In Pennsylvania, the next major presidential primary state, concerns about the economy loom large as global competition, economic restructuring, and an aging workforce threaten the state’s ability to prosper. Thanks to these assets, the six metro areas generate 80 percent of the state’s economic output even though they house 68 percent of its population. A true economic agenda for the state must speak to the core assets of Pennsylvania’s economy and where these assets are located: the state’s many small and large metropolitan areas. In short, this brief finds that:

• To help Pennsylvania prosper, federal leaders must leverage four key assets that matter today—innovation, human capital, infrastructure, and quality places. These assets help increase the productivity of firms and workers, boost the incomes of families and workers, and can help the state and nation grow in more fiscally and environmentally responsible ways.
• These four assets are highly concentrated in the state’s economic engines, its metropolitan areas. There are 16 metro areas in the Commonwealth, ranging from Philadelphia, the most populous, to Williamsport, the smallest. The top six metropolitan areas alone generate the bulk of the state’s innovation (80 percent of all patenting), contain the majority of the state’s educated workforce (77 percent of all adults with a bachelors degree), and serve as the state’s transport hubs.
• Despite these assets, Pennsylvania’s metro areas have yet to achieve their full economic potential. For instance, Philadelphia and Pittsburgh enjoy strengths in innovation, but they both struggle to convert their research investments into commercial products and real jobs. The Scranton metro area is emerging as a satellite of the New York City region, but it’s hampered by the absence of frequent and reliable transportation connections and inadequate broadband coverage.
• Federal leaders must advance an economic agenda that empowers states and metro areas to leverage their assets and help the nation prosper. To that end, they should establish a single federal entity that works with industry, states, and metro areas to ensure that innovation results in jobs and helps businesses small and large modernize. The federal government should strengthen access and success through the entire education pipeline. They should overhaul and create a 21st century transportation system. And they should use housing policy to support quality, mixed-income communities rather than perpetuating distressed neighborhoods with few school and job options.

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Ruy Teixeira joins NPR's Talk of the Nation host Neal Conan to discuss the Pennsylvania primary and the working-class vote.

NEAL CONAN: With us here in Studio 3A is Ruy Teixeira, a visiting fellow at Brookings Institution, co-author of the report "The Decline of the White Working Class and the Rise of a Mass Upper Middle Class." He's kind enough to be with us here. Thanks very much for coming in, nice to see you again.

RUY TEIXEIRA: Great to be here.

NEAL CONAN: And, what are some of the common themes that we see around these working class voters that Sherry Linkon was talking to us about?

RUY TEIXEIRA: Well, I think Sherry touched on a number of them. I think one critical theme, obviously, for this election is their level of economic discontent and their sense that the economic ground has shifted underneath their feet, and they are sort of wondering where they are going to go in the future, where their kids are going to go, sort of, where their way of life is going to go.

This is a matter of great concern to these voters because the last, you know, actually the last several years, have not been kind to them. But more broadly, you can look back, you know, 35 years and say the last 35 years has not been very kind to them. This has been a period when America, by and large, has grown not as fast as it did and incomes have not risen as fast as they used to, but it's been particularly bad for these voters.

Anyone with less than a four-year college degree has really done rather poorly since about the middle 1970s. So, there's a real question in their minds of what America has in store for them in the future. And they are very interested to hear what politicians have to say about it. So far, it hasn't seemed to work out quite so well.

And the other side of it is really touched on by the controversy that you're referring to which is their sense of cultural traditionalism, their sense that, especially the Democrats, perhaps, seem out of touch with that at times. It seems like they don't respect their way of life. It seems like their social liberalism gets in the way of connecting to these voters and really hearing what they have to say and what their commitments and priorities really are and a sense of elitism on their part.

And that's really what, I think, Obama's getting slammed on this, you know, in general, and of course, obviously the McCain and Clinton campaigns have some interest in pushing this, but it did give them an opening to raise this issue and argue that, in fact, he is elitist. And Democrats, if they wish to get away from this, they have to adopt - I think it's a little bit unfair to the remark once you look at it in context.

But nevertheless, the perception was there particularly, I think the stuff about guns and about religion. I mean, can't you, like, own a gun and go to church and not be clinging to it? Because you know, your economic way of life is deteriorating. Again, I don't think that's what he meant. But that's how it's being interpreted. And that's where the discussion is.

Listen to the entire interview »

In the long run-up to the Pennsylvania primary, there's been a good deal of candidate discussion of the state's economy and how to fix it.

But missing from the prescriptions of what the federal government would do and how it would do it has been a discussion of where it will happen.

That needs to change because place matters. For all the ink spilled on the declining fortunes of the commonwealth, there are many bright spots around the state that could be catalysts to growth and prosperity.

Recent Brookings research shows strength in varied fields across the state:

Advanced health care, pharmaceuticals, and information technology in Greater Philadelphia.

Health care, architecture and engineering, and banking in Pittsburgh.

Heavy construction, machinery and food processing in Lancaster.

Industrial gases, health care and higher education in the Lehigh Valley.

The state's economy is an amalgam of its 16 metropolitan areas that generate 92 percent of its economic output.

The top six metropolitan areas alone - Philadelphia, Pittsburgh, Harrisburg-Carlisle, Allentown-Bethlehem-Easton, Scranton/Wilkes-Barre, and Lancaster - constitute 68.4 percent of the state's population and produce 80.5 percent of the state's economic output.

The research underscores that four key assets overwhelmingly located in metropolitan areas - innovation, modern infrastructure, strong human capital, and quality places - are needed today to drive productivity of firms and workers, improve the wealth and opportunities of families, and ensure sustainable growth. America's metropolitan assets - the universities, the health-care concentrations, and the skilled-labor pools - are the drivers of our national economy and the key to future American competitiveness and success.

So what does this mean for Greater Philadelphia? And what would a more thoughtful federal role look like?

Two realms with extensive current federal involvement are transportation infrastructure and innovation. Cogent efforts from Washington in both these areas could significantly leverage state and local efforts.

Rather than thinly spreading transportation-infrastructure dollars across the country, the federal government should spend strategically.

For Greater Philadelphia, supporting its competitive advantage as the linchpin of Amtrak's Northeast Corridor with federal dollars for more frequent and reliable service would strengthen the region as a rail hub, as has been championed by the Greater Philadelphia Chamber of Commerce.

Additionally, federal transportation policy should empower metropolitan areas with the discretion to spend funds flexibly, whether that's improving the aging SEPTA system, beginning the work of reinventing and burying Interstate 95 to increase access to the Delaware waterfront, or increasing transit access of city residents to suburban jobs.

Regarding innovation, unfortunately, the federal government currently has no unified national strategy to maximize high-quality jobs and spread their benefits throughout the Philadelphia region. Instead, it has a series of highly fragmented investments and programs.

Current programs put strong emphasis on research, but are insufficiently attentive to the commercialization of that research and blind to how innovation and jobs arise from the intense interaction of firms, industry associations, workers, universities and investors - a nexus ready to be capitalized on in Greater Philadelphia as documented by the Economy League of Philadelphia in a report for the CEO Council for Growth.

To this end, the federal government should reorganize its efforts and create a National Innovation Foundation, a nimble, lean organization whose sole purpose would be to work with industries, universities, business chambers, and local and state governments to spur innovation. Similar, successful national agencies are already up and running in competing nations, such as Britain, France, Sweden and Japan.

This effort should include R&D and support for technology-intensive industries such as information technology and pharmaceuticals, but it also must make small and medium-size manufacturers more competitive and train workers in manufacturing and low-tech services to work smarter.

Looking forward, our federal government must realize this is a "Metro Nation" and value and strengthen economic juggernauts such as Philadelphia.

Only by organizing our currently fragmented investments in transportation and innovation - and targeting them where they will provide the greatest return, metropolitan America - will the United States continue not only to compete, but also to lead.

In last night’s Pennsylvania primary, Hillary Clinton won a sweeping if not quite overwhelming victory, receiving 55 percent of the vote and reducing Barack Obama’s overall popular vote edge by more than 200,000. Because of the Democratic party’s system of proportional representation, she netted fewer than 15 pledged delegates. These results have quieted calls for her to leave the race and will probably slow the steady flow of superdelegates to Obama. Nonetheless, her path to the nomination remains steep.

