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Era of ‘borderless’ innovation is over. US, India, China using national security to box tech

Security is now bleeding the economies of US and China, with flow of capital, people and technology being disrupted.

AI and tech
Representational image of artificial intelligence | Photo: Kriztian Bocsi | Bloomberg

In a recent pointed speech, US Vice-President Mike Pence warned that Beijing has “smashed the barriers between civilian and military technological domains”.

Pence then offered a contradictory statement of policy: “People sometimes ask whether the Trump administration seeks to ‘de-couple’ from China. The answer is a resounding ‘no’.”

Here’s the problem: If Pence is right that Beijing leverages all technology for military purposes, then the United States should have no interest in enabling flow of capital, people, hardware and software that might aid the military modernisation of a strategic competitor.

But Beijing is not the only government that takes an increasingly integrated view of technology. Across the world, techno-nationalism now threatens to disrupt the flow of technology and talent that has enabled decades of innovation.

Of course, governments never stopped trying to integrate national security with development and industrial goals. Even Mao Zedong’s China – the archetype of a country isolated from the world – used China’s relative standing on the international stage as a benchmark to guide domestic technology investments.

Techno-nationalists, irrespective of their nationality, take a strategic view of industry and technology. They view it as fundamental to national security and economic competitiveness and believe that economic policies must have strategic underpinnings. They argue that technology must be diffused – but held closely.

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Three disruptive changes

From the 1940s to 1960s, this was comparatively straightforward. The era’s foundational technologies emerged from innovations in weapons, particularly the “war babies” of British radar, American atom bombs, German rocketry, and American computers – that historian Walter A. McDougall has described as part of a suite of “command technology”.

Innovation in weapons resulted in “spin-off” innovation in the economy. Yet, it enabled a substantial role for the government and tended to refract technological competitiveness through the prism of national security priorities. Even Silicon Valley, today’s archetype of private entrepreneurialism, owed much of its early emergence to what Harvard’s Peter Galison describes as a fortuitous combination of “plentiful sunshine and even more plentiful government money” from military electronics contracts.

But the 1960s gave way to three disruptive changes. First, “spin on” replaced “spin-off”, with commercial microelectronics and semiconductors driving innovation in weapons rather than the other way around.

Second, physical production of hardware and supply chains became globalised.

Third, innovation became globalised too. Today, collaborative cross-border partnerships enable research on many next-generation technologies. Google, for instance, opened an AI laboratory in Beijing in 2017, collaborating with its labs in the United States, Canada, and Europe. Fei-fei Li, who was then Google Cloud’s chief scientist for machine learning, argued that “the science of AI has no borders, neither do its benefits”.

But technologies like artificial intelligence or AI are transforming the future of industry, jobs, work, and defence. In some cases, the same hardware and software will transform all four realms simultaneously. That has motivated a new generation of techno-nationalists.

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The China model

Until recently, most countries were content to allow a largely commercial prism to dominate the development of disruptive technology. For instance, acquiring technology has been central to Beijing’s economic reform goals since 1978. But until recently, its pursuit was characterised mostly by technology purchases – or, in some cases, intellectual property theft.

China’s government and firms sought technology through business deals and joint ventures. They encouraged foreign firms to set up technology-intensive operations in China. Sometimes, they reverse-engineered foreign technologies and developed indigenous alternatives, helping China modernise its own industrial base.

But the last decade has added additional dimensions. Beijing now seeks to turn foreign technologies into Chinese technologies, therefore it has increasingly made technology transfer a precondition for foreign firms to win contracts or do business in China.

Second, Beijing has deployed a comparatively flush balance-sheet into funds and direct investments overseas, including acquisition of foreign firms whose product suites comprise technologies that China hopes to leverage in its pursuit of leadership.

Third, Beijing has ramped up domestic investment, emulating Germany’s ‘Industrie 4.0’ and Japan’s ‘New Industrial Structure Vision’. Globally, policymakers have long presumed that economic integration can lift all boats while mitigating security competition among nations.

But security competition, especially between Washington and Beijing, is intensifying despite economic and technological integration. Worse, security is now bleeding economies, with flow of capital, people and technology disrupted by efforts in both the countries to indigenise, reduce external dependence, and export domestic engineering standards to make them default regional and global standards.

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Disruptive techno-nationalism returns

But if every commercial technology is now viewed as central to national security, it will re-entrench past patterns of techno-nationalism, which many believed to be relics in an era of supposedly ‘borderless’ innovation.

We must consider the basic principles of ‘five Ws, one H’ here.

WHAT technologies will shape the future? In many capitals, including Washington, governments now share a belief that AI, 5G, quantum computing, new materials, special metals, and biotechnology will be foundational to the future of both work and defence.

WHO, then, should make these things? The techno-national prism implies that “we”, not “they,” must make them. As a result, training Chinese students and scholars in leading-edge engineering subjects has suddenly become politically charged in the United States.

WHERE should these things be made? Beijing’s emphasis on indigenisation and Washington’s on reorienting supply chains suggest that location is increasingly the flavour of the future.

WHEN should cutting-edge technologies be ready? Governments now talk about a “race” to win the future. For Beijing, it is Make in China by 2025, or prevail in AI by 2030. In India, it means reaching the full potential of digitisation in manufacturing by 2030. In South Korea, it is about making domestic hydrogen technology standards default global standards by 2030. In the US, it includes advanced manufacturing and military goals, which involves meeting the technological requisites of the air force to ensure warfighting dominance by 2030.

WHY make things at home? In a techno-national world, governments link national interest to supply chain security. The US Defense Department has made precisely this argument to Silicon Valley about computer chips.

HOW to achieve security? Nearly every major economy now encourages firms to adopt preferred standards and avoid dependence on standards set by rivals. Washington seeks to forestall Chinese 5G exports that would make Huawei a default standard-setter. This return of disruptive techno-nationalism portends changes in the way innovators and firms collaborate.

In a world of networked firms and people, Chinese entrepreneurs forged strategic alliances with engineers –many of them, expatriate Chinese – in California. They sucked in venture capital from foreign investors, and fostered collaborative projects. These developments occurred mostly beyond the scope of old-style technology planners and target-setters. That world may now be fading.

A Chinese and Indian generation was nurtured abroad, including in the culture of Silicon Valley startups. They ensured state-backed strategic schemes weren’t the whole story of, for example, Chinese technology development.

But the state has returned front and centre. And ironically, state-led approaches are being emulated, in parts, even in the United States now. That is a ‘new’ yet eerily old world – one that could sequester technology in the name of security and permanently alter the scope of innovation.

This article is part of a series examining The Future of Data in partnership with Carnegie India leading up to its Global Technology Summit 2019 in Bengaluru from 4-6 December 2019. More details about the summit are available here

Evan A. Feigenbaum is Vice President for Studies at the Carnegie Endowment for International Peace, and the 2019-20 James R. Schlesinger Distinguished Professor at the Miller Center at the University of Virginia. Views are personal.