Town and Gown Technology and Economic Development

This writer was once a visiting scholar at the Public Policy Center at SRI International in Palo Alto California.  SRI was once the Stanford Research Institute and it was begun by some faculty at Stanford offering applied research and consulting to all sorts of organizations.  Over the years it evolved into a very involved research and consultancy organization with international reach, which explains its current name.

The Public Policy Center at SRI offered consulting services to local and regional governments.  It specialized in strategic planning around an economic development theme.  SRI believed that if communities partnered with their local universities and colleges they could identify industries that may be attracted to the area.  As an example, if a university had a great biological sciences program, then the city could identify an area of land close to the university where a pharmacological or biotech companies could locate.  The university graduates would be a ready source for employees and the faculty could partner for research opportunities.  

In 1985, the city of San Antonio developed a strategic plan in which it partnered with Austin to develop the area along the I-35 with high-tech industry.  It was successful.  Graduates from several University of Texas campuses help populate the area and develop new high-end communities in the area.  

The new businesses are from a class of industries called knowledge-based industries.   The people who work in these fields make a lot of money.  Salaries for database administrators, biotech researchers, systems designers and the like often have salaries in the comfortable six-figure income levels.  We created an educational elite.  The impact is that we have a new class of worker and the income distance between these workers and our traditional production worker is very significant.  Many people criticize the income distances between the financial people and the rest of us as the haves and have-nots.  In reality the knowledge-based worker needs to be included the “haves” category.   If one is a non-college graduate, or even a college grad in a non-STEM discipline, which includes science, technology, engineering and math, that person has a far less chance of achieving the income heights of a STEM graduate.

There are a number of conclusions that can be drawn from this effort to promote high-tech industry through governmental planning.  The first is that high-tech industry pays better than other industries on average. 

The second is more complicated.  In order to enjoy the benefits of high-tech industries, a community has to be within the area occupied by a high-tech university.  The more advanced and important the high-tech industry, the more the university is a research university, which narrows the areas that can enjoy the benefits of the new town and gown relationship.  The idea is that as new academic research produces new ideas for products, those faculty who develop them can move into businesses at a nearby university associated business park.  Most of these town and gown business relationships exist on the coasts, and in the case of key cities in select states such as Texas, Illinois, and others.  Clearly, rural areas and central cities rarely enjoy this new high-tech relationship between business and academic communities.

The third follows from the second.  Those people who work in these new industries tend to want to live in the new high-end gated communities with large homes, grass filled islands along highways and main streets, and new shopping centers anchored with Nordstrom and Saks Fifth Avenue stores.   Clearly, the rural areas and central cities of our daily life tend not to enjoy the wealth generated by these new town and gown relationships.

The forth is more of an insight than a conclusion.  It is that these new industries tend to group the responsibilities of development, engineering, and product definition and leadership in these new town and gown communities within the United States.  Production and support services tend to be in areas with lesser incomes, if here at all. 

The fifth follows from the forth.  Production of these new products is often shipped overseas.  Up until now, Apple has built all of its products in China.   It just announced that it is transferring production of the iPhone to India.   Many chips that empower our computers and communication devices are produced overseas. 

The sixth follows from the fifth.  Knowledge is fleeting.  Simply because a university and business develop an idea into a product doesn’t mean that they will always enjoy the fruits of their efforts without some type of intellectual protection.  There is something called technology capture.  Solar panels were the invention of creative people in the United States but China has become their largest manufacturer.  Simply developing an idea does not ensure one’s long-term success.

This is the basis of the new economy, the new growing economy. 

There are a few problems with this.  One is that the new economy is not the whole economy.  In fact, high-tech jobs do not even represent a majority of all jobs in the US workforce.  It is a growing sector and other, more traditional sectors, are decreasing.  One interesting fact is that though the US economy has grown over the last several years by only 2% annually, it can be divided into 5% for the top 20% of the country and zero percent for the remaining 80%.   The inference is that a small part of the of the country is growing and the rest is not.  This is not the formula for political stability.

It is important to note is that the high-technology sector along I-35 between Austin and San Antonio is only a few hours away from Cleburne and other poor communities along the State Highway 67 corridor.  A previous post cited the business and employment problems of poor communities such as Cleburne.  The success of the I-35 high-tech sector is geographically constrained, and economic problems close to but outside that area are not benefitting from the I-35 success.  That means that the people who live just outside the I-35 corridor are not sharing in its promise.  The hopes of the residents have gone unmet. 

The point is that the town and gown approach to transforming America’s workforce has its limitations.  Economic dislocations remain.  The economic benefits of town and gown effect the town and gown area itself.  Outside the area, say 30 to 45 minutes, there are displaced people with lives and hopes that remain unimproved.  In fact, they are worse off because the investment has gone to new industries, not to old.  The economic separation between the upper and lower levels of society is larger.  And not everyone can transfer into the new industries, a subject that will be discussed in the next post.    

So, there are places of significant poverty in the United States that are within a hour of some of the most successful high-tech communities populated with children whose parents cannot afford new houses and cars, and who definitely cannot afford the education that will transport their children an hour away to their regional town and gown.