From the Ground Up

by

Published: August 21,2000

With all the discussion about economic development in Mississippi, it is probably a good time to pause and review the difference between economic development and community development. The two are closely linked, but remain distinct in many ways.

Most academic and professional courses define economic development as the process by which a community creates, retains and reinvests wealth. Stated another way, it is the process by which a community mobilizes resources to generate marketable goods and services. Many in the profession use job creation as the measurement. Some use the assessed valuation of real property as the yardstick. In the end, economic development is a subset of marketing.

Community development is generally thought of as the process of planning and creating the desired community. It is more concerned with community preparation rather than community promotion. When all is said and done, we are talking about building viable communities for the future.

An analogy that might help explain the difference is the personal residence.

When a smart owner gets ready to sell his or her home, the owner doesn’t just place a “for sale” sign in the front yard. Time is spent preparing the property for the sales process. The yard is cleaned, the house is painted, repairs are made and an appraisal is done. This is similar to community development — getting the product ready for sale.

Next comes the marketing effort. The owner hires a professional (a Realtor) to market the property. The marketing includes evaluation of the market, creating a strategy to reach possible buyers, advertising the property, showing the property, negotiating the contract and following through on the closing and transfer of ownership. This is more like economic development as we currently think of it.

Historically, the profession continues to shift from industrial recruiting to what I call strategic development. The history of the name of the Mississippi state government department responsible for this effort provides insight. It began as the BAWI (Balance Agriculture With Industry) program in the late 1930’s. Next it was known as the Agriculture and Industry Board, then the Department of Economic Development and now the Department of Economic and Community Development. There is currently a proposal to change the name to the Mississippi Development Authority.

In the past a local economic developer often listed the strengths of the community, searched for industries that fit those strengths, identified companies in that industry classification and then contacted them by direct mail, trade shows or personal contact. If the company was in an expansion mode, then the timing was perfect and a new industry came to the community as a result of these efforts. Nowadays, the large expansions or relocations are handled by professional consultants employed by site selection firms or large accounting firms. In effect, the industry now goes looking for the community that best meets its needs.

Therefore, a critical factor in economic development today is having the community ready when the consultant starts searching. Is that community development or economic development? You can see how the terms are beginning to merge. It is a competitive world. There are thousands of economic developers chasing hundreds of prospects. There is a subtle shift going on in economic development as we realize that most new jobs in Mississippi are primarily a result of existing local industries expanding their workforces. Estimates are that anywhere from 60% to 80% of the new jobs in Mississippi during the past five years are from expansion of existing businesses. We are also realizing that many of the new jobs are from brand new businesses, not out-of-state businesses relocating to Mississippi. This adds to the thought that we should be more about encouraging new business growth. Mix in global marketing and Internet technology and it’s not hard to see the next shift in economic development.

The key to future development is the ability to change and to adapt in order to take advantage of the opportunities that are there. Change is sometimes difficult, but it is a fact of life.

I close with a story that I first heard in 1974. It seems that a local automobile dealer had taken some time off to visit the Mississippi Gulf Coast and walk along the beach to cure his depression. The reason he was depressed had to do with the energy crisis, long lines at gas stations, and the fact that nobody was buying large American-made cars anymore. As he walked in the sand he stumbled on a bottle. He picked it up and rubbed the sand off. The cork popped out and – poof! – the proverbial genie appeared and said, “Oh Master, as thanks for freeing me, I will grant you any wish you desire.” The car dealer thought for a moment and with perverted confidence replied, “I wish I could be an import car dealer in any major metropolitan market.” And – poof! – he was a Chrysler dealer in Tokyo.

The lesson of the story is twofold: We should always be prepared for change, and we should be careful of what we ask for. We might get it.

Phil Hardwick’s column appears regularly in the Mississippi Business Journal. His e-mail address is hardwickp@aol.com.

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