Wednesday, November 28, 2012

Book Review. The New Geography of Jobs.

If you take the Amtrak train from Philadelphia to New York City and look left when crossing the Delaware River, you'll see the famous sign "Trenton Makes, The World Takes" plastered across the neighboring bridge, the Lower Trenton.  If ever there was a marker to indicate where you are on the Northeast Corridor, this is it.

Unfortunately the sign, originally installed in 1935, refers to an American world that no longer exists.  Things are no longer "Made in U.S.A." and shipped to a waiting and appreciative world, at least not in the quantity they used to be. American manufacturing has been on the decline for decades and with this decline has come a retreat in economic leadership and global political influence, leaving this country searching for a new macro-economic identity grounded in the new economic realities.  America wants to find its niche in this globalized world - what can it still do uniquely, something that can't be captured or successfully imitated by other competitor nations or interests?  

New paths are emerging for the American economy and they are promising.  They emphasize innovation, creativity and broad imagination. In other words, they focus on the human mind in all its capacities. This is an exciting turn of events.  At the same time, these new paths carry with them all the warning signs of an economy that is dividing this nation sharply.  Economic transformation almost always brings social transformation with it, and in this upcoming century the "haves" will be able to accumulate plenty but the "have nots" are likely to lose even more. The challenge for millions of Americans is how to be carried by the upside of the change, and not to be trapped under the downside of it.    

Furthermore, this division has great implications for urban America with some cities coming out as big winners, and others being left behind.  Main Street in Cambridge, Massachusetts tells this story very well. Bordering MIT and once the home of the heavy industries that supported Cambridge from the 19th century well into the 20th, Main Street collapsed into disuse, disrepair and abandonment  in the 1970s as the industrial base withered away.  In the last 20 years however it has been reborn into an amalgam of 21st century American urbanity.  Gleaming with glass and steel, the street's new structures are like a display case of urban American prosperity on steroids. Construction now booms all around the MIT campus and the proximity is no accident. 

Proximity is seen as key to the long-term success of any venture.  The investors backing these efforts want to be near the knowledge factory known as the Institute.  It is not random chance that with MIT in the mix the city's coffers are flush with cash.  MIT has sought to blur the line between its campus and the outside world, hoping to foster this world of innovation. They seem to be succeeding. 

What is true in Cambridge is also true in San Francisco and in Brooklyn but not true in Flint, Michigan or Bakersfield, California.  Why is this and what does it mean?  The cities of the Rust Belt have yet to write any chapters about rebirth.    More problematic, today's winners are likely to be tomorrow's too as the competition for the young, talented creative labor force intensifies.  Path dependency is what economists call it, and it means that where you come from is where you're headed, which is another way of saying that history matters. 

Making sense of this new world is of critical importance as job growth, economic vitality and income security consume the national debate. Elected officials at all levels, but particularly at the local level, have ample reason to pay attention, as do business and labor leaders along with young people heading off to college, and those who aren't.  Berkeley economist Enrico Moretti has taken on this challenge in his new book, The New Geography of Jobs, and the story he tells is profound.

Moretti has done a good deed by sitting down to write.  He's clear and concise.  He has tackled these vexing questions from many angles - the decline in American manufacturing; the phenomenon of path dependency that he calls The Great Divergence; the reason why people choose to live where they live.  He has writer's knack for pulling out the illustrative detail while never losing the broad sweep of events.  It is truly a skill to be equally at home in the abstract realm of statistics and the very emotion-laden world of human decision-making. Most economists forget that the conclusions they draw from their sample populations also contain the drama of people's actual lives within them.   Moretti remembers this while avoiding another trap of economists.   He doesn't leave his story in the realm of the theoretical, but constantly brings his tale back to real-world existence in a way that amplifies the argument by making it coincide with everyday experience.  Most importantly, he knows his subject well and he's talking about something that is shaping our future more than we realize.