Seeing the Forest and the Trees
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Transcript of Seeing the Forest and the Trees
Seeing the Forest and the Trees:Seeing the Forest and the Trees:The Unique CEOs for Cities LensThe Unique CEOs for Cities Lens
Annual MeetingMay 6, 2005
by: Robert Weissbourd RW Ventures, LLC
THE FOLLOWING PRESENTATION HAS BEEN APPROVED FOR
MATURE AUDIENCESTHE FOLLOWING PRESENTATION HAS BEEN APPROVED FOR
MATURE AUDIENCES
R THIS PRESENTATION HAS BEEN RATED R FOR CONTENT. AUDIENCE DISCRETION ADVISED.
R E S T R I C T E D
CONTENT MAY BE UNSUBSTANTIATED,OPINIONATED AND PROVOCATIVE
AgendaAgenda
What Have We Learned?
Implications for Policy and Practice
Organizational Implications
Comments and Discussion
AgendaAgenda
What Have We Learned?
•The Role of Cities•Geography of the New Economy•Drivers of the New Economy•Market Forces
Cities Drive the National EconomyCities Drive the National Economy
0% 20% 40% 60% 80% 100%
Aggregate Personal Income
Consumer Expenditures
Tax Payments
Total Economic Grow th
Manufacturing Value Added
Exports
Business Establishments
MSA as % of US Total Nonmetro as % of US Total
The Role of CitiesThe Role of Cities
Cities and Economic Prosperity• Cities make a disproportionate
contribution to the nation’s economic output
• City economies are particularly concentrated in key types of new economic activity
• Cities are hubs for metropolitan areas
• Cities are drivers of metropolitan economies
0% 10% 20% 30% 40% 50% 60% 70% 80% 90%
Museums, botanical, zoological gardens
Educational services
Legal Services
Health Services
Depository institutions
Insurance Carriers
Communication
Air Transportation
Hub Functions of Cities
Suburban % of Total MSA Employment City % of Total MSA Employment
The Role of CitiesThe Role of CitiesCities are Even More Important in the Global, Knowledge EconomyCities are Even More Important in the Global, Knowledge Economy
Increased Value of Knowledge Factors…
• High skilled labor force• Intellectual property• Product innovation; flexible
customization• Customer networks• Knowledge management capacities300%
400%
500%
600%
Lead to New Drivers of Productivity which Favor Cities
• Dense knowledge networks• Functional specialization• Innovative capacity
hang
e
Gross Domestic Product% Growth over last 50 years
0%
100%
200%
$s lbs
% C
Greenspan: Greenspan: Fundamental change Fundamental change in the economy towards intangible in the economy towards intangible assetsassets
Economic Growth Worldwide has been Characterized by Urbanization
The Role of CitesThe Role of Cites
Demographic Shifts Enhance CitiesDemographic Shifts Enhance CitiesUS Population Growth
800,000
3,456,577
Population Growth 1990-2000(Top 100 Cities)
Native Born
Foreign Born
The top 100 cities added 4.3 million in population between 1990 and 2000. 80% of this growth was due to increases in the foreign born population.
The U.S. added 33 million in population between 1990 and 2000. 35% of this growth was due to increases in the foreign born population.
