The Real American Economic Debate

The media debate regarding the American economy continues to be dominated by the flatulence of whether the Federal Reserve should raise interest rates or not and should maintain “quantitative easing” or not.

The real action is thus occurring at the state and local level, which has been one of my themes for many years. Because a trend is defined by three events, in the journalistic mind at least, consider these three news items:

BUFFALO, NY: The New York Times reports today that New York Gov. Andrew Cuomo is putting up $750 million to lure a solar panel factory to Buffalo. It is billed as the largest economic development effort he has undertaken. The company he is luring in is Elon Musk’s SolarCity. This comes after his administration has sought to turn Albany into a center of nanotechnology and semiconductors.

RENO, NV: The state of Nevada has done much the same with another one of Musk’s companies, namely Tesla Motors. The Reno region hopes to turn Tesla’s new battery factory into the heart of a new lithium ion battery hotspot, or cluster. The Wall Street Journal put that story on its front page on Saturday.

BOSTON, MA: And Bloomberg BusinessWeek reports that the state of Massachusetts’ big bet on biotechnology is paying off. The state decided in 2008 to put up $5 million to support something called LabCentral, an incubator for biotech start-ups. Last year, the occupants of LabCentral raised $201 million in seed capital, more than the entire Swiss life-science and biotech industries.

So the real debate that should be dominating our airwaves is what are the right ways and the wrong ways to create new industries, new jobs and new wealth? It’s not necessarily crazy to put up $750 million to lure in a solar panel plant IF other measures are put into place to make sure that the plant jumpstarts a solar energy cluster of companies and researchers. What is the right balance between government, universities and the private sector in creating new industries? What are the lessons from where it has worked? The hell with whether the Fed raises interest rates by a quarter of a percent.

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