De-Planning Industrialization

Cleveland has an alphabet soup of agencies and foundations with overlapping and conflicting charters.  Most of these organizations are focused on developing companies and encouraging economic growth in the city.  While laudable for their aims, and notable for their earnest, well-meaning people, most of these organizations miss the point.

What we don’t need is a lot of smart, well-educated experts telling us what businesses we should encourage and develop.  Get out of the way, and let the people figure out what businesses they want to be in.

Make it easy for them to do so.

I know this flies in the face of current wisdom – that entrepreneurs need to be encouraged and assisted.  Perhaps.  But more than anything else entrepreneurs have to sense an opportunity and a welcoming environment.

Silicon Valley transformed itself because of the confluence of universities and ease of starting businesses (before California decided that it was hostile to business via its enormous debt and hostile regulations).    Route 128 (and 495) in Boston similarly developed high-tech businesses through a similar environment – universities and ease of startup opportunities (but now suffers from the same maladies as California).

Greater Cleveland has some great universities (including Kent State and Akron), and a talent pool of hard-working graduates.  Along with the influence of a world-class medical community, this area should be a hot-bed of entrepreneurial activity.  Yet, we hear the same refrain from government and non-profit agencies – we need to focus our energies on things they think we should be doing.

The same discussion is occurring on the national level.  The federal government is eager to see jobs developed in the private sector, and has lots of initiatives and programs to make that happen.  As usual, there are a lot of smart guys who think they know better than businessmen how to develop industries.  The problem is, none of those people actually are out there trying to develop businesses.  And, by trying to pick winners and losers they are forcing lots of creative and energetic entrepreneurs to sit on the sidelines.

In the 1980s and 1990s it was widely believed that Japan was going to bury us because of its industrial policy.  The government picked the winning industries and companies, supported them with appropriate tax policies and special programs, and protected its currency to help exports thrive.  Well, that ended up not doing them much good.  Japan has suffered more than a decade of deflation, enormous deficits, a real-estate crash, and a crushing debt overhang.

Today the wailing is directed toward the Chinese, with its command-and-control economy and directed investments.  Noted economist Paul Krugman pines for the ability of their government to make things happen without all of that messy democracy stuff.  Behind the scenes there are enormous inefficiencies which will sink a lot of their companies at some point, and blow the covers off how much they waste capital, manpower, energy, and opportunities.

History shows that directed industrial policy doesn’t work, and the government can sometimes end up wasting a lot of money on an industry that would be far better off without government “help” (Amtrak, anyone?).  But, here we are, with all of those experts presuming to tell us where we need to invest.

There are a lot of smart people who don’t work for the government, don’t work for a foundation, and are willing to risk their careers, fortunes, and health on developing something of lasting value.  Cleveland was built by such men and women.  It was a good place to do business, had a great location, and encouraged them to start businesses here.

Now there are confusing and complex tax policies, crushing regulation, 1930s labor mentality, and a failing secondary-education system.

Businesses will develop if we can get all of those agencies, and governments, and foundations to clear out and make it a welcoming environment for business with low taxes, few regulations, and a hands-off attitude.

I know several businesses that considered moving to the city, but backed away after realizing how many regulations they would have to live by (and staff for), how much they would lose in taxes, and how much control they would have to give to government agencies concerning labor policies and procedures.  It wasn’t worth it, and will not be for people who want to grow and develop their businesses.  There are lots of better places to do it.

Get out of the way, and let the people who know what they are doing thrive.

Then the city will blossom.

Doug Magill is a former Vice President of Nestle, and is currently a consultant, freelance writer, and voice-over talent.

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