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Home > Social Issues
Economic Development: What to do locally?
by Bob Powell, 5/29/09
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This article uses an economic development model to describe what can be done locally to respond to massive regional manufacturing and IT job losses. The same principles apply to the U.S. economy.

Links to sections of this article following the Introduction:
Economic Development Overview & Model
In general, what should be done?
Standard Economic Development Approaches
Going beyond standard economic development approaches
What to do about National Policy?
-- We Must Have Balanced Trade Policies, not "Free Trade". Here's how:
-- What can be done to influence the national agenda?
Operation 6035 Press Release on Initial Findings
On Operation 6035 Objectives
Story on Operation 6035 Chapter 2: target industry opportunities

Note 5/18/11: Made some edits, including updating some jobs & trade statistics.
Note 6/17/16: Added a section on creating Balanced Trade

Introduction

In response to Jobs & 'Trade' Data Update Mar09 (the latest as of Sept 2010 is Jobs & 'Trade' Data Update Jun10), I received the following question:

Good data - Would be interested in your thoughts on what we can do locally in response to these chilling job losses?  Don't think that EDC or the City will be in a position to impact US trade or the stimulus policy.

My first thought was, "Well, they should at least try to impact 'trade' policy." I put "trade" in quotes, because trade is the "exchange of one thing for another," not the "transfer of the factors of production", which is the great majority of what's going on.

And after recently reading a letter to the editor of the Colorado Springs Independent on "primary jobs," I decided to write an economic development primer to simplify the issues and describe what should be done. The question above and the letter just below prompt me to do so in what might also be called a "politically incorrect guide to economic development."

Here are excerpts from the letter in the Apr 2 - 8, 2009 edition of the Independent to which I respond here:

1A's flaws: forgivable

Forgive me. I am voting for 1A (Jobs Now), and it is flawed. There isn't a plan in place on how to spend $3.5 million a year for 15 years. It's also one of those "blank checks to government and trust us to spend your money well" initiatives. Then there are those darn words "primary jobs" in the initiative. Does that mean jobs whose money is sent elsewhere, or jobs where the money stays here? ...

Yes, 1A would have been better had Council taken time to craft it. But defining "primary jobs" and revisiting a shorter sunset can be worked out. The growing lack of jobs can't.

There is a time to distrust local government and a time to trust. Now is the time to trust. I'm willing to invest $15 a year if it means thousands of new long-lasting, decent-paying jobs. ...

Richard Skorman
Colorado Springs

Richard Skorman wonders what those "darn words," "primary jobs," mean? He asks, "Does that mean jobs whose money is sent elsewhere, or jobs where the money stays here?"

Frankly, it's shocking that this question comes from a former member of the Colorado Springs City Council and from a person formerly on Senator Ken Salazar's staff here in Colorado Springs. That said, let me be charitable and guess that this was simply a rhetorical device to reflect the general public's lack of understanding of what "primary jobs" are ... and chalk it up to a missed opportunity to explain what they really are.

The answer is: It's neither "jobs whose money is sent elsewhere" nor "jobs where the money stays here." It's "jobs at companies that bring substantial net dollars into the region"  ... typically dollars-out is 50% of dollars-in.

That is, primary jobs are jobs at "primary employers." This definition from the Longmont Area Economic Development Council in What Are Primary Employers? is as good as any.

Primary employers are those companies that sell the majority of their goods and services outside the Boulder County region.  They represent the foundation of our local economic base because they bring new money into the local economy.

 

Economic Development Overview & Model

Below is a diagram that Rocky Scott, former President of the Colorado Springs Economic Development Corporation, often used in his presentations. It illustrates the flow of dollars into, through, and out of the region.

  1. Buyers of goods & services from outside the region purchase products & services from primary employers, which brings dollars into the community.
  2. Those dollars are spent at local businesses ... dollars that are hopefully circulated and recirculated.
  3. Dollars are eventually spent with companies on products & services outside the region.

Economic Development Model used by the Colorado Springs Economic Development Corporation

When more dollars come in than go out, a region experiences economic growth. When there's balance, the economy is stable. If more dollars out than in, there's economic decline; in extreme cases where dollars stop coming in, a town becomes ... a ghost town (Colorado has them and sections of Colorado Springs look like them).

What applies to a region is pretty much the same as for a family. When more money comes in than goes out, a family prospers financially. When the opposite, it's debt and financial hardship. When a family can pay junior to mow the lawn, that helps by circulating dollars within the family.

