There are few things as repetitive as watching economic development presentations from different cities, counties, and states. Everyone's got an educated workforce, everyone's got a top ranked symphony, everyone's got a website with pictures of lab coat techs starting at test tubes. And just about everyone still has high unemployment.
The me-too wastefulness of the economic development industry is best seen in the billions poured into convention centers over the last decade. For some reason, sports stadiums make a lot of academics angry, but convention centers can actually be far more wasteful. Here in DC, there was all kinds of moaning about the $611 million stadium the city built for the Nationals, which is generating more than enough revenue to cover its debt service. But there was barely a peep over the me-too $800 million convention center that the city is struggling to fill.
But instead of wasting taxpayer dollars on copycat slogans and convention centers, it's time for economic development to draw on taxpayers' unique knowledge of their hometowns. Residents are already altering perceptions of cities and states with YouTube clips, from the Arlington Rap to the Hastily Made Cleveland Tourism Video to Minnesota Gurls, all of which get far more hits than any of the vapid symphony, science, and art videos put up by economic development authorities.
Rather than get surprised by some 18 year old's YouTube clip, it makes more sense for recruitment campaigns to incorporate more input from residents. Some cities will hold charettes and go through all kinds of planning debates over a 10 acre parcel of land. But economic development strategies are more important to these cities' futures than the position of the parking garage next to the new "lifestyle center". Moreover, many people developing those strategies are cautious government employees who do not want to venture too far away from conventional themes with predictably mediocre results. So why not involve citizens more?
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Showing posts with label Economic Development Strategies. Show all posts
Showing posts with label Economic Development Strategies. Show all posts
Thursday, July 29, 2010
Tuesday, July 13, 2010
Cities Should Focus on Creating Wealth, not Jobs
There's a lot of debate going on these days about Macroeconomics. One the one hand, there are people like Paul Krugman, who basically thinks it's still 1933, and that we should deficit spend our way back to prosperity. On the other side are people like Larry Kudlow, who thinks we need to tax cut our way to prosperity. But I think they're both wrong, especially in the context of urban economic development, because creating jobs has a lot more to do with microeconomic reality than macroeconomic policy.
Problem with macroeconomists is that they fall in love with theories the way teenage girls fall in love with quarterbacks. But at least the teeny boppers are fickle, macroeconomists can hold onto their crushes for decades. Krugman likely fell in love with Keynes in college, and has had hearts in his eyes ever since.
Back in the 30s when Keynes was coming up with the ideas Krugman and other disciples now cling to religiously, it was much easier for government to create jobs. This wasn't because FDR was some clever guy, but because capital labor costs were much lower. Hoover Dam, for example, cost $9,400 per construction worker to build. Adjusted for inflation, this works out to about $132,000 of capital expenditures per construction job. Yet today, a modern power plant costs about $2-$4 million per construction job. Cap labor costs have gone up about 7-8% a year since the 30s, while inflation's only gone up about 2-3%. As a result, it's gotten much harder for any government to create jobs, regardless of whether policymakers listen to Krugman, Ron Paul, Larry Kudlow, or Larry the Cable Guy.
In recent articles, I've pointed out the $1 million capital-invested-per-job steam turbine plant in Chattanooga, the $4 million capital-invested-per-job data center in Iowa, and the $25 million capital-invested-per-job wind farm in Oregon. It simply requires too much capital now to create a job, and this figure is not going to stop rising faster than inflation, especially when all the workers need health benefits. If it only cost $132,000 in capital investment to create a new job like it would if cap labor costs had stayed at the same level as broader inflation, then there'd be no issue, we could just have a 1930s economic policy, and Krugman would be a hero. But we don't, so the answer is to shift regional economic development away from just creating jobs, and focusing more on recirculating wealth.
Perhaps one of the best examples of recirculating wealth is the Lowell, Mass Venture Development Fund, which doesn't try to recruit massive factories that only need 300 workers, but rather locally owned shops and restaurants, which don't need tremendous amounts of capital to justify hiring someone. Additionally, the owners live locally, so the profits don't get sent to Toronto, Toledo, or Tokyo. Increasingly, regional economic development will have to focus more on building local businesses like this, because workers are simply too productive to be hired by the thousands anymore.
