of ICT-related and ICT-generated activities exceeds an eighth of GDP in Taiwan, Singapore, Ireland, Malaysia and Korea; it is close to 5 per cent in India, Brazil, Mexico, Russia, Spain and Italy.

It continues to see enormous activity. The OECD identified 20 leading areas of patenting in ICT. The US led in two-thirds of them. It was followed by Japan, Korea, China and Taiwan in that order; these five countries accounted for two-thirds or more of the patents. Germany, surprisingly, was significant in only three. The predominance of East Asia was striking.

Workers' productivity in ICT generally earns more than the average industrial productivity; but the difference varies depending on the general level of productivity and in its ICT activities. It is more than twice the general productivity in Ireland, Israel, the US and Mexico; the difference is less than 50 per cent in Scandinavia and Korea.

Within ICT, artificial intelligence leads activity. Patents in AI tripled from 5,000-6,000 a year in the early 2000s to 16,000-18,000 in recent years. Japanese firms took over a quarter of them, Korean and American firms roughly a sixth each; Chinese and Taiwanese firms followed. One can see the impact of AI in any medical testing laboratory; most of its technologies have been invented or transformed in the last two decades.

Artificial intelligence is an application; to what practical technologies is it being applied? The top ones, unsurprisingly, are computers, electronics and information technology services. The other leading ones are vehicles, machinery and electricals, the traditional realms of technological advance. Then come publishing, broadcasting, finance, insurance, chemicals and telecommunications. Thus, the impact of AI is extremely widespread.

Artificial intelligence aims to make machines learn, just like human beings. American and East Asian firms lead in embodying it into machines. But such applications have to be conceived and elaborated; there is a considerable intellectual literature on how to do this. The US leads with close to 2,000 publications; China has over a thousand. The third, surprisingly, is India, with close to 1,000 publications, followed by Britain, Germany and Japan. The US leads with 334 amongst the 10 per cent most cited publications, followed by China, Britain, India and Italy. India may not lead in the use of AI technologies, but it certainly figures in intellectual work on them.

Artificial intelligence applications get embodied in intelligent machines, traditionally called robots. Which countries use them most? Not the US: Korea leads, with close to 3,50,000 robots. Japan follows with about a quarter million; then come European countries - Germany, Czechoslovakia, Sweden, Hungary and Italy, all with 1,00,000 or more. China and India have great writers of papers about AI; but China has fewer than 50,000 robots, and India has less than 20,000. Robots should be related to ICT-intensity of tasks; looked at that way, the countries that use the most robots are Japan, Korea and Germany.

In the patent portfolio of the top 200 companies spending on research and development, computers and electronics lead patenting activity, with close to 1,50,000 patents. Engineering comes next, with almost as many. Chemicals follow, with about 20,000; all other industries have less than 10,000 patents. Russia gives the highest subsidy - over 0.5 per cent of GDP - to business research and development; France comes next at almost 0.4 per cent. India spends a great deal on publicly funded research and development institutions; but they produce little in terms of technology or industrial improvement. They should be made to generate useful technology. The way to do so is to subsidize them in proportion to their commercial earnings.

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