65%
35%
• Population growth fueled by immigrants settling primarily in urban areas
• Aging baby boomers increasingly choose to return to cities
• Young and singles get married later, enjoy urban lifestyle longer
• Cities Increasingly perceived as centers of business, culture and progress rather than crime and poverty (Celinda Lake Poll)
Median Growth (1990-2000)
02468
1012
Population Per Capita Income
1st Principle1st PrincipleThe Role of CitiesThe Role of Cities
Adapted from Gastner, Shalizi and Newman, University of Michigan
National Policy National Policy = = Urban PolicyUrban Policy(and vice(and vice--versa)versa)
Geography of the New EconomyGeography of the New Economy
Cities Perform in a Global EconomyCities Perform in a Global Economy
01,000,000
2,000,000
3,000,0004,000,000
5,000,000
6,000,0007,000,000
8,000,000
1976
1978
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
(in Millions of $)
050,000
100,000150,000
200,000250,000300,000350,000
1994 1995 1996 1997 1998 1999 2000
Source: BEA
The World is Smaller –Markets are Transnational
U.S. Assets Abroad up 1500% Since 1976(in Millions of $)
Foreign Assets in US up 600% (1994 - 2000)
Cost of a 3 Minute Phone Call from NY to London
$0.00
$10.00
$20.00
$30.00
$40.00
$50.00
$60.00
$70.00
1960 1970 1980 1990 2000
Source: Paul Masson, 2001
Geography of the New EconomyGeography of the New Economy
Markets Are Specializing Across CountriesMarkets Are Specializing Across Countries
Is the sky falling?
“Tech jobs leave U.S. for India, Russia. Who’s to blame?”
– July 2003
“Is your job next?”– February 2003
“American legislators are accusing India of stealing jobs”
– June 2003
“America’s pain, India’s gain”
– January 2003
“3.3 million U.S. service jobs to go offshore by 2015”
– November 2002
“Can America Lose These Jobs and Still Prosper?”
– July 2003
U.S. House Sub-business Committee
Sawhney on Outsourcing: Is The Sky Falling?
Labor Markets Increasingly Operate on a Global Scale
2nd Principle2nd PrincipleGeography of the New EconomyGeography of the New Economy
Urban Policy Must Reflect that the Economy is GlobalUrban Policy Must Reflect that the Economy is Global
Cities and Suburbs are LinkedCities and Suburbs are Linked
00.10.20.3
0.4
0.50.6
0.7
1970 1980 1990 2000
Income Levels Housing Values
Spe
arm
an R
ank
Cor
rela
tion
Wages Move in Tandem
-
10,000
20,000
30,000
40,000
50,000
60,000
0 10,000 20,000 30,000 40,000 50,000 60,000
City
Sub
urb
Correlation = 0.77, significantat the .01 level (two-tailed)
Geography of the New EconomyGeography of the New Economy
The Economy is RegionalThe Economy is Regional
CITYREGIONAL ECONOMY
ENVIRONMENT
AMENITIES
UTILITIES
TRANSPORTATION
HOSPITALS
AIRPORTS
HOUSING
JOBS
CITYCITY
CORPORATE SERVICES
SUPPLY CHAINS
MUSEUMS
CONSUMER MARKETS
Geography of the New EconomyGeography of the New Economy
3rd Principle3rd PrincipleGeography of the New EconomyGeography of the New Economy
Urban Policy Must Be RegionalUrban Policy Must Be Regional
Drivers of the New EconomyDrivers of the New Economy
Are Current Growth Patterns Efficient? Are Current Growth Patterns Efficient?
Regional Economic Efficiency Requires:
• Taking Advantage of Density• Building Livable Communities• Aligning Components of the
Economy (e.g. Reducing Jobs-Housing Mismatch)
• Efficient Regional Infrastructure
Source: Chicago Metropolis 2020
Drivers of the New EconomyDrivers of the New Economy
Equity and Opportunity are Good for BusinessEquity and Opportunity are Good for Business-.2
0.2
.4.6
Wag
e G
row
th (1
990-
2000
)
0 .1 .2 .3 .4Poverty Rate (1990)
Changing Dynamics Findings:• Inequality has negative effect
on income growth• Hispanic Segregation has a
negative effect on income growth
Regional Economic Efficiency Requires:•Using All Deployable Assets
•Avoiding Costs of Concentrated Poverty
4th Principle4th PrincipleDrivers of the New EconomyDrivers of the New Economy
An Efficient Regional Economy Uses allAn Efficient Regional Economy Uses allof its Assets and Organizes them Wellof its Assets and Organizes them Well
The Role of Knowledge Factors is Increasing Throughout the EconomyThe Role of Knowledge Factors is Increasing Throughout the Economy
Drivers of the New EconomyDrivers of the New Economy
Wage Growth Increases with Digital Economy1
.8
.4
.20 5-5
Wag
e G
row
th19
90-2
000
(PM
SA)
.6Grand Rapids, MI
Rochester, NY
San Diego, CA
Austin, TX
Presence of Digital Economy Factors
The Value of Output per Hour has Increased More than Ten-Fold Over the Last 100 Years
Drivers of the New EconomyDrivers of the New Economy
The Importance of EducationThe Importance of Education
Wag
e G
row
th 1
990-
2000
(Log
, MSA
)
% Adults with BA or Higher 1990
-.20
.2.4
.6
.1 .2 .3 .4 .5
Cleveland, OH
Washington D.C.
