Looking Back: Would Cleveland Be Any Better Off Today?

Clevelanders love to tell the story of how the automotive industry started in their hometown. Many express deep regrets that we didn't do more to become the leading center for the industry. Read this clip from a history of Cleveland's auto industry in the Encyclopedia of Cleveland History.

"Why did Cleveland, an early leader in the American automotive industry, lose out to Detroit? There is no single answer, but as historian John Rae has argued, the manufacturers and financiers of Detroit were more willing to take the risks involved in building the massive plants required to shift to assembly-line mass production than were comparable businessmen in any other manufacturing center of the nation." Source: Read a fascinating history of the automotive industry in Cleveland in the Enclyclopedia of Cleveland History

Looking at Detroit and Cleveland today, would Cleveland be any better off today had it gone the whole nine yards to develop the automotive industry back in 1920s? This is a puzzling question, but just the sort of question we should be asking ourselves as we look to the future we intend to create for ourselves.

Retrospect: The 50 Club of Cleveland

"The 50 CLUB OF CLEVELAND is made up of top business executives, corporate lawyers and other well-known Cleveland figures who meet to hear prominent speakers and engage in strictly off-the-record, frank discussion. According to its constitution, the club's purpose is to provide an informal organization through which leading citizens representing the business, professional, or cultural life of Greater Cleveland can come to know one another better, understand one another's points of view and become better informed on problems of local, national, and international interest. The club's policy is to not take any formal position on issues or projects.

The 50 Club was formally organized with 43 charter members 8 June 1939 at a dinner meeting at the Union Club. Membership (by invitation only), is based primarily on personal qualification rather than on business or other institutional affiliation. Membership was increased to 55 in 1942, and to 60 in 1946. In 1947 two classes of membership were created--"Active" (membership limit 100) and "Honorary" for those members who have reached the age of 65, who no longer have Greater Cleveland as a principal residence, or who have retired as an active principal executive officer. Regular Club (dinner) meetings are held on the first Monday in the months of October, November, December, January, April, May, and June (the annual meeting), with time and place decided by the Executive Committee. The meetings are open only to members and invited guests. George A. Martin served as the club's first president from 1939-40."

Source: Enclyclopedia of Cleveland History

Exclusive economic and business clubs have been a figment of American communities for many years. These groups formed for different reasons. The stated reason why the Cleveland 50 Club formed was to promote relationships and understanding among the area's top business, professional, and cultural leaders. Note: Government leaders were not included in this grouping.

In 1939, Cleveland's economy was booming. It was the 9th largest U.S. city in population with a metro population of 1.25 million and a central city population of 878,000, which is nearly double Cleveland's 2004 estimated population. In 1940, the Cleveland MSA had a manufacturing productivity rate that was nearly 125% of the U.S. rate. Today the region's manufacturing productivity rate is about 91% of the U.S. rate.

Things and times have changed.

Clevelanders formed an image of themselves during those days of plenty that lingered in the imaginations of men and women for many years. The factory, skyscraper, big house, big car, and many other symbols of material life proliferated those visions of 65 years ago.

There was little question in anybody's mind that Cleveland was a prosperous place in 1940. Few today would claim Cleveland to be a prosperous place.

Where will we be and what will we think 65 years from now?

Sometimes We Miss Things

The history of every great city is the story of the people who built it, and in some cases tore it down. Oris and Mantis Van Sweringen played a pivitol role in the Cleveland area's development at the turn of the last century. In 1905, exactly 100 years ago, these two men were busy developing Shaker Heights, which grew to become one of the most affluent suburbs across America for many years.

Here is a clip from a review of Herb Harwood's book, Invisible Giants: The Empires of Cleveland's Van Sweringen Brothers by Fred H. Smith, Department of Economics, Davidson College, which points up the need to think multi-dimensionally as we plan cities in the future:

"First, the book does an excellent job of laying out the facts of the Van Sweringen story, but it does not solve the fundamental Van Sweringen puzzle. Namely, how is it possible that these two men -- so forward thinking in the majority of their business dealings -- failed to understand how profoundly the automobile would change America? The Van Sweringens were pioneers of the leveraged buyout, they created Shaker Heights -- the nation's first planned community -- and yet they failed to grasp the impact that the automobile would have on urban spatial structure. So, as the automobile was becoming more and more popular with Clevelanders, the brothers were busy building the Terminal Tower complex to handle train and rapid transit passengers. It seems impossible that these intelligent, perceptive men would not have seen that passenger trains and public transportation were destined to diminish in importance."

