Chapter 4: Science & Engineering Indicators 93
Total and Nondefense R& D/GDP Ratios
R& D expenditures as a percentage of GDP have become one of the most widely used indicators of a country's commitment to scientific knowledge growth and technology development. France, Germany, Japan, the United Kingdom, and the United States each maintained an R& D/GDP ratio of between 2 and 3 percent throughout the 1980s. In 1991, the ratios for these countries were 2.4, 2.8, 3.0, 2.1, and 2.6 percent respectively. (Click here for footnote 26.) (In Italy and Canada, this ratio has moved from about 1 percent to 1.4 percent over the past 10 years.) For most of these countries, this measure of their economy's research intensity climbed rather rapidly from the mid-seventies through the mid-eighties before settling at their peak levels. Indeed, for several of these countries--including the United States, United Kingdom, and Germany--the R& D/GDP ratio has drifted downward since the late eighties. Even in Japan, which experienced the most rapid and unabated R& D growth during the past two decades, this ratio dropped slightly in 1991, from 3.1 percent in 1980 to 3.0 percent of total. Moreover, there are indications of a further R& D slowdown since then (Swinbanks 1993). With the exception of Germany, annual rates of R& D spending growth in all the countries since 1985 is less than those reported for the previous five years. (See appendix 4-35) Although cuts in defense R& D were a contributing factor--particularly in the United States and United Kingdom--the main cause of the overall R& D spending slowdown in most of these industrialized countries was that industry-financed R& D stagnated, and in some cases even declined.

Yet, with the end of the Cold War and the recent policy focus on economic competitiveness and commercialization of research probably a more relevant indicator of a nation's scientific and technological strength is the ratio of nondefense R& D expenditures to GDP. This is not to say that defense-related R& D does not benefit the commercial sector: There unquestionably have been technological spillovers from defense to the civilian sector. But almost as certainly, the benefits are less than if these same resources been allocated directly to commercial R& D activities. Moreover, considerable anecdotal evidence indicates that the technological flow is now more commonly from commercial markets to defense applications, than the reverse.

Intercountry comparisons of R& D expenditures change dramatically when defense-related expenditures are excluded. The nondefense R& D/GDP ratio in both Japan (3.0 percent) and Germany (2.7 percent) considerably exceeded that of the United States (1.9 percent) in 1991 and have done so for more than two decades. (See figure 4-7 and appendix table 4-36.) The nondefense R& D ratio of France matched that of the United States; those of the United Kingdom (1.7 percent), Canada (1.4 percent) and Italy (1.3) were somewhat lower.

In absolute dollar terms, the U.S. international position was markedly different--and comparatively more favorable--than that indicated by the nondefense R& D/GDP ratios. Between 1980 and 1990, growth in U.S. nondefense R& D spending was rather similar to that in other industrial countries, save for Japan, whose nondefense R& D expenditure growth was notably faster than in the United States. Thus, as a percentage of the U.S. nondefense R& D total, comparable Japanese spending jumped from 44 percent in 1980 to 62 percent in 1990. (See figure 4-8 and appendix table 4-36.) Japanese nondefense R& D reached $59 billion (constant 1987 dollars), compared with the $94 billion U.S. nondefense R& D total. Germany annually spent an amount equal to 28 to 30 percent of U.S. spending during the 10-year period, while France annually spent an amount equivalent to 16-17 percent of the U.S. nondefense R& D total. In 1989, the combined nondefense R& D spending in these three countries surpassed that in the United States, it is now higher still.

Footnote 26:
The 1991 R&D/GDP ratio for unified Germany was 2.6 percent.

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