What Are Technology Programs Really Supposed To Do?

Here is an interesting story about one of Ohio's Third Frontier Programs. It raises a very important issue about what is the intended impact of these types of high-tech programs. Are innovation-oriented economic development programs really about job creation? In my assessment, that is not their primary role. Rather these programs are about new product and process innovation and stimulating technology-based enterpreneurship. If we are successful in achieving these two goals, then new jobs will develop.

I have weighed in on this debate earlier with my new stakeholder-based value creation model that recognizes different types of value to be created for different types of ED stakeholders. Go here to download it.

A state program that earmarked almost $70 million to spur high-tech projects and new companies has not created a significant number of jobs, a recent study concluded. The report assessed a fund run by Ohio's Department of Development that is one leg of the Third Frontier program, a hallmark of Gov. Bob Taft's $1.1 billion effort to increase high-tech jobs in the state.

The program's impact on the commercial economy has been slight," according to the study by Policy Matters Ohio, a Cleveland- based research outfit. "Though it's still early and more new products could come out of the program, commercialization results so far are not substantial."

The fund was started five years ago to lure federal money for technology and development, especially for the Glennan Microsystems Initiative. The organization, near NASA Glenn Research Center, aims to create very small mechanical devices that work in harsh environments. Glennan Microsystems has received more than any other applicant - almost $5 million. So far, Glennan is close to creating new products, has spun off four new companies and has drawn $35 million from others. But the organization has created fewer than 20 jobs.

Jobs are certainly an important measure, Program Director Walter Merrill said. Yet, he added, "those weren't the only outcomes." His organization is about to spin off another company and has 20 patents pending or in place, Merrill said.

Frank Samuel, the Governor's science and technology adviser, called Glennan's ability to attract seven times more money than the state fund gave it "pretty darn good." What's more, Samuel said, the primary goal of the Third Frontier Action Fund is not to create jobs. Rather, the fund aims to cultivate an entrepreneurial climate and allow scientists to develop products and help them attract other investors.

There is room for perspective on this situation. The overall economy has killed, not created, jobs in the past three years. Only recently has the economy begun to throw off some job growth. Second, these programs do take time to show results, and they will, if they are properly designed and managed. I will add that it is far more difficult to stimulate technology-based entrepreneurship in Ohio and NEO than the often admired high-tech meccas across the country. All of these issues should be given consideration is any 'serious' evaluation effort, which it does not sound like Policy Matters Ohio conducted.

Go here to read more.

China's Limits to Growth

Changsha, China - Residents of this southern Chinese city spend one day of every four without power. Coal is growing scarcer. Electric heaters have been banned, and sales of generators have quadrupled. For the capital of the Chinese province where Mao Tse-tung was born, these are dark days.

A spike in demand for electricity, fed by a booming economy, is outstripping supply in parts of southern China. The government worries the power crunch could hamper the development so pivotal to its efforts to lift millions of Chinese out of poverty.

This is just one of many signs that China's rapid economic growth is placing on the country. It will be some time before China has the infrastructure to sustain growth at current levels. Keep watching. There is more to come on this issue.

Go here to read more.

Recruitment to Get More Attention in California

Gov. Arnold Schwarzenegger plans to establish a position in his new administration to re-start efforts to attract business to the state, say local economic development officials. David Crane, a San Francisco investment banker and member of the governor's transition team, is expected to head the initiative, say Bay Area officials who have been involved in a series of discussions. The proposal is a response to concerns from economic development officials that the state government retreated from economic development activities under former Gov. Gray Davis.

Go to read more here.

Economic Growth Spurring More Angel Investment

Angel investment activity is picking up in the Philadelphia area after falling off because of the tech and telecom busts. Consider these developments in the philly area:

- A year-old angel group is attracting 50-plus people to its monthly meetings and at least two other angel groups are being formed.

- A $2 million fund that guarantees investments by angels has agreed to work with five groups of them and is getting ready to issue its first guarantee.

-An angel fund has received $500,000 from the state and hopes to close on at least $3 million, including the state money, next month.

The increase in angel activity, which is largely fueled by the rising stock market, isn't just confined to the region. Nationwide, angels were more active the first half of this year than they were the first half of last, according to Jeffrey E. Sohl, director of the University of New Hampshire's Center for Venture Research.

Statistics for this year aren't yet available, but last year, angels made $15.7 billion in investments, according to the center. While that amount seems impressive, it's little more than half the $30 billion in investments they made in 2001, when many still were flush from the last stock market boom.

Go here to read more.

New Jersey Holds Off On University Merger

A plan to merge New Jersey's three public research universities into a statewide university system has been put on hold indefinitely because of financial and other concerns, Gov. McGreevey said yesterday. The merger plan recommended combining Rutgers, the New Jersey Institute of Technology, and the University of Medicine and Dentistry of New Jersey into a single statewide university system with campuses in Newark, New Brunswick and Camden.