Richmond, VA
Providence, RI
St. Paul, MN
Houston, TXChicago, IL
Columbus, OH
Indianapolis, IN
San Antonio, TX
College Education is the Biggest Driver of Economic Growth(and High School Alone is Barely Significant Anymore)
Functional and Occupational Concentrations are Increasingly ImportantFunctional and Occupational Concentrations are Increasingly Important
Sectoral Specialization (Manufacturing)
0.330.340.340.350.350.360.360.370.370.380.38
1977 1987 1997Gin
i Coe
ff. B
ased
on
Em
ploy
men
t Sha
reFunctional Specialization
(Management vs. Production)
0%5%
10%15%20%
25%30%35%40%45%
1970 1980 1990Per
cent
Diff
eren
ce fr
om N
atio
nal A
vera
ge
Drivers of the New EconomyDrivers of the New Economy
MSAs with Pop > 5,000,000Source: Duranton and Puga 2002
Estimated Effect on Income Growth (MSA)
0.0
Professional
Managerial
Sales
Clerical
Precision Production
Machine Operator
Transportation Equipment*
Material Handler & Laborer
Farming*
Services (Non HHD)
Knowledge Industries, Functions and Occupations Attract BAs and Drive GrowthKnowledge Industries, Functions and Occupations Attract BAs and Drive Growth
Information Sector
05
10A
ttain
men
t Gro
wth
(199
0-20
00)
.1 .2 .3 .4 .5Information Sector as % Total Earnings
Finance, Insurance, and Real Estate
05
10A
ttain
men
t Gro
wth
(19
90-2
000)
0 .05 .1 .15Share workers in Finance, Insurance, and Real Estate
Manufacturing
05
10A
ttain
men
t Gro
wth
(199
0-20
00)
0 .05 .1 .15 .2 .25% Employment In Manufacturing
Drivers of the New EconomyDrivers of the New Economy
Business Services
05
10A
ttain
men
t Gro
wth
(199
0-20
00)
.02 .03 .04 .05 .06 .07% Employed In Business and Repair Services
KnowledgeKnowledgeFunctionsFunctions
ProductiveProductiveIndustriesIndustries
High HCHigh HCOccupationsOccupations
Drivers of the New EconomyDrivers of the New Economy
5th Principle5th Principle
Invest WiselyInvest Wisely
Create a Knowledge Intensive EconomyCreate a Knowledge Intensive Economy
Drivers of the New EconomyDrivers of the New Economy
Multiple Drivers of SuccessMultiple Drivers of Success
High School Degree
Age 35-44
Business Services
Sprawl Index
Professional Jobs
College Degree
Exports
Immigration (1980s)
Hispanic Segregation
-0.6 -0.4 -0.2 0.0 0.2 0.4 0.6 0.8 1.0Estimated Effect on Income Growth
(Standardized Regression Coefficient: with 95% Confidence Interval)
No Silver Bullet: Many Factors Matter
Drivers of the New EconomyDrivers of the New Economy
Varied City Types and PerformanceVaried City Types and PerformanceIncome Growth vs. Population Growth 1990-2000
Top 110 CitiesFastest
Slowest FastestGrowth in Population (Rank)
Gro
wth
in In
com
e pe
r Cap
ita (R
ank)
WashiWashington D.C.ngton D.C.
