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Suggested Citation:"Technology Enhancement Programs." National Research Council. 1975. Materials and Man's Needs: Materials Science and Engineering -- Volume IV, Aspects of Materials Technology Abroad. Washington, DC: The National Academies Press. doi: 10.17226/10439.
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Suggested Citation:"Technology Enhancement Programs." National Research Council. 1975. Materials and Man's Needs: Materials Science and Engineering -- Volume IV, Aspects of Materials Technology Abroad. Washington, DC: The National Academies Press. doi: 10.17226/10439.
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Page 171
Suggested Citation:"Technology Enhancement Programs." National Research Council. 1975. Materials and Man's Needs: Materials Science and Engineering -- Volume IV, Aspects of Materials Technology Abroad. Washington, DC: The National Academies Press. doi: 10.17226/10439.
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Page 172
Suggested Citation:"Technology Enhancement Programs." National Research Council. 1975. Materials and Man's Needs: Materials Science and Engineering -- Volume IV, Aspects of Materials Technology Abroad. Washington, DC: The National Academies Press. doi: 10.17226/10439.
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Page 173
Suggested Citation:"Technology Enhancement Programs." National Research Council. 1975. Materials and Man's Needs: Materials Science and Engineering -- Volume IV, Aspects of Materials Technology Abroad. Washington, DC: The National Academies Press. doi: 10.17226/10439.
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Page 174
Suggested Citation:"Technology Enhancement Programs." National Research Council. 1975. Materials and Man's Needs: Materials Science and Engineering -- Volume IV, Aspects of Materials Technology Abroad. Washington, DC: The National Academies Press. doi: 10.17226/10439.
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Page 175
Suggested Citation:"Technology Enhancement Programs." National Research Council. 1975. Materials and Man's Needs: Materials Science and Engineering -- Volume IV, Aspects of Materials Technology Abroad. Washington, DC: The National Academies Press. doi: 10.17226/10439.
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Page 176
Suggested Citation:"Technology Enhancement Programs." National Research Council. 1975. Materials and Man's Needs: Materials Science and Engineering -- Volume IV, Aspects of Materials Technology Abroad. Washington, DC: The National Academies Press. doi: 10.17226/10439.
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Page 177
Suggested Citation:"Technology Enhancement Programs." National Research Council. 1975. Materials and Man's Needs: Materials Science and Engineering -- Volume IV, Aspects of Materials Technology Abroad. Washington, DC: The National Academies Press. doi: 10.17226/10439.
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Page 178
Suggested Citation:"Technology Enhancement Programs." National Research Council. 1975. Materials and Man's Needs: Materials Science and Engineering -- Volume IV, Aspects of Materials Technology Abroad. Washington, DC: The National Academies Press. doi: 10.17226/10439.
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8-170 TECHNOLOGY ENHANCEMENT PROGRAM General Because all advanced countries are concerned to remain at the forefront of technology, recognizing the connections between technological prowess and national prosperity, they invariably undertake government-motivated efforts to enhance technology. The feeling in the U.S. is that, while we have con- centrated much on defense and space, other countries have deliberately pushed to upgrade their civilian-oriented technologies. As we have seen, the differences in net effort in these areas between the U.S. and other countries are not as great as might be imagined. Nevertheless, other countries have experimented with a number of mechanisms for implementing civilian science and technology, and it is wise to review these attempts in order to assess whether any have lessons for the U.S. It is usually impossible to separate out, for a given country, a special national policy aimed at materials technology as distinct from policies for technology in general. We shall therefore review these broader policies, keeping in mind whether they will have special relevance to the materials field. A particularly valuable review of "Technology Enhancement Programs in Five Foreign Countries", (Canada, France, Germany, Japan and the U.K.) has been provided recently by the Department of Commerce CCOM-72-11412). Among its findings: "The effectiveness of technology enhancement programs appears