Yale School of Management

Rust Belts and the Reinvention of American Manufacturing

Colloquium on Entrepreneurship

The United States is “on the cusp of a whole new wave of innovation and competitiveness” thanks to a new paradigm of collaboration that is emerging in rust belt cities, Antoine van Agtmael MA ’70 told students at the Yale School of Management on March 30. Speaking at the Colloquium on Entrepreneurship along with co-author Fred Bakker, van Agtmael outlined the conclusions of their new book, The Smartest Places on Earth: Why Rustbelts are Emerging Hotspots of Global Innovation.

Van Agtmael and Bakker began to research the resurgence of aging manufacturing cities like Akron, Ohio, and Albany, New York—as well as European rust belt cities like Zurich, Switzerland, and Dresden, Germany—after van Agtmael encountered a surprising trend while traveling in Asia.

“People were telling me a story that nearly made me fall off my chair—they were complaining about American competition,” van Agtmael recalled. “That’s the kind of thing that shakes you awake.”

He and Bakker realized that, contrary to the common belief that rust belt cities have become shadows of their former selves, “there was tremendous dynamism and innovation.”

The pair identified several factors that account for this thriving environment. One of the most important is collaboration and teamwork—a bottom-up approach that breaks through silos to forge connections across industry, function, and rank.

In rust belts, “we saw that between local governments, between companies, between universities, startups, and spin-offs, there was close collaboration… Working in teams in manufacturing is becoming a professional trait,” Bakker said.

Van Agtmael added that the emergence of “smart” devices connected by internet-enabled sensors is helping to shift manufacturing away from the ruling paradigm of making things as cheaply as possible.

“That was a losing game because” China would always be able to produce cheaper products, and to do so more cheaply, van Agtmael said. “Now we have learned something new, which is to compete by making things as smart as possible, and that is going to be the new paradigm. It’s not cheap labor; it’s smart innovation that is going to be the key competitive edge.”

In this way, “rust belts will regain a major share of the high-tech economy,” he said. “Manufacturing is not coming back as some people say; it’s being reinvented.”

About the Event

On Wednesday, March 30 at 4:15 p.m., Yale SOM will host a book event with Antoine van Agtmael MA'70 and Fred Bakker, authors of The Smartest Places on Earth: Why Rustbelts are the Emerging Hotspots of Global Innovation, which will be published March 29, 2016 by Public Affairs. Advance registration is required.

Antoine van Agtmael coined the term “emerging markets” and built a career and a multibillion-dollar investing firm centered on these surging economies that would, over time, supplant the West as engines of wealth and prosperity. The trend held for decades, but a few years ago van Agtmael and Alfred Bakker, a renowned European journalist, began seeing signs that the tide might be turning.

Thus began a remarkable two-year journey to reassess the conventional wisdom that the US and Europe are yesterday's story and to determine whether there is something profound that is happening that points the way to the creation of the next economy.

In The Smartest Places on Earth, van Agtmael and Bakker present a truly hopeful and inspiring investigation into the emerging sources of a new era of competitiveness for America and Europe that are coming from unlikely places—those cities and areas once known as "rustbelts" that have, from an economic perspective, been written off.

Antoine van Agtmael is senior adviser at Garten Rothkopf, a public policy advisory firm in Washington, DC and was the principal founder, CEO, and CIO of Emerging Markets Management LLC. Alfred Bakker, until his recent retirement, was a journalist specializing in monetary and financial affairs with Het Financieele Dagblad, the “Financial Times of Holland.”

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