America’s Great Divergence (and why it matters)

There has been an upsurge in interest in regional economic development – and rightly so. The litany of ills in the structure of the U.S. economy – rising income inequality, the disappearance of manufacturing jobs, and three decades of wage stagnation – belies another important trend that has been largely overlooked. There is an increasing divide in the economic fortunes among different regions of the United States.

While the gap between the wealthiest and poorest members of society seems to make the news on a weekly basis, few seem to be talking about the disparity between urban centers on the coasts and flyover country. The 1% narrative – brought to the fore by Occupy Wall Street activists – overshadows the regional divergence between “elite” seaboard cities and the heartland.

America’s great divergence represents the reversal of a history of convergence across regions following the Civil War and lasting until the 1980’s. Writing in the Washington Monthly, Phillip Longman argues that the convergence resulted from a century of pulling policy levers ranging from anti-trust laws, to regulation of railroads, airlines, and trucking, as part of a concerted effort of the Federal government to achieve regional parity.

Globalization: more was lost than jobs

America’s great divergence in regional prosperity coincides with shifting gears toward public policies that privileged globalization over autonomy, resulting in the loss of manufacturing jobs. The standard narrative links this loss of manufacturing jobs to the rising income disparity between the coasts and flyover America. However, bringing manufacturing jobs back through renegotiation of trade agreements and enforcing international fair currency and exchange practices isn’t enough to restore robustness to the heartland. It is insufficient because jobs were not all that was lost.

grey jigsaw with missing pieces in the red center

America’s innovation capacity took a hit with manufacturing flight. The divergence in incomes across regions is a symptom, not the underlying cause of the problem.

The issue is not only distributive inequality; it is also about contributive inequities. A regional divergence in incomes represents an uneven distribution of the fruits of labor. But the underlying problem is the capacity of people to solve their own problems through their own inventiveness wanes when there are fewer work opportunities: this is what is meant by the term contributive inequity.

What is needed other than protectionism, is harnessing the power of American ingenuity at the grassroots – at the place of doing and making. Innovation isn’t the exclusive domain of elite research laboratories and universities. Americans from all walks of life have been tinkerers and problem-solvers. Robbing the heartland of its foundation in making undermines both the citizens’ capacity to contribute meaningfully, and, thereby, the security, national competitiveness, and cultural integrity of the United States.

Competitiveness and Security

Technology and innovation have been an integral part of the American narrative of advancement since at least the post-War period. That narrative – famously forged by Vannevar Bush, the head of wartime US government R&D (including the Manhattan Project) – links the imperative of American scientific and economic competitiveness with national security and independence:

A nation which depends upon others for its new basic scientific knowledge will be slow in its industrial progress and weak in its competitive position in world trade, regardless of its mechanical skill. (Bush, 1945)

Bush was writing at a time when the United States was the planet’s manufacturing powerhouse with most of Europe and Japan devastated by the war. He argues for maintaining and further bolstering the nascent research and development capacity developed under the government’s patronage. Bush likens the rejection of government responsibilities for R&D to living off of the fat. Like ‘resting on one’s laurels’, living off the fat entails sloth and consumption instead of responsible investment, frugality, and industriousness.

Science and technology needed to be bolstered in support of these burgeoning productive infrastructures. Since the War, the economy and security of the United States has been well served by its continual investment in cutting-edge research. Now, the situation is reversed.

Industrial know-how has been lost, in addition to lapses in productive capacities, and productive infrastructures need to be built back up in order to realize new (and renewed) knowledge.

Today, “living off of the fat”, means continuing to neglect the productive, physical infrastructure, while doing nothing to reign in the intellectual capital flight of scientific knowledge being put to use beyond our borders, benefiting foreign firms and workers.

The marriage of knowledge produced in research environments with the experimental platforms of American agricultural, extraction and manufacturing industries is critical to national competitiveness and self-sufficiency. Energy security is national security. Food security is national security. Industrial competitiveness – economic self-sufficiency and manufacturing know-how – is a matter of national security. And national identity.

America: A Culture of independence and interdependence

Lately, discussions of inequality most often arise in the context of social justice; however, the motivation for undertaking regional economic development is not social justice. Rather, it is derived from American identity. Beyond national security, the drive for self-sufficiency is a hallmark of national identity: American culture.

American culture is fiercely independent because of the strength of its domestic interdependence. The ideal of the yeoman farmer epitomizes the American virtues of hard work and self-reliance that today characterize the entrepreneurs and small business people that drive this country.

Factory, mine, oil field, construction and maintenance workers have historically formed the backbone of American competitiveness. Identification with this cultural identity weaves a fabric of American interdependence as a component of national identity.

By “living off the fat” in recent years, while industrial infrastructures and productive capacities were compromised, America lost the driving force of innovation in America.

It is in this way that America’s “great divergence” represents a compromise of American cultural integrity.

In Hillbilly Elegy, the New York Times bestseller, J.D. Vance illustrates the links between Appalachian culture and socioeconomic crisis. Although the prevailing narrative focused on economic distress, Vance rightly notes the isolation of people and their alienation from their culture and environment. Solutions to the problem of the great American divergence derive from people connected and emplaced.

Our next post does a deeper dive into the concepts of connectivity and emplacement, discussing how both robust communication and situated innovativeness are the foundations of health ecosystems. We show how ecosystem takes on the meaning of a situated network that helps innovators plant their ideas so that they take root, grow and bear fruit in combination with others.

