Archive for the ‘Must reading’ Category

THE END OF COUNTRY

March 11, 2017

ENVIRONMENT/CULTURAL CHANGE VS. ECONOMIC DEVELOPMENTEnd of Country

Not many planners or economic developers have the opportunity to reshape the physical environment changing the pristine environment into high density economically prosperous uses.

These situations typically pit environmental and neighborhood character preservation vs. economic gain.

It’s never a “clear cut’ decision, no “black or white” solution is easily identified to solve an endless number of questions and personal issues of folks concerned.

There are numerous books written about these situations, typically explaining how the economic development initiative has altered, not only the landscape but also the lives of people that live there.

The End of Country is another descriptive exploration of the conflict between economic development and change; both environmental and social.

Author Seamus McGraw chronicles the process of leasing mineral rights from rural country property owners through the making of Susquehanna County, Pennsylvania, Marcellus Shale natural gas-well royalty recipient millionaires.

McGraw who grew up on the family farm tells the story of his elder mother and her neighbors process of being solicited to lease their mineral rights, the land clearing well drilling site preparations and the transformation of the “rural hill country landscape” of Pennsylvania into an industrialized natural gas collection landscape.

It’s a great read, one that will challenge planners and economic developers to think about the changes brought about by certain economic development actions.

It poses the question…. When is it morally and ethically correct to exploit the natural environment [possibly resulting in non-revertible outcomes] and change the physical and cultural landscape in pursuit of economic development community gain?

It’s a plaguing questions one this writer has explored in other blog posts about books titled: Bulldozed, At the Crossroads and Hollowing out the Middle.

POLITICAL MANUFACTURING ELECTIONEERING – WILL POLITICS HELP REBUILD THE MICHIGAN MANUFACTURING JOB BASE?

March 5, 2012

McKinsey Global Institute confirms the notion that the US manufacturing job force will not likely return to historic job counts, identifying the challenge facing those relying on an economic development strategy focused on replacing manufacturing jobs.

Can Michigan rebuild its auto dominated statewide manufacturing base and diversify into related manufacturing jobs to create jobs for Michigan residents?

 It’s the million dollar question………..

According to Susan Lund, director of research at McKinsey, “If job creation is your goal, manufacturing is probably not the sector you’d look at”.

She expounds – US manufacturers have added 400,000 jobs since 2011, after a loss of 5.8 million jobs from 2000 to 2009. Manufacturing employed more than a third of the nation’s nonfarm workforce in 1950 but now employs less that 9% (WSJ 3-2/3-2012).

It’s easy to understand, as Lund explains, advances in technology and management processes have allowed factories to boost their production, or output per hour of labor.  The result is less manufacturing jobs providing the same, or more, product and at the same time providing higher wages for these jobs.

Economic developers are charged with two goals:

  • Create new jobs that increase household income and wealth which ultimately is reflected in increased government revenue from income, sales and real estate taxes, and
  • Provide jobs for local residents.

For the economic developer, this creates a conundrum – less jobs & higher wages vs. the difficulty of replacing lost manufacturing jobs – when the economic developer is typically graded on a scale of “how many jobs they create”.

Maybe Washington will help.

Today, both President Obama and all GOP hopefuls offer their perspectives on how to reinvigorate US manufacturing employment.                                                                                   

While the electioneering rhetoric offers varied ideas such as employment training credits, reduced profit taxation, government supplied special financing and regulatory barriers/exemptions, many economists question the merits of “industrial policy” – government efforts to promote certain sectors by picking “winners and losers”.

They claim the recent “rise in manufacturing employment of the past two years is more of a blip than a trend” and that future mechanization and management improvements will continue to work against large gains in total manufacturing jobs.

On the other side, are claims that government manufacturing incentives will incentivize business decision making resulting in new manufacturing employment.

Regardless of your political perspective, the reality remains, that manufacturing employment will not return to the “1950’s good old days” or pre-recession levels.

So what’s this mean for the Michigan’s economic development practitioner?

Michigan’s economic development platform will still focus on manufacturing, both auto related and those compatible jobs skill that are transportable to similar jobs, but for different products.