I created the diagram below to illustrate what happens in more detail to help draw economic development policy recommendations.

The diagram shows three kinds of companies. There are:

  1. Export Companies (primary employers)
  2. Local Service & Retail Companies (including government & local non-profits)
  3. Import Companies.

In practice, none of the companies in these categories are "pure" types. For example, export companies (primary employers) do spend dollars outside the region; it's just that export companies (primary employers) have substantial net dollars coming in.

Powerpoint Presentation Slides: Economic Development - What to Do Locally [4.42M].

 

Economic Development Model, Generalized with more detail

In general, what should be done?

Figuring out what should be accomplished is not rocket science. It's more like basic arithmetic. [Disclosure: I'm not an economist, though I do have an MBA, my Ph.D. is only in physics, not economics. Judge for yourself whether any of this makes sense.]

While arithmetic is enough to understand what's described here, systems thinking is necessary for understanding how to foster the feedbacks in the system to improve local and national economies; for example, how to foster economic clusters (see below). It's also necessary for understanding the "free trade" offshoring feedbacks destroying local and national economies. We'd better start using systems thinking because our individual, regional, and national futures depend on it.

So there are three things to work on:

  1. Increase dollars coming in.
  2. Increase circulation within the economy.
  3. Decrease dollars going out.

What do you think is the case in Colorado Springs? More dollars coming in than out? Or more dollars out than in? What's the trend?

Here's a clue from Jobs & 'Trade' Data Update Apr09: Colorado Springs has experienced a devastating loss of manufacturing jobs ... these are your primary employers!

The Colorado Springs manufacturing jobs blood bath.

Holy cow! Colorado Springs has lost 52% (12,700) of its manufacturing jobs since 2001 as of March 2011? And that trend is accelerating downward? Holy cow! These are typically those coveted "primary employers", the "export companies" needed to create a stable or growing economy.

And Colorado Springs has also lost 52% (7,500) of it's Information Technology jobs since 2001 as of March 2011. This should be no surprise, either, because many IT jobs are in support of manufacturing, which we're losing (e.g. Intel in India). What a bummer for those who retrained in IT as the wave of the future when they lost their manufacturing jobs.

Experienced Professionals Leaving U.S. for India (Jan/Feb 2006)

... now as companies start to ship high-end research and senior managerial jobs too to India, foreign workers see a huge opportunity for themselves here. ...

Estimates suggest that 200,000 to 400,000 jobs have moved from the U.S. since the outsourcing trend began in the 1990s, which is still a fraction of the some 138 million jobs in the U.S. The Information Technology Association of America (ITAA) says only around 2 percent of the 10 million computer-related jobs have been sent abroad; 12 percent of IT companies have outsourced work, compared to 3 percent of non-IT firms. The highest projection for outsourcing is by Forrester Research: a loss of 3.3 million U.S. jobs by 2015, including 1.7 million back-office jobs and 473,000 IT jobs, which will create a dent in the U.S. job market but not the wreck everyone fears.

Note that this article cites the corporate-backed ITAA figure of "2 percent of the 10 million computer-related jobs have been sent abroad". But as my chart shows, 830,000 jobs (22.3%) have already been lost as of Apr 09, as opposed the Forrester's "473,000 IT jobs by 2015." Talk about low projections. And by Jan 06 the nation had already lost 664,000 jobs; it appears that Forrester Research is either incompetent or lying.

Did you know the magnitude of these job losses? Does the corporate media inform or does it cheerlead for current "free trade" policies that led to the loss of those jobs? You know the answer. (See Denver Post 'Trade' Deception, 3/3/08.)

So it's obvious that Colorado Springs has more dollars going out than coming in.

Note: There are other reasons for Colorado Springs' woes: infrastructure backlogs, potholes, cutting regional services, and increasing "fees" (fees that many see as tax increases in disguise). This is happening all over, see Cities Turn to Fees to Fill Budget Gaps, 4/10/09). See the Growth Facts of Life on dysfunctional growth policies.

But back to the main question: What's a mother to do about the chilling job losses?

