Thursday, June 25, 2009

Geography of Economic Cooperation

What are the limits to economic cooperation? Nation-states are experiments that successfully expanded the reach of trust. The European Union is trying to take a functional common identity to another level. Back in the United States, (blog reference Brewed Fresh Daily) stakeholders within urban regions are struggling to agree on anything:

A local community’s attracting a new business is good news for Summit County — but not if the business was enticed to move from another area community.

Preventing such economic “poaching” is the purpose of Summit County’s intergovernmental “Memorandum of Understanding for Job Creation and Retention and Tax Revenue Sharing,” which Cuyahoga Falls City Council passed unanimously at the June 22 meeting.

The city joined Akron, Barberton, Fairlawn, Lakemore, Macedonia, Mogadore, Twinsburg, Richfield Village and Silver Lake, which have already signed the agreement.

A step in the right direction, but poaching business from your neighbor is the Rust Belt's problem in a nutshell. I've already posted about how backward economic development is in Cleveland. I could pick up that critique and plop it on a number of shrinking cities. While corporate headquarters move from Dayton to Atlanta, Great Lakes municipalities fight each other for an ever smaller economic pie.

A bigger problem is the competition between American states in a global marketplace. (Blog reference GlobalHigherEd) The geography of stem cell search is a good example of this dysfunction:

Governments have mixed motives for funding stem cell research; the main two are to develop a high-technology economic base and to promote medical progress.

The initiatives that set up the schemes in California and New York were led by high-profile patient advocates. “Our funding in New York focuses on finding cures through science rather than economic development,” says Ms Solomon. “I think the economic development will follow excellent science.”

Even critics of lavish state funding believe it could pay off in the long run by creating a regenerative medicine industry. “A bidding war [for talent] between the states is not a good model for supporting American science because it encourages the balkanisation of research,” says James Thomson of the University of Wisconsin, who first extracted stem cells from human embryos in 1998. “But, having said that, I think California will benefit enormously from the investment.”

Whether you look at immigration policy or the hysteria about brain drain, the result is balkanization that ultimately undermines economic development. Which brings me back to the limits of cooperation. Could Rust Belt communities broader than the handful in Northeast Ohio come to an agreement about poaching business?


Paz said...

I'm visualizing the geographic approximation of a cartel. The problem is, the resources of the Rust Belt aren't evenly distributed across the geographic area, so metros are going to feel the need to compensate for their insecurities with tax breaks or the like.

Jim Russell said...

Economic geography of cartels. Hmmm .... That ties in nicely with an upcoming post on globalization and trust.