What Principles Should Guide Effective Economic Development?
The pressures associated with the bidding wars and the “cut-taxes-and-deregulate” lobby lead to policy “on the fly.” Decisions are made in an un-strategic fashion and long-term consequences are rarely considered. Recruitment efforts focus on doing the deal and tax adjustments are made on the basis of political calculus. It is time to set out some basic principles that should inform economic development policies and programs.
We offer seven for starters.
Strong economies compete on the basis of high value, not low cost.
Conventional wisdom suggests that low-cost states and localities are automatically pro-business. Costs are not unimportant, but value for money is at least as critical. A state with low levels of educational attainment, poorly maintained and inadequate infrastructure, and a degraded environment is not attractive even if it has the lowest wages or the most lax regulations in the region. Conversely, a state that offers a skilled labor force, modern infrastructure and a high quality of life, but has relatively high taxes, can hardly be said to be anti-business. The task of economic development should be to identify and work to enhance those assets that add value to the business environment and give better returns on the taxpayer’s dollar.
Investments in development capacity provide the basis of future economic health.
For a couple of decades through the annual Development Report Card for the States, the Corporation for Enterprise Development has argued that strong development capacity is the key to business vitality and economic performance. By this we mean that states ensure that the necessary human technological, financial and physical infrastructures are in place to enable economies to grow and to withstand the impacts of business troughs and recessions. Business consultant Rosabeth Kanter’s important earlier book, World Class: Thriving Locally in the Global Economy, highlights Spartanburg and Greenville, South Carolina, where successful business recruitment has developed a new, globally competitive economy. However, she observes that essential success factors include customized training and continued upgrading of workers’ skills, visionary leaders with a clear agenda for development, and successful collaboration within the business community and with government to improve company quality and performance.
Government is an indispensable partner in the process.
As a provider of essential services, as a conveyor of the broad range of interests within a community, and as the custodian of an area’s assets, not to mention the democratic expression of the public will, government plays a vital role in economic development. There is much support around the country for reducing the size and scope of government, but business also needs government to provide the basic infrastructure within which it can operate. The challenge is to make government work better and to find ways in which the public, private and nonprofit sectors can create complementary and reinforcing roles.
The concept of government-as-usual is bankrupt.
New attention to reorganizing economic development program delivery for greater quality and impact is essential. Development initiatives, like all areas of government, must meet higher standards for accountability, for cost-effectiveness and customer-friendliness. In many cases, the public sector must seek to do more with less. Those that deny these trends, that do not innovate and that do little to educate constituencies and political leadership about the rationale and benefits of their programs, inevitably will face budget cuts and possible elimination. “Reinventing government” is not a fad: it is standard operating procedure.
Economic development is for everyone, not just businesspersons.
Although profitability and returns on investment are the driving forces in any economy, they are not the primary concern of economic development—they are means to other ends. The measure of how well an economy is doing is its ability to provide people with real opportunities for a richer and fuller life. Are there enough jobs to go around? If jobs exist, do people have the skills to qualify for them? Does everyone have a fair chance of obtaining a job if he or she is qualified? Do the jobs pay enough to provide an acceptable standard of living? Failure to address these concerns means that economic development is not serving the broader public interest.
Competitiveness and equity are two sides of the same coin.
The growing disparity in our society cannot continue. There is already evidence that even where suburban and edge city economies are doing well, their regional economies are lagging because of the drag exerted by a struggling metropolitan core. Conversely, where disparities between the core and suburbs are much smaller, the whole regional economy moves ahead. Henry Ford realized that unless his workers were adequately paid, they would not be able to buy his mass production motor cars. Today, as families struggle to makes ends meet and are no longer able to save, they put a brake on overall economic growth.
Economic development has to encourage and enable businesses to be more competitive in the world marketplace and thus expand the economic cake at national and local levels. It also requires opening opportunities for everyone to participate in the economy.
Quality leadership can turn economies around.
Economic success depends on effective leadership, in the business community and in government, education institutions, and the non-profit sector. This works at two levels. At the strategic level, leaders need a vision for their state or local community that encompasses the principles of value-added competitiveness, partnership, inclusiveness, opportunity and development capacity. At the operational level, citizens should expect the highest standards of accountability, openness and integrity. A few critical “spark plugs” can galvanize broad community support and can maintain new development partnerships through good times and bad.
State governments too must exercise leadership. They should promote a culture of performance and accountability in both the public and private sectors; acquaint businesses and workers with the new challenges and opportunities posed by today’s economy; and develop a strategic vision for the state’s development future, as well as incentives that fit this vision.