So What is to Be Done?

By The Economic Development Curmudgeon

Assuming the reader has waded through our initial review of the New Normal, the obvious question on your lips as you start this review would be: So… if we are in this New Normal,” What Should We Do”?

So what is to be done? This review will depressingly conclude that there is no instruction manual that comes with the New Normal. If true, as you know it is, then it should be no surprise that all sorts of approaches and strategies are being employed throughout the nation in response to the New Normal environment. To the best of the editor’s knowledge, there has been no real stand out pattern which has emerged (although we think we see a couple of “tendencies”). This should be reassuring to the reader in the sense that whatever it is you are doing, it’s not wrong; it’s just not necessarily right.

In any case, we have selected three, we believe, coherent and thought-through responses pursued or advocated by serious economic developers. Each, we think, tries to forge an integrated approach of how their communities should cope. We present this review with both skepticism and support in that each has obviously attractive features and each has limits and potential downsides. We want to allow the reader to discern both sides of the strategy coin.

1.

“Way Down South in the Land of Dixie”

“The Road to Recovery is Named Main Street: the 2010 Report on the Future of the South”, Linda Hoke, Southern Growth Policies Board (www.southerngrowth.com), 2010.

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“This economic downturn is different” is the opening sentence in “The Road to Recovery is Named Main Street” by Linda Hoke of the Southern Growth Policies Board (www.southerngrowth.com), a non partisan think tank formed by the governors of thirteen Southern states in 1971. The report is subtitled: “the 2010 Report on the Future of the South” and is available through download from their website.

From our perspective this report is relevant nationally and offers a coherent community-level response to the Great Recession which has been endorsed by governors of thirteen states and which is based upon a series of community forums involving over 2000 Southerners (Listening to the South

Initiative, 56 forums, 3 state dialogues, a regional retreat, and an online survey generating 1160 responses).

The summary observations which emerged from this process are: (1) look beyond industrial recruitment; (2) reduce regulations on small business; (3) Identify and build on community assets; (4) Revamp workforce training; and (5) Facilitate partnerships.

“Government should strive to be more involved in local … small business developments that are technology based and quit trying to hit the home run”
 
“Build a strong existing business program… and strong entrepreneurial development program.”

For me the first recommendation was somewhat surprising. The South has built up a long-standing reputation as the home of industrial recruitment/attraction strategy. The visceral response elicited from the Listening to the South forums, however, was not only a rejection of attraction but an embracing of small business retention and expansion. “Government should strive to be more involved in local … small business developments that are technology based and quit trying to hit the home run” (p.6-7) “Build a strong existing business program… and strong entrepreneurial development program” (p.7); “support local businesses by …buying from them, and investing in them” (p.7); Buy Local campaigns were also endorsed.

The third theme of the report was to build on community strengths (not overcome weaknesses). The first prerequisite in this is identification of assets thru citizen participation (which, I suspect, most communities, certainly those with a pre-existing economic development plan, ought already to have done). The Road to Recovery observes that what you perceive as strengths may well not continue as strengths into the future. The New Normal, after all, is a transition from the past hyper growth economy to a more average growth economy. Rather than push new ideas onto the community, instead involve the community and invite them “to help themselves”. Through this process, the Road to Recovery forums suggest, that new realistic growth expectations and visions be re-forged.

True or not, we must caution that new and feasible concepts will NOT inevitably and automatically arise from a community forum or from an academic/consultant project. Community visioning, or re-visioning in this New Normal environment, is fraught with peril and adventure. Ideas and concepts will be many (talk after all is still cheap), but most likely few new visions will possess sufficient quality or consensus to merit adopting them.

My take on this recommendation is more gut level. The editor thinks use of community forums should assume that previous community plans knew what the community was, developed a consensus where they wanted to go and with what directions they were comfortable. Future economic development plans and visions should operate within these established parameters. It may not be the best of times to reinvent the wheel; at a time when action and involvement is demanded, talk and palaver could reopen old wounds and expose new opportunities to divide the community rather than bring it together.

