B Schools and Social Responsibility

I ran across an interesting study ranking MBA program on their environmental and social impact management coverage. The name of the project is Beyond Grey Pinstripes. Beyond Grey Pinstripes: Preparing MBAs for Social and Environmental Stewardship, which is supported by the Aspen Institute and the World Resources Institute. The project spotlights schools and faculty worldwide at the forefront of incorporating issues of social and environmental stewardship into the fabric of their MBA programs.

Which schools come out on top? They are: George Washington, Michigan, North Carolina, Stanford, Yale and York University (Toronto). Hometown favorite here in Cleveland, Case Western Reserve University, made the "moderate level of coverage" category, which it shares with schools like Boston College, Northwestern and UCLA.

Download the report here.

China, U.S. Jobs, Wal-Mart, and American Manufacturers

How is that for the title of an article focused on whether China is America's leading silent job killer?

If you are interested in the China situation, this is an article you will want to read, and read carefully. As a preface, I will say this--we live in an increasingly complex economic, business and political world. It is not easy to sort through this complexity to find the truth about issues like China and its pluses and minuses as an emerging world economic power. The world of local economic development has had its attention turned "inward" for too long. It is time we seriously paid attention to what's happening "outside" that impacts what happens "inside" our communities.

Is China the major reason why we have a jobless recovery? According to a recent Business Week article, "the truth is, the major reasons for U.S. job loses lie elsewhere and are far more complex, so a revalued yuan isn't the answer."

China bashing is all the rage. With millions of manufacturing jobs evaporating from the U.S. while China's trade surplus soars, politicians of all stripes are under pressure to show the folks back home that they're doing something, anything, to stem the losses. The swelling federal budget gap means that further stimulative tax cuts are out of the question. So many politicians, manufacturers, and labor representatives have pounced on China, accusing it of keeping its currency artificially low to boost exports and snatch jobs from American workers. Americans are not the only ones in the world concerned about their sad state of economic affairs. Similar concerns exist across Europe and even in the Asia-Pacific Basin.

What's our take on the China siuation here in America? In Congress, moves are afoot to impose punishing tariffs on U.S. imports from China if Beijing doesn't mend its ways. Separately, a coalition of business groups, led by the 14,000-strong National Association of Manufacturers (NAM), is planning to file an anti-China trade case with the government, alleging that it rigs its currency to gain unfair advantage.

Regional debates about good, bad and the ugly of global production and its impact on local jobs are common everywhere, from Cleveland to Birmingham to Austin to Tacoma. According to Business Week, U.S. companies from Intel to General Motors face a simple imperative: invest in China to take advantage of the country's cheap labor and its fast-growing economy or lose out to rivals from Europe, Japan, and elsewhere. "It's hard to serve Chinese customers in a lot of our businesses unless we manufacture there," says W. James McNerney Jr., chairman and CEO of 3M. "We don't do it just to eviscerate U.S. jobs. We do it to be competitive." But--the net impact of this shift of production offshore is--the loss of jobs in American communities like Lorain, Ohio, Danville, Kentucky, Tupelo, Mississippi, and Tulare, California.

As a result of that shift in production, some 65% of the rise in Chinese exports since 1994 have come not from Chinese companies but from foreign companies, including many U.S. corporate giants. Did you hear that statistic? That is two-thirds of the growth of Chinese imports into the United States!

This increased interconnectedness is making it a lot harder for Washington to get beyond anti-China rhetoric. Of China's top 40 exporters, 10 are U.S. companies, including Motorola and Dell. What's more, retailers Wal-Mart and Target count on low-priced goods from China to help meet U.S. consumer demand for affordable products. Attention "Blue-Light Shoppers," the next time you save $6.89 on that new clock radio at Wal-Mart, you're contributing to China's ascent as a world production giant. Don't get me wrong. Imports are essential to our economic health. Raed on.

Wal-Mart alone has doubled its imports from China over the last five years, to $12 billion. It now accounts for nearly 10% of all Chinese exports to the U.S. That has helped keep U.S. inflation down, allowing the Federal Reserve to cut interest rates to their lowest level in four decades. Moreover, China is helping to keep U.S. interest rates down by investing bundles of money in U.S. Treasury securities -- some $126 billion, up from $60 billion in 2000.

Business Week says that the moral of all this is that China is not another Japan, bent on grabbing global share for home-grown companies with mercantilist trade policies and stiff barriers to keep foreigners out of its own markets. While Beijing often talks about industrial policies, its economy is dramatically more open to trade and direct foreign investment than the old Japan Inc. Moreover, as much as the American manufacturing community complains about China, India and other developing nations, remember that it is the members of their club (the manufacturing community) that are putting roots down in Chinese communities instead of Gastonia, North Carolina, Fort Wayne, Indiana and Wichita Falls, Texas.

Go here to read the article.

China Makes Headway in Fashion Design

I have been writing about the role of design as a stimulus for economic growth. Earlier articles have focused on industrial design. This article provides some insight into the growing role of Chinese fashion designers--another important dimension of the design world.

Six Chinese designers will unveil their creations during Paris fashion week as part of France's year-long celebration of Chinese culture, providing a window into a key market for the world's luxury houses.

"China is an extraordinary land of opportunity for the future. We cannot ignore this country. It's the world's biggest workshop but our houses are also making money there," said French fashion federation president Didier Grumbach ahead of next week's events.

"China is in the same position that Japan held about a decade ago. It should become an equally important market, which is why our companies are developing strategies to seduce and conquer it," noted Elisabeth Consolle des Portes of the Colbert Committee, which brings together 65 French luxury goods firms.

