Basic scientific research can allow global policymakers to accelerate post-Covid economic growth, the International Monetary Fund has said.
It is the key to innovation and can have a long-lasting impact on both developed and developing economies, the Washington-based fund said in its World Economic Outlook report.
Advanced economies can achieve long-term economic growth by fast-tracking basic research activities and developing closer connections between public and private research initiatives, it added. Its ripple effects will allow developing economies to translate innovation into economic growth, make rapid technology transfers, ensure a free flow of ideas and establish cross-border partnerships.
Basic research is theoretical and aimed at building the researchers’ understanding of certain phenomena and behaviours. It does not seek to solve real-life problems.
By contrast, applied research is commercial and aims to solve problems related to life, work, health and overall well-being. It is more practical and disruptive in nature.
“Basic scientific research affects more sectors in more countries and for a longer time than applied research,” the report’s authors said in a blog.
“Easy technology transfer, cross-border scientific collaboration and policies that fund basic research can foster the kind of innovation we need for long-term growth,” they added.
The Covid-19 pandemic, which forced countries to impose temporary lockdowns to stem the spread of the virus, disrupted the global economy, shut many businesses and wrought havoc on public finances.
The global economy contracted by 3.3 per cent last year, according to the IMF. In July, the fund estimated it would grow by 6 per cent this year and 4.9 per cent in 2022.
The recovery from the pandemic remains “hobbled” and the world economy could sustain as much as $5.3 trillion in losses over the next five years, the IMF projected.
To build back better from the pandemic, increased productivity, new technological innovations and sizeable public investments are needed. That can be achieved by prioritising basic research, the fund added.
“We emphasise the role of innovation in stimulating long-term productivity growth. Surprisingly, productivity growth has been declining for decades in advanced economies despite steady increases in R & [research and development] … our analysis suggests that the composition of R & matters for growth,” the authors said.
Theories of basic research, which are not related to any specific product or country, can be combined in random ways and used in different areas of science. They mainly intend to expand the existing knowledge base needed for advanced scientific growth.
A recent example is the development of the Covid-19 vaccines that not only saved millions of lives but also facilitated the reopening of many economies, “potentially injecting trillions into the global economy”, the IMF said.
“Like other major innovations, scientists drew on decades of accumulated knowledge in different fields to develop the mRNA vaccines [for Covid],” it added.
The fund’s report said basic scientific research is a crucial driver of productivity and it spreads across borders faster than applied knowledge. A 10 per cent increase in domestic basic research is estimated to raise productivity by nearly 0.3 per cent.
As well as having an impact on productivity and innovation, increased investments in basic research could also help to bring about a greener future and tackle climate change.
Basic research plays a “larger role in green innovation than in dirty technologies” and it spreads “more widely and remains relevant for a longer time than applied knowledge”, the authors of the report said.
The report recommended more robust policies, which fund public research and subsidise private research, for a “buoyant and inclusive” future.
It recommended policies that potentially double the subsidies for private research — both basic and applied — and boost public research expenditure by nearly a third.
“Policies that fund public research and subsidise private research will have positive pay-offs … these investments would start to pay for themselves within about a decade and would have a sizeable impact on incomes,” the authors said.
“We estimate that per capita incomes would be about 12 per cent higher than they are now had these investments been made between 1960 and 2018.”
The IMF noted that the rising tensions between the US and China could lead to “technological decoupling”.
The escalating geopolitical tensions between the world’s largest economies could harm innovation and global growth, the fund said.