R.I. needs to exploit its advantages

Bruce Katz and
Bruce Katz Founding Director of the Nowak Metro Finance Lab - Drexel University
Mark Muro

February 8, 2016

This commentary originally appeared in The Providence Journal.

For the past six months we have had the privilege of assessing Rhode Island’s economic health and offering concrete ideas for accelerating growth. We examined market trends and, more importantly, talked with hundreds of public, private, civic and community leaders.

The result — a Brookings, Battelle TEConomy and Monitor Deloitte report, “Rhode Island Innovates: A Competitive Strategy for the Ocean State” — sends a stark but hopeful signal. To combat poverty and bring prosperity, Rhode Island needs a radically new approach to economic growth.

Rhode Island has had a tough stretch, falling to the middle of the New England pack on measures of output and employment growth. Why? Because no state lost advanced industry jobs faster over the last two decades.

Advanced industries are the backbone of the U.S. economy. They are driven by high levels of research and development and high shares of workers with specialized STEAM (science, technology, engineering, arts and mathematics) skills. They disproportionately drive exports and support jobs in other sectors such as housing and retail. Roughly half of STEAM jobs are available to workers without four-year college degrees.

The new law of American economics is simple, if brutal. States such as Massachusetts and Oregon, with strong advanced industries, prosper. States without these powerful sectors fall behind. So it is critical that Rhode Island understands its economic starting point.

The good news: the state still has five growing advanced industry competitive advantages — biomedical innovation, cyber and data analytics, maritime technology and manufacturing, advanced business services, and design and custom manufacturing. These industries have survived partly because of innovative companies and talented workers. The state’s strong universities and research facilities — Brown University, the University of Rhode Island, the Rhode Island School of Design, Johnson & Wales University, the Naval Undersea Warfare Center and others — have also helped by steadily supplying skilled workers and new discoveries that have market potential.

So how does Rhode Island become the best 21st century version of itself?

Investing in innovation matters. With private sector investments in research and development relatively weak, the state needs more applied research and commercial-oriented faculty at its anchor institutions and more STEAM-skilled workers in the system. This necessitates private and public investment in public education and skills. And the state should locate smart research and people of varied training in vibrant innovation districts, taking advantage of its concentrated assets, historic industrial character, affordable housing and quality of place. These are investments in the fundamentals of economic development.

Becoming more competitive matters. The state tax code is cumbersome and the regulatory environment is a repellent to firms and workers with other choices. The state needs a campaign to bring common sense and new technology to legacy and anachronistic rules: for example, overhauling the unemployment insurance system and bringing e-permitting to the entire state.

Finally, the state needs to improve its ability to act. Currently, Rhode Island frequently undercuts itself with self-destructive turf squabbles and fragmentation. One response: Rhode Island leaders should create a formal Partnership for Rhode Island. Composed of top business and civic leaders, it would rebuild a collaborative ethos and channel private and civic capital and expertise into critical initiatives. State governments do not rebuild economies — people, as part of networks of public, private, civic and university institutions, do.

Some say the state can grow just by streamlining taxes and cutting red tape. They are wrong. Those are critical but insufficient moves. Advanced industries thrive on smart public and private investments in innovation, infrastructure and skills. You can’t solely cut your way to prosperity.

Some claim we would have the state pick winners and losers. That is simply untrue. We recommend the public and private sector invest instead only in crosscutting supports for multiple industries, not single firms, that already exist in Rhode Island and have real potential for growth.

The Ocean State has deep-rooted economic assets, tremendous beauty and a rich and diverse culture. But if Rhode Island wants to get back on track, it’s time to act with strategy and discipline. The future is the people of Rhode Island’s to decide.