There’s a growing divide between the haves and the have-nots in US cities, as a new report from the Brookings Institution shows.
Classical economics tells us markets should eventually reach equilibrium. So for example, people living in New York City would get so fed up with taking a shower in their kitchen they’d relocate to a roomy Victorian in Buffalo, and Buffalo’s economy would benefit.
But in the innovation economy, that hasn’t happened. Instead of places like Buffalo and NYC converging in economic performance, they’re becoming even more unequal. The winners are taking all.
But we have to consider this: Just five metro areas—Boston, San Francisco, San Jose, Seattle, and San Diego—accounted for more than 90% of the nation’s innovation sector growth from 2005 to 2017.
The authors view this regional polarization as a “grave national problem.” So they’ve proposed a call to action.
The authors argue that the federal government should step in and sprinkle Silicon Valley fairy dust across the heartland. This proposed program would set up an application process to select eight to 10 metro areas to inject with up to $700 million per year each for 10 years in direct R&D funding.
The authors accept that there will be counterarguments to their proposal.
How can the government create a tech hub out of thin air? Well, the federal government was instrumental in boosting R&D centers like the Research Triangle in North Carolina.
Isn’t this a short-term fix to a more systemic issue? It’s not the only solution, but it’ll kick start economies in small towns that’ve been left behind.
The debate is a fascinating and important one for the US economy. Would the country get behind such a program? Or should we let growth centers emerge on their own?