There are times when it just seems that Memphis can’t get its economic development strategies into the 21st century.
It’s as if we just don’t want to compete in a knowledge economy in a global marketplace. Our economic development strategies are caught in the commodity trap, stemming from our background as an agricultural center and continuing with our pride in being a distribution center.
Everything about our experience tells us that we’re about selling commodities, which is generally defined by a consumer making a decision based on the lowest price. Commodity economic development is premised on the same thing – appealing to companies who make their decisions based on the lowest prices.
This kind of economic development is forever in a race to the bottom to offer the cheapest land, and the cheapest workers.
Selling Cheapness
Because our tradition is in businesses with thin profit margins, our economic development culture is one with an aversion to risk-taking, which in turns undercuts innovation and entrepreneurship. Cities with commodity mentalities think they can grow their economies with low wages, low land costs, low utilities, low taxes. In a commodities world, these are seen as the factors that must be controlled to keep prices down. They are often cited as justification for the tax abatements that we hand out to any company that can complete the forms.
Unfortunately, when we are competing with workers in Southeast Asia, Mexico and Bangladesh, commodities economic development is doomed to failure. Most devastating of all is that cities accustomed to a commodity approach to economic development are at a huge disadvantage in attracting and retaining knowledge economy workers. It is not merely a coincidence that companies like FedEx report constant problems in attracting young, mobile, highly-educated workers to Memphis and convincing executives of International Paper to move from the Northeast to Memphis has met with similar hurdles.
Rather than make the investments in the intellectual infrastructure that we need to complete for knowledge-based companies, Memphis continues to sell the infrastructure of the industrial age, at the same time that its last remnants are vanishing before our very eyes.
New Approaches
What is needed are new approaches to economic growth – approaches like economic gardening which focuses on existing entrepreneurs rather than corporate relocations, on biological models of business and entrepreneurial policy and new economic theories and philosophies.
The words of a specialist in economic gardening seem especially especially pertinent to Memphis: “There was another, darker side of recruiting that bothered us. It seemed to be a certain type of business activity – the branch plant of industries that competed primarily on low price and thus needed low cost factors of production…cheap land, free buildings, tax abatements and especially low wage labor. Our experience indicated that these types of expansions stayed around as long as costs stayed low. If the standard of living started to rise, the company pulled up stakes and headed for locations where the costs were even lower. This was the world when we proposed another approach to economic develompent: building the economy from inside out, relying primarily on entrepreneurs.”
Survey after survey concludes that tax incentives are far down on the list of critical elements that influence companies’ decisions on locations and expansions. Much higher is the presence of a high quality of life – vibrant downtown, outdoor recreational options, rich cultural and intellectual scene and research universities.
For Memphis to succeed in today’s economy (and more importantly, tomorrow’s), we need to base our economic development strategies on quality rather than cheapness. After all, in selling our city for its cheapness only cheapens what we have to offer in the first place.
Most city don’t focus on entrepreneurship like they should. Most talk a good game like they do but most don’t just. Companies and entrepreneurs don’t look for cities with high wages, high land costs, high utilities, and high taxes. If thats the case D.C. wouldn’t be trying to give that defense company, which is trying to move headquarters to D.C., financial tax breaks and incentives. What companies and entrepreneurs do look for is low to average wages, low land costs, low utilities, and most importantly low taxes. The only thing that can over ride wages, land, utilities, and taxes is having a highly skilled workforce, both college and vocational train. Not trying to go against you though cause I agree with 95% of what you say on this blog.
I don’t think we have to throw the baby out with the bathwater… unless, of course, the low-skill strategy is a complete distraction.
Every year for the foreseeable future, our metro region will produce about 18,000 young people looking for work. If trends hold 2,500 will go somewhere else (forever) and 3,000 will be absorbed into the logistics industry. That leaves over 12,000 that could fill higher-skill positions instead of lower-skill positions (or none at all). If we can coach them, teach them, train them, engage them or inspire them to be the next wave of home grown entrepreneurial brains and build the companies that can employ them when they are ready, then there is no reason we can’t have it all… or at least a little more economic diversity.