  1. Michigan’s economic development platform will still focus on manufacturing, both auto related and those compatible jobs skill that are transportable to similar jobs, but for different products.
  2. Retraining of existing workforce and training of the “up and coming workforce” will strive to provide skill sets required for the continuation of the auto related labor force as well as for new manufacturing processes that are “targeted industries” chosen by state government.
  3. State and local incentives will be created and used (a Michigan tradition) to induce new business formation or new location of selected manufacturing businesses.
  4. There will be increased local competition for new manufacturing jobs between Michigan communities as they vie for the location of a lesser number of new businesses.
  5. Greater emphasis will be imposed on the success of the economic developer to “create new jobs” through location of new businesses.
  6. The current state emphasis on “core communities” will be challenged by smaller urban and smaller rural communities seeking their “fare share” of job creation attention by state government.
  7. Due to need for local job creation the role of the economic developer, especially in communities not cited on the states “favored list”, will focus more on  “economic gardening” the process of creation new jobs by forming new local-owned businesses.
  8. Greater attention will be given to removal of barriers to job creation, especially state regulatory, taxation and other rules that place Michigan in an uncompetitive position when compared to other states.
  9. As the complexity of local economic development programs increase, consolidated regional (multi-government) economic development organizations will become more common place in order to provide sufficient economic development funding for professional trained economic development staff functions.
  10. The educational and experience qualifications for leadership positions in Michigan’s economic development profession will require new, more advanced qualifications and experience, aimed more toward entrepreneurial skills rather that the traditional menu driven activities that currently underlies the Michigan economic development delivery system (that being offering new and existing business state and local incentives from a menu of options to create new jobs).

Finale

Regardless of election outcomes, the role of Michigan’s economic development practitioner is positioned to change, and the future role will be different.

We can expect to see a bifurcation of economic development strategy, first, continuing the competitive effort to secure new businesses wishing to locate in Michigan and second, local efforts to create new businesses that increase local jobs.

In either case, the pressure upon Michigan’s economic developers to produce new jobs and investment will increase.

THE COMING GLOBAL JOB WARS – ARE YOU PREPARED?

February 16, 2012
  
Gallup pollster Jim Clifton shares some
interesting global facts:
 
7b people
3b want to work
1.2b formal jobs exist
1.8b jobs shortfall
50+% deficit of full-time jobs
 
Scary information – to say the least!

Jim Clifton (Chairman of Gallup), in his newly released book “The Coming Job Wars” states that globally, politics will focus on this dilemma ….how to double the number of globally available good full-time and part-time formal jobs defined as 30-hour weekly employment paying living wages.

In the future the United States will compete, along with every country, state and local territory for these new jobs.

Clifton opines, since 70% of US GDP (Gross Domestic Product) is based on consumer spending any solution to job creation “requires consumer spending and any solution to job creation requires a lot of consumer spending or the GDP falls leading to less spending and higher unemployment”.

He concludes the US GDP growth rate is most important to job growth and, in the future, US GDP growth will come from global customer demand.

What’s needed today to remedy US and global unemployment according to Clifton, is a “transformational event that will cause a sudden extra ordinary surge of entrepreneurship and innovation just like the introduction of new technologies 30-years ago that saved America from the 1970’s recession” a technology transformation which created new global customer demand.

He further states the US has an oversupply of innovation and an undersupply of entrepreneurship; “innovation is not rare in America, neither is creativity, rather there is mass shortage – a significant undersupply – of successful business models”.

According to Clifton, “America’s job creation needs to focus on the connection between innovation and entrepreneurism – the person – the entrepreneur”.  He states that entrepreneurs are rare – “lots of people have good ideas, but most new businesses fail.  It’s not for the will or passion, but the lack of customers “and business knowhow.

While most Americans believe the US is run by “big business” in reality America is dominated by small and medium sized businesses – those with less than 500 employees which represent 99% of the proximate 6 million businesses with at least 1 employee.

Clifton believes it is here, these small to medium sized businesses along with entrepreneur formed new businesses is where job creation is most likely to occur.

He further opines that US GDP must grow at a minimum of 5% in order to create sufficient jobs to remedy present unemployment…this being double the near-term best future growth rate offered by leading economists.

This is how we get there –

1. Make Entrepreneurism a #1 Public Priority

The goal of economic policy must embrace the notion that private sector employment is most important.  Clifton opines that “if the overwhelming majority of Americans are not working outside of government jobs, America will go broke”.  He further states that “when GDP falls so does the amount of money government’s share [used] to fund services” 

The solution is to create new businesses which will create “new jobs” thus increasing GDP.

2. Seek Early Identification of Individual Entrepreneurial Potential

Researchers have documented a number of characteristics of people that start businesses.  The most common entrepreneurial traits include 1) parents that are entrepreneurs, 2) early age business involvements, 3) ability to take risk and 4)  an individual stick-to-itiveness personality trait.

According to researchers, these traits can be identified in youngsters aged 8-12 years when early education and mentoring can be provided to encourage them to consider entrepreneurship and business ownership as a chosen career choice.

