REMARKS AS PREPARED FOR DELIVERY - SANDY K. BARUAH, ASSISTANT SECRETARY OF COMMERCE FOR ECONOMIC DEVELOPMENT - REPUBLICAN GOVERNOR’S ASSOCIATION ECONOMIC GROWTH FORUM - ATLANTA, GEORGIA - “The Five Things That Matter for What’s Next in Economic Development”

WEDNESDAY, APRIL 18, 2007

AS PREPARED FOR DELIVERY

Introduction by Governor Sonny Perdue

Governor Perdue, I’m honored by your introduction and the opportunity to be here today in the beautiful state of Georgia. Governors Blunt, Sanford, Gibbons and Perdue, I’m pleased to be with you today and I thank you for your strong leadership and continuing commitment to public service.

I bring greetings and best wishes from President Bush for successful and productive meetings and his appreciation for all that you are doing to keep America’s economic engine running smoothly.

The theme of economic growth is near and dear to all of our hearts. Economic growth is what gives us our ever rising standard of living and provides our citizens the ability to pay their mortgages, fund their children’s education, and take family vacations to wonderful destinations such as the Georgia Aquarium – and I’m pleased to share my thoughts on the future of economic development in our 21st Century global marketplace.

As the head of the Federal Economic Development Administration, I’m in the “what’s next” business. What is the next strategy that will keep our economy growing? What do our economies need to do today in order to take advantage of the next big thing tomorrow?

In order to determine “what’s next” I believe there are five things that matter for economic development in our 21st Century global marketplace. But first, let me begin with a cautionary warning – and this warning falls under the heading of, “If All You Have is a Hammer, Everything Begins to Look Like a Nail.”

WARNING FOR ECONOMIC DEVELOPMENT POLICY MAKERS

As high-level policy makers – Federal or State – we must think carefully about engaging in new policy. Government intervention is disruptive to market forces, and that, of course, is by design. If markets worked perfectly in all places all the time, our need for government would be limited to parking meter readers, the post office, and one cop named Inspector Clouseau.

While there is a need for government because markets don’t always work – government policy must be used with care. Government action, regardless how well conceived or financed will not create jobs for the economy – that is the exclusive province of the private sector.

As we engage in the art and science of formulating new government policy, let’s keep in mind the key principle of economic development: “Until the private sector is ready, willing and able to invest in a community, economic growth and job creation will simply not occur.”

Also, as state or other high-level policy makers, let’s all be aware that the policy answer may not rest at the national or state level. The better decision makers may indeed be at the more regional level, which likely encompasses an economic area of multiple counties that may even cross state borders.

Of course, this is difficult. Our job as high-level policy makers is to, well, make high-level policy. That’s our product. But let’s be mindful that our product, high-level policy, may not be the right product at the right time in the right place.

THE FIVE THINGS THAT MATTER IN ECONOMIC DEVELOPMENT TODAY

So that’s my disclaimer regarding government action. But we all know that there is a useful and legitimate role for government in economic development efforts. President Bush supports such a role and has been very supportive of our work at the Economic Development Administration.

In my six years serving President Bush at the Commerce Department, I have come to understand that there are five things that matter regarding economic development in the 21st Century.

#1: LOCATION MATTERS

First, Location Matters. It’s a paradox, but in our 21st Century global marketplace, specific regional location matters more than ever before. Yes, our global marketplace exposes us to the opportunity for world-wide partnerships and supply chain efficiencies – as well as increased competition – the regional competitive advantages of location still matter.

In today’s global marketplace, our domestic economic regions are no longer competing with the company or county next door. Our competition today comes from anyone on any point on this planet with a good idea, a good education, and a good Internet connection. So it is important that when we develop our economic development strategies to best tap into the global marketplace, we focus on all the resources an area can bring to the table:

• What are the workforce strengths of a region?

• What are the institutional assets that can and should work in partnership to increase an area’s competitive advantages? Institutions such as universities, community colleges, development organizations, research facilities, chambers of commerce, and industry groups.

• What are the established and emerging industry clusters that can be cultivated and drive economic growth?

In today’s fast-paced dynamic economy, economic regions can not expect to be all things to all industries. However, every region does indeed have a competitive advantage – or a potential competitive advantage – that is their ticket to answering their “what’s next” question.

#2: SIZE MATTERS

Size Matters. We need to redefine how we define an economic region. As public officials, we tend to look at areas in terms of political boundaries – the city border, the county line, the divisions between the states. Unfortunately, this is an outdated notion in today’s global marketplace.

There is not a business today that looks at their market using these artificial boundaries drawn 100 or 200 years ago. Businesses look at factors such as:

• How far can I get qualified people to come work for me?

• How far can I ship my product or service?

• What assets such as suppliers or industry networks can I access in an area?

