ANTECEDENTES

been long established, but the path is not always predictable. More significant is the overall effectiveness of a nation’s National Innovation System (NIS)—the process by which intellectual concepts are moved toward commercialization for the benefit of a national economy. According to a NIC-contracted global survey of scientific experts, the United States currently boasts a stronger innovation system than the developing economies of China and India.

• The idea of an NIS was first developed in the 1980s as an aid to understanding how some countries were proving better than others at turning intellectual concepts into commercial products that would boost their economies. The NIS model is evolving as information technology and the effect of increased globalization (and multinational corporations) influence national economies.

According to the NIC-commissioned study, nine factors can contribute to a modern NIS: fluidity of capital, flexibility of the labor pool, government receptivity to business, information

communication technologies, private sector development infrastructure, legal systems to protect intellectual property rights, available scientific and human capital, marketing skills, and cultural propensity to encourage creativity.

China and India are expected in 10 years to achieve near parity with the US in two different areas: scientific and human capital (India) and government receptivity to business innovation (China). China and India will narrow significantly but not close the gap in all remaining factors. The United States is expected to remain dominant in three areas: protection for intellectual property rights, business sophistication to mature innovation, and encouragement of creativity. Companies in China, India, and other major developing countries have unique opportunities to be the first to develop a host of emerging technologies. This is especially the case in those instances where companies are building new infrastructure and not burdened by historical patterns of development. Such opportunities include distributed electrical power generation, development of clean water sources, and the next generation of Internet and new information technologies (such as ubiquitous computing and the Internet of Things—see the foldout). Early and significant adoption of these technologies could provide considerable economic advantage.

shelter these financial flows will increase. History suggests, however, that such a redirection toward regional financial centers could soon spill over into other areas of power. Rarely, if ever, have such “financiers of last resort” been content to limit their influence to strictly financial realms. Inter- regional tensions could divide the West with the US and EU having increasingly divergent economic and monetary priorities,

complicating Western efforts to lead and jointly grow the global economy.

Diverging Development Models, but for How Long?

The state-centric model in which the state makes the key economic decisions and, in the case of China and increasingly Russia,

democracy is restricted, raises questions about the inevitability of the traditional Western recipe—roughly liberal economics and

democracy—for development. Over the next 15-20 years, more developing countries may gravitate toward Beijing’s state-centric model rather than the traditional Western model of markets and democratic political systems to increase the chances of rapid development and perceived political stability. While we believe a gap will remain, the enhanced role of the state in Western economies may also lessen the contrast between the two models. In the Middle East, secularism, which also has been considered an integral part of the

Western model, increasingly may be seen as out of place as Islamic parties come into prominence and possibly begin to run

governments. As in today’s Turkey, we could see both increased Islamization and greater emphasis on economic growth and

modernization.

“China, particularly, offers an alternative model for political development in addition to demonstrating a different economic pathway.”

The lack of any overarching ideology and the mix-and-match of some of the elements—for example Brazil and India are vibrant market democracies—means the state-centric model does not yet constitute anything like an alternative system and, in our view, is unlikely ever to be one. Whether China liberalizes both politically and economically

over the next two decades is a particularly critical test for the long-term sustainability of an alternative to the traditional Western model. Although democratization probably will be slow and may have its own Chinese character, we believe the emerging middle class will press for greater political influence and accountability of those in charge,

particularly if the central government falters in its ability to sustain economic growth or is unresponsive to growing “quality of life” issues such as increasing pollution or the need for health and education services. The

government’s own efforts to boost S&T and establish a “high tech” economy will increase incentives for greater openness to develop human capital at home and attract expertise and ideas from outside.

Historical patterns evinced by other energy producers suggest deflecting pressures for liberalization will be easier for Russian authorities. Traditionally, energy producers also have been able to use revenues to buy off political opponents; few have made the transition to democracy while their energy revenues remain strong.

A sustained plunge in the price of oil and gas would alter the outlook and increase prospects for greater political and economic

Latin America: Moderate Economic Growth, Continued Urban Violence