amount of basic science. Over the past two decades the share of private funding dedicated to fundamental research has grown five-fold. Industry self-funds more basic research, to the tune of $37.4bn a year, than the government funds at universities. The 2024 Nobel chemistry prize, for a breakthrough in protein-folding, was largely achieved through industry resources and talent. Moreover, artificial intelligence is creating new conditions to which research institutions must adapt. AI has the potential to be the greatest accelerant of scientific progress in human history, if we match its capacities with a suitable research ecosystem. The longer we delay adjustments, the more likely it is that legacy organisational structures built to Bush’s blueprint will be overwhelmed. As the world changes, and the challenges of American leadership change with it, the effort to organise the national research system must move on from 20th-century managerialism. To respond to these new realities, government is refocusing its efforts to meet America’s best scientists where and when they do their best work. We should adopt a portfolio approach to funding that includes both fast, exploratory grants and longer-term support, matching the timeline to the researcher’s work. We should use the full toolkit of funding mechanisms, including prize challenges and binding commitments to create markets for innovative products. We should experiment with review processes that promote disruptive proposals, and fund new institutional models such as X- Labs, the NSF’s initiative to launch and scale new organisations to address technical challenges that university and industry labs cannot easily solve through traditional methods. Beyond all this, we should back early-career independence by expanding portable graduate fellowships and four-year PhD programmes. We should subject our work to the scrutiny of metascience, the scientific study of how we do science, including building metascience units in funding agencies. And we should co-ordinate national efforts, in the spirit of the Apollo programme, and prepare the scientific ecosystem for the AI era. To this end, last November President Donald Trump launched the Genesis Mission via executive order.
Making the case for this transformation, last month I published my own report to the president on the shape of the American science enterprise, “Science: A New Golden Age”. It is a sequel and an homage to Bush’s Endless Frontier, but also aims to be a successor. The moment calls for renewal of his original intentions, recapturing his ambition and optimism, while recognising the new context in which we find ourselves. ■ Michael Kratsios is director of the White House Office of Science and Technology Policy. This article was downloaded by zlibrary from https://www.economist.com/by-invitation/2026/08/13/the-case-for-overhauling- american-science
The yuan is more than a symptom of global imbalances Treating it as a mere by-product of deeper distortions lets China off too easily, argue Anantha Nageswaran and P.S. Srinivas Aug 13th 2026 In a recent essay for The Economist, Gita Gopinath, Pierre-Olivier Gourinchas and Hélène Rey argue that China’s persistent surpluses and America’s persistent deficits should not be blamed on an undervalued yuan. The exchange rate, they say, is an outcome of domestic savings and investment choices, not an independent lever for correcting them. The argument is sound as far as it goes: exchange rates do reflect domestic fundamentals over the long run. But it goes too far in treating the yuan as merely a reflection of deeper distortions, as if the currency were external to the policy regime that sustains
them. The essay’s policy conclusion—that the exchange rate is not an independent lever—depends on assuming savings and investment drive the currency, rather than the other way round or a two-way relationship. Yes, a country that saves too much relative to investment will tend to run a current- account surplus, often alongside a weaker real exchange rate. That, however, does not make the exchange rate analytically secondary in every case. In the short run, the exchange rate is also a policy lever in its own right. If it were not, the imf would not have long made currency devaluation a standard part of its structural-adjustment conditionality—a tacit admission that exchange rates matter independently of the policies behind them. In China the same state-led institutions that depress consumption also prevent the currency from adjusting freely. The exchange rate is not outside the imbalance; it is one of the channels through which the imbalance is generated. The spillovers are real and increasingly visible in the data. China’s goods- trade surplus hit a record $1.2trn in 2025, up a fifth on the year before, even as exports to America fell sharply; the shortfall was more than made good by a surge in shipments elsewhere. A hyper-competitive currency that keeps Chinese goods cheap abroad forces competitors to hold down their own exchange rates in turn, exporting the adjustment problem rather than solving it: China’s biggest export of late has been its deflation. Export prices are still rising more slowly than its trading partners’, even as domestic producer prices have recently ticked up. This is where the authors’ preferred alternative is weaker than it looks. Household consumption’s share of Chinese gdp stood at roughly 40% in 2024—almost exactly where it stood two decades earlier, even as Wen Jiabao flagged China’s “unbalanced” growth model as a policy priority. Two decades of stated intent have barely moved the number at all. A currency level is visible every day. A reform pledge can be obscured indefinitely. The authors are right to reject the fantasy that China could revalue tomorrow and solve the problem outright. A sharp appreciation, taken in isolation, could intensify deflationary pressure and weaken domestic demand—though the pass-through from currency moves to domestic prices tends to be smaller than the worst-case framing assumes.