 

Standard Economic Development Approaches

First let's look at two typical recommendations. These examples are pretty much the same (you can skip down to standard approach summary and not lose much):

  1. From Primary Employment Trends in Larimer County, January 2008. Prepared by: Dr. Martin Shields, Regional Economist and David Keyser, Research Economist at this website. In partnership with Colorado State University’s Office of Economic Development and Northern Colorado Economic Development Corporation (NCEDC).
    • first is through business retention and expansion (BR&E), an effort that focuses on enhancing the competitive abilities of the region’s existing businesses.
    • [the] second approach is through business attraction.
    • [the] final approach NCEDC employs in new job creation is
      through helping new local startups.
  2. From The Skinny on Primary Jobs, 4/12/01, by John Cody, CED, President/CEO, Longmont Area Economic Development Council. Created . Found at "What Are Primary Employers?"
    • Supporting Existing Employers - So They Will Stay and Grow
    • Attracting New Employers - To Further Expand and Diversify the Economic Base
    • Growing New Companies - Incubators, Entrepreneurial Assistance

Standard approach summary:

The focus is on "primary employers". It's pretty much standard economic development policy.

  • primary employer attraction
  • primary employer retention and growth
  • new primary employer creation

These are positive steps, but they're astoundingly incomplete. They focus on the "bring dollars in" front end, but ignore the circulation middle and the "limit dollars out" back end.

When I say these are positive approaches, I should add the caveat that in general competition among regions with subsidies to attract companies is a zero sum game. That's because it does not "create jobs", it moves jobs from one region to another. It either steals existing jobs from another region or it gets jobs that would have gone to another region if that region had larger subsidies. See The Growth Facts of Life.

Businesses die that focus on gaining new customers and not enough on why they're losing the ones they have ... their best ones. The same concept applies to an economy.

 

Going beyond standard economic development approaches

So what else can be done to improve an economy? Here's the diagram  again.

Economic Development Model, Generalized with more detail

Here's what can be done. The standard approaches above are colored.

Export Companies (Primary Employers)

  • Indeed, retain & grow them. Large and small.
  • Indeed, attract more of them. Large and small.
  • Indeed, help create them by supporting incubators and entrepreneurial networking.
  • Attracting their customers and suppliers is one of the best ways to do the first. Sets of similar companies, along with their customer and suppliers, form economic clusters. Economic clusters either grow or decline; regions should foster them. Fostering clusters helps them be more efficient and grow as well as increases dollar circulation within the local economy ... a double hit. On cluster feedback mechanisms and how to foster them, see A Systems Thinking Perspective on Manufacturing & Trade Policy, Section VIII.
  • Develop economic clusters for which the region has comparative advantage. There are analysis tools to help determine this. See Minnesota IMPLAN Group and in Proposal in Response to RFP NO. 07-016: Industry Cluster Analysis (submitted ... no response ... the county hired an expert from afar that didn't come even close to meeting the schedule required in the RFP). See also the section on clusters in Principles of Economic and Workforce Development.
  • Of these economic clusters, give special attention to developing clusters for industries that have high transportation costs. It's counterintuitive for many that large national clusters grow when transportation costs are low (they do because it's more efficient to build things in one place and ship them). Because fuel costs will increase, such national clusters will shrink and regional clusters will grow. Colorado Springs can target those.
  • Foster regional food production because increasing fuel costs increase food prices and make the region less competitive. Agricultural exports can also bring dollars into the region.
  • Focus on attracting companies with large economic multipliers. Those manufacturing jobs Colorado Springs has lost have really hurt because manufacturing has above average multipliers.

    An economic multiplier summarizes the total impact that can be expected from change in a given economic activity. From Local Income Multipliers: "Employment in the export sector creates a multiplier effect by providing additional employment from the new income it brings in. The service industries develop largely to serve the local needs of the existing population."

Primary employers are often attracted with tax incentives and other subsidies. These include investment tax credits, job traning credits, jobs credits, vacant building rehabilitation tax credits, ... it goes on and on, including support incentives, economic development "enterprise zone" and other subsidies. Here's are lists of business incentives and "enterprise zone" tax encentives for El Paso County. Companies that can take advantage of these incentives bear a lighter tax load than other companies.

Local Service & Retail Companies (including government & local non-profits)

  • Any region that provide incentives to attract new companies should also provide incentives for companies to buy locally.
  • Local government can institute "buy local" policies.
  • To boost local spending and keep money circulating within the community, many Struggling US towns print their own currency, 4/8/09. "According to some estimates, there are now more than 75 local currency systems across the country."

