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defense technology. The arms race, Sputnik, the energy crisis, and the information revolution stimulated continued growth in the field over the subsequent decades. For most of this period, there was sustained growth in the federal investment in science, including condensed-matter and materials physics. This federal role in fundamental research, originally articulated by Vannevar Bush at the end of World War II in Science: The Endless Frontier,1 was substantially justified on the basis of national defense.
In the late 1980s, the end of the Cold War, the emergence of the global economy, and the growing federal deficit combined to shake the foundations of the national R&D enterprise. In the absence of a major military threat, investments in the defense establishment were reduced, including support for R&D. Overall federal R&D investments, which peaked at $80 billion (in 1997 dollars) in 1987, declined 20 percent in the following decade (see Figure 7.1) as priorities shifted away from defense, and the desire to reduce the deficit applied increased pressure to the discretionary part of the federal budget. Federally supported basic research, performed mostly at universities, fared much better, increasing by 30 percent between 1985 and 1995 (see Table 7.1). This increase was dominated by increased investment in the life sciences; only modest gains were recorded for physics. At the same time, competition in the global economy (which itself was enabled by communications advances rooted largely in condensed-matter and materials physics) forced industry to sharpen the focus of its R&D investments. Industrial R&D turned away from long-term physical sciences and toward projects with more immediate economic return, reducing fundamental research investments that have been essential to the development of new technologies.
A Decade of Change
The transition to the global economy represents a significant opportunity for condensed-matter and materials physics. Competitiveness in a fast-moving economy is critically dependent on advances in materials for a broad range of applications from information technology to transportation to health care. Condensed-matter and materials physics has responded effectively over the past decade, supporting continued innovation in electronic and optical materials, while developing new thrusts in complex fluids, macromolecular systems, and biological systems (collectively known as "soft materials"), and nonequilibrium processes. At the same time, science has become increasingly international, and U.S. leadership in many areas of science and technology, including condensedmatter and materials physics, is being challenged. Continued progress in condensed-matter and materials physics is critical to sustained economic competi-