This would have been a bold step if it had been adopted. Financial considerations--that is the cost of higher education is a valid driver here, but consideration should also be given to the creating a critical mass of high quality knowledge resources.

Go here to read more.

Inland Southern Cal Regional Growth

Unusual forces - ranging from the state's financial uncertainties to the labor showdown at the area's major groceries - have turned into economic roadblocks for Inland Southern California, according to a report released Friday.

Job growth in San Bernardino and Riverside counties increased by an anemic 1.3 percent in November from where it was 12 months earlier, the state Employment Development Department reported. The year-over rate of job creation declined from 2.1 percent last month and is less than a third of where it was three years ago.

Inland Southern California's population is continuing to grow, and certain segments of the workforce are almost guaranteed to grow with it. One of them is the food-retailing sector, but the strike and lockout at Vons, Ralphs and Albertsons and the hiring of replacement workers meant close to 3,000 fewer workers in November than the previous month.

The Inland area is the only part of Southern California showing any substantial growth. San Diego County has added only 100 jobs in the last 12 months, according to the state's estimates. Los Angeles County hemorrhaged 37,900 jobs in the last year, and Orange County has lost 3,500 jobs.

Go here to read more.

New Knowledge Economy Ranking

Rochester has the fourth-best “knowledge-based economy” in the world. So says Robert Huggins Associates, a think tank based in the United Kingdom that ranked 125 regions for its 2003-04 World Knowledge Competitiveness Index.

The report defines a knowledge economy as “the capacity and capability to create and innovate new ideas, thoughts, processes and products, and to translate these into economic value and wealth.”

Rochester beat out better-known regions such as Seattle; Raleigh-Durham, N.C.; Tokyo; London; Hong Kong; and Ontario, Canada. In the 2002 rankings, Rochester finished 19th.

The Huggins index ranked Rochester first in the world for patents per capita, first in instrumentation and electrical engineering employment per 1,000 inhabitants, fourth in expenditures on primary and secondary education, 15th in labor productivity and 18th in gross domestic product per capita.

My take? Interesting, but probably not a very accurate portrayal of the knowledge economy strengths of many world cities. Rochester has lots of good tech-know resources, but certainly it does not out-rank Raleigh-Durham, Seattle and many other US tech-know centers. Indices can say pretty much what you want them to say. The key is employing the right measures and ensuring an apples-to-apples comparison of places or things.

Go here to read more, and go here to purchase the Huggins report.

Where the Jobs Are

As everyone looks for a solution to the jobless recovery situation, it is important to look at where the jobs actually are today. Here is a list of the US companies with the largest workforces, according to Fortune Magazine research.

McDonald's--395,000
United Parcel Service--370,000
General Motors--365,000
Ford Motor--352,748
Intl. Business Machines--319,876
General Electric--310,000
Sears Roebuck--310,000
Kroger--288,000
J.C. Penney--270,000
Citigroup--268,000
Home Depot--256,300
Verizon Communications--247,000
Kmart--240,525
Target--223,550
Albertson's--220,000
Delphi--195,000
SBC Communications--193,420
Safeway--193,000
Boeing--188,000
FedEx--176,960
Philip Morris--175,000
HCA--174,000
Aramark--162,000
United Technologies--152,000

Which of these companies has a presence in your community or region? I suspect that many American communities could identify with a number of companies on this list. Imagine the national and global job network that exists within any one of these corporations. Now, ask yourself how these jobs are connected and what happens to these connections when corporate restructuring occurs. This tells me how inter-dependent a large number of communities across the US and globally are when it comes to the jobs they hold. That network is important to keep in mind as you prepare future business expansion, retention and recruitment strategies.

Go here for more information. (Fortune subscription required.)

Business Recruitment Leads

If I were formulating a list of attractive growth-oriented companies to lure to my community or region, the Fortune 100 fast growth small businesses would be one place I would start my search.

Why these companies? For one, they are growing. Two, they are seeking new business locations. Three, many companies on this list are doing both innovative and useful things that markets want. Finally, they are not the usual suspects that most communities are obsessed with.

Get the list here.

Boeing: Will It Be Everett or North Carolina?

Amid the tobacco fields of eastern North Carolina lies a grand $80 million economic development experiment that is Everett's biggest rival in the eight-month battle to win Boeing's newest economic prize.

In the dozen years since the Global TransPark was first conceived, just a half-dozen small industries with 200 employees have located at the 5,775-acre North Carolina airport and industrial park. But the TransPark could get a huge shot in the arm if The Boeing Co.'s board on Monday overrules its staff recommendation to locate the company's newest assembly line at its existing plant in Everett. The Global TransPark, Boeing's own studies have shown, is a close second choice compared with Everett, where Boeing now builds all of its wide-body jetliners.

Go here to read more.

Emerge Tampa

Tampa, like a growing number of American communities, is concerned about keeping its young talent and attracting more. The area's new Emerge Tampa program will launch soon to help the region accomplish this goal. Four areas will receive attention:

- Voice - public affairs opportunities such as a luncheon with the mayor speaking.
- Connectivity - community service opportunities such as being an ambassador when Tampa lures major events.
- Growth - career development.
- Cool Stuff - meet-and-greet events tied to sports, arts and community outreach.