The demographics of the Pennsylvania vote followed a now-familiar pattern. Obama won among voters younger than 40, while Clinton prevailed among older voters. Obama won in big cities and some inner suburbs; Clinton carried suburbs overall while winning more than 60 percent of the small town and rural vote. Clinton did 9 points worse among men than among women, who constituted 59 percent of last night’s voters. She received 62 percent of the vote from gun-owning households and almost three-fifths of the vote from union households. Obama carried voters from families making less than $15,000 and more than $150,000; Clinton carried everyone in between. She received 64 percent of the vote from high school graduates but only 48 percent from college graduates. Obama won 55 percent of the vote among those who consider themselves “very liberal,” while Clinton got 60 percent of the vote among self-described moderates. Clinton took 56 percent among long-time Democrats, while Obama took 62 percent of new Democratic primary voters—principally Republicans and Independents who registered as Democrats to participate, but also the 4 percent of the primary electorate that previously been unregistered.

There is evidence that religion, gender and race all figured in the results. Clinton received 58 percent of the white Protestant vote and a stunning 71 percent of white Catholics. Obama got 64 percent of those who profess no religion and 56 percent of those who never attend church. Clinton did 22 points better among those who said gender was important than among those who did not. (Intriguingly, men who said it mattered were also more likely to support Clinton.) By contrast, race appears to have been a negative for Obama: whites who said it mattered gave 75 percent of their votes to Clinton, versus only 58 percent for those who said it did not. While nearly half the whites for whom race mattered refused to say that they would be willing to support Obama in the general election, their sentiments may well soften in coming months as differences between the parties come to the fore.

The long campaign mattered, and it left some bruises. 68 percent of the voters said that Clinton had attacked unfairly; 50 percent thought Obama had. Nearly a quarter of the electorate thought that Clinton was solely responsible for unfair attacks, versus only 6 percent who thought Obama was. Only 57 percent of the electorate thought that Clinton was honest and trustworthy, versus 67 percent for Obama. Only 40 percent said they would be satisfied if either candidate won; 32 percent wanted only Clinton, and 23 percent only Obama. But however negative the contest may have turned, it appears to have worked to Clinton’s advantage: she received 57 percent among voters who decided during the last week before the primary, 5 points better than she did among those who decided earlier.

The results also confirmed the surge in concern about the economy. Fifty-five percent of the voters regarded the economy as the top issue, versus only 27 percent for the war in Iraq and a modest 14 percent for health care. Obama prevailed only among voters who gave top priority to Iraq, while Clinton received 54 percent of the health care voters and 58 percent of the economy voters.

Attention now shifts to the May 6 primaries in North Carolina and Indiana. Obama is expected to prevail in North Carolina, but Indiana offers a level playing field. A split decision would be likely to prolong the race, while an Obama sweep might well induce many undecided superdelegates to declare for him and bring this protracted contest to an end. In addition, Obama’s fundraising edge is becoming increasingly important. Not long into her victory speech, Clinton made an urgent pitch for new contributions. Facing a mounting debt and dwindling cash on hand, her ability to continue on until the end of the primary and caucus season in early June may well depend on the size and speed of her supporters’ response.

Bringing together the five counties of Southeastern Pennsylvania, the nonprofit Metropolitan Caucus, a new regional consortium there, is promoting a joint regional application for ARRA’s competitive Energy Efficiency and Conservation Block Grant dollars. Its four-part proposal, which will add and refine partners and programs over time, draws on the collaboration of multiple regional institutions to establish and operate a loan fund for green building and retrofits; support clean energy technology deployment; assist local governments with energy efficiency plans; and measure the energy performance of public facilities.

The newly created Metropolitan Caucus of southeastern Pennsylvania is leading the bold new regional energy efficiency strategy targeting for the competitive Energy Efficiency and Conservation Block Grants (EECBG) in the American Recovery and Reinvestment Act (ARRA). Unprecedented for the region, the Metropolitan Caucus has brought together five area counties—Bucks, Chester, Delaware, Montgomery, and Philadelphia—to make the most of the stimulus opportunity by coordinating their plans, goals, and assets to achieve maximum regional benefit. Their proposed joint EECBG competitive application for roughly $35 million calls for financing construction and retrofits, supporting clean energy companies, measuring building energy performance, and assisting local governments in implementing various sustainability solutions. To carry out each of these activities, the caucus intends to engage in broad cross-sector collaboration to leverage the strengths and unique assets of regional educational institutions, key nonprofits, and planning agencies.

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This week will bring a cornucopia of new data, an econo-nerd's dream. Unfortunately for some of us nerds, there won't be any releases on state and local government finances. (The Census Bureau generally has to wait for all states to report and, as you can imagine, some states are laggards.)

However, there will still be a lot in this week's numbers for those who follow state and local government finances, pay into state and local coffers, or consume predominantly state and local public services like education, roads, and health care. Here are a few trends worth watching:

First, Tuesday's March S&P/Case Shiller house price indexes will be important for states whose fortunes are tied to real estate, especially in the West and Southwest. Macroeconomic forecasters are predicting home prices will decline slightly compared to one year ago but continue to increase month-to-month, suggesting that perhaps the market has hit bottom.

That would be good news for the housing sector. However, research from Federal Reserve Board economists Byron Lutz, Raven Molloy, and Hui Shan suggests that any boon to state and local revenues would be minor. They calculate the housing bust per se generated only a $22 billion drop in taxes over three years, equivalent to roughly 3 percent of annual state and local revenues excluding federal funds.

Meanwhile, the latest Census data suggest that state taxes are growing, but at a pace that is slower than usual. More worrisome, the pace appears to be moderating. In recent weeks, California, New York, New Jersey, Pennsylvania, and Rhode Island have all reported taxes coming in below projections. Also, local property taxes are likely to remain in the doldrums for some time. They tend to respond to house price changes with a delay and thus just started showing the effects of the housing bust in late 2010. Property taxes recently turned positive again, but these gains are anemic by historical standards and likely caused by rate hikes in some jurisdictions rather than improving property values.

Next up this week are Bureau of Economic Analysis revisions to first quarter GDP. Macroeconomists will be attuned to how the revisions compare to advance estimates and what this portends for the recovery. They might also take note of whether these governments are detracting from growth - as they have done by an average of 0.2 percentage points in each quarter since 2008 - or contributing to it as usual. State and local watchers will be more focused on state and local spending, which unlike previous downturns, has declined in real per capita terms and not yet recovered.

That leads us to the biggest number to watch this week - Friday's jobs report. State and local employment is already down by 665,000 jobs or about 3.5 percent from its pre-recession peak. Recent trends suggest that cuts may be abating, but this total masks differences across subsectors - state education has been adding jobs while losses continue in all other subsectors, especially at the local level.

Ongoing state and local job losses also distinguish this recession from previous downturns in the modern era. This may be in keeping with the depths of this Great Recession. However, it's hard to imagine state and local residents aren't feeling the pinch of higher property tax burdens or lower services. To take one example, Governor Jerry Brown has proposed closing California's $16 billion budget gap by converting state employees to a four day work week and closing state parks. From a macro perspective, the fiscal tightening may be over. But that doesn't mean state and local governments aren't still a real drag.

Last week international electronics mega-manufacturer Foxconn announced plans to invest $30 million in a new robotics plant in Harrisburg, PA. Foxconn, the notorious Chinese low-wage manufacturer of Apple’s iPhone, has become the poster child of U.S. outsourcing in the face of ruinous global labor cost competition. The calculus of manufacturing supremacy is seemingly simple: Low labor costs and taxes, proximity to a large consumer base, and manageable corruption levels equal a sure strategy to attract global firms.

So what’s going on in Harrisburg? Foxconn is beginning to realize what a number of global manufacturers have come to realize: Production sites that can leverage university, government, and private R&D, a market-ready STEM workforce, and a vibrant cluster of global manufacturing supply chains trump cheap labor and tax breaks. In this regard the Harrisburg region is a big win for Pennsylvania as well as Foxconn—a company trying to move away from a legacy of poor working conditions to one of high-value, high-skilled production.   

