Public sector demand is required to drive tech-rebirth in – Polity, 15 February 2016

Feb 16, 2016

By Rabelani Dagada 

Should the State ever get involved in the economy? As a rule the answer should be no as State intervention tends to introduce inefficacies and costs to the taxpayer that are never recouped. Nine times out of ten the State is best advised to leave the economy to market forces and the private sector. But there can be exceptions and one of these may be the innovative high-tech economy. 

In many cases the costs of developing such innovative technologies are immense and the technology in question may not for many years have any commercial application. As a result there may be little incentive for an economy to develop a privately financed hi-tech industrial sector.

State support may therefore be pivotal for centres of tech-innovation to foster as government support often allows the venturing into uncharted territories of innovation that would not be embarked upon if initial short term considerations of viability relevant to private consumers were applied. In many cases such State investment was initially driven by military considerations.

This is a controversial argument for a market-economy and private sector focussed think-tank – that often argues for the State to stay out of the economy - to make. But ambitious innovation projects, that grew on the back of State support have often resulted in the world’s most dynamic technologies. Many of these would initially – for cost and other reasons – not have been unfeasible for application within the homes, private sector.

The argument for State investment in the technology sector works best were initial sustained demand or investment by the State later sees a new technology finding viable application in the wider economy. Innovations such as nuclear power generation, the jet engine, high specification metal alloys, the radio, radar, fiberoptic cables, the Internet, or the computer, all arose from the state sponsoring high-technology faculties. Therefore, State sponsorship of technology development may permeate to an incalculable extent throughout the economy, in both public and private sectors.

Without initial State support, entities such as NASA, Boeing, Lockheed Martin, or SpaceX would not exist in the United States, nor would Baidu and Alibaba in China, Airbus in Europe, Irkut in the Russian Federation, or Sasol in South Africa, to name but a few examples.

In South Africa’s case, besides creating a conducive environment through protecting intellectual property rights and through providing the necessary infrastructure, there is a great deal that the South African government could do to stimulate private sector innovation in the high-tech space. At present South Africa does not sufficiently promote the sustainability or continued development of its high technology faculties, whether these be Denel, Council for Scientific and Industrial Research, Mintek, or any private sector equivalent.

The result, directly and indirectly, is the erosion of South Africa’s ability to emulate the extraordinary innovations of the heart transplant technology, computerised axial tomography (scan), radar speed gun, helmet-mounted sight, or mine-resistant, ambush-protected vehicle.

This is a pity as South Africa has a history of extraordinary technological innovations. Many of these admittedly occurred in the apartheid era and were driven by military consideration at a time when arms embargoes starved the country of weaponry. In areas such artillery development, nuclear arms development, and aerospace development South African scientists and engineers achieved some notable successes. The success of Sasol, created to some extent by oil embargoes, is perhaps the most prominent example.

South Africa is therefore very well positioned as a technology hub on the African continent. Its economy is rapidly evolving away from primary and secondary industries into the relatively highly skilled tertiary sector. A growing high-tech sector would complement that development. If the State could finance such innovation, and leave the private sector to get on with doing the work, the results could in time deliver considerable return on the taxpayer’s investment.

Written by Rabelani Dagada, Policy Fellow, IRR

Read the article on Polity here

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