• Keynes was soft on inflation.
• He was a socialist.
• He never changed his mind.
• He was an ideologue.
• He wished to end capitalism.
• His theory was not really "general" but instead fitted to the particulars of the Great Depression.
• The ideas proposed in his major treatise did not seek to replace classical and neoclassical economics but account for what to do when wages and prices were sticky and deflation is underway.
• You could "fine-tune" an economy.

Instead, Keynes hoped to save capitalism from its enemies on the left and its friends on the right.  He wanted to end the terror that unemployment represented to the average person.  And he advanced a new model of the workings of capitalism - one that put savings, credit, spending, investment, interest rates, risk management and securitization at center stage.

Keynes believed that the Efficient Market Hypothesis was false, market participants were far from rational, and that the capitalist economy had a strong built-in tendency to lurch from boom to bust.  Most important, his earlier research on the theory of probability made him suspicious of views that most market risks are manageable by viewing past trends.  Rather, he felt, to quote Donald Rumsfeld: "There are the unknown unknowns."  Very few of the opportunities and threats faced by investors are predictable.  Uncertainty, instead, characterizes markets as well as "planned" economies.

The uncertainties of technological change, wars, weather, new financial products, elections, coups, and so forth create lags, defaults, inflation, business shutdowns, uneven development, and joblessness.  These cannot be avoided.  According to Keynes, any theory and policy about modern capitalism must address this fundamental uncertainty: very little of the future can be predicted.

A new economic 'world view" is in the wings.  Let's hope that a true Keynesian revolution occurs this time.

Among the findings of the CFED research team was that in some cases, towns, cities and counties are coming up with more subsidies than the state. Yet, these jurisdictions have a less developed “infrastructure” for holding the firms accountable and for coming up with rational bids.  They also are often less savvy when it comes to negotiating with firms.  Additionally, a study of the effectiveness of inducing increased private investment in economically struggling rural economies finds that they have not made much of a difference in North Carolina. Schweke recommended that would be better if the state redirected some subsidy dollars to community development and capacity building, entrepreneurship, business retention/expansion/modernization, and upgrading workforce skills.

The first report, Local Economic Development Incentives in North Carolina , explores the often underreported area of local business incentives. The authors looked at 338 deals between 2001 and 2008 in which businesses received local incentives in addition to state assistance from either the state Job Development Assistance Grant (JDIG) program or the One North Carolina Fund.
According to the report:

“All companies that received state incentives from the One NC Fund and or JDIG program also received incentives from county and or municipal governments.  These incentives came in the form of cash grants, building and land purchases, infrastructure assistance, reduced fees, low interest loans, etc…. This study estimates that these local incentive packages had a median value of at least $200,000; the average incentive package was much higher at almost $2 million…. Even when accounting for the number of jobs connected with each incentive deal, there were over 50 cases in which local governments paid more than $10,000 per job. The most costly incentives, in terms of dollars per job, were also local incentives.  While the most expensive JDIG award had a maximum cost of $37,000 per job, the study found 6 instances in which local governments offered more than $40,000 per job in incentives.”

A power point of Schweke’s presentation to the panel on this report is included here.

The second report, Business Incentives and North Carolina’s Tier 1 Counties : Have they Worked? makes a strong case that North Carolina’s state-level business incentives are not having their intended effect on the state’s poorest and most development-starved counties. According to the report:

“The three primary incentive tools North Carolina has relied on in recent years are Bill Lee Tax Credits (now called Article 3J Credits), the Job Development Investment Grant  Program (JDIG), and the One North Carolina Fund. These tools may have helped the state increase investment and generate new employment opportunities. However, their effect on the most distressed areas of the state has been disappointing. The very counties that most need incentive programs to stimulate growth have been left behind in these programs. Over half of Bill Lee credits have been generated in Tier 5 counties in recent years, while only 13% of credits have come from Tier 1 counties. The One North Carolina Fund has awarded funding to distressed areas in similarly low proportions, and the JDIG program has awarded a majority of its funds to Tier 4 and 5 counties.”

A power point of Schweke’s presentation to the panel on this report is included here.

