This is a continuation of my last post: Reflections on the IEDC Conference

I attended the roundtable “How effective are today’s incentives in tomorrow worlds?”. There were 9 roundtables simultaneously and this was the largest. It had around 25 people, all from local governments (no State). It was remarkably directed by a gray haired facilitator. I loved the way he facilitated the conversation and asked interesting questions. Now I will transcribe my notes:

Facilitator: Who has free land for potential new comers? 6 out of 28 people.
Who would like to have it? 5 raise their hand.

Who has cash incentives? The majority. In the last 10 years, they have given 500,000$, 2million and one guy said 10 million.

Facilitator: They looked at how much money they have given in the last years, and how much they have collected. They have only gave 600,000$, but that they have got 16 million dollars in tax revenues. “A pretty good return of investment”. (later he changed to over 10 million dollars, so I’m not sure about the figure).

Most of the incentives (which can be tax abatement or other types of support – it is not always cash), is usually done over 3 years. Some said in 7 years or 10.

Usually money is for potential incomers, but sometimes they would give money if a company is planning to leave, and or they have an offer on the table from another place.

They all offer workforce training programs.

They all have guidelines, that is no strict policies (check list)

Tax benefits were usually based on investment, but in today’s economy the main thing is jobs.

They know big companies receive training to get governments money. They know the lingo, etc.

But they know that companies will hardly leave only because of the money. They also know that sometimes they just want attention, not money. “If they call you to complain about traffic, for example, it was advised not to excuse yourself by saying that this is not your department! You have to be the facilitator and help the firms!” (I loved that answer).

One Mayor of a small city in Milwaukee: “I was impressed yesterday, about what the keynote speaker said, that people first choose a city, then a job. I never though in that way!” (Richard Florida influences :)

Lady: How can we promote quality of place?

Facilitator: that’s very interesting, but it’s another subject, let’s stay focused.
Lady, a little in doubt: But, quality of place is also an incentive to bring companies! We have a great living standard, but we don’t know how to market it.
People agreed, this was also important, and the facilitator let them talk a little about it. (they use images with sailboats and kids with tricycles in their pamphlets).

Young fellow: We’re trying to focus on certain industries.
Facilitator: Yeah, we all are trying to do that.
Young fellow: We in Anytown, Colorado, we’re trying green energy, etc.
Facilitator: Yeah, we all try to target industries, the cluster idea, but boy if there is a bakery that will hire 25 people, we all run like…

Facilitator: In a very hypothetical case, that the federal government will ban cash incentives. Would you agree? Yes = 8. No=3. Undecided= A few.

Facilitator: It would be good, because at the end of the road, we’re fighting against each other (Some nodded) But why would it be bad? Let me ask among the ones who said -no-.

Man who raised his hand fastest when answering no: We will lose firms… In this globalized and competitive world, they will leave us.
Facilitator: So you’re saying that other countries will out-compete us with financial incentives.
Man: Yes.
Facilitator: Could not they do it now?
Man: Errr… yes. But… it would be worse…

Facilitator: Many here have not participated. Any of you have any comment?

I raise my hand.
“I’m a phd student, researching on LED, so I’m really happy to be here, because you’re the guys running the real show. My perspective from the academic research is somewhat different. Most research is very skeptical of incentives. Mainly for two reasons, first because as you said, you’re fighting against each other, and second, it’s really difficult to measure the impact of them. I mean sometimes it can be done (pointing with my hand to the facilitator’s example) but it can be very biased”.

(small silence)

3 old guys, including the facilitators, were hard on me.

Experienced man: “You got your research wrong!! In terms of recruiting, we have got many jobs because of the incentives we have given…. ”

Me: “Just to clarify, I’m talking about cash incentives”.

Experienced man: “Cash incentives, we rarely do it, but they are important…”

Facilitator (looking at me): “I tell you, we gave so little money, and we have got so much! It really works!!

Another guy also was hard on me, I could see his lips moving, but at that point I could not really hear much more nor take notes.

It would have been completely futile for me to quote authors and years, to prove a point, like in an academic conference. These people, they knew, they have been there, they have seen it with their eyes…

Two worlds. I hope you get my point, regardless of what field you come from.