Sounds a lot like what our Connection Series, Cleveland Bridge Builders and the blogging community is doing here in the Cleveland area.

Go here to read more.

What's Really Hurting Manufacturing?

"The primary competitive challenge facing U.S. manufacturers and their workers," says Jerry J. Jasinowski, president of the Washington, D.C.-based National Association of Manufacturers (NAM), is a collection of tax, employee benefit, regulatory and other "external, non-production" costs. Jasinowski's statement is based on a study by economist Jeremy A. Leonard that was released Dec. 9 by NAM and Arlington, Va.-based Manufacturers Alliance/MAPI, a business and public policy research group.

The study finds that "domestically imposed costs . . . are damaging [U.S.] manufacturing more than any foreign competitor and adding at least 22.4% to the cost of doing business from the United States."

Read the Industry Week article here, and download the NAM study here.

A Euro Take on America's Jobless Recovery

Politics, says the Economist, has a lot to do with the much talked about jobless recovery in America.

"A puzzle for economists, jobless recoveries are also a conundrum for psephologists, who study presidential elections. We know it’s the economy, stupid, but is it growth or jobs that have most bearing on the way people vote? GDP growth of 3% in 1992 was not enough to save George Bush senior. Growth of 3.8% in 2000 was not enough to win the election for Al Gore. Professor Michael Lewis-Beck of the University of Iowa and Charles Tien of Hunter College think unemployment is a more decisive factor. In every election since the second world war, falling unemployment in the spring of election year has foretold victory for the party in charge of the White House. The sole exception was the Democrats’ loss to General Dwight Eisenhower in 1952. Mr Bush will take some comfort from this. As long as the unemployment rate keeps falling through the spring, he should be home and dry in next year’s election. Unless, perhaps, he goes up against another decorated general."

Go here to read more.

Wi-Fi and Beyond

While broadcasters, cell-phone carriers, and other longtime licensees of spectrum rights are fighting Wi-Fi and other technologies to access the airwaves fro free, engineers are drawing up plans for next-gen technologies to go beyond Wi-Fi. What are they?

Here are three on the boards now:

- smart antennnas
- mesh networks
- agile radios.

Want to know more, go here to see what Business Week has to say about them.

Forbes Poll on Top Business Issues for 2003

So, what has been giving business owners and managers the most gas pains in the past year? Here is what Forbes Magazine says:

- Cost Of Conflict
- Digital Piracy
- Failure of Corporate Governance
- Global Epidemics
- Mega Media Stumbles
- Open Source Software Lawsuits
- Paying For Pills
- Regulation By Prosecution
- Return Of Protectionism?
- White-collar Outsourcing

My question is: How do these issues influence the ability of local economies to grow and develop? Have we though through the implications of these issues for local businesses, industries, jobs and communities? Maybe we should.

Go here to read more.

Talent as Inventory and Cities as Talent Warehouses

Those of you looking for answers on the people/jobs matching issue will find a recent article in Forbes (taken from the McKinsey Quarterly) to be of interest. Some of what you read, you may not like however.

Here is what the article says:

"A systematic and continuous approach to fitting the right person to the right job at the right time has long been the Holy Grail of workforce organization. But most managers, search as they might, come up empty-handed. Few companies understand which employees are essential or how best to structure their workforce. As a result, human capital--the skills and knowledge of employees--too often remains an untapped performance lever.

All this is about to change. A new generation of tools has made it increasingly possible to fashion a more sophisticated approach to the management of a large distributed workforce. Real-time deployment tools can adjust staffing to variations in customer demand with unprecedented precision and speed. Succession-planning tools can reach deep into the company to find unsung heroes. And coming soon is software that could solve some of the most nagging challenges to the systematic organization of the workforce.

The macroeconomic implications of mastering what economists might well call human-capital management are far-reaching. Capturing these productivity gains at the company level could measurably boost economic growth. In the knowledge economy, labor is the fastest-growing expense, and talent, in cold economic terms, is inventory. Having too many--or, worse, too few--workers costs money and opportunities for growth."

What's my take? Talent as inventory...now that is an interesting way to view human capital. Sadly, from the business' perspective, that is how people are seen. What does this have to say about the race for talent that every city in America is amidst? Does that say that cities will become "talent warehouses?" Just about the time we thought we were putting a human face back on the economy, we are told that human talent is nothing more than inventory. So, now you know what "knowledge management" in the corporate world is all about.

Business Facility Closings (BFCs)

This article was prompted by the recent announcement by Newell Rubbermaid to close its Wooster, OH facilities. Because I prepared a countywide economic development plan for Wayne County, including Wooster, in the early 1990s, I saw this plant closing coming. I distinctly remember touring the land-locked and transportation-challenged Rubbermaid facilities in the City. My first thought was that these were business facilities that might not be long for this world. I discussed my impressions with the plan steering committee, which agreed that Rubbermaid should be watched closely. Then when Newell acquired Rubbermaid, I was even more convinced that keeping Rubbermaid in Wooster and NE Ohio was going to be a struggle. The rest is history--or soon to be history.

