Ideas in Development

Monetary and fiscal policy, trade relations, property rights, labor and employment law, federal taxation and regulation, the fortunes and stage of the dominant industry in your state or region, and the quality of schooling, all pack more punch in terms of employment growth or decline. We must set reasonable expectations, regarding how much state and local economic development can deliver. ¹

Indeed, sometimes it seems like the field of state and local economic development has contracted a curious form of myopia, brought on by its efforts to coax large mobile projects to reside in your county or state. If your state has a string of successes, it's hard not to think that we are masters of the economy and these projects will have all the salutary effects that the company and the governor promise and heralds. It is as if the political leadership, the average citizen and the development professional have all forgotten three fundamental realities:

We are dealing with a limited number of footloose attraction targets.

Policy and practice can only accomplish so much, given the larger forces of change at work (e.g., medical breakthroughs, demographic changes, an accelerating product cycle).

Economic development policymakers, consultants, researchers, and practitioners don't create jobs but we, ideally, help to foster the conditions that are needed by 21st century firms and entrepreneurs to flourish.

Hugh O'Neill says it well and makes an important distinction about the development process versus policy in his out-of-print classic, Creating Opportunity: Reducing Poverty through Economic Development (1985):

Economic development is not, as government officials both here and abroad sometimes seem to think, simply a collection of large-scale capital projects. Instead, economic development is a process by which people, firms, and communities create new opportunities for growth. They do this by successfully adapting to changes in the economic environment - changes in demography, technology, resource availability, and competition from abroad or from other regions.

The entrepreneur who creates a new home insulation business or the person who builds a small hydroelectric plant in response to rising fuel prices is engaged in economic development. So are people who develop new health service businesses aimed at meeting the needs of a growing elderly population. So are large corporations that revitalize an old industry through application of new technologies . . . Industries that develop cheaper, domestically produced substitutes for goods that had previously been imported are also engaged in economic development. Governments generally cannot create the spirit of enterprise that is so basic to undertakings of this kind; but government can help to create the conditions that allow that spirit to flourish. Creating these conditions is the goal of economic development policy.

The implications of this statement are big:

• Policy matters

• The human factor is profoundly important

• Entrepreneurial initiative is key

• Good government is good economic development

You cannot blue print this process, but you can even the playing field a bit. Above all, get out of the way.