to be greater in those countries in which national science and technology (S and T) policy and goals, particularly as they affect designated industries, are well- defined and less subject to change. In Japan and France, governmental in- volvement in the formulation of S and T policy and the implementation of technology enhancement programs has been direct and substantial, in Germany less so, but still significant. In Canada and the U.K., doubt about the nature and extent of government involvement may have contributed to the lack of effectiveness of several such programs." On an organization for implementing policy: "Effective management of technology enhancement programs seems to require the establishment of an S and T agency at the highest 1GY~1 of government to perform a planning and coordinating function for the S and T programs of all the other agencies in the government." And on attitudes: "Open channels of communication and mutual trust between representatives of government agencies and the private sector are essential elements for effective operation of technology enhancement programs." All five countries maintain broad technology enhancement programs to improve the entire industrial spectrum. These programs offer a variety of incentives such as tax credits, accelerated depreciation allowances, low- interest loans, and outright grants for the direct support of R&D. Programs for supporting designated areas and industries exist in four of the five countries. These areas, generally regarded as of high risk,

8-171 great cost, and beyond the means of private companies, include atomic energy, space and ocean development, computers electronic data processing, and telecommunications. In some cases, the government has offered substantial benefits and incentives to the private sector to engage in mergers for "industrial rationalization" and to increase competitiveness. Many mechanisms and incentives are used to encourage the commerciali- zation, utilization, and diffusion of newly-developed technologies and products, particularly through modernization of plant and increasing produc- tivity. This forms part of a continuous process of industrial technological renovation. The approaches include, e.g., the Preproduction Order Support Program and Investment Grant Program in the U.K., and first-year depreciation allowances and tax deductions on newly-acquired fixed assets (Japan). "The stimulation of invention and innovation and the commercialization of research findings that are in the public interest and appear to have a good industrial potential have received strong support by the governments of the five countries. All have established a special agency to deal specifically in this area. All five agencies underwrite part or the full cost of developing a new technology or product and require repayment of their invest- ment plus the payment of royalties only in the event the venture is success- ful." Other mechanisms for enhancing technology found in one or more of these countries include special government-supported independent lending agencies to provide development funds, and incentives for stimulating R&D, particu- larly for small- and medium-sized enterprises. "The establishment of research associations and joint ventures both among private firms and between a government agency and one or more private firms is generally encouraged and supported whenever such action is likely to stimulate greater R&D activity or develop a needed new technology. Such arrangements are condoned in the interest of avoiding duplication of R&D, pooling resources, and spreading the risks." The study warns that: "A high level of funding provided for the implementation of a specific technology enhancement program does not necessarily ensure success or accomplishment of objectives. Several technology enhancement programs in the five countries have not been successful in spite of the availability and spending of large amounts of money; e.g. Investment Grant Program, Financial Support for R&D in Industry, and Launching Aid (U.K.), Plan Calcu1 (France), IRDIA (Canada), New Process for Olefin Products (Japan). Fear of government interference and excessive 'red tape' were the principal reasons given by the private sector." .... "On the other hand, several technology enhancement programs have been successful after only a short period of operation, suggesting that, more than anything else, the inherent characteristics of a program rather than either duration or level of funding determine its effectiveness." Some Specific Mechanisms for Technology Enhancement in Various Countries In this section, we summarize some of the more important mechanism in various countries that have been used for catalyzing the technology transfer .:..

