My colleague Derek Thompson takes on Paul Krugman’s contention that the Texas miracle was a mirage in his comment “Is Texas Special?” Challenging Krugman’s notion that the state’s deficit undercuts the advantages it derives from its population and economic growth, Thompson notes that, when it comes to Texas – and you can say this for just about any kind of economy – it is structural factors rather than short-term policy fluctuations that ultimately matter. “Whether or not Texas has cultivated a uniquely successful business environment at the state level,” he notes, “it’s pretty clear that many of Texas’ largest cities are uniquely positioned to withstand the recession. As a general rule, the cities that survived the recession avoided the housing boom and clung to strong government-backed sectors, like health care, higher education, and military.” Six Texas metros number among the country’s 20 best-performing regions, according to research and rankings by the Brookings’ Metropolitan Policy Program, he adds.
Posts Tagged ‘Rise of the Creative Class’
The rich world’s quiet revolution: women are gradually taking over the workplace
At a time when the world is short of causes for celebration, here is a candidate: within the next few months women will cross the 50 percent threshold and become the majority of the American workforce. Women already make up the majority of university graduates in the OECD countries and the majority of professional workers in several rich countries, including the United States. Women run many of the world’s great companies, from PepsiCo in America to Areva in France.
Women’s economic empowerment is arguably the biggest social change of our times.
From another article in the same issue:
The rich world has seen a growing demand for women’s labor. When brute strength mattered more than brains, men had an inherent advantage. Now that brainpower has triumphed the two sexes are more evenly matched. The feminization of the workforce has been driven by the relentless rise of the service sector (where women can compete as well as men) and the equally relentless decline of manufacturing (where they could not). The landmark book in the rise of feminism was arguably not Ms Friedan’s “The Feminine Mystique” but Daniel Bell’s “The Coming of Post-Industrial Society”.
Or perhaps Rise of the Creative Class is a landmark book for demonstrating why women have increasingly found a fit in the wage-earning world.
(Thanks to colleague MW for drawing my attention to the article.)
In a widely read cover story published earlier this month, Business Week’s chief economist Michael Mandel asks, “To what degree has American innovation been ‘interrupted’?” Mandel argues that the economic crisis is partly the result of America’s failure to generate high-impact commercial innovations.
What if, outside of a few high-profile areas, the past decade has seen far too few commercial innovations that can transform lives and move the economy forward? What if, rather than being an era of rapid innovation, this has been an era of innovation interrupted?
The crux of his argument is that many, if not most, of the big breakthrough innovations that were supposed to occur over the past decade or so have failed to materialize. His article provides a raft of compelling examples of once-heralded innovations – in areas from biotech to micro-machines – that have simply not panned out. This failure to commercialize and diffuse these new breakthrough innovations – America’s inability to set in motion the great gales of “creative destruction” identified long ago by Joseph Schumpeter as key to capitalist growth – he argues, is a key contributor to both the financial bubble and the economic crisis.
But since there is compelling evidence that the figures are overstated by the credit bubble and statistical problems, we can construct a plausible narrative for the financial bust that gives a starring role to innovation-or rather, to the lack of it. It goes something like this: In the late 1990s most economists and CEOs agreed that the U.S. was embarking on a once-in-a-century innovation wave-not just in info tech but also in biotech and many other technologies. Forecasters upped their long-run growth estimates for the U.S. economy. Consumers borrowed against their home equity, assuming their future incomes would rise. And foreign investors lent America money by buying up U.S. securities, assuming the country would come up with enough new products to pay off the accumulated trade deficit.
Mandel lists four areas in which America’s recent performance has been lackluster: stock market performance in the pharmaceutical, biotech, and life-science sectors; declining real wages for highly educated workers; a mounting trade deficit in high-tech sectors (which grew from $30 billion U.S. surplus in 1998, turning into a $53 billion deficit by 2008); and little improvement in the death rate (which he sees as a measure of the failure of breakthrough medical technologies to materialize) as evidence for the failure of American innovation.
It’s no secret that I’m a big fan of Mandel and I find his general thesis about lagging U.S. productivity and job growth over the past decade or so to be both intriguing and plausible. And since so much of my own work focused on the relationship between innovation and American competitiveness was flagging, I find myself particularly drawn to his most recent “innovation-interrupted” thesis.
My first book, The Breakthrough Illusion, written with Martin Kenney in 1990, argued that the U.S. system of venture capital-backed breakthrough innovation was skewed to encourage short-term super-returns from new breakthrough innovations, and was structurally ill-suited to capturing the longer-term wealth derived from developing these innovations into successful products and industries. That work drew upon the intriguing thesis of innovation theorist Henry Ergas, who argued that the U.S. had developed a shifting system of innovation geared to near-constant development of new products through new firms, as opposed to a deepening system (think of German cars) which continuously adds technology to upgrade existing industries. According to Ergas, the key to long-run prosperity lies in synthesizing both strategies – cultivating an economy which could deploy new technologies in new sectors while at the same time deploying them to upgrade and revolutionize old ones.