 

Sources

Bush, Vannevar. Science, The Endless Frontier. Report to the President, Office of Scientific Research and Development, United States Government Printing Office, Washington: National Academies Press, 1945.

Longman, Phillip. “Bloom and Bust.” Washington Monthly, November/December 2015.

 

Vance, J.D. Hillbilly Elegy. New York: Harper, 2016.

Peerdash™ enables the democratization of wealth creation by bringing people to together to solve their own problems

impulse

This post is the first of a five-part series dedicated to exploring how Peerdash™ – the secure collaboration platform – powers robust entrepreneurial and innovation ecosystems to achieve economic development in too-often overlooked regions.

The divergence in economic prosperity between elite urban centers on the coasts and the rest of the United States largely has to do with the loss of manufacturing jobs due to the forces of globalization. This is detrimental not only to national security and competitiveness, but also compromises American cultural integrity, which derives its independence from an “integrated interdependence”. Globalization has not only resulted in loss of jobs and livelihoods, but also alienation and isolation.

While industrial infrastructures and productive capacities have been compromised, the country has also lost the innovation capacity that comes out of emplaced ecosystems where people do and make. Remedying this divergence and disintegration takes more than bringing jobs back to America’s Appalachian coalfields, the Gulf Coast, and the Rustbelt. Making and producing sparks indigenous, grassroots ingenuity. Giving it wings takes a flourishing and thoroughly localized innovation and entrepreneurial ecosystem.

Ecosystems are built on the foundation of robust communication, and the ability to collaborate across geographical, sectoral and industry boundaries. Regions achieve economic development by leveraging the specificities of their local innovativeness through dynamic collaboration. The key to the digital revolution and the democratization of wealth creation requires enabling people to come together to solve their own problems.

Technology can create these virtual spaces, but it has to be adaptable to the local level. One such example is Peerdash™, a secure collaboration platform that powers robust entrepreneurial and innovation ecosystems – alleviating the alienation and isolation that has resulted from globalization.

Ecosystems Leverage Diversity

Policy-makers often seek to build “knowledge economies,” for their economic development benefits. Universities have historically been the primary generators of new knowledge, and have some of the requisite infrastructures and resources to drive innovation and foster spillovers into the surrounding economy. Silicon Valley has Stanford; the Boston area has MIT; Cambridge (UK) has the University of Cambridge. This concomitance has spawned a whole body of thinking about the interrelationships of universities, and the public and private sectors in fostering innovation-driven economic growth.

In addition to their education and research mandates, universities are often – themselves – stepping up to the role as key players in regional economic development. These institutions wrestle with questions like what their role and priorities should be, and how to foster innovation ecosystems – the self-sustaining networks that create synergies among innovators and enablers.

iStock collaboration cluster innovation

A major pitfall is a cookie-cutter, “one-size-fits-all” approach. Every ecosystem is unique – and must necessarily be. Universities are a diverse lot. Expectations can often be set unrealistically high, because universities operate in resource constrained environments and have diverse histories, capacities, cultures and mandates. Universities face trade-offs among their education, research and community engagement missions. The key is that universities cannot go at it alone. It takes an ecosystem.

This ecosystem includes diverse members of the community ranging from industry and government agencies to associations and other non-governmental organizations. An ecosystem must necessarily be localized to the specific needs of the region. The key to success is not duplicating – but adapting – existing models. As the World Economic Forum prescribes:

“…build the ecosystem on local conditions. Grow existing industries and build on their foundations, skills and capabilities rather than attempting to launch high-tech industries from scratch.”

The secret is structuring effective partnerships public and private sector stakeholders in such a way that addresses the special features of individual communities while acknowledging the diversity of academic institutions. Architecting productive ecosystem-building partnerships involves amplifying a university’s strengths, addressing its shortcomings and carefully aligning with the institution’s unique mix of student success and research capacities, steeped in institutional culture and tradition.

Ecosystem building requires a focus on human capital. It’s all about people, the world’s most underutilized resource. People are the conduits for developing and transferring knowledge and realizing the potential of new knowledge. People, not institutions or intellectual property are nodes in the innovation network. As nodes connect, innovation and growth capacity grow. In her study of university ecosystems, Dr. Ruth Graham extends the analogy: “creating fishermen and not the fish.”

So much of the vibrancy of an ecosystem depends on the human factor. Jason Bloomberg, President of Intellyx, emphasizes the role of how people interact in organizations in achieving exponential innovation:

“…even for the most technical of innovations, the most important component systems of the complex system of systems we call an organization are people, not technology subsystems. Innovation, after all, is a human endeavor. Technology innovation is itself a set of organizational processes.”

To effectively catalyze robust innovation ecosystems, universities and community stakeholders need to focus on people, developing and leveraging a diversity of human capital, the real fuel that builds the knowledge economy.

Instead of emulating others’ successes, it is critical to dig deeper and look at not only what worked, but why. Applying a greater granularity to ecosystem evaluation, it then becomes possible to leverage local strengths and regional needs, and summoning the institutional will to challenge and adapt global “best practices” to suit a unique ecosystem. A culture of evaluation and experimentation needs to be nurtured not only in the research labs, but also in university and public administration.

Adapted from blog content:

http://mariaadouglass.com/2015/01/10/balancing-act/

http://mariaadouglass.com/2014/06/30/inclusive-innovation/