Our business landscape needs to be addressed too. We have few, if any, real clusters of serious business activity. It is hard to build energy around entrepreneurialism when your office market is spread all over 300 square miles. Our Downtown office market is now smaller than Jackson, Mississippi’s. The only cluster of serious business is in the east market but you still have to drive to lunch.
There are few places where the brains can congregate over coffee, bump into each other on the way from here to there, spontaneously collaborate when going from the accountant to the dentist. I think the economic development plan to tackle first may be reknitting some urban fabric around pedestrian friendly office locations or concentrating business in a few select areas. I know people who recently have intentionally moved to more traditional, downtown office locations specifically for one reason… “everytime I go downtown I make money” is what they say. They run into opportunities on the street, are given referrals from someone who saw them in line for a sandwich, make acquaintances that lead to ideas that lead to businesses. They couldn’t do this in suburban markets.
and they can donate a buck or two to the winos, deadbeats and crackhaids every lunch hour-thus redistributing the wealth,
Businessman2010: We don’t see research to justify that entrepreneurs are looking for cheap. We think they are looking for quality. It is interesting that some of the most successful cities with entrepreneurship are cities with the highest taxes. That’s because often those taxes are directly connected with providing quality of life, research institutions, quality neighborhoods, vibrant downtown, all magnets for entrepreneurs and creative workers. It’s in creating the culture for innovation and entrepreneurship that we’re missing the boat, and if we had that culture, it really wouldn’t matter what our tax rate is (although it needs to be reduced). Thanks for commenting and for the good insights.
John: Amen. You have accurately recounted what is happening in the big winners in the new economy.
Interested Observer: Funny, I’ve been downtown for 35 years, and I’ve never donated a buck to anybody, and contrary to your view, it’s rare to see winos, deadbeats, and crackheads. Downtown is not nearly as good as the downtown cheerleaders say nor nearly as bad as the complainers say. I wouldn’t work anywhere else, and it’s because we do run into opportunities on the street, as John so rightly observes. Thanks for commenting.
What you want is just not in the path of this city’s karmic momentum.
John, SCM,and others,
It’s really no surprise our downtown office market has shrunk to such lilliputian scale. One of the great disadvantages downtown Memphis has inherited is it non-central location within the metropolitan area. A key reason why places such as Jackson, Little Rock, Nashville and many other cities smaller than Memphis can boast of a more robust downtown office market is because said markets are located very close to their population centers. Locating an office in those downtowns shows an appreciation that employees are just as likely to live 5 miles to the north, east, south or west. I am of the opinion that if the sprawl surrounding Memphis had occurred in a more balanced way, with Arkansas seeing population growth similar to, if not exceeding, DeSoto County then downtown would be seen as a prime office location. Growth around Memphis has been focused almost due east for so many decades (thanks to the Nonconnah Creek and Wolf River) we came close to achieving a linear city worthy of Le Corbusier. At this point, locating downtown has become more of a choice for those trying to make a statement- a location based on principals (well that and law firms for obvious reasons) rather than a pragmatic location.
You might say this has no impact on the issue being discussed, but I would offer that a space meant to be shared by an entire community – in this case downtown- should be located near a community’s population center. Otherwise you are using the tyranny of distance and transportation, or lack thereof, to discriminate against those forced to the far edge. All things being equal- a space that is equally shared by all should be located at the midpoint of the community. In this case- Memphis is a center-less city where downtown is in serious danger of becoming a high-rise suburb for the elite rather than the proud representation for the metropolitan area. No wonder so many are hostile towards continued investment downtown, it has become detached- or perhaps it was the population that detached itself- from the day to day function for so many of its citizens. With a dwindling employment base and very specialized retail component, does continued heavy investment in what is essentially “just another neighborhood” make sense when the true economic and social focus has shifted to another area? Thought: does it instead make sense to build a “new downtown” closer to the population center where the infrastructure is in place- say I-240 and Poplar- by enforcing new design criteria that requires higher mixed-use densities and sidewalks within well scaled pedestrian blocks that could replace the oceans of parking that currently exist in the area?
I’m not sure where the true population center for Memphis is located, although I bet someone at SCM could probably come up with a diagram for us. My guess would be somewhere near the Union/ Poplar viaduct, though I wouldn’t be surprised if it was further east.
Sorry, I forgot to sign in- I’m responsible for the essay above.
