In The New Localism, Bruce Katz and Jeremy Nowak discuss the elements needed for cities to continue to grow as economic engines of modern economies. The United States currently has a handful of dynamic cities across the country which are powering the national economy. San Francisco (really the Bay Area as a whole and Silicon Valley) is powered by tech companies, Houston is powered by oil giants, Boston is driving medical and biotech engineering, and New York City continues to be a powerful financial hub. While each of these metro regions is a model for the resto the country, they must adapt to globalized economies moving forward and must find ways to embrace new innovations to keep diversify and strengthen their own economies.
Katz and Nowak write, “the critical element is collaborate governance across networks of public, private, civic, and university institutions and leadership. No one sector can alone power a city and metropolis forward in today’s complex and competitive economy.” A single sector is not enough to reliably and consistently sustain an entire city or region. New innovations in diverse fields that share common foundations is required for economic well-being today. In order for cities to diversify and develop new industries in new sectors, a confluence of public institutions, private businesses, involved philanthropies, and cutting edge research universities is key.
The public sector has to be able to adapt and adjust laws, rules, regulations, and oversight in a world where every competitive advantage matters. Government must continue to protect the public interest and safety, but needs to allow for the organization of structures that can make real decisions timely. Private sector leaders also need to be involved and commit to place-making, developing the cities where they are located and bringing something beyond “jobs” to a region. Civic organizations and groups can fill the gaps between these actors and help provide funding and leadership initiatives to related to place-making and oversight.
None of these efforts will succeed if an intelligent and motivated workforce is not available to connect with the agencies and organizations involved. Research universities play a role in new economies by connecting students with relevant research and helping to get innovation out of the lab and into the private sector. Connecting students with real companies that are taking real steps to make their communities better will build the energy and excitement necessary for an educated and motivated workforce to make economic growth, innovation, and development possible. Some of this I recognize is “pie in the sky” thinking, but it is necessary for future growth. Pushing companies to become Public Benefits Corporations and rewarding more civic minded and responsible organizations is a small and necessary step to move in the direction I described, otherwise, there is nothing to convince companies to make greater investments in place-making rather than just finding a nice place to move to.
In The New Localism authors Bruce Katz and Jeremy Nowak quote Matthew Taylor of the U.K.’s Royal Society for the encouragement of Arts, Manufactures, and Commerce by writing, “it’s necessary for a city to think like a system and act like an entrepreneur. Thinking like a system requires taking a long and broad view of the regional economy.”
Cities cannot just assume that people will move to them, that current businesses will stay, and that a market will pop up on its own to make the city thrive. Cities need to consider all of the elements, from education and workforce development to infrastructure development, that are necessary to create regions where people want to live and work. They need to look at their regional economy and identify the areas (not just a single area) where they can be competitive and have unique advantages from institutional capital like universities to geologic benefits like attractive rivers or easily accessible ports. Cities have to figure out what it is that they can maximize and offer to people, and work with local groups and organizations to rebuild and promote the things that make them so attractive.
Acting like an entrepreneur requires that cities think about innovations and opportunities to invest. This is a challenge for cities because investments with public dollars that go south can be a reason to vote leaders out of office and can draw criticism from local residents who view their tax payer dollars as going to waste. With that in mind, cities, like any entrepreneur, must be able to cultivate multiple streams of funding for the plans they adopt and projects they take on. This requires working with organizations outside the formal city government to co-invest in projects that benefit the entire city. It also requires networking and building support systems with groups that can lead and groups that can provide the necessary assistance to get things done.
When cities adequately assess their economic prospects and develop networks to share risk and coordinate progress, real problem solving and real action can be taken. Cities can help provide the infrastructure and social capital needed for firms to move in and for organizations to feel connected to the places where they are located. This benefits the cities and provides a reason for companies to stay and invest locally by further developing the institutions that make the city an attractive and competitive place.
