Old versus new: New economy is where we are at

A very fundamental structural shift has occurred with economic development. In this new economic age, it pays to know the difference between the old and new economy.

Once research was completed by a partnership of several Michigan universities (see Part one: A new economic age and playing field), the task shifted toward presenting what was learned to state and local governments, so that those successful actions could begin in Michigan. The Land Policy Institute and Michigan State University Extension focused their efforts on that. Much of the activity in the past seven years has focused on working with numerous communities to shift gears and succeed in the new economy. It has allowed us to see, first-hand, these strategies work.

Before going into the successful strategies, lets further explain what the new economy is and how it compares with what Michigan’s economy used to be.

First, there is a shift in what is most important for businesses when choosing where to locate. In the new economy, a community that is rich in talent and ideas is most important. Today’s competitive market requires innovation, adoptability and a community and labor force that has the talent and ideas to change and remain competitive. This replaced what used to be most important: low cost (low tax, tax breaks, pre-built industrial parks).

Second is a community or region’s ability to attract educated people. Why? Because “educated people” is the best measure one has to determine if a community is rich in talent and ideas. In the new economy, one of the major economic development strategies is to do things that result in educated individuals wanting to come and live in their town or region. This replaced what used to be the strategy of attracting companies and factories.

Even factories need educated or knowledge workers. Advanced manufacturing is where the United States is competitive. In the mid-late 2000s, MSU Extension educators, working on this topic, toured parts of Ford Motor Company’s Rouge industrial complex. The UAW worker that was our tour guide pointed to the Ford F-150 pickup truck assembly line and indicated all workers on that assembly line have a bachelor degree, the technical equivalent, or more. 

Third is the realization of and action on the reality that physical and cultural amenities are key in attracting talent and knowledge workers. Those knowledge workers are who bring to a community the richness and talent in ideas, measured by level of education. That is what new economy businesses consider most important. It means that things like vibrant downtowns, theater, nature centers, green and blue trails, natural areas, forests, farms, historic features, arts organizations, and much more are the most important basic things for economic development. In many ways, things a community does to attract and accommodate tourists is now what is needed for attracting the talent to a community.  Often, the strategies used by hospitals to attract doctors to a community are now the strategies that need to be used for the knowledge worker as an economic development strategy. In the old economy, that was not the case. A high-quality physical environment was a luxury, costing money, and a negative for a cost-conscious economic development effort.

Bend, Oregon, is an example of this. Bend is where the spotted owl resided and, upon protection of that species’ habitat, the logging industry in Bend saw a major downturn. That was also when the new economy shift was happening in Oregon. The town’s economy rebounded to a point many times stronger than it was with logging – by promoting their natural environment and outdoor life: “If your business is in Bend, you can be on vacation at 5 p.m. every day.”

Fourth, knowledge workers choose where they want to live. Then, the majority of them move there. Once they have arrived, then they find work or become entrepreneurs and create their careers. With the millennial generation, about 66 percent of college graduates follow this pattern: chose where they want to live, move there and then look for work. The recession has not significantly changed this percentage. I suspect that most reading this article know a child, grandchild, friend or friend’s relatives that have done this. New economy businesses follow that talent to those regions where they are choosing to live. So, the economic strategy is to be the community that has the attractive qualities in your region where people choose to live. That is done with physical, cultural amenities and natural resource play areas. So, knowledge workers, educated people, choose to locate there. That is how a community becomes a region that is rich in talent and ideas, which attracts new economy businesses.

For example, I met the director of a culture department in one Norway city while hosting a study group. Every city in Norway has this type of department funded by their national government as part of their economic development strategy. Her department had seven full time and seven part time employees. Her city population was roughly 7,000. Their job is to make sure there are activities to do in the city: nightlife, sporting events, culture and so on. They have to make them self-sustaining, as these departments cease to exist after so many years. Norway understands the importance of a variety of activities for attracting people and economic development. Norway is one of our competitors in the new economy.

There are additional comparisons between the old economy and new economy. The table illustrated with this article compares the old and new economy. Each illustrates a significant shift from the economy Michigan had prior to 2009 and now. 

Old Economy

New Economy

Inexpensive place to do business was the key.

Being rich in talent and ideas is the key.

Attracting companies was key

Attracting educated people is key.

A high-quality physical environment was a luxury, in the way of attracting cost-conscious businesses.

Physical and cultural amenities are key in attracting knowledge workers.

People followed jobs.

Talented, well-educated people choose location first, then look for a job.

Location mattered, especially relative to transportation and raw materials.

Quality places with a high quality of life matter more.

Success = fixed competitive advantage in some resource or skill.  The labor force was skills dependent.

Success = organizations and individuals with the ability to learn and adapt.

Economic development was government-led.

Partnerships with business, government and nonprofit sector lead change.

Industrial sector (manufacturing) focus.

Sector diversity is desired, and clustering of related sectors is targeted.

Fossil fuel dependent manufacturing.

Communications dependent but energy smart.

Dirty, ugly and a poor quality environment were common outcomes that did not prevent growth.

Clean, green environment and proximity to open space and quality recreational opportunities are critical.

Connection to global opportunities was not essential.

Connection to emerging global opportunities is critical.

Those in Michigan State University Extension that focus on land use provide various training programs on planning and zoning, which are available to be presented in your county. Contact your local land use educator for more information.

 

Other articles in this series:

Part one: New economic age and playing field

Part two: Comparison of the old economy and new economy (this shift has already occurred)

Part three: Importance of attracting people, and that population growth is economic growth 

Part four: Placemaking and local government coordinating with regions 

Part five: It needs to be a coordinated state, regional, education, local government and private sector effort  

 

Related Events

Related Articles