New models drive economic growth

New models drive economic growth
 
Date October 17, 2005
Section(s) Local News
Brief  
 
By PETER HUSSMANN

Editor

If Maytag were to close, what would save Newton and Jasper County?

Would it be another Maytag? Could the city and county be successful at landing another big manufacturer with hundreds or thousands of jobs?

Not likely these days, the experts say. The days of chasing smokestocks appear to be nearing an end.

But it just might be another Frederick Louis Maytag, a Newton farm-hand who grew his big idea for a new product into a dominant position in the world.

Many new answers for community recovery have emerged in recent years as hundreds of communities have been forced to look for creative solutions after suffering massive job losses. One of the most promising of those is community-fostered entrepreneurship. Industry clustering, regionalism and philanthropy are several more.

In a search for solutions that might work for Newton, the Daily News looked around the country to see how other communities had successfully met similar challenges. Here’s what we found.

Rural Uncertainty

As director of the Center for the Study of Rural America, Mark Drabenstott says Newton is not alone.

“What Newton is passing through is a trend happening in a lot of places,” the Iowa State University-educated banker with the Federal Reserve in Kansas City says.

Globalization, Drabenstott says, is reshaping all facets of the U.S. economy. Rural areas, he says, are being especially hard hit because they have typically built their economies around single business activities, whether it be agricultural, like processing beef, or industrial, like building washing machines. When companies find this work can be done more efficiently or at lower cost in other parts of the world, these rural communities often have little else to offset the losses. The result is often a downward spiral.

What can a community do?

Creating an environment that fosters local entrepreneurs could be a big part of the solution, Drabenstott says.

“Newton has a choice,” he said. “Newton can try to hunt for the next Maytag, although I would argue it would be cost-exorbitant, and the likelihood for success would be low. The question is not how to attract and replace Maytag but finding the next Mr. Maytag and making sure you have enough of them in the pipeline that one might grow to a mighty oak.”

Eau Claire, Wis., is an example.

In the early 1990s, Uniroyal announced the closing of its tire plant there, putting about 1,400 people out of work. The community established task forces to deal with the immediate unemployment problems, job training issues and short- and long-term economic development efforts. Another group focused on what could be done with the 1.9 million square feet of empty production space.

But it was the vision of a local family that made all the difference, said Craig Carlson, industrial development director for Eau Claire at the time of the plant closing.

“I call it the eighth wonder of the world,” Carlson said.

The old tire plant was purchased by Cigan Properties –owned by Bill and Patti Cigan, and her son, Jack Kaiser. The property now houses more than 130 businesses, ranging from light manufacturing operations, commercial warehousing, service, retail, public/private offices and even a day care center. In addition, luxury warehouse style residential apartments have been constructed, as well as a 35-unit apartment complex.

Banbury Place, named after a tire machine used in the old plant, now employs nearly as many people as worked at the plant before it was shut down.

Carlson said it’s hard to imagine, but the closing of the tire plant has benefited the Eau Claire community.

“Long-term, it caused the community to come together,” he said. “It diversified the economy and brought about a positive outcome.”

Asset-based approach

Drabenstott warns, however, that a community’s focus on fostering entrepreneurship cannot be scattershot. It must focus on what the community can best bring to the global economic table.

“Your community has to do some soul searching,” he said. “The real onus lies with you. The answer to your economic future is not coming from Des Moines, it’s coming from Newton. You’re the captain of your own destiny.”

Deb Markley, co-director of the Rural Policy Research Institute’s Center for Rural Entrepreneurship, agrees. She says her work in North Carolina with individuals impacted by the downturn in the American textile industry shows successes can be found when individuals focus on what they do best.

Markley, whose institute just put out a new book, “Energizing Entrepreneurs: Charting a Course for Rural Communities,” notes that several textile firms have found success in niche manufacturing activities. One firm, she said, just opened a production facility for high end women’s apparel.

“You have to be rooted in reality,” she said. “You have to know what assets you have and build a world for tomorrow. You have to look where you want to be five years from now.”

Do what you do best

Looking ahead is what drove Jim Haguewood in his efforts to reverse the downward trends in his rural Washington state county’s economy.

For 20 years, Haguewood worked in the restaurant business in Port Angeles, Wash., a picturesque community in the state’s northern peninsula. But for all its natural assets, Clallam County had been in a state of decline for more than 30 years.

In 2000, Haguewood was recruited to run the county’s economic development council. Once on board, he soon realized that the traditional business recruitment model had not been successful. Slowdowns in the fishing and timber industry, caused to some degree by federal regulations, were forcing people to move. That hurt property values, the local tax base and retail activity.

