Jonathan Gruber - Jump-Starting America: How Breakthrough Science Can Revive Economic Growth and the American Dream

I N 2017, A MAZONONE OF THE MOST PROMINENT TECH COMPANIES IN THE WORLD announced it intended to build a second headquarters-type operation somewhere in North America. Amazon stated that HQ2 would hire, over ten to fifteen years, as many as fifty thousand employees, with average annual total compensation over $100,000. The company launched a public competition and gave localities just six weeks to submit bids, a very short deadline. The response was impressive: 238 cities and regions threw their hats into the ring, representing forty-three states, Puerto Rico, and the District of Columbia.

These bids reportedly included generous inducements to Amazon, including billions of dollars in tax benefits, infrastructure improvements, real estate deals, and other inducements. There are obvious major risks involved in making expensive commitments to any firm in a fast-changing industry, as it is hard to know who will be a large successful employer in a decade. A major investment by a company like Amazon is also not an unmixed blessing; if it drives up real estate prices and rents while undermining local public finances, it can actually worsen outcomes for some residents.

Why are so many local political and business leaders desperate to attract this number of jobs when, supposedly, the American economy is

Unfortunately, these headline numbers are deeply misleading. People in many parts of the country feel they have beenor soon will beleft behind by the growing importance of technology in our economy. Millions of good jobs have been lost to automation in recent decades, particularly in manufacturing. Yes, the service sector has expanded, but too many of the new jobs pay low wages that make it difficult for families to survive, let alone prosper. The low official unemployment rate also hides the fact that many discouraged workers have given up entirely on looking for work and are therefore not included in the statistics.

As our economy recovered from the financial crisis of 2008, some places and some people forged ahead. But many more placesmeaning a large number of peoplefeel increasingly frustrated. This frustration felt by millions of Americans is legitimate and reflects the decades-long failure of policy, from both Democratic and Republican administrations, to create the conditions that foster sufficiently rapid and shared economic growth.

Disappointment with national-level policies naturally leads to local initiativessometimes with support across the political spectrumthat include trying to win Amazons HQ2. While these local efforts have positive dimensions, they can also lead to a race to the bottom that reduces local revenue and makes it harder to maintain public infrastructure, including schools. Americas communities are increasingly trapped between fear of missing out on the next generation of good jobs and undermining the essential public services that make them safe and attractive places to live.

It does not have to be this way. Our book is intended for everyone who is tired of the old rhetoric and willing to try something different. We aim to tap into todays local energy for sharing economic prosperity, by proposing an update and (we hope) an improvement on the national-level policies that promoted economic growth just a few decades ago.

The United States of America has always been defined by the notion of forward progress. For a long time, the engine that drove this technological and economic progress was simple: innovation, through which new ideas become commercial products.

American innovation led the way in the nineteenth century for railroads, steel, automobiles, electricity, and radio. In the twentieth century, as science advanced, the United States strengthened its technical leadership: atomic power, digital computers, jet planes, microelectronics, and satellites. From 1940 through to the 1970s, it is hard to think of any significant area of rapid technological change in which the United States did not play a formative role.

During the postWorld War II boom years, a broad cross section of Americans shared in the rewards that come with being first to market with new ideas. Across almost all groups and almost all locales, people experienced higher incomes, improved standards of living, better health, and more opportunities for their children. The United States became one of the most dynamic nations on earth, and to a substantial and unprecedented degree, much of the newly created wealth was shared around the country.

This American engine of progress and prosperity is now in serious trouble. Job-creating innovation has slowed, resulting in a stalled standard of living for the middle class. Rewards from the remaining advances have become increasingly concentrated in the hands of a small number of people living in a few big cities. What went wrong?

The private sector has always been, and will remain, key to American prosperity. However, the majorand now mostly forgottenlesson of the post-1945 period is that modern private enterprise proves much more effective when government provides strong underlying support for basic and applied science and for the commercialization of the resulting innovations.