Harrisburg and the larger Rust Belt Pittsburgh-Youngstown region to the west are hotbeds of advanced manufacturing. Youngstown is home to the National Additive Manufacturing Innovation Institute—an internationally recognized hub for so-called “3D printing” that draws together public- and private-sector resources. Pittsburgh—with the University of Pittsburgh, Carnegie Mellon University, and firms like Google—has redefined itself from a gilded-era steel town to a modern technology leader in software and robotics. Indeed, Foxconn is investing $10 million in Carnegie Mellon’s world class advanced robotics R&D. Finally, also in the Rust Belt and including Harrisburg, Akron and Cleveland, cheap natural gas has helped push manufacturing job and firm growth in a region that was hit extremely hard by the recession.

While Foxconn may be one of the highest profile foreign firm to relocate to the United States it is certainly not, as we’ve discussed, the first. Again and again, global firms interested in high-end manufacturing are putting a renewed premium on geographic clusters of intensive innovation. To be sure, countries with low labor costs still maintain solid advantages in a number manufacturing industries that will help their economies grow—this is the benefit and reality of a global economy. But when it comes to advanced manufacturing, U.S. metro areas and regions that foster synergies between research, skills, and production will likely continue to be highly sought after from firms looking to move up the global value chain.

Last week, we showed how the share of the nation’s venture capital going to the Bay Area has actually increased over the last decade and posed the question: Are San Francisco and Silicon Valley good models for most cities to imitate? And with the answer being “no,” what strategies should cities employ to bolster local capital networks?

The answer depends upon regions’ technical strengths—different technologies imply different venture capital strategies. A common assumption is that most cities look like Silicon Valley with software monopolizing venture funding, but in many places a mix of different technologies are far more important. Metropolitan level venture capital data from 2005 to 2015 from Pitchbook illustrates how different cities require different strategies.

In Cleveland, for example, more than three-quarters of deals are in clinical care services and medical devices driven by Cleveland Clinic’s world-renowned success in identifying and funding companies creating novel health care technologies. However, software and medical technologies require very different venture capital strategies. Software companies need upfront funding but can scale quickly with few additional funding rounds. Medical technologies require FDA approval and clinical trials, costly and lengthy processes, implying the need to consider whether regional venture capital efforts can provide not only seed funding but multiple rounds. If not, promising health care companies may flame out or relocated elsewhere.

Pittsburgh, on the other hand, has a far more mixed portfolio than either Cleveland or the Bay Area, one of the most diverse in the country. Pittsburgh’s top 10 technologies funded over the last decade include laboratory services, energy exploration, battery storage, medical devices, software, and electronic equipment—with none making up more than one-fifth the metro area’s portfolio. Pittsburgh’s mix of educational and non-profit institutions like Carnegie Mellon University, University of Pittsburgh and UPMC support research in engineering, software, medical technologies, and therapeutics. In addition private companies like Google, Alcoa, and the shale gas boom have provided the region with a blend of market opportunities that are extremely different than that of the Bay Area.

Equally important to the type of technologies funded is how venture capital deals are funded. In the Bay Area private venture capital firms represent the vast majority of funding both in terms of numbers of deals and overall value. Deals from accelerators and universities together equal less than one-tenth of what is invested by private venture capital firms. Given the many private investment firms in the Bay Area, universities and accelerators are better at creating and incubating technologies instead of funding them. Unfortunately, other markets lack such private sector assets and try to jumpstart investments through other methods.

Over the last decade, Pittsburgh made just 3 percent as many total venture deals as the Bay Area, but breaking that figure down by the funding source, universities outperformed in Pittsburgh. There they funded nearly 30 percent as many deals as universities did in San Francisco and Silicon Valley, a rate 10 times as high as would be expected based the Bay Area “norm.” One reason for this is Pittsburgh is relatively new to venture funding and may have more research assets than private venture capital firms. Therefore, university funds could fill an important capital gap.

A common worry is these non-private sector deals are poor investments that private firms, with superior market intelligence, simply refused to make. This argument is most persuasive in regions like the Bay Area where there is no shortage of private capital to fund good ideas. However in other regions these investments can prove to be smart precursors to private funding. Also, rarely do public institutions make investment decisions. Instead, public dollars are funneled through private investment firms to kick start regional activity. For example, Philadelphia’s new StartUp PHL fund is paid for by taxpayer dollars but investment decisions are made by First Capital, the city’s largest private venture capital fund. The fund requires recipients to stay in the city for at least six months after funding, with the hope to increase the number of growing technology companies in Philadelphia.

Cleveland and Pittsburgh are specific examples of a general point. Cities have unique technology competencies and pathways to venture capital. Economic strategies to attract outside, and bolster local capital, should reflect those attributes and not simply default to what seems to have worked in the Bay Area. 

Last week, we showed how the share of the nation’s venture capital going to the Bay Area has actually increased over the last decade and posed the question: Are San Francisco and Silicon Valley good models for most cities to imitate? And with the answer being “no,” what strategies should cities employ to bolster local capital networks?

The answer depends upon regions’ technical strengths—different technologies imply different venture capital strategies. A common assumption is that most cities look like Silicon Valley with software monopolizing venture funding, but in many places a mix of different technologies are far more important. Metropolitan level venture capital data from 2005 to 2015 from Pitchbook illustrates how different cities require different strategies.

In Cleveland, for example, more than three-quarters of deals are in clinical care services and medical devices driven by Cleveland Clinic’s world-renowned success in identifying and funding companies creating novel health care technologies. However, software and medical technologies require very different venture capital strategies. Software companies need upfront funding but can scale quickly with few additional funding rounds. Medical technologies require FDA approval and clinical trials, costly and lengthy processes, implying the need to consider whether regional venture capital efforts can provide not only seed funding but multiple rounds. If not, promising health care companies may flame out or relocated elsewhere.

Pittsburgh, on the other hand, has a far more mixed portfolio than either Cleveland or the Bay Area, one of the most diverse in the country. Pittsburgh’s top 10 technologies funded over the last decade include laboratory services, energy exploration, battery storage, medical devices, software, and electronic equipment—with none making up more than one-fifth the metro area’s portfolio. Pittsburgh’s mix of educational and non-profit institutions like Carnegie Mellon University, University of Pittsburgh and UPMC support research in engineering, software, medical technologies, and therapeutics. In addition private companies like Google, Alcoa, and the shale gas boom have provided the region with a blend of market opportunities that are extremely different than that of the Bay Area.

Equally important to the type of technologies funded is how venture capital deals are funded. In the Bay Area private venture capital firms represent the vast majority of funding both in terms of numbers of deals and overall value. Deals from accelerators and universities together equal less than one-tenth of what is invested by private venture capital firms. Given the many private investment firms in the Bay Area, universities and accelerators are better at creating and incubating technologies instead of funding them. Unfortunately, other markets lack such private sector assets and try to jumpstart investments through other methods.

Over the last decade, Pittsburgh made just 3 percent as many total venture deals as the Bay Area, but breaking that figure down by the funding source, universities outperformed in Pittsburgh. There they funded nearly 30 percent as many deals as universities did in San Francisco and Silicon Valley, a rate 10 times as high as would be expected based the Bay Area “norm.” One reason for this is Pittsburgh is relatively new to venture funding and may have more research assets than private venture capital firms. Therefore, university funds could fill an important capital gap.

A common worry is these non-private sector deals are poor investments that private firms, with superior market intelligence, simply refused to make. This argument is most persuasive in regions like the Bay Area where there is no shortage of private capital to fund good ideas. However in other regions these investments can prove to be smart precursors to private funding. Also, rarely do public institutions make investment decisions. Instead, public dollars are funneled through private investment firms to kick start regional activity. For example, Philadelphia’s new StartUp PHL fund is paid for by taxpayer dollars but investment decisions are made by First Capital, the city’s largest private venture capital fund. The fund requires recipients to stay in the city for at least six months after funding, with the hope to increase the number of growing technology companies in Philadelphia.

Cleveland and Pittsburgh are specific examples of a general point. Cities have unique technology competencies and pathways to venture capital. Economic strategies to attract outside, and bolster local capital, should reflect those attributes and not simply default to what seems to have worked in the Bay Area. 

