| | Remarks of U.S. Assistant Secretary of Commerce For Economic Development EDA Seattle Office Regional Forum September 5, 2002 | Back |
| Thank you John (Bryan) for the kind introduction. John and I have been working together on a number of initiatives to replicate around the country and in D.C. Thank you Martin sisters, you are inspiring to us all.
It is a great pleasure to be with you today in San Diego. I want to thank Seattle regional director Len Smith for his hospitality and for inviting me to participate in this important program. I've been spending quite a bit of time with Len lately, and I can tell you something most of you already know - that Len is one of EDA's best and brightest. From Anchorage to Los Angeles, from Honolulu to Klamath Falls, Len's guidance in encouraging good investments, investments that drive regional economic growth and maximize return on tax payer investments are appreciated and valued by EDA and the Department of Commerce. I also want to recognize three of my staff that are with us today: David Bearden, Deputy Assistant Secretary; Matt Crow, Director of Communication; and Danette Rich, Senior Advisor.
That having been said, I fully recognize that we meet at a time of great national concern. Potential further terrorist attacks, trouble in the Middle East, a weakened economy, and corporate credibility issues have shaken our confidence. To be sure, many Americans are uncertain about the future and President Bush understands that. But, ladies and gentleman, as President Bush recently said, "The foundation for economic growth in America is strong."
As you know, President Bush has led the way in creating a new ethic of responsibility in America's corporate community. I was honored last month to join the President in the East Room as he signed legislation that exposes and punishes acts of corruption, moves corporate accounting out of the shadows, and protects small investors and pension holders. The President unveiled tough new criminal penalties and enforcement provisions to punish those who refuse to play by the rules and threaten to undermine the integrity of our financial markets. Make no mistakes, the American free enterprise system has not failed, some corporate leaders failed our system and let down workers and investors. Today, thanks to the President's leadership and bipartisan congressional support we have added safeguards in place.
I believe, as I know all of you believe that development of strong regional economies is absolutely key to rebuilding confidence and prosperity for all our citizens. We simply must press forward.
There are mixed signs that the economy is beginning to recover.
Just today, it was reported that:- Worker Productivity rose 1.5% during the 2nd quarter
- Durable Goods led a 4.7% increase in Factory Orders in July
- First time jobless claims fell last week
On Tuesday, the Institute for Supply Management said its index of U.S. Manufacturing activity held steady in August.As President Bush has said, at the Waco Economic Summit last month, the 1st 3 quarters of his administration were marked by recession. The last 3 quarters have shown growth. The trend is moving in the right direction, but we must do more to ensure strong growth and that every American who wants a job can get one.
The President has proposed an aggressive strategy to ensure economic and homeland security, but Congress and specifically the Senate need to act. (Insert talkers)
- National Energy Plan
- Terrorism Risk Insurance
- Department of Homeland Security
- Pension Reform
- Export Administration Act
- Spending Restraints
And so, caution remains the watchword in Washington concerning the recovery. As we all know, positive growth figures mean little to Americans out of work - who are trying to support their families and pay their mortgages.
To that end, everyone in this room, including me, has our work cut out for us during the coming months. We must work together in new partnerships and pursue market driven development strategies to enhance employment opportunities and long-term prosperity. Americans expect and deserve no less.
I would like to take this opportunity to provide you an update on two important issues EDA is dealing with in Washington. They concern EDA's future as a government organization, and the role we will play in the nation's economic development during the years ahead.
I am pleased to report that on August 29, the Office of Management and Budget (OMB) completed its clearance process and approved, with some funding modifications, EDA's proposed reorganization. On the same day EDA provided formal notification of the approved reorganization package to Congress.
OMB's support for and expeditious clearance of this initiative allowed EDA to meet its goal of sending the reorganization proposal to Congress by the end of August. Our Congressional Affairs team will continue to aggressively pursue securing the approval of buy-out authority for headquarters employees who qualify.
Secondly, we have begun the long -- and laborious process, of starting the wheels turning toward congressional reauthorization. As we begin to plan our strategies in this regard, I will keep our regional staff, and you, our stakeholders, informed of our activities in this regard. Many of you will be actively involved in helping us plan our reauthorization strategies.
Both of these challenges " reorganization and reauthorization " are inter-linked. Why? Because if EDA is to continue to be a resource for economic development we must change with the times - moving critically needed resources out to our regions, updating our economic development methods and tactics based on the best current research and market opportunities.
To that end, EDA has been working hard to maximize the economic impact of our existing resources to help regions attract engines of economic growth. In fact, while I am in the San Diego region, I will be announcing $6.3 million in U.S. Department of Commerce, Economic Development Administration investments in the Southern California region.