Business facility closings (BFC) are the ugly downside of economic development life. No community wants to lose the businesses, jobs and tax base it already has. It hurts the community financially and economically and personally it hurts those workers and their families that must pick up the shattered pieces of their lives after the closing takes their Dad or Mom's job away. Ask me. My Dad lost his job at Sylvania Electric in Wheeling, WV when I was a junior in high school.

Unfortunately, business closings, like business openings, are a part of the economic and business life cycles. Despite everything we have tried over my 27 years in the ED business, we have not found an effective way to counteract a plant closing when it is about to occur. By analogy, it's like taking an antibiotic to fight a resistant virus that must run its course. Medical science has taught us that the best we can do to fight off viruses is to strengthen our "immune system." That is precisely what communities, like Wooster, must do in the future. NE Ohio communities must strengthen their immune systems to become stronger and more resilient.

I remember when I first started in the economic development business back in the late 1970s in Greater Cleveland. Two-thirds of our business assistance caseload at the Greater Cleveland Growth Association involved business retention situations where area companies (mostly manufacturers) were shuttering existing plants, consolidating production capacity, and relocating production capacity and headquarter offices to lower cost and newer locations in the South and Southwest. The taste of a BFC was nasty then, and it is still nasty today.

I recall when I started the new Lake County Economic Development Center in 1984, Caterpillar had just announced it was going to close its Towmotor facility in Mentor. No economic developer wants to show up on a new job and have to deal with a major plant shutdown as his or her first business assistance case. After some time, Mentor recovered from the situation, but it was a hard road back.

So, what can we do when faced with a BFC situation? Here are a few tips that might help:

1. Continuously monitor your existing economic base. Look at big picture economic and technology trends and localize them as best you can. External events, like what happens in China, have a great impact on local economies worldwide.

2. Build strategic relationships with local companies before a problem develops. Get to know what factors drive their business and what they must do to survive and thrive.

3. Even when times are good, be prepared to present "opportunities" to local companies to grow and expand. In my assessment, two-thirds or more of what economic developers do is "react" to situations. We need to shift more of our resources and attention to being "proactive;" again even when times are good. Make proposals to local companies on how they can strengthen their market, supplier base, human resources, facilities, and other aspects of the company. Don't assume that company executives have all the ideas--they don't. Challenge them with new ideas.

4. Work on shaping the local business climate on a regular basis. Ensure that your community has an adequate supply of land and buildings to accommodate future business expansion. Make certain that your community's master plan anticipates the need for land and infrastructure for business growth. Don't allow your community to run out of developable land.

5. Work with neighboring communities on solutions that help your community and others in your area. More and more business retention projects are requiring that communities collaborate to respond to a major employer needs. Don't be afraid to enter into a cooperative agreement with another community for infrastructure and other services needed by your local companies.

6. Make incentive investments wisely. Invest in people and infrastructure, which stick around after a plant closes. Negotiate incentive agreements in a smart way that ensures the company and the community both live up to their ends of the deal.

7. Look at innovations by other communities in dealing with BFCs, such as having the company donate the closed facility to the city or local EDC for future use. Be careful not to assume responsibility for a company's environmental problems though. Brownfields are a common problem. Make sure the company does its part in cleaning up the site before it leaves.

8. Finally, always be on the hunt for new companies to locate in your community. You cannot afford to spend 100 percent of your time and resources taking care of existing companies. Statistics tell us that closings and relocations will occur and most you cannot stop. This should tell you that you must work at recruiting new companies all the time to fill holes created by those leaving. Assume that turnover will always occur--because it does.

Basic Family Budget Calculator

You may find the Economic Policy Institute's (EPI) online family budget calculator to be of interest. It's a simple menu-driven calculator that tells you the average cost of living for a family living in US metro areas. Here are the numbers for the Greater Cleveland metro area.

Cleveland-Lorain-Elyria, OH
2 Parents/2 Children
--------------------------------------
Monthly housing--$594
Monthly food--$510
Monthly child care--$692
Monthly transportation--$240
Monthly health care--$204
Monthly other necessities--$342
Monthly taxes--$296
Monthly total--$2,878
Annual total--$34,531
Percentage of all people in state living below family budget line * 21.9%
Number of all people in state living below family budget line * 473,000

* Families with 1-3 children and positive earnings.

Ohio's African-American Children

African-American children in Ohio are doing better than they were 10 years ago, but they still suffer from more health problems, and have fewer economic opportunities and lower academic achievement than other children.

That's the conclusion of a new Children's Defense Fund report that measures things from infant mortality rates to proficiency test scores.

The report, to be released today, found that black children in Cincinnati, Cleveland and Ohio's other big cities showed improvement but fared worse overall than those living elsewhere in the state.