With the GOP convention now in the electoral rearview mirror, attention is pivoting quickly from Ohio to Pennsylvania as the Democrats kick off their own nominating convention in Philadelphia.

Although it has voted Democratic in the last six presidential elections, political analysts have historically regarded the Keystone State as a swing state. FiveThirtyEight’s latest general election forecast projects a 46 percent vote share for Hillary Clinton, versus just under 44 percent for Donald Trump, making it the sixth-most competitive state. Pennsylvania also features what is shaping up to be a tight Senate race between incumbent Republican Pat Toomey and Democratic nominee Katie McGinty. Thus, it is useful to see how the state’s voters might view the condition of the economy, which could very well influence turnout levels and candidate preferences amid close contests this November.

The economic perspectives of Pennsylvanians are perhaps best understood through the prism of the state’s highly distinctive major metropolitan areas. Five large metro areas span the state—Allentown, Harrisburg, Philadelphia, Pittsburgh, and Scranton—and together account for 63 percent of Pennsylvania’s population and 75 percent of its GDP. Their economic specializations are diverse: trade, transportation, and manufacturing in Allentown and Scranton; financial, professional, and educational services in Philadelphia and Pittsburgh; and government in the state capital of Harrisburg. While much political news coverage of Pennsylvania is likely to focus on its iconic small towns, it is really these large metro areas that define the state demographically and economically.

While Pennsylvania was not one of the states hardest hit by the Great Recession, most of its major metropolitan areas bounced back relatively slowly. According to the Brookings Metro Monitor, Harrisburg, Philadelphia, and Scranton ranked among the 20 slowest-growing large metropolitan economies from 2009 to 2014. All performed somewhat better on achieving increases in the local standard of living (prosperity), but Pittsburgh stood out for its 6 percent average wage growth during that time, seventh-fastest in the nation. This wage trend also seems to have propelled Pittsburgh to a better performance than other Pennsylvania metro areas on indicators of employment, wages, and relative poverty (inclusion). Allentown, Harrisburg, and Philadelphia, on the other hand, registered declines in typical worker wages during the first five years of the recovery and little to no progress in reducing poverty.

The picture over a longer timeframe is similar, though somewhat less dire. Pittsburgh posted middling growth but very strong performance on prosperity and inclusion over the past 10 to 15 years. That provided a contrast with Allentown, where the economy grew somewhat faster but productivity and average standards of living did not, and economic inclusion suffered. The remaining metro areas—Harrisburg, Philadelphia, and Scranton—all grew weakly but managed to post middling performance on prosperity and inclusion indicators.

Pennsylvania remains a whiter state than the national average, but its major metro areas are increasingly diverse, particularly in the southeastern part of the state around Philadelphia and Allentown. Nonetheless, Pennsylvania’s economic challenges are frequently framed around the plight of the white working class, which, as my colleague Bill Frey notes, comprises 59 percent of the state’s eligible voter population. In Allentown, Harrisburg, and Philadelphia, whites have indeed suffered long-term wage stagnation. Yet in the more manufacturing-oriented Pittsburgh and Scranton areas, median wages for whites rose significantly from 2000 to 2014. By contrast, workers of color have experienced much more troublesome wage trends, losing ground to whites in every major metro area. Across the five metro areas, typical earnings differences between whites and other workers in 2014 averaged between $10,000 and $12,000.

A look at the most recent job trends, from 2014 to 2016, suggests a shifting metro growth map in Pennsylvania. Over the past two years, Philadelphia and Harrisburg have posted much stronger job gains, Allentown’s average annual job growth rate has halved, and Pittsburgh’s job level has flat-lined. The state’s two largest urban centers frame this stark change. In every major industry category, average annual job growth in Philadelphia over the past two years outpaced its rate over the previous five years. In Pittsburgh, on the other hand, job growth slowed—or turned negative—in nearly every sector. The recent energy price crash has halted a fracking boom that buoyed the western Pennsylvania economy through much of the recovery, at the same time that Philadelphia is enjoying a surge in professional services and construction employment. Fittingly, Donald Trump used Allegheny County, outside Pittsburgh, as the backdrop for one of his first post-primary campaign stops, while Philadelphia’s economic momentum will be the background of the Democrats’ argument for another four years in the White House.

The Pennsylvania economy is thus not easily characterized, and the attitudes of its voters are likely to be shaped by regionally specific short-term and long-term trends. Those trends seem sure to keep the Keystone State’s electoral votes and U.S. Senate seat highly contested over the next several months.

Key messages and Policy Pointers

• Given the stalemate in U.N. climate negotiations, the best arena to strike a workable deal is among the members the Major Economies Forum on Energy and Climate (MEF).

• The 13 MEF members—including the EU-27 (but not double-counting the four EU countries that are also individual members of the MEF)—account for 81.3 percent of all global emissions.

• This proposal devises a fair compromise to break the impasse to develop a science-based approach for fairly sharing the carbon budget in order to have a 75 percent chance of avoiding dangerous climate change.

• To increase the likelihood of a future climate agreement, carbon accounting must shift from pro­duction-based inventories to consumption-based ones.

• The shares of a carbon budget to stay below 2 °C through 2050 are calculated by cumulative emis­sions since 1990, i.e. according to a short-horizon polluter pays principle, and national capability (income), and allocated to MEF members through emission rights. This proposed fair compromise addresses key concerns of major emitters.

• According to this accounting, no countries have negative carbon budgets, there is substantial time for greening major developing economies, and some developed countries need to institute very rapid reductions in emissions.

• To provide a ‘green ladder’ to developing countries and to ensure a fair global deal, it will be crucial to agree how to extend sufficient and predictable financial support and the rapid transfer of technology.

The most urgent and complicated ethical issue in addressing climate change is how human society will share the work of reducing greenhouse gases (GHG) emissions. Looking ahead to 2015 when a new international treaty on climate change should be agreed upon, we fear we are headed towards a train wreck.

Key developed countries have made it clear they will not accept any regime excluding emerging economies such as China and Brazil, and the U.S. and other ‘umbrella’ countries are calling for only voluntary, bottom-up com­mitments. Yet the major developing countries have made equity the sine qua non for any kind of agreement: they will not take on mandatory emission reduction targets with perceived implications for their economic growth and social development, unless the wealthier countries commit to deep emissions cuts and act first.

These entrenched positions between the different blocs have led to the current impasse, but as Nobel laureate economist and philosopher, Amaryta Sen pointed out, the perfect agreement that never happens is more unjust than an imperfect one that is obtainable.

What is a fair and feasible way to break the impasse, given that all efforts are faltering? The most difficult task is determining a country’s fair share of the required emissions reductions in a way that is politically feasible. After 20 years of negotiations and gridlock, it is clear that many conflicting principles of equity are brought to the table, so a solution will have to be based on some kind of ‘negotiated justice,’ or a ‘fair compromise,’ which will not be one preferred by just one group of countries.

A few basic requirements must be met. A feasible, fair and effective climate agreement must involve the largest emitters from both the developed and developing countries. Such an agreement must find a way to engage the latter without penalizing them or the former countries too much. In order to secure progress, above all it must be acceptable to the two world superpowers and top carbon emitters, China and the U.S.; with this leadership, in fact, other emitters will likely follow. This agreement could be forged in a ‘plurilateral’ setting where a limited number of countries come together first, and then be brought into the formal U.N. negotiations as the basis for a future deal, perhaps by 2015.

How can future negotiations on emissions reductions overcome such political inertia? We suggest that taking three manageable steps to a fair compromise will unlock progress.

First, negotiate a core agreement between the 13 members in the MEF (including the EU-27), which accounts for 81.3 percent of all global emissions. This makes the negotiations feasible, where deals can be struck that would be impossible in the vast U.N. forum.

Second, use consumption-based emissions accounting, which is much fairer than the cur­rent production/territorial-based accounting that all past agreements and negotiations have been based upon. These are relatively new numbers developed by the Norwegian research center CICERO, and have been vetted by the top scientific journals and increasingly utilized by policymakers.

Third, forge a fair compromise to allocate emissions rights. We propose a compromise based on a short-horizon ‘polluter pays principle’ and an indicator of national capability (income).