The past is there for all of us to learn from. One hundred years later we can see what we could not (or were unwilling) to see then.

The Economy of Regions by Jane Jacobs

"Any region with an innovative and import -replacing city of its own becomes capable of producing amply and diversely for its own people and producers as well as for others, again no matter what its given natural attributes. Such a city and its city region also automatically become capable of shaping and reshaping the economies of distant regions lacking vigorous cities of their own, shaping them for better or for worse. Too often the shaping is either disappointing or disastrous, but there is no remedy for that other than the emergence of vigorous cities in regions that lack them and need them."

Back in 1377 a Tunisian scholar and historian, Ibn Khaldun, explained that the Bedouins of the desert, who sold animal products and grain to urban people, would remain economically weak and dependent "as long as they live in the desert and have not acquired . . . control of the cities." True to a point. But he might have added, "or as long as they do not create a city of their own."

Read the entire essay here.

Buddhist Economics by E. F. Schumacher

"The Buddhist point of view takes the function of work to be at least threefold: to give man a chance to utilise and develop his faculties; to enable him to overcome his ego-centredness by joining with other people in a common task; and to bring forth the goods and services needed for a becoming existence. Again, the consequences that flow from this view are endless.

To organise work in such a manner that it becomes meaningless, boring, stultifying, or nerve-racking for the worker would be little short of criminal; it would indicate a greater concern with goods than with people, an evil lack of compassion and a soul-destroying degree of attachment to the most primitive side of this worldly existence. Equally, to strive for leisure as an alternative to work would be considered a complete misunderstanding of one of the basic truths of human existence, namely that work and leisure are complementary parts of the same living process and cannot be separated without destroying the joy of work and the bliss of leisure."

Read the entire essay here.

Orion Society

The Orion Society's mission is to inform, inspire, and engage individuals and grassroots organizations in becoming a significant cultural force for healing nature and community.

Check out Wendell Berry's treatise on The Idea of a Local Economy.

Understanding the Basis for Leadership

"Great leaders through out history have used a number of styles: personal bravery (Alexander the Great), fear (Attila the Hun), eloquence (Churchill), charisma (T.E. Lawrence), coalition building (Franklin Roosevelt), autocracy (Patton), and ideas (Martin Luther)."

Source: Beatty and Burkholder, The Executive Career Guide for MBAs: Inside Advice on Getting to the Top from Today's Business Leaders. New York: John Wiley & Sons, Inc. 1996.

Appropriate Economics: What Can It Teach Economic Development?

In the interest of helping economic development find a path with a heart, I have been exploring different existing resources that seem to relate. Appropriate Economics has been around for a while. It has mainly been concerned with development issues in third-world countries, but has its place in developed economies like ours.

Economic thinkers like E.F. Schumacher, Kennth Boulding, John K. Galbriath, Herman Daly, and Joseph Stiglitz have all given attention to appropriate economics.

“Appropriate Economics” has focused itself on decentralizing economic systems to the local level and using proper processes to include the entire community in economic planning, to put the economy back into the hands of the people. Sounds a little bit like economic development, except the emphasis on "people" is greater.

Learn more about Appropriate Economics here.

Comparing Canadian and U.S. Manufacturing

Canada and the United States share a manufacturing economy, even though their national borders prevent people from seeing this fact.

A recent study on how Canadian manufacturing compares to manufacturing in the U.S. provides interesting and useful insights. Macroeconomic factors play a major role in the performance of both the Canadian and U.S. manufacturing sector.

Note: While overall shipment volumes are keeping up with those in the United States, one area where Canada's factories may be lagging is in profits. From their low in 2002 to 2004, manufacturing profits increased 191% in the United States compared to only 19% in Canada. This may reflect the severe squeeze on prices from the stronger dollar.

The study "Is Canada's manufacturing lagging compared with the US?" is now available for free online.

Australia Takes Notes from GM's Fall

Comments by Ivan Deveson, Chairman of the Committee for the Economic Development of Australia and a veteran of more than 30 years with GM.

"I want to outline a few of those factors as lessons for Australia, where our manufacturing sector is under siege, having fallen from 30 per cent of gross domestic product to about 12 per cent in recent years.

An excess of vertical integration, where GM made many of the components it used, made the company blind to advances in competitive pricing and technology. Outsourcing was resisted for too long, with make-versus-buy comparisons constantly clouded by investments in bricks and mortar.

The traditional management/labour bargaining rounds of the 1950s through to the 1980s resulted in excessively high wages and benefits that rendered GM plants in the US uncompetitive with imports and with vehicles manufactured in "greenfield" US plants.