The problems are more severe in the cities because poverty and African-American populations are more concentrated in urban areas, the authors of the report said.

As we consider our long-term economic development prospects...especially those of Ohio's central cities...this is a problem that needs to be fixed. We need much greater progress in this area. Remember that human capital is the #1 ingredient to grow the knowledge economy. That means human capital of all races and socio-economic classes.

Go here to read more.

Baseball Spring Training Camp Moves

In watching the relocation fever that has caught Major League Baseball's (MLB) spring training camps, you would think there is a lottery or draft for camp locations like we have for hot rookie players. The latest news is that the Anaheim Angels are eyeing Goodyear, AZ (Phoenix suburb) as a new spring training camp location. Of course, the deal would cost the city and the developer $30 million.

In a related development, the Chicago White Sox are thinking of leaving Tucson and moving north on I-10 to Tempe. Again, someone other than the MLB club will play the bill.

Are these deals worth the price? Economic development officials say the image and economic benefits are there. As I look at the numbers, I think the concerned cities have set their return on investment (ROI) too low for these investments.

Go here to read more.

Scottsdale Goes High-Tech

Scottsdale's image as a tourist destination has become a little frayed in recent years. The City is hoping to diversify its economic base by attracting high tech companies. Recently, its City Council approved a $3 million loan for TGen (Translational Genomics Research Institute) to build a new facility of Mayo Clinic's Scottsdale campus.

Go here to read more.

Maybe All the Moving and Shaking is Not Good for Boeing

You may find this recent Fort Worth Star Telegram article about how Boeing is undermining its own credibility to be of interest.

In short, its says that Boeing has made such a big deal about relocating its headquarters (now in Chicago) and now where to put its planned new airplane factory (likely in Everett, WA), but has the company in the final analysis gotten what it wants? Yes, it was showered with public incentive dollars, but it has taken a serious image spill in the public eye, it has ousted its former CEO, it has been investigated by the federal government, and it has wasted lots of people' time and money in chasing its facilities. When you add it all up, did Boeing get what it really wanted?

I think the Fort Worth article makes a good point. I will also add that coming from Fort Worth, which lost in its bid to bring the two Boeing facilities to the Metroplex region sounds a little like sour grapes. Well, that's show biz folks!

Rubbermaid to Close Major NE Ohio Facilities

Here is a recently announced plant closing situation to learn from.

Newell Rubbermaid Inc. announced today it will close its Wooster Rubbermaid factory and headquarters, affecting about 850 employees, as part of the struggling company's restructuring efforts.

Joseph Galli, Newell Rubbermaid's chief executive officer, said the Wooster factory is a "very high-cost facility." The company will place at least some of the headquarter's staff at other Rubbermaid facilities, he said.

The company also has started talks with unionized factory workers over the closing. Galli called the closing "tentative," but analysts expect the plant will be closed.

Newell Rubbermaid is eliminating between $200 million to $300 million in annual sales of low-margin products, Galli said, and now can speed up the timetable for closing down product lines. The company intends to shift some production to lower-cost facilities outside the United States, Galli said.

This closing is no great surprise to me. When the company ws acquired by Newell, it was evident that the Rubbermaid part of the business would be subjected to intense cost reduction pressures. Newell has a reputation as being a fierce cost-fighter and as such as stripped many of its divisions of facilities that do not meet the company's financial bottomline. Competition from offshore producers has grown in recent years, forcing Rubbermaid to rely more on its foreign production sources.

What action steps should be taken to address this situation? Here are seven recommended steps:

1. An EDO SWAT team should be assigned to the project to gather more information on the situation and how it unfolds. This team should include Wooster, Wayne County, Akron Chamber, Team NEO and State of Ohio officials.

2. All options to prevent the closing or at least reduce the size of the local economic loss should be explored with the company. These should include continuing operations at the existing location and exploring new locations within the NEO region that may be more competitive than the existing plant location.

3. The ED team should make a proposal to the corporate owners to keep the plant open, reduce operating costs and produce new products in the Wooster facility. While this may be a long shot, the effort should still be made.

4. The ED team should identify possible companies to acquire the Wooster business and its facilities. Again, this may be a long shot, but this stone must be overturned.

5. A worker adjustment plan should be developed to assess impacted worker skills, retraining needs and possible new job placements within the region.

6. Learn as much as possible about the factors driving the company's decision. Which, if any, of these factors could have been addressed by local/state ED officials.

7. Assess whether any other NEO Rubbermaid facilities are vulnerable at this time. What can be done to reduce these vulnerabilities?

