Implications of Frictionless Commerce for Economic Development

This one is a little out there. Forgive me for making everyone think a little harder about what we are doing in economic development. It is a NEW year, so it makes sense to look for some NEW ideas. Right? If you're brave enough, feel free to read on.

I ran across an interesting article in Fast Company Magazine discussing the implications of globalism and "frictionless commerce" for capitalism. It starts by describing the number of American senior citizens buying their prescription drugs in Canada and proceeds to discuss how the Internet has shattered traditional theories and strategies of market pricing and product distribution. That is if you don't like the price of a lawn mower at the local handy dandy store, search the Internet for the best price and have UPS deliver it to you in 3 days.

We have known these things would be issues for all of us since at least the early 1990s. Have we really come to terms with them in economic development? My response is that we have not.

My follow-on question is this: "What are the implications of "frictionless commerce" for place-based economic development as we know it today?" My assessment is that the vast majority of communities, regions and states are not prepared to cope with the consequences of these issues. My recommendation is that we figure out a way to cope with them--and fast.

If markets are less and less governed by geography--and politics, where does this leave economic development as "place-based economic advocacy?" At one extreme, one could argue that our current place-based model of economic development becomes obsolete and is discarded. This scares lots of people, but think about it anyway. Where does this leave economic development? Maybe it suggests we need to think more in global network terms about our goals of providing jobs, wealth, innovation and other things for people.

Maybe we should take down the non-productive "trade barriers" that separate local and "personal" economies across the world and give people and businesses the tools they really need to succeed in building wealth for themselves on a global basis. (Maybe we should start thinking of households as personal micro-economies. On one level, that is exactly what they are.) In this sense, it could be possible that our attention in economic development will turn from trying to make places more prosperous to making people more prosperous. The easy out is to say that we should try to make people more prosperous in places. But could it be possible that the price of place is simply too high and it needs to be driven down in a global marketplace? Is it possible that the carrying costs of place are no longer bearable and we need to reduce them? Is this another way to argue that we need fewer governmental units and that regional government is more in line with our ability to survive in global society in the future? I admit these are exceedingly difficult questions, but I think we need to ask them.

Most economic developers are wringing their hands about offshore outsourcing. What if I told you that our current model of economic development (place-based economic advocacy) is completely useless in the face of this trend that is sucking business, jobs and wealth out of American communities everyday. I don't believe that more government control (trade barriers) is the answer. I think the answer lies in inventing new strategies and tools that re-network people, businesses and jobs globally. Stop thinking about economic development within the confines of your city or regional economic boundaries, and start thinking about economic development as something that occurs among and between people, places and businesses worldwide. Might we find some new answers to offshore outsourcing if we adopted this brand of thinking? I think we would.

So, what are your thoughts? I'd enjoy hearing them. Thanks for allowing me to stretch your mind a bit.