I thought I was agreeing too much when reading this, and Urbanaut’s comments.
The donut. Memphis.
A commerce-less downtown.
A dead Main street.
That’s not a sign of quality thinking, councils, commissions, leadership, choices, and won’t lead to a quality city. But you know that and SO WHAT? (don’t take the capitalization as emotion, it’s not)
I moved down “Sowth” from the Northeast. I was born in the “Sowth”.
The progression Memphis has taken is a “natural” one.
It required absolutely no thinking to get us to this unquestionably weird state. It was going this way on it’s own, hence the term “natural”. It’s a result of an unconscious mass animalistic behavior, hoarding, clanning, migrating to avoid harsh elements of other tribes or gangs/clans/peoples, and people’s sense of right and wrong formulated by what they didn’t get caught at being deemed right, and excessive dereliction of duty sold and disguized as permissive liberal behavior.
Karmic Momentum? That’s one way of looking at it, but, it’s the same thing, I agree.
Two powerful words in the face of all that:
SO WHAT?
Do we have to follow past Karmic momentum? NO.
Do we have to continue in the “no planning followed, no thinking allowed, don’t blow the cheapskate economy” line of thinking? NO.
The past is only information, in our case, a “what not to do again” list.
To outsider, a “what not to do ever list.
That’s the crucial thing, people outside Memphis see what’s really going on here, they aren’t fooled by propaganda, especially northeasterners. They have a high level of education, they’ve seen what real opportunity looks like, they don’t believe the hype. Locals get fooled by it. It’s funny, I hear locals spouting the propaganda like it’s real even with things falling down around them. Years ago, a comedian, said ” I like southerners, they have their own version of religion. Up North, if a storm kills some people and only one is left, we say, “it’s a tragedy”. Down south if a storm kills people, they say “Thank Jesus, Gomer lived! It didn’t get us all!” Don’t go off thinking I’m saying that we’re stupid and they’re smart, I’m not. All men and women are created equal, so, we’re just as smart, but suffering from a SEVERE lack of information. We have confused “drinking the coolaid” with an accurate accounting of the facts. We have confused “looking at problems a different way” with “denial and believing our own hype”. That’s the most dangerous thing in business that doesn’t look dangerous till it’s too late.
Once again:
SO WHAT?
We don’t have to follow any trajectory of the past. Knee jerk reactions, even if they took a bureaucracy and forever to arrive at consensus, are the first clue and sign that although you may think you are headed a new direction, you aren’t, so, you gotta be careful.
Is there something wrong with cheap land? Depends on why.
Is there something wrong with cheap labor? Depends on the cost of living for that labor force.
Is there something wrong with cheap utilities? Depends on what kind, fossil fuels shouldn’t be cheap, but, the solar, geothermal, wind and hydroelectric should be cheap at this point. But are they?
You are so right about promoting entrepreneurship and reinventing Memphis.
Where we are at right now, I don’t think higher utility bills will work, neither will higher taxes, not yet. Our taxes are already way too high, employee bloat on the city, MCS, & MLGW payroll is telling of why we are where we are and what not to do ever again. It didn’t work. It never could.
QUALITY, that’s a key word, if you don’t have that, you have a temp job no matter who or where you are.
Maybe it should be much harder for companies looking for a cheap labor force to land here. Maybe they should be shouldering a lot more of the tax burden. When the citizenry is too used to being mercilessly trod upon, like here, that is the lowest form of suffering, the kind where divine intervention happens.
Gotta do better thinking.
Urbanut:
You have summed up what many of us debate frequently (however quietly). When do we admit that Poplar & Ridgeway may be the new Downtown and how can we make it function like a traditional one and is it right to even think about that? Perhaps one of us can craft a full & thoughtful post on the topic because it deserves exploring.
However, in terms of creating an entrepreneurial climate, Downtown still has amazing advantages. Advantages that will not be recreated elsewhere unless/until we have dramatic population growth.
A)Many cities have downtowns that are not in the geographic center but still serve strong populations. You are correct about the lack of westward expansion but I think you’d be surprised by the ease of access for many, many people to the north and especially south… access similar to or better than some peer cities.
