‘Smartest Places’ via smarter strategies: Sharpening competitiveness requires ingenuity, not inertia

Defeatist demagoguery marred the 2016 election season, and it continues to resonate with many beleaguered voters in advanced Western economies, who dread the gloom-and-doom scenarios sketched by narrow-minded nationalists. For reassurance about positive strategies for economic renewal, try a dose of optimism about urban “hotspot hustle and cutting-edge cool” – thanks to a book that champions smart public policies, delivered through an activist approach to Competitiveness Strategy.

Gazing into the rear-view mirror is a mighty reckless way to try to drive an economy forward. Yet backward-looking nostalgia for a supposedly safer economic past – with voters' anxiety being  stoked by snide sloganeering about “ taking back our sovereignty” and “ making the country great again” – infected the policy debate throughout the dispiriting 2016 election year, and its defeatist aftermath, in many of the world’s advanced economies.

Scapegoating globalization and inflaming fears of job losses and wage stagnation, populists have harangued all too many voters into a state of paralysis or passivity. Lamenting the loss of a long-ago era (if ever it actually existed) of economic simplicity, nativists and nationalists have been conjuring up illusions about an era when inward-looking economies were (allegedly) somehow insulated from global competition.

Optimism has been in short supply lately, but an energetic new book – co-authored by a prominent World Bank Group alumnus – offers a hopeful perspective on how imaginative economies can become pacesetters in the fast-forward Knowledge Economy. Advanced industries are thriving and productivity is strengthening, argue Antoine Van Agtmael and Fred Bakker, now that many once-declining manufacturing regions have reinvented their industries and reawakened their entrepreneurial energies.

“ Welcome to the brainbelt,” declares “ The Smartest Places On Earth: Why Rustbelts Are the Emerging Hotspots of Global Innovation” (published by Public Affairs books). Now that brainpower has replaced muscle-power as the basis of prosperity in an ever-more-competitive global economy, the key factor for success is "the sharing of knowledge." Longlisted for the Financial Times/McKinsey Business Book of the Year Award, “Smartest Places” is receiving well-deserved attention among corporate leaders and financial strategists – and it ought to be required reading for every would-be policymaker.

The era of “making things smart” has replaced the era of “making things cheap” – meaning that industries no longer face a “race to the bottom” of competing on costs but a “race to the top” of competing on creativity. Knowledge-intensive industries, and the innovation ecosystems that generate them, create the “Smartest Places” that combine hotspot hustle and cutting-edge cool.





Those optimistic themes may sound unusual to election-year audiences in struggling regions, which are easy prey for demagogues manipulating populist fears. Yet those ideas are certainly familiar to readers at the World Bank Group, where teams working on innovation, entrepreneurship and competitiveness have long helped their clients shape innovation ecosystems through well-targeted policy interventions that strengthen growth and job creation.

“Smartest Places,” it strikes me, reads like an evidence-filled validation of the Bank Group’s recent research on “ Competitive Cities for Jobs and Growth.” That report, published last year, offers policymakers (especially at the city and metropolitan levels) an array of practical and proven steps that can help jump-start job creation by spurring productivity growth.
 

Such ideas are all the more familiar within the Bank Group because Van Agtmael himself was formerly the deputy director of the Capital Markets Department of the International Finance Corporation, the Bank Group’s private-sector investment arm. Among his many think-tank speeches and media interviews about the book, Van Agtmael recently discussed his ideas at a forum at the IFC – where, in 1981, he coined the now-famous term “emerging markets” (before he departed to set his ideas into motion as a global investment strategist).

Along with Bakker, a longtime financial journalist in the Netherlands (where both authors were born), Van Agtmael extols the reviving “rustbelts” as re-emerging centers of productivity and competitiveness. “Smartest Places” offers profiles of several once-declining, now-reviving regions in the United States and Western Europe whose economies have been retooled – and, like the “Competitive Cities” report, the book pinpoints place-based strategies for shaping robust innovation ecosystems.

