Old Post: On State Economic Development

[Originally posted December 2005]

Dear Diary,

I can’t believe I’ve been asked to be the new DCED secretary. I also can’t believe I’m going to say yes, because even though this is my dream job, it also looks to be a nightmare of a job. To begin with, the state serves such a wide range of industries (both Old and New Economy) and communities (urban, suburban, and rural), as well as countless businessmen, politicians, and neighborhoods far too used to seeing DCED as a conduit for some special program for them.

And in many ways, Pennsylvania is showing its age. We’re in the top quintile for science and engineering grads but in the bottom half for “gazelle” jobs and 47th in overall employment growth . We ranked 19th in a recent New Economy poll, which sounds good until you see that all of our neighbors were in the top ten (Maryland #5, New Jersey #6, Delaware #9, New York #10) . We lost over 100,000 young people ages 25 to 34 between 1990 and 2000, the most of any state . And state finances are becoming strained by rising health care and pension costs.

I’m not even sure I can define success. Is my job to make residents richer? Get the Governor reelected? Create new jobs? Spend lots of money? Or just stay out of trouble? I don’t think I can do all of these things simultaneously. If our workers become more productive, that might mean less jobs in the state, which won’t go over well come election time. And if “economic stimulus” here means politically intervening into business matters, I know I’m not smart enough to always make the right call on what to invest in and where. Plus, there are so many other factors out of my control – like national trends, mass transit, and public education – that have a far greater impact on the state’s economic health than anything I can do from my seat.

So I’ve got a tough job in a tough economy with tough competitors. So what? If I had gone with my colleagues who were recruiting me to help them start their IT company, I’d be in the exact same place. In fact, it’s the challenge that gets me up in the morning – the challenge of creating something from scratch, against all odds. If Pennsylvania could attract, retain, and produce more entrepreneurs like this, we’d be a much more competitive and thriving state.

Easier said than done. At least in my new role, I can do a few things to help make that happen. First, I can work with the Governor and the Secretary of Education to get entrepreneurship into more of our high school curricula. I may not know how to support the hot sectors of the present or what are the hot sectors of the future, but I do know that an educated workforce is a more productive one, especially one learned in topics like business formation, financial literacy, and market innovation. Not only will we be seeding the state with future entrepreneurs, we might even attract some current ones who want their kids to learn what they do in school.

Second, we have to find a way to attract, engage, and retain our college grads. I heard that Philadelphia keeps 29% of the college grads not originally from there, while Boston keeps 42% . I’m a believer in Schumpeter’s idea of “creative destruction” – that long-term economic growth happens when entrepreneurs innovate and old sectors are transformed or replaced altogether. If we could just match Boston’s numbers, we’re talking 2500 to 3000 more college-educated “imports” per year, just the kind of injection of innovators we need to shake up our economy.

But with all this talk about the young and energetic, let’s not forget about what a great asset we have in our elderly and disabled. They, too, can be mobilized in this effort to increase the amount of entrepreneurship that is taking place in the state. SCORE, of which Pennsylvania has 14 chapters, is just one way startups are tapping into the wealth of knowledge contained in our older businesspeople . And the disabled start businesses at twice the national rate . So we ought to do more to get the elderly and disabled in on this “creative destruction.”

Lastly, we must push the Internet as a way to make business, education, and government faster and more efficient. Even our stodgiest firms can thrive if they harness the Internet to manage inventory, coordinate logistics, and connect with customers. I love how Drexel has made its campus wireless and given every student a laptop – now professors can communicate more easily, and the school doesn’t have to invest as much in computer labs and library books. We can use e-government to further accelerate commerce, by streamlining the process for applying for licenses, filing taxes, and doing business with the state. Speed begets more speed; whether it’s new production methods, new products, or new markets, it’s good for economic growth.

It’s a big risk to walk away from our current strategy of developing programs to attract sexy industries and appease important constituents; at least then, you can point to big deals, money spent, and jobs created. But I’m convinced that it’s time to go a new way in Pennsylvania. By promoting entrepreneurship to our high school kids, our college grads, and our elderly and disabled; by supporting the use of the Internet to make business, education, and government faster and better; and most importantly, by letting the market decide which industries are hot and where capital should be invested – we can do better. Sounds like a dream job to me.

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