Excerpt from Romancing the Smokestack

Twenty-five years ago, when I first started writing about economic development, the governors of seven states went on The Phil Donahue Show – the premiere daytime talk show of its time – and begged General Motors to build the assembly plant for its brand-new Saturn brand in their state. It was, to put it bluntly, a pretty pathetic excuse for an economic development campaign. Even though auto assembly plants don’t literally have smokestacks, this was a pretty stark example of politicians trying to find a short-cut to economic success through the standard technique of “romancing the smokestack” – wooing some out-of-town business in hopes that they will come to town. I always counted the Donahue show as the lowest point in the history of American economic development – especially since none of the seven states got the plant.

At least the Donahue show seemed like the low point until earlier this year (2010), when Ohio Gov. Ted Strickland made a Youtube music video beginning basketball start LeBrown James to re-sign with the Cleveland Cavaliers. The music video was even more of a low point than the Donahue episode because it managed to trivialize both the economic development goal and the means by which that goal is pursued. Somehow a talk show seems almost statesmanlike compared to a music video. And have we sunk so low that the holy grail of economic development is not an auto assembly plant but an individual basketball player? Not that it much mattered. In the end, making a music video didn’t help any better than going on a talk show. The Saturn plant went to Tennessee – at least until GM killed the brand last year – and LeBron went to Florida.

If the humorous failures listed above teach us anything, it is this: There is no magic bullet for prosperity. You can’t just romance the smokestack and hope to succeed, especially in the long run. But there are ways to maximize the changes of enduring success.

The fact that some communities are prosperous and some are not is hardly an accident. In large part, success is the result of deliberate effort on the part of business organizations, nonprofit entities such as research institutions and universities, and – yes – government agencies to nurture the growth and sustainability of particular businesses and particular types of economic activity in particular locations.

There’s nothing new about this. For thousands of years, cities and regions have prospered when they have grabbed emerging economic development opportunities and found ways to make sure the economic benefit flows toward them. Sometimes these efforts have been mostly private – as when the Columbian Rope Company, in the midst of the Depression, set up a research lab in my hometown and hired by grandfather, a chemistry professor, to run it. Sometimes these have been mostly public – as when the Erie Canal was built by New York State and the interstate highway system was financed by the federal government. And sometimes these efforts have been a combination – as when Congress subsidized the private construction of the transcontinental railroad.

But in the last couple of decades, the activist role of local and regional players has become more evident. Silicon Valley is part of a worldwide economic elite largely because of the presence of Stanford University and the way entrepreneurs have leveraged Stanford’s presence. Dallas and Denver are major cities largely because civic and political leaders built enormous airports – what one former Dallas major called “the port to the ocean of the air” – at a time when nobody else was doing so. Pittsburgh continues to prosper – despite the departure of steel mills and a steady decline in population – because it has reinvented its economy over and over again.

These places are prosperous specifically because they have not tried to romance the smokestack into town. They know that prosperity isn’t dependent on one company or one plan or one person. Prosperity – especially the kind that endures for decades – emerges from a carefully constructed ecosystem that nurtures and sustains skilled labor, innovative entrepreneurs, research breakthroughs, and well-capitalized start-ups. Such an ecosystem builds on the strengths that already exist in a city or a region or a state; and as it spins off wealth it plows a good portion of the profit back into the enterprise.

As the stories about the Saturn plant and LeBron James suggest, this kind of nurturing of the ecosystem is not always the popular image of economic development. Economic developers are sometimes viewed as the public-sector equivalents of corporate raiders, going around and stealing businesses from each other at the public’s expense At its worst, economic development really is no better than that. But at its best, economic development is a miraculous thing to behold, as cities and states and universities and business organizations work together to take advantage of emerging opportunities and create enduring prosperity for a community and its people.