Tag Archives: economic development

Gown Towns Thrive

Yesterday I was in a meeting with several people involved with local real estate development and they were asked what the top business priority is for their county (Guilford, NC) going into 2017. Their response, as has been the case for every year in recent memory, was that job growth will continue to be the most critical issue for their businesses. In the course of answering the question quite a few of these people referenced other cities in North Carolina that seem to be thriving – Raleigh, Cary, Charlotte and “even Wilmington” – were the names I remembered. What stuck out, to me, was that no one mentioned Winston-Salem.

Now let me state up front that I’m not prepared to offer any statistics that compare the jobs situation in Winston-Salem to those in Guilford County’s two cities, Greensboro and High Point. But I will say that if you were to poll most people who pay attention to business in the region, they will tell you that Winston-Salem’s economic recovery from the nuclear annihilation that has befallen this region’s traditional economy is further along than its neighbors to the east. For some reason, though, leaders in Greensboro and High Point seem to ignore what’s going on just 30 miles to their west (and in all fairness the reverse is also true), and as a result no one seems to know why there’s a difference between these two very similar neighbors.

A personal theory is that there are a lot of complex and interwoven factors at play here, but one big one is the presence of Wake Forest University in Winston-Salem. The university, and in particular it’s medical school, has been a partner with the city and local companies as the city moved away from it’s traditional tobacco manufacturing base toward a “knowledge economy” with a niche in the area of medical research. Starting over 20 years ago Winston-Salem’s civic and business leaders recognized the need to re-position the city’s economy and Wake Forest played a significant role in those plans. The results are plain to see in the city’s Innovation Quarter, which is booming and is primed for exponential growth over the next 10-15 years.

30 miles to the east Greensboro actually has more schools, including NC A&T and UNCG, but they don’t seem to have had the same effect on the city’s economy. Yet. We’re starting to see much more activity there, including the Union Square Campus that recently opened and is already bearing economic fruit for the city and there’s PLENTY of potential for even more growth. As long as the city’s leaders continue to keep their eye on the ball there’s a very good chance this will happen, as it has in other college towns.

This article in the Wall Street Journal has a lot of data showing how cities in the US that have strong colleges, especially those with research programs, have recovered from the decline in the manufacturing sector over the last two decades. Here’s an excerpt:

A nationwide study by the Brookings Institution for The Wall Street Journal found 16 geographic areas where overall job growth was strong, even though manufacturing employment fell more sharply in those places from 2000 to 2014 than in the U.S. as a whole…

“Better educated places with colleges tend to be more productive and more able to shift out of declining industries into growing ones,” says Mark Muro, a Brookings urban specialist. “Ultimately, cities survive by continually adapting their economies to new technologies, and colleges are central to that.”…

Universities boost more than just highly educated people, says Enrico Moretti, an economics professor at the University of California at Berkeley. The incomes of high-school dropouts in college towns increase by a bigger percentage than those of college graduates over time because demand rises sharply for restaurant workers, construction crews and other less-skilled jobs, he says.

And here’s the money quote as it relates to local economic development efforts:

Places where academics work closely with local employers and development officials can especially benefit. “Universities produce knowledge, and if they have professors who are into patenting and research, it’s like having a ready base of entrepreneurs in the area,” says Harvard University economist Edward Glaeser.

Let’s hope our local leaders take full advantage of what our colleges have to offer, for all of our benefit.

Winston-Salem as a Case Study

Since moving here in 2004 I’ve found Winston-Salem to be a fascinating study in how to revive a city that had been hit by multiple economic tsunamis in recent decades. It seems that others have taken notice, including a writer who penned a piece for the Christian Science Monitor about how a few US cities can teach the country a little something about democracy (h/t to my Mom for sending me the article). You can find the full article here (second story down), but here’s the segment focused on Camel City:

Winston-Salem, N.C., lost 10,000 jobs in 18 months after R.J. Reynolds moved its headquarters to Atlanta and several other homegrown companies failed in the late 1980s. It was the first of several waves of job losses as the city’s manufacturing base collapsed. Civic leaders chipped in to create a $40 million fund to loan start-up capital to entrepreneurs, hire staff for a local development corporation, and fund signature projects. One of them was the renovation of a 1920s Art Deco office tower into downtown apartments.

This activity helped spur Wake Forest University’s medical school to undertake an ambitious project to create a research park in former R.J. Reynolds manufacturing buildings next to downtown. The school has filled 2 million square feet of empty factories with high-tech companies and world-class biomedical researchers. An adjacent African-American church has turned 15 acres in the area into lofts, senior housing, and businesses. Downtown has attracted $1.6 billion in investment since 2002.

Now people gather to sip coffee, attend concerts, or take yoga classes in a new park in the shadow of the looming chimneys of a former Reynolds power plant. The plant itself is being repurposed into a $40 million hub of restaurants, stores, laboratories, and office space. Students, researchers, and entrepreneurs mingle in the halls and atria of all the former factory buildings, creating the kind of synergetic environment the innovation industry now craves.

