Most football teams find it easier to get into the “red zone” (inside the 20-yard line) than to go through it and cross the goal line, which of course, is the basic objective. As is evident, the more times the ball crosses the goal line, the more victories result.
There is a similar analogy on the playing field of our state economy, and there are two elements of the team that are equally essential in achieving victories. They are not the traditional offense and defense one sees in gridiron battles; rather, they are both offense. I call these two essential facets of economic development “fundamental” and “incremental,” and to be effective they must work in tandem.
Similar to the daily conditioning and preparation a team needs in order to play its best, fundamental economic development represents what state government does on an ongoing basis to create an overall environment that is conducive to economic success.
The primary role of government in achieving business prosperity is to perform its traditional functions in an exemplary fashion. Involved in this “preparation phase” are the creation and support of outstanding public schools and higher education institutions, and the operation of an efficient administrative and regulatory process unencumbered by needless bureaucracy.
Additional prerequisites for growth in which the government plays important roles include the maintenance of effective infrastructure (such as highways, water resources, utilities, and telecommunications), a clean environment, and a judicial system that is balanced in its approach to compensation for legitimate harms and resolving disputes.
Another essential is a fiscal structure that meets public needs and provides expanding revenue to meet the requirements of increasing economic activity. Initiatives that positively impact the costs of doing business (such as workers’ compensation or unemployment insurance) or the quality of life (such as crime reductions or improved public health) also contribute to the overall climate for growth.
These “fundamentals” make the state a desirable place to be and create a business climate that is conducive to prosperity. In other words, these elements get the ball into the “red zone.” While such efforts are essential, they are not enough to achieve a score or “close the deal.” To do so, the “incremental” process is required. It’s like the top-notch receiver or tough running back; it’s tough to score without them.
This “incremental” economic development activity that can be undertaken by the public sector involves initiatives taking the form of either explicit marketing efforts aimed at increasing business activity or some type of incentive to encourage locations. Because incentive programs typically involve the transfer of public resources to private firms in one form or another, they are often controversial. But incentives are a fact of life in the marketplace.
Effective financial inducements, precisely targeted job training, and enhanced capital access can make the difference in site selection competition. As with any arena where participants have differentiated offerings, advertising and promotion are vital to the process. It’s not enough for the state to offer a great set of incremental inducements to firms; we must also get the word out to desirable potential recruits.
Naturally, when public or private resources are invested in future progress, they should be directed in a manner that maximizes returns. None of us wants to see taxpayer dollars funneled to corporations without appropriate returns to the state economy and, thus, all Texans.
The bottom line, however, is this: overall costs and other fundamental factors are often approximately equal across several potential sites. Consequently, although incremental incentives have their drawbacks, they are almost invariably the difference between being on the “short list” and winning.
If Texas is to win with some degree of consistency, the state must have an effective game plan. Fundamental policy will get the ball inside the 20-yard line; incremental development efforts will take it over the goal line.