Problem with macroeconomists is that they fall in love with theories the way teenage girls fall in love with quarterbacks. But at least the teeny boppers are fickle, macroeconomists can hold onto their crushes for decades. Krugman likely fell in love with Keynes in college, and has had hearts in his eyes ever since.
Back in the 30s when Keynes was coming up with the ideas Krugman and other disciples now cling to religiously, it was much easier for government to create jobs. This wasn't because FDR was some clever guy, but because capital labor costs were much lower. Hoover Dam, for example, cost $9,400 per construction worker to build. Adjusted for inflation, this works out to about $132,000 of capital expenditures per construction job. Yet today, a modern power plant costs about $2-$4 million per construction job. Cap labor costs have gone up about 7-8% a year since the 30s, while inflation's only gone up about 2-3%. As a result, it's gotten much harder for any government to create jobs, regardless of whether policymakers listen to Krugman, Ron Paul, Larry Kudlow, or Larry the Cable Guy.
In recent articles, I've pointed out the $1 million capital-invested-per-job steam turbine plant in Chattanooga, the $4 million capital-invested-per-job data center in Iowa, and the $25 million capital-invested-per-job wind farm in Oregon. It simply requires too much capital now to create a job, and this figure is not going to stop rising faster than inflation, especially when all the workers need health benefits. If it only cost $132,000 in capital investment to create a new job like it would if cap labor costs had stayed at the same level as broader inflation, then there'd be no issue, we could just have a 1930s economic policy, and Krugman would be a hero. But we don't, so the answer is to shift regional economic development away from just creating jobs, and focusing more on recirculating wealth.
Perhaps one of the best examples of recirculating wealth is the Lowell, Mass Venture Development Fund, which doesn't try to recruit massive factories that only need 300 workers, but rather locally owned shops and restaurants, which don't need tremendous amounts of capital to justify hiring someone. Additionally, the owners live locally, so the profits don't get sent to Toronto, Toledo, or Tokyo. Increasingly, regional economic development will have to focus more on building local businesses like this, because workers are simply too productive to be hired by the thousands anymore.
Friday, July 9, 2010
The Workplace of the Future
Been reading a lot lately about changing workplaces. It seems a lot of urban pundits, especially the BS artist whose last name is also a coastal state, have just woken up to the world those of us in the tech industry have been living in since 1995. Actually funny to read all the stories about "results-oriented work environments", working from coffee shops, and casual dress. When I see these, I feel like I should be able to click on the Top Stories link, and get the latest breaking news on the President's affair with Monica Lewinski.
While urban pundits only have something to write about if things are changing, one thing that's not changing is simple economics. And one of the most fundamental economic principles for cities, employers, and employees, is that you're usually better off owning a scarce resource than an abundant one. And there is no shortage of nonsense being published today about 1990s-style work arrangements that aging pundits have just picked up on. And as I've written many times, Jennifer Granholm and many in the econ development industry are very impressed, and are preparing their cities and states for the economy we had in 1997.
The workplace of the future is still a place, not an Internet connection. Because for every new T-1 that gets installed, face-to-face becomes an even scarcer commodity, especially where that human interaction does not depend on any sort of connection to the Internet. Nurses, part of an incredibly fast growing profession, aren't meeting their clients at Starbucks, 3rd grade teachers are not turning their classroom into "ROWEs" where students only have to show up if they have a meeting with another kid. And health care and education are now a quarter of the economy and growing.
The workplace of the future exists today, and anyone who's smart isn't moving to Portland or some other slacker city urban pundits can't stop fawning over, but is looking for a job where they will have to interact physically with the people paying the bills, whether they're clients, patients, or students. Face-to-face is only going to become scarcer, not unlike Javascript skills were in 1998, except it's not going to be outsourced to Bangalore, unless you decide to visit India. So smart people today are not planning a tech startup, but rather thinking about how they will build on the scarce resource of face-to-face contact.
Not all face-to-face jobs will pay well, but at least working face-to-face can prepare you for future jobs that require that skill. Sitting in Starbucks writing a blog won't.