One of the case studies presented by Bruce Katz and Jeremy Nowak in their book The New Localism is Pittsburgh, PA, which has merged academic research institutions with business industry and supportive public policy. Pittsburgh has two major research universities within a block of each other, The University of Pittsburgh and Carnegie Mellon University. Experiences from Carnegie Mellon in the past are fueling the city’s reinvention and powering new industry as research is getting out of the institutions and into new businesses to drive the economic engine of the city.
What Pittsburgh does so well, explained by Katz and Nowak, is merge diverse industries and fields to create new innovation. They write, “A convergence economy emerged: a fusion of academia and industry with electrical and mechanical engineering, computer science, and multiple other fields. When disciplines collide, magic happens.” The idea of a convergence economy is crucial to New Localism. Academic institutions have been learning valuable lessons by creating more crossover between their divisions and fields. Bringing together academics who would otherwise rarely communicate is driving fields that previously had stagnated. With two leading institutions in the city, Pittsburgh has taken this lesson out of the academic fields into private industry.
Academics on their own don’t have a lot of great business sense or experience, but do have a good sense of where innovation is heading and what might be possible with new technology. Combining their expertise and knowledge with people who understand business and have connections with funding agencies can help lead to scale and commercialization of innovations. This cannot happen without something that creates a convergence between disparate entities.
Hospitals today are creating incubator labs to help get new medical advances out of the research lab and into industry. Universities are beginning to merge with private industry to find ways to get innovation out of the academic hallways and journal articles into factories and business. Governments are helping back quasi-governmental networks to share the risk of new innovation and find new ways to fund local developments in technological innovation. Pittsburgh is leading in this field, and cities across the United States are following by finding new ways to engage their academic institutions and industries.
A lot of work from both the Brookings Institute and from the Mercatus Center at George Mason University comes across my radar. Oftentimes the perspectives of the two think-tank centers differ quite a bit, but one area where they align is on local economies. Brookings (a center-left think tank) and Mercatus (a Libertarian leaning academic quasi-think tank) both agree that local economies depend on dynamic innovation and thriving centers where people actually want to be. Both agree that attracting competitive companies and driving innovation requires investments in placemaking, not just tax breaks and financial incentives for firms.
Bruce Katz and Jeremy Nowak (both from Brookings) write, “A globally dynamic economy requires that any locality that wants to thrive must invest in the qualities of place that attract and retain residents and firms, in human capital, and in an enterprise environment that enables innovation and business growth.” Mercatus also suggests that places focus on infrastructure and development to attract firms and encourage people to move to them. Mercatus is likely to encourage this growth in an organic invisible hand manner, while Brookings is more encouraging of using the state to intentionally develop infrastructure and systems for growth and network development.
The important lesson is that economic growth and development require meaningful investments in infrastructure. Human capital is the heart of networks and the key to innovation and growth. In order to attract people and to attract companies that can compete in a globalized world, cities need to make themselves livable and attractive to young and dynamic people. Tax incentives are not enough to attract companies for the long term. A company that is willing to move for a simple tax break, is not a company that is in it for the long run. Stable companies that want to grow and develop in one place will want places that are interesting and offer the amenities needed for a thriving 21st century lifestyle. Companies that are looking to make long-term and winning investments need human capital, and in order to attract human capital they need dynamic places where people want to live and set roots.
The first time I heard about globalism was in an English class as a freshman in college. Since that time, globalization has gotten a lot more attention and has come to represent people’s fears about automation and job loss, but also people’s ambitions as new markets across the world become more accessible to trade and innovation. Whether we like globalization or not, we must acknowledge the way that markets and societies are changing so that in our own minds globalization doesn’t remain the mysterious boogeyman that it so often is today.
In The New Localism, Bruce Katz and Jeremy Nowak discuss globalization and how our cities and metropolitan regions, as opposed to our states or federal institutions, are the most well poised to adapt to an increasingly globalized market and supply chain. The also ask what it means for civil institutions to adapt and change to globalization writing, “The connection between globalization and localism as an arena of enhanced civic action has not been as well explored as the general theme of global economic change and populism.”