Schweke is a veteran economic policy expert and a specialist in development finance, plant closings, small and community business initiatives, local development planning, environmentally compatible development, and urban neighborhood development initiatives.

This research was made possible by a grant from the Z. Smith Reynolds Foundation.

• The U.S. stands out relative to its wealthy peers as a country with a uniquely high rate of poverty.
• The majority of the poor do not stay poor for long. However, many families cycle in-and-out, while some families and individuals get stuck in poverty's clutches.
• Declines in poverty have been stalled since the 1970s, although some progress was made during the Clinton full employment years.
• Increasing inequality has decreased the impact that economic growth has in inducing falls in the rate of poverty.
• Poverty rates vary a lot from state-to-state.
• The less educated make up a vast proportion of poverty's rolls. Single-parent female-headed households are much likelier to be snared. Changes in family structure among African Americans accounted for being poor more than it did for other ethnic groups.
• Welfare reform in the U.S. has reduced dependency, but not poverty much.
• Drawing on an original study, Iceland found that the rate of economic growth was a larger influence on poverty rates in the U.S. than changing family structure.
• Productivity needs to be high and its gains must be more broadly shared if further progress is to be made.

1. Give every parent the right to a year's paid leave
2. Shorten the workweek
3. Equal pay and benefits for equal part-time work
4. Prohibit parental discrimination at work
5. Universal pre-school for the three and four year olds
6. Stop taxing mothers more than everyone else
7. Equalize social security for spouses
8. Add unpaid household labor to GNP

• Economic development has modest impacts on poverty in general, but important effects on central cities and remote rural areas.
• Programs must target the neediest. Trickle down growth only goes so far. Moreover, without such a focus, probably most of the jobs fostered by economic development would go to commuters and new residents, not the need locals.
• Geographically speaking, high poverty and unemployment rates can persist for a quite long time. Many places look about the same today as they did in the 1950s.
• The writers outline a promising job creation and wage subsidy program.
• They support first source hiring programs.
• Person-based policies are needed as well - such as training and work supports like childhood assistance.

(Even if they boast a good batting average in the recruit new business contest)  We can only have a limited effect on our home turf.

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.

With the federal government sidelined by a giant budget deficit and a war, state governments are critical to sub-state economic development approaches. However, since state governments cannot intervene everywhere, a capacity-building effort is the best way to go – one that seeks to improve the managerial and entrepreneurial talent of their public, private and nonprofit sectors; create a pipeline of new, more educated workers; upgrade the existing workforce; encourage lifelong learning; improve amenities and public services; exercise world-class environmental stewardship and growth planning; and cultivate its homegrown economy. ¹

In essence, we are

• Reinventing economic progress (“triple bottom-line”). 
• Spurring and implementing a far-reaching devolution of power and responsibilities. 
• Crafting state, regional, and local development strategies that generate “real” wealth, along with wider opportunities for all. 

These are no small tasks.  But it’s what is needed to truly chart economic progress, as opposed to simply easing today’s problems by creating new ones for the future.

Some choices will raise the standard of living but can also harm the environment.  Some can make the rich richer, while others would expand opportunities for more.  Some can waste the “people’s money” on fiscally irresponsible business subsidies while others can strengthen the tax base.

The goal should not be simply looking for the least painful trade-off. Economic development of the right sort is important.  Hence, we should think big.

Binary Economics states that with the continual modernization of labor, the percentage of work performed by machines, or systems, is increasing and thus the role of capital in production, the actual percent of work being performed by capital, is increasing as well.   The principle difference between mainstream and binary approaches to economic growth is the way in which capital is dealt with.  “According to binary economics, the primary role of capital is to do a growing portion of the work and distribute a growing portion of the income earned from production.”⁴

Kelso’s theory, of course, is different from mainstream economics in terms of how it conceives of capital and labor and their role in production.  “Conventional wisdom says there is only one way to earn a living, and that’s to work.  Conventional wisdom effectively treats capital (land, structures, machines, and the like) as though it were a kind of holy water that, sprinkled on or about labor, makes it more productive.  Thus, if you have a thousand people working in a factory and you increase the design and power of the machinery so that one hundred men can now do what a thousand did before, conventional wisdom says, ‘Voila! The productivity of the labor has gone up 900 percent!’ I say ‘hogwash.’ All you’ve done is wipe out 90 percent of the jobs, and even the remaining ten percent are probably sitting around pushing buttons.  What the economy needs is a way of legitimately getting capital ownership into the hands of the people who now don’t have it.”⁵ 

