A hole in the "USA out innovated" premise is that Silicon Valley was based on military spending. See Steve Blank's "Secret History" series for examples.
And, speaking more generally, the U.S. Department of Defense is the world's largest employer, 3.2 million strong. When taking into account benefits, pensions, etc., it may also be called the largest socialist program.
That statistic paints a big picture; it's not that having a market economy was sufficient to become the sole superpower of the 1990's. It was that the U.S. had a lot of centralized spending in "the right places at the right times" and then allowed the marketplace to pick up the results and run with them wherever convenient. However, it's very difficult to backpedal and reallocate now that this has been done, and the status quo probably won't change until a crisis motivates it.
The pattern of every emerging market - Japan, Korea, China - is that state power still entangles itself somehow, even if there is a marketplace at the low level. We have never had a "purely ideological" state anywhere.
To be honest, I find it frustrating when people trot out the old "sillicon valley was created by central planning" meme. If it were that easy to create a sillicon valley, there would be dozens of them by now. Believe me, Chinese bureacurats have tried. There are whole "ghost cities" in China that the government ordered built, but that people never moved into. http://www.forbes.com/sites/kenrapoza/2015/07/20/what-will-b...
The great entrepreneurs who built Sillicon Valley-- Shockley, Ellison, Jobs, and the rest-- were people who were driven to find funding wherever they could get it. If the government had said no, they would have gone (and often did go) to someone else. Similarly, the academics who are getting funding from DARPA or the DOD now would gladly accept funding from private sources as well. The money is just as green.
The military certainly jump-started many technologies by putting money into the hands of engineers and scientists-- in some cases, possibly even by years or decades. But those technologies would have been invented anyway, just on a slower timescale.
It wasn't inventing the technologies that gave the West an edge-- it was commercializing them. And for that you need businessmen, not bureaucrats. If the USSR could have produced a competitive semiconductor industry, the 1980s and 1990s would have looked much different. Instead, they couldn't even keep loaves of bread on the shelves.
And, speaking more generally, the U.S. Department of Defense is the world's largest employer, 3.2 million strong. When taking into account benefits, pensions, etc., it may also be called the largest socialist program.
That statistic paints a big picture; it's not that having a market economy was sufficient to become the sole superpower of the 1990's. It was that the U.S. had a lot of centralized spending in "the right places at the right times" and then allowed the marketplace to pick up the results and run with them wherever convenient. However, it's very difficult to backpedal and reallocate now that this has been done, and the status quo probably won't change until a crisis motivates it.
The pattern of every emerging market - Japan, Korea, China - is that state power still entangles itself somehow, even if there is a marketplace at the low level. We have never had a "purely ideological" state anywhere.