Against innovation mercantilism

Imagine a world with a global innovation policy. This is basically what the ITIF report asks us to do, and then ranks countries by how far they are from that.

ITIF has created measures that segregate contributions from detractions, creating a taxonomy of nations that ranges from what they call Schumpeterians (Finland, Sweden, UK), Adam Smithians (US, NZ, Australia), and Tigers (Korea, Israel, Taiwan) who are net contributors, to innovation followers (Italy, Chile, Philippines), to the ranks of innovation mercantilists (China, Brazil, Russia, India, Malaysia, Indonesia). Countries can contribute to global innovation, or not; and they can also detract from global innovation, or not. Now we know who is doing just what.

Innovation is a global public goods game-each country can play cooperate or defect. Each country's own domestic political incentive is normally to play defect, to minimize the amount spent on public innovation while still accessing new ideas globally. This is called free-riding. It is the enemy of cooperation.

Cooperation is the strategy you play if you were the whole world and all the benefit returned. This would look like what the ITIF report calls the 'Helsinki consensus'. Few countries play this strategy, unfortunately.

Australia is number 22 on this list. We contribute moderately to global innovation, but don't detract from global innovation either. We're on the good side of global citizenship, but we're not the best (Finland is the best).

To fix the world we need a way to solve this global coordination problem about innovation.

It doesn't look like a problem because each country is doing the best it can, given its domestic constituency. We're all unashamed innovation mercantilists. Just like in the 1930s, as with global trade. There is no native constituency for this argument. But still it must happen.

This requires a multilateral model of domestic reform. Overcoming trade mercantalism required politically defeating domestic vested interests. Multilaterally agreements made that possible by binding the hands of domestic politicians. The same logic applies to overcoming innovation mercantilism.

In a new world order innovation will occur where it is most efficiently done, and will spread from there. In this world, because of gains from specialization, there will be more innovation.

This will be a world that can handle problems such as sustainable energy, antibiotic resistance, clean air, and so on, much more effectively because it harnesses global economic incentives.

But what is missing is the analog of the WTO, a World Innovation Organization. Global innovation suffers a collective action problem. There is no governing institution to do the difficult thing of coordinating a global innovation agreement and global innovation activities.

At the moment all we have, as the ITIF report shows, is that some countries are better global citizens than others. We should hope to do better than that. There is no global government and nor will there ever likely be. But we should not give up on the importance of transnational institutions, like the WTO, and potentially a WIO, to resolve the deep coordination problems that affect us all.

Let's solve #globalinnovation now.