The solution is to test and identify entrepreneurship personality traits of young people, most likely, as part of current K-12 student education testing programs.

3. Introduce Entrepreneurship as a Career Choice in Early Education

Today’s education system is designed to prepare youth for many types of careers, but often does not provided encouragement nor specific training for entrepreneurial careers.

There are a number of educational program designed to remedy this deficiency, however educational programs seldom integrate these into the classroom experience.

The solution is to redesign current K-12 educational programs to integrate entrepreneurship course content as a career choice equal to the emphasis given to college preparation course content.  

 4. Provide Our Youth Entrepreneurial Opportunities

A 2010 Kaufmann Foundation sponsored study survey shows that “interest in starting a business is consistent among tweens (eight- to 12-year-olds – 39 percent), teens (13- to 17-year-olds – 39 percent), and young adults (18- to 24-year-olds – 41 percent). Males (45 percent) are more likely than females (35 percent) to be attracted to business ownership.

The research concluded that “youth who personally know another entrepreneur have the strongest interest in starting their own businesses. Among youth who know an entrepreneur, almost half (46 percent) would like to start, or already have started, businesses, compared to only one-third (31 percent) of the young people who do not know a business owner”. (Underline added)

The importance of business owner contact and actual business experience contact is critical to shaping the personal characteristics and propensity for young people to pursue entrepreneurship and as career choice.

The solution is to provide business owner contact and business experience for young people – more Junior Achievement programs – more child operated lemon aid stands please.

5. Reformulate Government Assistance Programs to Reduce New Venture Risk

Starting up a business is costly.  Start-up costs many times include attorney, accounting, monthly banking fees, plus computer software purchases that can easily add up to $1,000 in the first year, more if you have partners in your business requiring partnership agreements, filing incorporation paperwork, etc.

All of these require immediate cash payments, always coming from the entrepreneur’s pocket.

Young businesses need cash, typically more than planned.  Elimination or deferral of startup expenses may be the difference between success and failure in the first year of operation.

The solution to encourage new business formation is to remove these start-up costs or allow payment of them upon the first anniversary of the business formation.

6. Incent Commercial Lenders and Investors to Accept New Business Start-up Risk

Lenders and investors are, by their very nature, adverse to accepting risk. They are trained to identify how and why a business can fail and to install loss prevention programs for any investment they make in a business.

While business risk aversion is a good thing the amount of risk lenders and investors are willing to assume varies.  Risk is measured by commercial lender interest charged for use of funds or investor dividends paid and resultant increased value of their investment in the business.

New business start-ups being “more risky” imply greater risk requiring higher interest charges, higher dividend payments and higher business ownership valuation to secure business start-up funding.

Since interest, dividends and capital gain on the sale of business interests are all taxable – federal, state and, where applicable, locally – after tax return on investment becomes the final measurement of the investment in a new start-up business.

The solution to expanding the amount of capital dedicated for new business start-ups is to reduce or eliminate taxation for a period of time for funds loaned or invested in new start-up businesses.

Last Thoughts

Today job creation is caused by a “rare breed of people” those of a certain state of mind having a business plan of action, a totally consuming idea resulting in unstoppable determination and optimism, an unwavering confidence in their personal business skills plus understanding of what customers really want.

These rare soles understand that customer relationships “trump” all business challenges and leads to identification of new products and services desired by customers and when provided by the business assures success.

It’s these “rare soles” that ultimately produce additional GDP, by creating innovative products and services for which new jobs will be required to produce and deliver the products and services to the customer.

If Clifton is correct, and a new transformational innovation is required to fill the global job deficit, it will most likely come from a start-up business idea.

WHY WE HAVE GHOST TOWNS IN THE MIDWEST.

November 22, 2009

Why do we have ghost towns in the Midwest? 

Richard Longworth answers this by examining transportation……the movement of resources from supply origin to demand destination.

Chroniceling the growth of the Midwest from its earliest times, Longworth traces the history of transportation from water transport, to rail and then highway.

As the Midwest moved from one mode to another there were winners and loser communities, some grew and other became “ghost towns”.

He suggests that human intellect “manufactured”  by some 17 global and nationally known higher education institutions is the Midwest resource of the future.

This resource is mobile via the internet and is easily transportable evidenced by the exodus of highly educated young people from the Midwest to other locals viewed as better places to live.

Longworth suggests “Place Matters”.  To retain this resource communities with “Power of Place” –  “territorial endowments” and “social capital” will succeed in capturing this resource.  Others may not succeed and be future ghost towns.

A must read for every community planner and economic developer.

Chuck Eckenstahler