Obama believes States and Cities need urgent help

I’m currently studying the city of Vallejo, California, because it is so far the biggest city of California (and I think in the USA) to have filed for bankrutcy so far. For my PhD I learn about the “do’s”, but I also have to learn about the “don’ts”, so the case of Vallejo it seems it’s a good one to look at some “don’ts”. But, it’s not only California, all across the USA, Europe and Japan, cities now are seriously struggling. Many has been said about the countries, but as Jane Jacobs and Robert Lucas clearly pointed out, the economic development and innovation does not come from the coutries, but more precisely, from the cities. So, in my opinion, we should pay more attention to the cities, even if the neo-classical economists and the different national media across the countries only look at the national level.
Unfortunately, we have had not to wait too long to start paying attention to the economy of the cities. They have been getting into trouble, and this last Friday, President Obama talking about the American cities expressed the urgency to focus on them: 

I am concerned … that the lingering economic damage left by the financial crisis we inherited has left a mounting employment crisis at the state and local level that could set back the pace of our economic recovery. Because this recession has been deeper and more painful than any in 70 years, our state and local governments face a vicious cycle. The lost jobs and foreclosed homes caused by this financial crisis have led to a dramatic decline in revenues that has provoked major cutbacks in critical services at the very time our Nation’s families need them most. Already this year, we have lost 84,000 jobs in state and local governments, a loss that was cushioned by the substantial assistance provided in the Recovery Act. And while state and local governments have already taken difficult steps to balance their budgets, if additional action is not taken hundreds of thousands of additional jobs could be lost. (….) Because the urgency is high—many school districts, cities and states are already being forced to make these layoffs,”

(Barack Obama, 12 June 2010)

Then according to the media he’s asking for $50 Billion in this emergency fund. Something that of course many policy makers can hardly support, not so much because of the 13 trillion debt the USA already has, but because it’s an election year and this looks a risky move. Obama in order to get the monies he continues, a) “I have called for a three year freeze in non-security discretionary spending”, b) put a “a fee on the largest Wall Street firms”, and c) put “agency incentives to identify ways to save money”.

For the first, I think that’s fantastic, although the main chunk of the discretionary budget is the military, so if this is not even discussed to be frozen then it does not go too far. In fact I think the US should not have a freeze but to reduce the whole thing. The question is, Does the American people prefer to keep having a huge military force or teachers in their towns and cities? The fact is that the majority of the people believe that education should be the priority, but the choice it’s not that easy, even if the US military budget sums more than the next 16 countries altogether. For the second measure, it seems that the majority of the people won’t have any problem on taxing the big ones in Wall Street. I mean, it’s like one of the wildest dreams of the middle and poor class. The third sounds like empty words, that I can not even say it is a good try.

Anyways, I don’t want to get into US politics. The main point here it’s not if they’re going to be able to do this, but to say that it seems that the US Government is realizing about the importance of the state and local level. From my view, this is very positive, even if it might be too late. They should have let bankrupt some companies, but cities can not and should not go bankrupt.

p.s. Having said that, I of course have to acknowledge that leading-Republican American guys really think Obama wants sincerely to destroy the nation, as well as the leading-Democrats though Bush wanted the same.

This is the first time that I write in Danish for this blog. But I have some parts that were going to be for a book that most probably I will not use.  This is a book on the Experience Economy in Denmark, it will be published this year in Danish. I’m grateful to Birthe Ømark to assist me with the translation. I hope that one or two Danes enjoy reading this.

Indledning
Byen Frederikshavn kan kort karakteriseres på følgende måde: Den er lille (færre end 25.000 indbyggere). Den ligger i et udkantsområde. Det er Danmarks nordligst beliggende kommune. Industrien er traditionel med skibsværfterne, som var de største arbejdspladser i byen i det 20. århundrede.

Lysfestivalen skal ses som et projekt, der er knyttet til begrebet oplevelsesøkonomi. Ikke kun fordi festivalen stræber efter at lave sjove og mindeværdige oplevelser for såvel byens indbyggere som for besøgende, men også fordi projektet er organiseret af folk, der iøvrigt også er dybt involveret i oplevelsesøkonomien. Der tænkes her især på flere lysproducenter, der er involveret i eksperimentel arkitektur, show-business firmaer samt folk, der underviser i oplevelsesbelysning.