8-172 out of the research phase and through development into the commercialization phase. Those marked with an asterisk are regarded as particularly successful. Canada The cost-effectiveness of governmental investment in R&D has been con- troversial and it was felt there had been a failure to coordinate efforts. A Ministry of Science and Technology has now been established. The govern- ment interacts with industry through technology enhancement programs, through full or partial ownership of some enterprises, and through joint capital ventures. However, industry tends to be reluctant to cooperate through fear of governmental control and intervention. There is a need for improved communications and relations. The principal instruments for technology enhancement are: National Research Council (NRC) ($134M): This is a crown corporation influential in matters of science policy. Its main purpose is to serve the R&D needs of industry. *Industrial Research Assistance Program (NRC) ($44M from 1962-1972~: ~ . . . . . This program provides grants for salaries of scientists and engineers on approved R&D projects (Pharmaceuticals, chemicals, food products, aircraft, iron and steel industries). The program is regarded as successful by industry and government. Canadian Patents and Develpments Ltd.: This subsidiary company of NRC acts as the governmental patent and licensing agency. It may fund part of the costs of developing patents. *Program for the Advancement of Industrial Technology (Department of Industry, Trade and Commerce) ($57M from 1965-1972)0 This program provides direct financial assistance to industry for development, manufacturing, and the marketing of products and processes. Companies receive not more than 50% of the total estimated cost of the project. Patents remain the property of the company. The program is well received by industry. Industrial R&D Incentives Act (Department of Industry, Trade and . . . . Commerce) ($34M annually): This program is generally aimed at assisting current R&D rather than stimulating new R&D. It.supports up to 25% of capital expenditures on R&D, thereby easing the financial burdens to industry of maintaining R&D facilities. France The trend in recent years and in the current five-year plan is towards greater pragmatism in the support of R&D. High-technology industries

8-173 (electronics, chemicals, measurement instruments) are still being given priority, but emphasis on selected industries is being reduced in favor of more broadly applicable R&D. The General Delegation for Scientific and Technical Research (DGRST) is the central agency, under the Ministry for Industrial and Scientific Development, for coordinating public and private research proposals. Among the governmental agencies, highest priorities are given to atomic energy, space, oceanography, telecommunications, and governmental research laboratories. It also dispenses research contracts to industry. Government-industry relations are influenced by the fact that the government owns a significant fraction twholly or in part, the government owns 10% of all industrial output). Consequently, there is much regular consultation between government and industry. The principal instruments for technology enhancement are: *Concerted Actions Program (DGRST): This arrangement provides a 100% grant for up to 5 years in a cooperative program for industry with university and governmental laboratories. A requirement is that a project cannot be undertaken by existing governmental apparatus, toe. it is interministerial or interagency.^ Development loans can be granted for following-up; these are reimbursable only if the project is successful. The program is generally felt to be successful, particularly in enhancing university and industry cooperation. *Aid-to-Development Program (DGRST) ($42M in 1972~: The aim of this program is to facilitate development of new products, processes, and materials that appear economically promising. It pays 50% of total cost of the project, and provides for reimbursement if successful. Important factors are: the degree of foreign competition and foreign-government support of competitors; the degree of fragmentation of industry; the degree of risk; the social benefits from the project. The program is regarded as successful, and is attractive to industry. Letter of Agreement This mechanism is for encouraging large projects entailing substantial initial production costs. The government guarantees the difference between sales and break-even points. Major projects so far have included the Caravelle aircraft and computers. Interest in the scheme is Increasing. Agence Nationale de Valorisation de la Recherche (ANVAR) C$3M in 1912): This independent public corporation aims to stimulate invention and innovation. It collects research results, inventories from public and private labora- tories (especially universities and government laboratories), and from these selects and offers invitations to industrial firms likely to make best use of them. It also helps inventors find the best company for handling the develop- ment and commercialization. ANVAR may assume the whole or partial costs. It is partially supported by royalties from inventors it sponsors; the rest comes from the government.

8-174 The program is regarded as moderately successful, doing about as well as might be expected. Some have criticized it, though, for trying to fit industrial needs to existing technologies rather than the other way round. Germany During the 1960's, federal support for science and technology was con- centrated in the big science areas of nuclear energy, space research, civil aviation, and data processing. But in recent years, emphasis has been shifting from one of reacting to foreign technological achievements and towards the solution of social problems. There is a complex of interactions between the federal government, industry and universities, and at the federal-state level for overall policy, education, basic research, and the promotion of science. Likewise, there is a host of coordinating organizations and committees. The principal instruments for technology enhancement are: Privately-Operated, Publicly-Supported Organizations The German Research Society (DFG) supports basic research in the universities. The Max Planck Society supports basic research, and the Fraunhofer Society supports applied research in their own laboratories. The Confederation of Industrial Research Associations conducts industrial research in its own laboratories. Federal Support for Research and Development. Industrial R&D can be supported up to 50% from governmental grants, with the patent-ownership generally retained by the company. Low-interest loans are available for small or medium-sized firms with repayment excused in cases of failure. Joint industrial ventures for R&D are permitted, often encouraged, particularly through the mechanism of cooperating firms forming a jointly- owned subsidiary. Direct and indirect federal support has been available for large ventures such as nuclear energy, space research, civil aviation, data processing, oceanography and ocean resources, and environmental protection. Recent emphases embrace communications, transportation, health, food, and the envi- ronmentO Japan After World War II, Japan recovered and advanced its technological base by relying heavily on: (i) importing, modifying, and assimilating foreign technology, (ii) heavy governmental subsidies to industries, and Ciii) the dedication of its people. Managing the national program resulted in a com- plicated system of interlocking agencies, advisory councils, quasi-public corporations, industrial R&D laboratories, and technology enhancement schemes. Perhaps the most remarkable feature of the Japanese scene is the highly cooperative relationship between government and industry.