But as for homegrown world-class fashion talent, industry experts say China has a long way to go. "It will take a long time to develop Chinese name brands. It's a long, long process," Grumbach told AFP. "They're still making very basic ready-to-wear," said Franco-Swedish designer Marcel Marongiu.

One challenge is to stamp out the market for counterfeit luxury goods in China, which produces 80 to 90 percent of the world's designer fakes despite Beijing's efforts to stop the practice, according to Consolle des Portes. But for smaller brands trying to make a bigger name for themselves abroad, China is a veritable gold mine of possibility.

It would appear that the French recognize the potential that China has a production and design source. China has grown its clothing manufacturing industry quite successful over the past decade or more. The French recognize this. Now, Chinese brands are gaining recognition outside China, which is a big step.

Stay tuned.

Go here to read more.

Florida New Cornerstone Reports In

Florida has been assessing its competitive environment for economic development through a new initiative called the Florida New Cornerstone project. The initiative was developed and conducted by the Florida Chamber Foundation and sponsored by private and public organizations throughout the state. The study has sought to assess Florida’s economic performance over the past decade, and provide an outlook for the future.

The main objectives for New Cornerstone are to make Florida the most competitive state in key industries, raise per capita income levels above the national average and make Florida the number one state to live, work and do business. The first three chapters of the report were released in early 2002.

Key strategies identified in the report include:

* Economic Diversification Emphasize trade, tourism, technology and talent

* Economic Gardening Focus on creating and growing Florida-based businesses, particularly in the arenas of innovation and technology industries

* Intellectual Infrastructure Develop, retain and attract a highly-skilled workforce

* Creative Communities Enhance community livability, attract mobile workers and shift toward proactive growth leadership

There is a lot to absorp and digest in the report, but it is worth a scan for interesting ideas. While much of the analysis focuses on the state's earlier economic performance, it also provides some interesting and useful insights into the state's economic future.

Go here.

A Political Take on Manufacturing

The Economist recently ran an article describing the "rich-nation" political posturing going on around the world--not just in the United States--over manufacturing. In short, the article says that everyone everywhere is using the manufacturing issue as political fodder. This may be true, but that not mean there is not a serious competitiveness problem that we must deal with--especially here at home in the U.S.

The Economist says: "Politicians love manufacturing because it provides lots of visible, reasonably well-paid jobs. That is why American states fight each other with subsidies to land each new Japanese car-assembly plant, and central European countries do the same, knowing that no new car factories will be built in western Europe."

Moreover, the article says that in Japan, politicians decry the “hollowing out” of Japanese manufacturing, as large-firm production seems to flee offshore. In Europe, the French are normally stoutest in defence of their national champions. But Germany is newly fierce; its chancellor, Gerhard Schröder, has picked a fight with the European Commission, denouncing its “anti-industrial bias” as it seeks to stop subsidised state loans and other favours for German industry.

While the article recognizes China as a growing competitive threat to US and other developed country production, it says the Chinese threat is not as large as the picture being painted by Washington and industry trade association (NAM) officials. I urged a careful approach to the China issue in earlier ED Futures articles, and will continue to do so.

Go here to read more.

I am convinced that a growing number of US manufacturers are looking to China, India, Mexico and many other world locations as future sources of competitive advantage--and as markets for their products. Continued offshore sourcing and production will create a great deal of economic pain for workers and communities across America. That is no small problem to brush aside. We must find a new and better way to gain a competitive advantage in manufacturing.

The Senate Finance Committee on Wednesday approved a bill that would give companies a one-time tax break to bring their out-of-country earnings into the United States. Maybe there is a "job hook" that can be included in this piece of legislation, if it has not gotten too far out of the barn already. The White House is objecting to the bill on the basis that the measure favors manufacturers over other companies.

Meanwhile, the rest of the world is poised to make us suffer if the legislation passes. A European Union official earlier this week threatened up to $4 billion in trade sanctions on U.S. products starting next year if the United States does not move faster to end tax breaks for exporters.

This will be interesting one to watch play out.

Allegheny Conference on Community Development Hires New CEO

Former Navy pilot and economic developer Michael Langley was selected to lead the Allegheny Conference on Economic Development. He formerly worked in economic development in Florida. His base salary will be $300,000 a year. Go here to read the details.

Better Data on Employment Dynamics is Here

This is an article you should read if you're trying to understand the employment dynamics behind this jobless recovery we're experiencing now.

New quarterly data on business employment dynamics were issued earlier this week by the Bureau of Labor Statistics of the U.S. Department of Labor. These data quantify the sizable number of jobs that appear and disappear in the U.S. economy each quarter. From September 2002 to December 2002, the number of job gains from opening and expanding establishments and the number of job losses from closing and contracting establishments each were nearly 8 million. This is an important point. The data show that the net employment declines associated with the 2001 recession resulted from a large temporary increase in gross job losses accompanied by a sharp decrease in gross job gains. As of December 2002, gross job gains had not returned to pre-recession levels.

The change in the number of jobs over time is the net result of increases and decreases in employment that occur at all establishments in the economy. The new data track these changes in employment at private business establishments from one quarter to the next. In the new data series, gross job gains are defined as increases in employment resulting from expansions of employment at existing establishments or from the opening of establishments. Gross job losses are defined as declines in employment at existing establishments or from closing establishments. The difference between the number of gross jobs gained and the number of gross jobs lost is the net change in employment. These statistics show the dynamic labor market changes that underlie the net employment change statistic.