Lysfestivalen kan siges at have dybe historiske rødder, idet mennesker i Norden traditionelt har et særligt forhold til lys. Således er mange festivaler og aktiviteter i de nordiske lande dedikeret til lys i dag. I Danmark kan man nævne ”Lysende Vejle”, ”Lys over Lolland” og ”Lyslydprojektet i Høje Tåstrup”. I en brandingsammenhæng anvendes begrebet Lysets Land om den nordlige del af Nordjylland, som Frederikshavn også tilhører. Dette kapitel beskriver, hvordan Lysfestivalen i Frederikshavn har udviklet sig siden 2004 fra at være en kulturfestival til at være et projekt, der er målrettet iværksætterdynamikken i en sektor i den lokale økonomi, som er baseret på belysningsindustrien. Projektet vil blive diskuteret ud fra et lokaludviklingsperspektiv med særligt fokus på den lokale iværksætterdynamik og den politik, som sigter mod at støtte iværksætteri.

(…)

For ti år siden skabte Pine og Gilmore begrebet ”oplevelsesøkonomi”. Forfatterne hævder, at verdensøkonomien har udviklet sig fra en agrarøkonomi over en industriel økonomi til en serviceøkonomi for endelig at gå over i oplevelsesøkonomien. Pine og Gilmore’s ide er, at produkter og derefter services førhen var vigtigst for befolkningen og økonomien, mens oplevelser nu er blevet langt vigtigere. De foreslår i bogen, at erhvervslivet skal fokusere på at tilbyde oplevelser, fordi denne strategi ”åbner muligheder for ekstraordinær økonomisk ekspansion” (Pine II & Gilmore, 1999). De var imidlertid ikke de første, der fremførte tanken om at tilbyde oplevelser. Tidligere har Alvin Toffler således beskrevet, hvordan ”oplevelsesindustrier” vil blive særdeles vigtige i ”fremtiden” (Toffler, 1970). I dagens Danmark er der forskellige opfattelser af, hvilke brancher der er mest knyttede til oplevelsesøkonomi. Nogle kilder peger på ca. 16 brancher, såsom interaktive medier, events, sport, attraktioner, osv. (Nielsén, 2005).

Pine og Gilmore har aldrig indsnævret Oplevelsesøkonomien til specifikke industrier. De dristede sig endda til at kommentere på feltet planlægning af oplevelser for borgerne. Det følgende eksempel er meget relevant for dette kapitel.

Begrebet oplevelsesøkonomi og lokal økonomisk udvikling gennem iværksætteri
Desuden ”iværksætterforetagender er ikke det samme som små virksomheder” (Hart, 2003), og iværksætteri er hverken synonymt med radikal innovation eller noget helt nyt. Danmark betragtes f.eks. som et innovativt land og samfund (Hansen, 1991) og (Gregersen et al., 2009), men alligevel er innovation mest relateret til trinvis innovation. Langt størstedelen (94 %) af de firmaer, der driver forretning i Danmark, tilbyder produkter og ydelser som er kopieret direkte, eller med små ændringer fra andre (Jensen et al., 2007).

(…)

På tværs af forskellige erhverv i den private sektor bruger mange iværksættere ideer, der er relateret til oplevelsesøkonomi. Også intraprenører i offentlige organer har fået en forståelse for, at borgerne kræver oplevelser og ikke kun basal service. Det betyder, at specielt i Danmarks tilfælde, hvor så mange projekter bliver iværksat af intraprenører, kunne man forvente et samarbejde mellem intraprenører fra den offentlige og private sektor for at skabe flere muligheder for lokal udvikling. Kapitlet illustrerer netop, hvor vigtigt dette samarbejde er blevet i Frederikshavn.

Benneworth (2004) skriver “iværksætteri i udkantsområder er kompliceret, tilfældigt og usikkert” og peger på, at mere forskning i iværksætteri er nødvendig for at forstå lokal økonomisk udvikling i udkantsområder. I den forbindelse skal stedet og dets historie tages  i betragtning. Det følgende afsnit betragter den kontekst, i hvilken den lokale iværksætterdynamik fungerer i forskellige situationer.

