For the last quarter century there has been a growing tendency among policy makers and corporate executives to downplay, and even ignore, the primary importance of the ‘real,’ or tangible, economy. It is now widely believed that the primary engine of wealth creation is the manipulation of symbols and images — ‘the new economy’ of the ‘information/creative age’ — as opposed to the manufacture of tangible products and services.
This paper challenges these assumptions. Our research in Europe, Asia, Australia and North America suggests that rapid economic and income growth tends to occur most steadily in areas where tangible production has been readily encouraged. Although the successful strategy varies by region and country, the basic fundamentals to propel growth lie in policies that stress the construction of essential physical infrastructure, investments in basic and skill-oriented education, and favorable tax and regulatory policies.
Increasingly, this also includes the building of what we refer to as ‘infrasystems’, also called regional innovation systems. These are policies that encourage innovation and cross-firm transactions through the development of interlocking regional institutions, such as schools and governments that work closely with local industries. These infrasystems investments represent the cutting edge of progressive economic policies that encourage wealth creation and broad based opportunities for a wide variety of citizens.
We believe that this ‘back to basics’ approach is particularly applicable during the current global financial crisis. Attempts to ‘create’ wealth through financial manipulation and the hyping of cultural attributes have done very little except create short-lived economic bubbles on the local, national and, most ominously, global levels. The time for a reassessment, and a return to the basic principles of wealth creation, clearly has arrived.
See attached .pdf file for full report.
Primary Authors: Joel Kotkin, Delore Zimmerman
Research Team: Mark Schill, Matthew Leiphon, Andy Sywak
Editor: Zina Klapper