And with that, Kelso set out to devise a program that would make available capital ownership to those who did not previously have access to it: the poor and working class.  He came up with (in 1956) the idea of an Employee Stock Ownership Plan (ESOPs) that would allow employees to access capital before they actually have it (using their future income to invest in stocks for long-term savings). His goal in creating this new type of capital generation was to give workers the same capacity for savings that wealthy people already have by giving them access to increased capital without them having to use their salaries (which for most workers is not possible due to cost of living). 

In theory, ESOPs instill ownership in workers and full accountability in management and ownership.  In mainstream ideas of economics, introducing a machine to the production process means increased per-unit productivity which in turn raises the overall profit margin.  This raises the bottom line for the company and means greater profits; the problem is there is no guarantee that the worker will benefit whatsoever from this improvement.  The excess capital will most likely be reinvested in the company or reused to absorb and offset other costs.  But if the employee has a share of the company, if he literally owns a percentage of the business, he would benefit in two ways: a) he would benefit directly from a rise in stock prices, and b) he would have more influence into company decisions-- management executives would be more accountable to the worker in the decisions they make.

This proposal was intended not only to benefit the individual worker and his family but also the economy and society as a whole.  “Once poor and working people are empowered to acquire capital with the earnings of capital just as wealthy people do (1) poor and working people will grow more prosperous by increasingly earning more spendable income from their ownership of capital, (2) credit-worthy companies will more profitably (a) employ their productive capacity and (b) invest in more productive capacity, and (3) the economy will grow more quickly.”⁶

ESOPs are by no means a ‘pie in the sky’ concept thrown around by economists—today they are used by thousands of companies around the globe.  Data from the 2006 General Social survey show that “20 million Americans own stock in their company through a 401(k) plan, ESOP, direct stock grant, or similar plan, while 10.6 million hold stock options. That means that 17% of the total workforce, but 34.9% of those who work for companies that have stock, own stock through some kind of benefit plan, while 9.3% of the workforce, but 18.6% of those in companies with stock, hold options.”⁷  In 2005 there were 9,225 companies with ESOP programs in the US, the total growth of assets in ESOP plans in 2005 reaching $600 billion. ⁸

As part of his legacy in the field of Economics and specifically his work in developing the concept of Binary Economics, the Kelso Institute was created as a resource and tribute to the works of Louis Kelso and the continuing work in the field of Binary Economics.   For more information on Kelso’s ideas and policies, visit: www.kelsoinstitute.org.

Entrepreneurship involves moving resources from lower yielding investments to higher returning ones.  It may involve incremental productivity changes, breakthrough technologies and products, a new startup, or ideas from the shop floor.

Thesis 3: Economic development and economic opportunity can move in tandem or in opposition. 

The goal of economic development is to increase the business creativity, productivity and competitiveness of a specific place.  In such an environment, new businesses are encouraged to start and existing firms to expand and modernize.  This will further entail the growth of jobs and economic opportunities.  The objective of an economic opportunity strategy is to enable economically disadvantaged places and people to contribute to this dynamic and take advantage, as employers and employees of this period of growth and restructuring.  The problem is that an economic development strategy of increasing the size of the economy will only trickle down so far. Without equity-based efforts and the dynamic of creative destruction that accompany even the most positive economic changes, such a strategy will likely hurt those who are already hurting.  It is for these reasons that development strategies need to be designed with both fairness and efficiency in mind.

Thesis 4:  Economic development is all about removing barriers.

This entails improving the overall conditions for commerce, as well as working with particular firms, sectors and clusters.   Among the former, actions to upgrade the skills and agility of the workforce and entrepreneurial pool stand  out as critical, given the tight link between technological and market changes and trends.

Thesis 5: The most forward thinking approach to meeting this need is undertaking significant educational reforms and investments, from pre-K through high school, that are required to equip today’s and tomorrow’s workforce with the skills and attitudes for economic success and civic participation in the new economy and polity.

