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An everyday story of ‘industrial policy’

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Imagine I was to start-up a successful game development business right here in the northern town of Darkhaven, using the phenomenal talent available in the city, courtesy of a vibrant digital community carefully nurtured by public and private cash.

I am exporting my games all over the world, employing hundreds in and around the city (as well as an army of coders over in Eastern Europe and Asia).  We are an economic success story.

The Finance Director knocks on my door and says ‘Mike, its time for us to consider a move.  If we were to relocate our business  to Brighthaven I think we could negotiate some great breaks in return for the jobs we would bring them.  They will prioritise an application for the Brighthaven Growth Fund that could pay for a purpose built HQ on their new business park, and they will give us the land for a snip.  So, unless the economic development team at Darkhaven council are really prepared to up the support they give us we should really think about moving.  And if Brighthaven don’t come up with the goods there is always Southaven or anyone of another dozen cities that would love to be our home.  And that’s before we even look at the possibilities of moving the whole operation overseas.  This is no time for home town sentimentality.  This is business.’

And so the arms race that is called ‘economic development’  or ‘inward investment’ is underway as we play Brighthaven off against Darkhaven, talking to the politicians and the economic development directors seeing just how much they are prepared to offer to sweeten the deal.  And we wrap all of this up the language of ‘industrial policy’.  But in short I will take my business to whoever will offer me the best deal, the lowest cost base, the greatest support.  My future profit taking will enjoy a healthy subsidy from the taxpayer in return for the jobs that I bring to town.

Each administration makes careful calculations about just how much it can do to win our business.  And in a sellers market where politics probably count for more than the long term economics we are always able to negotiate a good deal.

Economic development becomes essentially the process of ‘buying’ jobs.  Which of course has nothing to do with developing economies.

A Way Forward for Communities?

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Sustainable community based enterprise

There is no doubt in my mind that community based and bottom up approaches to enterprise support like those pioneered by Ernesto Sirolli and subsequently developed and transformed by projects like Bizz Fizz and on a much more modest scale Elsie, provide significant clues to the emergence of truly sustainable and enterprising communities.

But instead we get celebrity entrepreneurs and academics delivering masterclass after masterclass after enterprise competition on a seemingly endless treadmill driven by incoherent policy and the increasingly desperate search for those Holy Grails of ‘narrow’  economic development – the quick win and the high-growth start-up.
It must be time for us to develop a focus on long term, community building  approaches to sustainable development that embraces the economy, culture and social cohesion as an inseparable trinity.  These things cannot be pursued successfully as separate entities managed by different silos. They are all part of the same process of ‘development’.
We need to develop affordable processes that engage the whole community in nurturing the development of those willing to act boldly and helping more of its members to see that bold action will often reap its reward, not just for the individual but for the community as a whole.  We must help to build communities that know how to recognise and help enterprising people who are looking to make a living and leave the community better off as a result.
And we must persuade policy makers, economic planners and perhaps most importantly our fellow citizens that entrepreneurship is not the only valid form of expression for our enterprising souls.

Product, Price, Place and Promotion – lessons for the entrepreneur from a virtuoso violinist

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What happens when you take a £3m violin, a virtuoso violinist and a platform for them to perform?

Well, the answer is – it all depends.  If the platform is the mass transport system of Washington DC or the Concert Hall with tickets going at $100 and more.

http://www.youtube.com/watch?v=myq8upzJDJc

At least two lessons to reflect on here:

The first is pretty prosaic and pertains to that classic of the 4 Ps of Marketing: Product, Price, Place and Promotion. You have to get all four right.  A brilliant product is nowhere near enough.

The second is more metaphysical and probably best captured by Weingarten:

 “If we can’t take the time out of our lives to stay a moment and listen to one of the best musicians on Earth play some of the best music ever written; if the surge of modern life so overpowers us that we are deaf and blind to something like that — then what else are we missing?”

The Problems with Buildings…

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Buildings are expensive things to run.  And these days fewer of us need them as places to go to work.  Or at least we don’t need to go to just one of them.  And we don’t need to pay rent.

Yet there is a vibrant industry driven by developers, politicians and consultants bringing semi derelict buildings, especially in poor communities where regeneration cash is easier to come by, back to life as managed workspaces, incubators and start-up hubs.

When money is being sought to kick these schemes off the business plans always look achievable.  This occupancy rate at these rates per square foot, taking a contribution from the community cafe, with fixed costs of x and variable costs of y, within z months we will be generating a profit and re-investing in the local community.  Money is raised work is done and with hard work and good luck the building is eventually opened.

Except it is rare that members sign up as expected, rents are hard to collect in an economy where most cities have millions of square feet of empty office space.  Fixed costs are usually higher than projected as budgets over-run and interest repayments are higher than anticipated. That break-even point always seems to be ‘just around the corner’ even as social objectives for the building get thrown out the window in pursuit of revenue.

So lots of money, usually intended to help people living in deprived communities, goes into the pockets of consultants and developers and into interest re-payments on loans and the community gets a building that continues to swallow up revenue as the various parties who supported its development and staked their reputation on its success do all that they can to keep it open.  Including setting rents that frequently act as  major barrier to access to local people.

Of course it doesn’t always work out like this.

Some communities can stand the overheads associated with such developments.  Typically they are vibrant, affluent and well-educated, with disposable income to invest in ‘community share issues’ with no real need to generate a financial return. Hardly the intended beneficiaries of regeneration cash.  But even in these communities, building based regeneration is an expensive, risky and demanding endeavour requiring a lot of know-how and goodwill to keep the show on the road.

If we are restoring a building for its own merit then that is fair enough.

But, there is a world of difference between a pretty building and a building that is doing a beautiful job.

 

Paul Seabright on The Supply of Shirts

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If there were any single person in overall charge of the task of supplying shirts to the world’s population, the complexity of the challenge facing them would call to mind the predicament of a general fighting a war. One can imagine an incoming president of the United States being presented with a report entitled The World’s Need for Shirts, trembling at its contents, and immediately setting up a Presidential Task Force.

The United Nations would hold conferences on ways to enhance international cooperation in shirt-making, and there would be arguments over whether the United Nations or the United States should take the lead. The pope and the archbishop of Canterbury would issue calls for everyone to pull together to ensure that the world’s needs were met, and committees of bishops and pop stars would periodically remind us that a shirt on one’s back is a human right.

The humanitarian organization Couturiers sans Frontières would airlift supplies to sartorially challenged regions of the world. Experts would be commissioned to examine the wisdom of making collars in Brazil for shirts made in Malaysia for re-export to Brazil. More experts would suggest that by cutting back on the wasteful variety of frivolous styles it would be possible to make dramatic improvements in the total number of shirts produced. Factories which had achieved the most spectacular increases in their output would be given awards, and their directors would be interviewed respectfully on television.

Activist groups would protest that “shirts” is a sexist and racist category and propose gender- and culture-neutral terms covering blouses, tunics, cholis, kurtas, barongs, and the myriad other items that the world’s citizens wear above the waist. The columns of newspapers would resound with arguments over priorities and needs. In the cacophony I wonder whether I would still have been able to buy my shirt.

Paul Seabright – The Company of Strangers

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