Opening and expanding private sector business establishments gained 7.7 million jobs in the fourth quarter of 2002, while closing and contracting establishments lost 7.8 million jobs. This led to a net employment loss of 70,000 jobs. Expanding establishments gained 6.1 million jobs in the quarter, while opening establishments accounted for a gain of 1.6 million jobs. Contracting establishments lost 6.2 million jobs, while closing establishments accounted for a loss of 1.6 million jobs. Expanding and contracting establishments accounted for most jobs gained and lost.

Out of 6.4 million active establishments, a total of 1.8 million establishments gained jobs from September to December 2002. Of these, 1.5 million were expanding establishments and 345,000 were opening establishments. During the fourth quarter of 2002, 1.8 million establishments lost jobs. Of these, 1.5 million were contracting establishments and 333,000 were closing establishments.

I'm sure most of you reading this article are asking this question: "What does this picture look like for my state, region or county?" I don't have the answer, but the ES-202 data for your state does have the data to provide an answer. Data reliabiity will be better at the state level and maybe the regional level. Estimation problems grow larger at the county level, especially in small-size counties. Check with your state workforce development or employment agency to learn more about what they can provide you. Go here to find a link to your state employment agency.

Download the report from BLS here.

More on Community Readiness

Nex Mexico is the latest state to pitch in and help its local communities build capacity for economic development. The New Mexico Economic Development Department has named its first list of "certified communities" under an initiative to boost economic development competitiveness in the state.

The Certified Communities Initiative was launched in July by the New Mexico Economic Development Department. The first certified list includes Belen, Cibola County, Carlsbad, Deming, Gallup, Grant County, Hobbs, Las Vegas, Raton, Rio Rancho, San Juan County, Sierra County and Tucumcari.

How do communities seek certification? Communities, which include incorporated and unincorporated municipalities, counties and federally-recognized Indian tribes, must submit an application that meets six requirements, including the development of a two-year community business plan and a retention/expansion program. They must also meet at least two elective requirements including the establishment of a business incubator and the designation of an industrial park.

What's the incentive for communities to become certified? certified communities will receive up to $5,000 per year for two years for projects such as training expenses, workforce study and hiring a grant writer. They also earn points toward the cooperative advertising program's rating process.

How long does the certification last? The certification expires after two years, but the communities can reapply one year after their certification.

Want to learn more? Go here, or contact the New Mexico Dept. of Economic Development here.

Community Readiness for Economic Development

Unless your community is ready, it will not get the economic development deal. Ok, so some times you just get lucky, but more often than not, the results you achieve are a function of your preparedness to grow and develop. That is what experience shows in the world of economic development.

Getting ready for economic development is no simple job. There is no one-size-fits-all approach to the task, but there are some common principles that seem to be shared by the community-readiness efforts we see out there. These include:

1. Communities must be proactive about economic development. A reactive startegy is no strategy at all. The community's attitude toward growth and development matters. Nowadays, communities are more selective about what type, where and how growth occurs within their borders and in the surrounding areas.

2. All communities are ready to develop and grow in certain ways now. They are doing some things right that can be built upon in future readiness efforts.

3. All communities have areas in which they need to improve their readiness. Even the most advanced communities have something to learn.

4. Readiness is a continuous improvement process, in much the same way that companies view quality improvement.

5. Increasingly, communities are trying to work together with other communities in their home region to get ready for economic development. Communities share their regional economy in common. That is the tie that binds them together. Communities do not grow and develop in a vacuum--the regional context is important to their success.

6. Common issues receiving attention from a community capacity-building standpoint include: leadership; planning; infrastructure; workforce, real estate and sites, incentives and development financing; image and marketing; handling business prospects and providing them with what they need; local and regional collaboration; networking with allies and other helping resources, and finally monitoring trends and developments that shape the local economic climate.

What are some communities and regions doing to increase their "capacity" to stimulate and support economic development?

Some communities have worked with the International Economic Development Council's (IEDC's) accredited EDO program to ensure that their economic development organization is equipped with the right programs, resources and strategies to get the job done. Some examples include: Tulare County EDC (CA), Danville Area ED Corp. (IL), Fond de Lac County ED Corp. (WI), Muncie-Delaware County ED Alliance (IN), Tyler ED Corp. (TX).

Some states, like Oregon, have instituted programs to help their communities get ready to meet the challenge of economic development. Some states, like North Carolina, help communities to build capacity to tackle specific issues, like downtown revitalization. States like Wyoming offer Business-Ready Community Grant and Loan programs. Arizona conducts a special economic development readiness program for rural communities. Iowa offers special help to communities in getting ready to develop specific industry sectors (industrial development, commercial development and tourism development).

Utilities play an active role in community readiness. For many years, FirstEnergy Corp. has operated a Minuteman program to help communities get ready for economic development. Cinergy Indiana is very active in helping Hoosier communities build capacity for economic development.

Universities play a role in community economic development readiness. One good example Georgia Tech's Economic Development Institute. Another example is the Economic Development Administration's (EDA's) University Center program that funds 69 universities across the country to help urban and rural communities build new competitive advantages for economic development.

Regional ED organizations are also playing a role in strengthening the capacity of local communities to get ready for economic development. The Greater Cleveland Growth Association and the Greater Akron Chamber of Commerce are collaborating to help communities become more business-friendly through their year-old Business-Friendly Communities Program. Both the Greater Phoenix Economic Council and the Pittsburgh Regional Alliance work on many fronts with their local communites to ensure they are included in regional economic decision-making and that they have the resources to get future economic development results.

