Turn labs into local economic ecosystems

Because information technology is killing jobs by productivity growth faster than it is creating new jobs, it is imperative that we find ways to make the federal investment in research and development have more impact on job creation. Government-owned laboratories will spend one-third of the federal R&D investment of $130 billion in 2013. Most of these laboratories fill defense missions.

It is not apparent how to best transform a defense laboratory so that it becomes the hub for an economic ecosystem; therefore, a reasonable approach is to select one or two of the highest performing government-owned laboratories, transform these from mission driven to mission and economic outcome driven and use the knowledge gained from that experience to transform other laboratories. We must identify ways to make the federal R&D investment at a government-owned laboratory have three to five times as much local economic impact as a single federal investment in highway construction.

New Mexico has two national laboratories — Los Alamos National Laboratory and Sandia National Laboratories — each with R&D budgets near $2.5 billion. Both of the New Mexico laboratories have demonstrated that they are capable of doing economically relevant work; however, much of their economic development work has emphasized helping large rather than small and mid-sized companies and economic development has been subordinate to their nuclear weapons mission.

Largely because of the high R&D investments made at Sandia and LANL, the total R&D investment in New Mexico as a fraction of state GDP is the highest in the U.S., 7.6 percent of the state’s GDP. Inverting this ratio to calculate state GDP per unit of R&D investment shows that New Mexico’s GDP return from R&D is the lowest in the U.S.

The simple truth is that New Mexico has not been getting much economic return from its R&D.

It is usual for the major metropolitan area to lead a state out of an economic recession. That has not been the case in New Mexico, where Albuquerque’s economic growth has been in decline. Albuquerque’s economic stagnation is attributable to slowdown of the construction sector, declining federal spending, low start-up rates of new companies and inability to attract existing firms to move to the city.

New Mexico and Albuquerque are classic examples of what happens when an area depends excessively on a small group of major employers such as the federal government or a large private sector employer. The economic decline of Flint, Mich., a city built on making cars, was initiated by the move of General Motors headquarters from Flint to Detroit.

Instead of looking to attract new industries, Flint focused on holding on to what it had. Detroit’s subsequent economic decline resulted from the automotive sector making major productivity improvements as well as encountering increased competition. Detroit focused on maintaining high labor rates for auto company employees rather than attracting and starting new industry sectors.

Because New Mexico has: (1) relatively low private sector industrialization; (2) only 2 million residents; (3) high density of Ph.D. and MS engineers and scientists; (4) high quality personnel, laboratories and offices in its National Laboratories; and (5) a moribund economy, it is an excellent test bed for converting defense mission-driven government laboratories into economic ecosystem hubs.

Sandia in partnership with the University of New Mexico could become the hub for a central New Mexico ecosystem; LANL could become the hub for a northern New Mexico ecosystem.

The experience of Stanford University and MIT as innovation hubs for successful economic ecosystems in Silicon Valley and Route 128 in the Greater Boston area should be utilized to convert these great laboratories into major hubs of economic development that would make New Mexico the economic wonder of the world.