    See also, Local currencies cash in on recession By Nicholas Riccardi, 8/11/09: "The local bills in the town of Pittsboro, N.C. are known as the Plenty. 15,000 Plenties are in circulation. Communities in North Carolina, Massachusetts, Arizona and elsewhere print their own money to encourage shoppers to patronize local businesses. Local money was last popular during the Great Depression."
  • To improve the economy of Colorado Springs, raise the minimum wage to increase aggregate demand. That's what will create jobs. Those who object to this on the basis that "there'll be less of anything that costs more" apply microeconomic principles to a macroeconomic issue. Simple "common sense" does not apply in this case (and many others).

Import Companies

Now here's the "politically incorrect" part: it's improper to talk about the damage these companies do. Export companies, those primary employers, get a lot of attention for their positive impact (even though we're losing them like crazy). Import companies do not get much attention for their negative impact. So what are they?

Import companies are the "big box" stores, with Wal-Mart being the quintessential example. Import companies are the polar opposite of primary employers. It's illogical and destructive to have companies like this and even more so to encourage them with incentives. Why?

  • They primarily import goods and ship dollars out rather than shipping goods out to bring dollars in.
  • Wal-Mart, for example, sends their dollars outside the region every night to company headquarters (Bentonville, AR), dollars that might otherwise be available for circulation.
  • They offer low wages and burden public services. More at How a Regional Economy Works.
  • Their employees often get discounts to shop there, so much of their wages also don't circulate in the community.
  • They put local businesses, businesses that do "buy local", out of business.

One of Rocky Scott's slides had this: "Without primary employers, we only export our wealth, get poorer."

This should be extended to say, "With only import companies, we only export our wealth, get poorer." And that's exactly what's happening ... and we wonder what to do?

So what would be done, if policies were logical?

  • For sure, don't welcome them.
  • Especially don't attract them with incentives. The tragedy is that many of these companies get many of the same incentives as export companies (see examples below).
  • Impose greater taxes to discourage them from locating here.
  • Or, at the very least, provide local, home-owned companies with the same kind of incentives given to export companies to give them an advantage over, or at least level the playing field against, the big box stores that undermine the economy.

Incentive examples for Wal-Mart:

Doing anything about import companies is, of course, controversial. That would, of course, violate "free market" ideology. You'd hear: "You can't do that, let the 'free market' take care of it. If people don't like having Wal-Marts here, all they have to do is stop shopping there! Everyone should act in their own self interest and everything will work out for the best."

Well, that's perfectly logical for individuals. Unfortunately, it's collectively irrational; it's a perfect example of the "fallacy of composition." In this case, it goes like this:

Every individual acting logically shops where prices are lower. Those prices are lower because the products come from, say, China where the wages are a small fraction of what they are here. Plus, costs are lower because they have few, if any benefits. These low wages and wage competition put downward pressure on all wages. This prompts more people to shop at big box stores where prices are lower. A reinforcing feedback loop and a recipe for the local and national disasters we're experiencing.

It's individually logical, but collectively irrational. We can't blame individuals for being logical, it's the structure of the system that's responsible. The typical, "If you don't like Wal-Mart, don't shop there", response ignores this logic and relies instead on simplistic ideology.

Another likely complaint: "We can't discriminate against big-box stores, that would be interfering in the 'free market' and unfair. That's social engineering." The fact is, though, we already discriminate by providing incentives for some companies and not others ... now that's social engineering, too. This is really beside the point because what we must care about is whether regions and the nation will fail or not.

You'll hear little in the corporate media about the downside of import companies. Retail and wholesale import companies are the corporate media's advertisers. It's not in the media's financial interest to antagonize them. As I document in The Tangle of Growth overview (p. 12), the media are part of what's known as the "growth machine" ... entities that are “naturally organized” by the profit motives they share.

So there are things the region can do locally to improve the economy. Alas, they'll not do enough to overcome the "free trade", anti-stimulus background that's undermined the U.S. economy.

 

What to do about National Policy?

The query at the beginning states: "Don't think that EDC or the City will be in a position to impact US trade or the stimulus policy."

Well, we'd better try because the same logic that applies to the region applies to the nation as a whole. The U.S. economy has only been kept afloat by massive borrowing from countries like Japan and China.

The cumulative U.S. trade deficit is $8.1 Trillion from 1960 through 2010. $6.2 Trillion of that is from 2000 through 2010.

