We admire city government for put up $5 million in capital funds to fight for jobs and business investment, but we’re worried that we’re still fighting the wrong battles in Memphis.
Quality workers and companies today are looking for cities that sell themselves on their quality, not for their cheapness, or how big their corporate bribes are.
It’s like we’re trapped in a time warp here. Decades pass, but we still think it’s about paying for infrastructure and giving away taxpayers’ money.
The $5 million for business incentives is a good enough idea, but the biggest risk is that it chases all the wrong goals again. Already, we’re talking about building roads, public garages and the like with the money. From where we sit, if the investments aren’t being built to inspire entrepreneurs and start-up companies, we’re just deluding ourselves (and we’ve gotten really good at that).
The Wrong Road
We’ve tried for decades giving companies enough money to make them love us and what do we have? A company town and a workforce that are predominately low-wage and low-skill, and a perpetual stream of excuses for our noncompetitiveness, a problem that is intensifying and God help us, it’s not because we’re not building roads.
All the jobs created in the past 20 years in the U.S. have come from start-ups, and if we’re not concentrating on them, we’re investing in old school economic development that’s falling apart in front of our eyes but apparently, we’re so trapped in our addiction to PILOTs that we can’t see a better way.
We’re told that from in the last four years, we’ve had a net loss of almost 40,000 jobs (the equivalent of losing FedEx), which indicates to us that our problem is more structural and attitudinal. Despite adopting the language about talent, minority business and quality of life and sprinkling the terms in all of our economic development rhetoric, we’re doing precious little about any of them.
Finding a Different Path
There are hopeful signs that changes are stirring, but we don’t have time to keep investing in the same old formulaic economic development and the same old incentives. Despite the Greek chorus from economic development types about the need for more incentives and more to give away to companies, the problem runs much deeper than that.
The problem is that we have spent 20 years walking down the wrong path, and even when it’s clear that we’re lost, we blithely march on rather than understand that we need to find a better, new way to the future, because simply put, this one isn’t working.
As a result, we urge Mayor Wharton to listen to new voices and new ideas as he tries to decide where to invest the $5 million set aside to prime the economic development pump. We hope he’ll listen to people like Eric Matthews at Launch Matthews, ask his minority business transition committee to deepen its recommendations and to assemble young entrepreneurs whose big ideas fail for lack of tens of thousands while we throw million-dollar hail Mary passes at corporate executives.
The Right Targets
Harvard University economist and commentator Ed Glaeser recently had this view, which should inform us about a better way: “With job growth continuing to lag even as the economy picks up, local communities will be tempted to resume “smokestack chasing”—using tax breaks to attract big employers. That’s a misguided approach.
“Our research shows that regional economic growth is highly correlated with the presence of many small, entrepreneurial employers—not a few big ones. In fact, a study of U.S. metro regions showed that cities whose number of “firms per worker” was 10% higher than the average in 1977 experienced 9% faster employment growth between 1977 and 2000.
“Data can be misleading, of course, so it’s reasonable to wonder whether industry structure, tax policy, or some other special circumstance skewed the results. The answer is no: Even adjusting for such variables, the relationship between small firms and job-growth rate stands.
“Politicians enjoy announcing a big company’s arrival because people tend to think that will mean lots of job openings. But in a rapidly evolving economy, politicians are all too likely to guess wrong about which industries are worth attracting. What’s more, large corporations often generate little employment growth even if they are doing well. Instead of trying to buy their way out of the recession with one big break to one big employer, politicians should reduce costs for start-up companies and small businesses.
“And a little work in that direction goes a long way. Research shows that once entrepreneurship gets established, it tends to be self-perpetuating.”
Back to the Future
In other words, our city needs to abandon its lip service to entrepreneurs and put them at the center of our economic strategies. Other cities are already ahead of us, and this should have been an area that we pioneered, building on the legacies of Clarence Saunders, Kemmons Wilson, Pitt Hyde and Fred Smith, to name a few.
It is in creating a culture of entrepreneurship that Memphis contributes to one of its most important business opportunities – to improve our dismal record on African-American businesses, which account for about 1% of total business revenues in a 50% black region.
