(Bloomberg View) -- I believe that Ross Douthat of the New York Times is right to say that the U.S. (and, really, the world) needs big, bold ideas right now. In a recent article, Douthat puts forth some appropriately bold thoughts about how to revive the country’s struggling regions. One of his ideas -- creating more college towns -- is truly excellent, and could be the keystone of a new U.S. region-based industrial policy.
There’s no question that the U.S. has a great many places that are struggling economically and socially. Many are concentrated in the upper Midwest and Northeast -- the so-called Rust Belt -- but the division is really more about how much human capital a place has. In his book “The New Geography of Jobs,” economist Enrico Moretti shows that technology hubs -- large innovative cities and college towns -- are doing well while other towns languish. The reason is that as the U.S. shifts from old-line manufacturing toward innovative industries like software and biotech, it’s more important for companies to cluster together in places that have a lot of highly talented workers.
But a place doesn’t have to be a big metropolis or tech cluster to reap the benefits of the new economy. College towns such as Ann Arbor, Michigan, and College Station, Texas, are doing great in the new economy. “I can drive into a town,” writer and photographer Chris Arnade told me, “and tell within five minutes whether it has a university in it.”
In the old days, lots of Americans would have simply moved from the struggling places to the flourishing ones. But nowadays, relatively few make that move. They may be culturally attached to their homes, or own houses that they can’t easily sell, or simply be afflicted with malaise. Or they may be priced out of successful cities by development restrictions and zoning. Or maybe government benefits discourage moving to a more vibrant place because living costs are usually lower in areas where the economy stinks. But whatever the reason, the decline in mobility implies that we should think of ways to help boost some of the places that have been left behind.
Douthat has several ideas for how to do that. He suggests tax credits to encourage businesses and nonprofits to regionally diversify. That could help, but if Moretti is right, it wouldn’t be enough of an incentive to overcome the forces pulling companies into clusters. By the same token, his idea of using the Federal Trade Commission to force companies to spread out regionally is likely to backfire and hurt the economy. Douthat also suggests moving many federal government offices outside of Washington. That’s a good idea. But since Washington’s economic output is less than 6 percent of the country’s gross domestic product, the effect will be marginal at best.
But Douthat does hit on one idea that I think has really big potential -- the creation of more university towns. He writes:
The deep-pocketed elite universities clustered around our bloated megalopolises. We’ll tax their endowments heavily, but offer exemptions for schools that expand their student bodies with satellite campuses in areas with well-below-the-median average incomes. M.I.T.-in-Flint has a certain ring to it. So does Stanford-Buffalo, or Harvard-on-the-Mississippi.
I don’t know about taxing endowments, but offering incentives to universities that upgrade and expand their branches in struggling regions is a great idea.
This is actually something the U.S. government has done before, with great success. The Morrill Acts of 1862 and 1890 established a system of land grant universities, dispersed throughout the U.S. Today, the places that received those grants are flourishing economically.
So should the U.S. establish more land-grant universities? Maybe. But the number of colleges in the country is already increasing at a fairly steady clip:
So instead of creating yet more new colleges, policy should be focused on upgrading the ones that exist. Massachusetts Institute of Technology-in-Flint already exists -- it’s called the University of Michigan-Flint. It’s just not as good of a research institution as MIT. But government policy can make it better. More research dollars to schools like UM-Flint would be helpful, as would federal matching funds that help states pay for universities in struggling cities. Research money would also help turn more universities into anchors for local businesses that spin off from professors’ research, which in turn help keep more smart workers in the local area.
One crucially important federal policy will be to allow lots of foreign students to study in the U. S. Since foreign students pay full price, their tuition dollars are used to subsidize college spots for Americans. This is already how U.S. colleges have continued to expand in the face of stagnant domestic enrollment. Of course, it would be good to expand subsidized domestic college enrollment too, but foreign students can provide much of the necessary money.
Educating foreign students is also an export industry that brings dollars into the U.S., helping to cut the trade deficit:
And when a university is in a struggling town such as Flint, those foreign dollars flow directly into the local economy, helping revive the whole region.
So Douthat’s idea could be just the thing the U.S. needs to save places like Flint. Better universities, endowed with more government research dollars, and providing expensive education services to rich foreigners, will help revive struggling places and lessen the dominance of big cities. It’s just the regional industrial policy the country needs right now.
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
Noah Smith is a Bloomberg View columnist. He was an assistant professor of finance at Stony Brook University, and he blogs at Noahpinion.
To contact the author of this story: Noah Smith at nsmith150@bloomberg.net.
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