With Washington paralyzed by gridlock, states—and the metropolitan areas that power them—need to take the lead in rebuilding the economy.
The second hallmark of the next economy is low carbon—low-carbon energy sources; infrastructure that can move people, goods, and ideas with less energy; and products that take little energy to build and operate. The United States has been slow to embrace the low-carbon economy. The Recovery Act devoted about $94 billion to renewable energy and green investments, everything from incentives to develop new battery technology to retrofitting public and assisted housing. China, by contrast, allocated $221 billion of its 2009 stimulus funds to renewable energy and other green investments. And China continues to out-invest the United States in key low-carbon categories: China has built some 4,000 miles of rail for fast trains. By 2020, the nation expects to build 10,000 miles of high-speed rail to connect all its major cities. The United States, by contrast, has one arguably high-speed rail line of 456 miles, the Boston-Washington corridor.
Key sectors of the low-carbon economy, like the export-oriented economy, will be primarily invented, financed, produced, and delivered in the top 100 metros. These large metros concentrate a majority of U.S. jobs in solar energy, wind energy, smart-grid systems, smart metering, energy research, engineering, and consulting services. Some 85 percent of jobs in green architecture, design, and construction are in large metropolitan areas, which makes perfect sense, since that’s where most people and buildings are.
But the United States needs to innovate not just in low-carbon technologies, designs, and land-use patterns. It needs to encourage innovation in just about every sector of the economy. Innovation, the third element of the next economy, has been the source of almost all economic growth in this country since the Industrial Revolution. As economist Paul Romer has written, “No amount of savings and investment, no policy of macroeconomic fine-tuning, no set of tax and spending incentives can generate sustained economic growth unless it is accompanied by the countless large and small discoveries that are required to create more value from a fixed set of natural resources.”
Unfortunately, as a share of GDP, total federal funding for R&D was lower in 2008 than it was in 1993. The Recovery Act’s massive infusion of funds, about $50 billion (including both appropriations and tax expenditures), was better than nothing, but it was not, and wasn’t designed to be, a sustained commitment to raise federal support for R&D activities.
The innovations that are happening are happening mostly in metros. One rough measure of innovation is patent rates, and these are much higher in metropolitan areas than outside them. And within metros, new innovations and patents spur yet more: Patent citations tend to occur within the metro areas in which the patent itself originated. Venture capital investments, another proxy for innovation, are almost exclusively made in metropolitan areas.
The fourth critical piece of the next economy is greater opportunity, especially for people without four-year college degrees. An economy that is innovation-driven, export-oriented, and lower-carbon will require workers who are well educated when they enter the workforce and who continually upgrade their skills. Thus the next economy will drive the United States to narrow our persistent educational attainment gap. African Americans and Hispanics will be nearly 40 percent of the working-age population by 2050, up from about 25 percent now. Yet these groups have lower rates of post-secondary educational attainment, including two-year degrees, than whites or Asians. An innovation-driven economy will demand, and reward, more education and skills. The attainment gap is, more than ever, a competitive hurdle.
But if workers can build their skills, the next economy may also create more opportunities for workers to move into well-paying jobs with secure benefits. For example, exporting firms pay workers more and are more likely to provide health and retirement benefits. Alexandre Mas, former chief economist at the Department of Labor, last year told Congress that an increase in U.S. export intensity “has the potential to create hundreds of thousands of new, good-paying jobs” and reduce income inequality by raising the income of many working-class and middle-class employees.
Metropolitan areas also have the potential to speed workers’ wage growth. One study from the Federal Reserve Bank of St. Louis suggests a worker in the Chicago metro area would enjoy wage gains about 15 percent greater over the course of a decade than a comparable worker in the Cheyenne, Wyoming metro area, simply because Chicago is so much larger. Metropolitan areas also seem to increase workers’ productivity levels and earnings, even after they leave the metro, according to research by economists Edward Glaeser and David Maré. All this is not to dismiss the discouraging condition of many school districts in metropolitan areas (usually in their urban cores), nor high unemployment rates in many central cities. But if a person has a job, he or she will probably be better off if that job is in a metro area.
A Metro Agenda for States
Metros, for all their economic power and next-economy advantages, are largely unrecognized in law and politics. Local governments are creatures of the states, and states have rarely seen fit to create metropolitan governments that would link up the constituent elements of metros, or to enable localities to do it themselves. In state legislatures, metro representatives tend to fragment along geographic and party lines, with suburban legislators often siding with rural representatives against city concerns. Executives and legislators feel pressure to spread state largesse thinly and evenly across the state, rather than concentrating big investments in infrastructure and innovation in their metros. Political discourse, driven by micro-targeting (and insufferable labels: NASCAR dads, Mama Grizzlies), further chops up metropolitan populations and undermines a sense of shared interests among both voters and their representatives.
Yet metros matter. States (and the federal government) may not be required to tend to their metros’ needs by law or custom, but economic reality dictates that states must do a better job of supporting the places where most of their citizens live, work, learn, and create.
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