This third step in particular is a genuine compromise for both developed and developing countries, but it is re­quired to break the current gridlock. Each MEF member gives and takes something from this simple, workable framework and all gain a liveable planet in the future.

Throughout the paper we first explain why counting carbon emissions by consumption is far better and the im­plications of doing so, and we then introduce the MEF and why it is a promising arena for forging a bold compro­mise like the one so badly needed before 2015. We then calculate what the numbers actually mean for that group of countries and develop a proposal for a fair compromise that embodies a feasible but fair operationalization of the central equity principles of the U.N. climate treaty, i.e. action by countries according to their responsibility and capability. We conclude with a discussion of how a start in the MEF could lead to a new framework being brought into those broader negotiations.

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Editor’s Note: An interactive feature, highlighting the key findings from this report, can be found here.

Over a billion people worldwide live on less than $1.25 a day. But that number is falling. This has given credence to the idea that extreme poverty can be eliminated in a generation. A new study by Brookings researchers examines the prospects for ending extreme poverty by 2030 and the factors that will determine progress toward this goal. Below are some of the key findings:

1. We are at a unique point in history where there are more people in the world living right around the $1.25 mark than at any other income level. This implies that equitable growth in the developing world will result in more movement of people across the poverty line than across any other level.

2. Sustaining the trend rate of global poverty reduction requires that each year a new set of individuals is primed to cross the international poverty line. This will become increasingly difficult as some of the poorest of the poor struggle to make enough progress to approach the $1.25 threshold over the next twenty years.

3. The period from 1990 to 2030 resembles a relay race in which responsibility for leading the charge on global poverty reduction passes between China, India and sub-Saharan Africa. China has driven progress over the last twenty years, but with its poverty rate now down in the single digits, the baton is being passed to India. India has the capacity to deliver sustained progress on global poverty reduction over the next decade based on modest assumptions of equitable growth. Once India’s poverty is largely exhausted, it will be up to sub-Saharan Africa to run the final relay leg and bring the baton home. This poses a significant challenge as most of Africa’s poor people start a long way behind the poverty line.

4. As global poverty approaches zero, it becomes increasingly concentrated in countries where the record of and prospects for poverty reduction are weakest. Today, a third of the world’s poor live in fragile states but this share could rise to half in 2018 and nearly two-thirds in 2030.

5. The World Bank has recently set a goal to reduce extreme poverty around the world to under 3 percent by 2030. It is unlikely that this goal can be achieved by stronger than expected growth across the developing world, or greater income equality within each developing country, alone. Both factors are needed simultaneously.

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In July 2013, the World Bank decided to phase-out lending for new coal-fired power plants in middle-income countries, except in rare circumstances where no financially feasible alternatives to coal exist. This decision was made for a combination of reasons including concerns about local air pollution and global climate change, as well as evidence that these projects have little trouble attracting private capital without World Bank involvement. Now, policymakers are considering whether the World Bank’s policy should also cover projects designed to retrofit existing coal-fired power plants in middle-income countries by adding scrubbers and other technologies that increase efficiency and reduce air pollution. 

There are several fundamental questions underlying this debate: Is financing coal power plant retrofits a good use of World Bank resources? If so, should the World Bank insist on the use of best available technologies when it finances these retrofits? These questions are vitally important, as retrofit technologies are designed to minimize toxic air pollutants, including soot and smog, which are both dangerous for human health and the world’s climate. Older coal plants without retrofit technologies are less efficient, and emit more pollutants per unit of coal burned than those with retrofits applied. Evidence shows that soot and smog can cause respiratory illness and asthma, especially in children and elderly people, and can diminish local agricultural production by reducing sunlight. Furthermore, in many countries coal plants are the single largest source of carbon dioxide emissions driving climate change. 

To help inform the policy debate, this analysis surveys the technologies in use in more than 2,000 coal-fired power plants currently in operation, under construction, or planned in middle-income countries. The findings reveal that roughly 70 percent of these power plants rely on old, inefficient technologies. Retrofitting these plants would reduce pollution, increase efficiency and save lives. In middle-income countries that do not mandate coal retrofits, the World Bank could play a helpful role in financing those improvements, particularly as part of broader policy reforms designed to reduce climate pollution and increase efficiency across the power sector.

Importantly, however, the data also show that important qualifications should be made. First, because coal is a major source of greenhouse gas emissions and retrofits are likely to keep coal plants operating longer, the World Bank should insist that retrofit projects occur within a context of national and local policy reforms designed to abate greenhouse gas pollution. Toward this end, the World Bank should continue to help countries build capacity to adopt and enforce climate pollution controls and other offsetting actions and policies. Second, the World Bank should insist that projects it finances use best available pollution control technologies. Already, the substantial majority of coal retrofits completed to date in middle-income countries have used best available technologies. These retrofits were almost universally financed exclusively by private capital. The World Bank should not use its capital to support inferior retrofit technologies that are below the standards already adopted by the private sector in middle-income countries.

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In the United States, the official poverty rate for 2012 stood at 15 percent based on the national poverty line which is equivalent to around $16 per person per day. Of the 46.5 million Americans living in poverty, 20.4 million live under half the poverty line. This begs the question of just how poor America’s poorest people are.

Poverty, in one form or other, exists in every country. But the most acute, absolute manifestations of poverty are assumed to be limited to the developing world. This is reflected in the fact that rich countries tend to set higher poverty lines than poor countries, and that global poverty estimates have traditionally excluded industrialized countries and their populations altogether.

An important study on U.S. poverty by Luke Shaefer and Kathryn Edin gently challenges this assumption. Using an alternative dataset from the one employed for the official U.S. poverty measure, Shaefer and Edin show that millions of Americans live on less than $2 a day—a threshold commonly used to measure poverty in the developing world. Depending on the exact definitions used, they find that up to 5 percent of American households with children are shown to fall under this parsimonious poverty line.

Methodologies for measuring poverty differ wildly both within and across countries, so comparisons and their interpretation demand extreme care.

These numbers are intended to shock—and they succeed. The United States is known for having higher inequality and a less generous social safety net than many affluent countries in Europe, but the acute deprivations that flow from this are less understood. A crude comparison of Shaefer and Edin’s estimates with the World Bank’s official $2 a day poverty estimates for developing economies would place the United States level with or behind a large set of countries, including Russia (0.1 percent), the West Bank and Gaza (0.3 percent), Jordan (1.6 percent), Albania (1.7 percent), urban Argentina (1.9 percent), urban China (3.5 percent), and Thailand (4.1 percent). Many of these countries are recipients of American foreign aid. However, methodologies for measuring poverty differ wildly both within and across countries, so such comparisons and their interpretation demand extreme care.

This brief is organized into two parts. In the first part, we examine the welfare of America’s poorest people using a variety of different data sources and definitions. These generate estimates of the number of Americans living under $2 a day that range from 12 million all the way down to zero. This wide spectrum reflects not only a lack of agreement on how poverty can most reliably be measured, but the particular ways in which poverty is, and isn’t, manifested in the U.S.. In the second part, we reexamine America’s $2 a day poverty in the context of global poverty. We begin by identifying the source and definition of poverty that most faithfully replicates the World Bank’s official poverty measure for the developing world to allow a fairer comparison between the U.S. and developing nations. We then compare the characteristics of poverty in the U.S. and the developing world to provide a more complete picture of the nature of poverty in these different settings. Finally, we explain why comparisons of poverty in the U.S. and the developing world, despite their limitations and pitfalls, are likely to become more common.

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In the developing world, more than 200 million children under the age of five years are at risk of not reaching their full development potential because they suffer from the negative consequences of poverty, nutritional deficiencies and inadequate learning opportunities. Overall, 165 million children (one in four) are stunted, and 90 percent of these children live in Africa and Asia. And though some progress has been made globally, child malnutrition remains a serious public health problem with enormous human and economic costs. Worldwide, only about 50 percent of children are enrolled in preprimary education, and in low-income countries a mere 17 percent. And though more and more children are going to school, millions have little to show for it. By some accounts, 250 million children of primary school age cannot read even part of a sentence. Some of these children have never been to school (58 million); but more often, they perform poorly despite having spent several years in school, which reflects not only the poor quality of many schools but also the multiple disadvantages that characterize their early life.