• How consistent are the demographics in the areas around me that provide the best market for my product or service?

In addition, size matters when we address the urban vs. rural issue. The time where we could pursue distinctly separate economic development strategies for urban and rural areas is over.

Sure, America’s largest urban areas, like Atlanta, are surely complete economic regions onto themselves. But most urban areas are not the size of Atlanta. They are cities like Gainesville, Georgia; Joplin, Missouri; Florence, South Carolina; and Carson City, Nevada. These cities are surely economic hubs of their region and they must have a comprehensive economic development strategy that encompasses the rural areas around them. In today’s competitive global marketplace, no competitive edge can go overlooked, and the urban areas of America ignore their nearby rural assets at their own peril.

#3: COLLABORATION MATTERS

Collaboration Matters. Just as we separate our urban and rural development strategies at our peril, we must also acknowledge that the components of competitiveness can no longer be pursued separately.

Our world becomes more sophisticated and integrated everyday – and in order to succeed in this environment, we must respond in an increasingly sophisticated and integrated manner.

We can no longer tolerate bifurcated efforts focused on economic development, workforce development, community development, educational inititives, research and development, and environmental stewardship.

These interconnected challenges must be tackled in concert. In our competitive economy, we don’t have the luxury to engage in disparate economic, workforce, community, educational, and research strategies. Successful economic development marries up these important components of competitiveness into an integrated and holistic approach.

And when it comes to economic development, there is one central collaboration partner that cannot be overlooked: the private sector. As I said earlier, economic growth will simply not occur until the private sector is ready, willing, and able to invest in a community. So the first question I ask, and that you should ask, when asked to support an economic development initiative is, “how is the private sector participating and actively supporting this effort?” If you don’t get a clear and compelling answer, you may want to think twice about committing your support – or taxpayer dollars – to the effort.

#4: SPEED MATTERS

Speed Matters. The pace of change in our global marketplace will only continue to accelerate. Despite America’s success in the past and today, we cannot afford to rest on our laurel for even a moment. There are no pit stops in this race.

Companies – by necessity – must continually strive to stay one step ahead of changing trends. If they don’t, they will cease to exist. We have the same responsibility as leaders of government to adapt our approach to fit the changing times.

Government – by design – moves slowly, and that can be a problem in our fast-moving economy. Unless we as government can offer flexible and innovative programs and tools to our economic regions, we risk putting these areas that we are responsible for at a competitive disadvantage in the global marketplace. Innovation is just as important in the government sector as it is in the private sector.

For example, the Federal agency I have the honor of leading, the Economic Development Administration, was created in the 1960’s during President Johnson’s Great Society effort. And the EDA Act was visionary for its time. But as I promote changes to the program to make it more flexible, I ask people if they would still use a doctor that was using a 1960’s approach to health care? I ask people if they would buy a car with 1960’s era technology? Would you bank with an institution that used 1960’s style regulations?

If the answer to these questions is “no”, why should we settle for a 1960’s style approach to economic development?

#5: RESULTS MATTER

Results matter. All government efforts, certainly including economic development efforts, must be based on fact – not feeling. Economic development efforts must have clear objectives and measurable outcomes.

One of the key differences between my private sector days and my current government service is how decisions are made. In government, we have a tendency to make decisions based on what’s good – what’s a good use of resources.

In the private sector, we make decisions based on what’s the best use of resources. This is an important distinction, because it’s easy to justify a whole lot of things if your standard is simply “good.” If you apply the standard of what is the “best” use of resources, you have a much different dynamic at play. And in today’s competitive, dynamic, and fast-moving economy, we owe it to the constituents we serve to make decisions based on the “best” not just “good” standard.

CLOSING

So, those are the five things that I think matter for economic development in the 21st Century.

• Location Matters. Regional competitive advantages matter more than ever in the global marketplace.

• Size Matters. We need to understand that economic units can no longer be defined by political boundaries drawn generations ago and that urban and rural development strategies can no longer be pursued separately.

• Collaboration Matters. The components of competitiveness, economic development, workforce development, community development, educational initiatives, can no longer be pursued separately. The 21st Century economy demands a holistic approach.

• Speed Matters. In a fast-paced and nimble world, government must keep up. Innovation is just as important in the public sector as it is in the private sector. And…

• Results Matter. At the end of the day, it’s results that matter and we should strive to ensure we are making the best use of our taxpayer resources.

It has been my distinct pleasure to be with you this afternoon. I applaud the innovation and very real results the states have achieved in the area of economic development. Our founding fathers envisioned the states as our labs of innovation, and this is certainly occurring in the field of economic development.

On behalf of Commerce Secretary Carlos Gutierrez, I look forward to working with America’s governors to advance the art and science of economic development and answering the “what’s next” question for America’s economic regions.

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