The workplace of the future doesn't look that exciting from a let's-hype-some-trend perspective. Restaurants, hospitals, and schools are far too mundane for the chattering class to start talking about. But the foosball playing, cappuccino machine-in-the-office companies we read about now are just implementing the workplaces of today. Trying to recruit such companies does little to prepare a city for the future.
While urban pundits only have something to write about if things are changing, one thing that's not changing is simple economics. And one of the most fundamental economic principles for cities, employers, and employees, is that you're usually better off owning a scarce resource than an abundant one. And there is no shortage of nonsense being published today about 1990s-style work arrangements that aging pundits have just picked up on. And as I've written many times, Jennifer Granholm and many in the econ development industry are very impressed, and are preparing their cities and states for the economy we had in 1997.
The workplace of the future is still a place, not an Internet connection. Because for every new T-1 that gets installed, face-to-face becomes an even scarcer commodity, especially where that human interaction does not depend on any sort of connection to the Internet. Nurses, part of an incredibly fast growing profession, aren't meeting their clients at Starbucks, 3rd grade teachers are not turning their classroom into "ROWEs" where students only have to show up if they have a meeting with another kid. And health care and education are now a quarter of the economy and growing.
The workplace of the future exists today, and anyone who's smart isn't moving to Portland or some other slacker city urban pundits can't stop fawning over, but is looking for a job where they will have to interact physically with the people paying the bills, whether they're clients, patients, or students. Face-to-face is only going to become scarcer, not unlike Javascript skills were in 1998, except it's not going to be outsourced to Bangalore, unless you decide to visit India. So smart people today are not planning a tech startup, but rather thinking about how they will build on the scarce resource of face-to-face contact.
Not all face-to-face jobs will pay well, but at least working face-to-face can prepare you for future jobs that require that skill. Sitting in Starbucks writing a blog won't.
The workplace of the future doesn't look that exciting from a let's-hype-some-trend perspective. Restaurants, hospitals, and schools are far too mundane for the chattering class to start talking about. But the foosball playing, cappuccino machine-in-the-office companies we read about now are just implementing the workplaces of today. Trying to recruit such companies does little to prepare a city for the future.
Wednesday, July 7, 2010
Why City Branding Fails
The National League of Cities put up an interesting post recently about city branding campaigns. These have been tried for years, but they often don't work, mostly because few cities are willing to be known for something, and would rather be known for everything.
The all-things-to-all-people craze right now is tied to biotech and greentech, in the late 90s, it was just “tech”. But whatever the flavor of the month is in economic development, developing distinctive messages is not an industry strength. The NLC article mentions Milwaukee's “Freshwater Hub of the World” slogan, which is an unusually focused message, and also promotes the idea that the city is a place for trade. This is the sort of point that does not come across well when you try to sell yourself as a “Cool City” and your governor holds a “Creating Cool” conference.
Connecticut is also promoting a trade corridor around Bradley Airport, with tax incentives for companies that can prove they need to ship goods out of the airport. What's smart about this is the defining trait of successful regions right now is not how many Bachelor's degrees citizens have, or how much money their state's forked over to high priced speakers and consultants, but their presence in industries where America is a net exporter.
As I pointed out a few weeks ago in the Seattle vs. Portland post, Seattle's done much better in the recession than its neighbor to the south, largely because it has two large exporting industries based locally. Portland, on the other hand, has won more praise from urban pundits than just about anyplace in the country, yet has above average unemployment. It has plenty of overeducated slackers who are the envy of Jennifer Granholm, and according to Richard Florida, attracting such people should be the focus of economic development, even if they spend all day pouring coffee and skateboarding.
I'm curious to see what the NLC comes up with next in their discussion, because it would be a major advancement in economic development if cities and states started talking up the products they can export, and stopped pandering to people they're trying to import.
The all-things-to-all-people craze right now is tied to biotech and greentech, in the late 90s, it was just “tech”. But whatever the flavor of the month is in economic development, developing distinctive messages is not an industry strength. The NLC article mentions Milwaukee's “Freshwater Hub of the World” slogan, which is an unusually focused message, and also promotes the idea that the city is a place for trade. This is the sort of point that does not come across well when you try to sell yourself as a “Cool City” and your governor holds a “Creating Cool” conference.
