WASHINGTON, DC – In many countries, innovation and good jobs have become increasingly concentrated in a few places. Some big cities have done well, but many regions feel left behind. In the United States, the United Kingdom, many countries in Europe and, increasingly, elsewhere in the world, how to address these disparities has become a crucial question.
At least since the 2008 global financial crisis, widespread frustration over stagnant economic prospects has fueled increasingly dangerous forms of anger in developed countries. All too often, this has led to self-defeating economic policies such as Brexit or Donald Trump’s promise to detain and deport all unauthorized immigrants — a move that would immediately reduce the American workforce by about 5% and likely cause a similar contraction of the broader U.S. economy.
But there is a much better way forward, as demonstrated by the CHIPS and Science Act of 2022, which overcame the U.S. Senate’s filibuster rule (the de facto requirement of a three-fifths majority for all legislation) and passed by a vote of 64 to 33 (including 17 Republicans). The act authorized a boost to federal support for research and science, with the goal of supporting advances across a broad range of sectors. Crucially, it also proposed distributing this support across the country, with the goal of creating next-generation technology hubs.
Innovation often involves technological advances, and in the past century the most important ones—such as radar, microelectronics, satellites, the Internet, and biotechnology—have had profound effects on the entire economy. But as Jonathan Gruber and I explain in our 2019 book, Jump-Starting America Precisely because the impact is so widespread, the full benefits (including the far-reaching and often unintended indirect effects) do not flow to any individual company or investor.
Moreover, the exact financial return on transformative advances is always difficult to quantify. As a result, venture capitalists and established corporations prefer to avoid the risks inherent in basic science, early applications, and scaling up into markets of unknown size.
In many countries, innovation and good jobs have become increasingly concentrated in a few places. Photo: Pixabay.
Today, for example, the potentially decisive importance of quantum computing is not disputed, but the US private sector’s hesitation to invest represents a major constraint, creating a significant risk that other geopolitical actors will move away from America’s current advantages. Or consider biomanufacturing (using biological materials to make all kinds of products), the basics of which are firmly established. Here, too, the private sector is unwilling to support scale-up. And in the case of advanced manufacturing (which generally denotes digital forms of machine control, applied in many industrial processes), small and medium-sized businesses are having a hard time finding and adopting domestic versions of what they will need next.
The United States, Britain, France, and many other European countries urgently need to make strategic investments in key technologies to create more quality jobs and stay ahead of increasingly aggressive geopolitical competitors. It is true that if other countries rush to invent the future, that increases the pressure on any country to act quickly, but overall this is a good thing, particularly in terms of job creation. As long as we invent useful things (not socially harmful goods like tobacco, junk food, and digital advertising), increased competition to invent is likely to trigger a race to the top.
During the implementation phase of the CHIPS and Science Act, the U.S. Economic Development Administration designated 31 technology hubs in 32 states and Puerto Rico. In early July, the EDA announced $504 million in funding for 12 regional technology and innovation centers, “to accelerate the growth of innovative industries.”
Will all of these hubs succeed? Perhaps not: after all, pursuing genuine innovation involves real risks. And funding so far is almost certainly not sufficient to have a significant impact. But the great news is that almost every part of the country wants in on the action: only four states failed to at least secure a grant for strategy development.
As Senator Maria Cantwell of Washington, chair of the Senate Committee on Commerce, Science, and Transportation, put it regarding the CHIPS and Science Act:
“We don’t know exactly what innovations will come out of this, but we do know this: America will be more competitive because of this. And… we will be able to grow our economy for the future, thanks to the investments we have made today.”
If we want to create more quality jobs, we need to invest in science, make it easier to commercialize the technology that comes from it, and make it easier for people to start companies where the product was invented. More funding and more strategic thinking are needed, in part because there will always be new technologies on the horizon. But the CHIPS and Science Act was a major constructive step forward, and other countries should take note.
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