THE AVENUE AUGUST 15, 2011
Last week, Gabe Bullard posted an article on the WFPL website, Louisville’s NPR station, about a recent Brookings report on how economic development policy in Louisville and seven other metropolitan areas responded to the loss of manufacturing jobs. By selectively quoting and citing the report, Bullard makes the report sound like an attack on Louisville’s major economic development policies and its major economic development organization, Greater Louisville, Inc. (GLI). As a co-author and co-principal investigator for the report, I must set the record straight.
The report criticizes the overblown rhetoric that has been used on behalf of GLI and several other economic development efforts and does not find evidence that they have had major impacts on the overall growth pattern of the Louisville region. However, that doesn’t mean we think GLI and other economic development efforts are ineffective or misguided. In fact, one of the report’s most important conclusions is that GLI and similar organizations have modest but important roles to play in responding to manufacturing job loss. What’s important is to be realistic about what regional economic development policy can and can’t do.
Our report wasn’t designed to cheerlead for or to criticize economic development efforts in metropolitan Louisville (or elsewhere) but to describe how the region’s economy changed between 1980 and 2005, explain why it changed as it did, and examine how economic development policy did or didn’t contribute to those changes. The key findings about the Louisville economy, as Bullard correctly notes, are that the region’s economic transformation was driven mainly by UPS, that job growth in the region was slightly above the national average from 1980 to 2005, and that wage growth was well below the national average.
Economic development policy, in the form of the expansion of the region’s airport and the creation of the no-tuition Metropolitan College, had a lot to do with the expansion and retention of UPS. Among the eight metro areas we studied, Louisville provides the clearest evidence that economic development policy can make a difference to the overall character of a metropolitan economy.
No other organization or policy had nearly as great an impact on the evolution of Louisville’s economy from one driven by manufacturing to one driven largely by UPS. That’s the report’s main focus but it’s a very high bar for an economic development organization or policy, and failure to reach that bar doesn’t mean that the organization or policy failed.
GLI, for example, was created to turn Louisville into an economic “hot spot.” It didn’t achieve that goal, but it did provide the services and advocate for economic development policies, just as other chambers of commerce do. It also convened industry cluster groups to help firms solve problems specific to their industry clusters. In general, it helped local businesses link the people, ideas, and resources they needed to accomplish their goals. These were useful activities even though they didn’t change the metro area’s economy in a major way as of 2005. They may have improved the performance of industry clusters or laid the groundwork for future economic growth. In addition, our report didn’t cover anything that happened after 2005, so it didn’t include Louisville’s successful retention of GE and Ford and, therefore, couldn’t assess GLI’s contribution to that success.
Bucks for Brains, a state program that Bullard mentions, was intended to spur innovation and economic growth by bringing outstanding faculty members to the University of Louisville and the University of Kentucky. It succeeded in bringing outstanding faculty members to the universities, and that, in itself, was good for the universities and their students. We were unable to find any evidence that it had done anything for the Louisville economy. For example, we didn’t see a spurt of job growth or a wave of startups in the years after the new professors were hired, at least not up through 2005. Here, though, it’s important to remember the old adage that “the absence of evidence is not evidence of absence.” The fact that we couldn’t find evidence that Bucks for Brains had an impact on the Louisville economy isn’t the same as saying that we found that it had no impact. The impact may have been there but it’s possible that we didn’t look at an indicator that would have shown it. Or the impact may have come after 2005.
Economic developers and their organizations are a boosterish lot, prone to making exaggerated claims about their own effectiveness. Most of the time, these exaggerations are harmless and should be taken with a big grain of salt. It’s our responsibility as researchers to point out that exaggerated claims are in fact exaggerated. However, if those claims are used as a basis for judging the value of an economic development organization or policy, then they aren’t so harmless. It would be a misuse of our research to argue that GLI, or Louisville economic development policy in general, failed because they didn’t live up to their own rhetoric.