Connecticut is also promoting a trade corridor around Bradley Airport, with tax incentives for companies that can prove they need to ship goods out of the airport. What's smart about this is the defining trait of successful regions right now is not how many Bachelor's degrees citizens have, or how much money their state's forked over to high priced speakers and consultants, but their presence in industries where America is a net exporter.
As I pointed out a few weeks ago in the Seattle vs. Portland post, Seattle's done much better in the recession than its neighbor to the south, largely because it has two large exporting industries based locally. Portland, on the other hand, has won more praise from urban pundits than just about anyplace in the country, yet has above average unemployment. It has plenty of overeducated slackers who are the envy of Jennifer Granholm, and according to Richard Florida, attracting such people should be the focus of economic development, even if they spend all day pouring coffee and skateboarding.
I'm curious to see what the NLC comes up with next in their discussion, because it would be a major advancement in economic development if cities and states started talking up the products they can export, and stopped pandering to people they're trying to import.
Thursday, June 24, 2010
Nashville - Below Average in Patents, Above Average in Income Growth
Encouraging signs coming out of the Music City. Specifically, it's avoiding the temptation to join the PhD or patent rat race, and is instead trying to build on its unique characteristics. Moreover, the city is playing down the buzzword industries that many other places are desperately chasing after. This is so basic it shouldn't be news, but it is when everything in economic development right now is a blur of biotech/greentech sameness.
I mention patents and PhDs specifically, because Nashville has very few of them. In the research done with Market Street consultants to update its economic development plan, the city found it had just 1.5 patents per 10,000 employees. Not only was this way below Austin, which has 27.2 per 10,000 employees, its below the national average of 6.4 per 10,000. Yet at the same time, the city's wage growth and per capita income growth rates have soared past national averages, as well as past cities like Austin, even when factoring out the recessionary impacts of the last year.
Nashville still looks likely to bump into a few of the same life sciences, green jobs roadblocks that have stopped other cities from defining distinct messages. However, its plan to focus on existing health care, manufacturing, and music industries show a much stronger willingness to build on its own strengths than the follow-the-fad strategies being pursued by so many other cities.
I mention patents and PhDs specifically, because Nashville has very few of them. In the research done with Market Street consultants to update its economic development plan, the city found it had just 1.5 patents per 10,000 employees. Not only was this way below Austin, which has 27.2 per 10,000 employees, its below the national average of 6.4 per 10,000. Yet at the same time, the city's wage growth and per capita income growth rates have soared past national averages, as well as past cities like Austin, even when factoring out the recessionary impacts of the last year.
Nashville still looks likely to bump into a few of the same life sciences, green jobs roadblocks that have stopped other cities from defining distinct messages. However, its plan to focus on existing health care, manufacturing, and music industries show a much stronger willingness to build on its own strengths than the follow-the-fad strategies being pursued by so many other cities.
Saturday, June 19, 2010
U.S. Economic Development Agency Offering Grants for Regional Innovation Clusters
One of the problems of the "tech" economy right now is that there are hundreds of cities, counties, and states fighting to be in the top 10 places for greentech and biotech. This has done a lot for photographers who sell stock photos of lab coat techs starting at test tubes, but has done little for the communities trying to get their message to stand out.
The U.S. Economic Development Agency has a plan that will help counter this, and is now offering grants to help municipalities and states identify some of their unique strengths through its Regional Innovation Clusters Mapping Project. This is a great opportunity for localities with blurred messages about "life sciences" to develop a more precise message that will resonate with prospective employers.
The U.S. Economic Development Agency has a plan that will help counter this, and is now offering grants to help municipalities and states identify some of their unique strengths through its Regional Innovation Clusters Mapping Project. This is a great opportunity for localities with blurred messages about "life sciences" to develop a more precise message that will resonate with prospective employers.
Monday, January 4, 2010
Morfessis Won't Go Providence
Well, it looks like Ioanna Morfessis won't take the $250K a year job running the Rhode Island Econ Development Agency after all. Now it's time for the state to reconsider its overall strategy. I generally don't believe in selling lifestyle benefits to promote young workers, but if there's one city with fewer than 300,000 people that should be getting more hype in the "best places for singles" magazine lists, it's Providence.
