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Tech dominates business news these days the way Trump dominates political news. And with good reason: technologies spawned by the information revolution such as the internet and smartphones are transforming every feature of the global economy.

This tidal wave of change is comparable to the coming of steam power and electrification in its potential to shape the course of civilization. We are just at the beginning and thus can barely imagine what innovations like artificial intelligence, gene editing and quantum computing may mean for the future, but it is already clear that the impact will be profound.

Like any other upheaval, the information revolution will produce winners and losers. One area where the shift could be pronounced is national security. America’s ability to remain the world’s leading military power is by no means assured. Other countries, most notably China, are leveraging new technology to become credible rivals.

Against that backdrop, my think tank, the Lexington Institute, this week released a report—we call it a white paper—entitled “Why U.S. National Security Requires A Robust, Innovative Technology Sector.” It is an attempt to concisely capture the challenge that America faces in trying to stay ahead of other military players during an era of unprecedented technological ferment.

Funding for the study was provided by the American Edge Project, which is focused on the importance of sustaining a world-class domestic technology sector. Lexington Institute is a participant in the project, and has long espoused the role of technology as a key determinant of success in securing peace and prosperity.

The United States tends to face major military challenges in every generation, and those challenges often are associated with new technology. The threat posed by imperialism in the late 19th century was linked to the appearance of dreadnaughts. The threat posed by fascism was largely grounded in air power. And the threat posed by communism was first and foremost driven by nuclear weapons.

What’s different today is that the new technologies driving the challenge to U.S. military dominance are mainly commercial in character. The Pentagon’s latest compendium of critical technologies requiring investment lists these innovations as its highest priorities: (1) microelectronics, (2) 5G communications, (3) hypersonics, (4) biotechnology, (5) artificial intelligence, (6) autonomy, and (7) cyber technologies.

Only one of these technologies, hypersonics, is exclusively military in character. The main repository of expertise for all the others resides in our nation’s technology sector, a burgeoning segment of the economy that has evolved from mainframe computers in the 1960s to software-driven microcomputers in the 1980s to internet-based services after 2000.

The domestic tech sector today is dominated by a handful of behemoths such as Google
GOOG
and Microsoft
MSFT
, but the ecosystem of innovation surrounding those market leaders includes many thousands of private-sector enterprises. It was not so long ago that Google and Microsoft themselves were obscure startups with uncertain prospects.

That is a powerful testament to the success of America’s entrepreneurial culture of innovation, but it is also a warning for the future. If America can become the global leader in critical technologies that barely existed a generation ago, it can also lose that leadership in another generation.

In fact, as the report issued this week points out, China has a plan for accomplishing precisely that outcome. It has been making steady progress in narrowing the gap between its own domestic technology sector and that of America, partly through heavy investment and government subsidies, and partly through the wholesale theft of U.S. intellectual property.

As of mid-year, the Federal Bureau of Investigation had over a thousand cases of suspected Chinese intellectual-property theft pending. Beijing is believed to employ 50,000-100,000 hackers, and their top mission is to secure the trade secrets that have made our domestic tech sector so successful.

This would be a source of concern even if China was focused solely on bolstering the competitiveness of its commercial companies. But Beijing also is using the technology it acquires to build up military strength in the Western Pacific. A senior U.S. military officer in the region told me recently that China’s military often fields new innovations faster than America’s military, even when the intellectual property originated in the United States.

This is a serious challenge to U.S. military dominance in a region that has become the industrial heartland of the global economy. It is hard enough to stay on top thousands of miles from home in China’s backyard; if China surpasses the U.S. in military technology, it will become impossible.

The report Lexington issued this week is critical of China and other countries such as Russia that steal U.S. intellectual property. However, it acknowledges that the recent erosion in America’s technological edge is largely a homegrown problem. U.S. tax, trade, immigration and regulatory policies often seem to be framed with the unspoken assumption that no matter what Washington does, America will always be the global leader in the technologies that matter.

That clearly is not the case. America’s technology sector can be severely damaged by bad policy, just as it has been benefited in the past by legislation that encouraged innovation. China figured this out decades ago with regard to its own tech base, but Washington seemingly needs to be reminded frequently that nothing comes easy in the global information economy. If U.S. technology companies do not have government on their side, they will continue losing ground to rivals in China and elsewhere.

The report concludes with a warning that, “The United States will lose its status as the world’s leading economic and military power if its technology sector falters.” That process may already have begun; you don’t need to go far down the list of leading global tech companies before you start encountering fast-growing Asian enterprises.

Washington can’t create a world-class tech hub in the public sector. That requires the incentives and the imagination of the marketplace. But if the political system doesn’t do a better job of supporting the domestic tech sector, national security will suffer.

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