Ensuring that all children—regardless of their place of birth and parental income or education level—have access to opportunities that will allow them to reach their full potential requires investing early in their development. To develop their cognitive, linguistic, socioemotional and physical skills and abilities, children need good nutrition and health, opportunities for play, nurture and learning with caregivers, early stimulation and protection from violence and neglect.

The Case for Early Interventions 

The arguments for investing in children early are simple and convincing. Early investment makes sense scientifically. The brain is almost fully developed by age three, providing a prime opportunity to achieve high gains. We know that the rapid rate of development of the brain’s neural pathways is responsible for an individual’s cognitive, social and emotional development, and there is solid evidence that nutrition and stimulation during the first 1,000 days of life are linked to brain development. 

Early investment makes sense in terms of equity. The playing field has the highest chances of being leveled early on, and we know that programs have a higher impact for young children from poorer families. In the United States, for example, increasing preschool enrollment to 100 percent for low-income children would reduce disparities in school readiness by 24 percent between black and white children and by 35 percent between Hispanic and white children. We also know that equalizing initial endowments through early childhood development (ECD) programs is far more cost-effective than compensating for differences in outcomes later in life. 

Early investment makes sense economically. Investing early prevents higher costs down the road, and interventions yield a high return on investment. There is evidence of the benefits for the individual and for society more broadly. For instance, at the level of the individual, in Jamaica children participating in an early childhood stimulation program were found to have 25 percent higher earnings 20 years later compared with children who did not participate. At the economy-wide level, eliminating malnutrition is estimated to increase gross domestic product by 1 to 2 percentage points annually, while countries with school systems that have a 10-percentage-point advantage in the proportion of students

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The United Nations will convene a major international conference on Financing for Development (FfD) in Addis Ababa, Ethiopia from July 13 to 16, 2015, to discuss financing for the post-2015 agenda on sustainable development. This conference, the third of its kind, will hope to replicate the success of the Monterrey conference in 2002 that has been credited with providing the glue to bind countries to the pursuit of the Millennium Development Goals (MDGs).

The analogy is pertinent but should not be taken too far. The most visible part of the Monterrey Consensus was the commitment by rich countries to “make concrete efforts towards the target of 0.7 percent of gross national product” as official development assistance (ODA). This was anchored in a clear premise that “each country has primary responsibility for its own economic and social development,” which includes support for market-oriented policies that encourage the private sector. While not all of the Monterrey targets have been met, there has been a considerable increase in resources flowing to developing countries, as a central plank of efforts to achieve the MDGs.

Today, aid issues remain pivotal for a significant number of countries, but they are less relevant for an even larger number of countries. The core principles of Monterrey need to be reaffirmed again in 2015, but if the world is to follow-through on a universal sustainable development agenda, it must address the multi-layered financing priorities spanning all countries. A simple “30-30-130” mnemonic helps to illustrate the point. There are 193 U.N. member states. Of these, only around 30 are still low-income countries (33 at the latest count). These are the economies that are, and will continue to be, the most heavily dependent on aid as the world looks to how it should implement the sustainable development goals (SDGs). Conversely, there are only around 30 “donor” countries (including 28 members of the OECD Development Assistance Committee, or DAC) that have made international commitments to provide more aid. For the remaining 130 or so emerging middle-income economies that have achieved higher levels of average prosperity, aid discussions risk forming a sideshow to the real issues that constrain their pursuit of sustainable development. The bottom line is that for most countries, the Financing for Development conference should unlock finance from many different sources, including but not exclusively aid, to implement the SDGs.

Addis will take place in the context of sluggish global growth, an upsurge in conflict, considerable strains in multilateral 2 political cooperation, and challenging ODA prospects in many countries.

There are other differences between Addis and Monterrey. Monterrey took place after agreement had been reached on the MDGs, while Addis will precede formal agreement on the SDGs by a few months. Monterrey was focused on a government-to-government agreement, while Addis should be relevant to a far larger number of stakeholders—including businesses, academics, civil society, scientists, and local authorities. Monterrey was held against a backdrop of general optimism about the global economy and widespread desire for intensified international collaboration following the terrorist events of September 11, 2001. Meanwhile, Addis will take place in the context of sluggish global growth, an upsurge in conflict, considerable strains in multilateral political cooperation, and challenging ODA prospects in many countries. In addition, regulators are working to reduce risk-taking by large financial institutions, increasing the costs of providing long-term capital to developing countries.

Against this backdrop, an Intergovernmental Committee of Experts on Sustainable Development Finance (ICESDF) crafted a report for the United Nations on financing options for sustainable development. The report provides an excellent overview of issues and the current state of global financing, and presents over 100 recommendations. But it falls short on prescribing the most important priorities and action steps on which leaders should focus at Addis.

This paper seeks to identify such a priority list of actions, with emphasis on the near-term deliverables that could instigate critical changes in trajectories towards 2030. At the same time, the paper does not aim to describe the full range of outcomes that need to be in place by roughly 2025 in order to achieve the SDGs by their likely deadline of 2030. Addis will be a critical forum to provide political momentum to a few of the many useful efforts already underway on improving global development finance. Time is short, so there is limited ability to introduce new topics or ideas or to build consensus where none already exists.

We identify three criteria for identifying top priorities for agreement in Addis:

• Priorities should draw from, and build on, on-going work—including the ICESDF report and the outputs „„of several other international workstreams on finance that are underway.
• Agreements should have significant consequences for successful implementation of the SDGs at the coun„„try, regional or global level.
• Recommendations should be clearly actionable, with next steps in implementation that are easy to under„„stand and easy to confirm when completed.

It is not necessary (or desirable) that every important topic be resolved in Addis. In practical terms, negotiators face two groups of issues. First are those on which solutions can be negotiated in time for the July conference. Second are those for which the problems are too complex to be solved by July, but which are still crucial to be resolved over the coming year or two if the SDGs are to be achieved. For this second group of issues, the intergovernmental agreement can set specific timetables for resolving each problem at hand. There is some precedent for this, including in the 2005 U.N. World Summit, which included timetables for some commitments. What is most critical is that the moment be used to anchor and advance processes that will shift toward creating a global financing system for achieving sustainable development across all countries. Committing to timetables for action and building on reforms already undertaken could be important ways of enhancing the credibility of new agreements.

In this paper, we lay out nine areas where we believe important progress can be made. In each area, we start from identifying a gap or issue that could present an obstacle to the successful implementation of the SDGs if left unattended. In some cases the gaps will affect all countries, in other cases only a subset of countries. But we believe that the package of actions, taken as a whole, reflects a balance of opportunities, responsibilities and benefits for all countries. We also believe that by making the discussion issue-focused, the needs for financing can be balanced with policy actions that will be required to make sure financing is effectively and efficiently deployed.

In addition to the nine areas listed below, there are other commitments already made which have not yet been met. We urge renewed efforts to meet these commitments, but also recognize that political and financial realities must be managed to make progress. Such commitments include meeting the Monterrey Consensus target to provide 0.7 percent of GNI in official development assistance (ODA), the May 2005 agreement of all EC-15 countries to reach that target by 2015, and bringing the Doha Development Round of trade talks to a successful conclusion. These remain important and relevant, but in this paper we choose to focus on new areas and fresh ideas so as to avoid treading over well-worn territory again.

The Central African Republic (CAR), a landlocked country roughly the size of Texas, has endured a nearly constant state of political crisis since its independence from France in 1960. In fact, in the post-colonial era, the CAR has experienced only 10 years of rule under a democratically elected leader, Ange-Félix Patassé, from 1993 to 2003. Four of the CAR’s past five presidents have been removed from power through unconstitutional means, and each of these transitions has been marred by political instability and violence. Fragile attempts to build democratic political institutions and establish the rule of law have been undermined by coups, mutinies, and further lawlessness, making cycles of violence tragically the norm in the CAR.