If we want to have educational investments and reform play a larger role in states’ overall economic development plans, then there are four major challenges to be faced as product cycles accelerate and competition for market share ensues from other economies across almost the entire earth:

• We need to curb the rising costs of incentive competition among the states and localities and reinvest a portion of scarce public dollars in educational reform.
• We must create a modern tax system, which boasts lower rates, more predictability, a broader base, more equity, greater simplicity and sufficient fiscal resources for a state’s highest priorities.
• The state must prepare students to leave school ready for work in a high skill, information economy.
• Policymakers and citizens must recognize that increasing proportions of the future labor force will be minorities, new immigrants and workers from economically disadvantaged backgrounds.

Thesis six: Education matters for economic development.

Education funding has been losing ground over the past several years, at a time when our knowledge-based economy demands a different and higher set of skills than those traditionally provided by public education and when increasing numbers of public school students are minorities or new immigrants. A compelling body of research links primary and secondary education to economic development and growth, showing that people are a type of economic asset—“human capital” —and that increased investment in health, skills and knowledge provides future returns to the economy through increases in labor productivity.  Education increases workers’ average earnings and productivity, and it also reduces their incidence of social problems, such as drug abuse, crime, welfare dependency and lack of access to medical care, which can put a hefty drag on the economy.

Thesis 7: Avoid what does not work.

Fortunately, the picture of effective practice in education reform is becoming clearer. However, let us start with what doesn’t work:

• Charter schools with hemmed-in autonomy and no thoughtful, “tested”, unique school strategy do not deliver.
• Lowering class sizes and not altering how kids are taught does nothing.
• Enhancing teacher skills have limited effects.
• Just spending more money does not enhance learning.
• Low-wealth school districts need more fiscal resources.
• Disadvantaged schools typically cannot retain the teaching and principal talent that they need: higher salaries are needed.
• Vouchers are not popular politically and have lost most referendum drives.
• Teaching to pass required tests and meet other standards discourages the customization and experimentation that is needed today for school reform.
• Low relative teacher salaries are hindering retention of good teachers.

Thesis 8: Yet, money wisely spent on schools in the poorest areas can raise student performance. 

Here are three illustrations of innovation in the school and creativity in spreading promising or proven practices.

Alliance Schools, the Texas-based network run by nationally respected community organizing outfit the Industrial Areas Foundation, demonstrate that money well spent on shrinking class sizes, establishing definite and understandable goals, providing high quality and relevant teacher training, structuring incentives, holding students to high standards and getting parents involved can make significant changes.  Most important has been parental and faculty agreement that there are real problems, demanding a commitment to genuine change.  This, along with IAF’s leadership development work with the parents, provided the leverage and energy that led to success.

The University Preparatory Academy, a charter school in Detroit, has grown tenfold in its seven years and exceeded its target of 90% graduation rate and 90% going onto a post-secondary school.  The strategy? 

• Developing the student identity of and motivation to be an excited and successful learner. 
• Aiding the student to become familiar with and adept at understanding and working within mainstream workplaces. 
• Building “soft” and academic and technical skills by individualized learning plans/compacts. 

Strong adult and peer advisee groups are needed to provide “family” and counsel.    Internships are a necessity, so are smaller classes and smaller schools.  High standards curriculum should be used.  There is a great need to set aside time to experiment, reflect and tailor new learning approaches.  Need for greater principal control over hiring and firing.  Critical is creating a school culture which will battle “street” culture.  UPA’s ”never give up” philosophy, which involved walking the extra mile, is definitely a prerequisite for establishing a cycle of success dynamic within the school and raising the trust and confidence of the student.

Minnesota’s nonprofit group, Growth and Justice, has recently held a conference on “Smart Investments in Minnesota’s Students,” whose aims were to acquaint policy makers, advocates, and opinion leaders with evidence on what works in education from Pre-K to the 12th grade and build a movement to raise the number of high school graduates to receive a respected credential or a 2-year or 4-year college degree by 50% by 2020.  In addition, conference participants dealt with and discussed what would be the cost of the likely and most promising program portfolio.

