Article 1: Where is Economic Development Headed?

If you had to make a prediction today about the future of economic development over the next decade, what would your prediction say? Have you given any thought to this question?

Maybe like a lot of people, you are focused on surviving today and will deal with tomorrow when it comes. I am an advocate of devoting some attention to the future. Also, I believe that if done properly, this process can help us manage today's issues and challenges more effectively.

I have been thinking about this question in bits and pieces for sometime and plan to share some of my ideas on this topic in a series of articles. After all, the name of this blog is what? Economic Development Futures!

This article concerns itself with some of the basic definitions required to approach a future-casting process for economic development and how we might develop some appropriate scenarios for the field. This is only the first installment in my thought process. This is no simple task, as you can imagine. Unfortunately, I will have to drag you through some of this complexity to build a useful and legitimate "basis" for making some predictions about economic development's future.

First, how do we even start to think about this question? For one, we need to define the "questions" that should be asked. Is it a question that can be answered in a meaningful way? I think the answer is yes, but we need to approach this "future-cast" with alternative scenarios in mind. Also, we need to define what we mean by "economic development."

What is the basic question we should ask? The basic question I think we should be asking is this: "How will the economic development field in the United States change over the next decade in terms of its structure, performance and impact on society?

Beneath this basic question, I am suggesting two important questions forcing us to consider different possibilities:

1. If the field were to follow a "favorable outcome" trajectory, what likely developments would occur?

2. If the field were to follow an "unfavorable outcome" trajectory, what likely developments would occur?

Next, let's look at a working definition of the economic development field. Here is the one I suggest working with.

Economic development is the system of organizations, policies, programs and practices that communities, regions, and states employ to maintain and increase the vitality of local economies, enhance the competitiveness of businesses and industries and increase the prosperity of local populations.

I have chosen to exclude national and international economic development concerns in my definition to sharpen our focus on local and state activities. It is recognized, however, that these local and state economic development activities occur within important national and international economic contexts. In fact, these contexts have grown in importance in shaping the field today, and they are likely to grow in importance in the future as the "worldwide economic web" becomes more tightly linked.

Scenario formulation requires us to do a couple of things:

1. Define the major factors and trends that currently influence the field and will shape its future.

2. Configure scenarios to fit the available data and expectations/assumptions used in the future-casting process

As my organizing questions above suggest, I think we should look at two basic overall trajectories for the economic development field:

1. Favorable outcome trajectory, which identifies what will occur in the field if things are deemed to go well or favorably. Of course that begs the question: what does "well or favorable" mean? For some, keeping things basically the same as they are now would be considered a favorable outcome. For others, a favorable outcome is for the field to advance to the next level or two of sophistication, value, significance, etc. A follow-on question is how favorably can the field develop? It is here that we begin to differentiate the outlines of scenarios.

2. Unfavorable outcome trajectory, which identifies what will occur in the field if things are deemed to not go so well in the future. Again, the valuing question needs to be answered, and we need to define the outlines for the possible scenarios along this trajectory.

Two possible bases can be used in constructing our scenarios:

1. Scenarios judged against current conditions.

2. Scenarios judged against some envisioned "ideal" set of conditions.

Given the pragmatic character of the economic development field, I am suggesting that we follow the first approach, or judge the scenarios against current conditions. We can also consider how our scenarios look when judged against some ideal set of conditions at a later point, if that is considered useful and productive.

Four generic scenarios can be identified under both the favorable and unfavorable trajectories:

1. Baseline, or continuation of current conditions.

2. Slight departure from current conditions.

3. Moderate departure from current conditions.

4. Radical or extreme departure from current conditions.

To start this process, we will need to define "existing conditions." We will need a framework to accomplish that. One starting assumption I am making in this regard is that "existing conditions" vary across states, regions and communities. While some parts of the economic development system in different places contains the same or similar elements, it is subject to similar influences and the like. I think we should assume there is meaningful variation in the structure, performance, orientation and goals, and other dimensions of the economic development field as it currently exists in different geographic places-both within the U.S. and internationally.

Manageability is important. This future-cast will concern itself with the ED field in the United States, and it will concern itself only with the common elements found in many or most U.S. places.

This is where I will break for now. To be continued. Please email or call me if you are interested in adding your thoughts at this stage. Don Iannone's Email and telephone number: 440.449.0753.

Very Good Example of University Research Park Development

Here is an example of a well-done university research park development. University Park at MIT is a 27-acre, mixed-use research and development (R&D) park, adjacent to the campus, that is integral to the long-range strategy of Massachusetts Institute of Technology (MIT) to foster technology transfer among the university’s students, graduates, faculty members, and the private sector. When completed, University Park at MIT will comprise a total of 2.3 million square feet and include at least 1.3 million square feet of office/R&D space, a 210-room hotel and executive conference center, up to 150,000 square feet of retail space and restaurants, 650 rental housing units, four structured parking facilities for 2,800 cars, and seven acres of parkland.