Accordingly, the approach we counter pose is more a back to basics, or “back to the future” thrust, rather than a “great leap forward” to new (and unknown) growth concepts. Our perspective seems compatible with the type of programs called for by the forums which are to build on natural and agricultural resources of an area, such as a farmer’s market, buy local campaign, creation of a signature event (festival), and identifying existing cottage industries for expansion-especially online.
“There has been no net increase in jobs and the jobs that exist have CHANGED. We must re-career and re-train people for positions that people need filled”
A fourth recommendation, expressed best by a forum participant, is based on the realization that “there has been no net increase in jobs and the jobs that exist have CHANGED. We must re-career and re-train people for positions that people need filled” (p.10). This could easily have been said previous to the Great Recession and accordingly is testament that the Recession has not changed everything. We knew going into the financial collapse that the workforce was in crisis—and surprise, it still is!

Nevertheless, more survey and forum participants picked worker/career retraining as one of their top three strategies for recovery than any other strategy. This was true for both urban and rural respondents (p.10). Key growth occupations were identified in the trades and services and health care. Importantly, the forums identified the broken link between K-12 and career focused development and upgrade as a problem that needs immediate attention. “Education can’t be cut if our community is to recover” (p.12). While a teacher’s union couldn’t have said it better, we ought to keep in mind that the complexity, cost and even cultural change required to fix K-12 is dauntingly complex. Education and workforce training, however, remain strong pillars for a revitalized local economy.

The fifth and final prescription, to facilitate partnerships, is quite interesting. It seems to have several layers. The first layer emphasizes intra-community “working together”, a greater trusting of one another. This trust seems to be intended to overcome existing bureaucratic silos by constructing new public private partnerships. The bottom-line goal of these partnerships would be efficiency and cost reduction, as well as pooling and sharing of existing resources.

The second partnership layer encourages greater regionalism or partnerships outside the community. “Bolster inter-governmental relationships between the city, county, state and tribal governments to work together on tourism, business development, etc” (p.12) However, of all the recommendations this particular one seemed to engender noticeable concern, or at least complexity. The final policy suggestions regarding this theme, as reported by the pro regional Southern Growth Policies Board, were not unanimous or uni-directional. Wasteful redundancy of governments and EDOs was certainly an issue brought up by some participants but the report also concluded that county home rule and state funding of local governments is equally a logical response to the Great Recession (p. 13). In that discussion on this recommendation was given three pages in a fifteen page report (compared to two paragraphs for reducing regulation), one wonders if we are witnessing yet one more battle between state advocates for greater regionalism and local advocates for greater resources and empowerment at the local level.

Finally, the Road to Recovery describes thirteen (amazingly one is found for each state in the Southern Growth Partnership) local innovation projects which could offer inspiration for others to copy. Several that caught my eye were from EntrePaduch (a central source for small business and entrepreneurial development) and Virginia’s Scholarship and Loan Forgiveness Program to create a world class workforce in tobacco dependent regions of Virginia. I am sure many readers will find other programs as attractive as well.

2.

A Rural Response to the Great Recession

“Homegrown Responses to Economic Uncertainty in Rural America”, Jonathan Q. Morgan, William Lambe and Allan Freyer, Rural Realities published by the Rural Sociological Society at Brigham Young University, Provo Utah (www.ruralsociology.org) , Vol. 3, Issue 2, 2009.

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Rural communities, troubled and often in decline previous to the Great Recession, have been especially hard hit since 2008. In our view, rural communities, like the chronically depressed urban centers discussed last month, are in need of special policy attention to address the particular needs of these communities. In any case, it would seem that economic developers working in rural communities, with very limited resources, must be especially creative in responding to the demands of the New Normal.
Three strategies for “homegrown reinvention”:
(1) Place-based development;
(2) Economic gardening, and
(3) Creativity and talent cultivation
The authors of Homegrown Responses observe, as did the Report for Recovery, that those communities which “have approached economic development by looking inward to community strengths and existing resources are often faring better than those that attempt to lure companies to relocate by promising low wages and tax incentives” (p.1) Instead of attraction and recruitment, they offer three strategies for “homegrown reinvention” (1) place-based development; (2) economic gardening, and (3) creativity and talent cultivation. Additionally, the authors stress the need for enhancing local capacity for action by (a) using higher education institutions; (b) increasing access of local firms to technical assistance, (c) spreading innovations and best practices via a centralized clearinghouse, and (d) better defining and measuring creative assets in the community. They too suggest incentives for regional and cross-jurisdictional collaboration especially in the areas of entrepreneurship development, financing, networking and incubation. (P.1)

Throughout Homegrown Responses the authors utilize case studies of rural communities presented in the publication: Small Towns, Big Ideas: Case Studies in Small Town Community Economic Development, William Lambe, Chapel Hill, NC: UNC School of Government and North Carolina Rural Economic Development Center, 2008. (www.cednc.unc.edu/stbi).