Thesis 9: Investing In What Works

Research confirms the value of investing in educational programs, curricula, technologies, skills and infrastructure, particularly in the following areas:

Pre-K – Longitudinal studies calculate a significant return on investment (ROI) for preschool education as well as a net public-dollar savings because of a decreased likelihood for preschool participants to repeat grades, require remedial education, be incarcerated for crimes and become dependent on welfare.  Many states are moving toward offering subsidized preschool, particularly for at-risk children, but funding these programs remains a challenge.

Primary and Secondary Education – Research shows that a high-quality education increases the earnings of individuals and the economic health of their communities.  Many believe, however, that increased public investment will not necessarily improve the quality of education offered.  To the contrary, recent studies show that education spending can have a direct, positive impact on business climate and can improve the success of at-risk students, whose contributions to the economy are critical if we are to achieve a high-value/high-wage economy in the 21st century.  Such spending will have a greater chance of success if coupled with specific reforms, such as smaller class sizes, greater access to technology for at-risk students, support for teacher training and innovation, and improved accountability structures. 

Community Colleges – The rate of return on community college education is generally positive; those who attend community college earn significantly higher wages than those who stop at a high-school diploma.  Because of their low cost and lack of requirements for admission, community colleges have become the postsecondary organizations that many disadvantaged groups use to gain access to employment.   Thus, community colleges are well-positioned to help bridge the educational, wage, race and class divides in America.

Thesis 10: How To Invest More in People (i.e., Who will pay for all of this?)

Supporting this continuum of programs will require a financial commitment.  Federal and state governments need to take a leading role and a long-term perspective, considering the significant ROI that a productive education and training infrastructure can bring.  Such a long-term and forward-thinking perspective demands courageous reform of the current tax system.  Specifically, CFED recommends the following strategies for financing an investment in education and training programs: 

• Curbing the use of profligate business incentive programs, which give businesses economic “breaks” but do not always guarantee local job creation or economic growth.

• Halting the use of corporate tax-sheltering loopholes, which are eroding revenues generated by state corporate income taxes.

• Modernizing state (and local) revenue systems to be more efficient, effective, customer-friendly and accountable.

Thesis 11: Attaining the Prerequisites for a High-Wage, High-Performance Economy

More American goods and services are facing stiff foreign competition.  If this nation is to achieve a higher and more shared standard of living, U.S. firms must compete on the basis of new, higher quality service and production approaches, utilizing new technologies and a more skilled workforce.  Economic developers call this “the high road.”  Taking the high road will require that we as a nation develop a more seamless, well-endowed lifelong learning system; reform wasteful business incentive programs and redirect the resulting savings into education or other state priorities; and create and maintain a modernized, high-quality revenue system.

States and localities must find ways to encourage more of their employment in high-value sectors and workplaces. A high-quality education and training continuum, while not alone sufficient, is a necessary condition for meeting this challenge.

Now, here are the reasons, absent evidence, rhetoric, or polemic:

1. Progressive taxes are a good deal.
2. They are a moral obligation.
3. They can strengthen the economy.
4. Excellent schools depend on taxes.
5. Taxes help families raise kids.
6. Pollution taxes can save life on earth.
7. Taxes can promote economic justice for all.
8. Taxes pay for economic opportunity.
9. They are good for business.
10. Taxes fuel democracy.

This book provides the ammunition needed to shift the debate on taxes.  Buy it and broadcast its message.

French economist Daniel Cohen’s books on today’s economy deserve wide readership among policy makers, activists and intellectuals.

Hardly a household name or common feature of the American talk show circuit, (or is the proper word “circus”?), economist Daniel Cohen has authored a series of readable, challenging and illuminating works. He is a master of the book-long essay and is big on irony.

Cohen’s core arguments and diverting digressions offer little ideological solace to right or left. Both views are found wanting. Solutions that he proposes tend to draw from each side of the political spectrum.

Misfortunes of Prosperity: An Introduction to Modern Political Economy (MIT Press: 1995) suggests that we are witnessing a healthy return of the classic field of political economy. Further, it can provide decent answers to questions such as

• Are current patterns of economic growth too low to sustain today’s welfare state?
• Will globalization impose a universal economic model, akin to the 19th century’s, and thus end the social democratic state as we know it?
• Is worldwide affluence just a dream? Can modern economies balance their needs for efficiency and solidarity?