Dr. Glaeser’s overriding advice given to Leadership Memphis earlier this year: “Focus on quality and smart people. “There is much to be said for the strategy of focusing on the quality of life policies that can attract smart, entrepreneurial people,” he said. “The best economic policy may be to attract smart people and get out of their way. This approach is particularly appealing because the downside is so low. What community ever screwed up by providing too much quality of life?”
Mayor Wharton is smart to be looking for ways to shake up economic development for Memphis, but we hope he realizes that the city we have created is exactly the one we set out to create with our economic policies. Progress depends on changing and changing depends on thinking about a different city and then creating the policies to make it happen.
Most of all, we hope that this discussion about how to use the $5 million will include much more than the usual suspects if we are serious about finding more than the usual answers.
Tom, there’s just no sense of fairness about getting ahead in this politicized city. Even YOU are guilty of this, e.g.: “our dismal record on African-American businesses, which account for about 1% of total business revenues in a 50% black region”. Whose fault is this? Whose kids drop out and go gangster? Who’d rather invest in a set of spinning tire rims than a degree? And all this despite the breaks given to the so-called minorities here who are actually majorities. Would you like to get into the accuracy of the statistics in “The Bell Curve” while we’re on this topic? I didn’t think so. “Pock pock pock!”
@ Wintermute,
Are you suggesting that the statistics in The Bell Curve are accurate? If so, you may want to broaden your research. Look especially hard at the critics of that now thoroughly debunked book.
Every city in the country offers tax and other incentives to business. Even NYC, and if there were ever a city that wouldn’t need to, it would be NYC. Its folly to suggest that businesses don’t take that into account, and are just looking for whatever “quality” means. Fact is – we need businesses to locate in this city. Large, small, black, white, whatever. Particularly in Commerce Square and other downtown businesses. The $5 million fund is nothing to be ashamed of or concerned about; rather, we ought to be proud that we finally have a mayor that understands what needs to be done and how it gets done.
I’ve said this before and I’ll say it again, it doesn’t matter how much of the talk we talk if we don’t walk the walk it might as well be gibberish!
Here’s the thing, we don’t ask this question:
WHY don’t we walk the walk?
1. Because we don’t know how!
From MCS on up we have no effective training for the last two generations on how to get the job done. Where we do have hat training, the students who “get it’ quickly exit to a place where it will be utilized and appreciated.
2. We haven’t employed anyone as far as I can see or know to train us in that. We’ve traditionally hired yes men to assuage our egos and nothing more. We have a lot of gall!
What kind of ego thinks it can invent a better wheel than the billions of wheels that are our there.
Well you hit it on the head, STARTUPS!! LOTS of them. We need to get rid of a BUNCH of stupid “commissions” that do NOTHING and use the money to “StartUP Memphis”!
No, not a slogan, not another slogan, really do it.
They can’t be more crony giveaways with no real thought about statistics to measure success and plans that are designed to succeed.
They have to be real businesses.
Paradigm #1:
There are two types: Opportunity based businesses and necessity based businesses.
We have quite a few of each, unequally distributed, and they need to be held to a more stringent and fiscally responsible standard than normal. In other words, they need to create more money than debt or promissory notes monetized. That’s OLD thinking, the new economy will not support the federal reserve type thinking anymore. The entire globe is against that very system.
So,
on to something new, better, more responsible and more sound.
Can we do it? Sure, but, it takes more action than words, yet, you have to speak the language of success the whole way or it’s not even going to happen. Do we speak hat language?
Survey says: NO we don’t.
SO, on to learning to speak that language as a city!
HOW?
Well, it can be taught in school.
Now before you go on thinking I am talking some esoteric ethereal crap here, I’m not.
There really is a real language of success, it can be taught, it has it’s own vocabulary, it must be learned on purpose in a focused manner, you WILL NOT LEARN IT ON YOUR OWN.
You have to hire an instructor. I could teach it, I know it. I’ve used it, it works every time. But, you quote Harvard, and I like Harvard, good to quote. For what we pay MCS, we could have our kids sent to Harvard instead of MCS, SOOOOO, let’s get the people who designed and put the program in Harvard and Wharton school in MCS.
Whaddya say, gonna keep on talking, or, are we gonna walk the walk.
