China’s impressive economic growth over the last three decades and increasing political influence and military capabilities have caused people around the world to wonder or worry about how China will use its new-found power. More specifically, they wonder whether, and how, China might attempt to transform the international system that has enabled it to become the world’s second largest economy and potential contender for global leadership.

Thomas Fingar, the Oksenberg-Rohlen Distinguished Fellow at Stanford’s Freeman Spogli Institute for International Studies, addressed these and related questions during the Walter H. Shorenstein Asia-Pacific Research Center’s annual Oksenberg Lecture on May 22. 

After describing how China has benefitted from participation in the liberal order led and maintained by the United States, Fingar argued that China has neither the will nor the ability to lead or transform the existing system, and that its continued “rise” will increase its stake in the system and make it even less willing to seek changes that could jeopardize its own success. He also suggested that other nations benefitting from the existing order would constrain China from attempting radical change even if it wanted to.

Following Fingar’s remarks, Jia Qingguo, associate dean of the School of International Studies at Peking University, said it is important to recognize that China is in the midst of a major transition. It is both a developed and a developing country, he said.

Thomas Christensen, director of Princeton University’s China and the World Program, added that due to China’s weight in the world, it will be called on more and more to collaborate on critical global issues, such as climate change and disease.

Fingar’s keynote remarks drew on “China's Vision of World Order,” a chapter published in Strategic Asia 2012–13: China's Military Challenge (National Bureau for Asian Research), as well as Shorenstein APARC’s research initiative on China’s interactions with its neighbors.

Since 2002, Shorenstein APARC has held the Oksenberg Lecture Series as a tribute to the legacy of Michel Oksenberg, a pioneer in the field of Chinese politics and an important force in shaping American attitudes toward China.

An audio podcast of the May 22 event is available on the Shorenstein APARC website.

Greater income inequality among places, not just people, reshapes the labor market in America and beyond. Driving the change: the innovation cluster.

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Dr. Moretti's book, The New Geography of Jobs, was described by Forbes magazine as “easily the most important read of 2012.”

Americans frequently debate why wages are growing for the college-educated but declining for those with less education. What is less well-known is that communities and local labor markets are also diverging economically at an accelerating rate.

A closer look at the 300-plus metropolitan areas of the United States shows that Americans with high school degrees who work in communities dominated by innovative industries actually make more, on average, than the college graduates working in communities dominated by manufacturing industries, according to research by University of California, Berkeley economist Enrico Moretti, the author of The New Geography of Jobs, a book that Forbes magazine called “easily the most important read of 2012.” In the San Jose metropolitan area, for example, a high school graduate averages $68,009, compared with the $65,411 that is average for a college graduate in Bakersfield, Calif.

Some places have always been more prosperous than others, but these differences have increased more rapidly over the last 30 years as the gross domestic product and patents for new technologies have concentrated in two to three dozen communities that Moretti identifies as “brain hubs” or “innovation clusters.”

In these clusters, highly specialized innovation workers, such as engineers and designers, generate about three times as many local jobs for service workers ― such as doctors, carpenters, and waitresses ― as do manufacturing workers, Moretti said recently when speaking at Stanford Graduate School of Business. Here are edited excerpts from Moretti’s answers to questions from the Stanford audience.

What causes clusters to emerge?

This is a very active area of research, but I think fundamentally, there are three major reasons why clustering takes place. One is the thick labor market effect. If you are in a very highly specialized position, you want to be in a labor market where there are a lot of employers looking for workers, and a lot of workers looking for employers. The match between employer and employee tends to be more productive, more creative and innovative in thicker labor markets.

It is the same thing for the vendors, the providers of intermediate services. Companies in the Silicon Valley will find very specialized IP lawyers, lab services, and shipping services that focus on that niche of the industry. And because they are so specialized, they're particularly good at what they're doing.

The third factor is what economists call human capital spillovers ― the fact that people learn from their colleagues, random encounters in a coffee shop, at a party, from their children, and so on. There's a lot of sociological evidence that this is one of the attractions of Silicon Valley. You're always near other people who are at the frontier, so you tend to exchange information. Sometimes it's information about job openings. Sometimes it’s information about what you're doing, what type of technology you're adopting, what type of research you are doing. And this, as you can imagine, is important for R&D, for innovation.

So these three forces are crucial, and that means that localities that already have a lot of innovation tend to attract even more workers and even more employers. That further strengthens their virtuous circle.

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Dr. Enrico Moretti leading a seminar organized by the Stanford Program on Regions of Innovation and Entrepreneurship (SPRIE) of the Stanford Graduate School of Business as part of its Silicon Valley Project.