Jacksonville, FLJacksonville, FL
Chicago, ILChicago, IL
Indianapolis, INIndianapolis, IN
Boston, MABoston, MA
Baltimore, MDBaltimore, MD
St. Paul, MNSt. Paul, MN
Cleveland, OHCleveland, OHColumbus, OHColumbus, OHChattanooga, TNChattanooga, TN
Houston, TXHouston, TX
San Antonio, TXSan Antonio, TX
Richmond, VARichmond, VA
MilwMilwaukee, WIaukee, WI
Great Variation in City Economic Types, Paths, Outcomes
Drivers of the New EconomyDrivers of the New Economy
7th Principle7th Principle
Build on Your Unique StrengthsBuild on Your Unique Strengths
Learnings from the Field: the Business of DevelopmentLearnings from the Field: the Business of Development
Market ForcesMarket Forces
$0
$50
$100
$150
$200
$250
$300
1999 2000 2001 2002 2003
Shorebank Corporation: Total Community Development Investment(in millions)
$0
$2
$4
$6
$8
1999 2000 2001 2002 2003
ShoreBank Corporation: Net Income(in millions)
• Widespread Success of CDFIs
• Effective Tax Credit Policies (EITC, LIHTC, NMTC)
• Annie E. Casey Foundation – from children to families to neighborhoods to economics…
Market ForcesMarket Forces
Goals: Aligning Markets and DevelopmentGoals: Aligning Markets and Development
High AlignmentHigh Alignment
Low AlignmentLow Alignment
Market Market RefiningRefiningMarket solution Market solution possible with possible with new information, new information, products or products or networks
Market Market InterventionInterventionMarket solution Market solution possible if possible if market market operations and operations and environment environment changed changed through public through public policy and policy and advocacy
Market Market RedefiningRedefiningMarket solution Market solution possible if possible if market market operations and operations and market market environment environment changed through changed through private activities
networks
private activities
Pure MarketPure MarketMarket solution Market solution possible; market possible; market already already generates generates development development outcomesoutcomesNonNon--MarketMarket
No market No market solution; market solution; market is not the is not the appropriate appropriate channelchannel
advocacy
Market InterestsMarket Interests
Development Development GoalsGoals
Adapted from Kahane /Weiser/Ford CIIAdapted from Kahane /Weiser/Ford CII
Market ForcesMarket Forces
Goals: Aligning Markets and DevelopmentGoals: Aligning Markets and DevelopmentHigh AlignmentHigh Alignment
Low AlignmentLow Alignment
Market Market RefiningRefiningMarket solution Market solution possible with possible with new information, new information, products or products or networks
Market Market InterventionInterventionMarket solution Market solution possible if possible if market market operations and operations and environment environment changed changed through public through public policy and policy and advocacy
Market Market RedefiningRedefiningMarket solution Market solution possible if possible if market market operations and operations and market market environment environment changed through changed through private activities
networks
private activities
advocacy
Pure MarketPure MarketMarket solution Market solution possible; market possible; market already already generates CED generates CED outcomesoutcomes
NonNon--MarketMarket
No market No market solution; market solution; market is not the is not the appropriate appropriate channelchannel
Market InterestsMarket Interests
CED GoalsCED Goals
Adapted from Kahane, Weiser, Ford CIIAdapted from Kahane, Weiser, Ford CII
Make Market Make Market WorkWork
(Addressing (Addressing Internal Internal Imperfections)Imperfections)Change Market Change Market
ParametersParameters
(Using Market (Using Market Mechanisms)Mechanisms)
Change Market Change Market ParametersParameters
(Using Non(Using Non--market market Mechanisms)Mechanisms)
Vital Work Vital Work ––
but not market but not market based!based!
