Economic Vigor of Large Cities
Washington, DC: In a world of rising urbanization, the degree of economic vigor that the economy of the United States derives from its cities is unmatched by any other region of the globe, according to a recent report by McKinsey Global Institite. Click here for a downloadable copy of the report.
Large US cities, defined here as those with 150,000 or more inhabitants, generated almost 85 percent of the country’s GDP in 2010, compared with 78 percent for large cities in China and just under 65 percent for those in Western Europe during the same period. In the next 15 years, the 259 large US cities are expected to generate more than 10 percent of global GDP growth—a share bigger than that of all such cities in other developed countries combined.
The overwhelming role that cities play as home to the vast majority of Americans but also as a dominant driver of US and global economic growth argues for a keen focus on their prospects. MGI sheds new light on the role cities play in the US economy and gauges how large they loom in the urban world overall. Other highlights of the research include:
The United States has a broader base of large cities than any other region, and that explains their greater economic clout.
Beyond the Business Cycle
Washington, DC (NIST, February 2012): Facing the worst economic slowdown since the Great Depression, efforts to reestablish acceptable growth rates in both Europe and the United North America are relying to a great degree on short-term "stabilization" policies.
In a structurally sound economy, the neoclassical growth model states that appropriate monetary and fiscal policies will enable price signals to stimulate investment. The subsequent multiplier effect will then drive sustainable positive rates of growth. However, these macrostabilization policies can do relatively little to overcome accumulated underinvestment in economic assets that create the needed larger multipliers. This underinvestment has led to declining U.S. competitiveness in global markets and subsequent slower rates of growth—a pattern that was underway well before the "Great Recession."
However, the massive monetary and fiscal "stimulus" applied since 2008 in the United States has had only a modest impact on economic growth. The reason is that the prolonged current slowdown is a manifestation of structural problems. Thirty-five years of U.S. trade deficits for manufactured products cannot be explained by business cycles, currency shifts, and trade barriers, or by alleged suboptimal use of monetary and short-term fiscal policies.
High rates of productivity growth are the policy solution, which can be accomplished only over time from sustained investment in intellectual, physical, human, organizational, and technical infrastructure capital. Implementing this imperative requires a public-private asset growth model emphasizing investment in technology.
This paper assesses the limitations of monetary and fiscal policies for establishing long-term growth trajectories and then describes the basis for a technology-based economic growth strategy targeted at long-term productivity growth. This growth model expands the original Schumpeterian concept of technology as the long-term driver of economic growth where technology is characterized as a homogeneous entity that is developed and commercialized by large-firm dominated industry structures. Instead, the new model characterizes technology as a multi-element asset that evolves over the entire technology life cycle, is developed by a public-private investment strategy, and is commercialized by complex industry structure that includes complementary roles by large and small firms. Click here for a downloadable copy of the paper.
Making Bone a Snap
Cambridge (Fast Company, March 2012): The process of making synthetic bone is, as you might imagine, fairly arduous. But the end result is undeniably useful; synthetic bone can be used in everything from medical implants to construction materials. Instead of doing the most laborious parts of the synthetic bone creation process themselves, scientists at Cambridge University have turned to LEGO kits.
In order to make synthetic bone, scientists have have to take a sample, dip it into a beaker filled with protein and calcium, rinse that in water, and dip it into another beaker containing protein and phosphate. This needs to be done repeatedly until a bone-like compound is built. That's time-consuming. The Cambridge researchers decided to automate the process using a LEGO Mindstorms robotics kit.
For the uninitiated: Mindstorms is not the LEGO kit you played with at age 6. It's a kit for slightly older kids (and adults), filled with motors, sensors and microprocessors. In this case, the researchers used the kit to build a crane. They attached the starting sample to the end of the crane and programmed it to dip the sample into the various solutions. Lo and behold, a synthetic bone-making Lego machine.
Now the Cambridge scientists can spend less time on the sample-dipping process and more time on their research, which aims to produce a synthetic material that has a low-energy cost and a high similarity to human bone tissue.
How the US Lost Out on iPhone Work
Not long ago, Apple boasted that its products were made in America. Today, few are. Almost all of the 70 million iPhones, 30 million iPads and 59 million other products Apple sold last year were manufactured overseas. Why can't that work come home? Mr. Obama asked. Mr. Jobs's reply was unambiguous. "Those jobs aren't coming back," he said, according to another dinner guest.
The president's question touched upon a central conviction at Apple. It isn't just that workers are cheaper abroad. Rather, Apple's executives believe the vast scale of overseas factories as well as the flexibility, diligence and industrial skills of foreign workers have so outpaced their American counterparts that "Made in the U.S.A." is no longer a viable option for most Apple products.
Apple has become one of the best-known, most admired and most imitated companies on earth, in part through an unrelenting mastery of global operations. Last year, it earned over $400,000 in profit per employee, more than Goldman Sachs, Exxon Mobil or Google.
