Energy Innovation in China, or Lack Thereof

Alpbach News interview with Robert D. Atkinson, head of the Information Technology and Innovation Foundation think-tank in Washington D.C., USA.

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Alpbach News: Dr. Atkinson, you have been working under three US administrations: Clinton, George W. Bush and now Obama. What were the biggest changes in the technology and innovations sector during that time?

Robert Atkinson: It was clearly the rise of ICT (Information and Communications Technology) back in the late 1990s. Internet was a tiny little thing. About 2% of Americans had broadband, and it was really slow. There were no wireless devices, for example mobile phones. That was the major innovation which transformed the economy in the last decade.

AN: Some people are worried that increased productivity through better machines would kill jobs. Is that realistic?

Atkinson: There certainly is a danger to particular kinds of jobs. If you work in an occupation that is vulnerable to IT or technology-based automation, then you should be worried. Productivity, however, does not lead to fewer jobs or higher unemployment rates. If you are an average worker, you are better off with productivity, because your wages are higher and the prices you pay for things are cheaper.

AN: You are a supporter of Joseph Schumpeter, an Austrian economist. He popularized the theory of “creative destruction”, saying that a capitalist system regularly requires the destruction of old technologies to stay productive. Did this happen during and after the global economic crisis of 2008?

Atkinson: I think the economic crisis of 2008 was more about destruction than creation. Creative destruction is an evolutionary process. In the US there are about 20% fewer bookstores than there were a decade ago. That is creative destruction, because Amazon is a better experience for a lot of people. Otherwise they wouldn’t use it.

AN: Is there some construction going on right now or is Europe still in shock?

Atkinson: I think it is more the latter. Most of the policymakers in the US and the EU believe that there is just nothing you can do about it. It’s like a hurricane that destroys a lot of houses when you just saw them rebuilt.

AN: They also say nobody saw it coming…

Atkinson: Yes. In fact that is a ridiculous notion. The reason no one saw it coming was because most economists just simply cannot envision that markets can get it so wrong. If you had looked at the housing prices in the US, you would have realized that the trend was unsustainable. There is no way that the market would allow a doubling of housing prices within six years.

AN: In the US, rich people, so-called ‘angel investors’, give money to small and start-up companies. Could that be a possible model for Europe too?

Atkinson: The US is very good at science-based innovation, creating new inventions and have them commercialized. In this matter we are among the best in the world. I think Europe is not as good at that. Europe is a really good engineering economy. They take things and perfect them in high quality. Europe and America should learn from each other. Europe’s challenge is to figure out how to become a more science-based innovation system. You are still reluctant to take risks. Look at Bill Gates or Steve Jobs. All companies at that time were saying nobody would buy a PC. But they were able to get money and make it happen.

AN: You strongly rally against green mercantilism, because it would inhibit the innovation of green products. Could you briefly explain your critique?

Atkinson: We are not going to solve climate change with existing technologies. As long as clean energy is expensive, only rich countries will have it. The challenge is how do you make clean energy cheaper than coal and oil. There is only one way to do that and that is through innovation. You have to develop better biofuels or better solar cells. The problem with what China and some others are doing in terms of green mercantilism is trying to take a shortcut by stealing intellectual property from green innovators like Germany and the US.

AN: Couldn’t China develop cheap green technology?

Atkinson: You have to consider the difference between low cost and low price. The Chinese are developing low price but not low cost technology. They are doing that through massive state subsidies. Some of these Chinese solar companies are getting three to four billion dollars of bailouts from the government. It is unbelievable. When you are getting that much money and you don’t have to make profit, because you are a state-run enterprise, you can charge half the price. Looks great. The only
problem is these guys don’t innovate. They are just temporarily taking the market away from the innovators, who are working to get the price down much lower. Because of that they are going to slow down innovation in climate change technology.

AN: Where are we going to be in 20 years?

Atkinson: If we do it right, there is an enormous promise for innovation. I am convinced we could be in a better shape with regard to cancer, climate change or productivity. We just got to keep the eye on the ball. Technology is the big driver of human progress. If we focus on that, our kids are going to be in a much better shape than we are.

● Robert Atkinson is the founder and president of the Information Technology and Innovation Foundation, a Washington, DC-based policy think tank. He is also author of Innovation Economics: The Race for Global Advantage (Yale, 2012), the book, The Past And Future Of America’s Economy: Long Waves Of Innovation That Power Cycles Of Growth (Edward Elgar, 2005), and the State New Economy Index series. He has an extensive background in technology policy, he has conducted ground-breaking research projects on technology and innovation, is an advisor to state and national policymakers, and a popular speaker on innovation policy, nationally and internationally.

● This interview was first published by Alpbach News, published by the European Forum Alpbach – Europäisches Forum Alpbach, 26 August 2012