So-called hard-earned conditions of employment can be a burden in the ever-changing global economy, particularly if they threaten business viability.

Success breeds complacency — and some arrogance. When I visited Japan in the mid-1970s and saw the just-in-time and quick-die-change processes, I struggled to convince many of my Detroit colleagues that an economic tsunami was coming. Beating budget and being better than last year are irrelevant if you do not meet or beat world's best practice."

Read more here.

Northeast Ohio is Losing a Good One

Bob Farley has announced his resignation as the President and CEO or Team Northeast Ohio (NEO), an organization he was hired just two years ago to set in motion.

Bob is a national economic development talent. I hate to see my home region lose top professionals of his caliber. The search resulting in Bob's selection in 2003 took a long time to accomplish. NE Ohio is not an easy sell to top economic development talent, especially if you like the sound of new industrial and office buildings going up.

Unless Northest Ohio gets very lucky, it is my impression that we might have some difficulty replacing Bob with a known national talent.

What’s the problem? There are two major ones.

The first is that we have a regional economy that is in a “structural straitjacket,” which means the force field created by our current driving industries is preventing us from moving forward. This is a tough environment for economic development, where most of the deals are about holding onto what we have with relatively little new growth.

The solution is an accelerated economic diversification initiative that shifts our attention from trying to prop up dead and dying industries and companies to truly “jumpstarting” new industries and greater entrepreneurship.

The second problem is the “development culture” of the region, which still favors a command and control style of leadership and petty politics, rather than enlightened team-based leadership.

Training and better development of our economic development leaders is an imperative. This is not an easy job. I find that many “seasoned” leaders do not know how to work in high performance economic development teams, especially if these leaders come from “rugged individualism” organization cultures in business, government, and education.

I posted this article on ED Futures on Sunday. (No, it was not written with NEO in mind, but maybe NEO economic development leadership could learn by the message.) Maybe we have too much “suffering leadership” and not enough “joyful leadership.”

My comments are not intended as critical. We have too much of that already. Rather, they are constructive observations about why economic development is no easy matter in NE Ohio.

Bob indicated to me that he intends to return to the private sector to work in real estate development and investing. I wish him well as he takes his next career step.

What is Technology Roadmapping?

Technology roadmapping in Canada is a planning process that is driven by the projected needs of tomorrow’s markets. It helps companies to identify, select and develop technology alternatives to satisfy future service, product or operational needs. It brings together a team of experts to develop a framework for organizing and presenting the information to make the right technology investment decisions. And it provides a way to leverage those investments.

Given a set of needs, technology roadmapping defines the critical requirements and performance targets that must be satisfied by certain time frames if a company is to meet the demands of future markets. It also identifies the technologies a company should develop to meet those targets. Finally, it provides the information needed to make trade-offs among different technology alternatives.

The concept has gained widespread recognition in U.S. business. The American firm Motorola, for example, has seen tremendous returns on the technology roadmapping it did back in the late 80s. Other ambitious companies have learned from Motorola’s success and have made technology roadmapping a central part of their business planning. Canadian companies are now beginning to realize just how powerful this planning tool can be.

Learn more about technology roadmapping in Canada.

Canada's SME Market

In 2001, there were more than 1.5 million small and medium-sized enterprises (SMEs) in Canada. The location of these enterprises is governed primarily by population density and by other factors such as sector concentration. The figure to the left compares the distribution of SMEs by region to the distribution of population by region in Canada in 2001. It shows that the distribution of SMEs is fairly proportional to the overall distribution of population, with 58 percent of business enterprises located in Ontario and Quebec. Source: Industry Canada

Ford: Junk Status!

Fitch Ratings cut its ratings on Ford Motor Co. to junk status, the third of the three major rating agencies to strip the second-largest U.S. automaker of its investment-grade ratings.

The downgrade reflects ongoing market share losses, slumping sales of sport utility vehicles and competition at Ford's core North American auto operations, Fitch said.

Read the details here.

Industry Quiz: Global Car Production Leaders

Question: Which nations produced the most passenger cars in 2004?

