Tuesday, December 11, 2012

Economic Development

Economic development is an elusive topic because it embodies various aspects of life. This essay will try to define the term, distinguish it from economic growth, and describe related theories and tools. Finally this essay will provide policy suggestions for specific target business and certain beneficiaries of South Florida’s low-income areas.
Economic growth is centered on the short-term expansion of the local economy by creating jobs, adding additional business, and increasing the household median income (or GNP at the country level). In general, growth models are concerned with stimulating business cycles, attracting new business and creating employment. Tools used evaluate the industrial mix, the export industries and the rate of growth in a particular locality (Malizia & Feser, 2000, pg. 244). “Growth typically leads to more employment and aggregate income, a larger tax base, and higher property values,” (Malizia & Feser, 2000, pg. 248). Therefore, the role of institutions, like the Beacon council or similar Chamber of Commerce, who measure the increases in jobs in a specific area are promoting economic growth and not development.
Economic development is a long-term process. City planners and economic developers use analytical tools (like shift share analysis) to understand the longer trends in a local economy and make comparison with other areas (reference economy). They are more concerned with competition to other areas than the short-term gains in a particular market. Economic developers are not only interested in income level, but also the distribution of wealth (equity) and its long-term stabilization. They look at growth trends, studying their origins, spurts, and outcomes.
The bottom line, if there is no growth, there will be no economic development. Specifically economic developers are interested in the diversity in the market place, centrality to information and transportation hubs and resiliency for producing goods efficiency with a skilled labor force. Most notably, economic developers do not create jobs, but facilitate their creation by providing a good quality of life, promoting a investment climate, offering credit to start-ups and servicing the public in their perceived business needs. Essentially, economic developers must adjust their strategies to their local realities, including their labor market, universities, business climate, centrality or access to transportation hubs and the like.

This essay argues that the government should intervene in the market place. Encouraging economic development consists of “federal polices like taxation, monetary policy (interest rate, money supply, strength of dollar), trade, welfare, healthcare, employment/training, environmental regulation and funding” (Revell’s notes). If government did not intervene with subsides, regulation, tax, management or other controls: businesses would heavily pollute; the value of the dollar could become unstable depending on marketplace woos; trade with foreign countries would be sporadic; and citizens would not receive proper healthcare, education and training, so necessary to confront the ugly neo-classical world. Although the counterfactual, and a more radical view, is noteworthy, often intervention perpetuates wealth within the small space of the few involved, whether they are in business or government (Blair, 1995, pg. 7). Therefore citizens of a country should be mindful and watch this effect closely.
Theories are used to understand how and why economic development happens. Although they are not always directly used in practice, they may assist policy makers define their agendas (Malizia & Feser, 2000, pg. 255).  For example, economic base theory suggests that local economies consist of basic industries and non-basic that support a high quality workforce. The non-basic industries, including services like a laundry mat, specialty shops, restaurants and entertainment places, drive the character of the local area and basic industries drive the growth. Economist use location quotients with SIC/NAICS data to determine which industries are located in their area. This can help identify business located in a region and construct comparisons to the reference economy. The export-lead businesses are typically highlighted by government agencies to generate new capital into an area. They use industrial recruitment, promotion to diversification and growth of forward and backward linkages for developing good local multipliers and generate the promotion of clusters (Porter, 2005; Revell’s notes). Public policies to promote increased efficiency in public services are typically used.
On the other hand there are newer theories to promote growth. They include endogenous growth theory, production cycle theory, entrepreneurship and human capital theory. These theories promote the creation of a new type of worker, with higher-level human capital, skills and entrepreneurship, who invent new technologies, which will drive the production cycle to new levels. These individuals start at the top of the cycle, as consumers use more products, they will earn higher prices for inventing new products and services, pushing the cycle to new levels. Florida suggests local governments should attract this new “creative class” by changing traditional policies of industrial recruitment and creating an “eclectic” environment (Florida, 2002). The past polices suggested creating workforce training centers, universities and technical colleges, and employment services for connecting the talent to the job market.  Florida’s radical policy change has generated many critiques. As an economic developer, it is too soon to tell whether his model works and cities should change totally adopt his mantra. 
There should be at least three-prong approach to policies for south Florida. They include: a) the promotion to current businesses and the attraction of new ones; b) research of target industries and promotion of clustering; and c) the engagement of an integrated welfare-to-work approach for the very poor. Next I will outline each and define their target communities and strategies to meeting the needs.
First, although typically seen as unfavorable, South Florida needs an active Chamber of Commerce or Beacon council type facility, which provide advertisements, promotion materials, but also engage the private sector to do business in the region (to keep the competitive advantage). They should be most interested in growth with the increases of community’s numbers of jobs. Their target audiences are businesses.  But I would transform the current organizational structure into a Community Development Corporation. This more inclusive non-profit community based organization will not only do the development promotional activities, it will also have a public-private board of directors including business representatives and citizens. Their work will include activities from filing for tax credits of the enterprise zone initiative to paining older façades in developing areas. This will require citizen’s involvement in their mission, vision and work plans. This inclusive model will cut the insular feel of the current institution and hopefully solicit new ideas for and from the community.
Next, the region should engage in synergies between research centers at university, government officials and businesses. The core audience should be long-term development planners.  This is Michael Porters use of target industries studies and cluster analysis (Porter, 2005, pg.17).  For example, it would encompass The Metropolitan Center’s Target Industry Study, which provided an assessment of growth and competitive of existing industries in Miami. By using NAICS data, the center identified the motion picture, furniture and plastics as places for potential industrial development. Inconsequentially, all of these industries could be categorized as Richard Florida “Creative Class.”  Beyond the method of analysis, the Metropolitan center, or similar public-private partnership think tank on innovation for the region, should promote and define specific policy to promote these areas, which have potential growth in the region. They could include policy recommendations like: 1) start developing the FEC corridor as mix used space; 2) create workers guilds in the identified geographic areas of motion picture, furniture and plastics industries; 3) set up an incubators, industrial parks and tax-free areas for locals to meet and interact; 4) design user-friendly open spaces for artist to display their work and create community support; 5) promote products by hosting trade shows and fairs. Finally as the study suggests the city could develop a Business Development Office within the City’s Department of Economic Development to provide economic assistance for small business in the FEC Corridor and develop a Mayor’s Invention Award to advertise the Mayor’s progressive work in this area.
Finally at the local level, I would prescribe a Wisconsin’s welfare-to-work model program aimed at getting jobs for the poor.  This consists of job banks, technical training programs, assistantship, and promotion of apprenticeship programs.  The jobs banks should facilitate computerized systems for linking jobs to the unemployed. They should offer daycare facilities, transportation vouchers and be linked to other social service assistance like signing up for Medicare and Medicaid, aids testing, driver’s licenses services, etc.  These one-stop shops aim at the poorest of the poor, in order to help them find jobs in the neo-classical economy and doggy-eat dog world.

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