Schools and cities driving economic growth

In a recent New York Times column Harvard’s Edward Glaeser wrote: “In the long run, America will be richer than China only by having smarter citizens, and that requires the skills that come from schools and cities, not dispersed factories.”

Rick Haglund in an insightful Mlive column reviewing Governor Granholm’s new book makes the same point:

Her prescriptions are heavy on government partnerships with industry, and a focus on “clean energy” and advanced manufacturing. But Granholm says precious little about the areas where most of the good-paying jobs in a changing knowledge economy are being created — information, health care, education and financial services. Nor does she say much about the need for an urban strategy and boosting state financial support for higher education — two areas that are critical in attracting and retaining the young talent Michigan needs. But state government has been cutting revenue sharing to cities and university appropriations for years, a practice Gov. Rick Snyder has continued. Reversing those trends will be hard at a time when Snyder’s fellow Republicans want to abolish as much government as possible. But if Snyder fails in his pledge to make our cities more attractive and our workers smarter, he may find himself hiding behind sunglasses and a ballcap as his days as governor wind down.

Skills that come from schools and cities. Think about how different that is from the normal approach to economic development. Most policy makers and practitioners would think you are from Mars if you suggested that schools and cities are the levers that matter most for economic success. They almost exclusively focus on retaining and attracting businesses.

The evidence, in an economy being constantly transformed by globalization and technology, supports Glaeser’s central conclusion: concentrated talent is the most important ingredient driving economic growth. And where are college educated adults concentrating? Big metros anchored by vibrant central cities.

We found in our just released progress report on Michigan’s transition to a knowledge-based economy that high prosperity is occurring chiefly in those places where knowledge-based enterprises across many sectors are concentrating. They are concentrating in areas with a high proportion of adults with a bachelor’s degree or more.

In 2000, at the end of the boom years, Michigan still ranked 18th in per capita income. We were 34th in four-year degree attainment. In many ways, 2000 marked the end of an era when you could have high prosperity with low education attainment. No more! In 2009 Michigan ranked 36th in college attainment and 37th in per capita income — 13 percent below the national average, our lowest since the federal government started keeping statistics in 1929.

Our basic conclusion: what most distinguishes successful areas from Michigan is their concentrations of talent, where talent is defined as a combination of knowledge, creativity and entrepreneurship. Quite simply, in a flattening world where work can increasingly be done anyplace by anybody, the places with the greatest concentrations of talent win. States and regions without concentrations of talent will have great difficulty retaining or attracting knowledge-based enterprises, nor are they likely to be the place where new knowledge-based enterprises are created. The knowledge-based economy is now the path to prosperity for Michigan.

Michigan has lagged in its support of the assets necessary to develop the knowledge-based economy at the needed scale. The assets that matter most: a quality and agile higher education system and big metropolitan areas, anchored by vibrant central cites, where talent want to live and work. These are two areas the state has been disinvesting in this decade. Not smart!

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