One of the most interesting questions was when the facilitator asked who will increase/the same/decrease their cash incentives the short term future.
Decrease = 8 (our current economic situation won’t let us do it)
Increase = 8 (we have to do it, we have no option)
The same = 4

What a great topic for research, uh!! It would be great to see in 5 years, how these cities have performed in several aspects. It would be such an interesting and publishable paper :) I thought about asking for their business cards, but first I ran out of biz cards (I forgot to bring extras!), and after my controversial question, I don’t know how happy they would be to give me info. I’m sure, like always, some researchers have already done that. I have to find these papers… For my post-doc :)

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The International Economic Development Council’s 2011 spring conference, held June 5-7, in Indianapolis, IN.

Understanding Tomorrow’s Industries Today: The Landscape of the Future.

My wife wanted to come to Indiana to visit her family, anytime in spring/summer 2011. We made it coincide so I could attend the IEDC conference, that by coincidence was taking place in Indianapolis. Unfortunately, I found that my PhD student fund for the 3 years had ran out, so I weighed if I REALLY wanted to attend to that conference, and I decided most of it was not really relevant for me, specially in the very last stage (hopefully) of my PhD. But I wanted to attend to a couple of sessions. So, after a lot of though, I decided to attend, and I openly confess my fault, I decided to crash a couple of sessions. (I’m a poor phd student ok!?). It was a little bit uncomfortable to be the only one around the conference of around 200 attendees without a name tag. I though, in case they catch me, with my Spanish accent I could always pretend I was serving water or something.

I was really happy I attended, and if you’re interested in local/regional economic development (LED), I highly encouraged to learn more about this outstanding organization. (A little advertisement to cover for my conference fee :) I would not mind to join myself.

I think there were only a couple of academics, the vast majority were practitioners of local governments, and a few were from consultancy companies.

The LED literature says that there is a big disconnect between academia and practitioners. I confirmed this when I conducted some interviews with public officials in USA and Denmark. Attending to this conference was just a big confirmation stamp of the stereotype.

University LED researchers and LED officials are two worlds apart. Almost like the astronomical bodies and the astronomers. I know it sounds ridicule, but what I’m trying to say, it’s that there is not much communication among them. Well, at least astronomers seems to admire the sky, something that LED researchers not always do.

At the conference, I performed two informal interviews to LED experts. I asked them several things, but concerning the topic I’m blogging today I asked them if they found in their sphere a disconnect from the academia. They both have certain links with the universities, but they said that they’re “in their world”, “ivory tower”, “disconnected from reality”. One explained how in her hometown “the professors in the field (usually in planning), have their network, they all come from the same prestigious university, they recruit themselves, and live by and for them. There are some younger PhD students who have more involved projects, but not the professors.”

The dislike of the people in the field for the academic research is matched if nor surpassed by the professors for the field. In Berkeley, I interviewed one prominent professor on economic geography and regional development. When I asked him about his feelings about LED, he said “Much prostitution!! Much prostitution!! (not literally) These guys will do whatever to please companies!”

Both positions are wrong and right. I belief the way forward is to combine both views. It’s true that the academic world can really suck to come up with useful things for the economic development of cities and regions. Academics much focus on concepts and discussion, but the governments cant make little use of that. In the case of more public funded universities (European), many professors have not in their agendas help cities. For the ones more based on private and quasi-public grants (US), they’re neither motivated to do the applied research on the field.

The lack of rigorous research and fluffy concepts are the the main courses in the practitioners’ menu, while professors and their phd students have endless discussions about the ingredients of the onion soup. Then we have the consultants, another amazing world, that I can not reflect upon in this post.

In one of the sessions I attended I heard this quotes from the speaker:

a) Today the world -of business creation and growth- does not depend on geography.

b) How do we train for jobs that don’t exist yet? (question posed for the organizers)
You don’t! you focus on lifelong learning, curiosity, trust, etc.

–I think it would be pretty cool to be able to write academic papers like this :) —

note: I talk about two worlds, as dichotomy, but there are actually a big scale of grays.

Yesterday there was an article about Vallejo in the Financial Times. It says:

For an image of the future that is guaranteed to chill US civic leaders and bondholders alike, there is no better place to look than among the potholed streets and boarded-up houses that litter the Californian city of Vallejo.

It made me feel good that last year I went to the city to make a case study about it. I stated at Univ. of California, Berkeley during the whole Spring semester 2010. A few days ago I finished writing a paper called “VALLEJO, CALIFORNIA. FROM THE FRINGES OF THE CITY, A CASE FOR THE ‘CITY REGION SYSTEM OF SURVIVAL’. I wrote it to present it at the DIME-DRUID ACADEMY Winter Conference 2011, this week.

