Ohio can be an export leader — again

By BRUCE KATZ and LAVEA BRACHMAN

It can be hard to find good news in Ohio. Foreclosure filings are at record levels — again. Income tax receipts plummeted 35.6 percent from April 2008 to April 2009, and the downward trend continues in 2010. Unemployment remains high: Youngstown’s metro jobless rate reached 13 percent in December 2009.

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 U.S. GDP, compared to 40 percent in Europe, 40 percent in China, and 36 percent in Canada. Only 4 percent of U.S. companies export.

Ohio can lead the U.S. 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. Youngstown and six other large Ohio metros exported about $3.6 billion’s worth of goods and services to Brazil, India and China in 2007 alone.

Youngstown is in the country’s top five large metros in terms of export intensity (the percentage of metropolitan region output that is exported overseas), and leads the state in percentage export growth between 2002 and 2008.

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 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, and smart meters. All of these products could be designed, developed and built in Ohio.

Green technology

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.

Ohio attracted $46 million in venture capital investments in clean technology in 2008, over 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.

It is true that Ohio’s job losses in manufacturing have been staggering. But manufacturing doesn’t have to be a millstone — it can be a stepping stone toward the next economy. Important innovations emerge from the factory floor. Innovating more means producing more, and that production can take place in Ohio.

This mindset 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 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 recently recommends 39 policies, from rebuilding physical assets to collaborating at the regional scale, that can help Ohio be strong in an export-oriented, low-carbon and innovation-fueled world.

Youngstown’s leadership in pioneering the concept of “right-sizing” the city, the Youngstown Business Incubator’s business growth efforts and Youngstown State’s steps to generate neighborhood stability and growth exemplify some of the ideas in the report about transforming the city and region into stronger, greener places where next economy leaders want to live and work.

Yet just as important as the policies is the underlying message: Even as this economy falters, Ohio could benefit from next one that’s emerging. Its strengths are just as real and relevant as the current crisis.

X Bruce Katz is vice president and director of the Metropolitan Policy Program at the Brookings Institution in Washington, D.C. Lavea Brachman is co-director of the Greater Ohio Policy Center in Columbus. They are co-authors of the report Restoring Prosperity: Transforming Ohio’s Communities for the Next Economy, which was released Monday.