1 Japan 8,618,730
2 Germany 5,123,240
3 United States 5,016,310
4 France 3,283,780
5 Korea, South 2,651,270
6 Spain 2,266,900
8 United Kingdom 1,628,020
9 Brazil 1,521,430
10 Canada 1,369,000
11 Italy 1,125,770
12 China 1,090,820
13 Russia 980,736
14 Mexico 960,896
15 Belgium 936,903
16 India 706,061
17 Czech Republic 441,312
18 Malaysia 380,000
19 Iran 310,000
20 Australia 307,064

Source: International Organization of Motor Vehicle Manufacturers

University Research Parks

About Research Parks in the United States & Canada
Source: Association of University Research Parks

-Currently represent over 41,000 acres of land; have over 2,900 tenants in their parks and employ over 235,000 people. The total capital investment exceeds $9 billion.

-Represent over 94,000,000 million square feet of office and laboratory space, and plan to add another 32 million square feet over the next several years. More than 430 staff manage the parks.

-83% of the parks are not-for-profit entities

-62% have a business incubator component

-Medical/biotechnology is the leading dominant technology

-70% of the parks were established using public funds

-73% of the parks lease their land

-37% of the parks have an operating budget greater than $1,000,000 per year

-61% of the parks use public incentives to attract tenant development

-The majority of the research parks were established in the decades of the 1980's and 1990's

Facts on Tennessee Manufacturing

New Report on Tennessee Manufacturing
By Center for Business and Economic Research
College of Business Administration
The University of Tennessee

The report documents the size, nature and changing fortunes of Tennessee’s manufacturing sector using data available from public sources. Teh authors hope that with a better understanding of manufacturing’s role in the economy—for Tennessee, the southeastern states and the U.S.—improved public and business policy in support of manufacturing can be developed.

The report concludes that manufacturing certainly does not play the same role in the economy that it played decades ago. Jobs in the manufacturing sector have declined as a share of overall jobs, in part because of rapid growth in the services sector. And in Tennessee there have been outright job losses in manufacturing dating back to 1998. At the same time, new jobs are being created by newly-locating and expanding manufacturers in the state. The economic forecast for the state actually calls for some net job creation in manufacturing in both 2006 and 2007. But as a share of overall jobs in Tennessee, manufacturing will continue to decline in the years ahead.

Download the full 145-page report here.

Urban vs. Rural: Looking at the Gaps

It's a conflict that has long simmered in Kentucky...city vs. country, urban vs. rural, haves vs. have nots or some other variation on the theme. A study released by the Center for Business and Economic Research at the University of Kentucky offers some statistical analysis to support the existence of the disparity between the two and makes some recommendations that are sure to stoke the heat in the argument.

University of Louisville economist Dr. Paul Coomes wrote in the 2005 Kentucky Annual Economic Report that when it comes to distributing public resources, such as tax money for transportation infrastructure and even education, the state is too evenhanded. Urban areas should be getting more because they not only contribute a greater proportion of the tax base, those areas are the only real hope to pull all of Kentucky out of the economic backwater.

"Kentucky's fiscal policies clearly disadvantage the economic competitiveness of its largest cities," Coomes wrote in the article, "Kentucky is missing lucrative office economy growth."

ED Futures Newsletter

Dear ED Futures Subscriber:

Welcome to our December 17, 2005 issue.

I have been noticing two interesting tendencies in the places where my consulting work takes me. The first is a tendency toward mean-spiritedness and desperation. The second is a tendency toward kindness and sacrifice for others. Of the two, the second is clearly preferred. And yes, both tendencies are found in all communities.

Let's look at each.

Suffering Leaders

Leaders in many communities have allowed themselves to become calloused, jaded, ungrateful, judgmental of others, and overally self-critical. Some seem to excuse this behavior as appropriate and acceptable because "that's what leaders must do to get things done." This behavior exists in growing and declining communities alike.

As I explore why these leaders are so unhappy, I discover that many suffer from two related conditions: low self-esteem and extreme egocentrism. Many leaders are unhappy because they can't wave a magic wand over the community and transform it into some "magical economic wonderland." Many suffer because they are obsessed with making businesses happy at the expense of people.

I listen to what these leaders have to say when they ask my firm to take a "hard look" at their competitive advantages and what needs to be done to make the place more attractive to businesses. I see the leaders of these communities and states blaming themselves and their citizens for not doing enough for business competitiveness. As I listen to them further, I hear anger and blame, which masks the underlying fear, apprehension, and worry they carry around in their gut. I work at feeling compassion and understanding for these leaders.

Joyful Leaders

Then, there are leaders in places that demonstrate a sincere concern about people, unprecedented acts of kindness, caring, and generosity. I hear true empathy and compassion, and not blame and ridicule, in these leaders' voices. These places are also concerned about their competitiveness, but they are not willing to throw people aside at the expense of unaffordable incentive packages or other actions that permit businesses to do what they shouldn't do anywhere. I see a courage to care, love, and respect in the faces of these leaders. Joyful leaders are found in both growing and declining places.