8-175 At the government level, the principal agencies concerned with tech- nology enhancement are the Science and Technology Agency (STA) and the Ministry of International Trade and Industry (MITI). The STA is concerned primarily with science and technology policy, budget planning, and the overall co- ordination among ministries. MITI, through its Agency of Industrial Science and Technology (AIST), promotes R&D in mining and manufacturing, co-ordinates the R&D of affiliated institutes and laboratories, manages national R&D projects, exercises authority over technology imports, exercises authority over tax and other incentives to channel support to designated industries in the national interest, and balances the needs for technology imports against the protection of domestic industry. The principal instruments for technology enhancement are: *Research and Development Corporation of Japan (JRDC) C$6.5M in 1971) Ten to fifteen high-risk scientific projects are selected for support each year out of proposals submitted by universities, and public and private institutions. It funds 60-80% of the cost, and failures are written off as a loss. If successful, the commissioned company repays the investment, interest- free, within 5 years. Royalties from the firm are shared between JRDC and the inventor. The program is regarded as exceptionally successful. Developments are 90% successful and two-thirds of the current operating budget derives from repayments and royalties. *National Research and Development Program ($38M in 1912~: This program provides full subsidies for projects urgently needed by the nation and which can lead to building new industries. Current projects (1972? include: MHD generator, high-performance computers; desulfurization process; sea-water desalinization and resource recovery, remote-controlled undersea oil drilling rig; electric car, pattern recognition systems; and turbofan aircraft engine. The program is operated by MITI and is regarded as successful. All major firms are involved, cooperating fully with the government. Joint Government-Private Sector Technology Projects Large projects, accorded high funding and priority, are usually organized as quasi- government "corporations under special charter" established especially for the purposes. These corporations may eventually qualify for loans from the Japan Development Bank. Private-sector funding participation varies from a token 3% up to about 50% depending on total cost, risk, etc. The government solicits proposals from companies for projects, preferring to deal with large conglomerates because of their R&D expertise. Funding usually covers develop- ment up to final prototype or prototype plant, and there is close day-to-day contact and working relations between government and industry. Projects given high priority include: Atomic Energy 60182M in 1972 - to develop power reactors, nuclear fuel and uranium resources, reprocessing of spent fuel, and nuclear ship); Space Program C$18M in 1972 - to develop, launch, and track scientific satellites and develop launching rockets); and the Ocean Development Program ¢$29M in 1972 - to develop a remote-controlled oil-drilling rig, survey the Japanese continental shelf, develop

8-176 acquacultural techniques, establish experimental facilities, and develop engineering techniques for marine structures. United Kingdom The British Government set up a Department of Scientific and Industrial Research (for supporting applied R&D) as long ago as 1916. Research Associations to foster R&D throughout various industries proliferated in the 1920's. Under the Labor Government in the 1960's, the overall responsibility and coordination of these applied R&D activities were assumed by the Ministry of Technology. Policies of centralization versus decentralization tend to vacillate according to the political party in power. Under the Labor Government, the Ministry of Technology acquired sponsorship for virtually all electrical, electronic, and mechanical engineering industries. The ConserYative- Government replaced "Min Tech" with the Department of Trade and industry and proceeded to decentralize government support for R&D, with the control over R&D reverting to mission agencies. Except for new programs, the new policy was one mainly of "hands-off" instead of one with the government seeking to lead, control, and stimulate R&D in industry. The government tends to formulate science and technology policy with relatively little input from industry. Industry cooperates more in implemen- tation of the policy, as handled through the Department of Trade and Industry. The principal instruments for technology enhancement are: *Preproduction Order Support Program (DTI) The aim of this program is . to accelerate adoption of technologically-advanced equipment (especially machine tools) by industry. The DTI buys tools and lends them free to potential purchasers or users. A typical purchase is 3-4% of projected total sales in 3 years. The user subsequently has the option of purchasing at sub- stantial discounts. The program is regarded as highly successful. Both the machine tool suppliers and users have benefited. Investment Grant Program (about $1.3B per year): The aim was to provide incentives for increased capital investment in machinery and plant for particular industries e.g., computers, ships, hovercraft. The new government in 1970 started phasing out the program in favor of tax incentives to promote higher investment. The Conservative Government felt the program involved high public expend- itures and did not achieve intended objectives. Furthermore, the program benefited firms whether or not they were profitable and discriminated against service industries. Financial Support for R&D in Industry (DTI) ($9.3M). This program seeks to aid small firms and research associations which cannot afford the costs of sustaining R&D programs themselves. The DTI contributes 50-100% of the cost. The program has been of some benefit to industries but is not a financial success itself.