The country’s current crisis (2012–present) stems from political tensions and competition for power between the predominantly Muslim Séléka rebel coalition and the government of President Francois Bozizé, as well as unresolved grievances from the CAR’s last conflict (2006–2007). Since the Séléka’s overthrow of the government in March 2013 and concurrent occupation of large areas of the country, the conflict has evolved to encompass an ethno-religious dimension: So-called Christian defense militias named the anti-balaka emerged to counter the Séléka alliance, but in effect sought revenge against the CAR’s Muslim minority (about 15 percent of the population), including civilians. During a March 2014 trip to the Central African Republic, United Nations High Commissioner for Human Rights Navi Pillay remarked that “the inter-communal hatred remains at a terrifying level,” as reports of atrocities and pre-genocidal indicators continued to surface. Even today, horrific crimes against civilians are still being committed at a frightening frequency in one of the poorest countries in the world: The CAR has a per capita GNI of $588 and a ranking of 185 out of 187 on 2013’s United Nations Human Development Index.

Amid the escalating insecurity in 2013, African Union (AU), French, and European forces were deployed under the auspices of the African-led International Support Mission in Central Africa (MISCA) to disarm militant groups and protect civilians at a critical juncture in December, and their efforts contributed to the relative stabilization of the capital in early 2014. Meanwhile, in January 2014, Séléka leaders relinquished power to a transitional government led by former mayor of Bangui, Catherine Samba-Panza, who was then tasked with preparing for national elections and establishing security throughout the country. In September 2014, the United Nations incorporated the MISCA forces into the larger Multidimensional Integrated Stabilization Mission in the Central African Republic (MINUSCA) and then in 2015 extended and reinforced its presence through 2016, in response to the ongoing violence. Despite the international military intervention and efforts of the transitional authorities to address the pervasive insecurity, reprisal killings continue and mobile armed groups still freely attack particularly remote, rural areas in the central and western regions of the country. The unguarded, porous borders have also allowed rebel forces and criminal elements to flee into distant areas of neighboring countries, including Chad and South Sudan, in order to prepare their attacks and return to the CAR.

This paper will explore the origins of the complex emergency affecting the CAR, with a particular focus on the economic causes and potential economic strategies for its resolution. It will begin by providing an overview of the core issues at stake and enumerating the driving and sustaining factors perpetuating the violence. Then it will discuss the consequences of the conflict on the humanitarian, security, political, and economic landscape of the CAR. Finally, it will highlight strategies for addressing the underlying issues and persisting tensions in the CAR to begin building a durable peace, arguing that the national authorities and international partners adopt a holistic approach to peace building that prioritizes inclusive economic recovery given the economic roots of the crisis.

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Executive Summary

Cities are creations of their states. Their boundaries, their powers, and their responsibilities are all substantially prescribed by state law. With the advent of the new federalism—beginning in the 1970s and resurgent today—the devolution of power from Washington to state capitals has increased the importance of state decision making for cities.

Yet, this shift occurred precisely as cities were losing political clout in state legislatures due to population decline within city limits and rampant growth in suburban jurisdictions.

This paper argues that in response to shifting population distributions within states, cities need to build new coalitions to effectively achieve their legislative goals within state legislatures. Case studies—New York City, Chicago, Detroit, and the three largest cities in Ohio (Cincinnati, Cleveland, and Columbus)—are used to more closely examine coalition-building methods.

Overall, the authors find:

• Cities' dependence on state government has increased as the federal government has ceded more power to the states. As cities' populations have declined, they have become weaker in state legislatures that have grown more powerful due to federal policy. In the peak year of 1978, about 15 percent of city revenues came from the federal government. By 1999 that had decreased to 3 percent. Concurrently, the federal government has shifted a number of programs to the states, which control the rules and revenue mechanisms cities operate under.

• Traditional political coalitions cities have used to achieve their state legislative goals are no longer as effective. Partisan (usually Democratic) coalitions are less reliable as focus has shifted to suburban swing districts. Moreover, as their power has decreased, cities' agendas have become more reactive, aiming to preserve the status quo in funding, infrastructure projects, and autonomy.

• Older, inner-ring suburbs are a logical new partner for cities in state legislatures. Increasingly, these suburbs, and some outer ones, have common interests with central cities as they address immigration, fiscal stress, and infrastructure woes. Such alliances would also better address metropolitan-wide issues on a metropolitan basis.

There remain many obstacles to forging such coalitions, however, including longtime distrust among big cities and their neighbors, racial disparities, and in some cases, growing investment in central cities while surrounding suburbs languish. Nonetheless, for cities to effectively influence their state governments more creative approaches to coalition building must be found.

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This presentation by Alan Berube to the Cleveland EITC Forum explains how boosting low-income families' participation in tax credits can help put the city's workers, neighborhoods, and the local economy itself on more solid financial ground.

The metro program hosts and participates in a variety of public forums. To view a complete list of these events, please visit the metro program's Speeches and Events page which provides copies of major speeches, powerpoint presentations, event transcripts, and event summaries.

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It can be hard to find good news lately in Ohio. Foreclosure filings are at record levels -- again. Income tax receipts plummeted by 35.6 percent from April 2008 to April 2009, and the downward trend continues in 2010. Unemployment remains high: The Cleveland region's jobless rate was 8.9 percent in December.

But the current devastation is only half the story. Ohio is in a paradoxical moment: The present is painful, but the future could be promising. And in another paradox, its manufacturing heritage is part of the reason why.

The pre-recession economy was driven by consumption, energy profligacy and financial bubbles. The next American economy must be very different: export oriented, low carbon and innovation fueled.

According to the World Bank, exports make up only 11 percent of the gross domestic product of the United States, compared to 40 percent in Europe, 40 percent in China, 36 percent in Canada, 22 percent in India and 16 percent in Japan. Only 4 percent of U.S. companies export. Less than 0.5 percent of U.S. companies operate in more than one country.

Ohio can lead the United States back into the export game, because the state still manufactures what the rest of the world wants, including medical instruments, electrical machinery and aircraft parts.

Brazil and China, two rapidly growing economies, are Ohio's third- and fourth-largest trading partners. The seven largest Ohio metros exported about $3.6 billion's worth of goods and services to Brazil, India and China in 2007 alone.

Cleveland is in the country's top quarter of large metros in terms of export intensity (the percentage of metropolitan-region output that is exported overseas). Every patient who comes from abroad to visit the Cleveland Clinic bolsters the region's service exports economy.

Low carbon is the second hallmark of the next U.S. economy, and it could spark a production revolution in Ohio and other manufacturing states.

The transition to a low-carbon economy is fundamentally about markets and products. We will need new energy supplies -- like wind and biomass -- and new machines -- like turbines and solar panels.

Also, we will need new kinds of batteries, new kinds of cars and energy-efficient appliances, smart meters and local food. All of these products could be designed, developed, built and grown in Ohio.

The state ranks seventh in the nation for total green-technology patents for 1998–2007, with strengths in batteries, hybrid systems and fuel cells.

According to a recent report by the Pew Center on the States, Ohio's number of clean-energy jobs grew by more than 7 percent between 1998 and 2007, even as the overall number of jobs in the state fell 2 percent.

Creating the products and services demanded across the globe, and those that fit with a low-carbon world, will take quantum leaps in innovation.

Already, the state is gaining some notice, attracting $46 million in venture capital investments in clean technology in 2008, more than triple the 2007 amount.

The state is in the top 10 nationally in science and engineering doctorates awarded, in academic research and development spending, and in small-business-innovation research awards, according to recent National Science Foundation data.

Cleveland's patent rate, another measure of innovative power, is above the national average.

We used to think that we could divorce innovation entirely from production, keeping the former here as we sent most of the latter abroad. But important innovations also emerge from the factory floor. Innovating more means producing more, and that production can take place in Ohio.

It is true that Ohio's job losses in manufacturing have been staggering, especially in the northeast corner of the state. But manufacturing doesn't have to be a millstone -- it can be a stepping stone toward the next economy.

It is this mindset that should drive Ohioans' policy decisions over the next year. It is not easy to raise spending on innovation, or vote for an additional $700 million for the Third Frontier, while pressing school districts and local governments to find more savings. But those hard choices will position Ohio for a stronger future.

The "Restoring Prosperity" report that the Brookings Institution and the Greater Ohio Policy Center released last week recommends 39 policies -- from rebuilding physical assets to reorganizing work-force supports to collaborating at the regional scale -- that can help Ohio strengthen its footing in an export-oriented, low-carbon and innovation-fueled world. Groups like the Fund for our Economic Future are already working to advance many of these ideas.

