N ext week, I head back to work with our colleagues at Fraunhofer. As I prepare for the trip, I’ve been thinking about the future of the economic development profession.
In the wake of the financial crisis and the near collapse of the financial system, hopes that the global economy would return to “normal” have faded. Across the advanced economies, including the U.S., employment remains low relative to very slow GDP growth. At the same time, income gaps are widening.
The Search for a New Growth Model
In the face of these challenges, governments at all levels are searching for a new growth model to ignite their economies. While the details of this new approach to growth are still emerging, the outlines are becoming clear. Technology development, network-based innovation, and collaborative leadership are emerging as key components in both company strategies and government policy.
We see these new frameworks emerging everywhere. So, for example, more university professionals and policymakers are interested in understanding the lessons of the Fraunhofer Institutes in Germany, a network of over 60 advanced research institutes that bridge the gap between university research and the market.
In the U.S., the Obama administration is focused on the development of regional innovation clusters and new advanced manufacturing institutes that combine the resources of the private sector, government and universities to develop new technology platforms.
Oddly, the federal government is relatively late to this game. Of course, we have the Small Business Innovation Research (SBIR) program and the Bayh Dole Act, but both of these initiatives are over 30 years old). In the early 1980’s, as a staff member on the Senate Democratic Policy Committee, I participated with a group of staffers from the National Science Foundation to draft legislation to establish a National Technology Foundation. This effort died before we were able to get hearings. Not much has happened at the national level since then, as ideology hijacked our politics and made bi-partisan compromise more difficult to locate.
In the meantime, other countries have been experimenting more aggressively. In the UK, new Catapult Centers are anchoring regional innovation development in university research. A*STAR in Singapore, VTT in Finland, ITRI in Taiwan, the new Callahan Institute in New Zealand: all are pursuing this new growth model that combines technology, innovation and collaboration. As Mariana Mazzucato demonstrates out in her book, The Entrepreneurial State, our ideological mindsets have blinded us to the realities of what really makes economies grow.
In the U.S., the most interesting experiments in new models for economic development are happening on university campuses. See, for example, a recent interview of UC Davis Chancellor Linda Katehi or SUNY Chancellor Nancy Zimpher. At Purdue, we are focused on understanding more deeply how to design both startup and innovation ecosystems and the role universities play in regional innovation systems.
Regardless of the level of your analysis — firm, region or nation — collaboration drives competitiveness. Bright line, binary thinking about free markets and government interference distorts our view and undermines our performance. Acemelou and Robinson in their work, Why Nations Fail, reach similar insights from a different perspective.
Within secondary and higher education, an emphasis on new approaches to regional growth has led to a deeper focus on the STEM disciplines and the redesign of engineering education to include more emphasis on entrepreneurship and innovation. More people are recognizing that in a global economy in which technology can skip over borders and capital can fly with the click of a mouse, our most genuine and lasting advantage comes from the brainpower we develop.
Economic Development: Lagging Behind
The profession that stands in the deepest need of these new frameworks – economic development – has not kept pace.
There are approximately 17,000 economic development professionals in the U.S. working in a wide range of settings: local and regional economic development organizations, federal and state agencies, utility companies, municipalities, and real estate development corporations. In addition, a significant number of economic development consultants work for large architecture, planning, engineering, accounting and law firms.
The slow adaptation of the profession is rooted in its history and perpetuated by its current structure. Local and regional economic development is a relatively young profession, born in the Depression era. In both rural and urban settings, the economic development profession grew out of commercial real estate development.
In the U.S. the profession remains heavily oriented in that way. At the same time, government policy is skewed toward “smokestack chasing”, the practice of luring companies from one jurisdiction to another with the heavy use of incentives. By some accounts, the national expenditure for these incentives exceeds $60 billion a year.
Because the research base for regional economic analysis does not translate closely into practice or policy, the profession is vulnerable to both standard answers that don’t work very well (incentives, convention centers) and fads that quickly fade (the Creative Class).
At the same time, oddly, the emerging field that calls itself technology-based economic development seems isolated, paradoxically narrow and detached, without clear professional development offerings or pathways.
For economic development to survive and thrive, we will need stronger, practical connections between research and practice. We are also missing rigorous, flexible, and practical career paths for economic developers. The education and training options for young professionals are limited.
The Opportunity in Front of Us
Clearly, the next generation of professionals differently needs a new set of skills more appropriate to understanding and guiding complex economies. In sum, the profession needs a new framework of economic thought and practice. Professionals will need skills in collaborative leadership and management, talent development, network-based innovation, agile strategy, narrative design and presentation, and place-making.
In the midst of this global readjustment, we now have the opportunity to re-imagine the economic development profession. One aspect of this transformation is certain: Universities will play an increasingly important role in both educating professionals and researching new frameworks and policies.
With our colleagues at Purdue, we are beginning to develop these new curricula and professional training. We welcome your thoughts and participation on what the next generation of economic developers will look like. Please connect directly with Scott Hutcheson, my colleague at the Purdue Center for Regional Development, to share your thoughts. Scott, who assisted me in writing this post, is leading this effort for us.