Sadly we didn’t get out of bed quick enough to buy the paper, but the moment lives forever on their website.
The picture was originally used to illustrate ‘A Hidden Geography’, written in the Bay Area in late 2009.
Sadly we didn’t get out of bed quick enough to buy the paper, but the moment lives forever on their website.
The picture was originally used to illustrate ‘A Hidden Geography’, written in the Bay Area in late 2009.
I’ve just finished Enrico Moretti’s terrific new book, The New Geography of Jobs. Moretti is an annoyingly young and brilliant economist at UC Berkeley who made his name with seminal papers on agglomeration, knowledge spillovers and multiplier effects. He’s now following Ed Glaeser and Paul Krugman out of the seminar room into the mainstream.
Moretti’s argument is in three parts. First, globalisation has made the knowledge economy increasingly important as a source of productivity and wealth in countries like the US (and the UK). Each ‘innovation economy’ job supports five others, two in other professions and three in local services.
Second, these big shifts have very uneven impacts. Cities concentrate economic activity. Places’ initial advantages matter. People’s ability and willingness to move is limited. So social and spatial disparities tend to grow – even though higher living costs in richer cities partly cancel out higher wages.
Third, our policy responses need to change. Unlike Glaeser, Moretti likes some area-based initiatives. But he also pushes strongly for public science, better public education and raising high-skill immigration.
So far, so familiar – see Glaeser’s The Triumph of the City, or Richard Florida’s The Great Reset. But Moretti arguing that it’s precisely these long term trends and their implications that need to be deeply understood. (Meanwhile, Glaeser gets one mention in the index – the same as Marlene Dietrich – and Florida gets a discreet knife in the ribs in Chapter 5.)
The book also has great range. Moretti combines serious urban economics and economic geography with a number of excursions – on the historical origins of Hollywood, Berlin and culture-led regeneration, the dynamics of shared workspaces, cleantech investment, gentrification and ethnic inventors. In many pop academic books these passages feel bolted on – a break from the high-level narrative. In this case they’re actually doing some intellectual work.
One of the richest passages comes early on. In the most successful cities, Moretti suggests, the innovation economy is supporting the return of urban manufacturing. He visits the site of the old Levi’s factory in San Francisco to find ‘dozens of workshops offering hand-crafted products’ – such as bespoke clothing line Cut Loose and the DODOCase iPad case factory.
Across town on Pier 17, Tcho has taken over an old warehouse and converted it into a craft chocolate factory, importing vintage German machinery and high-tech computerised gear. (The chocolate is absolutely amazing.) In London, S.E.H. Kelly (limited-run menswear), The Kernel (craft beer) and Berg’s Little Printer are riding the same wave.
The growth of high-end manufacturing in cities seems rich with possibilities. But Moretti convincingly shows that it’s fundamentally a niche phenomenon. First, this kind of manufacturing is essentially the result of wealth created elsewhere in the city. Although these firms can trade globally, their key market remains local – in that sense, they’re a form of high-end local service.
Second, an important part of these products’ appeal is that they’re unusual, or unique. Both the thing – and the experience of buying it – are positional goods. That business model then allows firms to cover high manufacturing costs. Scaling up would involve either jacking up prices even higher, or moving production to lower-cost locations – precisely what such firms are reacting against.
The most extreme example of this is also the best known. American Apparel gear sells precisely because it’s made in LA (and because of its softcore ads, of course). If Moretti is right, it literally couldn’t be made anywhere else.
A more profound transformation, which the book doesn’t touch on, is the emergence of small-scale digital manufacturing. With 3D printers，economies of scale matter much less: there’s no need to retool a production line, and almost infinite customisation should be possible. The technology is already good enough to make specialised car parts, and some nice art objects.
Micro-manufacturing is deeply disruptive – especially when combined with zero-cost marketing and sales online. Craft manufacturers will adopt it. But it’ll be the technology, as much as the brand positioning, that’s doing the hard work.
