Denmark, Finland, and Sweden are three of the world's most competitive and innovative economies, as speakers commented at an ITIF event on Nordic Innovation: What Can America Learn from the Scandinavian Innovation Ecosystem. The recent success of the Nordic economies is a result of several factors that the United States can learn from, including: a strong bipartisan consensus regarding the importance of federal investment in education, scientific research, and innovation; well-organized national innovation systems that benefit from formally articulated national innovation strategies (Finland’s, Sweden’s, Denmark’s) and well-funded national innovation agencies; and fundamental reforms undertaken in these economies over the past two decades that have made their tax structures more globally competitive, markets more competition-based, federal budgets better balanced, and workers greater skilled.
Shutting Down our Innovation Future
The shutdown of the federal government has earned deserved derision from all corners of American society, and the negative impacts of the debacle will be felt by millions even if it only lasts a short time. However, this is just one symptom of a broader illness affecting governmental budgeting that is sabotaging our economic future by severely inhibiting innovation, business development and long-term economic growth.
Restoring America's Lagging Investment in Capital Goods
This report analyzes U.S. business investment the past three decades. Business investment in capital equipment, software and structures grew by 2.7 percent per year on average during the 1980s and 5.2 percent annually during the 1990s. However, from 2000 to 2011 it grew by just 0.5 percent. As a share of GDP, business investment has declined by over 3 percentage points since the 1980s. Moreover, investment that was once broadly distributed across industries is now much more concentrated in a few select domestic service sectors, while industries that once powered U.S. investment growth and global competitiveness have seen sharp declines. This decline in investment negatively affects U.S. productivity growth and competitiveness. The authors argue that “short-termism,” the growing focus on short-term profits over long-term planning by many firms, and the diminished global competiveness of the U.S. economy has contributed to declines in private capital investment. ITIF calls on Congress to establish an investment tax credit and on the Administration to create task force to investigate the causes of and solutions to market short-termism.
R&D Tax Incentives to Stimulate Competitiveness, Jobs and Growth
Ezell will moderate a discussion on the use of tax reforms to spur innovation. It will include an analysis of recent laws passed by the government of Belgium to create a tax code that provides stronger support for innovation, R&D and entrepreneurship.