Two weeks ago in Northern California Commerce Secretary Evans announced a $6.44 million EDA investment in Advancing California’s Emerging Technologies (ACET) of Alameda to expand a business incubator facility that is helping high-tech companies get their start and creating jobs for local residents.
ACET, located on the grounds of the former Alameda Naval Air Station, is an excellent example of tech led economic development that links the university with industry, transfers and commercialized technology.
Indeed, throughout the EDA Seattle region EDA is making a difference in helping communities diversify their economies, boost business development, and create jobs.
I know all of you believe that development of regional economies is absolutely key to rebuilding confidence and prosperity for all our citizens. I hope all of you keep this in mind during this conference. The conference will give you the opportunity to discuss new ways and new strategies to spur growth and to create jobs.
In Washington and in our regional offices, we are working to transform EDA into the premier standard bearer for domestic economic development. That means our goal is to generate more economic impact per dollar of input than any other federal agency involved in economic development. To accomplish this, EDA will embrace an economic development strategy based on enhancing regional competitiveness, fostering innovation, increasing productivity and developing industry clusters.
I recently had the opportunity to visit with Dick Thornburg, former U.S. Attorney General, former Governor of Pennsylvania and current chairman of the State Science and Technology Institute. He provided an excellent historical context for our consideration regarding economic development strategies in the 21st century. Thornburg stated: "In the last two decades of the 20th century the U.S. economy was transformed in a way and at a speed that few could have anticipated. The 19th century's long-term transition from an agrarian based economy to a manufacturing based economy was replicated in an accelerated transition from a manufacturing based economy to a technology-based economy. While traditional agriculture and manufacturing will always be important economic sectors in our economy, today's new economic growth is being driven far more by technology and its influence on traditional economic sectors than ever could have been foreseen."
"While this change is a product of national, indeed international forces at work, it manifests itself community by community. No master plan or industrial policy directed out of Washington, DC could effectively stimulate these new opportunities for economic growth and future-oriented jobs. Nor should it attempt to do so."
We can't predict what the next "hot" industry will be, but we do know that innovation and the imbedding of technology in core industries and manufacturing processes will drive the next regional economic engines of growth.
Over the past three decades federal agencies have invested hundreds of billions of dollars to help states and communities create jobs and economic opportunity. According to a 1996 study by the National Academy of Public Administration, annual federal government support for economic development totaled over six billion dollars per year, including out lays, tax subsidies and the cost of loans and loan guarantees. No doubt that number is larger today. Given the war on terrorism and the priorities that national security and homeland security will have on the federal budget, we believe the time has come for a reassessment of the federal role and its investment of resources. We must ask: What is the appropriate role of the federal government in promoting economic development?
President Bush has said, "The role of government is to create conditions in which jobs are created, in which people can find work." Not withstanding the demands placed on our budget by national and homeland security efforts, we believe there continues to be a significant federal role in economic development activities. However, the country needs a smarter federal effort, both in the sense of what is expected of it and in the sense of how it is designed and managed.
Expectations profoundly influence how we conduct economic development efforts and when expectations are unfulfilled they lead to disappointment, disillusionment and erosion of credibility. It's easy to set high and lofty goals for what we want to accomplish, but unless those goals are quantifiable, and achievable, our credibility is eroded. None of us in the profession of economic development can afford that.
One policy goal is to increase the productivity and wealth of the American economy. After more than a decade of generally successful business efforts to compete effectively in a global economy, it is still important that public policies encourage and strengthen American firms to become more productive and profitable.
A second policy goal is to ensure that all communities share in economic opportunity. Even after a decade of dramatic expansion of the national economy, some communities still have chronically high unemployment and low incomes. It is important for government to do what it can to enable all Americans to have the opportunity to participate more fully in the American dream and national prosperity.
So the difficulty lies not in the goals of federal economic development activities, but in our expectations of what can actually be achieved.
What we need to do is acknowledge the federal investment in economic development can have only a marginal direct impact on national productivity and economic opportunity. Its impact is dwarfed by other federal policies and programs that focus on national economic conditions and on providing the legal and regulatory parameters within which private sector activities take place: things like TAACs and trade policies. The federal government also has many policies and programs in transportation, technology and other fields that impact state and local economies, but are not primarily directed to economic goals. Expenditures for these programs are far larger than the federal effort in economic development.
A second reason why federal economic development programs have a limited direct impact is that market forces, rather than the decisions of government officials, are the primary force driving both the overall rate of economic growth in our 10.4 trillion dollar economy, and the geographic location of economic activities. Economic development programs cannot counteract these powerful forces but they can work in tandem with them.
