Universities a Key to Economic Recovery

October 23, 2009 | CUNY Matters Columns

This is a pivotal time in our country. A fast-moving and deep recession has resulted in the collapse and disappearance of some of this country’s most venerable companies; high unemployment is having a chilling effect on the lives of many Americans; and mounting federal debt is projected to accumulate to approximately $9 trillion over the next decade – all of which, combined, is creating shock waves not seen since the 1930s.

It will take time to stabilize this difficult financial environment. Our economy is complex and highly dependent on interlocking relationships and structures across the globe. While most economists believe that we are in the early stages of a recovery, it is clear that systemic changes are needed.

What was once primarily a manufacturing economy is now moving aggressively toward being an innovation-based economy, one based on high skills. As competition from across the globe increases, we must rely more and more on talented, entrepre-neurial workers contributing to an economy that changes and evolves more quickly.

That’s why it’s time for serious dialogue about what is really needed to stimulate, stabilize and redefine New York’s economy.

In fact, around the world, cities and countries are trying to figure out not simply how to survive but how to build resilient economies and societies in a new world market. For example, in an economy driven by innovation, many in Germany believe that a movement away from factories and toward think tanks could be a very positive economic development.

The rise of the knowledge-based economy can be seen in Israel, as well. A recent City Journal article noted that this relatively small and young country “is launching far more high-tech companies per year than any country in Europe,” thanks to an influx of highly educated immigrants from the Soviet Union and the availability of capital from American retirees in Israel. The mix has led to momentous change: a flow of bold new ideas, along with the financing to develop them. Knowledge – in the form of a highly skilled and entrepreneurial workforce – begat innovation and, ultimately, a place of leadership in the global economy.

These global developments are instructive for New York. How can the state build the infrastructure for its own knowledge-based economy?

I believe that New York’s best economic recovery vehicle is its large number of world-class universities. University research is the originator of new ideas, the spur for new industries, and the catalyst for economic development and high-skill jobs. University academic programs prepare tomorrow’s workforce and entrepreneurs.

But universities cannot operate in a vacuum. They are most effective working in partnership with government and business. For example, universities provide job training, not job creation. For degree and training programs to work, small businesses must get the financing they need. This recession has largely been a credit recession – and that has had a devastating effect on the city’s 220,000 small businesses, which employ half of the city’s private-sector workforce, or about 1.5 million people.

This is why I’ve been calling for a triangular compact, a collaborative effort among government, business and universities to build the infrastructure for innovation on which the future of New York State depends. Government must take the lead by creating a climate conducive to attracting private investment opportunities, while working with lenders to make access to capital more predictable and creating incentives for colleges and universities to develop the needed programs.

Private industry is already developing new partnerships for a new economy. For example, Hewlett-Packard has reportedly reduced its in-house R & D projects while simultaneously soliciting grant proposals from universities around the world – generating a diverse pool of ideas.

We need to continue to find new ways to use our world-class universities to increase the research and workforce-development efforts that lead to new industries and the educated workers who can sustain them. Government must serve as a catalyst to ensure access to capital – working capital and risk capital. The city’s Economic Development Corporation has begun this effort through programs to encourage entrepreneurial and small business activity in key sectors: the financial industry, retailing and media.

Today, we face the most serious economic downturn since the Great Depression. Universities can be a key to our recovery, encouraging innovation and advancing the skills and creativity of thousands of new workers, at a time when our future has never been more dependent on those talents. Let’s put our universities to use, in partnership with government and business, and get New York back on track to prosper in this innovation economy.