Since 2016, we have been asking ourselves why a global wave of populism seems to have overtaken normal political processes in the US and UK. Why authoritarian leaders have seemingly become so well entrenched in Turkey and Russia, and why so many people across the globe are willing to protest traditional and seemingly rational governments. What we have not looked at as closely, is how local level leaders can make a huge difference on a global scale and how cities and metropolitan areas can shape policy that influences people’s lives at a greater scale than what we see with movements by populists and authoritarians.
Individual states in the US are reversing marijuana policy against the will of the Federal Government. Individual cities are designing their own immigration policy contrary to the demands of the Federal Government. And industries clustered in metropolitan areas are not waiting for new laws and regulations to make decisions that will impact people living within the US and across the globe. The scale of action is local, and that means that cities are the ones who set the agenda for globalization, rather than the larger state governments or federal institutions. How this will ultimately change those larger civil institutions is still a mystery, but in my opinion, local action can dismantle the energy and grievances of populists and authoritarians. Local action can drive economic performance and growth, pacifying the unrest we see at national levels. Globalization might be a phenomenon that connects networks and places all over the Earth, but its effects are felt locally, and good local management and innovation can help make globalization a positive and constructive force.
“While competing in this global economy requires new thinking, many cities continue to pursue zero-sum economic development strategies that subsidize stadia and steal businesses rather than incent innovation,” write Bruce Katz and Jeremy Nowak in The New Localism. Our world’s globalized economy scares a lot of people. Add to globalization new technological innovations and the automation of a lot of jobs, and we find threatened people, threatened cities, and threatened industries. The proper response to such threats is adaptation and change, but a more common human reaction is fearful recalcitrance. Rather than go through reinvention, rather than develope new skills, and rather than embrace new changes, cities, states, countries, and the people within them double down on the familiar and the known, using policy to entrench themselves in the familiar jobs of yesterday.
Katz and Nowak continue, “These strategies are rarely aligned with smart education and workforce strategies that give workers the technical skills they need to succeed in growing occupations. And reinvestment in neighborhoods, downtowns, and water-fronts still has a long way to go to make up for decades of disinvestment, depopulation, and decentralization.”
Stealing jobs, offering tax incentives to get companies/sports teams to move, and passing policy which prevents companies from automating away common jobs is not a strategy built for success in a globalized world of changing technology. To be competitive in a world where companies can move easily, where ideas can take root anyplace, and where jobs and technology are changing the way we work, cities and governments need to find new ways to build human capital and new ways to get innovative ideas into the economy quickly. Approaching the world and the economy as a zero-sum competition prevents innovation and encourages the short term thinking that leads to the poor strategies mentioned above.
The only way to truly adapt to the changing globalized world is to innovate. Protectionism leads to eventual disruption and greater anger on the part of the people whose industry and jobs are being disrupted. Those who lose out to automation without any training or skill development to help them adapt are understandably frustrated, but the proper response is not to dig our heels into the dirt to pull back on innovation and change. The proper response is to embrace change and help people innovate and learn alongside new technology, new jobs/industries, and new institutions.
During my Masters in Public Administration, I had a seminar class about theories of the policy process. One of the theories that I enjoyed was policy innovation and diffusion theory in which a policy introduced in one jurisdiction gained traction and was subsequently introduced and adopted within another jurisdiction. Networks, physical proximity, and other characteristics of jurisdictions influence whether or not a policy is likely to diffuse to a new jurisdiction. Policy can diffuse vertically, moving up from counties to states to the national government (or backward) and can diffuse horizontally across cities in a state or sates in a nation or across nations on Earth.
In the book The New Localism, Bruce Katz and Jeremy Nowak discuss diffusion at the city level. They argue that, “New Localism reflects a new horizontal rather than vertical mechanism for societies to solve hard problems.” Most innovation and diffusion research that I studied in the United States was related to states. The question is usually, if a state adopts a new law to address an issue, what factors make it likely that other states will or will not adopt a similar law? And how many states need to adopt a regulation before the federal government institutes the regulation nationwide? States have historically been the main laboratories of democracy, but Katz and Nowak suggest that in the future they will not be. Rather than having a state adopt policy and filter that policy down to the counties, cities, and local governments for implementation, it is cities that are now the ones experimenting with new policy.
