Challenges to sustainable economic development.

Author:Mitra, Amlan
 
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Abstract

The purpose of this paper is to identify innovative approaches for regional economic development that will lead to sustainable economic development. The challenges to sustainable economic development are presented for the Northwest Indiana region and innovative approaches are addressed.

Keywords: sustainable economic development, regional economic modeling, econometric and input-output models, innovation, economic growth

JEL Index: O16, O31, O40, R11, R15,

  1. INTRODUCTION

    Traditional economic development strategies focusing on attraction, expansion and retention in discrete communities of Northwest Indiana with clear geopolitical boundaries will no longer work. The conventional approach of hiring a consulting agency to develop a new economic development strategy to help identify the opportunities and develop a roadmap for a community may be a necessary, but not a sufficient condition for sustainable economic development. Very rarely the traditional approaches offered through consulting agencies bring new ideas because most often the funding or the process used to secure the consulting services had already defined the approaches that are acceptable and desired.

    When the community leaders in Northwest Indiana partner with surrounding jurisdictions and institutions to develop comprehensive economic development strategies they truly leverage a regional advantage and secure a competitive position in the national and international economies. The overall challenge that Northwest Indiana faces is to encourage and appreciate innovative approaches in the region. A critical factor for competitive advantage is to be innovative in the economic development strategies. Therefore, we should and must innovatively engage in rethinking regional economic development strategies for Northwest Indiana.

    The purpose of my paper is to identify alternative innovative approaches for regional economic development that will eventually lead to sustainable economic development policies. I will present the challenges facing Northwest Indiana and suggest innovative approaches to them. The first part of my paper will highlight the economic development background of Northwest Indiana. The second part will identify the challenging issues facing the region and describe the innovative approaches needed to promote regional economic development. The final part will suggest a strategy to prioritize these challenges so that regional and local economic development organizations of Northwest Indiana can build a roadmap to implement sustainable economic development policies.

  2. ECONOMIC DEVELOPMENT BACKGROUND OF NORTHWEST INDIANA

    Northwest Indiana is a three-county region that includes Lake, Porter, and La Porte counties. Based on 2009 estimates by the Bureau of Census, the population of Northwest Indiana is approximately 770,000, where two-third of the population lives in Lake County. Since 2000, Porter County grew the fastest with an 11.4 per cent change in population compared to a 6.9 per cent change in La Porte and only a 2 per cent change in Lake County.

    The current unemployment rate in Northwest Indiana is higher than Indiana and United States with almost 13 per cent of the population below the poverty level. Only 18 per cent of the population in the region has a bachelor's degree or higher compared to 28 per cent in the United States.

    The median household income of Northwest Indiana is $53,035, higher than Indiana and United States, where Porter County has the highest median household income of $62,676 and highest. The homeownership rate of Porter County is also the highest in the region. Lake County commands over 70 per cent of the total federal spending for Northwest Indiana while 2 per cent of the total federal spending for the state comes to the three counties of Northwest Indiana.

    The top three industrial sectors in Northwest Indiana in terms of percentage of total employment are manufacturing, health and social services, and retail trade. The top three in terms of average earnings per job are in the management of companies, manufacturing, and construction. In Lake County, health and social services is the leading sector in percentage of employment while in Porter and La Porte counties, manufacturing is the leading sector. Tables 1 to 6 provide detailed information on Northwest Indiana's economic development data.

    According to the State Competitiveness Report of 2007 (Beacon Hill Institute, 2007), Indiana ranks 46th in the overall level of competitiveness in economic development. Among the different indices to calculate the overall economic development index, Indiana ranks 48th in environmental policy and 44th in infrastructure. Table 7 shows the level of competitiveness in economic development by state.

    The Northwest Indiana Regional Planning Commission (NIRPC) operates as a metropolitan planning organization (MPO) and is a regional council of local governments in this tri-county region. It engages in regional economic development analysis by providing a forum for Northwest Indiana residents on regional planning issues. Since there is no funding for NIRPC to actively engage in regional economic development, efforts are being made to make the region eligible for certain types of federal funds. In 2009, the region created the Northwest Indiana Economic Development District (NWIEDD) and has developed a comprehensive economic development strategy (CEDS) as a requirement to qualify for funding through the Economic Development Administration (EDA).

    The NWIEDD works with many public and private sector organizations of Northwest Indiana to reflect each organization's economic development strategies. Therefore, the NWIEDD has a formidable task of coordination and collaboration of each organization's economic development strategies into a comprehensive economic development strategy for the region. Regional collaboration becomes a big challenge for Northwest Indiana, and therefore, I will discuss this challenge in a later section of this paper.

    The Northwest Indiana Regional Development Authority (RDA), created by the Indiana General Assembly in 2005, works with the collective assets of the tri-county region to develop the necessary infrastructure for the region. The RDA has been actively working to meet the first four of five primary objectives:

    1. Expansion of Gary/Chicago International Airport

    2. Extension of South Shore Commuter Train Line Service

    3. Revitalization of Lake Michigan Shore Line

    4. Creation of a Regional Bus Transit System

    5. Engagement in Regional Economic Development

    Both NIRPC and RDA recognize that the region should actively engage in developing economic development strategies and now is the time to act. Therefore, this paper is timely and it is my hope that it will provide some valuable insights on the economic development challenges facing Northwest Indiana.

  3. INNOVATIVE APPROACHES TO CHALLENGING ISSUES

    Northwest Indiana has faced many challenges in the past. Over the last decade, policy makers and economic development experts in Northwest Indiana have invested a great deal of time and money to promote economic development and improve the economic well-being of its citizens. However, recent data on the state of the region does not show any significant growth of the economy and improved standards of living. A sound logical argument can be made to justify the current conditions in this region due to the current economic and financial crisis in the entire U.S. economy. But past data shows that even when the U.S. and other regional economies enjoyed prolonged periods of economic expansion, Northwest Indiana failed to compete with other regions. The question is why did Northwest Indiana not face up to the challenge to diversify its economy by reassessing the infrastructure and its assets to promote economic development? There is no evidence that policy makers did not make sincere efforts over the past several years to meet those challenges. So, why did the economic development and public policy strategies that have been implemented not make any significant impact on the economy? I propose rethinking the challenges and finding creative approaches to face them in light of the changing national and global dynamics.

    The biggest challenge that Northwest Indiana faces is the lack of manageable and appropriate regional parameters. The region is defined in many ways by different public and private sector organizations at the regional, state, and national levels. It is not clear if the region is defined by a geographic location, by an economic system, by managed political jurisdictions, or by other less tangible parameters. Without a common definition of the region, is it possible to have a common vision of the region? This should be the starting point to allow the region to take a fresh look at what constitutes comparative opportunities. The next step should be to understand the other challenges and address them with creative solutions.

    3.1. Attracting Businesses in the Region

    Too often we hear that lower taxes and tax incentives are major economic development tools to attract businesses, create jobs, and grow the economy. Recently, the Indiana Secretary of Commerce joined Northwest Indiana's local economic development officials in an ad campaign spending more than $200,000 to attract businesses from Illinois to this region. The Northwest Indiana Forum is using this money to run ads in Chicago electronic and print media themed "Feeling Squeezed by Taxes?" a reference to the recent 66% hike in business taxes by the state of Illinois.

    The apparent goal of this advertising campaign is to encourage businesses to move from Illinois to Indiana based on the advantage of paying less taxes. However my research has shown that there is no direct evidence to support tax cuts and tax incentives when these economic development tools occur at the expense of public investment. This finding is consistent with similar studies (Lynch, 2004; Fisher & Ditsler, 2003).

    My review of the recent...

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