Are these clusters sustainable forever?

Probably not. Previous clusters have collapsed in spectacular ways. The Silicon Valley of the 1950s was Detroit. People have researched the rise of Detroit, and it mimics very well the rise of Silicon Valley in terms of the amount of innovation, the type of engineering, the type of salaries they were paying. In the 1950s, if you were a car engineer, there wasn't any better place in the world to be, and if you were a car company, you had to be there. But then, of course, it collapsed.

In my book, I have a chapter on the difference between Detroit and Silicon Valley. This region has kept reinventing itself in ways that are remarkable. It was all orchards, and then it became all hardware, and then it became all software. And now it's becoming something else: social media and biotech and clean tech. Some types of clusters don't survive big negative shocks, and other clusters are able to leverage themselves into the next thing.

Is there a clean energy cluster that is structurally different from an internet or an IT or a biotech cluster? Or are they all intermingled?

Typically, clusters are very specialized. Silicon Valley is the exception in the sense that there are so many different technologies. More typical examples are Boise, Idaho, for radio technology or Portland, Oregon, for semiconductors. Seattle has a combination of software and now a growing body of life sciences. Boston is mostly life science. D.C. is a remarkable story. It's very diversified now in terms of private-sector innovation, but most clusters are going to be small pockets of one industry.

Does your argument hold for high-paid but non-high-tech sectors? I was thinking of New York being a financial sector or L.A. being entertainment, and Houston being oil and gas. Then you mentioned Washington, D.C. That's government.

I would argue that three you mentioned would belong to what I define as innovation sectors in the following sense: Finance in New York is not bank tellers; it’s people who invent new products, new technology, and new ways of making things. They are unique, and you can't easily reproduce the cluster somewhere else. That certainly applies to entertainment, especially the digital part of entertainment that is the fastest-growing part of entertainment jobs.

It also applies to the D.C. cluster. The growth of D.C. over the last 20 years is mostly driven by private-sector headquarters moving there, and an educated labor force. Some of the companies are military contractors. Some companies are life science. They're anchored by the National Institutes of Health being there, and other government agencies. But most of the growth actually comes from the private sector.

Now oil, Houston, I'm not sure. I don't know how strong these clustering forces are for these type of jobs. I would imagine ― and we're not talking about the guy who drills, but it's more like the guy who plans where to drill ― to the extent that there is a high component of innovation that makes something that is unique, I would say it applies.

If I'm a high-tech worker, how am I responsible for creating five other jobs? It’s hard for me to accept there are five.

The way to interpret the multiplier is to imagine dropping 1,000 innovation jobs in one city but not in another, and then going back 10 years later to measure how many additional local service jobs there are in the city that experienced that innovation-sector drop of jobs. So it's a long-run effect, but it’s not impossible for three reasons.

One is that the average high-tech worker tends to do very, very well, and people who are wealthy tend to spend a large fraction of their salary on personal and local services. They tend to go to restaurants and movies, and to use taxis and therapists and doctors on average more than people who are paid less.

The second reason is high-tech companies themselves employ a lot of local services; everything from security guards to IP lawyers, from the janitor to the very specialized consultant. High-tech companies tend to use more services than manufacturing companies.

The third reason is the clustering effect. Once you attract one of those high-tech workers, then in the medium to long run, you're going to be attracting even more of those high-tech workers and companies, which will further increase your multiplier. So it's a long-run number, measured over a 10-year period.

You pointed out that the salaries of the less-educated part of the local population are higher in those places that do have a lot of the innovation. How is that reconciled with the drastic drop over 30 years in their national average compensation?

We don't have enough brain hubs where innovation is concentrated. We have 320 metro areas in the U.S., and probably, by my definition, we have 15 to 20 brain hubs. In those places, you have brisk job creation outside the innovation sector, and you have decent wages for people outside. But we also have a big chunk of the country producing not very much, in part because manufacturing jobs have been shrinking, and innovation hasn't really taken place.

So what hope is there for these areas?

That's a million-dollar question. It's tough because, in some sense, if this clustering effect is particularly strong, it's good news for places like here, but it's terrible news for places like Flint or Detroit. A successful local labor market has a very nice equilibrium, where you have a lot of skilled workers who want to go there and a lot of innovative employers who want to go there. It's really hard to re-create somewhere else.

And it's not like we're not trying. We're spending $15 to $18 billion annually in what economists call place-based policies, which are essentially subsidies to try to attract employers to these areas. The idea being: “They're not coming, so if we just break this vicious circle, if we just bring some, then the clustering effect starts taking off. We can effectively create innovation hubs where they don't exist.”