@ Anonymous:
I don’t think things are going to get done that way anymore. I don’t think it has really worked out but for a small few, the rest seem to be victims of his very scenario. Maybe we can do better with a little more thinking and planning and not so much “hurry up and do it the old way and create more low wage jobs” which isn’t much help. This is about doing better.
If you want to keep the kids in town, there have to be jobs for degreed people and non degreed but well educated people (which will require a BIG change in efficient use of funding at MCS), BECAUSE if we keep creating low wage jobs, well, that just isn’t creating jobs for the intelligent and well educated that we want to generate.
Scenario:
Guy comes into town for a Job for a degreed person and wants to live near his job downtown. The people at the recruiters office LIE and say that it’s safe and Memphis is safe and wonderful now, but, it isn’t. He goes to work on his bike and gets mugged. His car is burgled and vandalized in the garage, his house is burgled, then some racist from his neighborhood starts yelling and threatening him, one of his kids is accosted by one of the many free-range child molesters we have cleverly incarcerated in plain sight.
OK, the dude is PISSED! He calls his recruiter and books another job and leaves without notice, and tells the truth about Memphis to anyone he hears is even considering accepting any position here.
That’s what we do, we generate these types of experience for unsuspecting people.
The locals already know the deal.
The paradigm that “leadership” (NOT) has generated for locals is that “it’s the same everywhere” although, statistics that show drastic differences in crime levels and types of crime in cities with “EFFED UP” school systems like ours which tell the true story contrast greatly.
Here’s our current paradigm for Memphis own brand of success:
If you aim at the bottom, you’ll get there. If you don’t aim at the top, you won’t get there.
There are so many successful ways to plan success. We have too many political debts and people politically beholdin to others. Those debts are “bad debt” now. They won’t be payed.
This $5million should not be used to pay those bad debts.
Let the holders be as screwed as the rest of us this once, they can weather it. We’ll ALL be better off for it in the long run and since the way to build wealth is through delayed gratification, it’s a more solid plan than incentives for the usual suspects.
I’m not against incentives where appropriate. We haven’t done that yet.
Anonymous:
We would disagree slightly. The $5 million is something to be ashamed of if it is spent in the same old ways – chasing old economy jobs with old school economic development strategies. It just leaves us further behind in the dust.
Wintermute:
We assume that your post was satirical. There are plenty of minority entrepreneurs but without access to capital, venture capital, even playing fields for loans, etc., we see little success here. As John Seeley Brown said when he was here to speak to Leadership Memphis, he made the cogent observation that low-income people are as entrepreneurial as everyone else. They have to be to get by every day.
As we said, we have created exactly the kind of city we set out to create. We have institutionalized low-wage, low-skill jobs that keep people in poverty so our economy has grist for its mill. It is designed to make the same old people and industries rich. What could we have done if we had been serious about giving incentives for minority businesses and for minority entrepreneurs? We would today be more competitive.
Since all these black people are getting so many breaks, I’m sure that wintermute would be glad to swap places with them. Give me a break. What drivel.
”The Bell Curve” has been thoroughly debunked except by people who still want to hang on to its racist thesis.
The scientific refutation of the contention that intelligence is genetically determined. For decades, studies of infant brain and behavior have demonstrated how brain structure changes along with behavior. Clinicians have long been aware of the fact that infants and young children subjected to deprived environments fail to thrive. Further, new methods in neurobiology demonstrate the great malleability of central nervous system development in early life.
Let’s get the racist mythology behind us and provide every child with an environment that will facilitate the full attainment of his or her human potential.
“Politicians are all too likely to guess wrong about which industries are worth attracting.” No kidding. Memphis needs to focus on lower taxes, better schools, and less crime. That’s where the money should go.
“1% of total business revenues in a 50% black region.” That sickens my stomach.
Chris, you’re right on.
It IS sickening.
The rest of the country is disgusted with Memphis because of it.
We either do better right now or die.
The people are in control, they are conjuring more economic catastrophes for this city.
Late to the party here but, how much of our business revenue is driven by large employers? If you strip large corporate entities I wonder how bad things would be. Still bad I’m sure, but probably not as dire as the cited statisitc.
I just don’t see why these loans/grants should be limited in scope. Shouldn’t they just go to the best ideas with the most potential for success? Or am I misreading this?