Link for further information.

Very Good Example of a Sustainable Building Project

For those of you looking for a very good sustainable building project to learn from, take a look at the PNC Firstside Center, which is a large-scale, environmentally sustainable facility that is used for operations, processing, and many other traditional back-office functions for PNC Financial Services Group in Pittsburgh, Pennsylvania.

Completed in September 2000, this five-story, 650,000-square-foot (6,038-square-meter) structure has achieved the distinction of being a LEED-certified green building under the U.S. Green Building Council's Leadership in Energy and Environmental Design (LEED) program. Located on a former brownfield in downtown Pittsburgh, the edifice offers an employee-friendly environment with plenty of natural light, fresh air, and sustainable building systems. As a benefit to the city of Pittsburgh, the redevelopment of this formerly idle site brought new life and activity to this underutilized section of downtown.

Additional information link.

Changing Settlement Patterns

Urban Land Institute Senior Resident Fellow Maureen McAvey says that over the past decade, the shape of metropolitan areas evolved from the old “hub and spoke” system, in which all the outlying areas were dependent on the core employment center, to a diverse “ring system” with numerous dispersed commercial and retail hubs following housing out to the outer rim.

McAvey cites strengths and weaknesses of each area:

* Downtown core and first-ring—Strengths: prime location; strong job base; ample supply of existing housing (although generally not affordable); proximity to transit options; ample parks and cultural facilities. Weaknesses: infill development often difficult and slow; land assembly difficult; fractured local leadership; tax base often eroding; pressing social needs, such as homelessness; public education perceived as poor quality.

* Middle-ring—Strengths: tendency to have more affordable housing; plentiful character and sense of community among residents; ethnically diverse. Weaknesses: limited mix of land uses; limited tax base.

* Outer-ring—Strengths: Largest supply of affordable housing within the urban area; new, high-quality new schools; ample recreational amenities such as golf courses; perception of safety; perception of residents having close ties to local government; less cumbersome development process. Weaknesses: Edgeless, devoid of gathering places and sense of community; pandemic retail and island office development completely dependent on auto access; virtually no transit options; pedestrian-unfriendly; unsustainable low-density development pattern.

Source: Urban Land Institute.

Boeing Has Cities and State Going Bananas

What’s the hottest ED deal out there at the moment? How do you spell craziness? B-O-E-I-N-G.

According to recent news reports, states and communities will blanket Boeing with proposals today -- everything from $100 million in tax breaks in Palmdale, Calif., to decades of tax abatements in Michigan -- in the battle for the next U.S. manufacturing prize: the 7E7 jet.

Today is the deadline for any town, city or state to file proposals for Boeing's proposed 7E7 final assembly plant. While the process is clouded in secrecy, lawmakers are compiling perks to win the prestige and thousands of jobs that will accompany the project.

Here’s a preliminary rundown of whose going bananas for Boeing:

* California: The state plans to submit a collection of bids, including offers from Long Beach and Palmdale. Fresno is another candidate, according to The Fresno Bee, and Victorville is also interested, the city's local paper, the Daily Press reported.
* Texas: The state is also expected to file a group of bids, including proposals from Fort Worth and Brownsville. Other sites include El Paso, Houston, Harlingen and San Antonio, The Associated Press reported earlier this month.
*Michigan: The state will offer three sites. Sawyer International Airport and Willow Run Airport are both candidates, according to AP.
* Georgia: Gov. Sonny Perdue announced the state will make a bid for the factory, The Augusta Chronicle said.
* Ohio: Dayton, Toledo, Columbus and Youngstown-Warren are all potential sites, AP says.
* Arkansas: The state will propose four sites in three regions. Little Rock, Fort Smith, Blytheville and another site in northwest Arkansas are reportedly seeking the work, AP reported.
*Alabama is also developing a bid, AP reported.
* Illinois is preparing a proposal, according to the Chicago-Sun Times
* New Jersey: The southern New Jersey city of Millville is also making a bid for the plant, AP reported.
* Oklahoma
* North Carolina
* South Carolina
* Arizona

Article link.

As you searching for...

a source of new economic development ideas for your community, consider reading about your community's economic and business history. This could be a goldmine in terms of insights about sustaining economic growth in your area. I have been spending more time on the Western Reserve Historical Society's website for this very reason. Great stuff.

Looking for Benchmark Economic Data on Euro Cities?

