Rethinking Economic Development
Rafael Baptista is the Strategy and Performance Analyst for the City of Raleigh, North Carolina. He serves on the Engaging Local Government Leaders Management Team and is a contributing author to Careers in Government.
When most people picture economic development, they think of smooth-talking men convincing companies to bring their jobs and investment to a community in exchange for infrastructure improvements and tax breaks. They think about backroom deals at the steakhouse and golf course. While this may be true to some degree in some communities, there is a growing movement towards equitable economic development. In today’s Morning Buzz, I will talk about that growing movement through the following three points: 

  1. Traditional Economic Development has become outdated
  2. Why we need to shift to equitable economic development 
  3. Some quick tips and resources if you want to do equitable economic development

Traditional Economic Development Models Don’t Work 

Traditional economic development has historically been focused on recruiting projects where the state and/or local government compete with other regions to see who can provide the best offer (IE tax incentives) to a company to bring jobs and capital investment to a community. This model works great for larger corporations as they can play local governments against each other (IE Amazon HQ2) to get the best financial offer. It creates a race to the bottom for local government. 

But there is an additional issue with traditional economic development when approaching it from an equity lens. These projects while focused on creating jobs in a community many times don’t create jobs that fit the local workforce profile or they bring in workers from other communities so that local lower socioeconomic and communities of color may not benefit from the jobs. 

Think about programs that you can create to support small businesses.

We Need to Shift Focus onto Prosperity for All, Economic Mobility 

Fortunately, there is a new trend in economic development that is the movement for equitable economic development. Econsult Solutions describes this movement as being able to, “unlock the full potential of the local economy by dismantling barriers and expanding opportunities for low-income people and communities of color.” 

Equitable economic development tends to focus on identifying ways to support economic development within the existing community and population, many times by focusing on small businesses and entrepreneurs. This approach allows you to create tailored approaches for the diverse communities within your broader community and build the economy with and for your residents.

This approach brings with it many benefits. The first is that it tends to be significantly cheaper than traditional economic development. The below chart from the Center for American Progress shows the cost breakdown per job of various economic development strategies. 

Another benefit is that small businesses tend to keep more money in the community versus larger companies. The American Independent Business Alliance estimates that 13.6% of revenue generated by chains remains local compared to 48% of independent revenue. 

A third benefit is that small businesses are statistically much more likely to be minority and/or woman-owned versus larger corporations. CNN reports that 6.2% of fortune 500 CEOs are women while data shows that 40% of privately held companies are owned by women and women-owned businesses are more likely to be minority-owned then other businesses. 

A Couple of Quick Tips 

You might be thinking that sounds great but how do I do it? I have a few quick tips and strategies that you can apply to your community and daily life. 

The first tip is to shop locally. Instead of buying businesses meals or supplies from larger companies can you purchase them from local companies. Can you break down your five facility janitorial contract into 5 separate contracts to make it easier for local firms to win those contracts? 

The second tip is to ask your local small businesses and aspiring entrepreneurs what their barriers to starting, operating and growing their businesses are. While there are general barriers that they will face regardless of community, the magnitude of those barriers will vary, and each community will have its own unique barriers. Some of those barriers may include permitting, access to capital, available and affordable real estate, business acumen, and talent pool. Additionally, ask them what you can do to help them overcome those barriers. 

The third tip is to think about what other organizations can help you support small businesses. In many communities, you will affinity business groups and local business alliances that can help you support their members. Also, consider engaging non-traditional economic development groups such as ones that support freelancers and the arts community. Also, think about engaging with anchor institutions in your community like hospitals and universities. Work with them to support community development efforts and to encourage them to have a strong diversity within their supplier and vendor pipeline. 

Lastly, think about programs that you can create to support small businesses. This can include grant and loan programs for small businesses. Something to consider when creating these programs is that many small businesses (especially women and minority-owned businesses) struggle to get traditional loans because of an inability to have a down payment, local governments can step in and provide low-interest gap loans to provide small businesses with down payments. Also, research if your state provides grants to launch main street programs and consider ways to use CDBG funds to support economic development. 

In summary, equitable economic development focuses on building up a community and it starts by deciding to focus on your community and listening to challenges and needs. 


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