Many once-derided “rustbelts” are now enjoying reinvigorated growth through technology-driven innovation. “Smartest Places” profiles the resurgence of regions like Albany, New York; Raleigh-Durham, North Carolina; Portland, Oregon; Eindhoven, Holland; Dresden, Germany; and Lund-Malmo, Sweden. All of those metro areas have bounced back from what Van Agtmael calls “a life-threatening challenge” – the erosion of old industries, the departure of signature corporations, the downsizing of aging factories – and have reconfigured their enduring assets to reignite growth.

Now, as fate would have it, I happen to have some first-hand observations about such rustbelts-turned-brainbelts – because my family’s hometown has been included (somewhat to my surprise) as one of the “Smartest Places” that’s profiled in the book. A casual visitor might think that Akron, Ohio – a manufacturing and university city of about 200,000 near Cleveland, with an industrial history as the world’s onetime capital of tire- and rubber-making – is just another amiable Middle American town that is gradually making a successful “eds and meds” (universities and hospitals) post-industrial transition.

Taking a closer look at the Akron economy, however, Van Agtmael and Bakker discern the elements that have helped revive the region’s competitiveness – making its economy far more vibrant than its nearby neighbors, like fraying Cleveland and forlorn Youngstown.

Akron benefits from having a technology-focused university (a global leader in advanced polymer research) that’s been well-funded by the state and well-coordinated with local industries; the headquarters of a tech-driven multinational corporation (Goodyear Tire & Rubber Company) with global supply chains and an international sensibility; a network of public-private consultative bodies that cross-pollinate ideas across industrial sectors; incubators and accelerators that serve as knowledge-sharing catapults for startups; access to capital to amply fund innovation-minded investment; and the activism of civic “connectors” who help catalyze growth by linking startup firms, established corporations, government agencies and local philanthropies.

Put all those energizing elements together, the authors assert, and a city-based economy has the building blocks for success in the Knowledge Economy. Critically, those assets are all knowledge-driven: It’s no coincidence that each of the profiled “Smartest Places” is home to a university that puts a premium on developing ever-higher technologies.

As Van Agtmael and others suggested at a recent Brookings Institution forum – hosted by the city-focused Metropolitan Policy Program – the coordinated urban-based strategies that have created the “Smartest Places” go beyond old-fashioned forms of “industrial policy” (although they take some of their basic inspiration from that approach). Going one smart step further, the leading-edge hotspots epitomize the success of agile Competitiveness Strategy, which emphasizes not top-down, sector-by-sector decision-making but the bottom-up effervescence of ideas.

The public sector has been an indispensable partner, as Van Agtmael noted, in creating and sustaining the technologies that define the “Smartest Places.” The sources of high-tech research funding have often been such national-level programs as the National Science Foundation, the National Institutes of Health, and the Defense Advanced Research Projects Agency (DARPA) – which Van Agtmael dubs “the most innovative venture capitalist in the United States” In addition, state and local government funding has played a major role in creating such innovation-focused hubs as the Research Triangle Park in North Carolina and the high-tech cluster in post-industrial, research-savvy Pittsburgh. Taken together, such activist public-sector interventions seem to add up to, at least, a modernized and market-attuned variant of "industrial policy."

Sound public policy is essential in unleashing private-sector innovation, as well. Van Agtmael points to the positive effect of the bipartisan Bayh-Dole Act of 1980, which allowed universities to take federally funded R&D out of the laboratories and into the manufacturing stage – thus encouraging researchers to connect with private financiers to try to capture the value of taxpayer-funded technologies.

So the next time some posturing demagogue tries to claim that the best days are over for the world's advanced industrial economies – or that globalization is likely to be a one-way ticket to poverty – remind him or her that the "Smartest Places on Earth" are the ones that champion ideas, innovation and enterprise. There are plenty of examples of how the spirit of collaboration – asserting the most contructive features of private-sector dynamism, public-sector legitimacy, social-sector inclusiveness and academic imagination – is paying off in tangible ways for idea-driven industrial cities worldwide.

That thought ought to help make the aftermath of the dismal 2016 election year slightly more bearable, awaiting the day when even more policymakers are ready to embrace the constructive lessons of sound Competitiveness Strategy.