In tackling these questions, Cohen intelligently reflects about the causes of the “Golden Age” of post-World War II capitalist growth, the factors explaining slower rates of growth since, an interesting analysis of what causes joblessness, the “shadow” side of Keynesianism, the strengths and weaknesses of monetarist theory and policy, and others.

The Wealth of the World and the Poverty of Nations (MIT Press, 1998) picks up where the last book left off. (In some ways, Cohen is writing just one book, published in installments.) Issues covered include the poverty of much of the world, the East Asian development successes, growing fears in the West about low-wage competition in developing countries, the nature of the Third Industrial Revolution, unemployment and exclusion in Western European economies, and the bankruptcy of present political efforts to deal prudently and fairly with these challenges. Cohen is actually optimistic in the sense that we are intellectually and wealthy enough to foster a decent standard of living worldwide.

Our Modern Times: The New Nature of Capitalism in the Information Age (MIT Press, 2003) is Cohen’s foray into the “New Economy.” He traces the roots of this economy back to the 1960s and its political movements, which sought to reduce standardization, to increase initiative, and promote decentralization and the Global Village. But with flexibility has come added job stress of the new 24/7 workplace. Family, as well as work life is undergoing radical changes, many of which are troubling. In short, what is the future of work? Will there be enough to go around? Will it be spiritually overwhelming and family destroying, while richer in its excitement and learning?

The book, Globalization and its Enemies (2007), is his defense of freer international trading and investment systems and his critique of conventional protectionist policies. Ironically, globalization is generating a stronger opposition, because it has not gone far enough. Developing nations are well aware of their material shortcomings, as shown on the global media. However, economic forces are lagging behind worldwide communication trends. In fact, “the problem is not so much that they {the poor} are exploited by globalization as that they are forgotten and excluded.”

He concludes we must pay attention to these trends:  Asian migration.  Internal migration.  Increased migration.  Temporary migration.  Highly skilled migrants.  Respecting migrants. 

The book provides the sort of rational analysis, the nuances and the calmness needed to craft better policies and to lower the emotional level of current debate.

Lastly, Koser’s work is brand new and hot off the presses.

Economic development is not a single strategy, such as business attraction efforts or cutting high marginal income tax rates or earmarking more funds for in-state research and development.  Instead, it should be regarded as a broader dynamic process that these initiatives may affect positively or negatively.  To quote Kenneth Boulding: “Economic progress (or development) involves the discovery and implementation of better ways to address our wants.”  Such a definition could be elaborated into a series of goal statements and relevant data indicators.  So, economic development is not a collection of large capital projects, such new plants and convention centers.  It is an adaptation process, involving how smoothly, swiftly, profitably, and humanely, a sub-national economy can adjust to changes in demography, technology, resource availability and costs, and competition from abroad and within the U.S.

Thesis 2: On the other hand, entrepreneurial initiative in the private, public, and nonprofit sectors is almost synonymous with the process of economic development.

Entrepreneurship involves moving resources from lower yielding investments to higher returning ones.  It may involve incremental productivity changes, breakthrough technologies and products, a new startup, or ideas from the shop floor.

The goal of economic development is to increase the business creativity, productivity and competitiveness of a specific place.  In such an environment, new businesses are encouraged to start and existing firms to expand and modernize.  This will further entail the growth of jobs and economic opportunities.  The objective of an economic opportunity strategy is to enable economically disadvantaged places and people to contribute to this dynamic and take advantage, as employers and employees of this period of growth and restructuring.  The problem is that an economic development strategy of increasing the size of the economy will only trickle down so far. Without equity-based efforts and the dynamic of creative destruction that accompany even the most positive economic changes, such a strategy will likely hurt those who are already hurting.  It is for these reasons that development strategies need to be designed with both fairness and efficiency in mind.

Thesis 4:  Economic development is all about removing barriers.

This entails improving the overall conditions for commerce, as well as working with particular firms, sectors and clusters.   Among the former, actions to upgrade the skills and agility of the workforce and entrepreneurial pool stand  out as critical, given the tight link between technological and market changes and trends.