I opened my 2002 book, Rise of the Creative Class, with a time-traveler experiment. Someone traveling from 1900 to 1950 would be blown away by the varied technical marvels that surrounded them from televisions to airplanes. But while someone who time-traveled from 1950 to the 2000 would see a few new technologies, like the personal computer and the cell phone, he or she would likely be much more amazed by sweeping social changes. And in my 2004 book, Flight of the Creative Class, I argued that America’s innovative edge in the late 20th century was inextricably tied to its ability to attract foreign scientists, technologists, and engineers. The combination of mounting U.S. immigration restrictions and growing efforts by foreign countries to retain their own best and brightest (and attract others from around the world), I suggested, was an under-appreciated threat to U.S. competitiveness and prosperity.
In fact, I found Mandel’s essay so compelling that I decided to take a look at the actual data. Mandel rightly says that we currently lack a comprehensive “innovation index” that tracks commercial innovation: “There’s no government-constructed “innovation index” that would allow us to conclude unambiguously that we’ve been experiencing an innovation shortfall. Still, plenty of clues point in that direction.”
True enough. But research into the economics of innovation has discovered at least one reasonable measure of innovation – patents. There are problems and biases with using patents as a measure of innovation, as economists who specialize in the subject have pointed out. Patents measure certain areas of technology more than others. In some areas of commercially important R&D, patents are rarely used. Other areas, including less commercially relevant ones, are awash in patents for minutiae. And patents are not synonymous with commercially relevant innovations. That said, patents do provide a consistent, broad-gauge indicator of the level and rate of innovation – one that can be tracked over long periods of time and be broken out by nation, city, and region, and by U.S. resident versus non-resident or foreign inventors.
With my Prosperity Institute team – Charlotte Mellander, Scott Pennington, Dieter Kogler, and Patrick Adler – I’ve taken a look at the trends in U.S.-patented innovations. In a series of posts this week, I will report our findings. Tomorrow we’ll look at the trends in U.S. patents over time. Wednesday we’ll explore patenting by U.S. resident versus non-resident (foreign) inventors. Thursday we’ll examine the geographic distribution of innovation – tracking the rise of some innovative regions and the fall of others. And Friday we’ll discuss the longer-run historical relationship between innovation and economic crises.
This spring’s 2.3 million newly minted college grads are understandably worried about their economic future. Unemployment among their peers is on the rise, according to this analysis by Chicago-area employment services firm Challenger Gray & Christmas, which found the unemployment rate for 20- to 24-year-olds jumping to 13.2 percent this spring, up from 9.2 percent a year ago.
Saturday’s Wall Street Journal reports that many of the past decade’s “youth magnet” locations are losing their appeal as economic opportunities whither in cities like Phoenix, Seattle, Atlanta, Charlotte, Dallas, Las Vegas, and others which led the nation in attracting young college grads from 2005 to 2007.
So where are this year’s college grads heading?
This recent survey lists the best places for college grads to launch their careers. New York City topped the list – despite the financial crisis – with eight in 10 survey respondents listing it as one of their top destinations. Second-place Washington, D.C. was named by 63 percent. Los Angeles, Boston, San Francisco, Chicago, Denver, Seattle, and San Diego round out the top 10. And, remember, this is a list of the places that are best to find a job, not to have fun, go to great restaurants or clubs, make friends, or get lots of dates.
The list is heavy on big cities. It differs considerably from the Wall Street Journal’s youth magnet list, but it’s quite similar to a list my research team and I developed of the best places for recent college graduates which put big cities like San Francisco, Washington, D.C., Boston, Los Angeles, and New York on top. (D.C. jumped to the top of the list when we factored affordability and cost into the mix).
The appeal of big cities stems from a simple economic fact – they offer thicker labor markets with more robust job opportunities across a wide number of fields.
Getting ahead in your career today means more than picking the right first job. Corporate commitment has dwindled, job tenure has grown far shorter, and people switch jobs with much greater frequency. The average American changes their job once every three years; the average American under the age of 30 changes their job once a year.
In today’s highly mobile and economically tumultuous times, career success also turns on picking a thick labor market which offers diverse and abundant job opportunities. For new grads, picking the most vibrant location is an important hedge against economic uncertainty and the risk of layoff.
So for you newly minted college graduates ready to jump at the first job you’re offered, now more than ever it’s important to gauge the vibrancy of the job market and economy you’re signing onto. Moving is an expensive and time-consuming proposition; mistakes are hard to undo. Maybe this place finder tool will help.
And, here again, the economic crisis appears to be reinforcing the position of America’s leading talent magnets while further eroding the status of both older manufacturing centers and sprawling Sunbelt centers, for a simple reason: the location decisions of young college graduates are critical to shaping the future of cities and city-regions. The likelihood that a person will move peaks at around age 25 and then declines steeply with age: a 25-year-old is three times more likely to move than a 45- or 50-year-old. The combination of declining housing prices and concentrating economic opportunity in large U.S. city centers is only likely to compound this trend.