This paper is very heterodox, and is a paper on progress. The main purpose of it was to make a summary of theories I learned about Local Economic Development at the Berkeley libraries. I then tried to connect the case of this city (or district) of the San Francisco Bay Area, and its significance to entrepreneurship and innovation policy. Innovation from a broad sense, for the ones that now what I’m talking about.

I got much help from the locals of Vallejo, and one of them, the editor of the popular Vallejo Independent Bulletin, asked me to send him a copy of the article when I would finished it. Keeping my word I sent it to him, and he has published it online.

My article at the Vallejo Independent Bulletin

I am grateful he did it, because I got a few comments from the citizens. This made me realize that my ideas are still quite confusing. So I wrote a comment. It seems it has an anti-spam feature, I told the editor. For now I’ll put it here.

Since I read the comments of Ab and SomeoneElse on my paper about Vallejo and the Bay Area, I have been thinking a lot.

I am grateful for the comments. In particular, because I have realized that I have not made a good job to express my ideas. This is hard, as English is not my native language. But also because of the internal fight I have had. I am a PhD student specializing in local economic development, but it is the case of Vallejo that has made me changed many of my preconceptions. Now I would like to comment on the comments.

Ab says: -“the last line is spont on”- and then quotes me: -“Vallejo … end up like many cities in third world countries, where a few (police and firefighters?) live in affluence while the vast majority of citizens live and die in misery”- [police and firefighters added by Ab].

There are two things. First it should be understood that even though Vallejo has been a city, since the 19th century, I refer in the paper as a “district” of the city-region of the Bay Area. I know this may sound weird for any local (of the Bay Area), but coming from abroad I can clearly see that the Bay Area is a large metropolitan area, highly connected in its economic geography.

The second thing is that I don’t necessarily say that police and firefighters are the few, or the elite of Vallejo, nor of course the elite of the city-region. True, they are an interest group, and as I referenced in the paper they have a well known “symbiotic relationship” with the political power of the city. But going back to my first point, one has to look beyond the city limits of Vallejo. Making $150,000 as a safety employee it’s certainly high, but what about the bankers and real estate leaders who make 10 times or more, in the different districts of the Bay Area?. This is probably a stupid comparison, but what about the profits of a company of the city region, like Apple making 100,000 times more. But still, what is their responsibility towards their neighbors?

“Someone Else” points out we need to think outside the box. I’ll try to do it. There is so much anger against the public safety employees, and probably with a reason. But this is not going to solve the problem of Vallejo. Thinking outside the box… What about a Bay Area police? After all, the criminals operate in all the Bay Area, not only in one particular city. I am NOT an expert in safety, but I see that the New York City Police Department, covers 8 million people, more than the 7 million of the Bay Area. The Bay Area has already the BART police, that would fall inside the Bay Area Police. The 9 counties police departments (sheriffs), a heritage from a bygone era could also be reduced. I repeat, I have no idea about this field. But as an economist I would think that cities (and their tax payers) would avoid the “competition” among them. And that is the idea: work more towards collaboration, than competition.

Of course, safety should not be the only thing. In fact should be the least. The most important things would be towards, education. I had the chance to be in UC Berkeley, one of the most amazing universities in the world. Also visited friends in Stanford. Great places. I know all these ideas have been said many times before, even from the former Governor (I still can’t believe people voted for an European actor). But there should be more mechanisms to get more funding for the rest of more ordinary higher education. However, what I think is of really concern, is the high inequality in the school districts across the Bay Area. In Europe we have many problems, don’t get me wrong! but with the exception of a few countries (like UK), every child has the same amount of money allocated for education, regardless in which neighborhood was born. There is an urgent need for a more cohesive education across the Bay Area.

More cohesiveness should be as well for access to justice, healthcare, transportation, innovation and entrepreneurship policy, etc in the Bay Area. That’s what I am trying to say in the paper. Because the different parts of the city region are so interdependent.

The same goes to having X or Y Mayor. Sure, many question if Davis should be the Mayor. But I think it does not matter if X or Y, or Z would be Mayors. Neither if Vallejo hires the best consultants, or the best City Manager. My hypothesis is that it does not matter who is in the leadership of Vallejo. The city will not survive.

Unless, they realize that: 1) Vallejo is dependent of the city-region. (This does not mean surrender). 2) There is need of active coordination, at local (Vallejo) and city-region level. That is stop fighting at local and inter-local level, and start collaborating.

If not, and now I clarify, the city region of San Francisco, will become more and more as third world country, “where a few live in affluence while the vast majority of citizens live and die in misery.”. Many in the elite, as the mentioned Andy Grove in the paper, have noticed it.