A quick debrief from last night’s Liquid City debate, ably put together by Future Human. I was on the panel, alongside Eric van der Kleij from Tech City UK and Andrew Carter of Centre for Cities. It was a really helpful session for me, with a super-engaged audience full of good ideas and sharp questions.
Unvarnished notes follow.
‘Tech City’ is nice shorthand for London’s rapidly-growing tech scene, especially its nexus around Old St. What can policymakers do to help it along, if anything?
Eric set out his four main tasks:
1 / Stop Government messing things up
2 / Help big firms to come
3 / Help small firms to grow, e.g. through access to finance
4 / Promote ‘talent’.
Still quite vague, but the focus on micropolicies is wise. International evidence gives no clear steer on what Government’s role, and standard cluster policies have a very patchy record. Rather than just ‘building Silicon Valley in the UK’, strategy needs a distinctive London flavour.
The Olympic Park
It’s still not clear to me how the Olympic Park fits in – except as a big space nearby that will need filling post-Games. Officials hope that tech firms priced out of Silicon Roundabout might come to the Park. This feels optimistic , and rather goes against the intention not to masterplan the cluster.
More promising is the idea that the Park can morph into a campus for big firms like Cisco. Siemens have announced something similar in the nearby Royal Docks.
Big firms, small firms
What might global firms like Google and Facebook might do for, or to, Shoreditch? Eric was clear that big firms should be ‘good neighbours’, citing Google’s upcoming hub and Cisco offer of free telepresence as examples. Ministers are ‘encouraging’ them to set up R&D facilities here, but of course can make no promises. Someone suggested using Section 106 agreements to leverage, say, incubators, as a condition of setting up shop here – an idea worth looking at.
The room was divided about the competitive threat posed by big arrivals. A few people worried about small firms being ‘eaten’ by bigger ones. But for most companies in the Bay Area, being bought by Facebook is a dream outcome. More important is that the local ecosystem keeps producing new firms and new ideas. Which brings me to …
As Silicon Roundabout gets more popular, it will get pricier, and some firms will get pushed out. This is part of the neighbourhood change cycle. For small companies it’s of course disruptive, though London is big enough to allow new hot neighbourhoods to form. Policy can help by providing some cheap space, and avoiding any needless property shakeups. The area’s ‘soft infrastructure’ – cafes, bars and public spaces – also helps people get their creative work done. Keeping the feel is as important as keeping physical space available.
The UK needs to change its attitude to business failure, and develop a more positive view of serial entrepreneurship. This is partly a legal issue – bankruptcy rules in California are more relaxed than here. It’s partly attitudinal – US VCs actively look for entrepreneurs who’ve tried out a few ideas and learnt from their mistakes.
More broadly, we need to remember that Tech City is a long game. A lot of the innovation hotspots mentioned – in the US, Finland and Israel, for example – took decades to mature.
We can accelerate innovation by helping smart people cluster together. But current immigration policy will hurt London’s ability to keep international talent. The Entrepreneur Visa, which requires £50k of backup funding per application, isn’t terribly helpful. Equally, London needs to get better at growing its own skilled people – improving education and training systems, and opening up routes into the industry are both forward priorities.
London’s cultural diversity is a big plus. My research (here and here) suggests that diversity helps push up innovation. However, Silicon Valley’s heavy dependence on international migrants is a cautionary tale – diversity has done a lot for the Valley, but firms are often at the mercy of DC immigration politics.
‘The first rule of Tech City is, you don’t talk about Tech City,’ someone says. We’re sat in a conference discussing the Coalition’s plans to turn East London into Silicon Valley. Others around me nod their heads. ‘What we’ve got here already is great,’ says someone else. ‘My message to Government is: don’t fuck it up.’
The Tech City proposals still feel like ideas without a strategy. Government wants to support the nascent tech cluster around East London’s Old Street; bring in big investors like Facebook and Twitter; and develop the post-2012 Olympic Park into a high-tech hub.
It’s not hard to see tensions (see above, from one of the breakout sessions). Will big arrivals threaten existing firms? Could start-ups be pushed out by rising rents? How far will East Londoners benefit? And what’s in it for the rest of the UK?