’Lock-in’ og måder at undslippe fastlåsheden på

Et berømt eksempel på ’lock-in’ på det teknologiske område er det, der handler om et tastatur. For tiden bruger vi et computertastatur, som har de første bogstaver i det øverste hjørne i rækkefølgen QWERTY. Dette design blev patenteret i USA i 1874. Baggrunden for dette layout var at undgå at de mest brugte bogstaver skulle støde sammen i skrivemaskinen. I dag, hvor vi bruger computere, kunne vi bruge andre tastaturer for at skrive hurtigere, f.eks. Dvorak tastaturer (Dansk Dvorak), men langt de fleste mennesker har lært at skrive i det gamle system, og alle tastaturer laves på den gamle manér. Derfor har vi en historisk betinget ’lock-in’ i QWERTY (David, 1985). Dette paradoks kan også forekomme i den økonomiske udvikling i byer og regioner.

(…)

Der er to problemer med studierne af innovation og læring. For det første, at mange af studierne ”beror på officielle data og derfor ofte mangler den nødvendige specificering og fokus for at kunne vurdere lokale læringsprocesser” (MacKinnon et al., 2002). For det andet, er det studier, der støtter læringsideerne ”baseret på empirisk evidens fra storbyer og bymæssige bebyggelser” (Fløysand & Jakobsen, 2008). Problemet er, at det ikke er oplagt, at storbyers erfaringer kan overføres til mindre byer, som er anderledes i såvel størrelse som råderum. Det er blevet vist, at læringsnetværk har eksisteret i de berømte italienske industrielle distrikter og allerede i 1970’erne i den private sektor i Norge og Danmark i form af erfaringsnetværk eller læringsfællesskaber (Rosenfeld, 2001).

(…)

Alt i alt er der forskellige strategier som en by som Frederikshavn kan vælge for at undgå lock-in. Talrige projekter er da også blevet gennemført, nogle af dem fortrinsvis rettet mod oplevelsesøkonomien, som f.eks. Lysfestivalen. Festivalens hovedstrategi er at forbedre udviklingen for det lokale erhvervsliv eller iværksætterdynamikken gennem lokale initiativer. For at kunne gøre det, og under hensyntagen til Frederikshavns kendetegn, synes ideen om midlertidig geografisk nærhed for at stimulere læringen blandt byens aktører at være passende. Det er derfor relevant at finde ud af, hvordan denne nærhed er organiseret, hvem der er involveret, hvor lang tid de samarbejder og hvad resultatet bliver.

(…)

Konklusioner
I alle vestlige lande er der mange byer, som befinder sig i en fastlåst situation (lock-in). Akademikere fra forskellige felter har forsøgt at dokumentere og foreslå måder til at slippe ud af denne fastlåshed eller lock-in situation. Desværre findes der ikke megen litteratur, der omfatter provinsbyer. Dette kapitel har fremlagt vidnesbyrd fra en lille by i et dansk udkantsområde.

Det påstås i dette kapitel, at byen har skabt en Lysfestival ved at benytte sig af oplevelsesøkonomien, specifikt i belysningssektoren. Projektet er ikke blot en festival, men har adskillige bestanddele, som har fremmet lokal læring, og i et bredere perspektiv kan det højne den lokale iværksætterkultur og økonomiske udvikling.