Much of this has been used to buy U.S. companies, buildings, roads, and ports so U.S. Net International Investment  is only somewhere around $2.5T. [See Redux: Who owns America? How is foreign ownership of U.S. Treasuries and other securities trending? and Warren Buffett's Chart of growing foreign holdings of U.S. assets at The Trade Deficit and the Fallacy of Composition.] Then again, it may now be more:

What the US owes the world by Eric deCarbonnel, 12/26/08

Owen F. Humpage and Michael Shenk explain the US's net international investment position (what the US owes the world). Reading this article is necessary to understand a point I make below, which is that the amount the US owes the world has doubled in 2008 to around 5 trillion. [Last year, that negative position reached a record $2.5 trillion.]

 

We Must Have Balanced Trade Policies, not "Free Trade". Here's how:

There are so many factors affecting trade that achieving a "level playing field" is extremely difficult. Trying to adjust the many factors is just too complicated. There's currency manipulation, competitor countries having national health insurance (removing the cost from industry), tax policies, capital subsidies, transfer pricing manipulation of profits, theft of intellectual property, tax deductions for moving manufacturing and research to China, and lack of labor & environmental standards.

Trying to adjust for each of these by means of import tariffs will mean political battles with virtually every special interest in America, battles which will mostly be lost. Therefore, focus on outcomes by promoting "even trade" or "balanced trade," not "free trade."

Warren Buffett is also concerned with the long-term problems caused by international trade that's "out of balance." He described the problem and what to do in his article in Fortune:

America's Growing Trade Deficit Is Selling The Nation Out From Under Us. Here's A Way To Fix The Problem--And We Need To Do It Now. By Warren E. Buffett Carol J. Loomis, 11/10/03 (alternate link here).

To deal with this out of control situation, he's proposed an Import Certificates mechanism to create balanced trade to deal with what he describes as "a shifting maze of punitive tariffs, export subsidies, quotas, dollar-locked currencies, and the like."

Buffett's Import Certificates mechanism: If a country purchases products or services from the U.S., then it can sell that amount back to the U.S. If it does not want to sell to the U.S., it can sell its Import Certificates to another country that does want to sell to the U.S.

This is a market-based mechanism that would produce the desired outcome: balanced trade.This is necessary because anything out of balance will be, WILL BE, brought back into balance.The more out of balance it's allowed to become, the more severe will be the correction.

When I wrote this article in May 2005, I suggested it would be wise to phase in this policy over a decade or so to mitigate the economic shock. Going "cold turkey" would be ugly; "warm turkey" will be painful, but less so than "cold turkey" and much less than will be the consequences of current policies. That was then; it's too late now (Sept 2010). There's no time left for warm turkey.

Also see: Buffett's Import Certificates Plan Could Pilot the Economy to a Safe Landing By Howard Richman, 1/18/09. This article echoes my view that

"Obama's stimulus package won't accomplish much if it doesn't address the trade deficit". Exactly.

Richman also wrote that "If they don't [pass Buffett's Import Certificates plan], we will continue losing our remaining manufacturing industries and will continue to pile on more and more debt. We could be heading toward a dollar crash." Exactly what's happened and what will happen.

The U.S. has borrowed so much that it's going to be unable to pay it back. The result can only be hyperinflation to devalue the debt. See The 9/22/08 Economic Crisis.

 

What can be done to influence the national agenda?

  • Support "Buy American". Unfortunately and incredibly, the U.S. Chamber opposes this:
    Opposing "Buy American" legislation, U.S. Chamber of Commerce, et al 1/23/09
  • Oppose those like Senator McCain who opposed Buy American raising the spectre of Smoot-Hawley. That Smoot-Hawley had any effect on the Great Depression is an obvious fabrication: See exactly why at Smoot-Hawley Fiction, 2/15/09. Obama should not get a pass on this, because he supports "free trade", too.
  • Lobby the U.S. Chamber of Commerce and other organizations to stop pushing for "free trade" that leads to the loss of export companies ... these primary employers are the very companies that regional economic development organizations attempt to attract. Ask them why they're working against regional economies and the U.S. economy? Ask them why they hate America?
  • Either work to change Rep. Doug Lamborn's ideology or work to change representatives. See Rep Doug Lamborn on 'Free Trade'. This is not a minor issue; it's a matter of national security, not just economic security.