Community readiness for economic development is always important, but it is even more important today because:

1. Competition among communities and nations has grown for businesses and jobs.

2. The world is changing very rapidly and staying in synch with the "opportunity-side" of the economy is an ongoing task.

3. If your community intends to remain an attractive place to live, work and play, then you must work on an ongoing basis to strike a balance among these three objectives. This balance will come only if you work at it.

Stay tuned. We continue to monitor this important area.

European Auto Industry Limping

Here are a few insights into how the European auto industry is doing at this point in time.

The Ford Motor Company is cutting 3,000 jobs at its Belgian manufacturing plant. The world's number two automaker is also canceling a planned billion dollar investment in new equipment at the facility in the city of Genk.

These job cuts follow 4,700 layoffs at Ford's other European and U.S. facilities announced earlier this week. The company has lost more than $6 billion in the past two years. I suppose it's comforting to know that Ford is not only cutting back its US operations.

Meantime, the world's number four automaker, Daimler-Chrysler, is also considering thousands of job cuts and may offer early retirement to throngs of workers to trim costs. A joint team of management and union officials is set to convene soon to work out details of the plan. Chrysler is said to be considering closing some manufacturing plants. As I reported earlier, Daimler will not move forward with its proposed Georgia production plant because of financial troubles and a struggling market.

The automakers blame their troubles on slack demand in European and U.S. markets, and strong competition from Japanese and Korean rivals.

Go here to read more.

Some Good News in Manufacturing

Simmons Co., the nation's second-largest bedding manufacturer, is planning to open three new manufacturing plants.

New plants will open in Sumner, Wash., and Hazleton, Pa. A third plant will open in South Georgia as a result of the closing of Atlanta-based Simmons' Jacksonville, Fla., plant.

The plants will range in size from 150,000 square feet to 215,000 square feet. The Sumner facility is expected to employ 140. The other two will employ 225 workers.

The Sumner plant is expected to open in November, with Hazleton opening in March. The South Georgia plant, the site of which has not been announced yet, will likely open in May 2004.

Let's hope other manufacturing companies will follow Simmons' lead.

Go here to read more.

How About European Manufacturing?

European manufacturing activity was much improved during September, with output rising for the first time in six months.

According to Reuters, PMI data for the month of September showed gains in output and new orders, although manufacturing employment continues to contract. The overall index improved to 50.1 during September from 49.1 in August. Manufacturing activity is improving in Germany and Italy, although conditions seem to be deteriorating in France.

Europe's manufacturing economy continues to stage a manufacturing recovery, although the pattern of growth is highly inconsistent. Germany was the worst off earlier this year, and so it is not unreasonable that the pace of acceleration in Germany's manufacturing economy is leading the pack. German industry is also more concentrated in producing capital equipment, and stronger business spending in the U.S., Eastern Europe and Asia will do more for Germany than France and Spain, which are more service-oriented. Opposite from Germany is France, which is swimming against the prevailing current of recovery. French manufacturing output is up 0.3% month to month during the two most recent months (June and July), and business sentiment is improving, although still decidedly negative. Thus, the recent deterioration in French PMI data is likely to be reversed amid the general euro-zone improvement.

The improvement is expected to continue, although the pace of recovery will be timid. Business balance sheets are poor in the currency union, which is militating against capital spending and M&A activity. Also, there continues to be structural constraints against spending on structures and infrastructure that will constrain construction activity and purchases of construction equipment. Thus, the stronger impetus for growth will come from foreign demand—Eastern Europe, Asia and, most prominently, the U.S. This reliance on foreign stimulus is a considerable risk, as the U.S. recovery is by no means self-sustaining as yet. Further, the euro is climbing against the U.S. dollar again, and will inhibit competitiveness in foreign markets.

Go here to read more, if you subscribe to Economy.com.

US Economic Outlook: October Update

So, where is the economy headed at this point. As best we can tell, it's still headed upward--yet the recovery remains fragile at this stage. Here is what Economy.com is saying at this point in their macroeconomic update.

The most likely economic scenario is that the recent revival in demand and production will induce businesses to soon resume hiring. Yes, that's waht we've been waiting for! The current fragile recovery will then evolve into a sustainable rebound. This scenario is increasingly at risk, however, as businesses are surprisingly reluctant to expand their operations. If businesses do not begin to add to their job roles before the year is out, then next year’s economic outlook will quickly darken.

Demand and production have rebounded strongly in recent months. Real GDP is expected to post a robust over 5% annualized gain in the just ended third quarter and 4% during the second half of the year. This is a positive sign. Retailing, vehicle sales, and home sales have also strengthened as this year has progressed. This will last as long as their are jobs and income to pay for these consumer purchases. Production has rebounded in response, as is clear from much stronger manufacturing activity.

Businesses are also enjoying better profits and balance sheets. Total corporate profits are rising at a double-digit pace and are nearly back to their pre-recession peaks. Corporate debt loads are falling and new corporate borrowing has nearly come to a standstill.

Stronger demand and production combined with better profits, and balance sheets are expected to soon induce businesses to shift their focus from cost-cutting to expanding revenues. This should be evident in greater advertising and travel, expanded investment, and ultimately hiring. The rising jobs and incomes will reinforce demand, and the economy will be off and running. Indeed, advertising, travel, and investment have all seemingly improved a bit recently.

