Economic development shouldn’t be about branding Michigan

George Erickcek

Twenty five years ago, my former supervisor told me that there was very little economics in economic development.

As a young economist, of course, I disagreed.

Since the goal of business is to maximize profits by producing goods and services the market wants at the lowest costs, it only made sense that economic developers would focus their efforts on ensuring that their region provided a competitive environment for their firms. However, once again, experience trumps theory; my supervisor was right.

Economic development efforts to “brand” a region and identify target industries are less associated with economics than with marketing, and, I believe, they also are misguided.

In consumer markets, branding makes sense. Harley Davidson doesn’t sell motorcycles; it sells the idea that a nerdy economist can become a reckless, young Marlon Brando on the weekends. Nike doesn’t sell shoes; it sells the dream to a middle-age guy that he can run faster and jump higher than he did when he was younger.

Target marketing also makes sense when it comes to consumer goods. If your product is aimed at tech-savvy youngsters, you don’t hawk it on the network evening news. On the other hand, if you are selling anti-depressants …

For economic development, I question the worth of both activities. It is highly unlikely that if you brand it, companies will come. Regional brands are describers of what is already there, not what could be there. Companies located in southern San Francisco Bay were producing computer components before the region was branded Silicon Valley.

Detroit was branded the Motor City because it was the center of the domestic auto industry. Kalamazoo once was branded the Celery City and then the Paper City. Pittsburgh was, of course, known as the Steel City.

We now know how those brands played out.

I believe that businesses care little about such notions as the Green Belt, Michigan: the Alternative Energy Capital of the World, Automation Alley (Southeast Michigan), or the Other West Coast (West Michigan). They want to know if the area’s work force will meet their needs and if the necessary transportation infrastructure is in place. They should already know if the region is a good market location for their goods or services.

As for targeting industries, I just don’t believe anyone is that good at forecasting. I agree that the market for health care products and services will only grow due to the aging population in almost all developed countries. I am also willing to go along with the need to explore alternative energy sources.

However, I question if anyone knows what technology or product is going to come out on top in either industry. If the French are successful in their efforts to commercialize fusion energy, it will have a sudden and severe impact on wind, solar and battery technologies. A new battery design could be announced next week in Germany or Japan that could leap frog over current designs being produced.

In short, targeting not only requires you to pick the right race; it requires you to pick the right horse.

High-growth firms exist in nearly all industries. Maybe we should target them and not their industries.

With my last economic development dollar, I would rather spend it helping our existing firms achieve their potential. Moreover, I am not opposed to giving them a little push in developing new products and services or encouraging their better employees to start up their own enterprise.

I would spend that last economic development dollar on customized training programs, a business retention call or a business leadership or innovation program, long before I would consider spending it on a branding campaign targeted at a specific industry.

In short, let’s put economics back into economic development and leave branding and targeting to the hawkers of consumer goods.

George Erickcek is senior regional analyst at the W.E. Upjohn Institute for Employment Research in Kalamazoo.