Friday, December 18, 2009
The Electric Car City
Was just reading the Urbanophile's article on Detroit over at Newgeography. It's a thorough analysis of both the city and The Brookings Institute's recent "Plan for Detroit" project. I particularly liked where he pointed out the absurdity of a rail transit system for Detroit as recommended by some analysts. With neither high population density, nor high job density, the core urban area is about as good a candidate for light rail as downtown Menominee.
There are tons of opinions on Detroit, but what's irritating is that I see a lot of advantages there many cities would kill for, but the state is too inept to really take advantage of them. But don't tell me the city's urban decay has anything to do with Coleman Young or Kwame Kilpatrick. Here in DC, we saw rising home values and the beginning of massive gentrification while we had a mayor who smoked crack.
In terms of economic development, Michigan is already bending over for the battery industry, and will do the same for anyone kind enough to put them on any kind of short list. They gave Boston-based A123 Systems $100 million of tax credits for a new plant just outside Detroit, even though the company would never have gotten a quarter as much from Massachusetts. Plus, as the battery supplier for Chrysler's EV, wasn't like A123 needed a reminder to consider Michigan.
In terms of getting businesses to come to Southeastern Michigan without having to pay them $100 million, Detroit and Michigan must stop with the watered-down marketing gibberish that has plagued the state's econ dev efforts during the Granholm years. Detroit should market itself as "the electric car city". The message is believable and would set it apart from the hundreds of counties and cities buying stock photos of lab coat technicians staring at test tubes, and all going on about the same green tech, biotech, "knowledge workers" nonsense.
Electric cars are already a large industry, with excellent growth prospects. Moreover, they pull in the supply chain of energy storage companies, a sector which VCs have fallen head-over-heels in love with.
Blue Springs, Mississippi, where the U.S. Prius factory will be, could copy "the electric car city" slogan, except it's not a city. I know, if Detroit sticks to saying one thing then they run the risk of not diversifying their economy. But saying they do everything hasn't really worked too well. Additionally, every city has a health care industry because it has people who get sick, has a utility industry because it has people who use electricity, not to mention about five different adjectives to place in front of the word "tech".
Detroit has the chance to do something powerful and distinctive. Let's hope it doesn't trade it in for more lab coat guys, pictures of test tubes, or embarrassing campaigns to sell itself as a "cool city".
There are tons of opinions on Detroit, but what's irritating is that I see a lot of advantages there many cities would kill for, but the state is too inept to really take advantage of them. But don't tell me the city's urban decay has anything to do with Coleman Young or Kwame Kilpatrick. Here in DC, we saw rising home values and the beginning of massive gentrification while we had a mayor who smoked crack.
In terms of economic development, Michigan is already bending over for the battery industry, and will do the same for anyone kind enough to put them on any kind of short list. They gave Boston-based A123 Systems $100 million of tax credits for a new plant just outside Detroit, even though the company would never have gotten a quarter as much from Massachusetts. Plus, as the battery supplier for Chrysler's EV, wasn't like A123 needed a reminder to consider Michigan.
In terms of getting businesses to come to Southeastern Michigan without having to pay them $100 million, Detroit and Michigan must stop with the watered-down marketing gibberish that has plagued the state's econ dev efforts during the Granholm years. Detroit should market itself as "the electric car city". The message is believable and would set it apart from the hundreds of counties and cities buying stock photos of lab coat technicians staring at test tubes, and all going on about the same green tech, biotech, "knowledge workers" nonsense.
Electric cars are already a large industry, with excellent growth prospects. Moreover, they pull in the supply chain of energy storage companies, a sector which VCs have fallen head-over-heels in love with.
Blue Springs, Mississippi, where the U.S. Prius factory will be, could copy "the electric car city" slogan, except it's not a city. I know, if Detroit sticks to saying one thing then they run the risk of not diversifying their economy. But saying they do everything hasn't really worked too well. Additionally, every city has a health care industry because it has people who get sick, has a utility industry because it has people who use electricity, not to mention about five different adjectives to place in front of the word "tech".
Detroit has the chance to do something powerful and distinctive. Let's hope it doesn't trade it in for more lab coat guys, pictures of test tubes, or embarrassing campaigns to sell itself as a "cool city".
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