So far, Ministers have mixed hands-on optimism and hands-off caution. ‘This is our attempt to generate Silicon Valley in the UK’, announced one at the event. ‘We seem to have a cluster on our hands,’ said another. ‘Do we need to do anything about it?’
Here are some evidence-based thoughts that I hope will help.
In theory there’s no need for cluster policies: firms should sort across space to optimal locations. In practice this often doesn’t happen. Because of agglomeration economies, co-locating firms raises their productivity – which raises urban wages. So cities can benefit if we push firms together.
Some sectors are far more location-sensitive than others, though. So a tech city strategy needs to start with the firms we’re interested in, then configure urban space accordingly. First tech, then city.
BIS already has a shopping list from the tech industry – better access to finance, improving intellectual property regimes, improving workforce skills, easing immigration caps, cheaper rents and widening the open data initiative. Not all of these merit intervention, although some do (more below).
The technology industry also tends to cluster locally. Yet firms’ markets and supplier relationships are often global, and important functions (like customer services) are often offshored.
So how does the city fit in? London’s tech businesses are largely service-sector, and benefit from the matching, sharing and learning economies that big cities offer.
These effects kick in at different scales. At city level, London offers economic diversity, access to skills, finance and world markets. At neighbourhood level, East London offers soft infrastructure – the cheap spaces, bars and coffee shops where a lot of creative work actually gets done.
We need to be realistic about growing our own Silicon Valley. As I’ve said before, the Valley is a city-region, over 1300 square miles across – more than twice the size of Greater London. It also emerged over decades – Tech City has barely begun.
I think this leaves six big challenges for London.
First, what is London’s USP in the global tech field? New York City might be a better comparator than Silicon Valley. Like NY, London’s tech scene is cross-pollinated by the wider creative economy.
Second, how much strategy do we need? The wider role for government isn’t clear from international experience. In the Bay Area government did little, except spend large amounts on defence-orientated research. But Bavaria’s leaders took the opposite approach, developing a cluster through political leadership, public spending and public research agencies like the Fraunhofer Institutes.
Third, finance. Both the Bay Area and New York have large local venture capital scenes. London firms complain about this. Are there information gaps or deeper structural problems in connecting London VC to London businesses? What, if anything can policy do to help?
Fourth, how best to build human capital? Bavaria grows its own skilled workforce; Silicon Valley depends heavily on skilled immigrant workers. London is somewhere in between, although the Coalition’s migration cap is already making life harder for tech firms.
Fifth, should we worry about gentrification? Silicon Roundabout is a vibrant local scene, but higher rents could push local firms (and services) out. London is big enough for that cluster to reform, but does short term disruption outweigh any wider gains?
Finally, what’s in it for the rest of the UK? At the moment, very little. Whitehall can probably help by concentrating on ‘tech’ – sectoral support that helps firms everywhere – and devolving the ‘city’ bit – property, planning, economic development – to the GLA.
LSE Cities have just published a new paper of mine on innovation and growth in the Munich city-region. In terms of high-tech growth, the Munich metro is probably Germany’s Silicon Valley – it’s a fascinating story, with lessons for both the Bay Area and for British policymakers.
For over two decades, Munich has had Germany’s highest share of technology patents per population. Like the Bay Area, it’s led the rest of the country on ICT. And Munich’s story has some further, surprising parallels to the history of the Valley. Over the past 60 years, both have shifted from mainly rural communities to high-tech hubs. Both offer a strong economy and an excellent quality of life – something that’s helped keep people in the area. And both benefited from Federal defence funding – Pentagon money helped fund the early Internet, while in Munich’s case defence cash built up the advanced manufacturing sector.
In other ways, Munich is very different. The metro has a notably diverse economy – the ‘Munich Mix’ spans manufacturing, ICT, life sciences, finance and creative industries, unlike the Bay Area which is still dominated by computing.
More importantly, Munich’s economic development has been hugely influenced by the State, especially the Bavarian regional government. It’s essentially a social democratic Silicon Valley.
