August 24, 2001
Who Deserves the Credit for Economic Growth?
Some of us got a little carried away with our rhetoric when the Berlin Wall came down in 1989. Not to take anything away from that historic event, it was not quite the clear-cut victory of market-based capitalism over central planning that some made it out to be. That's because what passes for a market economy on both sides of the Atlantic Ocean, and in the state of Indiana as well, contains a stronger dose of governmental planning, coordination, and regulation than we sometimes admit.
A cynical person might say that when you join a democratic political system to a market economy you get a world where the private sector delivers the results and politicians take the credit. In that spirit it’s probably harmless, although a bit silly, to give Bill Clinton credit for the strong economy of the 1990's, or to blame either generation of the Bush family for the economy's missteps. But when we get down to neighborhoods and communities, where tax revenues and private resources might be used to help attract and retain jobs, the accountability takes a more serious tone.
Whether or not it is getting the job done, we spend a great deal of time and money in building infrastructure, devising incentives, and marketing our communities to whomever will listen. Much of that is done behind the scenes by banks, utilities, and real estate developers with a direct stake in the outcome. But from the level of state government all the way down to our townships, public officials, together with business groups, foundations, chambers of commerce and other community organizations, are charged with the task of finding ways to grow their economic base.
How do we keep score on their efforts? That turns out to be a very difficult question. The old saying about economic developers who "shoot everything that moves, and claim anything that falls" captures one aspect of this problem. In an economy dominated by private capital, many of the developments that lead to job creation -- or destruction -- happen because of geography, technology, or market forces that are beyond developers' control.
That is particularly true when industry "clusters" emerge within any region or community, consisting of many companies in industries linked by a common supply-chain, technology, or labor force pool. The business advantages of locating, say, a software company in Seattle or a media business in Los Angeles may be great enough that new companies will come no matter how well -- or how badly -- those officials responsible for development do their jobs.
But the rubber really hits the road for economic development when the economy changes course and leaves one's existing economic base on the side of the road. In a production-oriented state like Indiana, operating in an economy that is increasingly creating jobs in services and knowledge-based industries, that situation is all around us. Can a community or region that came together in an old economic climate change its course to become competitive in a new one?
Some cities have accomplished that daunting task with aplomb, but many have not. And while natural factors like geography, climate, and physical size give some areas around the country a leg up in the competition for new industries, many things a community can change, including schooling, access to transportation, or quality of life, are equally important.
Is this a job we can turn over to those who work on the front lines of economic development, trying to bring in new businesses to our communities? Probably not. The vision and energy it took to turn Cleveland into a major medical center or a few small towns in North Carolina into a research and development leader requires a level of commitment far beyond that.
About the Author
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