Overall Homegrown Responses contains an excellent, succinct summary of the fundamental and chronic problems which particularly plague rural areas. In the environment of the New Normal, the long-term “shift away from agriculture and the collapse of manufacturing industries” has been accelerated and rural areas were substantially more negatively impacted than urban areas (with the exception of those rural areas fortunate enough to benefit from either/both ethanol or farming.

Farming employment, however, continues to decline and rural areas must fight to preserve their manufacturing base from the challenge of transitioning “low-skilled manufacturing that is vulnerable to off shoring to higher-skilled, technology intensive manufacturing”. (p.3). Rural areas continue to suffer from outmigration, losing younger, more educated labor force and retaining an older, less skilled and educated workforce. The authors further cite that the income gap between urban and non-core metro areas is growing.
The back to our roots/assets thrust of Road to Recovery is replicated in Homegrown Responses and may well be a rather instinctual response to harsh realities faced by almost all our communities.
Homegrown Responses suggest that the initial response of many rural communities (as we found nationally in C2ER’s 20009 survey) was to turn to industrial recruitment. As we suspected at the time, industrial recruitment in a seriously declining economy with a financial system in crisis, apparently was not especially successful. Instead, rural communities, the authors suggest, have turned to “home-grown approaches” which leverage local assets. Their three program recommendations are each interwoven and share the common theme of looking inward–as did much of the Road to Recovery prescriptions. If we are correct in this observation, the back to our roots/assets thrust of Road to Recovery is replicated in Homegrown Responses and may well be a rather instinctual response to harsh realities faced by almost all our communities.

In any case, Homegrown Responses calls attention to “amenity-led development strategies such as tourism, recreation, and retiree attraction”. The authors stress emphasis on a community’s cultural heritage, arts and crafts traditions, its specialized infrastructure and its quality of life. Although reflecting a bit of an academic perspective (the perspective that is at least 80,000 ft in the atmosphere), the authors correctly report the linkage of rural community assets to “conservation and sustainability issues” which prompt many communities to adopt an environmentally-friendly, green, smart growth and eco-related programs and responses such as using methane gas to power studios of local artisans, farmland preservation and eco-tourism.

For me at least, the cornerstone of their approach is anchored by their advocacy of economic gardening as a core strategy response. Nevertheless, for years I have been fascinated as to how many communities have practiced economic gardening, combining it with an industrial recruitment strategy; sort of balancing fire and water I suppose. But Homegrown Responses, having more of less depreciated industrial recruitment, advocates a more pure, frankly more consistent, economic gardening strategy which they define as “a program of entrepreneurial activities that includes information (business and market intelligence); infrastructure (physical, quality of life, intellectual); and social capital (connections and networking). The general theme of economic gardening is to ‘grow your own’ by cultivating local entrepreneurs and small firms and creating an environment that supports their growth.” (P.7) Specific programs which reflect economic gardening range from greater access to credit, child care, trade, entrepreneurial and occupational training, technical assistance of various types, incubators, and social and expertise providing networks.

The authors conclude their report with a “creativity and talent cultivation” approach which is closely associated with Richard Florida’s “creative class” and which advocates quality of life as a key economic development strategy. Have no doubt that someday the editor will inflict his thoughts concerning Dr Florida’s approach in a future review. In the meantime, the Homegrown Responses folk suggest that the creative economy ‘in rural America, which typically centers on local arts and culture, can be used to cultivate artistic talent and its occupational targets for apprenticeship and training programs for crafts and design trades” (P.9). This section is liberally sprinkled with references to “local clusters” (which we strongly suspect would not correspond to our previous month’s more stringent definition) and how social networking and creativity programs no doubt “result in new jobs, increased investment, and improved quality of life” (P.10). For our money, we wish the authors had spent more time discussing tourism, retiree attraction, workforce training, or specialized infrastructure enhancement which, to our mind, are more concrete (pardon the pun) responses to rural America’s dilemma.

3.