The job market continues to founder, however, and this is the most substantive and growing threat to the sanguine, most-likely economic outlook. Leading indicators of job growth for the most part are still discouraging. Help-wanted, manufacturing hours, the proportion of respondents to the Conference Board’s consumer confidence survey that believe jobs are hard to get, and initial and continuing claims do not suggest an imminent substantive rebound in jobs.

Without job growth, the recent revival in demand and production will fade early next year when the benefits of tax cutting and mortgage borrowing will wane. Adding to the concern is that policymakers have few tools left at their disposal to lift the economy. With the federal funds rate at 1%, the Federal Reserve has very little room to maneuver, and with a budget deficit that is approaching half a trillion dollars, fiscal policymakers are also largely hamstrung.

And, that's the economic word for now.

Read more here, if you subscribe to Economy.com.

Tackling the Human Capital Challenge

The American Society of Training and Development (ASTD) has released a very informative report on how companies are tackling the human capital challenge they face. The report also points to remaining problems and what needs to be done.

Responding to the human capital challenge means more than figuring out how to recruit and retain top talent. Organizations also need to address other obstacles to human capital development and management, including:

* Weak job architectures and job design.
* Tenured and older workers limiting the mobility of new talent.
* Workers feeling entitled rather than challenged and motivated to perform.
* Failure to align human performance practices, including compensation, work design, training, and performance management.
* Disconnect between human capital practices and organizational performance and goals.
* Failure to accurately measure the quality of training and learning outcomes.

What was the "Old Reality" surrounding human resource management?

* People need organizations.
* Machines, capital, and geography are the competitive advantage.
* Talented employees make some difference. Jobs are scarce.
* Employees are loyal and jobs are secure.
* People accept the standard package they are offered.

What is the "New Reality?"

* Organizations need people.
* Talented people are the competitive advantage.
* Talented employees are essential to success. Talented people are in demand.
* People are mobile and their commitment is short term.
* People demand much more.

What are the right questions that organizations should be asking?

* Is your organization developing and adopting a human capital strategy?
* Is your organization assessing workforce characteristics and future needs?
* Is your organization developing and/or implementing a strategy for recruiting and retaining the talent the organization needs?
* Is your organization implementing a well-defined strategy for both identifying and developing your senior, mid-career, and newly appointed managers and leaders?
* Is your organization identifying best practices and benchmarking studies?

Transferable practices are described from several employers, including Delta Airlines, Kroger, Home Depot and Southwest Airlines.

Go here to download the report.

Rethinking Rural Manufacturing

Rural communities across America experienced great success in recruiting factories over the 30+ year period, starting in the 1960s. Now, factory closings in rural America outpace those in urban areas.

An analysis by the Federal Reserve Bank of Kansas City examines these issues. During the 1991-1998-period, manufacturing jobs in rural areas grew at a 3.3% growth rate, while those in metro areas grew by only 2.2%. Then in 1998-2000-period, both urban and rural areas lost manufacturing jobs at the rate of 1.7% and 1.9% respectively. Since 2000, manufacturing jobs in urban areas declined by 7.1% and those in rural areas fell by 10.1%.

The Fed article questions the prudence of continued efforts to lure more factory jobs to rural communities. My sense is that will be a tough one to talk rural officials out of, unless someone can provide them with a better answer to their growing economic problems. The article urges caution in using economic development incentives to support future recruitment efforts. Again, good idea in concept, but that's the game right now in economic development. Change the game and the incentives might go away. Rural communities would put themselves at an even greater disadvantage if they decided to unilaterally disarm their incentives.

Should rural areas be more selective about what companies they rercuit and how much they give to get them? No question about that.

Go here to download the article.

Artful Business: Using the Arts for Community Economic Development

Rhonda Phillips, a former economic developer and now a University of Florida professsor says that coupling the arts with eocnomic and community development does make sense. She says we need to approach this task more systematically and we should understand the various strategies that have been put into play to accomplish that coupling.

Phillips says that communities across the United States are integrating the arts into their development efforts. Emerging as a viable approach, community development based on the arts is increasingly being recognized as a catalyzing force. This article presents a typology of artsbased community development approaches: arts business incubators, artist’s cooperatives, development of tourism venues, and comprehensive approaches.

Art as a strategy for encouraging quality community economic development has only recently gained wide spread attention in the U.S. However, its role in community development is long-lived, with roots in the City Beautiful Movement that began in the late 1890’s.

The arts as related to community economic development can be defined as: (1) an industry comprised of individuals, institutions, and organizations functioning as businesses interrelated with other local and regional businesses; (2) wide-ranging to specific cultural amenities; and (3) cultural education, tools, policies, and processes.

Bottom line: Phillips says that arts-based economic development makes a great deal of sense. Download a review copy of her paper here. It will be published this coming Spring in the Community Development Journal.

I noted with great interest that Phillips did not cite Richard Florida's work in her references. That I find interesting.

Indiana Workforce Agency Goes with Service Provider from India

Talk about a controversial deal. Listen to this one. The Indiana Department of Workforce Development helps out-of-work Indiana residents find jobs. But when the agency needed $15.2 million worth of computer upgrades to speed handling of unemployment claims, it hired a company based in India.

Indiana state officials acknowledge that hiring an overseas firm that competes with U.S. companies has raised public concerns, especially given their responsibility to put Indiana workers first, but they say the contract will save taxpayers millions of dollars -- and insist those savings won't come at the expense of jobs in Indiana. Tata America International Corp., the New York subsidiary of a Bombay firm, is scheduled to begin work Oct. 28 on the four-year project.

