In his 2011 State of the Union Address, President Barack Obama said the United States needed to “out-innovate, out-educate, and out-build the rest of the world” to remain competitive and “win the future.” In his short history, though, Obama has not proved very adept at turning brave words into action.

Is the U.S. finished as an economic superpower? Its optimists assert that the U.S. retains critical cutting-edge advantages. Adam Segal, senior fellow at the Council on Foreign Relations, has written a thoughtful book asserting that American innovation can overcome the challenges from rapidly growing Asia. He draws a distinction between what he calls, “the hardware of innovation” — meaning the amount of spending on research and development, the number of engineers and scientists, patents and publications — and the “software,” which he terms as “the political, cultural and social institutions and understandings that help move ideas from lab to marketplace.”

Segal acknowledges that China is spending vast sums and will eventually outspend the U.S. in research and development, but believes that the U.S. still leads as an innovator, able to make “the discovery that, under the right conditions, can spark the creation of a whole new industry and drive economic growth.”

Other Americans have written whole operas on this theme — that the U.S. encourages creativity, and the spirit of freethinking that can lead to a huge leap in the dark. China on the other hand trammels its citizens. It is clear enough in political matters, which business executives wisely steer clear of as they concentrate on making money. Still, the private sector suffers from the massive presence of state-owned enterprises and big banks that act as their handmaids.

Segal starts his book “Advantage: How American innovation can overcome the Asian challenge” (published by W.W. Norton) by drawing attention to the growing challenge from China in high technology. He singles out nanotechnology, the manipulation of molecules and individual atoms. Nanotechnology is already important in hundreds of products, from stain resistant fabrics to camera sensors and light-emitting diodes. Some of the hopes of nanotechnology are still the stuff of science fiction, such as creating supercomputers so small they are invisible to the naked eye, or swarms of “nanobots” that break down the metal in enemy tanks.

Segal cites the achievements of Cui Fuzhai, professor at Tsinghua University, in creating “nanobones” to replace the metal pins that traditionally hold broken bones together. Cui’s work was interrupted by the closure of hospitals during the SARS outbreak, but he succeeded in creating artificial bones that dissolved as the patient’s own bones hardened.

Nevertheless, China’s spending on nanotechnology is in the hundreds of millions of dollars whereas the U.S. spends several billions. In addition, says Segal, China’s massive numbers of engineers mostly don’t have soft skills because China’s education system focuses on rote learning and examinations, and the pressure on scientists has resulted in much plagiarism and data theft. The expansion of China’s entrepreneurs is in C2C — “copy to China” — meaning taking a U.S. model and applying it to the Chinese market.

This movement is being helped by China’s determination to reduce its dependence on foreign technology and encouraging reverse engineering rather than looking to science-based product innovation. Beijing’s policy to become “an innovative nation in the next 15 years and a world power in science and technology fields by the middle of the 21st century” is also more easily said than done, even though China has outlined its 20 world-beating fields, including nanotechnology, biotechnology and new drugs, high-end generic microchips and aircraft.

The U.S. advantage is being eroded, as even Segal concedes. He passionately pleads for more sensible attitudes on visa policy. The U.S. as the land with an open embrace for people with great new dreams is being betrayed by policies that send away thousands of foreigners with degrees from American universities in science and engineering just when they would be able to contribute to a new 21st century.

It would be savagely ironic if the seeds of the next great invention were planted in Boston or Stanford but bore fruit in Bangalore or Beijing because Washington had slammed the door on the foreign scientists it had educated. Washington is rightly worried about theft and copying of its technology, yet sends bright foreign Ph.D.s home with their ideas.

In spite of faith in the free market, Segal and others applaud increased U.S. government spending on blue-sky research. This should be worrying: Will the planned spending survive the budget cuts? Why isn’t the private sector the driving force in the Land of the Free?

Alcatel-Lucent, Segal noted at the Council on Foreign Relations in early June, “announced in 2008 that Bells Labs — responsible for six Nobel prizes as well as the invention of the transistor, the laser and numerous other communications and computer technologies — would no longer conduct basic research in material physics and semiconductors, but instead would focus on networking, high-speed electronics, wireless, software and other commercial applications.”

In the opening lines of the film “The Social Network,” Mark Zuckerberg, the founder of Facebook, tells his girlfriend that there are more people in China with genius-level IQs than the entire population of the U.S. That is patently untrue, but it touches on a number of issues that should be worrying for the U.S. and its claims to innovative economic leadership.

Is Facebook really the best flag-bearer of U.S. creativity, a successor to the electric light, the laser, the transistor? Can the U.S. retain any sort of innovative or political or moral leadership when its best brains devote themselves to financial engineering? And to take up the other side of Zuckerberg’s point, how can the U.S. be a world beater or leader with so many high school dropouts, so many unemployed living on credit and fixated on their Facebook profiles?

Former Intel chairman Craig Barrett noted in 2006: “We’re all fat, dumb and happy, which is one reason why this is so insidious.”

Kevin Rafferty is editor in chief of PlainWords Media, a consortium of journalists concerned about issues of economic development.

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