A Look at the New Normal from an Eastern Big City

“What the New Normal Means for Philadelphia: A Progressive Pragmatist’s View”, Mayor Michael A. Nutter, Brookings Institution, Metropolitan Policy Program, and December 3, 2010.

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Mayor Nutter of Philadelphia provides some interesting reinterpretations of what the New Normal means to a mayor of a large Eastern city. On December 3rd, 1010 Mayor Nutter made a presentation before an audience assembled for him by the Brookings Institution’s Metropolitan Policy Program. His purpose, as I interpreted it, was to present a more or less optimistic, or at least determined perspective on the opportunities available to Philadelphia to continue its quest for revitalization and prosperity for its residents. To some extent, the Mayor’s presentation necessarily had to also include some measure of explanation for the obvious negative impact the Great Recession has had on that city, and the wrench it inevitably threw into the platform and priorities of his administration. What chiefly concern us in this review is (1) how Mayor Nutter defines the New Normal, and (2) what policy/program responses he had chosen to respond to the new economic environment.
For Nutter the New Normal is a FISCAL CRISIS, an insufficiency of revenues to support ongoing programs and desired, if not promised, new priorities.
Make no mistake about it; Mayor Nutter’s perspective is that of an elected politician responsible for the administration of a major metropolitan city; he does not define the New Normal as Mohammad El-Arian has done. For Nutter the New Normal is a FISCAL CRISIS, an insufficiency of revenues to support ongoing programs and desired, if not promised, new priorities. The concept of deleveraging and the implications derived from the collapse of the private sector finance and banking system are nowhere in evidence. This is a public sector definition of the New Normal as a period of time in which previous, already insufficient, sources of revenue have been negatively impacted and the task before the chief elected official is to (1) find new revenues or somehow restore the flow of older revenue sources (2) while revamping past priorities and programs to adjust to the new level of revenues. A subtly expressed fear of the Mayor is that while revenue decline has now stabilized, in the future revenues “are not growing and we do not project substantial growth for some time to come” (P.2). In any case, Mayor Nutter’s plight and his definition of the New Normal may well be what most economic developers hear from their Local Elected Officials.

The Mayor’s presentation reports how Philadelphia has already responded to the New Normal; drastic spending cuts and “raised revenues” (not outlined) but totaling during the last two years over $2.5 billion. His present day concerns include a pension system only 50% funded, the need to curtail benefits for the city’s unionized employees, and the dire consequences of coping with the newly elected “western” (read, Pittsburgh) Republican Governor who has already “signaled his intention to make dramatic cuts at the state level that will flow down to Philadelphia…”( P.2). To this reader, it is fairly evident that the first priority of local government during the New Normal is adjusting to declines in revenues, not economic development. In this atmosphere, new projects and programs must really, really, really compete with some really, really serious headwinds.

But take some hope. This environment of budget cuts and revenue declines, the Mayor believes, MUST end and the solution will emerge from “an adult conversation about our future and the role of government” (P.2). The thrust of the conversational dialogue is that higher levels of government (states and federal) must resolve their gridlock, take heed of the urgent human and institutional crises at the municipal level, and reopen the money spigots so that we “can get stuff done” (P.2) at the local level. No matter where the reader sits on the political spectrum, this trend of thought neatly encapsulates the current national Great Debate, a debate triggered by the Great Recession and the New Normal. Whether or not we will have this adult conversation, and whether or not it produces a consensus such as Mayor Nutter hopes, is, of course, unknown except to True Believers but it does suggest the policy seas of local government will be quite turbulent, with heavy waves, and huge gusts of wind for the foreseeable future.
The Mayor stresses the City’s successful and innovative clean energy-technology development cluster which will be led by local government
As to the policy/program priorities which will survive this turbulence in Philadelphia, the Mayor stresses that he will emphasize the City’s successful and innovative clean energy-technology development cluster which will be led by local government (P.3). The City must “attract, direct, and concentrate investment in the areas – both industry and physical – where it has the biggest impact”. Citing the impact of his signature project, the Philadelphia Navy Yard “where we are creating a clean energy campus that is fast becoming THE national hub for clean energy technology research and commercialization” (P.3). A closely aligned program, EnergyWorks emphasizes the green economy by advancing weatherization funding for low income residents, retrofit loans to small business, and grant funding for the commercialization of new energy efficiency technologies.