Look no further. It will cost you, but Cambridge Econometrics has the stuff. Visit their website here. By the way, U.S. metro areas should be including international city comparisons in their future competitive assessments. That is the direction our work is headed in.

For a sample of their metro economic analysis, download this report.

Latest Regional Economic Outlook

According to Economy.com's latest regional economic outlook, there are no surprises in terms of who is faring the best at this point. The West and South are emerging as leading regions in the U.S. economic recovery. The workforce in the South is stable, and the West has nearly stabilized. Their leads are slim, but a few of the larger metropolitan areas in the West and South are beginning to emerge with strengthening labor markets and stable commercial real estate markets.

While the phenomenal pace of growth in Las Vegas and Riverside-San Bernardino has faded, these markets are still expanding. Also benefiting the West, office vacancy rates are relatively low and stable in southern California. In the South, the worst of the downturn seems to be over in Houston and Dallas. Meanwhile, Florida’s payroll employment is the strongest among the larger states and its real estate markets are as strong as ever. Washington DC’s workforce is expanding consistently, and Atlanta saw job growth in the first quarter, bringing payroll employment back to where it was one year ago.

According to recent manufacturing purchasing surveys, older manufacturing regions are beginning to slow some improvement.

The numbers are not that impressive, even for the Southern and Western regions, which should see new growth in the 0.4 to 0.6% growth range through 2003. At least things are loving in the right direction.

If you subscribe to Economy.com, click here for more information.

White Collar Jobs Will NOT Return

There is some very sobering news in a recent article published by Economy.com on the outlook for U.S. white collar job growth.

"A large number of jobs lost in the U.S. and Western Europe during the latest economic slowdown will never return. These jobs have migrated to other countries because many companies, in an attempt to trim costs, have either moved or outsourced their back-office operations to countries with lower costs and comparable workforces. What happened to blue-collar jobs in the 1980s is now happening to white-collar jobs thanks to the global reach of information technology. On the flip side, a growing, prosperous middle class in the developing world means higher exports of goods and services for the U.S. and Western Europe and a tighter integration of the global economy."

The article assesses the damage in terms of white collar job loss and gives the reasons why. In a nutshell, low costs and the ability to produce comparable quality work explain why India, China and the Philippines have made such huge in-roads in this market. The outsourcing trend that gained momentum in 2000 is expected to continue, which is not good news for U.S. communities and states that have major business service concentrations and hope to grow them in the future.

Check out the National Association of Software and Service Companies (NASSCOM) website and download its 2003 Strategic Review report by clicking here.

Article link.

Going to and Finishing College

Here is a clip from a recent paper on college enrollment and completion. In short, it says that we have a long way to go to close the completion gap.

"More students are attending college than ever before, and the labor market rewards to completing a college degree have increased appreciably over the last quarter century. Yet, the rise in the incentives for collegiate completion has not been accompanied by an increase in the share of students making the transition from college enrollment to college completion. Among individuals age 23 in 1970, 23 percent of high school graduates had completed a BA degree while about 51 percent had enrolled in college for some period since high school graduation. For the same age group in 1999, the share of high school graduates who had enrolled in college at some point rose substantially to 67 percent while the share receiving a BA degree rose only slightly to 24 percent of the cohort. Thus, for college participants measured in their early twenties, completion rates fell by more than 25 percent over this interval. Measured at older ages completion rates are closer to stagnant, implying an overall increase in the time-to-degree.

Source: "Going to College and Finishing College: Explaining Different Educational Outcomes," by Sarah E. Turner, University of Virginia and National Bureau of Economic Research (NBER).

Download the full report here.

Homelessness in Japan

"Once famous for its equitable society, Japan is now suffering from a homeless problem so bad that shantytowns are filling nearly all the big parks in cities like Tokyo and Osaka. Part of the problem is the economy: 13 years of slump have pushed up unemployment and bankruptcy rates, driving the poorest onto the streets. The number of homeless people has ballooned to about 25,000, according to a recent government estimate, up from almost none in the late 1980's. Activists say the actual figure is probably several times higher."

Source: The Wall Street Journal, June 18, 2003

Study Coming on National Impact of Indian Gaming

The Harvard Project on American Indian Economic Development (HPAIED), in conjunction with the National Indian Gaming Association (NIGA) and its member tribes, has embarked on a National Impact Study to set the record straight on the true impacts of Indian gaming.

The study is an ambitious project consisting of: on-site data collection; detailed statistical analyses of public and tribal socioeconomic data; economic modeling; in-depth case studies and symposia on policy issues of concern. The five components support and reinforce each other. The study is expected to take 2 to 2.5 years to complete.

