There are times when it 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.
Question:
Is it not possible to have both?
We often present this as an either/or scenario. And that is valid given our limited resources, energy and current ability. But, perhaps that is driving a wedge between the dreamers and the existing business/political leadership.
How do we present a package of educational reforms, new-economy business pursuits and cultural reforms in a way that leads us to the next level while not threatening our base… which is almost entirely holding other people’s stuff until we can take it to them.
How do we convince political leadership that this shift must be a priority while still chasing an Electrolux that fills an immediate need and introduces a little manufacturing to the city?
Is it possible to be both? Pittsburgh? Los Angelas? Houston? Are those valid models of mixing Economic Development initiatives?
A plant that sprouts in a location from seed has far greater potential to thrive in the long run compared to the exotic species imported from a separate location and climate.
The concept simply makes too much sense to be bypassed as an economic model. A company that begins in a location and thrives does not do so in spite of the local economics and workforce it grows and evolves because of these factors. It speaks to both where we are and where we want to be as a community. Regardless the cycle must be interrupted or at least altered at some point to achieve a new economic outcome. One of the easiest and most superficial methods to make this change is via our physical environment. A higher quality built environment will at least portray a community that appeals to those we wish to locate and remain here. To add depth and increase the potential for success we must then add flexible financial incentives that are biased to the local start up over the outside relocation.
However, such an environment will be limited to the effectiveness of a Hollywood set if we fail to take on the more difficult long term task of supporting a home grown class of creative and educated individuals that will seed the field with their own ideas.
The basic premise comes back to convincing the average voter that this makes sense for our community. This community is not known for its patience even though apathy and poor communication seems to pervade many of our institutions. How do you sell the idea of community support for entrepreneurs when it will require patience to reap the rewards? We must encourage a population that is apathetic to their existing status and disconnected from the community as a whole to engage themselves and be willing to take a risk- a risk that will receive community backing in some form.
John: We’d agree if we had shown any impulse to entertaining both at the same time. We seem inexorably linked to old school economic development strategies and jobs. It’s telling that we were in a competition with Mexico for Electrolux. Ultimately, we’re not going to be able to outcompete third world cheap labor if that continues to be the “hook” that we sell to companies.
Urbanut: Amen.
UN: you hit the nail on the head. SCM: I do see some value in being a creator community that at least builds and exports something… even if it is something that could have been built elsewhere. BUT, believe me, I do get your overall point.
SO… who do we need to convince? Who needs to be on the team? Business leadership and political leadership is not budging and this is too important for a small grass-roots effort.
We know the answers of what we need and how other communities do it. We can weave a compelling story. Who do we need to tell that we aren’t engaging? Who are the leaders and change agents that we don’t know are leaders and change agents?
AND/OR… what can the group of people who believe in this premise (who are reading this blog today) do to move the idea into an action?
John-
That’s a good question. How do we move this from theory and intellectual conversation to action on the ground? Seeing as we are talking about public investment here, it will obviously involve someone in city hall at a high enough level that the overriding strategy is not lost through excessive compromise or diluted through the bureaucratic process. As SCM pointed out, there are those in the community that not necessarily benefit from the current approach being altered thus the path taken would need to be sensitive to that fact. Knowing who those individuals and their representatives are would be crucial to modifying our economic development efforts. Obtaining an audience with the “right people” would be the critical step.