The imf’s own 2026 External Sector Report puts the yuan’s undervaluation at a midpoint of 21.3%, with some market estimates running higher still. Suppose it closed at the imf’s midpoint. It would shift demand from domestic goods to imports and render some domestic capacity redundant, taking it out of circulation—both of which are welcome from a rebalancing standpoint. Among many other reasons, a firmer yuan would ease the costly sterilised intervention needed to hold the currency down, lower the cost of imported energy and commodities that feed into domestic prices, and reduce the trade friction its undervaluation increasingly invites abroad—gains to China itself, not favours to its trading partners. The real question is whether sustained appreciation pressure, paired with financial liberalisation and domestic reform, can shift incentives that two decades of polite exhortation have not. China’s current-account surplus has swung considerably over the past two decades. But that volatility reflects where the excess savings went, not whether the underlying imbalance was fixed: a sharp narrowing of the surplus in 2007-18 coincided with a domestic investment boom, not a rise in household consumption. The entrenched piece is the savings-investment gap itself—rooted in local-government finance, state-bank balance-sheets and the political weight of the tradable sector, not its current-account expression, which moves far more easily than the structure producing it. That is what makes it slower and costlier to rebalance than an American fiscal deficit that unfolds within an electoral cycle and an independent central bank. Treating the two sides as symmetrical lets the more entrenched imbalance escape scrutiny. America must also adjust its own fiscal policy to narrow the deficit that attracts global capital. Developing countries are squeezed from both directions: China’s excess capacity crowds out their own manufacturers, while American deficits draw investment away from them instead. A deficit country at least sustains demand for what others sell it. A real appreciation of the yuan, alongside genuine fiscal adjustment in America, would do more to rebalance global demand and ease pressure towards beggar-thy-neighbour trade measures than either side’s reforms alone. It would also help reinvigorate growth in many developing economies and stabilise their societies, improving the prospects for a less conflict-prone
world. The yuan is part of the policy architecture that shapes global imbalances, not a decorative outcome that sits outside it. Of course, it is pointless to wonder who in the world can engineer an appreciation of the yuan all on their own. Only China can do it. So far, it has avoided the question. In an insightful recent post on China’s “k-shaped policy regime”, Yasheng Huang of mit Sloan suggests that addressing domestic demand is a political challenge in China because it requires the state to cede power, whereas a supply-side response does not. Exports, trade performance and hence the need for a competitive currency fall in the supply-side camp. The question of what will persuade China to contribute to rebalancing global demand remains open. ■ V. Anantha Nageswaran is the chief economic adviser to the Indian government. P.S. Srinivas is a visiting research professor at the East Asian Institute at the National University of Singapore. The views expressed are personal and do not represent the official position of the Indian government. This article was downloaded by zlibrary from https://www.economist.com/by-invitation/2026/08/10/the-yuan-is-more-than-a-symptom- of-global-imbalances
Under the Taliban, Afghanistan is, for once, peaceful Also very hungry, poor and repressed Aug 13th 2026 THE cafés on foreign-ministry road in the heart of Kabul’s government district used to blare out Afghan pop to attract a gossipy crowd of civil servants. No music comes from them now—or from anywhere else. It is banned. Men bustle along the street in traditional shalwar kameez, sporting long beards. Where a colourful mural used to be there is now a giant slogan in Dari, the local dialect of Persian: “There is no god but Allah”. Next to it a man in black fatigues lounges in the turret of a captured American Humvee, fondling a machinegun and keeping a lazy eye on the lunchtime traffic. On August 15th it will be five years since the Taliban swept back into Kabul. For 20 years they had been fighting against the government, its