For half a century science has played a crucial part in America's international dominance. Now the rest of the world is catching up - fast.

When America's prominence in the world is discussed, it's usually attributed to its open democracy and free market policies, to its military might and economic heft since the second world war, to the sheer size of its population and landmass and to the American idea of liberty and opportunity for all.

What's seldom mentioned is the quality and contribution of America's scientists and engineers, and the size of their budgets. Institutions such as universities may get a nod, as may America's technology production, but research and development and the small groups that do it are often forgotten. Yet scientists are a cornerstone of the success and dominance America has built over the past century.

A congressionally requested report, Rising Above the Gathering Storm, which was released by the National Academies in late 2005 and has gained traction on the Hill, says: "[US economic] vitality is derived in large part from the productivity of well-trained people and the steady stream of scientific and technical innovations they produce. ... Today, Americans are feeling the gradual and subtle effects of globalization that challenge the economic and strategic leadership that the United States has enjoyed since World War II."

Back in September, I wrote that America is out of touch and behind the times on climate change and economic reform. It is mired in a stagnant war that the rest of the west has abandoned or is abandoning. American global influence is in decline, the country having lost the respect of allies and the credibility to lead. As we've seen yet again in last week's brinkmanship by Turkey, American diplomacy has all the vim and vigour of Fred Thompson. For now America remains the world leader, but it's moving steadily from superpower to first among equals. Nowhere is this more evident than in the sciences.

In the half-century following the second world war US universities were magnets for students and academics from around the world. Crucially, many foreign graduate students studying the physical sciences, biological sciences, IT and engineering stayed after graduation. As the Gathering Storm report notes: "Government spending on R&D soared after World War II, and ... as a percentage of the gross domestic product (GDP) reached a peak of 1.9% in 1964." In the last six or seven years, however, that tide has turned. Overseas institutions and companies are increasingly competitive, and federal and state funding for science and engineering has fallen significantly, to just 0.8% of GDP. The wars in Iraq and Afghanistan are sucking up federal money, with President Bush last week asking Congress to raise the war budget for 2008 to $196bn. That's quite an opportunity cost.

As Tom Friedman put it in his New York Times column on Iraq recently: "Can we pay for it and be making the investments in infrastructure, science and education needed to propel our country into the 21st century?" The answer, judging from speakers at the TechNet summit at Berkeley earlier this month, is no. John Chambers, the CEO of computer company Cisco systems, said the US has long had the international advantage with its great universities, R&D funding and venture capital. But other countries are churning out engineers and scientists in greater numbers than ever from increasingly competitive institutions.

By one estimate, America produces roughly 75,000 engineers per year. China graduates ten times that number, and India, close to a million. The Gathering Storm report states: " In South Korea, 38% of all undergraduates receive their degrees in natural science or engineering. In France, the figure is 47%, in China, 50%, and in Singapore, 67%. In the United States, the corresponding figure is 15%."

If the implications of that aren't clear enough, I'll let Intel Corporation spokesman Howard High spell it out for you: "We go where the smart people are. Now our business operations are two-thirds in the US and one-third overseas. But that ratio will flip over the next ten years."

Where America remains dominant is in venture capital. No one else comes close. But money alone can't slow successful start-ups in Bangalore or stop South Korea's broadband penetration leaving American for dead. "We've got five years," Chambers said. Professor Laura Tyson, from UC Berkeley's Haas Business and Public Policy Group, nodded repeatedly as he spoke. She said America urgently needs to improve the quality of math and science teaching in its public schools and invest more in R&D.

According to the American Association for the Advancement of Science (AAAS), which monitors science funding, the US is still responsible for 34% of the world's total R&D spending by both government and industry. That's the good news for Americans. But for most of the 1990s it was 40%. China and Japan now account for 13% and growing. Kei Koizumi, who watches America's R&D budgets for the AAAS, told me the 2008 budget, which still needs to be passed by Congress, continues that worrying trend, leaving the federal research portfolio 7.4% below the 2004 level. That's quite a second term, Mr President. China and South Korea, by contrast, are increasing government research by 10% or more each year.

One interesting note from the AAAS data: the only reason the decline isn't steeper is America's increasing support for weapon systems development. This year's Nobel prizes captured the mood. For the first time this century, Americans were not among those awarded the physics and chemistry prizes.

If you're looking for a glimmer of light, you might find some in the America Competes Act passed by Congress in August, authorizing billions of additional science funding. But the way the US system works, it's an authorization bill only. It doesn't appropriate any new money. At the moment it's all talk and no trousers.

Of course, the US still dominates our world. It retains huge advantages in terms of lifestyle, wealth and knowledge - for now. For the sake of democratic principles, we can only hope the next president can rebuild its reputation and sway. But I can't see it being able to recapture its dominance in those areas of infrastructure, education and, especially, science. It's hard to ignore the scientists and business leaders who wrote the Gathering Storm report when they write, bluntly: "We are worried about the future prosperity of the United States." As the US slides, other countries are catching up too rapidly. I think Americans will look back at the second half of the 20th century as the pinnacle of American power and influence.

This post first apepared in the Guardian's Comment is Free section on October 29, 2007.

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