• Garrett Tyson

Economic Development is not a Zero-Sum Game

Updated: May 11, 2020

Economic development is the name of the game in contemporary local government and politics. You would be hard pressed to find an influential figure in any community that will not tell you that economic development needs to be their community's top priority for the future. What is meant by this is sometimes unclear, but in my experience it seems that the common thread tying economic development goals together is that of financial progress, meaning the influx of financial resources into the community that can be accessed and translated into symbols of wealth that did not previously exist. These symbols are often the much coveted but elusive "thing" that Community A has that Community B does not but wishes it did. These are often things like river-walks, convention centers, corporate HQs, sports arenas, or neighborhoods full of expensive, custom-built homes.

Another common thread you will find in local and state economic development strategy is that of inter-governmental competition. According to this premise, the game of economic development is largely viewed as a zero-sum game in which gains in financial investment by one community necessarily come at the expense of other communities in the game. This is not an uncommon or unexpected way of thinking about economic activity. We have, after all, been trained from an early age to think about our political-economic landscape in the United States as one that maximizes general utility by pursuing individual self-interest in what was probably described to you as some sort of marketplace competition. It only makes sense that we would translate this oversimplification onto our economic thinking at the organizational level later in life.

I want to suggest a better and much more helpful way to think about how we conduct economic development at the local and state levels, and that is to abandon the competitive, zero-sum game mindset in exchange for a perspective on economic development that embraces broad wealth creation and productivity. I think we should be playing an infinite game of economic development where gains by one community enhance, rather than diminish, the prospects of other communities, especially those in close networked proximity. It is my belief that this thinking about economic development is far more congruent with our economic, social and political reality and much more likely to produce desirable long-term gains that sustain our communities.

The competitive approach to economic development also involves adversity as the principal driving force behind inter-municipal relations. This is an unhelpful way to conduct the business of economic development. Our neighboring communities are not our adversaries and treating them as such is folly. The economic struggles experienced by our nascent American political experiment under the Articles of Confederation provide a telling historical analogy for the harm that can be done when individual, component parts of an economically interdependent network take an adversarial approach toward their economic relations. The Framers were wise to counteract this in the development of our Constitution, facilitating networked cooperation while allowing the uniqueness of the local marketplaces to remain and flourish in the federal structure. (It is interesting to note here that each of the colonies/states at the time of the Declaration of Independence had populations roughly equivalent to a small- to mid-sized metropolitan statistical area today).

Our modern communication, financial, and transportation infrastructures have advanced to the point that events in distant and seemingly remote locations can have significant ramifications locally. (The present viral epidemic has made this exceedingly apparent, I think.) We are more connected than ever before. Today, the adversarial mindset toward economic development at the local level poses many of the same threats that the inter-state competition of the late 18th century posed to the Framers. Our continual internal striving erodes the strength of both our collective and individual positions and, at the same time, projects an image of uncertainty and weakness that discourages investment of all kinds (not just financial).

As the Framers did when they constituted our United States, we must continue to think of our distinct communities as important partners rather than adversaries.

From this perspective, a zero-sum approach to economic development makes no sense. Instead, it suggests that we should adopt an infinite, positive-sum game perspective in which our aim is not to achieve a final victory vis-à-vis an adversary, but to achieve lasting and sustained success that perpetuates and matures from one generation to the next. It also infers that we should seek to achieve success that provides benefits broadly and inclusively as well.

For too long our local communities and governments have deployed economic development strategies that are not only averse to our neighbors but also to our own long-term success. We too often exchange the resiliency and capacity for durable and broad gains in wealth in order to achieve a short-term victory of one kind or another. Communities that leverage job-creation incentives for the relocation of a business from one neighboring community to the next where there is no reason to expect a net economic benefit other than the short-term value of construction activity and a few headlines is just one example among many.

It is not my contention that any of us do this deliberately or with bad intent. I think we are all simply responding to the incentives set before us by our professions and the organizations we work within. These incentives are representative of the way we think about what we do and, in the case of economic development, I think it is time to think differently. We must develop, institute, and begin to respond to new incentives that facilitate broader, more inclusive wealth that will last and put our communities in increasingly stronger positions over time.

We have attracted some of the smartest and most capable people among us to this field we call economic development, but we have them competing in a game where the rules are not designed to achieve the success we all agree we want. Together we can change the rules of that game to cooperate for long-term, broad-based wealth creation rather than competing in a so-called economic race to the bottom.

The reality is that, regardless of relative size or resources, these communities are so interdependently networked that gains/losses in any location are experienced throughout the network.

What does this mean, practically speaking? For starters, I think it means that community A needs to stop coveting community B's symbols of wealth and success and, instead, celebrate them as they would their own. Our local communities should be reaching out to neighboring communities to explore opportunities to collaborate and to share resources and expertise for broad wealth creation.

Reach out to neighboring communities within your sphere influence. Smaller, less developed communities can benefit greatly from the wealth of expertise and insight that results from the institutional growth and maturation that a more sophisticated organization has developed over time. Likewise, smaller outlying communities should stop viewing their larger and better resourced neighbors as bullies who suck up all the wealth and attention at the expense of the “little guy”. From an economic perspective, such a mindset is nonsense. The reality is that, regardless of relative size or resources, these communities are so interdependently networked that gains/losses in any location are experienced throughout the network.

Though our individual communities are closely networked and interdependent, they also represent unique marketplaces within the broader economy. The unique character of each community means that there are certain communities that are situationally better suited for certain types of growth and development at certain times. Helping investors discover the situation that is best for their specific needs, regardless of whether that situation exists within our local community, should be a hallmark of successful and ethical economic development. Doing otherwise is most likely a very inefficient manipulation of the market forces and influences that would otherwise more efficiently direct the flow of the capital. (Believe me, I appreciate that our brand of capitalism has many flaws and has resulted in much wealth inequality, but I am also convinced that the price mechanism operating within a secure and transparent market is far more effective at guiding resource allocation than any of us could achieve on our own or as a group).

We must stop viewing nearby communities as competitors and start viewing them as teammates in the infinite game of broad-based wealth creation. We must start advocating for our neighbors' financial, social and political success. Competition between our communities is fine when it comes to real sports. But when it comes to making decisions about creating long-term wealth, let's leave those concerns on the field. We really are all on the same team here.

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