“Cities are constantly crafting new ways to address challenges that are urgent, immediate, and often highly visible. Solutions that are concrete imaginative, and tested on the ground do not stay local for long. Instead, they are adapted to other cities’ situations, tailored to the different economic and social starting points and the fiscal conditions of different cities.”
A big piece of new localism is its non-partisan nature. Flood drainage, snow removal, and local zoning ordinances are not Republican or Democrat issues, they are local issues directly relating to the lives of citizens. This allows people who might otherwise disagree with each other to come together and cooperate to find solutions to the immediate problems of a locality. Focusing on local strengths, weaknesses, opportunities, and threats (SWOT) allows local stakeholders to develop long-term plans and to find innovations to novel problems. Once these solutions have been identified and implemented, city leaders, especially people in the business community, can share their insights and solutions with groups from other cities. These policy innovations diffuse horizontally from city or metropolitan region to other cities and metros. State governments are not the ones innovating. Cities are developing the new networks and innovations that diffuse across state lines, across the country, and even across national boarders. Each solution is adjusted and tailored where appropriate for local contexts and in line with local SWOT analysis. This local problem solving and horizontal city level diffusion is the best current answer to global challenges and problems and to improve the lives of people through new innovations.
A key aspect of new localism, as described by Bruce Katz and Jeremy Nowak in their book The New Localism, is cooperative governance. The national government and many state governments today are characterized and plagued by partisan gridlock, however local governments are able to function and get beyond gridlock through principles of new localism. Cogoverning is a term that the authors use to describe the new system of governance that is in action at city and metropolitan levels across the nation today, and that seems to be able to help communities thrive in a globalized world.
The authors write, “Cogoverning also helps explain why New Localism is nonpartisan. The regular engagement of business, civic, and academic leaders elevates pragmatic thinking and commonsense discourse and crowds out the inflammatory rhetoric associated with partisanship and ideology. This creates a healthy group psychology that rewards creative tinkering (the essence of problem solving) rather than obstructive action (the essence of partisanship). Localities, in other words, engender group innovation; legislatures reward groupthink.”
At a local level, our common interests are more clear. We can more clearly see that a rising tide in our city or metro will lift all boats, and we can get on board to make big advances. Having the leaders of businesses, civic groups, and academic research facilities coordinate together helps bring elements that might normally oppose each other and cause friction into alignment to GSD (get shit done). On a national level, we lose our common interest, and we revert to a form of tribalism where we look for the group that reflects our identity, and lose an ability to GSD as we become recalcitrant partisans, only favoring legislation if we gain without the possibility of a loss.
A key distinction at the local level between new localism and business-as-usual is that new localism brings together leaders from different arenas. It is not just a single business leader who dominates or a single industry that holds the loudest voice. Placemaking requires the input of people living in the place, and it requires that those with money and authority also work with those who can bring a civic perspective and cultivate local support for initiatives. By incorporating these voices and working together, business leaders can find new innovative solutions to problems that will actually be supported and aligned with the spirit and interests of the local community. Creative tinkering cannot be a top-down process that is guided by business and government agencies alone, it requires a bottom-up element that incorporates the desires and values of the local population. New localism incorporates this bottom-up element in a constructive way, by bringing the top leaders of organizations and groups together in structures and situations that demand decision-making and not just deliberation.
Bruce Katz and Jeremy Nowak’s third highlighted feature of New Localism in their book The New Localism is that it, “reflects a commitment to a new kind of problem solving that is distinct from the uniformity of policymaking.” American cities and metropolitan regions are leaders in innovation, diffusion, and development in the United States. The networks formed between university researchers, students, business and industry, government agencies, and local non/not-for-profits or charities help new research translate into real-world applications and eventually into new innovations. Crucially, this is not just true of new technological innovations. In medicine, material science, and communications technology we see new devices entering the market to change the ways we live, but outside these areas we are also seeing cities and metropolitan regions innovate thanks to dynamic networks and united stakeholders. New Localism is helping to drive new forms of governance, new forms of funding for local projects, and even new ways of engaging communities.