As Professor Peter Navarro explained, in a presentation on "The Wealth of Manufacturing Nations in the 21st Century" at the Coalition for a Prosperous America's 4/7/09 Issues Forum on why free trade is not working... and cannot work today:

"Get into politics or get out of business!!!"

So far, the U.S. has done a pretty good job of getting out of business.

I've also written on economic development at

  • Principles of Economic and Workforce Development, 11/29/07. A systems thinking perspective is necessary for understanding the dynamically complex challenges that face our organizations, our community, and our society.
  • How a Regional Economy Works, 8/24/06. The purpose of this short paper is to illustrate how an economy works, from a regional economy within the U.S. to the U.S. economy is a whole.

__________________________________________________

 

Operation 6035 Press Release on Initial Findings

Subject: Press Release: Operation 6035, April 14, 2009
Date: Tue, 14 Apr 2009 15:31:19 -0600
From: "Julie Boswell" <JBoswell@csedc.org>
To: "Economic Development Corporation" <EconomicDevelopmentCorporation@csedc.org>

FOR IMMEDIATE RELEASE           
"Operation 6035" Underway -- Initial Findings to be Presented

Consultant to present initial findings of the Pikes Peak region's Market Assessment

Colorado Springs, Colo. (April 14, 2009) - - Operation 6035 ("sixty-thirty-five") launched by a diverse coalition of community, government and business organizations has released the initial findings of the first phase of a comprehensive regional economic development strategic plan for Colorado Springs and the Pikes Peak region. The mission of Operation 6035 is to create a shared vision for the Pikes Peak region's economic future, assess the region's current competitiveness and outline specific implementation strategies.

AngelouEconomics (AE), an economic development consulting firm based in Austin, Texas, has conducted a community engagement process that included over thirteen focus groups, over fifteen one-on-one interviews with key community leaders and received responses via an online survey from over 1,200 residents and business owners in the Pikes Peak region. 

"The level of response and the quality of feedback we've received is impressive, particularly from residents using the Operation 6035 website," said Chris Jenkins, president of Nor'wood Development Group and co-chair of the project's Steering Committee. "It is giving us a true ground-up look at the challenges to economic development in our community, and it shows that we have an engaged and educated populace that truly cares about the future of the Pikes Peak region."

The initial phase of the study will help the consulting team learn more about the region's opportunities, issues, and strengths.  The team has benchmarked the Pikes Peak region against competing cities (including Fort Collins, Colo.; Tucson, Ariz., Portland, Oreg.; Austin, Texas; and Boise, Idaho) to determine the region's competitiveness for attracting quality jobs and businesses.

"This is an important step in gaining a clear understanding of the strengths, weaknesses and opportunities in regard to our region's economy," said Pam Shockley Zalabak, Chancellor of the University of Colorado - Colorado Springs and Co-Chair of the Steering Committee.  "The information contained in the Market Assessment will help shape the final recommendations to the community."

Key findings presented at the press conference included:

- The Pikes Peak region has an extremely competitive cost of living -- 8% below the national average and well below all benchmarked regions.
- The Pikes Peak region benefits from a strong existing technology industry base and workforce, which positions the region competitively for future growth.
-  Residents in the region are highly educated, over 35% of residents have earned a bachelors degree or higher, 3% above the national average.
- The region has experienced a decrease in the percentage of young professionals (those ages 25-44). This age group, most often part of a community's "creative class" and almost always the engines of innovation, are extremely important for economic growth. The Pikes Peak region has experienced a 7% decrease in this important age range.
- The region lacks a unified and collaborative vision for economic development.  This issue was identified as the number one challenge to future economic growth on the online survey.  More and more communities are learning that competitive advantages in this advanced and integrated economy are gained through a collaborative, regional approach.
- Competing regions are aggressively marketing to companies in the Pikes Peak region with significant incentive programs often unmatched by the region.  Incentive programs in other states put the Pikes Peak region at a competitive disadvantage.  Many states are providing upfront cash grants to attract companies while maintaining public confidence through various clawback provisions. 
- The region must build upon existing entrepreneurial and start up support programs for emerging companies and take advantage of the growing opportunities at UCCS.
- The Pikes Peak region is positioned competitively to build existing amateur sports assets such as the USOC to continue to attract sports and sports related industries such as medical device manufacturers and related research and development activities.
- The Defense and Homeland Security industries and military presence have a significant positive impact on the region.  Future efforts should focus on continuing to attract military related research and development activities and programs.