Our very own Jeff Smith, of Smitty’s Notes, provides the money quote:

“It wasn’t one person or thing that made it all happen; it was everyone from the grass roots to the corporate leaders coming together,” says Jeffrey Smith, who runs Smitty’s Notes, an influential community news site. “We realized it would take all of us to get this hog out of the ditch.”

Much of the foundation for this renewal had been laid by the time I moved here with my family in 2004, but community leaders have continued to do what’s necessary to keep building upon it. For my job I get to spend a significant amount of time in neighboring Greensboro, a city that is slightly larger but quite comparable to Winston-Salem, and it’s been interesting to see how the two cities have proceeded from their respective economic crises. Winston-Salem has a lot of momentum, and it’s redevelopment seems to be benefiting from consistent collaboration among its community leaders, including elected officials as well as corporate and civic leaders. Greensboro, on the other hand, is making progress but it seems to be in more fits and starts; its progress seems to occur in spite of local leaders’ lack of cooperation and collaboration.

Sure, Winston-Salem has its problems and leaders sometimes disagree on how to proceed, but for the most part its leaders have shown how to lead a community out of the ditch and back on the road. Hopefully we keep it going for decades to come.

Tax Incentives ≠ Job Creation

David Cay Johnston has written an interesting article that references studies that show tax incentives do NOT lead to job creation. He also explores why, despite the existence of empirical data showing that tax incentives don't work, businesses continue to get them:

The answer, I believe, lies in three areas:

  • A failure by news organizations to aggressively or even adequately explore these deals, which from my experience would never have survived scrutiny in the 1960s when newspapers were still a mass media read by nearly all homeowners.
  • The success of corporate America in implementing the recommendations of the Lewis Powell memorandum from 1971 urging the U.S. Chamber of Commerce to bring news organizations to heel and thwart consumer advocate Ralph Nader and others. The future Supreme Court justice's memo prompted the creation of institutions such as the Heritage Foundation. Powell took aim at news coverage critical of tax incentives for business, writing that those news reports "undermine confidence and confuse the public."
  • The campaign finance system, which increases the power of the well-off to influence who runs for office and who has the money to become known to the public, and ensures access for donors while reducing accountability to the majority.

 This is particularly interesting reading right now as Greensboro and North Carolina consider getting into a bidding war for Boeing's newest project.

Will Winston-Salem, Greensboro and High Point Punch Above Their Weight?

An interesting piece in Foreign Policy makes the case that "middleweight" cities, those with populations between 150,000 and 10 million people, will drive the economic recovery in the U.S.:

It is America's large cities, and particularly the broad swath of middleweights, that will be the key to the U.S. recovery and a key contributor to global growth in the next 15 years. Large cities in the United States will contribute more to global growth than the large cities of all other developed countries combined. We expect the collective GDP of these large U.S. cities to rise by almost $5.7 trillion — generating more than 10 percent of global GDP growth — by 2025. While New York and Los Angeles together are expected to grow at a compound annual rate of 2.1 percent between 2010 and 2025, the top 30 middleweights (measured by GDP) are expected to outpace them with a growth rate of 2.6 percent.

What is behind the clout of middleweights in the United States? For a start, there are simply more of them than in other developed regions. Of more than 600 middleweight cities around the developed world, the United States is home to 257 of them…

For cities like our three here in the Triad, there's no magic formula for reinvention or reinvigoration:

While slowing population growth and mobility will make it harder for U.S. cities to sustain rapid population growth rates, cities that want to grow their GDP will need to pay attention to attracting and supporting expanding populations. Many observers argue that it is the mix of local industries in a city that determines its ability to grow. This is true — but to a much lesser extent than often assumed. Our analysis suggests that the mix of sectors explains only about one-third of the above-average growth of America's most rapidly growing cities. (Emphasis mine).

Even when narrowing our focus to the strongest performing cities, again there is no single path to success — no unique blueprint that all urban leaders should pursue. The cities that outperform their peers simply find ways to make the most of the economic opportunities they face, get lucky, or both. Some cities have been able to reinvent themselves; many others make the most of their endowments or their location.

This is sobering news for those folks working in economic development. The Triad's cities have been forced to reinvent themselves thanks to the rapid decline of their traditional industries – tobacco, textiles and furniture – and they seem to have started to find their footing with industries like biotech, nanotech, logistics, etc. That's the good news, but this study makes the point that the effect of the growth in these sectors will be muted if they aren't accompanied by an influx of people. It seems like a bit of a "chicken and egg" thing to me – you need good jobs to attract people, and you need good people to attract good jobs – but as the authors point out there's also a need for a bit of good luck to be in the mix and maybe that's what turns the egg into a chicken.

The Triad's good fortune might be found at the end of the article:

But the landscape is moving. For example, the shift in the global economic balance to rising emerging nations favors urban centers that are well connected to global growth hubs. Cities with airport hubs and ports, business connections (such as electronics value chains), or personal connections (with universities that attract foreign students) will be in a better position to take advantage of the growing emerging market opportunity.

Granted PTI is not an airport hub, but we're right next door to one and our other transportation infrastructure is critical to the east coast. We're also home to lots of universities and large corporations that draw people from around the world. All things considered I like the Triad's chances.