Last week, we showed how the share of the nation’s venture capital going to the Bay Area has actually increased over the last decade and posed the question: Are San Francisco and Silicon Valley good models for most cities to imitate? And with the answer being “no,” what strategies should cities employ to bolster local capital networks?

The answer depends upon regions’ technical strengths—different technologies imply different venture capital strategies. A common assumption is that most cities look like Silicon Valley with software monopolizing venture funding, but in many places a mix of different technologies are far more important. Metropolitan level venture capital data from 2005 to 2015 from Pitchbook illustrates how different cities require different strategies.

In Cleveland, for example, more than three-quarters of deals are in clinical care services and medical devices driven by Cleveland Clinic’s world-renowned success in identifying and funding companies creating novel health care technologies. However, software and medical technologies require very different venture capital strategies. Software companies need upfront funding but can scale quickly with few additional funding rounds. Medical technologies require FDA approval and clinical trials, costly and lengthy processes, implying the need to consider whether regional venture capital efforts can provide not only seed funding but multiple rounds. If not, promising health care companies may flame out or relocated elsewhere.

Pittsburgh, on the other hand, has a far more mixed portfolio than either Cleveland or the Bay Area, one of the most diverse in the country. Pittsburgh’s top 10 technologies funded over the last decade include laboratory services, energy exploration, battery storage, medical devices, software, and electronic equipment—with none making up more than one-fifth the metro area’s portfolio. Pittsburgh’s mix of educational and non-profit institutions like Carnegie Mellon University, University of Pittsburgh and UPMC support research in engineering, software, medical technologies, and therapeutics. In addition private companies like Google, Alcoa, and the shale gas boom have provided the region with a blend of market opportunities that are extremely different than that of the Bay Area.

Equally important to the type of technologies funded is how venture capital deals are funded. In the Bay Area private venture capital firms represent the vast majority of funding both in terms of numbers of deals and overall value. Deals from accelerators and universities together equal less than one-tenth of what is invested by private venture capital firms. Given the many private investment firms in the Bay Area, universities and accelerators are better at creating and incubating technologies instead of funding them. Unfortunately, other markets lack such private sector assets and try to jumpstart investments through other methods.

Over the last decade, Pittsburgh made just 3 percent as many total venture deals as the Bay Area, but breaking that figure down by the funding source, universities outperformed in Pittsburgh. There they funded nearly 30 percent as many deals as universities did in San Francisco and Silicon Valley, a rate 10 times as high as would be expected based the Bay Area “norm.” One reason for this is Pittsburgh is relatively new to venture funding and may have more research assets than private venture capital firms. Therefore, university funds could fill an important capital gap.

A common worry is these non-private sector deals are poor investments that private firms, with superior market intelligence, simply refused to make. This argument is most persuasive in regions like the Bay Area where there is no shortage of private capital to fund good ideas. However in other regions these investments can prove to be smart precursors to private funding. Also, rarely do public institutions make investment decisions. Instead, public dollars are funneled through private investment firms to kick start regional activity. For example, Philadelphia’s new StartUp PHL fund is paid for by taxpayer dollars but investment decisions are made by First Capital, the city’s largest private venture capital fund. The fund requires recipients to stay in the city for at least six months after funding, with the hope to increase the number of growing technology companies in Philadelphia.

Cleveland and Pittsburgh are specific examples of a general point. Cities have unique technology competencies and pathways to venture capital. Economic strategies to attract outside, and bolster local capital, should reflect those attributes and not simply default to what seems to have worked in the Bay Area. 

Last week, we showed how the share of the nation’s venture capital going to the Bay Area has actually increased over the last decade and posed the question: Are San Francisco and Silicon Valley good models for most cities to imitate? And with the answer being “no,” what strategies should cities employ to bolster local capital networks?

The answer depends upon regions’ technical strengths—different technologies imply different venture capital strategies. A common assumption is that most cities look like Silicon Valley with software monopolizing venture funding, but in many places a mix of different technologies are far more important. Metropolitan level venture capital data from 2005 to 2015 from Pitchbook illustrates how different cities require different strategies.

In Cleveland, for example, more than three-quarters of deals are in clinical care services and medical devices driven by Cleveland Clinic’s world-renowned success in identifying and funding companies creating novel health care technologies. However, software and medical technologies require very different venture capital strategies. Software companies need upfront funding but can scale quickly with few additional funding rounds. Medical technologies require FDA approval and clinical trials, costly and lengthy processes, implying the need to consider whether regional venture capital efforts can provide not only seed funding but multiple rounds. If not, promising health care companies may flame out or relocated elsewhere.

Pittsburgh, on the other hand, has a far more mixed portfolio than either Cleveland or the Bay Area, one of the most diverse in the country. Pittsburgh’s top 10 technologies funded over the last decade include laboratory services, energy exploration, battery storage, medical devices, software, and electronic equipment—with none making up more than one-fifth the metro area’s portfolio. Pittsburgh’s mix of educational and non-profit institutions like Carnegie Mellon University, University of Pittsburgh and UPMC support research in engineering, software, medical technologies, and therapeutics. In addition private companies like Google, Alcoa, and the shale gas boom have provided the region with a blend of market opportunities that are extremely different than that of the Bay Area.

Equally important to the type of technologies funded is how venture capital deals are funded. In the Bay Area private venture capital firms represent the vast majority of funding both in terms of numbers of deals and overall value. Deals from accelerators and universities together equal less than one-tenth of what is invested by private venture capital firms. Given the many private investment firms in the Bay Area, universities and accelerators are better at creating and incubating technologies instead of funding them. Unfortunately, other markets lack such private sector assets and try to jumpstart investments through other methods.

Over the last decade, Pittsburgh made just 3 percent as many total venture deals as the Bay Area, but breaking that figure down by the funding source, universities outperformed in Pittsburgh. There they funded nearly 30 percent as many deals as universities did in San Francisco and Silicon Valley, a rate 10 times as high as would be expected based the Bay Area “norm.” One reason for this is Pittsburgh is relatively new to venture funding and may have more research assets than private venture capital firms. Therefore, university funds could fill an important capital gap.

A common worry is these non-private sector deals are poor investments that private firms, with superior market intelligence, simply refused to make. This argument is most persuasive in regions like the Bay Area where there is no shortage of private capital to fund good ideas. However in other regions these investments can prove to be smart precursors to private funding. Also, rarely do public institutions make investment decisions. Instead, public dollars are funneled through private investment firms to kick start regional activity. For example, Philadelphia’s new StartUp PHL fund is paid for by taxpayer dollars but investment decisions are made by First Capital, the city’s largest private venture capital fund. The fund requires recipients to stay in the city for at least six months after funding, with the hope to increase the number of growing technology companies in Philadelphia.

Cleveland and Pittsburgh are specific examples of a general point. Cities have unique technology competencies and pathways to venture capital. Economic strategies to attract outside, and bolster local capital, should reflect those attributes and not simply default to what seems to have worked in the Bay Area. 

Event Information

On May 24, the John L. Thornton China Center at Brookings hosted U.S. Undersecretary of the Treasury for International Affairs Nathan Sheets for a discussion on the U.S.-China economic relationship and engagement in preparation for the economic track of the upcoming eighth U.S.-China Strategic & Economic Dialogue (S&ED), to be held in Beijing in early June. Senior Fellow and Director of the Brookings China Center Cheng Li provided opening remarks and Senior Fellow David Dollar moderated the discussion.

Undersecretary Sheets was confirmed by the U.S. Senate as the Treasury Department’s undersecretary for international affairs in September 2014. In this position, he serves as the senior official responsible for advising the secretary of the Treasury on international economic issues. Previously, Sheets worked as global head of international economics at Citigroup, and at the Federal Reserve Board in a number of positions, including as director of the division of international finance.

Following the discussion, panelists took questions from the audience.

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Video

• Introduction by Cheng Li, and remarks by Nathan Sheets
• Discussion between Nathan Sheets and David Dollar

Audio

• A preview of the eighth U.S.-China Strategic and Economic Dialogue

Transcript

• Transcript (.pdf)

Event Materials

• 20160524_us_china_sheets_transcript