Rubbermaid operates a large network of production facilities globally. Here is the list:

AZ--Phoenix
Mexico--Cadereyta
TN--Cleveland
Mexico--Monterrey
VA--Winchester
AZ--Phoenix
France--Amiens
France--Grossiat
France--Lomme
Germany--Dreieich
Hungary--Debrecen
IA--Centerville
Mexico--Cartagena
Mexico--Tultitlan
NC--Greenville Netherlands Brunssum
OH--Mogadore
OH--Wooster (To be closed)
Canada--Mississauga
Poland--Seupsk
Spain--Zaragoza
TX--Cleburne (Closed)
TX--Greenville
TX--Wills Point
UK--Corby
Nether.--Goirle
KS--Winfield
MO--Farmington
Canada--Paris
CA--San Bernadino
OH--Canton
OH--Macedonia
PA--Elverson
IL--Elk Grove
P. Rico

Read more here.

Mapping the Spatial Effects of Business Incentives

The Keystone Research Institute in Pennsylvania has been mapping the spatial development effects of state and local economic development incentives in Pennsylvania. The impetus for this mapping effort is to encourage "smart growth" in Pennsylvania communities, counties and regions. While I see merits with the effort, I also see some fatal flaws.

I spent some time at the mapping site and tested the system. No great surprises in what I saw. The group's report summarizing its findings is due shortly. I would offer a couple initial observations that are worth bearing in mind as we look at the issue of whether and how public incentives shape the spatial pattern of business and job growth in geographic areas:

1. The issue of the spatial development effects of these programs should be considered at the onset when these programs are first designed. Usually they are not given sufficient attention in the policy and program design phase. This was a recommendation that I made to the Ohio Legislature in 1999 in my cost-benefit analysis of Ohio's ED programs. Question one should be: "what goals and objectives are we striving to achieve with these programs or economic development in general?"

2. Smart growth is easier said than done. The truth is that most American citizens and businesses do not want government on any level telling them where they can live or locate businesses. Can you blame them, given government's shoddy past track record in making economic policy decisions? In all honesty, government is more of a culprit in sparking urban sprawl and causing other inefficiencies in how communities and regions develop than the actions of individual citizens and businesses. The structure of our governance system, especially at the local level, encourages inter-jurisdictional rivalry for tax base and other economic development resources. Most local governments within regions are unwilling to reinvent themselves to serve the larger regional whole that sustains them. It's really quite simple...the incentive programs we have reflect the shortcomings of the governance system that creates them.

3. In a perfect economic development world, no political jurisdiction any where would use incentives to influence the location of economic activity. The truth is that incentives are found just about everywhere worldwide. Moreover, those found in many other countries are more powerful and influential than those found here in the US. Low-cost labor, vis a vis inhumane child labor practices, are at work in many countries, including China, and these very practices are viewed by government officials as inducements to attract foreign capital investment. Most political jurisdictions have decided that "unilateral disarmament" of their ED incentive programs is not a wise move in this cut-throat world of business location and economic development.

4. I believe there is room for future productivity improvement in how we approach development in the future. I have said for sometime that probably more people would adopt the concept of "productive growth" than "smart growth." Productivity clearly aims at conserving resources, which is a good thing for businesses, governments and citizens.

5. Regions, and the communities that comprise them, should be looking for better ways to increase economic growth through more leveraged public and private sector investment strategies. First, we should invest in people and their continuous skill and knowledge enhancement. Second, we should invest in building high-quality, innovative and creative communities that businesses find competitive and people find exciting and interesting. Third, we should re-haul our overall tax system to encourage greater capital formation by businesses and wealth creation for all segments of the population. Fourth, we should increase our awareness of the cumulative effects of our various community and economic development policies. We have not been paying attention to the long-term effects of these programs. Finally, we need to learn to live within our means and make government on all levels more productive and cost-effective. For starters, local governments within regions need to increase public service collaboration.

If we did these things, we may find that many of our economic development incentives would become less important.

Like It or Not, Economic Growth is Step One in Job Creation

The $35-trillion world economy is not growing fast enough to provide jobs for millions of people who want them, according to a new analysis by The Conference Board.

Half of the current 2-3% average annual economic growth in the global economy is needed to provide employment for the 40 million people flooding the world?s job markets each year. But the global economy is not expanding fast enough to absorb the emerging work force. "There is simply not enough growth to go around," says Gail Fosler, Chief Economist of The Conference Board and author of the analysis.

"Among the advanced countries," says Fosler, "only the United States has been able to maintain its labor force growth, although about one half of the new labor force entrants in the U.S. are foreign-born."

The critical questions in a slow-growth world do not revolve around how to distribute economic growth or how to keep some nations from advancing too fast. "The real question is how everyone can advance faster together," notes Fosler. "Unfortunately, the issue of how to achieve higher sustainable world growth is still not being asked."

My take is that we need to remain mindful of national and global growth expectations as we gear up for local and state economic development efforts in the future. And yes, our national economy is picking up steam, and no, just an accelerated GDP rate is not the sole answer to job creation. The composition of growth also matters. We need growth that comes from a balanced mix of old and new, fast and moderate growth industries, and industries that serve local and national needs and those that aim at global markets. Ultimately for the US, our growth will be driven by innovation and our ability to build and sustain industries of scale.