Market Works:Market Works:
Company profits Company profits while providing while providing Development Development impact.impact.
Market ForcesMarket Forces
6th Principle6th Principle
In Our Economy, Markets are the Most Powerful In Our Economy, Markets are the Most Powerful Mechanism for Wealth CreationMechanism for Wealth Creation
Harness Market ForcesHarness Market Forces
What Have We Learned?What Have We Learned?
1. National Policy = Urban Policy
2. Urban Policy must Reflect that the Economy is Global
3. Urban Policy must be Regional (the region is the economic unit that performs in the global economy)
4. An Efficient Regional Economy Uses all of its Assets and Organizes them Well
5. Invest Wisely -- Create a Knowledge-Intensive Economy
6. Harness Market Forces
7. Build on Your Unique Strengths
AgendaAgenda
What Have We Learned?
Implications for Policy and Practice
Organizational Implications
Comments and Discussion
1. National Policy = Urban Policy1. National Policy = Urban Policy
• Strategy 1.1: Strengthen Urban Economies to Strengthen the Nation
• Policies and Programs:– See, Everything under the other Principles
• Strategy 1.2: Focus on the Urban Economic Effects of National Policies
• Policies and Programs: – Tailor immigration policy to local labor force needs; – Health care;– Banking regulation (e.g. CRA)– Transportation.
2. Urban Policy Must Reflect that the Economy is Global
2. Urban Policy Must Reflect that the Economy is Global
• Strategy 2.1: Enable Regions to Compete in Global Economy
• Policies and Programs:– Strengthen infrastructure for participation in global economy; – Identify and support your niches in the global economy;– Leverage international linkages and FDI (e.g. Seattle Trade
Development Alliance)
• Strategy 2.2: Reap Long-Term Benefits of Offshoring While Addressing Short-Term Costs
• Policies and Programs:– Focus on job retraining and education; – Foster entrepreneurship; – Invest in innovation
3. Urban Policy Must Be Regional3. Urban Policy Must Be Regional
• Strategy 3.1: Support Regional Infrastructure, Integration and Planning
• Policies and Programs:– City-suburb partnerships, particularly aimed at managing growth
patterns (e.g. Metro regional government in Portland); – States limiting government fragmentation and consolidating land
use and zoning powers; – State and federal governments encouraging cooperation among
jurisdictions
[See Strategy 4 and related Policies and Programs as well.]
4. An Efficient Regional Economy Uses All of its Assets and Organizes Them Well
4. An Efficient Regional Economy Uses All of its Assets and Organizes Them Well
• Strategy 4.1: Deploy Human Capital, Take Advantage of Diversity• Policies and Programs:
– Workforce Development; – Regional Housing and Transportation Planning (Chicago Metropolis 2020); – ESL Classes and Targeted Workforce Development for Immigrant Population;– Reduce cost of healthcare
• Strategy 4.2: Reduce Negative Effects of Concentrated Poverty• Policies and Programs:
– Financial Education and IDAs– Earned Income Tax Credit; – Affordable Housing and Mixed-Income Communities (HOPE VI, Sec. 8, LIHTC)
• Strategy 4.3: Promote Regional Economic Efficiency• Policies and Programs:
– “Fix it first” transportation policy (Maryland) – Correct State and Federal Policies that Favor Sprawl– Downtown Revitalization (e.g. Central Philadelphia Dev. Corp; Denver Downtown
Housing Office)– Asset-Based, rather than Deficiency-Based, Community Economic Development
5. Invest Wisely -- Create a Knowledge-Intensive Economy
5. Invest Wisely -- Create a Knowledge-Intensive Economy
• Strategy 5.1: Focus on Innovation and Commercialization of Knowledge
• Policies and Programs: – R&D tax credit; – University-industry partnerships (e.g. Research Triangle Park); – Industry Innovation Initiatives (e.g. Innovation @ Scale in Rhode
Island, Bay Area Science and Innovation Consortium); – Investment in Business Incubators; – Incentives for Start Up and Academic Inventors.
