Shuman on alternative models of economic development

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I have a guest editorial piece in today's Palladium-Item, End risky economic games.  I've also reproduced the edited version of the piece below.  I had originally hoped to title it "What can James Bond teach us about economic development?" but I decided that's not actually a question I want to know the answer to.  So instead the article focuses on two different labels for economic development models, coined by author Michael Shuman.

I first saw Shuman speak at a conference back in 2005.  He's an economist, attorney, speaker, author and entrepreneur, and he's written a number of books on the economic why and how for creating thriving, self-reliant communities.  In particular, he posed the labels of "TINA: There is no alternative" and "LOIS: Local Investment and Import Substituting" as shorthand names for the dominant economic development model of today (TINA) and an alternative model that he sees having great success and sustainability on paper and in practice (LOIS).

I was compelled enough by what Shuman had to say in his writings and in my brief conversations with him that back in 2008 I bought a whole case of his book The Small-Mart Revolution: How Local Businesses are Beating the Global Competition directly from the publisher, and started distributing free copies to local community members. including government officials, higher education leaders, and business owners.  Shuman's research also helped inform the long list of possible action items I include in the slideshow talk that I am sometimes asked to present about how to make Richmond, Indiana in particular more economically self-reliant.

Hopefully without sounding too much like a fanboy, I suppose my point is that if you're someone who does any thinking about what kind of economic development models might be appropriate in this age, you would probably find a lot of useful research and practical suggestions in Shuman's writings.

Here's the text of my editorial in today's paper:

End risky economic games
In the 1983 movie "Never Say Never Again," the villain challenged spy James Bond to gamble on a video game about world domination, with a twist. The players went to virtual war to win control of territory, and when they failed, their video game controllers gave off real electric shocks. Ouch! The higher the value of the disputed territory, the greater the pain of the shock, and if you let go of the controller you forfeited the game altogether, at significant real-world financial expense.

When I look at the dominant economic development strategy around the region, I can't help but feel we're playing a similar game, fighting for employers attracted, jobs created and investment imported instead of territory to control. And like the game in the movie, once we grab the controller and begin playing, it gets more painful and more expensive to quit as time goes on.

In the book "The Small-Mart Revolution," author Michael Shuman calls this the T.I.N. A. model of economic development -- "There Is No Alternative." It's the one w here we jump at opportunities to maximize business activity not because they're necessarily the best for our community, but because we're worried some other city might snatch them up if we don't first.

It's the one where we offer up land or public services for free as competitive incentives, fumble around looking for state or federal grant dollars (often with lots of s trings attached), and just hope that the businesses we attract or the incremental improvements we make might take hold. It' s the one where we're asked to trust those in control of the purse strings to place the right risky bets on our behalf.

In this model, we give ourselves almost entirely over to the ups and downs of a global economy, admit that we have no particular driving vision for shaping our own local economy, and try to minimize any "regrettable" side effects of the things we do as a result. We do all this because, again, there is seemingly no alternative.

Or is there?

I don't think any of us enjoy the thought of playing an endless and un-winnable game under constant threat of pain. What if there were another model that allowed us to make decisions about economic development because they contribute toward a sustainable, self-reliant community that looks like one we and others really want to live in?

Shuman calls this alternative L.O.I.S.: "LOcal ownership/Import Substituting," focusing on nurturing locally owned and operated economic entities while finding substitutes for goods and services that might otherwise be imported. It means investing in locally owned businesses first, helping consumers to make buying choices that support that investment, and plugging the leaks where dollars are leaving the local economy.

When we do this, we actually spend less dollars per job created, have fewer "destructive exits" where a business pulls up its roots and extracts itself from the community, raise our standards of living, help dollars circulate in our area longer, and lower the overall cost of doing business here.

If the primary question we ask about an economic development opportunity -- whether it's how to use Certified Tech Park Funds or how we structure the operations of our EDC or Chamber -- is "how many jobs will it create?" we miss the chance to consider other critical factors that might have more to do with the long-term health of our city.

And if we want to truly consider different driving questions, we have to be willing to step back from the current game. While this requires courage and risk-taking on the part of local officials, it also requires a change in mindset for the rest of us. Thriving cities around the globe are abandoning the old game and figuring out a new way -- we can too.

As with the video game in the Bond movie, this shift might bring some pain and even a sense of lost opportunities at first.

But when it comes to our conversations about economic development, imagine how good it might feel to consistently say, "we' re making this decision because it's the right thing to do for our city" instead of "we're making this decision because we just can't see any alternative."

What kind of model do you want to participate in?

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