Government spends heavily on public schools, universities and strategic infrastructure. Munich is at the centre of a network of innovation intermediaries – public research agencies like the Fraunhofer Institutes, dedicated to technology transfer. And there are very strong networks between public and private sectors.
In the jargon, this is ‘institutional thickness’. It’s created a strongly technocratic vision of economic progress, and a clear sense of common purpose. Or as they say at Audi: Vorsprung durch Technik.
As a result, Munich’s leaders rode out a potentially disastrous period in the early 1990s when the area was hit by a triple whammy of re-unification, recession and global competition. Over the next two decades, state and city developed a rolling programme of policies to grow innovation capacity.
Our research suggests it paid off. Munich’s per capita economic output remains comfortably above regional and national averages. The metro has also markedly increased innovative activity in ICT, biotech and green industries – with a three-fold rise in green patents over the last 20 years.
The growing green economy sector has also benefited from pro-green federal policies, which have guaranteed a market for green energy and thus spurred a new industry of green energy products and services.
Of course, Silicon Valley’s market-led model has yet to face such a crisis point. But as the Valley focuses on ‘cleantech’, Munich’s state-led model is looking increasingly attractive. VC money is pouring into green economy start-ups across the Bay Area. But California still lacks the quality public education system that will connect local people into new jobs.
More importantly, the US has not introduced market-making incentives like carbon pricing or feed-in tariffs. So California is going its own way – although its State-level cap and trade scheme has only just survived a Big Oil-sponsored public vote.
What can the UK learn from the Munich experience? A lot of lessons are familiar. High-tech regions grow out of what’s there. Economic diversity is helpful, adding resilience and helping stimulate new ideas. Human capital is critical, as are good schools and universities. Both time and luck matter more than we’d like.
For me, the crucial lessons from Munich are about what the public sector can do. There are three.
First, decentralisation has given Munich flexibility to develop policies that suit its needs. It’s also helped strong leaders to develop, and over time, effective working across boundaries (and political parties).
Second, both local and national governments have kept up public investment in the things that matter – notably human capital, public services and strategic infrastructure.
Third, incentives and market-making are really important – especially in moving towards a greener economy. British cities can do something here, but it’s really about national policy, and political leadership.
Last week David Cameron launched ‘East London Tech City‘, which he hopes will become ‘one of the world’s great technology centres’. Could it work? Up to a point, according to research from LSE. Science parks can pay off, although it’s unlikely they’ll create the next Silicon Valley.
Theoretically, we shouldn’t need science parks at all. In spatial economics models, firms sort across space to optimal locations. In practice, this doesn’t always happen. Planning restrictions limit space; businesses may lack the funds to move; and some firms will head to prestigious addresses, rather than the most productive.
So policies that try to cluster firms together might be a good idea. Theory and evidence suggest businesses benefit from co-location. Big labour markets, a rich mix of input-output linkages and knowledge spillovers help firms become more innovative – and more productive. In turn, this helps explain why cities form and grow.
So, can science parks can replicate these dynamics? Christian Helmers, a research economist at SERC, is trying to find out. There are now at least 85 parks in the UK, with over 76,000 workers on site. Helmers looks at two: Cambridge Science Park, the UK’s first and most prestigious, and the St John’s Innovation Centre next door.
Christian is interested in whether science parks drive up firm’s innovative activity. So he tests whether co-location raises patenting rates. He finds it does. He also looks at what types of firms tend to gain. Controlling for various other factors, he finds that inside the park, firms of the same industry tend to patent more. Science parks can pay off.
What does this mean for policy? Christian suggests policymakers should promote specialised science parks, dedicated to single industries. I think there are some wider lessons here too – not all of which are good news for East London.
1) Lifecycle – Helmers finds no significant effect of firm age on patenting – that is, start-ups don’t particularly benefit from being in science parks. This echoes other work which suggests that economically diverse cities act as ‘nurseries’ for young firms – basically offering a big pool of ideas, suppliers and people. In turn, it suggests that unless they’re in big cities, incubators might not be effective.
