Sunday, November 28, 2010

Economic Development

Small towns need to encourage entrepreneurship.

Economic development often means, unfortunately, bribing big companies to build a factory in the bribers’ town. You spend unconscientiously to woo, you offer tax breaks and incentives, you beg.

That model was never effective. Even larger cities like Phoenix and Salt Lake City spent huge efforts to woo consumer finance companies to open call centers in their cities. So all the high-paying executive jobs remained in New York, and the minimum wage phone jobs were moved to the West. The cities gave up more than they gained, and they used resources that could have been used for creating real jobs.

But now the model is completely unrealistic. Why would a manufacturer move their factory to your town instead of to coastal China? Your town is already hollowed out and Guangzhou is dynamic.

Courting companies is begging for a piece of the pie. Creating companies is baking more pies. 

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