Friday, September 30, 2016

The Smartest Places on Earth: Why Rustbelts Are the Emerging Hotspots of Global Innovation

For nearly four decades, the manufacturing centers of the industrialized world have been in decline, their once mighty engines of mass productivity decommissioned and rendered into silent, rusting hulks. Waves of capital and (mostly white) people have streamed out of the central cities, leaving ruined landscapes in their wake. Recently however, the deconstructive narrative of a number of these beleaguered towns seems to have been recuperated, and investment and populace (primarily of the hipster variety) have begun to trickle back in. In their book, The Smartest Places on Earth: Why Rustbelts Are the Emerging Hotspots of Global Innovation, economist Antoine van Agtmael and journalist Fred Bakker claim that, through advances in technology and communication, once moribund industrial cities like Albany, Akron, and Pittsburgh are being revived and are now poised to enjoy substantial competitive advantage in the international marketplace.

The Smartest Places on Earth chronicles innovation the authors see reigniting the spirit of capitalism in the West as the postindustrial tsunami of creative destruction—the disaggregation of vertically integrated value chains achieved in part through outsourcing to new profit centers in "emerging markets" (a term van Agtmael coined)—appears to be receding. The authors' thesis is a rejoinder to those on both the right and the left, particularly in the current political cycle, who continue to forecast doom and gloom in United States and the Eurozone. Like butterflies emerging from the chrysalis, moribund rust belts are being transformed into what van Agtmael and Bakker term "brain belts."

One of the contributing factors to this revitalization is the new application of so-called "legacy" infrastructure and expertise once deemed outmoded, the ostensible dead weight of which was held to be responsible for the decline of the old industrial centers in the past. In North Carolina, for example, researchers at NC State in Raleigh have gathered the remnants, as it were, of the distressed textile industry to research and develop materials and applications for new types of fabrics and other substances with a wide  range of uses, from apparel to wall and floor coverings to protective membranes and insulators in high-tech devices. Nearby Duke University and University of North Carolina-Chapel Hill have similarly retooled old manufacturing facilities into scientific research centers so as to attract corporate and governmental investment and incubate new businesses.

Driving innovation in these enterprises are what van Agtmael and Bakker term "brainsharing ecosystems," multidisciplinary networks that bring together educational institutions, business interests, and the government, many times sharing the same facilities. In contrast to the "lonely hero" ethos of the entrepreneurial archetype, an open-source, collaborative spirit underpins brainsharing. To use an old gestalt psychology term, with brainsharing the whole becomes greater than the sum of its parts, creating solutions whereby smart beats cheap, adding value in ways
that low-cost producers overseas cannot. The State University of New York Polytechnic Institute's NanoTech Complex in Albany brings together academic researchers, State government support, and investment and personnel from major corporations such as IBM to develop semiconductors and other nanotechnology products, along with biotechnology. One advantage of the NanoTech Complex brainsharing model, van Agtmael and Bakker note, is the ability for market competitors to collaborate under the university's umbrella and therefore avoid charges of collusion and price fixing. They may then apply relevant research results to developing their own proprietary products.

Another comparative advantage of former rust-belts-cum-brain-belts is the availability of relatively low-cost real estate in the form of those aforementioned silent, rusting hulks of decommissioned factories, warehouses, and office buildings. Although not mentioned in the book, Wayne State University, in partnership with local industry, private foundations, and government, established the business incubator TechTown in a 1927 Albert Kahn building formerly owned by General Motors that had been abandoned for decades. TechTown now houses some 200 start-ups with a wide range of business interests, including biotech, fashion, and alternative energy. 

As much as one might appreciate the respite from doom and gloom, the book raises important questions that go unspoken, much less answered, among the biggest being the status of those left behind in the deindustrialization of the past half-century, which resulted in the proliferation of rust belts to begin with. In the chapter titled "White Coats and Blue Collars," there is nary a sentence devoted to the current conditions of the working class—the specter haunting brain belts—outside of the need for a phantom cadre of construction workers (never identified by job title) to build the infrastructure needed to support brainsharing ecosystems and a mention of farmer's markets to satisfy the palettes of hipster locavores who sit higher up the food chain. The only mentions of labor in the rest of the book are a couple of  passages that take note of corporate decision-making on locating enterprises in areas based on availability of nonunion workforces.

Another fundamental question is what added-value the brain belt thesis has, practically speaking, beyond getting its authors gigs as guest lecturers and consultants. The Smartest Places on Earth traces its lineage back to French sociologist Alain Touraine, who in the late 1960s developed the concept of postindustrial society, which was later popularized by American sociologist Daniel Bell in his 1974 classic The Coming of Post-Industrial Society. Under that concept, knowledge work replaces the production of goods as the main driver of comparative economic advantage—essentially the core of what constitutes a brain belt's value proposition. More recent in the lineage is Richard Florida's "creative class" concept. Whatever its shortcomings, Florida's research at least tracks the decline of working-class occupations based on empirical data and offers a prognosis, however pessimistic, on their future growth prospects.  (See my review of the revised edition of Florida's creative class bestseller.) By contrast, van Agtmael and Bakker rely primarily on anecdotal evidence from their personal travels.

Also challenging van Agtmael and Bakker's tale of brainy high-tech phoenixes rising from the ashes of somnambulant milltowns (a process they repeatedly refer to in a hokey metaphor as "awakening sleeping beauties") is the fact that a substantial number of the examples they cite both in the narrative and in a table surveying world brain belts never declined into rust belts in the first place and so have no ashes to arise from. These too-numerous exceptions to the rule diffuse the power of the book's overall argument, leaving one to wonder just exactly what the path forward might be. That haziness is exacerbated by the generic set of policy prescriptions—a compendium of "innovation-lit" exhortations—that serves as the book's less-than-compelling conclusion.