5. Economic Development Strategies
In 2011, state leaders faced a Catch-22. They needed to create jobs, but had fewer resources with which to do it.
“(For states), economic development is about creating jobs,” said Mark White, vice president for research at the Center for Regional Economic Competitiveness, “Economic development is how we get jobs.”
But the old model of economic development—offering large incentives and tax breaks to companies—“is being heavily scrutinized,” he added. So to do more with less, states have had to turn to one of their signature strengths: policy innovation. They have been shaking up the old way of doing business to get more jobs for the buck.
A theme has emerged in the changes states are making to economic development plans.
“People are being forced to interact and get out of their old silos,” White said.
Michigan has been a leader in innovative policies in part because the Great Recession has been so destructive to its industrial economy. Gov. Rick Snyder took a fresh approach with economic development by launching the Michigan Economic Development Corporation, an agency that incorporates a regional perspective to develop the state’s economy.
Traditionally, state policymakers worked with a myriad of local governments that often got mired in turf wars. Michigan, however, uses its new development corporation to coordinate its urban areas—the state’skey economic engines—as a regional unit through its Office of Urban Initiatives. Deploying economic development strategies that energize these crucial components of the economy can further enhance the state’s return on investment in its development programs.
Michigan’s development corporation has been part of a trend to recreate public economic development agencies as private and public/private, hybrid entities.
Wisconsin Gov. Scott Walker created the Wisconsin Economic Development Corporation, a public-private entity, to recruit businesses. The new structure replaced public employees in the state Commerce Department with private employees, and that department’s regulatory duties are now being directed by other state agencies.
Gov. John Kasich of Ohio followed a similar path with a private, nonprofit organization called JobsOhio. Iowa Gov. Terry Branstad is replacing the state’s Department of Economic Development with the Iowa Partnership for Economic Progress, another public-private partnership. Proponents argue these hybrid and private economic development institutions are more flexible and responsive to business.
States also have changed their strategy for conducting international business.
“For a long time, foreign direct investment was a priority for the states,” White said. “South Carolina pursued BMW and Alabama pursued Mercedes, but in this climate, export strategies are the new trend.”
One example is Enterprise Florida, a nonprofit development agency.
Florida was particularly devastated by the housing crisis, which left its core industries of construction, real estate and tourism weak. To build prosperity, the agency has aggressively promoted international trade and supported companies that have a global customer base. As Manny Mencia, the senior vice president of international trade and business development at Enterprise Florida, explained to CSG members earlier this year, the key vehicle for growth for a lot of states can be found in the rapidly emerging markets of developing nations. As evidence, he pointed out that international business has become one-sixth of Florida’s economy.
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