Referencer

  • Benneworth, P. 2004, “In what sense ‘regional development?’: entrepreneurship, underdevelopment and strong tradition in the periphery”, Entrepreneurship & Regional Development, vol. 16, no. 6, pp. 439-458.
  • David, P.A. 1985, “Clio and the Economics of QWERTY”, The American Economic Review, pp. 332-337.
  • Fløysand, A. & Jakobsen, S.E. 2008,”Searching for embeddedness of innovations in rural areas: a practice turn”, Conference Paper from Regional Studies Association: “Regions: The dilemmas of integration and competition?” 27-29 May 2008
  • Gregersen, B., Linde, L.T. & Rasmussen, J.G. 2009, “Linking between Danish universities and society”, Science and Public Policy, vol. 36, no. 2, pp. 151-156.
  • Hansen, N. 1991, “Factories in Danish fields: How high-wage, flexible production has succeeded in peripheral Jutland”, International Regional Science Review, vol. 14, no. 2, pp. 109.
  • Hart, D.M. 2003, The emergence of entrepreneurship policy: governance, start-ups, and growth in the US knowledge economy, Cambridge University Press.
  • Jensen, M.B., Johnson, B., Lorenz, E. & Lundvall, B.Å. 2007, “Forms of knowledge and modes of innovation”, Research Policy, vol. 36, no. 5, pp. 680-693.
  • MacKinnon, D., Cumbers, A. & Chapman, K. 2002, “Learning, innovation and regional development: a critical appraisal of recent debates”, Progress in Human Geography, vol. 26, no. 3, pp. 293.
  • Rosenfeld, S. 2001, “Networks and clusters: The yin and yang of rural development”, Exploring Policy Options for a New Rural America, pp. 103-120.
  • Tofler, A. 1970, “Future shock”, London: The Bodey Head Ltd.
  • Nielsén, T. 2005, Kultur- og Oplevelsesøkonomien i Region Nordjylland, Aalborg Samarbejdet.

Picture used by GABA, the organizors of the conference

On Wednesday and Thursday I went to the “Building Innovation Bridges between Silicon Valley and Europe” Conference. It was very nice to meet all these European people here in the Bay Area. I liked the first day meeting in Google headquarters (these are actually several buildings, it reminded me a little bit the one of Intel). It was very stimulating listening to Alberto Savoia, Director of Engineering at Google and the extreme innovation concept. Among other things, I think it’s a fantastic idea what Google does with their employees and the 20% rule, in which they can work in whatever project they have created on aprox. 1/5 of his time. It’s just a great example to encourage intrapreneurship, and being successful.

On the next day there were several panels. They were very knowledgeable, however I would have to say that I was not very satisfied with the couple of questions I did. I have to say though, that I’m now more interested on policy making than business strategies, so here my bias. The first question was to a one to a panel of 5 experts in Venture Capital and Business Angels, was “How can we improve the ‘ecosystem’ (the always use this word here) the European cities in order to have investors invest in our own young people, such as young engineers who would like to start a business?” They dodged the question, I think basically because they don’t care about European cities. The only thing they basically answered was something like “send your kids here, pay us, and we will teach them how to innovate”. Somewhat egocentric.

My second question was directed to a panel of representatives of of several European organizations, the majority subsidized by the national governments (Denmark, Ireland, Germany, Finland, Italy, and others in the room present, Estonia, France, the Netherlands, UK, Czech Republic, etc.). My question was something like: “The majority of your organizations are specialized in bringing European entrepreneurs to the Silicon Valley… (some nod their head). We talk about bridges, and that bridges are for traffic in both directions. In a previous panel a successful European entrepreneur here said that in 20 years, never a politician or any organization has asked to come back. He said he would really think about it if being asked. China, who has been mentioned here several times about being a strong competitor, has a strong policy of sending people abroad and really building bridges with their people, so they can give/come back. Does any of you, or do you know about any organization who assists entrepreneurs to bring back to Europe?”. They avoid the question, and basically it was “no”. Which I found somewhat disturbing.

Everyone wants to be wanted. I think that this is something we’re missing. There is an amazing knowledge overseas, who could really help back at home, but they’re completely forgotten. To put an example, more than a century ago when they wanted to electrify the country, they did not know how to do it. Then they made efforts to recruit Scandinavians who had worked in the U.S. cities setting up the electric grid. They came back and helped in a crucial sector. (Jensen, Johnson, Lorenz & Lundvall, 2007. “Forms of Knowledge, Modes of Innovation and Innovation Systems”, Research Policy. Vol. 36 ( 5), 680-693.). People felt wanted. I know this also from me personal experience. My father he’s originally from Ecuador. He has always dreamed of going back there since he left in the 1970’s. He would be the most happy man in the world if his home country would ask him to do something. In fact in one occasion they asked them to do something and he really devoted his heart to do it.

