Pushing past economic anger to reach opportunity

by Jeff Collins ([email protected]) 112 views 

Editor’s note: Jeff Collins is the former director of the Center for Business and Economic Research at the University of Arkansas and is an economist for Talk Business & Politics. Opinions, commentary and other essays posted in this space are wholly the view of the author(s). They may not represent the opinion of the owners of Talk Business & Politics.

A lot of people seem angry. Why they’re angry is as varied as the individuals who feel that way, but one common theme is that America isn’t what it was. Certainly the American economy is not what it was.

One thing I have always tried to communicate regarding the regional economies I analyze is that Arkansas has been impacted not just by the Great Recession, but by fundamental changes to how the economy is structured. Simply, efficiencies driven by information technology imply it takes fewer workers to produce the same amount of output.

The application of information technology to the production process has reduced employment in manufacturing globally, but in industries where the value added by labor was relatively low, manufacturing employment has been doubly impacted by off-shoring of jobs. Unfortunately there are no acceptable governmental policies that will reverse these phenomena. We cannot legislate where production takes place without significant costs.

Employment data consistently shows it is the service sectors that are growing. However, even in these sectors not all jobs are safe as those that can be automated have been or will be soon.

So where does this leave us?

If we look at our own state, the regional economy with the most strength is Northwest Arkansas. Job growth has been truly spectacular. The growth of Northwest Arkansas companies was the catalyst but now growth is feeding on itself. Rising income and wealth levels translate into consumption which fuels new business creation. It is effectively a benevolent spiral. Obviously the opposite can and has occurred in other parts of the state.

How to generate economic growth in Arkansas has been the focus of numerous academic and private studies. No matter the author, each study reaches essentially the same conclusions. We need greater educational attainment levels. We need more new business creation, particularly in knowledge-based sectors. We need more investment dollars for start-up companies. We need to invest in quality of life amenities to attract and retain high income professionals.

However all of these recommendations enable the creation of an economy weighted toward a very different economic structure than the one our parents knew. Income and wealth creation requires talented, hard-working people – the best and brightest. Those people can and will come from anywhere. Strong local economies are increasingly diverse.

When I moved to Northwest Arkansas almost 20 years ago there were no Indian restaurants, no farm-to-table restaurants (at least none that purposefully intended to be), and no sushi bars. There were no bike paths, no downtown condos, no Starbucks. But these are the trappings of economic success today.

The greatest challenge that results from the new economy is how we insure that everyone has access to the opportunities it creates. This is a better focus for governmental policy than trying to legislate the genie back into the bottle.