The firm won the state contract over two U.S.-based companies: Accenture LLP and Deloitte Consulting LP. Tata's proposal came in $8.1 million to $23.3 million lower than these two companies' proposals. No Indiana-based companies submitted proposals.

The Indianapolis Star newspaper is conducting a poll of readers to determine what the public thinks about the issue.

If you were the procurement director for Indiana state government, what would you do in a case like this? Remember that US-based companies, like Deloitte and others are providing a wide array of services to government agencies across the world.

I will admit that this is a thorny ssue and politically there is no simple way to explain the state's decision away, especially in light of the huge loss of American IT jobs to India and other foreign locations in recent years. At the same time, government agencies have a responsibility to get the best value for the taxpayer dollars they use.

Go here to read more.

Conservatives Say Shutter Michigan ED Organizations

Here is an extreme view of government's role in economic affairs--one in this case that says government should not play a direct role in promoting and stimulating economic development.

Two Senate committees examining Michigan’s efforts to spur economic development should take action to abolish the state’s two primary development agencies, the Michigan Economic Development Corporation (MEDC) and the Michigan Economic Growth Authority (MEGA), and redirect the state’s development strategy, the Mackinac Center for Public Policy is saying.

"The state government should get out of the business of picking economic winners — something even Wall Street mavens can’t do consistently — and focus on fixing the fundamentals: schools, infrastructure, a lower tax burden, and a generally improved business climate for everybody," said Michael LaFaive, fiscal policy analyst for the Mackinac Center.

I'm sure that my good friend Don Jakeway, who will take the reins of MEDC shortly, will not be exactly pleased with this denouncement.

My view on this one is that there is no way to disentangle government from the economy. Government is an industry that participates in building economies on a local, state, national and international level. LaFaive suggests the state should simply stick to creating a climate for economic development through infrastructure, education, etc. That sounds good is concept, but Michigan businesses actually want MEDC and MEGA to help them in a more direct way to become more competitive.

States do need to be careful about the policies actions they adopt to support economic development. They should not do what the private marketplace should and can do better. At the same time, Michigan would come out on the losing end of the stick if it decided to dump its economic development programs while all other states continue with theirs. Once again, unilateral disarmament is not the answer.

Mackinac ED Site here.

Read more here.

Foreign Tech Center Incubated by Virginia EDO

Here is a story that just might surprise you.

The Republic of Hungary has chosen the headquarters of the Fairfax County Economic Development Authority (FCEDA) for its first Hungarian Technology Center in the United States.

The Hungarian Technology Center is Hungary’s first effort to expand its technology industry into the U.S. market. Selected companies will use the center as an incubator to develop contacts in the U.S. Six companies will inhabit the technology center for its first year. The government also will use the center to raise Hungary’s profile for U.S. companies interested in investing in central Europe.

Why Fairfax County? Hungary chose the Fairfax County location because of Virginia’s reputation as a technology powerhouse and because of its proximity to Washington, D.C., and east coast markets. “This is an excellent opportunity for Hungarian technology companies to expand,” said Hungary's U.S. Ambassador Simonyi.

Back in March, Invest·UK, the Government’s worldwide economic development agency, joined with the Fairfax County Economic Development Authority (FCEDA) in a competition that encourages technology companies to cross the Atlantic and expand into each other’s marketplaces. A number of companies are now seriously looking in both directions.

This is "innovative" economic development strategy from where I sit. I like the concept of EDO's from the U.S and those abroad working together. The idea is very consistent with my earlier call for industry clusters worldwide to form ties and work together on "win-win" deals. The key is "how" you do it, and making sure that the payoff on this side of the deal is sufficient to justify what you give to get.

Go here to read more.

Securities Fraud Website

While newspapers and other media sources catch most of the "dirt" about businesses and other aspects of the community, sometimes they miss things--like security fraud cases that fly under the radar screen.

The integrity of the companies your community keeps matter. For that reason, you may want to know about the Securities Fraud Case Database maintained by Stanford University's Law School. It is a very valuable information resource on securities law, cases before the Federal Courts and related issues.

Click here to learn more.

Wal-Mart Cuts Both Ways

Here is an all too common tale about the impact of big box retailers on a small town.

Beech Grove, Indiana is a city of about 15,000 people and it is increasingly surrounded by suburban development on Indianapolis' Southeastside -- pharmacies, apparel stores and other downtown retail have given way to flashier malls and big-box shopping.

Soon local merchants will have something new to contend with: Wal-Mart. Although the city, which has no room to grow, sees the new store as an effective way to boost revenue, local meat cutters and other merchants see it as a sellout and extreme competition headed their way.

Wal-Mart plans to build a 200,000-square-foot supercenter in the Beech Grove just south of I-465. The company is promising more than 600 jobs and more than $300,000 a year in property tax revenue after the store opens in 2005.

Beech Grove, like Lawrence and Speedway, is trapped by Uni-Gov. Unlike communities such as Greenwood and Plainfield, there is no room for Beech Grove to expand. About 200 acres are left to be developed -- 30 of them, zoned commercial for many years, await Wal-Mart.

And once again, Wal-Mart cuts both ways as a source of economic growth and destruction.

Read more here.

Human Capital Management Adds to Bottom Line

Workforce development and talent retention and recruitment have become much more important responsibilities of economic development organizations.

Are you trying to understand the connection between human resource quality and investment and competitive business performance? Recent research by Watson Wyatt Consulting says there is a clear connection. HR strategy and investments pays off in terms of business competitiveness and financial performance.

