Elvira Nabiullina, the Russian Minister of Economic Development and Trade, is developing a program to restructure “monotowns” or cities built around a single industry. She is also grappling with industry failures in some monotowns leaving thousands in desperate peril. The minister has said bluntly that people in these towns “physically do not have any alternative employment.”
But why should Memphians care?
Some think Memphis has the rare opportunity to truly diversify its economy and set itself apart in the never-ending competition for talent. We should be inspired daily by our colorful and resilient past. We can look to a history packed with experience for such a young city. And, we have a great and noble benefactor that should be harnessed and focused for the greater good.
One Horse Town
Many people have a hard time seeing this or any other vision. They feel trapped in a one horse town. But one horse towns are loosely defined as very small, unimportant places. These places lack options for shopping and entertaining. They have little in terms of culture and lock up after dark.
This isn’t Memphis at all. The 18th largest city in the country is critical to distribution of goods to the world. We care for the young and the sick so that others in the future won’t have to. We are large and important. We can eat and drink at all hours of the day and night, shop at more stores than we can name and have more museums per capita than we should logically be able to support. If Memphis doesn’t have it, you probably don’t need it.
I contend that we are a long way away from a one horse town. But I am very afraid that we are a one company town.
One Company Town
Historically, one company towns were run by a corporation that owned the plant and the store. They built the houses and unlocked the bank to sell mortgages. If there was a mayor, he belonged to the company. If the streets were clean, it was the will of the company that ran the town.
Carnegie Steel built mining towns. Pullman built rail-cars and built towns to house people to build more rail-cars. Others harvested lumber or built ships or sewed clothes. And the employees were often so physically tied, mentally attached or financially indebted to the company or town that they relinquished many personal rights simply due to their lack of options.
Some of these company towns were shut down as the result of court action. Many faded into history through depression era bankruptcies, technological advances reducing the need for labor, cars that allowed commuting or just plain old market forces.
That doesn’t mean America is free from company towns. Detroit is always on our minds. There are others. New Orleans, rooted in shipping and known for entertainment has become a hub for energy companies. However, after Hurricane Katrina, many of these companies have not returned their knowledge workers to the city or very strategically diversified their geographic footprint to protect their company. The regional electricity giant Entergy, for instance, has relocated many of its skilled workers to Jackson, Mississippi and Little Rock, Arkansas leaving one of many voids in the Downtown skyline. Now the city is playing catch-up with special programs to attract new “Industries of the Mind”.
In Greenwood, Mississippi (population 18,425), people have seen prosperity come and go like so many other ag-based Delta towns. But a revival has been taking place. Home grown entrepreneur Fred Carl started shipping Viking Ranges from Greenwood in 1987. The company has since exploded to include every kitchen appliance, tool and knife imaginable. Most made in Greenwood by its over 1,000 employee workforce.
Carl has taken Greenwood’s largely abandoned Downtown and built a showpiece hotel, spa and restaurants. The company inspires culinary tourism to its demonstration kitchens, in addition to vendors and suppliers coming to town for business.
However, as the economy has slowed, Viking has laid off over 23% of its workers. What is to become of the town that was saved when the savior suffers?
Flying High in Memphis
Memphis has been known as cotton capital, financial center and Soulsville USA. Today we are what we have always been, the undisputed heavy-weight champion of distribution. As Aerotropolis says, we are where runway, road, rail and river merge. Officially almost 12% of our population is employed in logistics and warehousing.
That number is deceptively low. We have medical technology companies here solely to ship repair kits within hours to hospitals around the world. We have computer repair centers here because they can have a laptop from Montana turned around in 24-hours. We have hundreds of businesses here making our economy appear diverse for one reason. FedEx!
FedEx alone employs over 30,000 and pays Shelby County taxes like no one else on the books. When we need a new zoo exhibit, baseball field or charitable donation, FedEx is there. We should have better school programs to train people for this company. We should do more to recruit businesses that want to be around this company. We are spoiled by the company and we know we don’t do enough to recognize that. So is it wrong to ask… Have we thought recently about life after FedEx?
What happens if gas-prices skyrocket and it becomes cost prohibitive to fly boxes around? What if email replaces document shipping all together? What if there is just a better method or location emerging to do what they do? What if something happens we just can’t predict and don’t expect?
One Industry = Insecurity
I bet that your financial advisor told you to diversify your portfolio a few years back. “Lighten up on stocks, pick up a few commodities and a few bonds, build up some cash reserves”, she may have said. And if not… well, now we’ve learned our lesson. It is our responsible duty to diversify.
We must use FedEx and our dominance in distribution to prepare. Perhaps we beg our great benefactor, FedEx, and other logistics companies to help us diversify. We must build relationships with companies that use us for shipping and adapt to what they need to bring more than just packages to this community. They need to bring brains here instead of just using our brawn.
Our incentives and redevelopment plans and recruiting tactics may need an aggressive shift toward creating options. And we must start doing a bit more for ourselves by preparing for those options. Additionally, and most immediate, the coming bubble of young people looking for jobs in this community is looming.
The Memphis logistics industry needs Memphis and Shelby County to produce roughly 3,000 new employees annually. That leaves around 15,000 19-year-olds each year that need new options… even if the unthinkable collapse of Memphis logistics never happens.
Check out Part Two for other cities exploring economic diversity.
“Our incentives and redevelopment plans and recruiting tactics may need an aggressive shift toward creating options.”
What sort of plans and incentives? I am curious to see if we are thinking on the same page.
My gut is all about A) finishing what we’ve started, B) promoting linkages between existing companies and the community and C) addressing the entire spectrum between Workforce Development and Quality of Life. That being said, we likely have a great deal of planning/research to do before we know what industries to chase. It is not as simple as saying (as I essentially did) we need jobs here for smart people and smarter people to attract new jobs. This post was more about expressing why we need to diversify and posing the question of how.
In my next post, I hope to cover the techniques a few other places are using to define a diversified economy. A couple that are interesting but may not make the column are the EDGE program in Newfoundland and the Mississippi State/Nissan Partnership.
Targeting technology companies, the Economic Diversification and Growth Enterprises (EDGE) program provides income tax, payroll tax and property tax rebates for up to 20 years, along with land. Pretty aggressive.
The incentive package put together to attract Nissan to Mississippi included over $20 million to train workers for employment in the actual plant but also included funding to create the MSU Center for Advanced Vehicular Systems. Move the workforce from a rural to a manufacturing environment. This is a research institution designed to produce both new product advancements but also to train engineers specifically for vehicle production.
These are extreme examples and I believe there are likely more simple paths to take in addition.
Your question is difficult because the need clearly goes beyond incentives to attract new businesses. For diversification we have to tap our unrealized resources and, at the same time position our people for something new and different through education opportunities. All while defining what the next opportunity-industry really is.
What were you thinking?
You have given us a lot to think about John. I’ll bring up some of my thoughts soon in the next few weeks in another SM post. But what you touched on with the Research Institution is a key component. Great post BTW.