Rebooting Economic Development: Getting Past the Incentives Debate

OK.  So we know that economic development incentives can have some benefit, but we also know that easily become too reliant on them.  We have too often viewed economic development as a one-trick pony, a grab-what-you-can-get-and-don’t-look-too-hard-at-the-costs, we-gotta-keep-up-with-the-Jones-even-if-it-kills-us kind of game.  Used simplistically, without carefulness, used as a pickaxe instead of a shovel, we can get our communities in big trouble.  And we have.

We can’t be that simple-minded about it anymore.  We know too much.  And we just don’t have the extra cash to fling around.  We have to get much, much better returns on our investments, on all dimensions.

So if overreliance on incentives, careless use of incentives, is a loser’s game, then what do we do?

I don’t claim to have all the answers (unless it’s telling my son why he can’t have an IPhone).  But we need to start a serious conversation.  It’s starting already, in bits and pieces.  But we can’t just ruminate, just lick our wounds and go back to the same old tomorrow.

So here’s my take on the agenda for that conversation, the things that I think we need to change.  I’d like to know what you’d add or take off.

  • Get serious about doing economic development better.  We have to take a leadership role – we as professionals, we as people who care about our communities, whatever our role.  We cannot afford to wait for some elected official, some professional development organization, someone else to stand up and say it.  If we know it, if we believe it, we gotta do it.  Anything less is telling ourselves an intellectual falsehood – and ensures that we all stay in this laugh-a-minute race to the bottom.

 

  • Focus on real community impacts.  People are starting to see past the happy job numbers we like to pronounce in conjunction with our incentive deals.  And as social media tools make it easier for the passionate and the thoughtful (and yes, the axe-grinder) to express themselves to a bigger and bigger audience, our ability to ignore the unintended impacts of our work, to pretend we don’t see the ramifications or to take shelter in “that’s not my job” … it just ain’t gonna work, people.

The general public doesn’t see a difference between your job and the guy down the hall  — you’re all part of the same thing.  And the public is going to be talking to each other, and the electeds, about the big picture they see of what’s going on.   The days of being able to hide are coming to a quick end.

That means we’re going to have to start looking at the impacts – not just the new inputs, but also the new costs.  Too many people have seen the new big box in town get followed by a lot of depressing empty storefronts, or the increase in police costs that doesn’t seem to be covered by those new tax dollars that they told us the new buildings would generate (“I can’t believe they’re asking for another tax increase! “).  The connections might not be as simple as the public thinks they are, but they are seeing connections.  And often we haven’t, or pretended not to.

 

  • Remember that there’s ways to grow an economy other than attracting new businesses.   Economic developers like new businesses, especially new businesses that we can claim _we_ made happen.   Frankly, it’s a hell of a lot of fun—it’s the same rush that keeps people in intense, commission-driven sales jobs, like cars.  It’s fun, that is, when it works – when we can get the sales to drop.   But in most cases, there’s a lot fewer deals than there were 5 years ago.  And the deals that are out there are smaller and less impactful.  Don’t believe me?  Find a copy of Site Selector Magazine from 2005, compare it to one from last month, and see what I mean.

We all know that there’s more, so much more, we could be doing to make a real impact on that local economy – you probably have a pile of books and workbooks and seminar binders on those other things.

But…but…

The myth of the Big Deal keeps calling us.  It sounds so enticing.  But it’s more like the siren on the rocks in the Odyssey than the golden fleece that it (maybe) used to be.   We have to shift from selling to growing, from marketing to facilitating, if for no other reason than the fact that the big game are on the endangered species list.

 

  • Focus on making great places where people want to be.  People, more and more and more, make jobs.  They make them for businesses, or they make them for themselves.  That’s not just a hipster town factor, where impeccably sloppy-looking people in expensive glasses sit in coffee houses all day and do something mysterious that somehow earns them money.  It’s increasingly the factor that drives every aspect of the economy.  It’s the one location factor that consistently trumps the incentives game because it’s the one factor that businesses of all types (other than the lowest-paying) cannot live without.

 

But do not let the planners sweet-talk you into thinking that great places are created by  some magic called Urban Design.  Planners have been too focused on design for too long, as witnessed by hundreds of beautiful streetscapes fronting vacant storefronts and pretty parks that no one uses.   You who think about local economies have a central set of powers for addressing the missing pieces critical for making making great spaces.  And yes, a well-placed, well-considered, targeted incentive that helps a business happen that couldn’t happen on its own can make a key difference between creating a Place that Builds Your Economy and a very pretty, and very expense, collection of planters.

 

  • Stop trying to be everything to everyone.  Assets are all that matters.  Differentiation equals value. That applies to you, to your town’s businesses, to your town itself.  You know that you cannot be everything to everyone, and you’ve probably talked internally ad nauseum about “targeting” your efforts.  Do that.  Do it with a laser focus.  Being a commodity is useless anymore.  The only way your community adds value, commands the premium that you need it to, is by building on its assets.  And you may simply not have the assets for the latest cool thing (witness the 87,000 towns that were going to be world leaders in “biotech”).  You don’t have to be cool.  You do have to do the best you can with what you have.