• Strategy 5.2: Invest in Knowledge Functions, Industries and Occupations
• Policies and Programs: – Identify and build on your unique concentration of human capital-
intensive industries and occupations – Look beyond industry clusters
5. Invest Wisely to Create a Knowledge-Intensive Economy5. Invest Wisely to Create a Knowledge-Intensive Economy
• Strategy 5.3: Invest in Education, at All Levels
• Policies and Programs: – School finance reform -- Make education system more
equitable by revising school funding (e.g. move away from property tax system);
– Charter/small schools; – Teacher quality and compensation; – Improve job market connections (e.g. KIP in Philadelphia,
Summer of Cuyahoga in Cleveland); – Early childhood and family support. – Attract BAs through investment in the economy, not just quality
of life.
6. Harness Market Forces6. Harness Market Forces
• Strategy 6.1: Use Government as Market Enabler
• Policies and Programs:– Focus direct interventions on areas where markets can’t work; – Provide the market preconditions of infrastructure and human
capital (health and education)– Supplement – don’t supplant – the market where possible:
EITC, LIHTC, and New Markets Tax Credit– Support CDFIs; – Gather and release critical information that can improve market
operations in urban areas (e.g. American Community Survey); – Increase government efficiency (e.g. e-government, inter-
agency cooperation).
7. Build on Your Unique Strengths7. Build on Your Unique Strengths
• Strategy 7.1: Build on Overlap of Local Assets, Economic Drivers and Geographic Connections
• Policies and Programs:– Increase availability of flexible funding sources (e.g. CDBG)– Develop more targeted economic investment programs to
support varying economic functional concentrations; – Take into account different roles cities play in the context of
regional and global economy. – Focus here should be first on practice, not policy.
AgendaAgenda
Organizational Implications
“It is one of the happy incidents of the federal system that one courageous State may ... serve as a laboratory; and try novel social and economic experiments without risk to the rest of the country”
- Supreme Court Justice Louis Brandeis, quoted in Osbourne, Laboratories of Democracy
The Unique CEOs for Cities LensThe Unique CEOs for Cities Lens
Applied Research: addressing current problems; leading to
practical solutions
Policy informed by best practices
Grounded Knowledge to test and inform policy
Three Priority Areas of FocusThree Priority Areas of Focus
•R&D: Value Added Economic Strategies
•Practice: “Clinical Economics” (Sachs)
•Policy: Build Majority Coalition
R&D
Value Added Economic StrategiesValue Added Economic Strategies
• Compete on Value, not Costs – not zero sum game• CEOs’ Focus: Best Practices for Prosperity in the Knowledge Economy:– Education, at all levels
– Regional Efficiency Strategies
– Knowledge-Intensive Occupational and Functional Concentrations
– Commercialization of Knowledge, Entrepreneurship and Innovation
Practice
“Clinical Economics”“Clinical Economics”
Sophisticated, Targeted Diagnostic Tools
National Research• Cities Survey• Urban System Design• City-Suburb Linkages• ….
Local Services• Metro Audit• Industry by Occ. Analysis• Customized Typologies• ….
Customized Products and Solutions
Policy
Making Policy HappenMaking Policy HappenClosely and Deeply Divided
RepublicanDemocrat
Closely but not Deeply Divided
RepublicanDemocrat
Source: Morris Fiorina, “Culture War?”
Build Majority Coalition Around Urban Agenda for State and Federal Policy Reform
AgendaAgenda
What Have We Learned?
Implications for Policy and Practice
Organizational Implications
Comments and Discussion
Seeing the Forest and the Trees:Seeing the Forest and the Trees:The Unique CEOs for Cities LensThe Unique CEOs for Cities Lens
Annual MeetingMay 6, 2005
by: Robert Weissbourd RW Ventures, LLC