"The critical findings shed light on the region's competitiveness and lay the foundation for future strategies and a unified vision for economic development.  This community engagement process has been one of the most successful efforts our firm has conducted.  We applaud the efforts and time of everyone involved" said Angelos Angelou, principal executive officer with AngelouEconomics.

About AngelouEconomics:  AngelouEconomics is recognized as one of the most innovative economic development and site selection firms.  The firm has consulted with more than 150 public and private clients; including countries, states, regions, communities and Fortune 500 companies. 

For more information and to view the Preliminary Market Assessment Report, visit www.operation6035.com.

__________________________

On Operation 6035 Objectives

According to the "Operation 60THIRTYFIVE" site, these are the objectives listed on the site of the project:

This community based economic development strategy has six objectives:

  • 1. Create a shared vision for the economic future of the Pikes Peak region
  • 2. Assess the region's current competitiveness
  • 3. Identify specific high impact target industries
  • 4. Recommend organizational, programmatic and structural improvements to support the mission of the Colorado Springs Economic Development Corporation of high quality job growth
  • 5. Outline a specific implementation plan
  • 6. Establish tangible performance metrics

Below are some thoughts on each of these objectives:

1. Create a shared vision for the economic future of the Pikes Peak region

Here's some heresy for you: The idea should not be to create a shared vision of what the economic future of the Pikes Peak region should be. The focus should not be on the qualities that would make the region attractive.

The shared vision should be about how we will allow the region to become unattractive ... an unorthodox assertion.

Huh? What's that? How the region will become unattractive? Who wants that? Nobody. But that's what is happening and what will continue to happen.

To understand why this is true, one must understand the nature of urban dynamics and understand what's called the "Attractiveness Principle." Applied to businesses, it's the well-known principle that no business can be all things to all people (lowest prices, best service, best quality). The same goes for regions.

And a fact of life is, given free migration, that no place can long remain more attractive than any other place (where "attractive" means the composite of factors that attract). As Colorado Springs will eventually become as unattractive overall as any other place, we must develop a shared vision of what will be allowed to make us unattractive so as to allow us to maintain a region with the many qualities we desire. This is known as practicing "strategic unattractiveness."

For example. Will we become unattractive by having low taxes along with potholes and dying grass and closed restrooms in parks? Or will we maintain quality of life with impact fees on growth to offset implicit and explicit growth subsidies. If not ending growth subsidies, will we redistribute costs onto the public with higher taxes to pay for the long-term costs of growth? It's apparent we are following the first path.

A main reason to try to arrive at how we'll become unattractive is that everyone tends to want to be attractive on all dimensions and we're largely unaware that becoming more unattractive in some way(s) is inevitable.

For an understanding of urban dynamics, strategic thinking, and the attractiveness principle, see

2. Assess the region's current competitiveness

As noted above, use IMPLAN to determine current clusters. Consider the inevitable higher fuel costs (including the coming hyperinflation) and the need to stay local.

3. Identify specific high impact target industries

As noted above, attract export companies (primary employers) and companies that will "buy local. This means attract manufacturing, promoting local agriculture, and industries in clusters that will grow locally as transportation costs increase. Given the inevitable increase in energy costs, attract companies that improve energy efficiency and develop renewable energy. Promote reuse.

Also, as noted above, there should be consideration of which industries should NOT be targeted and subsidized ... e.g., import companies.

4. Recommend organizational, programmatic and structural improvements to support the mission of the Colorado Springs Economic Development Corporation of high quality job growth

In 2003 Colorado Springs eliminated its Office of Economic Development. This was short-sighted and a mistake. Economic development should look out for the whole of Colorado Springs and not favor those who can, thanks to growth subsidies, contribute to financing a private endeavor to increase already-subsidized profits.

5. Outline a specific implementation plan

Including tracking performance against plan.

6. Establish tangible performance metrics

These should be publicly available for companies courted and attracted. Individual company and summary statistics should be included. Projected and historical data should be tracked, compared, and reported. Metrics:

  • net import of dollars into the region
  • absolute and percentage "buy local" expenditures
  • economic multipliers

Story on Operation 6035 Chapter 2: target industry opportunities

The Colorado Springs Independent had an article on 5/28/09: Operation 6035: No surprises yet by J. Adrian Stanley.