Another, and final Mayoral priority is to align the interests of both central city and its four county suburbs in a coherent, coordinated regional strategy focused on infrastructure, transportation, economic development, and national security issues into a unified regional program which demonstrates “much greater clout when we stand together than when we stand apart” (P.4). His regional vehicle, the Metropolitan Caucus (modeled on Chicago) is the instrument with which the spigots from above will be re-opened. While this is not the regionalism that regionalists and regional economists advocate, it most certainly is “a real regionalism” that is likely to be enhanced by the adversities imposed by the New Normal.

Concluding Thoughts:
Possible Suggestive “Tendencies”

There are two semi-obvious insights which, we think, follow from our three community reviews. First, there is a common theme in the first two articles which rejects recruitment and attraction in favor of more traditional business retention and expansion/economic gardening approaches. Philadelphia, on the other hand employing clusters as a core strategy embraces recruitment. Secondly, the first two articles stress assisting resident small businesses; conversely, Mayor Nutter is focused upon a large signature project, the Navy Yard, which, he believes, will propel the area’s cluster upward. His determination to forge a regional consensus around common priorities with which to assault the state and federal governments (among others, we assume) for resources sufficient to resolve the crisis of the Political New Normal, however, is a noteworthy attempt to change the New Normal environment.

One missing element which we didn’t really find in any of our examples is to draw upon and address the needs of the private sector. There is talk of “the community”, but not the “business community”. There really is no clamor to create a business climate attractive to competitiveness and business investment. Nor is there any intensive focus on assisting firms in trouble. All focus on government and how government can address the difficulties of the New Normal. Perhaps this is a sign of the times; perhaps this too will change as we move deeper into the second phase of the New Normal, with its rapidly intensifying state and local fiscal, pension, and municipal bond crisis.
There really is no clamor to create a business climate attractive to competitiveness and business investment. Nor is there any intensive focus on assisting firms in trouble.
But let’s conclude on something equally as obvious: there is no consensus or instruction manual on how to deal with the New Normal. We suspect (and C2ER’s 2009 surveys support) that each community is largely on its own and having paid its money (or at least issued more debt), makes its own choice. All sorts of factors intrude on this decision of how to respond to the New Normal. From public and political pressures, to the condition of the local economic base, the individual preferences of key players in the local economic development policy process, the response to the Great Recession will be varied across communities and regions. There may be some theme or trend, but it is, to my best understanding, still undocumented.

“In the Trenches” hopes to return to this discussion from time to time and we welcome feedback and data sources which can improve our current perspective. In terms of personal recommendations, the editor believes that most communities will benefit most from approaches which:

• Go Back to Basics – traditional business retention and expansion, economic gardening, and simply being concerned with helping existing firms and do what can be done to create new ones.
• Infrastructure, Infrastructure, Infrastructure – Enhance local capacity/productivity by modernizing and upgrading what exists (it is possible that whatever state/federal monies are to be available, will be for infrastructure).
• While the sexy current trend is entrepreneurs and innovation, I still feel a loyalty to those firms and businesses existing in our communities and laboring in an atmosphere of limited consumer demand and struggling local lenders. The plight of existing small business is very real and ought, in my hierarchy of recommendations, place them at the very highest rung of those deserving of economic development assistance!
• Create “Town” Centers where none exist; demolish vacant housing where feasible, and develop a plan for dealing with dying/stagnant strip malls, dealerships, half-finished projects and the like.
• Create programs which address structural unemployment. If the New Normal persists, as we suspect it will, structural unemployment will emerge as a critical and pressing national issue. Education and training, not job creation, will be the most appropriate response and economic developers should be leading advocates for, and program participants, in both.

In the meantime, “Be Good, or at least, Be Careful”

POSTSCRIPT

As the reader no doubt fully appreciates, the 2011 State of the Union challenged America to a strategy of innovation, entrepreneurship, education and export. As such this is a prescription of the Obama Administration for local economic developers operating in the New Normal environment. Clearly, this is a long-term, probably generational strategy which offers a vision for a future competitive America in a highly competitive global system. Whether this is helpful to local economic developers in need of more short term, micro initiatives relevant to opportunities and growth in a particular jurisdiction is a reasonable observation. We shall put this theme on our comment agenda and foist our usual well thought through comments upon unwilling future readers.