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How to Rebuild America’s Economic Foundations

Unfortunately, the US is not making the best use of one of its biggest advantages, relative to its international competitors: a lot of smart people are dispersed, for historical reasons, across many cities. Any effective infrastructure strategy must reckon with the problem of coastal economic agglomeration.

WASHINGTON, DC – The modern American economy was shaped by four major infrastructure initiatives, each of which was too big for the private sector to take on alone: the continent-wide railroad network, the interstate highways, the air traffic control system, and the Internet. Early development of all of them was supported by the public sector, and each dramatically reduced the cost of transport and communications, making it easier, cheaper, and safer to move goods, people, and information.

With the potential for a major new infrastructure push on the horizon, one obvious priority is to rebuild and renew crumbling parts of the existing systems. But the United States can do even better, for productivity and job creation, by considering who and what needs to be better connected to the fast-moving scientific frontier. Historically, innovation has generated faster growth and good jobs. But America has lost its innovative edge in basic science – and with it many of the high-paying jobs that go with creating knowledge and turning it into goods that consumers want. The best way to regain that edge is to prioritize our public investments in a forward-looking manner, one that engages people and places across the US in the processes that generate new ideas and breakthrough products.

The central problem of America’s economic geography today is that a very high share of new opportunities is concentrated in a few large coastal metropolitan areas, particularly Boston, New York, Washington, DC, Seattle, San Francisco, and Los Angeles. These places are doing well in terms of creating new ventures and relatively well-paid jobs, but they are also extremely crowded, with high real-estate prices that continue to rise. Many talented people find it hard to break into these labor markets, and lower-income residents are increasingly being pushed out.