I think there is a lot of potential in that strategy. Reinhard Bütikofer, a politician from the EU Parliament, he picked the idea and suggested some stuff in that line. Like inviting some successful expats entrepreneurs in America, to come back to Europe to give some presentations to EU entrepreneurs.

All in all, it was a good conference. GABA is very nice organization and I wish them the best. But we should be careful, as an American guy told me, to do not “drink the kool-aid” that many here in Silicon Valley are trying to sell. We need to take an effort to learn from these amazing firms, but also keep in mind that, innovation is NOT only high-tech.

Now I have to write a lot of people, I got plenty of cards after asking the questions.

Before I start some qualitative research in the area I have to study the background. I always like to pay special attention to history. In the outstanding libraries here I have found some very interesting material, some of them quite old. I have a pearl to share.

This is from “The prospects of Vallejo; or, Evidences that Vallejo will become a great city. A re-publication of a series of articles first printed in the Vallejo evening chronicle, from March to July 1871.”  It came with a nice map, and when they gave it to me, the librarian told me: “careful, the map is falling apart”.

To put in context, the leaders of Vallejo at the time, were explaining the reasons why Vallejo was going to become a big metropolis, probably among the top 3 cities in California (being at that time the city of San Francisco their main competitor, which even though it had the 25% of the State population and the 50% of its wealth, it seemed to show some weaknesses related to economic geography issues). The articles are actually really good. In such a fashion that I think anyone could be convinced. The main reason they argue was that the train arrived to the city (direct connection from East Coast to West Coast), and that their harbour was starting to take off. During the various articles they mix the best skills of real estate, politicians, academics and marketing fellows.  Their main point was to attract capital for their harbour. Probably these guys had all the investments in their life there.

The interesting thing is the different language. Something that now would not look politically correct. Their thesis all across the articles is: 1) “the intelligent men” look for the most profitable places for their enterprises, 2) They go where they are, and 3) That’s what creates economic development (me paraphrasing).

In the following snippet, (that I think I’m the first to transcribe on the internet) they quote the magnate Horace Greeley, and then they present a rebuttal:

Horace Greeley on San Francisco

At a dinner given in New York on the 13th of October, 1869, to an excursion party of the California Pioneers, Horace Greeley having been called on to respond to the toast of “New York and California,” in the course of his remarks said:

When we speak of the present or the expected greatness of these two remarkable cities, New York and San Francisco, I bet that it will ever be remembered that great cities are the expression of great ideas that they grow out of genius men. Alexander gave his name to the city he formed, and that city bears his name and is memorable to this day. Rome is mighty because of the Senate and people that made her high and proud position – made her the Eternal City; eternal because the genius that created her still lingers over her hills, still is reflected in the sunshine that gleams on her palaces; and thus the shadows of ancient greatness recall to our minds memories and associations that make us nobler that we otherwise would be [Applause.]   If these two cities are to be great, they will be great because of the men who have still the genius to preserve and extend the advantages they have won. Had there been no De Witt Clinton, and had there been no Erie Canal, in vain would have been the central position and commercial advantages of this city. She was not the first city of America until her great men gave artificial extension and development to those advantages, and thereby fixed on her, I think, for centuries, certainly for the present age, the honored advantages of being the emporium of the Western World. If she is to maintain this position, she will do it because she will do it because she will have great men continually able to keep her in advance. As she has seized the canal, telegraph and railroad, and pressed them into her service, so she must be ready, as new inventions are presented, to seize them and turn them to her advantage. As it is with New York so will it be with San Francisco. Les us not believe that because this city has quadrupled in population in the last half century that it is in the order of things and must continue. She will maintain her position, for her great men have the power to plan new enterprises, and her great financiers shall second those efforts, and continue to keep her at the head of the commercial world. So with San Francisco. The great railroad recently achieved would never have been if there had not been men in that city who saw capacities and perceived opportunities and possibilities which the multitude did not see.

Mr. Greeley is wrong in supposing that the construction of the railroad is due to San Francisco; he is wrong in supposing that the danger to which that city is exposed (he refers to it, evidently, though he does not mention it,) could be averted by the genius of the business men; and he is wrong again in assuming that genius makes cities. It is the good site that attracts and rewards genius, and stimulates enterprise.

