REMARKS AS PREPARED FOR DELIVERY BENJAMIN ERULKAR DEPUTY ASSISTANT SECRETARY OF COMMERCE FOR ECONOMIC DEVELOPMENT INTERNATIONAL ECONOMIC DEVELOPMENT COUNCIL 2008 ANNUAL CONFERENCE ATLANTA, GEORGIA

MONDAY, OCTOBER 20, 2008

AS PREPARED FOR DELIVERY

Introduction by: Kathie Gannon, DeKalb County Commissioner, Super District 6

OPENING

Thank you, Commissioner Gannon, for that kind introduction. It is a pleasure to be back in Atlanta, and I’d like to thank IEDC Chairman Robin Roberts Krieger and President Jeff Finkle for the invitation to be with you today. I’m very grateful for many things concerning my service at EDA, and one of those things is the opportunity to have worked with Robin, Jeff and the entire network of economic development professionals at IEDC. The fact is that when it comes to interest groups understanding all of the ever-evolving facets of the art and science of economic development from its deepest local roots to its most global macroeconomic implications, IEDC stands alone -- merely a brief review of the comprehensive conference agenda that you all are enjoying bears witness to that. I’m particularly glad that EDA and IEDC are positioned to continue their long-standing partnership into the future, as evidenced by the recent $450,000 investment EDA has made into IEDC’s all-important work developing a long-term public-private partnership in New Orleans, as part of that great city’s redevelopment work following the Gulf Coast hurricanes of 2005, as well as the more recent occurrences of Hurricanes Gustav and Ike. I look forward to seeing the EDA-IEDC partnership continue to make a real difference in advancing the art and science of economic development in the 21st century -- which is the topic I’d like to address today.

As you know, this Administration’s time of service at EDA has grown short, and one of the things that folks in my position are supposed to do at this point in their service is to look back in a wave of fondness and hazy nostalgia to canonize some of the great things they’ve done to establish some sort of legacy. I really don’t buy into that, and I think it would be a disservice to EDA and its stakeholders to focus on the past when the future holds so many immediate challenges and opportunities. I’ve told EDA staff repeatedly that if in five years EDA’s mission remains the same as it does today, the agency will have missed a real opportunity, not just to maintain its niche among the pantheon of federal financial assistance programs, but to serve its stakeholders nationwide with the most forward-looking, cutting-edge programs and solutions to economic development challenges. So let’s take a look just briefly at where we stand today in economic development generally, and then look at some of the things EDA will be working on presently and further into the future to ensure not only its continued relevance, but its sustained excellence.

Most of you have heard Sandy Baruah speak of the 5 new realities of economic development. It’s worthwhile to review those realities because I hear them reflected in what Robin Roberts Krieger spoke about this morning, and it’s worthwhile to see where we’re on the same page and where we have some different emphases.

THE FIVE NEW REALITIES

Let’s begin with New Reality #1 of the 21st century economy: While perhaps the most obvious, it’s the most important, which is that we are truly in a Global Economy. The fact of the matter is that globalization – in whatever form it takes now and in the future – is here to stay. We live, exist, do business, and compete in a world that is “smaller” – more interconnected – in more ways and to a greater degree than at any time in our history. And the rate at which we will continue to become more interconnected is increasing, and will continue to increase.

As proof of this, look no further than the evolution of open-source R&D, the growing role of sovereign wealth funds, how global economics and politics are driving gas prices, or the global implications of the current situation in our financial markets – all of which re-enforce the view of our economic geography.

I’m not saying that this is the “right” order of things. I’m not saying that this is the way things are and therefore you must love it. I am saying that this is the way things are, and therefore we must acknowledge that and recognize and embrace the challenges and opportunities that arise from it.

Along with increased global competition come opportunities for global partnerships – opportunities to expand our markets and increase our competitiveness. And, with most of our potential customers being outside of the U.S., this reality holds great promise.

