The Latest in Economic Development

This week’s blog discusses cities’ quests to foster technology hubs, new strategies beyond traditional manufacturing, the impacts of re-shoring, a commitment to streamlining small business regulations, and rural economic development strategies. Comment below or send to common@nlc.org.

Get the last edition of “The Latest in Economic Development” here.

Possessing high-tech startups is obviously a tremendous asset for cities, but developing a “tech hub” is not a realistic goal for all cities. At Slate.com, Matthew Yglesias explains that “while it would obviously nice to become the next Silicon Valley, the fact is that Silicon Valley is already where it is.” Focusing on the fundamentals (schools, infrastructure, etc.) is more important than choosing the “hot” sector of the day. Inventor extraordinaire James Dyson, of vacuum cleaner fame, recognizes the value of non-tech, which is why he is establishing an incubator at his alma mater that will focus on engineering physical products. Dyson says that “with the world abuzz with digital, we are losing sight of real engineering.

If manufacturing is going the way of agriculture in the 1800s due to technological advancement and globalization, economic development must look at opportunities beyond manufacturing in the traditional sense (including beer). In the case of western North Carolina’s Transylvania County, Dale Katechis of Colorado’s Oskar Blues Brewery located a production facility there because two of his interests – mountain biking and lowering shipping costs to the east coast – aligned organically. But there are also steps regions and cities can take to stimulate non-traditional manufacturing operations. Kalamazoo, Mich. recently modified its zoning regulations to allow bakeries and breweries to locate downtown. This heads-up move is serving to accommodate the already burgeoning “beer trail” in west Michigan. For more on how cities are courting craft breweries, check out this post from NLC’s Katie McConnell.

Many commentators are hoping that “re-shoring” will turn the tide of the US economy, signaling a return to increased exports and manufacturing capacity, but this view may be premature. The rationale behind the shift is the changing economic fundamentals between the US and China. Knowledge@Wharton notes that in 2000, “US wages were almost 22 times higher than those in China, but by 2015, wages in the US will only be four times higher.” While this may turn out to be true, the article points to the fact that wage rates are not the only determinant a company considers when deciding where to locate, not to mention there are options other than China to source low-wage labor, including Vietnam and Indonesia. Re-shoring is an encouraging development, but it probably won’t catalyze a new explosion in US manufacturing.

Two of America’s largest cities are re-focusing their efforts on streamlining regulations for small businesses. Responding to a spike in the number of fines levied on small businesses, New York is committing to a review of the city code to remove obsolete regulations, issue warnings instead of immediate fines, provide customer service training for inspectors, and establish an agency liaison to industry groups. Rahm Emanuel is also joining the party with a proposal to “restructure the city’s business licensing center with the aim of helping small businesses get licenses and find potential financial assistance more quickly.”

Economic development in rural locales presents its own set of unique challenges and opportunities. A recent article from the USDA outlines five key lessons for rural economic development strategies: 1) wealth creation is context dependent; 2) it is critical to understand the interrelationships among multiple forms of wealth; 3) degrading some types of assets may undermine the benefits of investing in others; 4) diversifying assets may reduce risk; and 5) local ownership has benefits but may also entail risk.

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