B)You cannot recreate the grid system… the system of comfortable, walkable streets that stretch throughout the historic city making it conducive to the most desirable social environment. Enough can never be said about the importance of a pedestrian environment.
C)Start-up business needs a diversity of price ranges and types of space. This exists in mass downtown for any endeavor you can imagine. This may be our greatest advantage.
D)Access to existing institutions of research, medicine and government are concentrated in or near Downtown.
E)The largest bragging point about Downtown Memphis is its entertainment options. This often is linked to entrepreneurial areas in other cities.
F)This list could get long… I am just making the point that making somewhere else function as a mixed use environment with parks, schools, warehouses, offices buildings and people at the scale of an existing downtown is close to impossible. We should make what we have better before trying to build a new one.
Some cities try. Some high growth cities succeed. When you have population growth of 5% a year, you can build density in old suburbs. You can build new mixed-use neighborhoods in developing areas. You can invent Main Streets where none existed before. In slow growth markets, you get The Avenue at Carriage Crossing… a nice replica of a town center with all the latest & greatest shops. But a place that is still in the middle of a parking lot, connected to nothing, 100% auto dependant, not benefitting the office market or residential market at all. And something, that if successful, will cause the failure of another mall in another part of town.
The greates density and the most accessibilty for the most is still around Downtown. The tyranny of distance has been building for 60 years as we have spread out. Moving Downtown could just change the victims, the winners and losers. Nothing will ever be convenient for everyone.
The only comment I have heard in this string that I take any issue with is about Downtown as a neighborhood for elites. No one can deny that there are a lot of expensive homes in the area. But there are a lot of affordable homes too. And the surrounding neighborhoods offer anything and everything you can imagine from Miami to Maybury. You will know when Downtown Memphis has a disproportionate amount of elites and wealthy home owners living there… office space will start to be absorbed, law firms will start to return, accounting companies will rehang shingles… where the boss lives is where the business usually goes. I hope the bosses of the future are choosing the inner city for home, business and pleasure because that will boost the entrepreneurial opportunities for thousands more than it could anywhere else. I hope we can someday have a true gentrification fight. But for now we are stuck in limbo between rich and poor with no sense of place. That does not breed confidence in entrepreneurs.
I completely agree that building a second downtown would be a colossal waste of money when we already have an existing one. I guess what I am trying to balance here is the reality that a vibrant downtown in its current location is almost as likely (and could be almost as costly) as a new downtown somewhere else. One of the issues I’ve noticed while living downtown is the lack of vibrancy, or more specifically, pedestrian activity. You are dead on in that it is almost impossible to place a value on a healthy pedestrian realm (sidewalks and street front businesses). It leads to chance encounters and socializing that otherwise does not occur- on the sidewalk, at the deli, and during the after work drink tradition (that is non-existent in this city). I was mulling this issue one day while walking up Main Street and while thinking back about historic pictures which show an amazingly vibrant downtown, realized that we cannot hope to achieve this level of activity on our current path. Residential re-use has been the backbone of downtown’s redevelopment with the promise hung out there that we can achieve a level of vibrancy that is lacking if we keep just keep renovating old buildings for condos and apartments with some office and retail mixed in. The simple fact is we cannot achieve a truly vibrant streetscape at the current building densities found downtown even if all the currently unused buildings were occupied by apartment dwellers and condo owners. The problem: one resident uses the amount of space once occupied by anywhere from 3 to 15 office employees. Residential re-use is actually decreasing the potential density of our existing built environment downtown. One either needs to build new and taller structures in order to compensate for this loss of potential pedestrians/ block or we need to conserve the remaining unused building stock for potential office users. Unfortunately, the low rental rates and demand will continue to cap new high rise construction and renovation downtown.
So yes, we need a greater degree of office occupancy downtown. Once again, the overall office vacancy rate for Memphis coupled with a traditionally slow growth rate in employment that uses that type of space does not bode well for an influx of new users into downtown.
So I guess my question would be, in light of these factors, does one intensify the residential component and begin to a pedestrian scaled block structure missing from the “new downtown” focused somewhere between Perkins and Massey or do we somehow try to convince corporations to build and renovate space downtown?
I agree with the last two posts, but, convince corporations to renovate downtown?
What corps?
Target and sell a corp on it then build to suit?
Who knows, might work.