 

  • Give the residents ownership.  In economic development, we’ve been able to hide from the public a lot more than many other local government professions behind the confidentiality requirements of Making the Deal.  But if deals dry up and if the people who elect and talk to your electeds don’t see (or believe) the value of what you are generating, what good was all that secrecy for you, anyways?

 

If you are truly going to make great places, build on your assets, do all this stuff we just said, then you’re going to need their help.  You certainly can’t incent your way there.  You will need a lot more, a whole lot more, than what you can generate out of your little nonprofit or City Hall.  Even more importantly, the people who live in your town aren’t dummies, even if they don’t know all the inside ball that you do.  Even if some of them have sounded like total dummies in some public hearing you had last year (it takes a very specific skill set to not sound stupid in that context).

They know things about the community, about how it works, what assets it has, what the connections look like, what opportunities are being overlooked.   They won’t be able to just hand you magic answers (like you, they could be wrong), and you will need to do like good teachers do and develop a structure to help them get out what they know.  And it takes a while to build those working-together muscles, for you and for them, and you might stumble while you are learning.   But putting your head together with theirs, collaboratively, can’t do anything but help.

 

So… let’s talk. Let’s figure out how to do economic development better, more constructively, more in tune with the era we live in.  Let’s get past wound-licking, past ruminating  over whether or not this or that program does or does not do what’s promised.  We need a deep re-thinking, a re-alignment with a world that has changed since the 1960s.  We need a reboot.

Let’s get to work.

6 thoughts on “Rebooting Economic Development: Getting Past the Incentives Debate”

  1. Amen! We can’t attract the Big Deal unless we are a place they want to be. We need to look at why we choose to be here and build on that.

  2. My thoughts in my newish role in the small district of South Waikato, NZ (22,000 people) is that something isn’t working in the “way we’ve always done it” on a worldwide scale. As a consequence I’ve gone back to basics.

    Yes, everyone wants to attract a new factory to employ say 100-200 people and elected members enjoy this as you say, but this can be pursued at the same time as ensuring that the businesses that we already have are fulfilling their potential.

    We have over 800 businesses and many productive farms in our district. If each of these employed one extra person that would be 800+ people, and if one business struggles it doesn’t take 200 people with it. Even if they don’t need an extra employee, if we can improve their efficiency or increase their sales they will make more money that they will spend on expansion or on themselves making the money go round.

    The other great thing about this is that as I get out and meet each person I can hear very clearly what they need and it’s not usually a difficult solution. I don’t need to think what the district issues are – they tell me! Many are having the same issue and with a little coordination on my part they can be sorted.

    Yes, simultaneously it’s important to ensure that the district is a place people want to live so ticking the boxes on education, health, etc is very important for attracting. We are lucky to be very central, on State Highway 1 and in a beautiful location in NZ so we have many opportunities.

    This is not rocket science. This is basic sales and marketing techniques applied to the masses. When a new sales person starts, the easiest, quickest and most effective way to increase turnover is to grow sales in the existing client base. Consolidate it and ensure it is being looked after properly. While doing this, listen for what is and isn’t working, correct it – then start expanding the client base.

    While our council has other, broader strategies occuring at the same time, it’s very important and, in my opinion logical, moral and even obligatory to work at the grass roots level with the people who are already here. They are already commited, often passionate, they’ve made it this far even after a world recession or three so they have the clues, and they are often relieved/grateful to work with other people on the collective goal. I’m finding them amazing to work with.

    A visionary man who I worked with in UK years ago, Morel Fourman, used to drum into us “Do the little things excellently”. For economics at this level it means supporting our people to ensure they are doing the little things excellently.

    Thanks for listening! 🙂

  3. Your comments are right on, and brings up the next ugly truth, which is that using incentives as the focus for an economic development strategy can make EDPros lazy and becomes an opportunity to ignore the more significant challenges you outline in your posting….making a community a good place to live, work and raise a family. Often, incentives are seen as a way to overcome disadvantages that may be too challenging to address directly. Of course, dealing with some (most ?) of these disadvantages can be beyond any one community’s efforts, such as the “rust belt, anti-union, old urban” lens that some people see urban areas through. And therein lies the opportunity for regional collaboration, so long as the collaboration recognizes the unique opportunities in each area of a region.

  4. There are two parallel paths here: administrative and political. While ED folks are trying to figure out the next “big deal” or how to stay employed, the local government elected officials are wanting to know when the next “big deal” is going to happen, and if not make the threat of not having a job. Council members get elected on answering complaints or being the one on the front page announcing or being in the photo of the last “big deal.” Both the ED staff person and the elected official need to understand the severe paradigm shift that we are experiencing. They need to concentrate on growing the local economy. The pattern/rule of thumb has been that 80% of job creation is local, yet probably 80% of ED budgets are spent on marketing. The local concentration also needs to include an thorough examination of the permitting approval process so that existing companies are guided through the process swiftly and smoothly.

    The regional approach also has great merit. Years back, I was fortunate enough to work in an Ohio county where the county was the emphasis. If a project was not going to work in one community, it was referred to another one in the county. Political boundaries may be important, but my car did not automatically turn around when it got to the city limits…

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