Photo by dpatricklewis/flickr.com
Over the last few decades the city of Littleton, Colo., has enjoyed the sort of economic success that many other communities can only dream of. According to the city’s economic intelligence specialist, Christine Hamilton-Pennell, Littleton’s economic development practices have resulted in the following growth:
- The number of jobs created in Littleton has doubled from 15,000 to around 30,000.
- Sales tax revenues tripled from $6.8 million to $19.6 million (Hamilton-Pennell notes that this increase occurred despite two major recessions and a population increase of only 30 percent).
Furthermore, the city offered no tax incentives or breaks to recruit these new businesses. Recently Christian Gibbons, Littleton’s director of business/industry affairs, conducted a conference call with Las Cruces community leaders, city staff, and representatives from local business groups like the Las Cruces Green Chamber of Commerce, the Mesilla Valley Economic Development Alliance, and the Hispano Chamber of Commerce, among others, to discuss how they did it.
How did they do it?
Littleton’s economic prosperity is thanks to an economic development model that Gibbons calls economic gardening. A cornerstone principle underlying economic gardening is that economic development efforts should focus on:
“…investing in local businesses rather than the traditional approach of luring businesses… from elsewhere by offering incentives and tax breaks.”
Economic gardening’s focus on investing in local entrepreneurs is derived from David Birch’s research while he was at MIT. Here’s what CBS Moneywatch says about the impact of Birch’s research:
“Small business is now widely regarded as the principal generator of net new employment in the United States. When first introduced fifteen years ago, the idea was revolutionary. Few economists or policy analysts gave smaller firms a passing thought. Large entities were presumed to be the primary, if not the sole, source of economic vitality and the only units worth examining. Yet, the newfound utility of small business took hold quickly not only because it fit America’s self-image, but because the empirical data supported it.”
Following are some of Birch’s key findings:
- An estimated two-thirds of net private sector jobs created in the last 25 years were created by small firms (a small business is defined as one that employs fewer than 500 employees).
- Small firms employ about half of the total private sector work force.
- Small businesses that employ from one to 18 employees create the most net new jobs relative to their share of total employment.
Furthermore, a more recent research study conducted by the Federal Reserve Bank of Kansas City determined that “between 1990 and 2003, companies employing fewer than 20 employees accounted for 79.5 percent of the net new jobs in the US.”
It’s clear from the data that investing in small businesses and entrepreneurship can lead to significant job growth.
How economic development usually happens
According to the Federal Reserve Bank of Atlanta, economic development policymakers have traditionally focused on the following four activities:
- business recruitment
- retention
- expansion
- entrepreneurial development
Many communities are now turning their focus away from only recruiting big companies – it’s called smokestack chasing – to encouraging entrepreneurial development. There are a few reasons for this shift, according to the Federal Reserve Bank of Atlanta:
- Investment in business recruitment has not consistently produced strong job growth or economic development.
- Policymakers are concerned that incentives are an ineffective way to attract businesses that might not be committed to the community for the long-term, and are likely to leave once the incentives expire.
With communities shifting to entrepreneurial development, policymakers and planners are looking for successful models like economic gardening.
How economic gardening works
Economic gardening nurtures entrepreneurship. By investing in smaller, high-growth businesses – which Birch calls “gazelles” – economic gardening, according to the Federal Reserve Bank of Atlanta, “allows local communities to capitalize on their unique assets and to leverage their existing strengths for future growth.”
Following are the three “building blocks” that economic gardening programs use to nurture entrepreneurship:
- Information. According to their website:
“Over the years we have developed very sophisticated search capabilities using tools often only available to large corporations. We subscribe to a number of database services and CD-ROMS which provide us access to over 100,000 publications worldwide. We use these tools to develop marketing lists, competitive intelligence, industry trends, new product tracking, legislative research and to answer a number of other custom business questions.”
- Infrastructure. This includes not only physical infrastructure necessary for businesses to be successful but also quality of life infrastructure like parks, green spaces and community development. Economic gardening programs also focus on developing “intellectual infrastructure” through training and seminars. Here’s what they say about infrastructure:
“All of our infrastructure work is based on the idea that economic development and community development are two sides of the same coin. In the New Economy, where new wealth and jobs are being created by knowledge firms, creating a community that is attractive to entrepreneurs and the talent they hire is as important as natural resources and heavy rail were to Old Economy companies.”
- Connections. This involves not only connecting businesses to one another but also to trade associations, academic institutions and research and innovation.
The future of economic gardening in our community
I hope that, with the new leadership at the city, and empowered local business advocates like the Green Chamber, our economic development policymakers will look at ways to adapt the principles of economic gardening to fit Las Cruces. BALLE, a nationwide network of local businesses, contends that a strong local economy not only makes good economic sense but also helps a community celebrate and leverage its inherent strengths.
In Las Cruces, those strengths are things like our mild climate and the particular beauty of the Organ mountains; our unrivaled positioning on the globe to be a leader in renewable energy production; access to NMSU, a Carnegie foundation top research institution; and our unique mix of culture and tradition.
Furthermore, investing in our local entrepreneurs will create what sociologists call social capital, the formation of which, according to public policy expert Lewis Feldstein and Robert Putnam in their book Better Together, can improve schools, make people live longer, create broad prosperity, and – if that’s not enough – build prosperous local economies.
Congratulations to Littleton and the economic gardening folks for creating a model of economic success that invests in homegrown talent. Let’s hope that we in Las Cruces can figure out how to adapt their ideas to work for us.
Happy New Year!
Nick Voges is the blogger behind NMPolitics.net’s Zeitgeist. E-mail him at nick@nmpolitics.net.