New Reality #2: Competition is intense, and the pace of change will continue to accelerate. It took 55 years for the automobile to spread to one-quarter of the U.S. population. It took 35 years for the telephone to do the same thing. The personal computer accomplished the same level of market penetration in 16 years, 13 years for the cell phone and only 7 years for the Internet.

Every day it seems the gadget we bought yesterday becomes outdated as the new and improved version hits the marketplace. There are good jobs that exist today that we couldn’t even dream up two years ago: Podcast manager…Blog writer…I-Pod accessory manufacturer…Satellite radio host.

This new reality where cycle times for products and ideas continue to shrink will require all institutions – public, private, educational, and non-profit – to continually adapt and change. Those that don’t are at risk. Those that do have the opportunity for reward.

New Reality #3: Because of realities one and two, for economic developers, the resources and tools of our craft – the tools of competitiveness -- can no longer be deployed separately. Just as technologies are converging to create new fields of innovation, so are the tools of competitiveness merging to shape economic growth in the 21st century. This reality holds two important lessons for the local and regional level:

First, the idea of workforce development, community development, economic development, and educational programs occurring in separate silos can no longer be tolerated. The interconnected challenges of workforce, education, community and economic development must be tackled in concert.

Second, we are no longer competing with the company, city, or county next door. Our competition today comes from anyone on any point on this planet with a good idea, a good education, and a good Internet connection. As competition intensifies, no one resource alone is sufficient to succeed in today’s worldwide marketplace. Likewise, no singular town, city, or county can compete on its own. Instead, communities must work together to garner and leverage a critical mass of resources to spur innovation and offer more to the worldwide marketplace than any one community standing alone could hope to offer. That’s why we at EDA continue to emphasize regional approaches to economic development. It’s what the smart folks and practitioners around the world see as the state of the art, and for the moment we don’t see a better alternative to the regional model.

New Reality #4: Private - Public partnerships become more critical every day. What’s more, there’s plenty of new innovative ground to break in terms of developing the state of the art. That’s why we’re so excited about IEDC’s continuing work in New Orleans. We’d love to see some good lessons learned from that investment. The private and public sectors have fundamentally different but equally necessary roles to play in making these partnerships work.

New Reality #5: At the end of the day, it is the ability to innovate that is the only possible sustainable competitive advantage in the 21st century. It’s not location. It’s not even the cost of doing business. Factors such as these will continually shift in a dynamic worldwide economy. But if a company, a region, or a nation can maintain its edge in innovation, it will prosper.

Companies and governments – by necessity – must continually innovate to stay in existence or stay relevant as the pace of change in our global marketplace continues to accelerate. If they don’t, they will cease to exist. There are no pit stops in this race. You heard me correctly -- innovation is just as important in the public sector as it is in the private sector.

And this is where I turn to talk about EDA, innovation in our program operations is more important than ever. Most prominently, Congress has asked EDA in 2008 to expand its role dramatically in long-term economic redevelopment from natural disasters, by appropriating an additional $500 million. I’m deeply saddened by the circumstances that have brought about this increased role for EDA. But I can assure you that we will be doing everything we can to make sure that these additional funds are invested efficiently, effectively and in the most affected areas to set a new standard for long-term redevelopment work.

This appropriation is a game-changer for EDA, and will require us to continuously develop innovative new ways of doing business, both internally and externally. That’s because the additional funds Congress gave us are, for the moment, exclusively for program use – we’ve received no additional operational funds to evaluate, select and administer the new investments we’ll be making. Great opportunity on one hand, great challenge on the other. We’ve already begun the process of investing the $100 million appropriated to EDA this past June for the storms that swept through the Midwest and the rest of the country in the first half of the year, and we anticipate making announcements in the very near future as to how we’ll be investing the additional $400 million appropriated in September for this purpose.