The second set of voices gives me hope that something we might call "humanistic economic development" is possible in our field in the future.

Of the two groups, the second is far stronger and much better prepared to confront the realities of economic change, conflict, and hardship. These places are also better prepared to develop new opportunities because they are open and willing to listen, learn, and grow.

Truthfully, I find both voices in most places. The question is which is voice is louder and takes precedence? Which description best fits your community, region, or state?

The choice is ours in terms of how we want to be. I celebrate the enlightened joyful leader who understands the need for gratitude and kindness in economic development. I have compassion for the suffering leader, who shares his suffering, rather than his joy, with others.

Leaders in any community have a choice on how they want to be. Given the choice between suffering and joy, I will take joy any day.

My advice to communities for 2006 is quite simple: "Create a joyful environment and prosperity and abundance will take stronger root in your community." It's worth a try. Don't you think?

Here are some links to ED Futures articles you might like to read:

Flash Forward: IEDC Creates Certified Humanistic Economic Developer Certification

Thinking Small, But Beautiful, in 2006

Ontario's New Manufacturing Initiative

Ethics in Practice: A Look at Honesty

Michigan State University's College of Human Medicine

Cumo Vs. DaimlerChrysler: End of Big Incentives?

Michigan: Stop Blaming Yourself for the Auto Sector's Demise

Target Industry: The Geographic Arbitrageur

Self Employment is Growing

As always, we welcome your thoughts and questions.

Best wishes for the upcoming Holiday Season, and may God bless you!

Don Iannone
ED Futures Publisher
Email: dtia@don-iannone.com
Tel: 440.449.0753

Flash Forward: IEDC Creates Certified Humanistic Economic Developer Certification

The year is 2008. It is a warm late September morning. The place is the International Economic Development Annual Conference. It is the kickoff session to the conference. The speaker announces with great excitement the creation of a new professional certification for economic developers called the Certified Humanistic Economic Developer (CHEcD).

Can you conceive of such a thing? I can. Maybe all of us should start thinking about it.

For starters, let's look at Humanistic Economics, an innovative group of economists concerned that economics really serve human needs across the world.

There is an Institite for Humanistic Economics at the University of Maine. Check out what it has to say. It is a starting point.

What is humanistic economics?

The general nature of Humanistic Economics can be described as a distinct pattern of economic thought with old historical roots that seeks to understand and explain how the economy works, how it changes, and how it can be managed to enhance the human well-being of all citizens. In the process, one primary element has always been a critical analysis of the dominant economic way of thinking.

The human image implicit in mainstream economic science is particularly rejected, while also encouraging a rethinking of economic principles based on a richer and more balanced view of human nature. It's a perspective that leans heavily on humanistic psychology, moral philosophy, humanistic sociology, and last but not least, on common sense. In more formal terms, contemporary humanistic economics seeks to both describe, analyze and critically assess prevailing socio-economic institutions and policies, and provide normative (value) guidelines on how to improve them in terms of human (not merely "economic") welfare. Basic human needs, human rights, human dignity, human equality, freedom, economic democracy and economic sustainability provide the framework.

Moreover, the label humanistic also applies as a critique of the naturalistic basic orientation embodied by so many economic approaches. We start from a realization that human nature is both part of and apart from Nature, an important fact that cannot be easily grasped with the tools of empirical social science. We recognize that being fully human implies a "higher nature" (including moral integrity and a sense for truth, love, and social justice), a "higher consciousness," and the capacity to embrace and realize "higher values." These distinctly human characteristics first and foremost involve the transcending of the usual confines of an economics centered on self-interest. Neither are they easily reconciled with a more collective economic way of thinking that focuses on socialization based on class, race, or gender differences.

Think about it!

E. F. Schumacher

"Schumacher's most radical break with the mainstream of economic thought, however, comes with his willingness to sacrifice economic growth - for so long the Holy Grail of economic policy and strategy - for a more fulfilling working life. Perhaps more than any economist since Karl Marx, Schumacher called attention to the quality of people's lives as producers, even stressing its importance over their lives as consumers. Work, rather than being, as in neoclassical theory, a "disutility," becomes in Schumacher's philosophy a means towards satisfaction, fulfillment, and personal development." Source: Noah Enelow

Thinking Small, But Beautiful, in 2006

Remember this book? Perhaps all of us should re-read it as we think about economic development strategies for the coming year. Buy it here at Amazon.com.