Harvard Indian Economic Development Study Center.

Article link.

Massachusetts Launchs New $1 Million Marketing Effort

Feeling overlooked and misunderstood, Massachusetts officials have announced the launch of a new $1 million economic development marketing campaign to attract more attention to the state. Half of the money will come from businesses and economic development organizations.

The marketing blitz will include national newspaper ads and mailings with personal sales pitches from Massachusetts Gov. Mitt Romney, a former venture capitalist.

The campaign will include newspaper ads in The Washington Post and direct mailings to chief executives who will be making expansion decisions in the next 18 months, said Michael Hogan, executive director of MassDevelopment.

One million dollars is not a lot of money for a statewide marketing effort. Because of the economic environment however, it is much harder to raise money for ED marketing. Massachusetts' timing may be good at this point, as the economy continues to slowly grow stronger.

Article link.

Bottomline advice on incentives

In an recent interview with the Buffalo News, I was asked what was my basic view of ED incentives. Here is what I said:

1. Incentives are a necessary evil in many economic development environments, especially in those areas that have a long history of using these programs.

2. Incentives are a catch-22 for areas that are pressured to use them by businesses and competing locations. You are damned if you do and you are damned if you don't. The key is using them in a smart manner. Know what the return on investment (ROI) will be to your area under different investment scenarios.

3. Incentives should be budgeted on an annual basis by state and local governments. State law should require that every city, county, special authority, state development agency using ED incentives create an annual budget that establishes an upper spending limit and defines an expected ROI for that budget.

4. Incentives matter more than companies and EDO's let on. They always matter wherever the competitive environment requires that they be used. If you area uses incentives, then assume that they will matter in future competition for deals.

5. Performance-based incentives are the only way to go. Don't use any incentive that is not guided by explicit performance requirements for companies using these tools. In my assessment, communities and states are only at the starting blocks in making their incentive programs performance-based. All of us have a lot to learn in how to do this successfully.

Bidding on long shots

Should you go after a major economic development project when you don't have a snowball's chance in hell of getting the deal? In general, my advice is yes--but approach the project with clear objectives and with a realistic strategy.

Economic developers and their leadership often struggle with the issue of whether it makes sense to make a bid for a big project, like the current Boeing 7E7 plant, when the deal is a long shot for your area. After 27 years in the ED business, I have seen more than a few of these situations, and I have concluded that there can be a benefit to pursuing the "long shot."

Why go after a long shot deal?

1. Because it shows that your area has an aggressive ED strategy and is trying its best to land a major project. You are more likely to suffer greater criticism for sitting on your thumbs and not pursuing the project. The only catch is that your leadership and those who really need to know should know that you know the project is a long shot and that you have other objectives in pursuing the deal.

2. Even if you don't get the project--and remember only one place will get it--the process could reflect the positive aspects of doing business in your area to the prospect, its site selection consultant, state development officials and other third-party EDO's involved in the contact chain. If you handle the project right, it could help you market your area to intermediaries that do not know much about your area now. The key is doing it right!

3. It could provide a useful "trial-run" to assess how ready your area is to respond to a big project. A fire-drill can be a good thing if your leadership and other community officials are a bit rusty in their skills. View this as capacity-building.

You should keep one major caveat in mind. Set realistic expectations about your chances and don't over-promise anything. It's a bad idea to talk about giving millions of dollars to a project that will probably not come your way. It sends the message to that company and others listening in that "your community is an easy mark." You do not want to be perceived as a pushover for a big incentive handout.

Finally, be ready to learn from the experience. Use your access to decision-makers as a way to strengthen your ED strategy.

Make no...

little plans; they have no magic to stir men's blood and probably themselves will not be realized. Make big plans; aim high in hope and work, remembering that a noble, logical diagram once recorded will never die, but long after we are gone will be a living thing, asserting itself with ever-growing insistence.

- Daniel H. Burnham

Confidence is...

the foundation for all business relations. The degree of confidence a man has in others, and the degree of confidence others have in him, determines a man's standing in the commercial and industrial world.

- William J.H. Boetcker

Success...

To laugh often and much: To win the respect of intelligent people and the affection of children, to earn the appreciation of honest critics and endure the betrayal of false friends; to appreciate beauty, to find the best in others, to leave the world a bit better whether by a healthy child, a garden patch, or a redeemed social condition; to know even one life has breathed easier because you lived. This is to have succeeded.

- Ralph Waldo Emerson

The greatest...

derangement of the mind is to believe in something because one wishes it to be so.

- Rene J. Dubos

It is the...

tragedy of the world that no one knows what he doesn't know - and the less a man knows, the more sure he is he knows everything.

- Joyce Cary