EDA also advanced innovative improvements to its programs throughout our campaign to reauthorize EDA. We are proud to have succeeded on the Senate side by generating bipartisan consensus that EDA’s programs are vital to American economic development in the 21st century. EDA’s Senate authorizing committee marked up and voted out successfully an EDA reauthorization bill in 2008. The House counterpart committee, however, was unable to did not take action on that legislation, and as a result, as far as we can see, EDA will not be reauthorized before 2009.

I said in testimony before the Senate that I believed reauthorization of EDA should be a no-brainer for Congress. I still believe that, and while we’re disappointed that the House chose not to act on reauthorization this year, EDA will continue to build on the strong progress we have made toward reauthorization. While some uncertainty remains, we will maintain close contact with Members of EDA’s authorizing and appropriating committees to ensure that EDA remains highly visible as a preeminent economic development thought leader, a disaster redevelopment authority, and an exemplary Federal financial assistance agency. We will of course, keep our partner IEDC intimately involved.

Finally, it is our intent at EDA to be innovative when it comes to ensuring a smooth and successful transition to a new Presidential Administration come January 2009. We have already begun organizational efforts to facilitate this transition so that EDA’s next leadership team is ready to go on Day 1, and we look forward to introducing IEDC to whomever that team will be when the time comes.

Finally, I’d like to make a few remarks on the economic context in which we are all working. We’re dealing with significant economic challenges right now. We are in the midst of a serious financial crisis – the financial system is clogged, and credit is not available to many families and business owners who need it. Problems that originated in our real estate and credit markets – and first showed up in the area of subprime mortgages – have spread throughout our financial system and are threatening Main Street.

The most important thing to recognize about the measures our government ha taken over the past two weeks is that they’re going to work. Not only is failure not an option, failure isn’t even on the table for discussion. President Bush signed the Emergency Economic Stabilization Act of 2008 on October 3 to restore the levels of confidence and liquidity necessary to get credit flowing again. The levels of government involvement within this financial rescue plan are unprecedented and designed to address every component of the current problems being experienced in our credit markets, namely:

1. Ensuring the viability of America’s banking system: The government will use up to $250 billion of the $700 billion financial rescue plan for a voluntary program to inject capital into banks by purchasing equity shares using authority granted in the rescue plan. [This is an essential short-term measure to help healthy banks continue making loans and struggling banks recover so they can resume lending and help spur job creation;]

2. Enabling banks to borrow money so that they in turn can lend to consumers and businesses: Effective immediately, the FDIC will temporarily guarantee most new loans to insured banks. [Money flowing more freely between and among banks will make it easier for Americans to borrow for cars, homes, and business expansion;]

3. Giving small business owners peace of mind and bringing greater stability to the banking system: The FDIC will immediately and temporarily expand government insurance to cover all non-interest bearing transaction accounts, which are used by businesses to cover day-to-day operations;

4. Unfreezing the market for commercial paper, thereby helping businesses meet payroll, purchase inventory, and invest to create new jobs: The Federal Reserve will soon finalize work on a new program to serve as a buyer of last resort for commercial paper, which is a key source of short-term financing for American businesses and financial institutions.

This level of government involvement in the financial industry is not something that anyone figured government would need to do. But, when the global financial system and the American economy are at risk – including retirement accounts of millions of Americans, the ability to get a home and auto loans, and the ability of small businesses to keep their doors open – we need to do it.

I will say this about our current economic circumstances: We didn’t get into this mess overnight, and won’t get out of it overnight either. It’s going to take some time to restore levels of credit and confidence necessary, but it will happen. And to the extent that new circumstances emerge that require new solutions, we’ll develop and implement them too.

CLOSING

Like everything else in the 21st century, economic development is getting more complex and more international. Given our current challenges, it’s also more important than ever. I am proud to be part of EDA at a time when the agency and its partners are looking beyond the usual suspects of economic development and are instead looking to the opportunities that our 21st century worldwide marketplace presents. Thank you for being part of this important effort, and thank you for the invitation to be here today.

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