2) Mix and scale – Christian’s research basically tells us that at small scale, similarity matters – firms gain from having others like them around. (In the jargon, science parks exhibit ‘Marshall-Arrow-Romer’ externalities.) But at city scale, the opposite seems to be the case. Economic diversity matters. Jane Jacobs first suggested knowledge spillovers across industries – recent work by Duranton and Puga and a team at SERC empirically confirms this . So we shouldn’t expect science parks to drive cities.
3) Expectations – Silicon Valley is not a valley – it’s a city-region. By contrast, science parks are tiny. Taken together, Cambridge Science Park and the St John’s Centre cover around 2m square feet. At a conservative estimate, Silicon Valley covers 1300 square miles. To put point 2) another way, no science park (or Silicon Roundabout) is going to be the next South Bay.
4) Surroundings – some of Christian’s results have to be driven by what’s outside the science park – in this case, Cambridge University and the Cambridge high-tech cluster. All the firms in the park benefit from high quality research and a big pool of skilled workers. The East London park will have to draw on the whole of London’s innovation system if it’s to benefit its tenants. The London location will clearly help. But as Vivek points out here and here, high-tech growth is fundamentally about people and culture – not property.
The terrifying prospect of Eric Pickles as Tom Cruise still lingers after his recent LGA speech. But amongst all the one-liners, the shape of localism is becoming clearer.
First it’s cash and rules-light – ‘less money, more freedom’, as Jon Rouse puts it. Second, as Julian Dobson says, it’s a bit centralist right now. That’s not surprising – the Minister has the tricky job of devolving via the machinery of central government.
Most importantly, localism points in several directions at once. Councils get more freedom, but so do community groups and local people. For me, this is the most radical bit – and the most radical idea isn’t big city Mayors, but direct votes on local taxes.
The Economist memorably referred to local referendums as ‘the crack cocaine of democracy’. So should we be worried about what Eric might (or might not) call ‘freebase localism’?
The referendum proposal focuses on council tax. At the moment Whitehall can cap council tax levels ‘to protect council taxpayers from excessive increases’. The Coalition wants to replace capping with local votes on whether taxes are too high.
Getting rid of capping is a good thing. It’s not transparent, and it’s verging on the undemocratic. It’s not obvious we need to replace capping with direct votes, however.
In the jargon, local people already have choice (of parties), voice (in local elections) and exit (moving out). Of course local elections are every four years, voter turnout is often low, and many people don’t find it easy to move. Direct democracy seems to raise turnout, and plugs people straight into decision-making.
The big problem with Eric’s proposal is the loaded question issue. It’s effectively a massive nudge for lower taxes – although the Coalition is silent on what ‘low enough taxes’ means in practice. That will put an automatic, and potentially destabilising limit on council revenues. In turn, that makes it harder for Councils to provide effective services – especially in a ‘post-bureaucratic’ age of changing social structures and more demanding consumers.
California is an extreme example of where low-tax bias takes you. Under Proposition 13, the state has capped property taxes *and* requires a supermajority for any revenue-raising measures. Right now, recession-hit public finances are in a total mess, but it’s proving politically impossible to pass a budget. As a result, one small town is now disbanding its police force.
Councils might get round the loaded question if they had other means of raising money, besides council tax. Right now they don’t: over 80% of council finance comes direct from Whitehall.
The bigger issue here is the disconnect between local taxes, local votes and local services. Because the latter are largely grant-funded, it’s not properly clear to voters what they’re voting on, and how that vote might change local services. Worse, Council tax hasn’t reflected real house values for years.
1) new money-raising tools – a green light for Accelerated Development Zones, and borrowing on the Housing Revenue Account;
2) a clearer link between local taxes and local services – the Review of Local Government Finance should push a revaluation of council tax, relocalising the business rate, and arguably a local income tax (as proposed by the Lib Dems).
With all this in place, I’m not sure local referendums are needed. Votes will really make a difference to services – and taxes. That should raise both turnout and political engagement. And if local taxes are too high, politicians will exit via the ballot box.
In other words, really show us the money. And just say no to crack.
