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Rebuilding America's Job Machine

By Business Week

January 29, 2009



Large-scale collaborations between the public sector and the private sector could be the key to unlocking economic growth and technology innovation across America. Many state governments are now designing strategies that some say verge on industrial policy. States have been targeting specific businesses and technologies and, alongside companies, investing significant dollars in R&D centers, cutting-edge factories and industrial parks. The article takes a comprehensive look at the collaborations between the federal government, states and technology companies and then assesses the impact of these public-private R&D programs.

The Obama Administration's $900 billion economic stimulus package raises new hopes that states can tap federal funds to support their industrial policies. The stimulus package will include provisions for more federal dollars for R&D, workforce training, and business promotion to be channeled through successful public-private collaborations in the states. The problem, of course, is that public officials can be bad at picking winners, with state intervention sometimes leading to cronyism, market distortions and costly bidding wars. In response, many state officials insist they are becoming more sophisticated about economic development. Rather than woo plants that could relocate to Mexico or China in five years, they are trying to build new industries in fields such as renewable energy, nanomaterials, and biomedical devices that could generate high-paying jobs for decades.

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