However, what has vexed Mr. Obama as well as economists and policy makers is that Apple — and many of its high-technology peers — are not nearly as avid in creating American jobs as other famous companies were in their heydays.
Exports Rebalance Economy
Washington, DC: The Great Recession reset the world economic map. Suddenly, with the bulk of the world's economic growth transferred beyond the borders of a recession-mired West and into emerging markets, American metropolitan areas and the nation as a whole were left to cast about for new sources of growth. Such a search for growth is why, in the months after the crash, a chorus of business leaders and economists called for a new emphasis on exports in a "rebalanced" American economy.
This report by the Brookings Institution recognizes the power of exports to help reorient the American economy after the recession — launched the National Export Initiative (NEI) in March 2010, with the goal of doubling exports by the end of 2014. Recent research by Brookings supports the emphasis on exports.
- U.S. exports grew rapidly in the first year of the nation's economic recovery. Specifically, U.S. export sales grew by more than 11 percent in 2010 in real terms, the fastest growth since 1997. In terms of job creation, the number of U.S. total export-supported jobs increased by almost 6 percent in 2010, even as the overall economy was still losing jobs.
- Large metropolitan areas powered the nation's export growth. Taken together, the largest 100 metro areas produced almost 65 percent of U.S. export sales in 2010, three-quarters of the nation's service export sales and 63 percent of manufacturing export sales. The largest 100 metropolitan areas produced the majority of export sales in 30 states in 2010. Export salesfrom Midwestern metro areas generated the fastest growth in direct export-production jobs.
- The Great Recession accelerated the shift of U.S. exports toward developing countries. Canada and Mexico remain the largest export markets for the United States, with one-quarterof the U.S. goods and service exports sold to the North American Free Trade Agreement(NAFTA) trading partners in 2010. From 2003 to 2008, the share of U.S. exports going toBrazil, India and China (the so-called BIC countries) increased by 3 percentage points and by another 2 percentage points in just the two years from 2008 to 2010. Metropolitan areas that produce what emerging markets consume are better-positioned to take advantage of the growth in these countries.
- Manufacturing drove the export resurgence in 2010. Comprising about 61 percent of U.S.exports, manufacturing industries produced three-quarters of the nation's additional sales abroad between 2009 and 2010. The rapid growth in manufacturing exports led 11 metropolitan areas to achieve 2009–2010 export growth rates that, should they continue, would double their exports in five years.
- High-value-added service exports witnessed uninterrupted growth through the recession and recovery. U.S. service exports such as education, telecommunications services, and businessservices grew in both 2009 and 2010. The largest 100 metropolitan areas produced more than 75 percent of these high–value–added service exports.
Innovation and Cities: Reframing the Dialogue
Washington, DC (This is the first installment in blog series that will be posted at www.CitiesSpeak.org, March 5, 2012): These are tough times for cities, economically and politically. Our own research points to a period of managed retrenchment where city leaders are confronted with undesirable choices — cuts in vital services, laying off personnel, delaying needed infrastructure investments, to name a few. But, times like these often open opportunities for innovation, to rethink the roles and structures of cities. "Never waste a crisis," as the oft-cited saying goes.
But what is innovation? An idea? An invention of a new practice? The word is overused and usually lacks definition. At National League of Cities' Center for Research and Innovation, our definition is that innovation is a process by which new ideas are generated, implemented in practice and widely adopted.
Unfortunately, innovation in cities is challenged by a national malaise about the role of government or by advocates who present city leaders with trendy or fad-ish options, rather than guidance for addressing issues most likely to improve the success of cities in the future.
Not wasting the current crisis and fostering innovation in cities requires that we reframe much of the current dialogue about the forces shaping our communities. The paragraphs below briefly suggest reframing conversations and debates about a number of issues in order to provide a platform for the future success of cities.
PA Shared Work Program
Harrisburg (Central Penn Business Journal, March 06. 2012): The Pennsylvania Department of Labor and Industry is now accepting shared-work applications for a new program that could prevent mass layoffs. The U.S. Department of Labor recently approved the state's proposal to move forward with the program, which was introduced last year by Bucks County Republican Sen. Chuck McIlhinney as part of a comprehensive unemployment compensation reform designed to help businesses and claimants.
Senate Bill 1030, which was signed into law over the summer, ensured 45,000 state residents receiving an extra 13 weeks of federally funded benefits would not suddenly lose them. It also permitted an additional 90,000 to qualify for benefits.
In addition, people receiving unemployment benefits are now required to show they are looking for jobs through the state's CareerLink site.
The voluntary shared-work program allows employers to reduce employee hours by 20 to 40 percent per week, while allowing employees to receive unemployment compensation benefits for their lost time. The total shared-work plan cannot exceed 52 weeks, and no employer will be permitted to take part in shared-work plans for more than 104 weeks out of a 156-week period, according to the law.
Participating employers must comply with all applicable federal labor laws and agree to not lay off employees during the term of the plan and not hire or transfer new workers into an affected unit.