Ah, the perils of place branding. Wired have re-upped their ‘Silicon Roundabout’ story, highlighting the cluster of tech and new media firms around the Old Street / City Road junction in East London (thanks to Eric and Mat for pointing me to it).
The magazine reckons there are now about 85 firms in the neighbourhood, including Dopplr, last.fm and moo.com (who make my lovely business cards). That’s exponential growth since Matt Bidduplh’s original 2008 map. Along the way it’s picked up a Wikipedia entry, props in the FT and a (slightly self-conscious) support group.
There’s only one problem here. Almost none of the firms are *actually on the roundabout*, or even near it. Look at Wired’s picture again. These companies are almost all down the road in, er, Shoreditch – or in one case, way out in Bethnal Green.
Obviously ‘Silicon Roundabout’ is a good meme (here I am writing about it, after all). And it means people don’t have to say they work in Barley-esque Shoreditch. But it fails completely as a descriptor for a real cluster, or even a spot on the map. It’s also nothing like Silicon Valley, which is a continuous sprawl stretching halfway across the Bay Area, including several cities along the way. Silicon Roundabout is Trumpton to the South Bay’s Sim City. But that’s another story.
Eleven weeks in, five more to go, and I’m still finding my way around this place. It’s got me thinking about the different ways we can get to know a city. How to get under the skin?
The job of geography is to explain the production of space, place and the everyday life of those places. Jane Jacobs tells us to think about cities as ‘problems in organised complexity’. We should pick an angle and work around it, pick another and connect to the first, and so on.
Why and where
This works for me. My way in is via urban economics and economic geography. The first task is to draw a line. In practice, it’s many overlapping boundaries – from satellite images, terrain maps, political units, transport networks.
We identify hubs and start linking them up. Then we can begin to fill in what happens where and why. At base, economic geography is about understanding the push and pull forces that help explain location. At the heart of successful places are increasing returns – from matching, sharing and learning. Feedback loops amplify these returns; bad luck or bad choices can run them down. Each local recipe is always slightly different.
So we start with people’s ‘demand for urbanness’. Then by looking at who gains and how, we can factor in the institutional, class and political forces shaping production.
The best geography of this kind – Jacobs, Michael Storper, Ian Gordon, David Harvey – succeeds in connecting macro to micro, megatrends to real places. But a lot of everyday life falls between the lines – the ‘Bay Area-ness’ of the Bay Area is gone. What can bring it back?
The city as conversation
The local mediascape is more powerful than you’d think. As Jane Jacobs says, we should look less at the front pages and more at the small ads to understand what’s truly valued – or what isn’t. Dave Eggers’ San Francisco Panorama is a fantastic piece of street-level writing, if nothing else.
The city as story
Fiction helps us intuit urban experience. Each of the eight million stories in the Naked City reveals a little more of New York. The Wire does the same for Baltimore, to the point that it’s hardly a crime show at all. David Simon says it aims to be “…a show that would, with each season, slice off another piece of the American city, so that by the end of the run, a simulated Baltimore would stand in for urban America, and the fundamental problems of urbanity would be fully addressed.”
The city as you find it
Benjamin and his disciples in psychogeography show how powerful wandering, image and imagination can be for understanding urbanity. Essentially you are wiring the city into yourself, from your own impressions and resonant memories. These are Lefebvre’s ‘representational spaces’, or lived space. Yours is only one of eight million stories, but if intuition is a kind of hyperlogic, others will share it. This excellent post by Owen Hatherley on seeing Sheffield via Red Riding, brutalist architecture and Warp is a great example.
The city as game
The mobile and social web is – finally – starting to help us multiply urban possibilities. Matt Jones talks about a better kairos – more opportunity, richer knowledge – as technology tells us more about where we are, what’s happened, or who’ll be around. And one level up, we’re using the data itself. Here’s Dan Hill mapping a building from the wifi cloud. Or MIT’s Senseable City Lab using mobile phone data in real-time urban heat maps; or Mapumental linking access, price and quality of neighbourhood life. Urban Tick has masses of interesting real-time stuff.