South Carolina Debates "Buffalo Hunting"

Economic development leaders in South Carolina have been debating the merits of business recruitment (buffalo hunting) as the state's primary economic development strategy. Some, including officials from the Palmetto Institute, say the state needs a new strategy that looks beyond recruitment.

What can I say, but this is a cyclical issue for all states. My take is that South Carolina should continue to give attention to business recruitment while introducing other strategies (clusters, entrepreneurship, and internal expansion) to keep the state's economy humming. This is not an either/or situation as recent news articles have portrayed it.

China Readies to Grow Its Auto Sector

After some debates about the health and efficiency of its automotive industry, Chinese officials have indicated they are ready to plunge ahead with plans to strengthen automotive production for domestic and international markets. why does this situation sound like a deja vu of the early 1980s when I was working in Soutk Korea on automotive development projects? Maybe because it is.

Read more here.

MEP May See Budget Slashed

Federal funding for the Manufacturing Extension Partnership would be slashed by 63 percent to $39.6 million under the omnibus appropriations bill expected to pass Congress. The program provides technical assistance and business support services to small manufacturers through 60 centers with 400 locations across the country. It also receives funding from states and private-sector sources.

The Bush administration proposed an even bigger cut in MEP's budget: Its plan called for only $12.6 million in MEP appropriations, and restricted federal funding to centers that are less than 6 years old. The administration maintained that mature MEP centers should be self-sufficient, and that manufacturers who receive help from them should pay for it.

What is my take? MEP is a worthwhile government program that delivers valuable services to our nation's manufacturing sector. I look at the tremendous work that CAMP Inc. in NE Ohio provides to local manufacturers as a perfect example of what the MEP centers can offer to industry.

To cut the program's budget sends the wrong message to manufacturing companies that are struggling to innovate and stand strong in the face of growing foreign competition. This position undermines the Bush Administration's designation of a Manufacturing Representative in the Commerce Department. I say expand MEP and help the national network of centers become resources in coping with the growing competitive threats posed by China, India and other nations.

Go here to read more.

Western Michigan Gains in Life Sciences

Michigan has given major attention to the development of its life sciences sector. Western Michigan has stepped up its efforts in this area. Since 2000, the Van Andel Institute in Grand Rapids has received more than $25 million in federal grants for this purpose. According to the Michigan Ed Corporation, 74 new companies have started up or located in the corridor. Go here to read more about Michigan's Life Science Corridor Initiative.

Ports Innovate with Development Funding

Many areas have turned to port authorities to help fund transportation and economic development projects because of funding shortfalls experienced by local government. That is the case in Pittsburgh and Allegheny County, PA.

Go here to read about the role of the area's port in funding development related and area infrastructure projects. You will see in reading the Allegheny County story that competition for public transportation funds has intensified greatly--a situation that is being experienced in many areas as state and federal transportation funds have been cut.

One bit of advice...be careful how you use port funding. In some states, state auditors have been taking a much closer looking at how ports use their financial resources to support economic and community development.

North Carolina to Boeing: It Ain't Over Till It's Over

North Carolina is still hoping it can persuade Boeing to locate its new plane factory in the state. State and local ED officials are working to sweeten the incentive deal offered to Boeing.

In my read of the media coverage of the deal, this one sounds like it's headed to Everett, WA, but stranger things have happened, and highly visible projects of this sort have done an about face if the company's first locational choice falls short for some reason. You have to admire North Carolina's tenacity. Go here to read more.

One thing is for certain about the Boeing deal, this project is going to cost two arms and two legs. Is it worth it? My guess is that most communities and states would be inclined to pay through the nose to attract the deal given its economic and image benefits. Believe me that Washington state is going to pay big time to this project.

Holland, Michigan Targets Young Professionals

If you are a smaller city trying to hold onto or attract young talented people, you may find the effort by the Holland, Michigan Chamber of Commerce to be on interest. Go here to read the story. I'm sure that somewhere in the mix is our good friend, Dean Whittaker, who runs an ED consulting business in Holland.

The Politics of Public Funding

As most EDO managers and board members know, public funding for ED operations can pose challenges...not the least of which are political attacks. Take a look at this article about the hot water the Lehigh Valley ED Corporation (LVEDC) is in over using county tourism taxes to support its general ED activities.

The story here seems to be a backroom deal for LVEDC to receive the tourism tax funding, which is seen as less than on the up and up. Reading the story reminds me of many "witch hunts" by the news media to find where EDOs are vulnerable. In this case, the media was able to play the public funding angle. This is not the first attack LVEDC has received from the media.

One point that I would add regarding tourism and how it relates to other ED activities...tourism is an economic development strategy that should be designed to articulate with other ED strategies, including existing and new business growth. These strategies can and should be mutually supportive of one another. Many tourism agencies attract visitors as a way to lure new businesses to the area. This is not unusual at all. The question is how you accomplish this synergy and whether your stakeholders, including the general public, understand the relationship and how you go about creating this synergy.