Every time I get into a second hand book I always find something ‘super interesting’. My wife picks on me about it. Earlier this semester I found the book of The Prince [Translated by Daniel Donno. Bantam Classic. 2003], for 1 dollar. I already read some parts but now I want to read the whole thing. I liked most of it, and it is true, that he is not that “Machiavellian”, as the people say. Come on! he was born in 1469! Governments were all about realism.

Because he was leaving in near poverty, he was trying to find a position back in the government. He had to convince the guys in power that, he was a good and useful guy, and even if they tortured him before!

I transcribed the last paragraph of the Chapter 21, ‘What a Prince Must Do to Be Esteemed’. Here it is Machiavelli discussing entrepreneurship policy, local economic development, “cultural economy”, and the importance of having a charismatic/catalystic local government.

For the ones unfamiliar with the term, a prince, was what he was referring to the man in power of the Italian city-states. And the Lorenzo de Medici, which he (or one of his friends) later hired Niccolo.

A prince should also demonstrate that he loves talent by supporting men of ability and by honoring those who excel in each craft. Moreover, he ought to encourage his citizens peaceably to pursue their affairs, whether in trade, in agriculture, or in any other human activity, so that no one will hesitate to improve his possessions for fear that they will be taken from him, an no one will hesitate to open a new avenue of trade for fear of taxes. Instead, the prince ought to be ready to reward those who do these things and those who seek out ways of enriching their city or state. In addition to all this, at the appropriate time of year, he ought to keep the people occupied with festivals and spectacles; and since every city is divided into guilds or other corporate bodies, he ought to take these into account and assemble with them on occasions, thus giving proof of his affability and munificence, yet never failing to beat the dignity of his position in mind, for this must never be lacking.

Niccolò Machiavelli, 1513

In his grave it says: TANTO NOMINI NULLUM PAR ELOGIUM (No eulogy would be adequate to praise so great a name)

Books recently read

July 20, 2010

Books I’m about to return to the library (actually 4 different ones) on the Berkeley campus:

  • Goodman, Robert, (1979) The last entrepreneurs : America’s regional wars for jobs and dollars [In the book he refers to the local and state government workers, and how they act as bad entrepreneurs. I quoted him here once talking about energy]
  • Richard D. Bingham, Robert Mier (1993) Theories of Local Economic Development: Perspectives from Across the Disciplines. [I started reading their books in 2006, and I love their different perspectives. When I grow up I want to be like them]
  • B. Joseph Pine and James H. Gilmore (1999) The Experience Economy: Work Is Theater & Every Business a Stage [If you want to know more about this, see my slides about it]
  • Daniel Hjorth and Monika Kostera (2007) Entrepreneurship and the Experience Economy [Their point of view on “The Rise of the Experience Economy”]
  • Norman Walzer (2009) Entrepreneurship and Local Economic Development. [Very good book, with out of the box ideas. Recommended reading for LED specialists]
  • Henri L. F. De Groot, Peter Nijkamp, Roger R. Strough, and Roger Stough (2004) Entrepreneurship and Regional Economic Development: A Spatial Perspective [It includes 25 contributors, including my affiliated supervisor Phil Cooke. It has a focus on quant research]
  • Jane Jacobs (1983) Systems of Survival: A Dialogue on the Moral Foundations of Commerce and Politics. [She should have got the Nobel Prize in Economics, even if she was not an economist. Here I comment on one of her books.]
  • Jeffrey Scott Luke, Curtis Ventriss, Betty Jane Reed, and Christine Reed (1988) Managing Economic Development: A Guide to State and Local Leadership Strategies (Jossey Bass Public Administration Series) [This book is made by these four authors. I recently commented on this book]

  • Richard Walker (2007) The Country in the City: The Greening of the San Francisco Bay Area [This is from my advisor here at the Dept. of Geography in Berkeley. He recommended to me, in order to learn more about the efforts that the Bay Area have had on trying to promote a more cohesive regional government. Too bad they failed. See more on chapter 6. The book explains why San Francisco has so many parks (relatively) and nature around. I theorize this makes it different and attracts people. Excuse, DW, to mention Richard Florida, but he would say that these outdoor amenities attract the creative class. And I think it’s right in this one. It’s a good reminder for cities to keep green places.]

Ok, I admit it, I have not read the whole books. But I tried to find the useful things for my project and papers I’m working on now.

“Effective economic development strategies must be customed-designed to meet the unique strengths and opportunities of local and state economies”.