For me, this is exciting but risky: the danger in this perspective is that urban life reduces to codeable routines or design solutions. A city can’t always be hacked.
As Benjamin says, ‘the power of a country road is different when one is walking along it from when one is flying over it by airplane … Only he who walks the road on foot learns of the power it commands.’
The most knowledgeable people I’ve met here have simply spent a lot of time in the Bay Area. They’ve walked the roads; they know it inside out. So I leave you with A Hidden Geography, an awesome piece of spatial synthesis by UC Berkeley’s Richard Walker. As a layering of image and text, framework and dot-joining, it’s hard to beat. Enjoy it.
In 2007, Al Gore laid down a challenge to Silicon Valley: invent the technologies to conquer climate change. The Valley has spent the past few years trying to do just that. The green economy and ‘cleantech’ are big deals here: if you believe the hype, this is what Silicon Valley 3.0 will look like.
So can the world’s most innovative region really do it again?
It’s important to pin down what the green economy means. UC Berkeley’s Karen Chapple identifies four components: energy, building, transport and recycling. Each is very broad – e.g. energy covers tidal, wind and solar power, decentralised infrastructure (or ‘smart grids’), and installation and maintenance activity.
The South Bay has rapidly developed a presence in all of these, particularly in solar (which shares technologies with semiconductor manufacture). Joint Venture Silicon Valley recently put out a Greenprint for the Valley [pdf] setting out ‘climate prosperity’ – growing a new generation of innovative, world-beating firms and dealing with climate change on the side. For solar, the upper level jobs target is 20,000 positions by 2017.
The Valley has plenty of first-mover advantages – a big talent pool, strong industry networks, an entrepreneurial culture, lots of venture capital, eco-conscious consumers, and helpful regulation designed to boost local green industries (California recently passed AB32, a state-level cap and trade scheme, and has just passed AB920, a feed-in tariff system).
The area’s cultural diversity helps too. Kim Walesh, San Jose’s Chief Strategist points out that South Bay firms are already plugging into big markets in Chinese cities.
And yet … this may not turn out to be the world’s eco-region. As GBN analyst Olaf Groth told me, the sheer diversity of ‘the green economy’ presents challenges – much of has limited ICT crossover. Geographies of innovation, production and sales are diverse, and don’t really favour a single hot location. There are dozens of distinct cleantech clusters in the US and around the world; production is often outsourced; consumer markets are very localised. It will be hard for Valley firms to access all of these.
Government’s role is also critical. Green technologies need subsidy and regulation to be fully economic: traditional VC won’t invest on a 20 year payback schedule. But the big public contracts that helped kick start ICT 30 years ago will be harder to secure today.
So the Valley’s traditional advantages may be of limited help. And as Karen Chapple and Bill Lester argue in forthcoming research, green industry may not mean local green jobs. The South Bay already has a number of defunct semi-conductor factories, as production shifts to cheaper locations offshore.
What can we Brits learn from this? I think there’s a few key points here. First, ‘green growth’ is feasible. But UK policymakers need to get clearer on which bits can generate growth and jobs. In energy, that means wind and tidal power; and there will be significant waste, construction, transport and maintenance markets in urban areas.
Second, there is an important spatial dimension. The UK is small but highly urbanised; many of the key green markets (in waste and transport, for example) will be in and around cities. London’s Mayor already has powers to combat climate change, and is using these to leverage extra funds for business development; other big cities should get the same.
Third, national policy is hugely important – meaning regulation, planning and tax tools aimed at fostering behaviour change and stimulating green industries. As the Turner Climate Change committee argues, this requires a strong national planning system.
The Opposition stance here is unhelpful: a Cameron Government would probably abolish the Independent Planning Commission, which takes decisions on energy networks.
More broadly, the UK is still seen as a bit soft on cleantech: according to Deutsche Bank, the UK is not seen as a safe bet for international investors, who increasingly prefer China or Germany.
The Silicon Valley story tells us there is unlikely to be a single winner in the green economy. But it also suggests that the UK can do a lot more to push forward its own distinct eco-sectors, and develop greener cities (and valleys) while we’re doing it.