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Here's an interesting article out of Maine. A private sector leader sees the source of economic growth n the innovation of Maine's companies. Read more.
He's right, of course. Most job growth comes from smaller growth-oriented companies. The Edwartd Lowe Foundation has produced a really useful web site, YourEconomy, which enables you to see how these companies -- Lowe calls them Second Stage entrepreneurs -- generate jobs. Check out the data for your economy here.
Over on a local Cleveland blog, Brewed Fresh Daily, I posted some information on the Cleveland economy, oulled from YourEconomy.org. I was obliquely criticizing TeamNEO for touting its pitches to site selectors. You can read the post here.
John Polk, an astute observer of the Cleveland political scene offered these comments about Economic Gardening, a set of strategies designed to nurture these high growth companies.
“Smokestack chasing” was a post-WWII-era economic development strategy, driven primarily by local utility companies in an era of greenfield suburban/exurban expansion.
It sorta ran out of gas in the late 1960’s in Northeast Ohio, as our tax and regulatory structure and labor costs placed the region at a disadvantage not only to right-to-work states in the South and West, but also to Columbus, where Jim Rhodes used his power as Mayor and Governor to force a regional approach to development, leavened with plenty of incentives.
It was the relative ineffectiveness of the old Greater Cleveland Growth Board at attracting new outside investment to the region which forced a merger between the Growth Board and the Cleveland Chamber of Commerce to create the Growth Association.
In similar fashion, it was the relative ineffectiveness of GCGA (now GCP) and other Northeast Ohio Chambers at business attraction which led to the formation of TeamNEO. Because it is essentially a “collaborative” effort of a number of organizations which were themselves ineffective at their jobs, there was little evidence that one single organization could really do a better job.
The real value of TeamNEO to local Chambers was that it became a convenient place to “outsource” regional attraction and retention efforts, leaving the Chambers free to pursue things it was easier to take credit for.
There’s nothing wrong with a little smokestack chasing in context; somebody’s probably got to “handle it.” But it is a high-cost, low return strategy. And it’s sort of the economic development equivalent of my friend from college who’d go to a bar and ask 50 women to go home with him; 49 failures didn’t phase him as long as one said yes.
TeamNEO is just one of many organizations in the region involved in might be considered display behavior…largely symbolic activity meant more to demonstrate that we have “a process in place” to “handle” various aspects of economic development. The success of these groups have much less to do with the results they achieve than with the fact that they’re doing…something.
To expand a bit on Ed’s metaphor, there are two central paradigms for development: engineering and gardening.
Engineers believe that economies can be developed via top-down centralized efforts to focus on big projects, “big bets,” and picking winners. The activities of these organizations tend to be very expensive relative to the concrete results of their efforts. Their mantra is a variation on trickle-down theory: that a lot of process surrounding big projects will somehow create subsidiary economic activity that will benefit more than the “winners” receive in the form of big incentives.
Gardeners believe that economies develop, but they are not developed from the top down; rather, economic growth results through the efforts of many, many entrepreneurs doing their own thing.
The efforts of gardening organizations tend to focus on enriching the environment for grass-roots entrepreneurship, and on reducing the barriers to entrepreneurial success. Gardening organizations will focus on meaningful efforts to reduce tax and regulatory barriers, reduce non-wage labor costs such as health care, workers compensation and other payroll taxes, to promote educational attainment, and workforce readiness, and to create an open environment in which entrepreneurs can receive the answers and help they need to make smart investment decisions.
As Ed’s numbers imply, Northeast Ohio is top-heavy with engineering organizations, and almost devoid of gardening organizations. The relative value of gardening vs. engineering is quantitatively indisputable. And yet in Northeast Ohio, our leadership caste has boldly embraced the 1950’s-style model.
Why?…Because symbolic behavior is fun. Big bets, big wins, and a concentration of economic activity which produces economic benefits for the engineers and the transaction processors who support them. And lots of process keeps everyone busy. If TeamNEO talks with 100 companies, and one decides to locate here, we don’t talk about the 99 who didn’t, or the companies which leave, we can “focus on the wins.”
Gardening is harder. It requires hard work, patience and persistence. It doesn’t make corporate oligarchs rich; instead effective gardening helps the company with 6 employees add a seventh, then multiplies that sort of grass roots job creation by the thousands.
I may be mistaken, but I believe Cleveland is the highest-tax city in the highest-tax county in one of the top five highest-taxed states in America. Yet a key element of the community’s economic development strategy is to RAISE taxes to finance big projects whose benefits might somehow trickle down through the rest of the economy.
I don’t get it…Then again, maybe I do…
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