For many companies business is tougher than ever. With no let-up in sight, there continues to be a need for companies to focus on maximising real, sustainable value from human capital as never before. The results of Watson Wyatt's fourth year of global human research shows that the link between human capital management and real business value is stronger than ever.

Here is what they found:

- Organisations with the best human capital management deliver significantly more shareholder value than those with poor people practices

- Excellence in HR practice is similar across the world, with some interesting local variations

- The key practices associated with higher value continue to show up in bear and flat markets, with the emphasis evolving over time, as do the HR practices that are linked with a loss of value

- When companies tune their human capital management to focus on both employee commitment and customer satisfaction, rewards for shareholders are substantial

- The effectiveness of the HR function itself is a key factor – to drive value from human capital, well designed practices and a highly efficient HR function closely aligned with business needs are essential.

Go here to learn more.

Offshore Sourcing Insights

This is one you will want to read if your community is feeling the effects of job exporting, which many communities are today. This story centers on offshore sourcing decisions by Chicago area companies for the most part, but the lessons apply to other cities.

For several years, Western companies have been shifting ever-larger and more complex operations offshore, starting with basic data processing or code writing in the early 1990s and quickly moving up to customer services, such as the Indian call centers that answer questions about your Dell laptop or your American Express bill.

The trend toward using inexpensive labor overseas, even for white collar jobs, has hit communities nationwide - and Chicago's suburbs are no exception. Lucent Technologies, with operations in Naperville and Lisle, and Schaumburg-based Motorola Inc. are two of the largest suburban employers that have eliminated thousands of jobs in the last three years, in part, to take advantage of the less expensive work force overseas. Both Motorola and Lucent have overseas plants as well as partnerships with foreign companies that help them produce products there for less.

Now, panicked at cost pressures from a sluggish economy and global competition, some companies are getting even more aggressive in their offshore ambitions, shipping payroll accounting, loan processing or human-resource departments off to India. You can now get a pink slip in Manhattan sent by a clerk in Mumbai.

A bandwagon effect has taken hold over the past six months as companies rush into what used to be a slow and careful decision. Many are emboldened by headlines trumpeting moves by the likes of Bank of America and EDS to shift more back-office jobs offshore.

JPMorgan Chase recently unveiled plans to set up an off-shore equities-research unit in Mumbai with 40 analysts and support staff.

General Electric already has 11,000 agents in its Indian call centers, and recently created a division of 400 people to analyze credit-card data and trends.

The technology research firm Forrester predicts that 3.3 million U.S. service-sector jobs will move offshore during the next 15 years. TPI consulting estimates that in India alone, the value of Western outsourcing deals will rise from around $10 billion today to $80 billion by 2008.

Roughly 27,000 technology jobs moved overseas in 2000, according to Forrester. It predicts that number will mushroom to 472,000 in 2015 if companies continue to farm out computer work at today's frenzied pace.

Companies in the United States and Europe will spend 28 percent of their information technology budgets on overseas work in the next two years, Forrester said.

Jean-Marc Hauducoeur, a senior vice president at Cincinnati-based human resources consulting firm Convergys, said his 47,000-employee company will employ 6,000 customer service representatives and network engineers in India by year's end. Convergys' average technical employee in India stays on the job for nearly three years - more than double the U.S. average, saving tens of thousands of dollars in recruitment and training per employee per year, he said.

We are no longer just losing low-skilled jobs to developing countries. Now, an increasing number of knowledge jobs are marching offshore. We need some new thinking on this issue. While some scream "protectionism," these actions are likely to come back to haunt us in the long-run. Economic developers in Cleveland, Pittsburgh, Phoenix, Louisville, Indianapolis, Dallas, Denver and many other cities are trying to combat this rush through new talent retention and recruitment efforts. Will they succeed? We won't know for a while, but we have to keep trying.

We will be following the offshore sourcing issue closely in the future. Stay tuned.

Read more here.

Global Supply Chain Complexity

The corporate world has spent enomous time and resources trying to reduce risks, lower costs and improve efficiencies from their supply chains, which now stretch globally. This article offers some insights into how manufacturers are trying to cope with these challenges.

A new global benchmarking study by Deloitte & Touche examines how intense pressure to reduce costs, innovate products and expand into new markets has manufacturers shifting production and spreading out supply chain and other operations beyond their home geography. The report looks at the increasingly complex and fragmented supply chain environment, the implications to manufacturers and the resulting challenges.

The study also uncovers five emerging paradoxes as a result of supply chain complexity:

- Despite globalization, most supply chain optimization is done locally.

- Supply chains are not fully equipped to support accelerating innovation.

- Flexibility is more difficult to achieve in the face of shorter product cycles, increased customer demands, the pursuit of lower-cost locations and the race to new markets.

- While managing risk is a priority, fragmented supply chain initiatives are increasing potential risk.

- While customer service is a priority, less than 8 percent of companies collaborate on a high level with customers on key initiatives.

More than 500 companies from North America and Europe participated in the benchmark study. Industries represented include aerospace and defense, automotive, life sciences, manufactured consumer products, process and chemicals, high technology and telecommunications and metal fabrication, industrial machinery and equipment.

Download the report here.

Tax Cuts Alone Not Enough to Spur Investment

Tax cuts alone will not cause businesses to make more capital investment and patch a weak spot in the economy, according to a survey of tax executives released last week.