These are real challenges for any EDO using public money. A word to the wise: be careful whose money you take and how you use it.

Ohio Company Investigated Over Chinese Labor Practices

The New York Times has been running a series on modern day sweatshops in China. The Ohio company that makes Etch A Stetch is the latest victim of these investigations. Ohio Art Company uses Kin Ki of China to produce the product.

Kin Ki employees, mostly teenage migrants from internal provinces, say they work many more hours and earn about 40 percent less than the company claims. They sleep head-to-toe in tiny rooms. They staged two strikes recently demanding they get paid closer to the legal minimum wage. Most do not have pensions, medical insurance or work contracts. The company's crib sheet recommends if inspectors press to see such documents, workers should "intentionally waste time and then say they can't find them," according to company memos provided to The New York Times by employees.

William C. Killgallon, the chief executive of Ohio Art Company, the owner of Etch A Sketch, said that he considered Kin Ki executives honest and that he had no knowledge of labor problems there. But he said he intended to visit China soon to "make sure they understand what we expect."

Etch A Sketch is the same child's drawing toy today that it was in 1960, when Ohio Art first produced it in Bryan, Ohio. But efforts to keep its selling price below $10 on shelves at Wal-Mart and Toys "R" Us forced the company to move production to China three years ago.

China now makes 80 percent of the toys sold in America, according to United States government figures, and no industry here has come under greater pressure to adhere to global labor codes.

Go here to read more about the Ohio Art Company China operations and click here to read about the impact of the earlier Ohio Art Company plant closing on Bryan, Ohio.

South Florida Looks for New Ways to Strengthen Regional Advantage

Interest in regionalism ebbs and flows across the country. Most areas are talking a better game than they are walking at this point in time. Most local governments are still driven by Darwinian "survival of the fittest" thinking. Read this article about the latest take on regional cooperation in the Miami-South Florida area.

I think regionalism is important and I believe it is vitally important to South Florida's economic future, but it is unlikely to happen the way things are headed right now. Here is a suggestion. Maybe South Florida's economic leaders should sign an industry cluster-based "trading bloc agreement" with five other world regions to intensify trade, investment and technology cooperation with and among the regions. First question...Which five regions are the best partners? Second question...How do you motivate firms and institutions in the clusters to work together globally?

Perhaps this type of strategy would do more to propel regional cooperation in South Florida than the usual suspects sitting around a table talking about why they need to cooperate. In this case, a larger outside purpose could unite them. Cooperation occurs best around specific things. That is a lesson for all regions.

Korea Struggling to Restore Investor Confidence

Things have not been so good in Korea in recent years. What looked to be the Japanese economic miracle all over again, has turned into a not so pretty economic tail spin in Korea in the past 5-7 years.

Read between the lines in this Korean newspaper article. Basically it says that the Korean Government is looking to deepen incentive subsidies to firms that invest in the country in the future.

Korea, like many other countries, is finding China and India to be very hard to compete with.

Otis Indiana Plant: Latest Casuality of China and Mexico

Pressures to produce abroad are mounting as our economy kicks into high gear. Here is a story of another manufacturing loss...not to just China, but Mexico as well.

Otis Elevator plans to end its manufacturing operations in Bloomington, Indiana by the end of next year, leaving about 200 jobs at a plant that once employed more than 1,000. The company said it would eliminate all factory, distribution and field-tool operations in Bloomington by the end of 2004.

About 18 percent of the products made in Bloomington will be shifted to an Otis plant in China. Production of low-rise elevator components already had been shifted to a plant in Nogales, Mexico, and other outside suppliers.

Linda Williamson, president of the Bloomington Economic Development Corp., called the move "disappointing." "Otis’ decision to move production out of Bloomington is really a decision to move production out of the United States and is based on global considerations and not on the productivity and quality of their local work force," she said.

Otis Elevator, with headquarters in Farmington, Conn., is a subsidiary of United Technologies. It is the world’s largest company manufacturing, installing and servicing elevators, escalators, moving walkways and shuttle systems.

I have one suggestion. Maybe CoreNet Global should host a conference to discuss some new ideas on how manufacturers can increase competitiveness by producing domestically. What would it REALLY take to overcome the cost advantages offered by offshore locations? This is about the search for true innovations and not just fixing old solutions.

Go here to read more.

Baltimore Looking for Answers For Ailing Manufacturing Sector

A recent Baltimore Sun article talks about the manufacturing situation in Baltimore. The demise of a major General Motors plant there is the most recent source of angst for city and regional leaders there.

Here's a suggestion. Maybe Baltimore and Cleveland should sit down at the same table and discuss how the two urban regions can work together to advance manufacturing in their respective regions. And yes, other regions should be invited, including Pittsburgh, Indianapolis, Cincinnati, Richmond, to discuss the future of "urban manufacturing." The group should be charged with finding new collaborative solutions that spark revitalization of older manufacturing areas and industries. One starting point could be the retrofitting of small and medium-sized manufacturers for global markets.