Economic development programs can help private businesses build links with public institutions, like schools, universities, community colleges and research institutions. They can assure that public infrastructure is available and that public services are provided to attract economic growth. They can help emerging businesses navigate complex regulatory systems. When the market place bypasses certain geographic areas or when regional economies are experiencing structural economic change, economic development programs can help build a more favorable business climate to attract private capital investment.
Over time these economic development activities can help to influence both the rate and location of economic change.
But federal agencies cannot undertake these activities on their own, especially in a highly diverse and decentralized economy. Without a sustained concerted effort by states and communities themselves, federal efforts will have little or no impact.
Communities can attain real economic improvement, even if they are currently experiencing economic distress. But first they must mobilize a broad based and well-conceived effort to increase economic opportunity. This effort must generally be consistent with market forces and take advantage of the opportunities that markets create. Finally this effort must be sustained over many years - perhaps even decades. Helping such communities get started and contributing to their momentum are realistic goals for the federal government.
But to increase overall wealth and to help communities improve economic conditions, the federal effort must be designed and managed more efficiently. That's why I have proposed the most sweeping reorganization of EDA in its history. We must align resources, flatten the organizational structure, and move resources to the field where the interaction with our partners takes place. We must ensure that YOU have access to the best economic development research and market trends available. Economic development programs must help states and localities Learn through better information, enable them to Leverage all available resources, and Link scattered initiatives to serve local needs. (The three L's = Learn, Leverage and Link)
The economic reality of the 21st century economy is that higher levels of private capital investment drive the creation of higher-skill, higher-wage jobs. Therefore, our mission at EDA is to help foster a positive business environment among America’s distressed communities " both rural and urban " to attract private capital investment to produce goods and services and increase productivity thereby providing higher-skill, higher-wage job opportunities.
Governor Thornburg, speaking about the impact that the new economy will have on economic development said, "The challenge for today's state and local officials and policy makers is to fashion strategies for each state to ensure they are positioned not to just compete, but to thrive in the new economy."
Fortunately they can draw on what we already know about promoting sustained regional economic growth and prosperity. EDA funded research done by ICF International in 1998, which has identified four basic rules for economic development in the 21st century.
Rule number one: Think regionally to compete globally.
Competing in the global market requires the resources of all businesses, academic institutions, and communities within a region. That is today's reality. More and more, certain regions tend to have specialized knowledge and capacity that is of a scale and form that distinguishes them from other areas.
Industry no longer cares about political boundaries - except when they're a barrier to business. What they do care about is competitive advantages. And that's where EDA and all of us in economic development come into play. We must cooperate regionally, think regionally to avoid fragmentation of resources, and build a strong economic platform for growth.
So thinking regional should be the key point of departure for defining economic development needs and goals.Rule number two: industry clusters drive regional performance.
Industry clusters are groupings of industries, suppliers and supporting institutions within a region that export to national and global markets. They are a set of industries that have a lot in common in terms of technology, worker skills, finance, and logistical inputs. As a result, they tend to congregate near one another, sharing innovative practices and economies of scale.
Industrial clusters are very important to a region because while they typically account for only 25% of the employment base, their economic multipliers account for much of the balance of the region's employment. This makes them the driving force of economic development.Rule number three: Economic input-advantage fuels cluster competition.
The rise in competitive clusters is due to the ability of regions to provide them with distinctive sources of economic input advantage - for example: adequate financing, available infrastructure, advanced communications, and most importantly, a skilled workforce. In other words, clusters won't come to, or expand in, regions that fail to provide at least one input advantage.
Finally, rule number four: Collaboration achieves economic advantage.
If industrial clusters are the center of action in the global economy, how do they become, and how do they remain, competitive? By collaborating. Citizen leaders, both public and private, must agree on a long-term development strategy that creates a competitive climate.
They need to agree on the investments in regional assets ... education ... research ... physical infrastructure ... and quality of life over time. With such a strategy in place, you will attract private investment and employment. And you will build a "platform for economic growth."
In the next generation economy that regions are seeking to build, the hallmark of vitality will be the agility of institutions and their leaders to recognize and to collaborate in the improvement of existing - or creation of new-sources of economic input advantages. Communities that fail to realize this, that fail to come up with a long-term development strategy, will either decline, or they will stagnate. Our job at EDA ... working with you, is to capitalize on this market-based strategy to seize the economic development opportunities of tomorrow. We believe our regional approach to development will work. It's based on solid research and reflects the global market place.
Let me end by saying we see this as a unique moment in history for EDA. It is an exciting journey with many opportunities for people to embrace the future. And we look forward to taking this journey with you as we work to build long-term economic opportunity for all Americans. THANK YOU. (I would be happy to take your questions on any issue.) |
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