The accounting firm Deloitte & Touche asked 124 senior tax executives whether their businesses would buy equipment, computers and other capital investments if Congress should enact a number of tax breaks being considered.

Clint Stretch, director of tax policy at Deloitte & Touche, said the survey shows business executives look at the broad economic climate, not just tax policy, before deciding on investments.

While most economic developers are not expecting miracles from the tax cuts, the Deloitte & Touche analysis points to the complexity of business investment decision-making at this time.

Read more here.

Minnesota Tax Increment Financing

The Center for Urban and Regional Affairs at the University of Minnnesota conducted a recent study on the effects of TIFs on local government finances in Minnesota.

First, how does a TIF work? Usually, a local government floats a general bond issue for public improvements and pays the bond off through additional tax revenues generated by the improvement.

What is the overall conclusion of the Center's analysis? In general, the financial benefits of TIF deals analyzed in the state do not exceed the costs created for local governments. Data for the 1974-2002 period were analyzed. The study is fairly technical in nature, but worth a review. We are likely to see more research challenging the costs and benefits of economic development financing tools in the future as state and local government contain to struggle financially.

Download the report here.

Latest Poverty Spike: A Commentary

Recent government data point to a growth in poverty. Maybe poverty is our leading growth industry in the world. Seriously, we need some perspective on this issue. Here is a review of what most of us already know in economic development.

Poverty follows many paths. The research that I believe out there says that the single most powerful factor in stemming the long-term poverty cycle is e-d-u-c-a-t-i-o-n. People's ability to occupy knowledge-based jobs and earn more lies in increasing their education. Those with the least education and the formal job training are those most susceptible to unemployment and poverty.

Industry and corporate restructuring account for most of the actual job loss, or job destruction, (short and long term) in all industries (from high to low tech) today. Restructuring is caused by: increased market competition--especially international, technological shifts, decline of old and growth of new world markets, public policy (especially laws that create unintentional costs that must be bourne by the market, including consumers), and even unethical corporate behavior--ala Enron and a big piece of the 1990s dot.com economy that gave rise to thousands of businesses with no foundation or substance--only dreams and promises of access to the "Net". This job loss erodes incomes, which causes a spike in poverty.

Many now are blaming China for the latest wave of job losses, income disruptions and poverty. In some low-skilled and labor-intensive industries this is true. In my humble view, China is as much opportunity as threat to the US and other national economies out there. We've been asking companies and this is what they tell us.

There is also a longstanding argument that a "culture of poverty" exists, causing some segments of the population to be structurally disadvantaged in terms of economic participation. This argument says that minorities and ethnic groups are most likely to be impacted by the culture of poverty.

There are also the "silent job killers" out there, which include inhospitable government regulations (including many of the laws designed in the first place to protect workers), environmental regulations, and now political instability--including terrorism and cultural wars taking shape on many fronts in our world.

And actually, m-o-n-e-y is a source of poverty. It attacks jobs and incomes through exchange rates and shifts in currency rates. That's why some folks are clamouring about the Chinese juan and other currencies. If you recall, we complained about the yen in much the same way in the 1980's.

The question is how should local communities respond to these issues. Do we have a fighting chance, especially if our community is highly cost and trade-impact sensitive business location--meaning that it costs more to do business here (or we produce less value for the costs that must be paid than competing locations) and our existing industry base is very sensitive to imports, world currency fluctuations and other trade-related developments. Manufacturing is most sensitive to these factors.

There are no easy answers or silver bullets for American communities. Long term, hang your hat on efforts to increase overall educational attainment with a special emphasis on our disadvantaged population. We need to restructure the educational system to accomplish that and change how we "teach" and "learn." We talk a good game of "lifelong learning," but in practice we have just scratched the surface.

In the intermediate term, the answer is further economic diversification of local economies, which includes building more less trade-sensitive industries, and in the short term, all of us need to become stronger "dealers in hope," attentive fixers of many many small things, and work now on setting the stage for systemic change in our local economy. Right now, we have many local economies that are "dogs that just won't hunt."

Futurism: Virtual Countries May Lie Ahead

Ok, it's time to stretch your worldview a bit. That's a good thing from time to time. Can you imagine a world comprised of "virtual countries?" Why not? We have already seen the emergence of tens of thousands of virtual communiities on the Internet. Maybe there is a day ahead when we have the option of belonging to more than one country.

Can you imagine the implications of the virtual country on economic development as we know it. The next generation of economic developer may be developing virtual economies that span geographically-defined countries across the world.

Too far fetched you say. Maybe not. Read on about what the DaVinci Institute has to say about virtual countries.

The Internet, while still in its infancy, has created borderless economies, that are confusing the issues of power and control, and even the sovereignty of nations. We are now entering into a new era of public power and control. The true power that is beginning to emerge is "technocratic," meaning that we are beginning to reorganize the world around the technical imperatives of global competitiveness and economic efficiencies.

The nation-state has only been around for roughly 350 years. Will it still be around 1,000 years from now? Perhaps not.

The surge in interest in online communities has given rise to unique groupings of people, based on cross-cultural commonalities. The strength of many of these commonalities often transcends present loyalties to country or nationality. In short, the driving force of money will, in many people's minds, force the issues of culture and heritage to take a back seat.

Emerging forces in globalism has given rise to the notion of creating Virtual Countries, countries without land and without borders. Citizens of Virtual Countries will live in existing land-based countries; abide by their laws; and, at the same time, hold two or more virtual citizenships.

Who's thinking about this issue? Well, for one, the Colorado-based DaVinci Institute. Click here to read more.