I should preface and soften any criticism on this page by saying that it's extremely difficult to go beyond standard economic development recommendations; it goes against powerful ideological beliefs and would alienate almost all clients. That said, here goes:

It reports the selections for "target industry opportunities" to be ... my comments are in italics:

  • software and information technology ... really? ... considering the incredible losses of IT jobs from the region ... ??? (see note below)
  • renewable energy ... that's fine, but the danger is, with so much manufacturing being offshored, companies should be examined for whether they'll manufacture locally. And don't forget companies specializing in increasing energy conservation & efficiency ... and reuse.
  • aerospace/defense/homeland security ... considering these areas will inevitably decrease because the U.S. can no longer afford so much of them, emphasizing these areas is suspect.
  • sports and sports-related industries ... depends on what happens with the USOC, doesn't it? Our elevation does give us an advantage that sea-level locations don't have.
  • emerging industries/entrepreneurs ... if they fit in identified economic clusters that are expected to grow, with consideration as to whether they will buy local.

How about manufacturing? Agriculture? Buy Colorado Springs? Import company impact?

It appears this $160,000 study by an expert-from-afar reports the conventially obvious, but the conventional is going to be wrong given the changing economic conditions that I've noted.

The suggestion that the region pursue IT is ... is ... well, simply amazing. See the devastation in the graph below: Colorado Springs has lost a greater percentage of IT jobs (49%. 7,100 lost) than manufacturing jobs (46%, 12,300 lost).

U.S. Employed Foreign Guest Workers Outnumber Unemployed Techies 5/28/09

It is no secret that the H-1B visa program is rife with fraud and abuse.  The program allows American companies to exploit foreign IT workers at the expense of Americans, drives down the wages of all those in the field and costs the U.S. countless tax dollars.

... “in January of 2009, the total number of workers employed in the information technology occupation under the H-1B program substantially exceeded the 241,000 unemployed U.S. citizen workers within the same occupation."

... a recent study conducted jointly by researchers at New York University's and the University of Pennsylvania's business schools ... found that the use of H-1B visa workers by U.S. companies drives down the wages of American IT workers by as much as six percent.

"We simply sought to dispel the myth that globalization generates no losers," the researchers wrote.

Seriously now, this H-1B policy would be laughable, if it weren't so destructive and despicable. Why is it U.S. policy to systematically undermine the educational investment of its citizens by causing them to lose their jobs and depressing the pay of those who do have a job? Answer: to depress wages and increase profits ... to increase return-to-capital and reduce return-to-labor.
___________

Added 7/8/09: And they want even more. Incredible!

Task Force to Recommend Overhaul of U.S. Immigration System By Spencer S. Hsu, Washington Post Staff Writer, July 8, 2009.

A bipartisan task force will recommend today that the United States overhaul its immigration system in response to national security concerns, saying that the country should end strict quotas on work-based immigrant visas to maintain its scientific, technological and military edge.

"The continued failure to devise and implement a sound and sustainable immigration policy threatens to weaken America's economy, to jeopardize its diplomacy, and to imperil its national security," concluded an independent Council on Foreign Relations panel, co-chaired by former Florida governor Jeb Bush (R) and former Clinton White House chief of staff Thomas V. "Mack" McLarty III.

The report comes as President Obama and Congressional Democrats say they expect to begin debate on a comprehensive immigration plan within a year. But key Republicans -- including  Sen. John McCain (R-Ariz.), the 2008 Republican presidential nominee and co-sponsor of previous overhaul legislation -- have said a plan must include expanding temporary-worker programs. ...

Edward Alden, the task force's director and a CFR fellow, said the involvement of Bush, a prominent national Republican and the brother of former president George W. Bush, and McLarty, a Democrat and senior international fellow at the U.S. Chamber of Commerce, was intended to create political space for centrists in both parties.

The Council on Foreign Relations, Republicans, the U.S. Chamber of Commerce ... the usual suspects ... supporters of "free trade" and undermining wages. Excellent!
___________

Many of those who lost their jobs in manufacturing retrained in IT, but those jobs are going, too. What are they going to retrain for now? Note that Advanced Technology Products jobs are being lost, too? (... see the ATP graphs ...) The truth? They'll be expected to get jobs at WalMart.

Colorado Springs IT Jobs Trend

Colorado Springs Mfg Jobs Trend

Comments and criticisms will be appreciated.


URL: http://www.exponentialimprovement.com/cms/econdevlocal.shtml

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