Economic Development Podcast
Economic Development Trends
Moderator: Welcome to the Federal Reserve Bank of Atlanta's EconSouth Now podcast. Today we're talking with Todd Greene, assistant vice president for community and economic development research and policy at the Atlanta Fed. Before joining the Atlanta Fed, Todd was director for community, policy, and research services at Georgia Tech's Enterprise Innovation Institute with oversight of research and implementation efforts and applied economic development. We're going to talk today about economic development trends in the Southeast. Thanks for joining us today, Todd.
Todd Greene: Well, it's a pleasure to be here.
Moderator: First off, Todd, what are some of the key elements for a community or state economic development strategy?
Greene: Well there are several. But, I think the ones that are most successful are business recruitment, business retention, workforce development, entrepreneur development, tourism development, and innovation and creativity. While approximately 80 percent of new jobs are created by existing businesses, ironically only about 20 percent of state and local economic development budgets are devoted to efforts to retain and grow businesses.
Moderator: What are the biggest changes that we've seen in economic development practices in our region in the past 20 or so years?
Greene: Well, historically the Southeast prospered in the '70s and '80s by promoting cheap land and cheap labor, largely by attracting industry and manufacturing from high-cost Rust Belt states. Well, the Southeast has now become the victim of its own formerly successful strategy. We are all aware of the offshore markets, where land and labor costs are significantly cheaper than in our region. While many of these jobs may have ended up in China or India, other developing countries, like Laos and Cambodia, have come in with even lower costs. Because of these low-cost factors, many traditional industries important to our region just will not be coming back. Textiles are a good example.
Moderator: Well, what do you think will be the most important changes in economic development strategies and, also, tactics that we'll see in the next decade?
Greene: Because of globalization, more emphasis will be placed on knowledge worker jobs. Those are jobs that require critical thinking skills. The importance of developing human capital in an innovation-based economy will be a big challenge for our region. Because of these needs, I expect to see more comprehensive economic strategies, which meaningfully incorporate colleges and universities. We're seeing our local universities take a more active role in economic development. Indeed, the new chancellor at the University System of Georgia has mandated economic development goals for each of the presidents of Georgia's 35 public universities.
Moderator: Now, Todd, we've seen some of the states in our region, and municipalities as well offer mainly manufacturers, I guess, but also some other types of businesses fairly sizeable financial incentives to locate facilities in their states and cities. Do you think these sorts of incentives—tax breaks and so forth—will become more or less important in industry recruitment in coming years?
Greene: Well, while financial incentives will remain important in the recruitment of certain industries, like the automotive manufacturing sector for example, there is really little doubt that the importance of financial incentives is diminishing. For example, because the tax obligation to many start-up and high growth companies are already low, they are often not even able to take advantage of the tax credits. Furthermore, companies are placing more emphasis on quality-of-life factors in their location decisions. The quality of schools, the availability of cultural activities, and commute times for employees really represent just some of the considerations which have grown in importance over the last several years.
Moderator: Well, turning to some of the challenges that states in our region face in economic development, how much of a concern is the quality of public education in the Southeast? We hear that pretty frequently as an issue.
Greene: Well, you've hit on a really important topic. The quality of public education in our region is a huge concern, and maybe the single most important long-term impediment for economic development, both for our existing industry and the recruitment of new companies. Most of our Southeastern states, unfortunately, are in the bottom 5 percent of almost all national public education measures. These measures become even starker when considering school districts outside of the region's largest cities. In a 2005 Georgia Tech survey of Georgia manufacturers, they cited basic skills—I'm talking reading, writing, and arithmetic—as among the most important problems in managing their business. Low high school completion rates are inconsistent with the required skill sets of the jobs of the future.
Moderator: So we've talked about education. What are some of the other major economic development challenges facing our region, Todd?
Greene: Well, there are several, but I'd really like to focus on two. One is workforce, and the other is regionalism. First, workforce. In a 2007 report conducted by the Southern Growth Policies Board, employers indicated soft skills as a major problem. What I mean by "soft skills" includes showing up for work on time, being alcohol and drug free, and being respectful in the work environment. The second economic development challenge is regionalism. For the most part, economic development is done within jurisdictional boundaries: cities, counties, states. This notion is based on 20th century transportation models that don't consider current workforce commute patterns or economic spending factors. It will be critical for economic development entities to work cooperatively and to understand that regional resources result in better outcomes. One innovative example is the Valley Partnership, an organization of economic development entities from Alabama and Georgia, which has successfully leveraged the assets of the Columbus, Ga., and Phoenix City, Ala., region to attract the Kia automotive assembly plant. Suppliers will be located throughout the region in both states, and workers, too, will come from all across the region.
Moderator: Well, Todd, you mentioned transportation there. What role does infrastructure play in economic development, and has that role changed over the years?
Greene: Infrastructure is critical to economic development. Abundant natural resources, low utility costs, and an efficient transportation network have been key drivers of economic growth in our region following the Civil War. Yet the pressure on these traditional advantages mounts. First, water scarcity is a real problem, which limits business growth. The current drought in many areas of our region will likely limit the growth and recruitment of water-dependent industries. Second, while low-cost power remains necessary, competitively priced telecommunications access and services is the backbone of modern businesses. We will need to continue to invest in the telecommunications infrastructure and support policies encouraging its growth and development, particularly in our rural communities. Third—and perhaps the biggest economic development infrastructure issue—is transportation, which you mentioned. Railroads, air transportation, and robust ports have historically been and continue to be competitive advantages for our region. The globalization of our economy makes these linkages even more important, yet more work needs to be done to ease traffic congestion in some of our region's cities. Economic developers have many examples of prospective companies, which have decided to locate elsewhere simply because of the traffic. The ability of workers to get to and from work in a convenient manner is a significant infrastructure barrier.
Moderator: Thanks for your insights, Todd. Again, we've been speaking with Todd Greene, and this concludes our EconSouth Now podcast on economic development in the Southeast. For more information, please see the first quarter 2008 issue of EconSouth, and from our Web site you can read all the stories in the magazine or subscribe. Thanks for listening, and please return for more podcasts. If you have comments, please send us e-mail at email@example.com.