Working with a Maryland consulting firm, ViTAL Economy, Haguewood pushed the area’s development efforts in a different direction. Again, it focused primarily on the area’s existing assets and how they could best be leveraged for success.

“To change a rural economy requires a facilitated disciplined approach,” he said. “It must start with community activation and assessment to determine the current community climate, strength of leadership, existing industry clusters, defining a goal, identification of key indicators to measure the health of the economy and, lastly, the development of a strategic plan.”

Community buy-in, coupled with a sense of urgency, are critical to success.

“This is the foundation to change a community culture,” he said. “The past approaches to economic and community development are not going to work in Newton and Jasper County in the future. The economy is changing and will not be the same again.”

In the past five years, Clallam Networks has proven successful. A new $23 million timber processing plant is near completion — the result of convincing business owners it made sense to process trees close to their source instead of trucking them hundreds of miles. And the new West Port Shipyards is producing 160-foot production yachts that sell for about $30 million each.

“What we’ve been able to do is change both the local belief that we had a terrible economy and the reputation that we were a bad place to invest,” Haguewood said.

Regionalism

Northwest Washington’s successes highlight another point stressed by Drabenstott: Future economic development efforts will likely need to focus on regions rather than stand-alone communities.

“Is Newton big enough on its own or would it gain power partnering with other communities?” he asks. “I feel that any region that does its homework, that’s willing to build new partnerships, will be given an edge in the global marketplace.”

A look north shows regionalism’s benefits and the power of non-traditional partners.

Joe Sertich knew the Arrowhead Region of northern Minnesota had been slowly bleeding for years. Twenty years ago, mining accounted for 50 percent of the jobs and 60 percent of the income. Today, it accounts for 10 percent of both.

In 2000, LTV Steel Mining Company closed, putting 1,400 people out of work. Other mines, paper mills and wood product plants were announcing layoffs or threatening to close. The region was in a serious decline.

As president of the Northeast Minnesota Higher Education District, a consortium of five community colleges, Sertich saw an opportunity for higher education “to serve as a catalyst and coordinator for the region.”

The goal, Sertich said, was to align the private sector, government and higher education under one umbrella with the goal of revitalizing the regional economy.

What local leaders realized, Sertich said, was that new opportunities were likely not to arise from outside the area but rather through development within the region. A strong emphasis was placed on putting together education and training programs for displaced workers.

The major emphasis was placed on technology.

“Technology supports the infrastructure that allows individuals to be more productive in the workplace and in their pursuit of opportunities as lifelong learners,” Sertich wrote about the Arrowhead model.

“Technologically trained and equipped individuals can be at the cutting edge of the changes and innovations that will serve the region.

“The greatest danger to the viability of rural communities is not globalization but a retreat into isolationism and protectionism, so technology was used as a tool to create living wage jobs across the region. This was the best way for communities to preserve their local control and become more competitive globally.”

The area has rebounded since the model was unveiled in 2000.

Blue Cross has an adjudication call center in the area. Delta Dental does billings while World Perks operates a worldwide reservation system. Software design firms are also growing.

“People grew up here often wondering who they were going to work for,”

Sertich said. “Now we are building an entrepreneurship model — find an asset, find a niche and push hard.”

Hometown

Competitiveness

The sandhills of northern Nebraska might not seem a likely setting for a cutting-edge economic initiative, but the Kellogg Foundation Board of Directors sees it differently. Earlier this year, the Kellogg Foundation awarded Hometown Competitiveness $2 million for its efforts to bring growth to rural areas.

Based in Lincoln, HomeTown Competitiveness provides a framework for rural communities to help them identify reachable goals and strategies designed to reverse rural decline. The plan is built on four cornerstones: building leadership and community capacity, engaging young people, fostering local philanthropy and supporting entrepreneurship.

Craig Schroeder, a program coordinator with the group, said HTC is an asset-based approach that attempts to bring the four facets together in a single drive toward community improvement.

“This is not rocket science,” he said. “We sit down with a group and look at where they are at, what are their goals and what challenges they face in bringing changes about. Then we look to see how we can leverage all that to revitalize the economy of the town.”

But the program’s entrepreneurship element has received some of the most notice. Nationwide, two-thirds of job creation and business growth comes from entrepreneurial ventures, according to the National Commission on Entrepreneurship. Chuck Hassebrook, director of the Center for Rural Affairs, said that is important, especially for rural areas.

“Small entrepreneurship is especially important as companies that formerly looked to rural areas are now moving offshore for lower wage labor,” he said in a statement announcing the HTC award.

“Entrepreneurial development keeps local people in control of their community’s future. It keeps profits at home and enables local people to build assets and earn middle class incomes.”

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One Response to “New models drive economic growth”

  1. TireAstoria Says:

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