Economic Perspective from Dr. Alan Russell

Alan Russell, PhD (pictured), is director of the McGowan Institute for Regenerative Medicine. Recently, he was asked to provide his economic perspective. Below is his point of view on this subject.

We are all acutely aware of the crisis in our country's financial institutions and markets. Unfortunately, we have become completely dependent on the financial sector, which has allowed us to consume more than we invest.

Until the last few weeks, the financial sector represented 20 percent of our GDP and produced 58 percent of profits made by American businesses. In recent days, this large chunk of profits has been evaporating before our eyes and the government has begun to nationalize a significant percentage of our economy.

Over the 50 years that the financial sector has expanded its influence, America's manufacturing base, the traditional foundation of our national economy and national security, has nearly vanished. In the 1950s manufacturing provided 60 percent of our corporate profits; today that figure is 8 percent.

The rock upon which American families based their hopes for the future and defeated foreign tyrannies was our ability to innovate and manufacture. With that foundation almost gone we are less able to withstand the kind of financial instability we are experiencing today.

If we do nothing to restore our position as a manufacturing innovator, our economy will continue to shudder with every inevitable hiccup in global financial markets. President-elect Obama must not just restructure banking but must look to the future and position our country to defend itself with innovation and manufacturing.

Pittsburgh helped save the world through its manufacturing innovation and excellence in the 20th century. Perhaps we can play a special role in the reemergence of 21st century manufacturing, as well.

A natural question emerges. Should we take back all the manufacturing that we have "given" to other countries or should we identify areas where we can beat our competitors in new global manufacturing challenges?

Winding back the clock is unrealistic, but there are two global manufacturing races that we can win through innovation.

We already have entered the era of biotechnology. The leading nations in the bio-economy will be the economic leaders of the 21st century.

Biotechnology provides clean energy sources and environmental remediation, creates new materials, develops better and more personalized medicines and increases food production for a planet that will have to support 12 billion to 15 billion people by 2050. When combined with a revolutionary restructuring of the health-care economy and the pharmaceutical industry, biotechnology also can help reduce the costs of health care.

Industrial biotechnology represents one of the few remaining types of manufacturing that is expanding rapidly and in which the United States, thanks in part to Pittsburgh, holds a dominant position. Yet at this critical juncture, rather than building our bio-industrial base, we have begun to export the very biological technology, manufacturing capability and knowledge base that we must grow at home to succeed. This foolish strategy still can be reversed but the window of opportunity is closing.

Our government invests nearly $30 billion in life-science research each year. We are the undisputed world leader in bio-research. But President-elect Obama will need to invest in the next crucial step -- applied biological sciences, where the future jobs and economic rewards lie. We must build our nation into a bio-manufacturing superpower as a matter of economic survival and national security.

Another global manufacturing opportunity is in nuclear power, also a strength for Pittsburgh. The world will turn more to nuclear power as the climate and energy crises worsen.

Power generation without oil or greenhouse gases is commendable but manufacturing more nuclear plants will generate more highly radioactive waste and more potential sources for nuclear-weapons proliferation, so these problems will have to be dealt with.

Nevertheless, at a recent gathering of the world's ministers of science and technology it was reported that we can expect to see an increase from 400 nuclear power plants to more than 4,000 in the next decade. The ministers recognized that the United States will have to take the lead in the design of safe reactors. Yet the United States stands alone in not having a Cabinet-level secretary of science, technology or innovation. President Bush demoted his science adviser from the Cabinet in his first 100 days in office.

Building on our strengths in bio-manufacturing and nuclear energy is not just economically smart it also is necessary to our national security. Two major crises now threaten our way of life: economic decay and global terrorism.

While we panic about our savings evaporating we may forget that we still must worry about the threat from biological and other weapons of mass destruction. Since 9/11 we have invested nearly $50 billion in our bio-defense program, yet the major hurdle that remains in protecting us is the development and manufacturing of advanced biologics. Yes, one of the core competencies needed to help fuel our broad economic growth for the 21st century -- biotechnology -- is also the single biggest opportunity for a quantum improvement in our national security.

Twenty-first century approaches to biotechnology manufacturing and nuclear power production will help pull us out of our current fiscal crisis and help protect our national security. These strategic opportunities are so important and so complex that it is essential for the White House to coordinate and lead the process. The appointment of a Cabinet-level science and technology adviser would be a good start.

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Pittsburgh Post-Gazette (11/13/08)

Bio: Dr. Alan Russell