1/6/2017

Adam Bruns of Site Selection magazine discusses a speech delivered by Amy Liu of the Metropolitan Policy Program. Is it possible that disadvantaged long-term economic development strategies could have their chances improved by improving the long-term chances of the disadvantaged themselves?


"There is pressure to grow an economy that works for more people," she said, and make regions as inclusive as they are competitive. "That means a stronger focus on the productive nature of our industries, and making investments in workers and communities. The economy today is structurally broken, and our strategies cannot continue to move down the same path if we're going to be relevant to industry in an environment that's much more disruptive today."

 

Amy Liu, vice president and director of the Metropolitan Policy Program at Brookings Institution, which she co-founded with Bruce Katz in 1996, directs the Global Cities Initiative, a joint project of Brookings and JPMorgan Chase that aims to help US metro leaders reorient their economies toward greater engagement in world markets. But it's greater engagement with the people in our own backyards that she's after today, she explained at the TrustBelt conference in Chicago last summer.


How Does Your Garden Grow? Economists such as Lawrence Summers and Joseph Stiglitz are also exploring how to boost shared prosperity. Liu says inclusion is one of the basic pillars of economic success, because it means a broad base of the population is better off, with rising employment and rising incomes. "Growth absolutely matters, because an expanding economy creates opportunity for people," she said. "How you grow, though, does matter. If you attract low-value industries or low-wage jobs, it doesn't mean your economy is better off." In pure growth terms, the US economy has done well, she said, growing by 10.1 percent annually between 2009 and 2014. But the median wage has declined by 5 percent since 2009, and wages in the bottom half have declined the most. Part of it is changing demographics, Liu suggested, as retirees are replaced by new workers who often earn lower wages. But go behind the stats and you see a distinct color line. "The disparity in median wage between whites and people of color is $40,337 vs. $26,219," she said. In 2014 the US hit a milestone, as for the first time, the majority of school-age children were people of color. But diversity is not yet marked by prosperity. "About half of African-Americans born poor stay poor," Liu said. And despite progress in the economy and all the tools in economic development, she said, "the number of high-poverty neighborhoods has grown from 13,404 in 2000 to 21,512. Today there are nearly 26 million people living in such neighborhoods, an increase of 79 percent since 2000."


By Brookings' gauge, 95 of the largest 100 metro areas have experienced economic growth, 63 are more prosperous in terms of improvements in wages and cost of living, but only eight improved inclusion between 2009 and 2014: Charleston, Chicago, Dayton, Denver, Provo, Salt Lake City, San Jose, and Tulsa. "And only Baton Rouge, Honolulu, New Orleans, and Tulsa achieved similar improvements over the full period from 1999 to 2014," said a Brookings Metro Monitor report in January 2016. 'Starbucks, stadia and stealing businesses' What's needed now, says Liu, is not more philanthropy (welcome as it is), but a new outlook on economic development. "Conventional economic development strategies are no longer sufficient," Liu said. "They're too short-term, too focused on quick wins, with too many fragmented efforts across jurisdictions, and too often led by subsidies. Some are obviously good, but the literature constantly reinforces that most of these provide mixed and often counter-productive results when it comes to ROI." States and localities spend tens of billions of dollars each year on tax breaks and incentives, she said, but "many are focused on lower-value parts — what we call Starbucks, stadia and stealing businesses. Three percent of job creation comes from out-of-state business relocation, yet that 3 percent dominates. It really is time for us to be honest about how we right-size our strategies."


Liu understands that some traditional economic development tools will still be in the proverbial toolbox, "but if we stick to the same old approaches," she insisted in Chicago, "all we are doing is simply shifting companies and jobs across regions, versus creating new firms, products and services, and ultimately new income, that can raise the overall living standards of our citizens."