Last week I went to a presentation of a book. This was done by my academic supervisor, Birgitte Gregersen, who is one of the authors. The book is JUST published. It’s only in Danish and the original title is: ”Ny energi og innovation i Danmark”. Honestly I have not much idea about energy issues, well, at least compared with many of my close friends who are doing their PhD’s in Energy (in engineering, planning and economics).

I will post some of the policy proposals they suggest for the case of Denmark. The reason why I’m doing it is because I always find very interesting the policy proposals, no matter in what field. It’s always nice to discuss it. And honestly I admire the reports, articles and books, that dare to give policy proposals. I find more interesting these ones, that the ones who are purely descriptive. One of the teachers I had in a Phd class, Andrea Fernandez Ribas, said that the ones who don’t give policy proposals do not really contribute for the society (or something like that).

Here are the policy proposals about how to improve the energy industry in Denmark. Something that probably any country can learn from. Again, I insist, I do not know too much about energy. So here I’m trying to repeat things, like a parrot. This is from the notes I took at the presentation.

1)    Strength Danish framework: collaboration among Danish firms and institutions (I guess this follows the ideas of the theories on National Systems of Innovation)
2)    Policy should be different for each technology (solar, wind, fuel cell, etc.)
3)    Continue strength Public-Private Partnerships
4)    On public money: More transparency (for example clearly show in websites the budgets, etc.). Avoid stop-go policy, that is ensure long term plans, to avoid momentum because of different policy makers in power. Also merge similar support schemes. If there are going to be changes, early warning, avoid surprises.
5)    Stimulate demand for renewable energies. R&D is not enough. (This can be done not only with subsidies, but taxing the use of other energies)
6)    More public innovation procurement as a direct policy. For example for new buildings and renovation of them.
7)    Better coordination of the energy and innovation policy
8)    Strength systematic experiences and learning process. For example, teaching energy efficiency in technical schools.

A couple of weeks ago I got via Google Alerts (Fox News), the release of the 2009 declaration of Pine and Gilmore. It’s actually Gilmore and Pine, but one has been used to refer to them as in the former form.

It has the date of July 4, and it has the apperance of the U.S. Declaration.

It has the date of 4th of July, and it has the apperance of the U.S. Declaration of Independence.

This declaration, can be found here at the website of their consulting company: http://www.strategichorizons.com/thinkaboutinvites/2009/EconomicSense.pdf 

I think this was done with the purpose of celebrate the 10 year anniversary of the book “The Experience Economy” and especifically to promote the conference they’re organizing in Philadelphia, next month. If it weren’t 2500USD$ to register I would not mind to cross the Atlantic.

The basic idea in this declaration is that we’re in this economic crisis because businesses (and the private) have not really focused on offering experiences. Then they came up with very good perpectives for the private sector. I have to say that I always enjoy reading these guys. They’re really innovative and they come up with cool things.

Unfortunately, as good conservative Americans, I think they have been too influenced in the current political debate. In the last paragraphs they condemn goverment support to healthcare and higher education. I still don’t understand this part of the declaration. I guess is my European perspective. They say that public support to education and healthcare hinder The Experience Economy, but they don’t say anything about other public spending in endless wars, bail outs to corporations, or evasion to tax havens. Maybe they’re right, but I think this is a debate they should not have got into. Maybe it’s me who I should not get into this debate…

From the U.S. we have some numbers and various interpretations.

reported unemployment figures for every month since begining of recesssion

reported unemployment figures for every month since begining of recesssion


National Public Radio | July 5 2009:
Is The Worst Over? Most Economists Say Yes

Nouriel Roubini | Jul 2, 2009
U.S. Job Report Suggests that Green Shoots are Mostly Yellow Weeds
“The June employment report suggests that the alleged ‘green shoots’ are mostly yellow weeds that may eventually turn into brown manure…”
(I read this quote and I started laughing)

Anyways as I mentioned, and the same Paul Samuelson (Nobel Prize in Economics and key figure in neoclassical economics) admitted last year: “What we know about the global financial crisis is that we don’t know very much.”