I haven't found one example of an innovation hub in the U.S. that has been created by deliberate policy that says, "We're going to create an innovation hub here." Taiwan might be a good success story. It’s hard to get data, but Taiwan was an agricultural economy in the 1960s that had very little innovation. Then in the 1970s, it created enormous government subsidies for semiconductors and a lot of other technologies. All the others didn't pan out, but semiconductors worked. Taiwan is still putting money in, so it's not exactly clear whether it's a perfect example. Picking the next big thing is very hard for the venture capitalist. It's virtually impossible for the government worker.

What's the situation in other regions around the world ?

Obviously, India and China are major success stories, but that doesn't mean that this clustering effect is not at play within those countries. A different example is Italy, where I am from. Italy has been the Detroit in this story. It had a very strong pharmaceutical sector in the 1980s, and a smaller computer cluster. Once the pharmaceutical industry started becoming global, you saw mergers and a concentration of the industry’s R&D in a few places. I know because my dad was employed there, and his lab was first moved to Sweden and then to New Jersey.

I think the same is happening throughout many countries in continental Europe, and even in places like China and India, which have success stories but enormous regional differences. The innovative part of the Chinese economy is concentrated in a handful of megalopolises.

This is an interesting paradox of the current economy. Probably the best news of the last 20 years globally is the vast increase in the standard of living in places like China and India and Brazil, so there's certainly been a convergence in the standard of living when you compare nations. But when you look within those developing nations, you see the same great divergence that you see here.

Enrico Moretti is professor of economics at the University of California, Berkeley, where he holds the Michael Peevey and Donald Vial Career Development Chair in Labor Economics. He is also director of the Infrastructure and Urbanization Program at the International Growth Centre at the London School of Economics and Oxford University. His talk at Stanford was hosted by the Stanford Program on Regions of Innovation and Entrepreneurship, located in the Graduate School of Business.

 

Kathleen O'Toole is a journalist who frequently writes about social science. She is currently assistant editorial director of marketing and communications at the Stanford Graduate School of Business.

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REAP Co-Director Scott Rozelle recently spoke at a Lung Yingtai Cultural Foundation (龍應台文化基金會) event about China and the middle income trap. Using the contrasting experiences of South Korea and Mexico as a guide, Rozelle provided a glimpse into the economic ramifications of allowing the gap between rural and urban education in China to grow wider. Read the CommonWealth Magazine article in Chinese here.

Sharon Gourdji spent three months this winter down in Colombia at the International Center for Tropical Agriculture (CIAT) as a Fulbright Scholar studying climate impacts on bean production in Central America and adaptation options. During her stay she led a series of Decision and Policy Analysis workshops focused on climate data sources and crop statistical models.

The Program on Human Rights at Stanford's Center on Democracy, Development, and the Rule of Law (CDDRL), together with the McCoy Family Center for Ethics in Society, are pleased to introduce the 2013 Summer Human Rights Fellows. These four remarkable Stanford undergraduates were selected from a competitive pool of applicants to spend the summer serving in organizations advancing human rights work around the world.

The Summer Human Rights Fellowship enables undergraduate students to gain practical experience at international organizations that promote, monitor, evaluate, or advance human rights work. In order to apply, potential fellows must identify their ideal placement and work with the partner to ensure there is a viable project that allows the student to contribute meaningfully to the organization’s work. This year, the fellows will be working on the ground in India, Jordan, and Guatemala with informal workers, at-risk children, trafficking victims, and using technology to advance social justice worldwide. Upon their return to Stanford next year, each of the Human Rights Fellows will participate in campus events to describe their work.

Below are the profiles of our four fellows highlighting their summer projects, interest in human rights and some fun facts. Click here to learn more about the fellowship program.

 

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Name: Firas Abuzaid (’14)

Major: Computer Science

Hometown: Plano, Texas

Tell us about your project. I'll be working with Visualizing Justice in Amman, Jordan. The mission of Visualizing Justice is to empower people worldwide to create visual stories for social justice and human rights. My mission for the summer is to exploit new software innovations in web development to augment Visualizing Justice’s data visualization capabilities, thus making their stories more expressive and accessible worldwide.

What first sparked your interest in human rights? I think there is a disconnect between the technologies we develop and the societies we live in, and that gap is most noticeable in the area of human rights. In particular, our innovations in technology have created an information overload problem. We are now inundated with information about various human rights issues, but struggle for a more nuanced or contextualized understanding of those issues. Also, the quality of the information has not kept up with the growth in quantity. If we can invest the time to build better tools and re-couple the quality of information with its quantity, then we, as a society, can make a lot more progress in the field of human rights.