8-177 Grant Program to Research Associations ($11M)~ This program provides financial help to groups of companies with similar interests to set up research associations. Grants are for 5-year periods and the amount is related to the amount contributed by industry. Some special, nonrecurring grants are also given. The objectives are more or less achieved, but the value to small firms is limited because not many participate. Launching Aid This program provides interest-free loans for civil air- craft and engine development. The amount lent is proportional to the esti- mated development costs and is repaid by levies and sales, usually less than 50%. Several successful products have resulted, but the program is not regarded as a success by the government. Alternative means of support are being sought. Programs of Assistance to Computer, Electronics, and Telecommunications Industries The purpose is to establish and maintain viable industries in - these three areas. The aid is short- to medium-term as the government wishes to avoid continued support. *National Research and Development Corporation (NRDC) Cm$19~: This quasi- government corporation, which started in 1949, is now a major force. It aims to develop and exploit inventions and support research likely to lead to inventions. NRDC acts commercially and expects its investment back, with a profit, if the venture is successful. It licenses industrial firms to exploit public sector inventions and pays the full costs of further development if it considers chances of recovering the investment to be good. NRDC enters into joint development projects with firms, when it usually contributes 50% of the costs and usually requires royalty payments. NRDC gets involved in about 500 inventions per year and supports about 120. NRDC is universally considered successful. It is now operating in the black and further government input is regarded as unlikely to be necessary. The benefits to industry are numerous and include the development of new technologies and products, increased competitiveness in world and domestic markets, increased productivity, employment, production, sales and exports. Some further details: Over 25,000 inventions have been submitted since 1949. Of these, about 6kOOO have been accepted for development and/or licensing. A substantial part of NRDC's income, however, is derived from a comparatively small group of inventions, the primary one being in the pharmaceutical industry. The phenomenon is not unexpected, for NRDC is usually concerned with projects entailing a high degree of risk, and has been referred to as the "lender of last resort". The success of NRDC has led many other countries to adopt similar plans; these countries include Australia, Canada, France, India, Japan, New Zealand, and South Africa. Factors considered important to the success of NRDC include: (i) the time element, in that sufficient time is necessary for a program of this i'

8-178 sort to "bear fruit", (ii) the structure, in that NRDC is not in the Civil Service, and (iii) the selection of the portfolio of projects to be sponsored. About 10% of the supported projects have been exploratory, i.e. leading to inventions. About 75% have led to development of inventions, and the remainder to the production of commercial products. Projects have included hovercraft, computers, fuel cells, flexible barges, pharmaceuticals, cryogenic engineering, diesel engines, variable speed gears, potato harvesters, automatic foundary equipment, photo-typesetting, electrochemistry, plastics, computer time-sharing systems, stored program telecommunications control, printed circuits, and many more. Some Broad-Gauge Factors and Policies Affecting Technology Enhancement Most of the mechanisms discussed in the preceding section can be regarded as capable of being oriented towards specific national needs. There are a number of broader-gauge government policy options available to enhance industrial efficiency generally, and these, in turn, often reflect national and societal attitudes towards technology. These options and factors include: (a) Miscellaneous Lending Agencies: All countries field an array of landing banks and other agencies for financing industrial development and facilities. These are often aimed at small- and medium-sized firms and can be at favorable terms, such as in Japan through the Japan Development Bank. The World Bank performs a similar function on an international scale, aiming especially at the smaller and developing countries. (b) Tax Exemptions and Incentives for R&D: Most countries employ tax ~ . incentives to stimulate R&D. Canada exempts R&D from taxable income, uses accelerated depreciation allowances for machinery and manufacturing