Thesis 5: The most forward thinking approach to meeting this need is undertaking significant educational reforms and investments from pre-K through high school, that are required to equip today’s and tomorrow’s workforce with the skills and attitudes for economic success and civic participation in the new economy and polity.

There are four major challenges to be faced as product cycles accelerate and competition for market share ensues from other economies across almost the entire earth, and if we want to have educational investments and reform play a larger role in states’ overall economic development plans.

• We need to curb the rising costs of incentive competition among the states and localities and reinvest a portion of scarce public dollars in educational reform.
• We must create a modern tax system, which boasts lower rates, more predictability, a broader base, more equity, greater simplicity and sufficient fiscal resources for a state’s highest priorities.
• The state must prepare students to leave school ready for work in a high skill, information economy.
• Policymakers and citizens must recognize that increasing proportions of the future labor force will be minorities, new immigrants and workers from economically disadvantaged backgrounds.

Thesis six: Education matters for economic development.

Education funding has been losing ground over the past several years, at a time when our knowledge-based economy demands a different and higher set of skills than those traditionally provided by public education and when increasing numbers of public school students are minorities or new immigrants. A compelling body of research links primary and secondary education to economic development and growth, showing that people are a type of economic asset—“human capital” —and that increased investment in health, skills and knowledge provides future returns to the economy through increases in labor productivity.  Education increases workers’ average earnings and productivity, and it also reduces their incidence of social problems, such as drug abuse, crime, welfare dependency, and lack of access to medical care, which can put a hefty drag on the economy.

Thesis 7: Avoid what does not work.

Fortunately, the picture of effective practice in education reform is becoming clearer.

However, let us start with what doesn’t work.

• Charter schools with hemmed-in autonomy and no thoughtful, “tested”, unique school strategy do not deliver.
• Lowering class sizes and not altering how kids are taught does nothing.
• Enhancing teacher skills have limited effects.
• Just spending more money does not enhance learning.
• Low-wealth school districts need more fiscal resources.
• Disadvantaged schools typically cannot retain the teaching and principal talent that they need: higher salaries are needed.
• Vouchers are not popular politically and have lost most referendum drives.
• Teaching to pass required tests and meet other standards discourages the customization and experimentation that is needed today for school reform.
• Low relative teacher salaries are hindering retention of good teachers.

Thesis 8: Yet, money wisely spent on schools in the poorest areas can raise student performance. 

Here are three illustrations of innovation in the school and creativity in spreading promising or proven practices.

The Texas-based network, run by the nationally respected community organizing outfit, the Industrial Areas Foundation, and called Alliance Schools, demonstrate that money well spent on shrinking class sizes, establishing definite and understandable goals, providing high quality and relevant teacher training, structuring incentives, holding students to high standards, and getting parents involved can make significant changes.  Most important has been parental and faculty agreement that there real problems, demanding a commitment to genuine change.  This, along with IAF’s leadership development work with the parents provided the leverage and energy that led to success.

The University Preparatory Academy, a charter school in Detroit, has grown tenfold in its seven years and exceeded its target of 90% graduation rate and 90% going onto a post-secondary school.  The strategy? 

Developing the student identity of and motivation to be an excited and successful learner. 
Aiding the student to become familiar with and adept at understanding and working within mainstream workplaces. 
Building “soft” and academic and technical skills by individualized learning plans/compacts. 

Strong adult and peer advisee groups are needed to provide “family” and counsel.    Internships are a necessity, so are smaller classes and smaller schools.  High standards curriculum should be used.  There is a great need to set aside time to experiment, reflect and tailor new learning approaches.  Need for greater principal control over hiring and firing.  Critical is creating a school culture which will battle “street” culture.  UPA’s ”never give up” philosophy, which involved walking the extra mile, is definitely a prerequisite for establishing a cycle of success dynamic within the school and raising the trust and confidence of the student.

Minnesota’s nonprofit group, Growth and Justice, has recently held a conference on “Smart Investments in Minnesota’s Students,” whose aims were to acquaint policy makers, advocates, and opinion leaders with evidence on what works in education from Pre-K to the 12th grade and build a movement to raise the number of high school graduates to receive a respected credential or a 2-year or 4-year college degree by 50% by 2020.  In addition, conference participants dealt with and discussed what would be cost of the likely and most promising program portfolio.