Luke, Ventriss, Reed & Reed argue on page 175, as the editors of the book Managing Economic Development – A guide to State and Local Leadership Strategies (1988). My first impression when I read this, is the striking resemblance of what I must have written a few years ago for a paper conference or project. That is, one should be careful with the ‘one size fits all’ approach than many economists have. I completely agreed with that. That is… agreed. Because now I’m kind of skeptical of this local oriented approach that treats all communities if they were in the same line of the race track.  I keep reasoning in my head:

For example, in the case of Vallejo, they can make the best possible study looking at their financing, regulation, infrastructure, public services, human capital, etc… to tackle their Local Economic Development (as the mentioned book does in chapter 9).  However, no  matter what these cities do, their options will be very limited because theyir economy is quite dependent on the city-region (the San Francisco Bay Area), State of California, etc.

I think to my self that reviewing this book is not going to be very helpful. I keep reading;

“ (…) As a result of the growing economic interdependence, there has been a significant decline in state and local governments’ capacities to unilaterally develop an implement economic development policies and programs. No one government department or individual public manager can effectively act single handedly. This situation forces the invention of new collaborative mechanisms and collective development strategies.
Successful economic development strategies not only precipitate from an intergovernmental contest of cities, counties, COG’s (Council of Governnments), and state and federal agencies, but also emerge from intersectoral collaboration between the public, private, and non profit sectors. Each sector depends on the vitality of the other (…)”

This book is better that I though!, this are so much in line with one of my working papers!. Let’s continue.

“In such an interconnected policy context, a new type of public leadership is required – catalytic leadership. Chapter Eleven examines this trend and shows how, unlike charismatic leadership, which rallies people around the leader’s vision, catalytic leadership facilitates cooperation among a group of leaders and stimulates the pursuit of a goal that is created collectively by the group”.

A pretty nice book, with good complementary articles.

Again, I remembered that one should never judge something for the first paragraphs one reads. Specially from old fellows…

I’m currently in Berkeley, California. Besides the good research environment I have experienced here, I came because of the city of Vallejo. Why Vallejo?

In March 2009 I went to visit our old friends the Tanners, here is Jason’s website. They picked us up in San Francisco and we were driving to his home in Folsom. While driving on I-80, he told me that this city we were driving by (Vallejo), recently declared bankruptcy. He told me it was because of the unions (the police and firefighters), they were getting super high salaries, and the city couldn’t pay them. I was like “come on, you always blame the unions. no matter if it is the car industry or the education system”. We discuss the situation for a while, and then I kept it in mind.

The Doctoral School at my university, Aalborg (Denmark), encourages PhD candidates to study abroad for one semester or so. Something I wanted, was to be able to improve my qualitative research on Local Economic Development. I also wanted to go to a place where I could communicate with any problems (sometimes in Denmark is hard for me), a Spanish speaking country or English place would be fine.  So I looked at a few possibilities in my home country, Spain, England and the U.S. But I was looking for a place somewhat similar to Frederikshavn (see Differences and Similarities between Frederikshavn and Vallejo), with an industrial history, and in the struggle of transform themselves. Besides I had to go to a fine environment research, which is what the Doctoral School wants too. That is to a good university or research center.

Fortunately I knew about Richard Walker at UC Berkeley, from some of his literature, I think his publication with Storper is the number 4 most quoted reference in the discipline of Economic Geography. But specially I knew him from listening to one of his classes on line, [that anyone can follow] or the Berkeley podcast on Economic Geography. It’s an introductory class he teaches to undergrads. Because I also have to do the same, I liked to listen to this classes while I cleaned or cooked at home. I used some of his stuff in my classes. By the way he received the Distinguished Teaching Award this semester too. At the AAG 2009 meeting, I went to thank him for putting his classes online, and the inspiration I got from him. He said I made his day :)  I think he remembered me, so when I asked him if I could visit his Dept. of Geography, he agreed to sponsored me. He’s not an expert on Local Economic Development, but his approach to it is really enriching. I’m really grateful to him, and the whole UC system here. He also has given very good insights for my PhD project and research.

So here I came in late February, and I will leave by the end of July. I like Berkeley, which by the way it’s the institution who gives more PhD degrees in the world. I’ve heard around 800 a year, so here they know how to make PhD’s. have been enjoying visiting a few classes, and I’ve learned a lot from seminars and colloquiums they always have around. The case of Vallejo is amazing, and my family is quite happy to be here visiting Berkeley.

Stay tuned, today Vallejo is the canary in the coal mine.