Katz and Nowak continue, “It adapts the risk-taking and attitude of individual entrepreneurs and investors to the collective sphere. It is experimental and tolerant of failure. It is the twenty-first century embodiment of Franklin Roosevelt’s words in his famous 1932 speech: It is common sense to take a method and try it. If it fails, admit it frankly, and try another, but by all means, try something.”
Government is frequently criticized for being slow and unresponsive. Rules and regulations take over, and creativity, customer service, and improvements seem to disappear. Without a profit motive, it is hard to see why governments should feel a pressure to move quickly and why they should feel a pressure to be highly responsive to the public. Free markets on the other hand (and especially tech start-ups), seem to operate on a model of, “move fast and break things.” They feel pressured to always up the design and innovate, although they also face a pressure to provide gimmicks and overstate their level of innovation and fast-breakiness. New Localism helps by finding a way to establish more of a common ground between these two extremes.
New forms of social and civic organization can help create quasi-governmental structures that provide the regulation and oversight necessary to protect citizens, but businesses can find profit and reward from working closely with those structures to innovate in a way that actually solves the local problem. Funding from associations and foundations help reduce the risk that government agencies would otherwise face, again providing a new avenue to help encourage innovation and development while avoiding typical roadblocks in a standard policy making process. These new ways to solve problems are a direct result of new networks and local action to address challenges in a cohesive manner.
I tend to be a bit hard on the idea of free markets. I grew up learning about the invisible hand and in a family that started a business and did well. I (mostly because of my family’s business) appreciated the idea that setting up a market and running a business was a good thing from the standpoint of finding an efficient point at which to price a product or service. Today however, perhaps as a result of my healthcare interests, I see numerous examples of markets falling short of the goal we establish in our minds based on the idea of the invisible hand.
Rather than seeing markets find an efficient point where competition drives efficiency and provides everyone with better products at better prices, I see too many externalities from free markets and unfettered competition. We are producing a lot of greenhouse gasses that harm life on the planet. CEOs are getting better (maybe deservedly so
) at capturing greater salaries from their companies, driving economic inequality, and straining social stability. Private health insurance markets seem to drive overall healthcare costs up at every turn, and no one seems to be able to understand how health insurance actually works. The free market, and open competition, does not appear to function as clearly and organize as succinctly as my simple understanding from high school would have suggested.
What is missing is something that ties markets and capitalism back into civil society. Bruce Katz and Jeremy Nowak, in their book The New Localism, suggest that shifting political power and decision making back to local contexts within cities and metropolitan regions can help correct these problems. They write, “New Localism is a mechanism for converting the self-organizing power of markets and civil society into structured fiscal and financial resources, and ultimately, political power.”
National and multinational sized corporations often have a responsibility to maximize profits for shareholders or top executives. Their huge scale means that any local or regional place is less important for them, since there are always markets in other countries and other states. However, when local governments exert more control over such companies, the local contexts begin to matter more. When CEOs and executives from these companies are invited in to help shape policy beginning at the local level, and are held accountable to the local individuals in the places where their markets are strong or where their employees actually live, the business motives that encourage negative externalities are shifted. The dynamic becomes one where civil responsibility is elevated, and ultimately political power is shifted in a way to help organize business in a more responsible manner in relation to the local context.
The lesson that Katz and Nowak share is that businesses on their own are encouraged to organize themselves in a way that maximizes profit at the expense of the local communities in which they operate. By giving localities more power and better networked governance structures, big businesses can instead be a cooperative part of the political and social structure, re-organizing themselves within society in a way that helps make Adam Smith’s invisible hand dream a little more plausible. The Invisible hand in this model is not so invisible, but more of a structured handshake creating a commitment to more than just profits.