equip- ment, and eliminates sales taxes on scientific equipment for product develop- ment and testing. France and Germany use tax incentives to promote industrial R&D. Japan allows a 25-50% tax deduction on R&D expenses; first-year acceler- ated depreciation up to one-third of the acquisition cost of the equipment and facilities; and a 50% tax deduction on newly-acquired fixed assets, including buildings, during the first three years following purchase. (c) Government Procurements Government procurement programs to stimulate industry are employed in several countries. France uses such schemes to provide advance credit for financing R&D and for protection of selected industries from foreign competition. The Preproduction Order Support Program in the U.K. has already been mentioned. (d) Patent Policies and Rewards: Patent ownership in publicly-aided R&D .. . . programs varies from country to country, and with the type of program. In some programs the patents remain the property of the inventing firm Ce.g., the Program for the Advancement of Industrial Technology in Canada). In some, rights to them are shared with the government (e.g., Research and Development Corporation of Japan), and in others the patents become the outright property of the sponsoring agency (e.g., some projects sponsored by the National Research and Development Corporation in the U.K.~. In Japan, patents that / /

8-179 result from government-funded R&D belong to the government and may be licensed to any company on a nonexclusive basis with royalties going to the government. Exceptions are patents obtained under the National R&D Program which can be exclusive to the participating company for the first two years. (e) Governmental Ownership: The degree of governmental ownership of industry varies considerably from country to country. Partial or full govern- mental ownership is found in Canada, France, and the U.K. In France, about 10% of all industrial output results from government-owned industry and about 30% of French investment is government-funded. In the U.K., the government owns half of a major oil company, while some industries, such as coal and steel, are fully nationalized. It is impossible to generalize as to the effectiveness of government-ownership in improving industrial efficiency and competitiveness. In some cases, the industrial sector had become so run down, poorly managed, or fragmented, that nationalization seemed the only way to upgrade them. However, once restored to financial health, the reverse process of returning such industries to the private sector is conspicuous by its absence. In other cases, where governments have been tempted to take over successful enterprises, it is by no means obvious that any further improvement or national benefit has resulted. (f) Policies Towards Consortia and Mergers: Most countries outside the U.S. take a rather liberal view towards industrial mergers and the formation of consortia. The argument is that large concentrations of industrial strength put the country in a more competitive position versus foreign enter- prises. As a result, mergers and consortia are not only often condoned but actively encouraged by the government. It is felt that such concentrations help avoid duplication of research, and allow the pooling of resources as well as the spreading of risks. (g) Government-Industry Partnerships: In several countries, one can find examples of government and industry forming commercial partnerships, usually with the aim of creating or exploiting export markets. In the face of such strong partnerships, industries in the United States have often felt at a definite disadvantage. Japan is regarded as the principal exponent of this approach. (h) National Spirit. Despite all the exhortions and conscientious efforts of governments to enhance technology and, thereby, economic strength, in the last resort much depends on the attitudes of the people. Most nations, given inspiring leadership and/or recognition throughout the population of the urgent need, can respond to the call for greater effort. The peoples of Germany and, especially, Japan seemed to sense for themselves the need for exertion after World War II to rebuild their shattered economies. Churchill during World War II was able to count on great efforts by the British people because they knew survival was at stake. DeGaulle was able to count on the psychological need of the French to restore their national pride. The problem in the U.S., until recently at least, is that the people have not really felt a sense of national urgency about the economy or survival. And probably such national urgencies are needed for inspiring leadership to emerge.

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