In Silicon Valley, an economic rebound

There’s a place in the United States where factories are thriving under global free trade, pay is scaling record highs, and the housing market is sturdy as brick.

In Silicon Valley, the American Dream endures. The region has added thousands of jobs and recently overtaken Manhattan for the nation’s highest weekly wages – even as Californian cities just 80 miles east form the glowing core of the real estate meltdown.

It’s not that the tech hub is impervious to downturns: Just six years ago, its capital, San Jose, suffered the greatest loss of jobs of any major US city since the Great Depression. But as before, Silicon Valley has reinvented itself and rebounded.

The region’s resilience holds lessons for the United States as the country faces stiffer global competition, say experts. Specifically, there’s a future for high-tech manufacturing and exports in the US economy with the help of a weak dollar, strong education, and the embrace of immigration and change. Government can also help with the right incentives to speed up business deals.

“The Silicon Valley economy today is one of the healthiest that we’ve seen in a generation. The reason is that it’s a diversified portfolio,” says Russell Hancock, head of Joint Venture: Silicon Valley Network, a group that connects regional business and government leaders. “They call it Silicon Valley, but really that’s a misnomer. We really should be called Innovation Valley.”

The region grew 2.1 percent – not stratospheric, but easily outstripping the ailing US and California economies. San Jose added 11,700 jobs in the past year, a sign of reviving health after shedding 205,000 jobs between 2002 and 2004.

In the aftermath of that crash, dot-com companies hit upon social networking and christened it Web 2.0. Computer hardware firms pushed innovation to portable devices like iPhones, iPods, and GPS navigators. Internet services flourished, and the new fields of biotechnology and nanotechnology blossomed. So did “clean tech,” an industry focused on renewable energy, particularly in markets like Germany, Japan, and California where government subsidized its adoption.

A clean-tech success story
The story of one clean-tech firm, Nanosolar, exemplifies how Silicon Valley bounced back.

Two local Stanford PhD candidates formed the company in 2002. With help from the world’s epicenter of venture capital located in nearby Menlo Park, they solved some of the technological hurdles in “thin film” solar energy.

Then the founders picked a place to headquarter their factory. San Jose won out because of the local talent pool, availability of industrial space, and the city government’s help in moving things along quickly, says CEO Martin Roscheisen.

“It’s truly phenomenal the way the city has streamlined administratively. Several of the key permitting items are literally 24 hour [turnarounds],” says Mr. Roscheisen, who says the wait times in other locations would be three to six months. “It means everything – being in business or not. We cannot possibly be stalled by permits in building our factory.”

San Jose revamped its business outreach after the dot-com collapse. One key change, says Paul Krutko, the city’s chief development officer, was the formation of teams from across city government who travel to businesses to approve permits. Since 2002, the program has permitted 9 million square feet of commercial space, housing almost 15,000 jobs.

“It cost the city about $81 a job to make that happen,” says Mr. Krutko. “We think that’s a pretty good trade-off.”

The weak dollar has benefited Nanosolar and the rest of the export-based economy of Silicon Valley. Nanosolar manufactures solar cells in the United States, paying wages in cheap dollars, then sells to Europe, which pays in higher-value Euros.

1 | 2

Next