Thesis 9: Investing In What Works

Research confirms the value of investing in educational programs, curricula, technologies, skills and infrastructure, particularly in the following areas:

Pre-K – Longitudinal studies calculate a significant return on investment (ROI) for preschool education as well as a net public-dollar savings because of a decreased likelihood for preschool participants to repeat grades, require remedial education, be incarcerated for crimes and become dependent on welfare.  Many states are moving toward offering subsidized preschool, particularly for at-risk children, but funding these programs remains a challenge.

Primary and Secondary Education – Research shows that a high-quality education increases the earnings of individuals and the economic health of their communities.  Many believe, however, that increased public investment will not necessarily improve the quality of education offered.  To the contrary, recent studies show that education spending can have a direct, positive impact on business climate and can improve the success of at-risk students, whose contributions to the economy are critical if we are to achieve a high-value/high-wage economy in the 21st century.  Such spending will have a greater chance of success if coupled with specific reforms, such as smaller class sizes, greater access to technology for at-risk students, support for teacher training and innovation, and improved accountability structures. 

Community Colleges – The rate of return on community college education is generally positive; those who attend community college earn significantly higher wages than those who stop at a high-school diploma.  Because of their low cost and lack of requirements for admission, community colleges have become the postsecondary organizations that many disadvantaged groups use to gain access to employment.   Thus, community colleges are well-positioned to help bridge the educational, wage, race and class divides in America.

Thesis 10: How To Invest More in People (i.e., Who will pay for all of this?)

Supporting this continuum of programs will require a financial commitment.  Federal and state governments need to take a leading role and a long-term perspective, considering the significant ROI that a productive education and training infrastructure can bring.  Such a long-term and forward-thinking perspective demands courageous reform of the current tax system.  Specifically, CFED recommends the following strategies for financing an investment in education and training programs: 

• Curbing the use of profligate business incentive programs, which give businesses economic “breaks” but do not always guarantee local job creation or economic growth.

• Halting the use of corporate tax-sheltering loopholes, which are eroding revenues generated by state corporate income taxes?

• Modernizing state (and local) revenue systems to be more efficient, effective, customer-friendly, and accountable.

Thesis 11: Attaining the Prerequisites for a High-Wage, High-Performance Economy

More American goods and services are facing stiff foreign competition.  If this nation is to achieve a higher and more shared standard of living, U.S. firms must compete on the basis of new, higher quality service and production approaches, utilizing new technologies and a more skilled workforce.  Economic developers call this “the high road.”  Taking the high road will require that we as a nation develop a more seamless, well-endowed lifelong learning system; reform wasteful business incentive programs and redirect the resulting savings into education or other state priorities; and create and maintain a modernized, high-quality revenue system.

States and localities must find ways to encourage more of their employment in high-value sectors and workplaces. A high-quality education and training continuum, while not alone sufficient, is a necessary condition for meeting this challenge.

Edited by Alan Jenkins and Brian Smedley, All Things Being Equal: Instigating Opportunity in an Inequitable Time, is the first publication of a new organization that they run, The Opportunity Agenda.

Boasting a number of respected research authors, the book’s chapters include both critique and alternatives. Jared Bernstein kicks it off with an incisive study of the challenges of advancing beyond your current wealth quintile. Linda Darling-Hammond explores the role of quality education in expanding opportunities to achieve your dreams. Marc Mauer examines the effect of mass incarceration on class and racial mobility. (The U.S. is number one in size of prison population in the world.) Philip Tegler treats the hope and reality of using housing mobility programs to move poor households closer to available jobs. Brian Smedley discusses the importance of universalizing affordable health insurance options for the poor, near-poor and middle class. (Without it, families can lose everything, when faced by costly disease or injury.) The book concludes with a thoughtful discussion of the findings of discrimination research today and yesterday and an article outlining an assimilation and upward mobility effort for aiding our newest immigrants.

This is a practical and visionary work that deserves wide readership. And I will be watching for other publications by The Opportunity Agenda.