What are your post-Stanford aspirations? I want to develop new tools that make it easier for individuals to create compelling data visualizations, especially those that lie outside the traditional domains of technology.

Fun fact about yourself: I can solve a Rubik's cube in under a minute.

 

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Name: Lara Mitra (’15)

Major: Human Biology

Hometown: Washington, D.C.

Tell us about your project. I’m traveling to Ahmedabad, India to work with Self-Employed Women's Association (SEWA), a union of 1.4 million informal economy workers, which provide community-driven socioeconomic services, including healthcare, local banking, social security, and housing to marginalized groups. Given my interest in public health, I will focus on SEWA’s initiatives responding to people's inherent right to a healthy life, working with the health team to analyze and document the changing role of front-line health workers who deliver care to expecting mothers. I aim to assess the effectiveness of services provided by three unique classes of health workers, and identify how their knowledge and skills can be harnessed to deliver primary health care to a broad swath of the rural and urban population.

What first sparked your interest in human rights? The day of my 16^th birthday found me waiting in line at the DMV in Washington, DC. When I reached the front of the line, I was given one final form to fill out. I mindlessly scribbled my name and date of birth before I stumbled upon a question that I did not know the answer to: “Would you like to be an organ donor?” This was my first exposure to a human rights issue that I hope to pursue well into the future. Upon doing some research, I became hooked on the topic of organ donation. The future human biology major in me enjoyed reading about the dire need for kidneys in the US, but the humanitarian in me found another area of the debate more gripping – the black market for organs. 

What are your post-Stanford aspirations?  Find a job that allows me to combine my interests in medicine and human rights! 

Fun fact about yourself: My parents made me take classes in juggling and unicycling growing up in case the whole college thing didn't work out.

 

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Name: Nicolle Richards (’16)

Major: Human Biology (planned)

Hometown: Vienna, Austria

Tell us about your project. I will be traveling to Guatemala to work with Kids Alive, a nonprofit that works to rescue orphans and at-risk children. In Guatemala, they run a care home for girls who have been abandoned or abused – often in the form of forced labor and/or physical and sexual abuse. I will be working with the girls in the care home, and also evaluating a program that works to continue supporting the girls who have returned home.

What first sparked your interest in human rights? Throughout high school, I volunteered at a care home in Romania for women and girls who had experienced abuse. This first exposure to drastic poverty sparked my interest in social work and development, and led me to explore different aspects of human rights. Later in high school, I taught summer school in the Dominican Republic to at-risk children, where exposure to obvious injustice solidified my passion to fight for human rights. As a Christian, I believe that I have a responsibility to help those less fortunate – and fighting for human rights is an obvious way to do this!

What are your post-Stanford aspirations? I hope to study international human rights law and eventually work combatting human trafficking around the world. 

Fun fact about yourself: I get to spend my vacations in Seoul, South Korea where my family currently lives.

 

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Name: Garima Sharma (’15)

Major: Economics

Hometown: New Delhi, India

Tell us about your project. I am going to be working with Apne Aap: Women Worldwide, an anti-trafficking NGO based in Forbesganj, India. Forbesganj is in close proximity to the Indo-Nepalese border, which has led to its emergence as a source, transit center, and destination for women trafficked for prostitution. I have spent the past two quarters designing an interactive human rights education curriculum focused on sex trafficking, which I will use in Forbesganj to engage with at-risk girls who are the daughters of sex workers in the red light district, as well as 12-14 year-old girls belonging to the Nutt (lower-caste) community. Simultaneously, I will be working with older men, women and community leaders, with the goal of making preliminary headway into a community-wide anti-trafficking strategy.

What first sparked your interest in human rights? I cannot count the number of times that I have been verbally harassed, whistled at or sung to by strange men in the course of my fairly “normal” existence as a middle-class girl in India. My passion for wanting to ensure that women are able to demand and access a life of dignity is a consequence of having grown up in a society that normalizes aggression against us. This prompted me to intern at the National Human Rights Commission of India, where I spent my time reading reports on trafficking, examining anti-trafficking legislation, and talking to activists and victims of human rights violations. I realized we critically need to place greater focus on the prevention of violations and develop a true, nuanced appreciation for the concept of human rights – a change I am hoping to effect through this fellowship.

What are your post-Stanford aspirations? A few years down the line, I hope to work as a policymaker advancing women’s rights in India.

Fun fact about yourself: I am one of two—I have a twin sister named Anima, who attends medical school in India.

 

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