Wednesday, August 20, 2008

ongoing walmart debate illustrates zero-sum economic development

The staff at this blog is staying out of rendering an opinion on the latest city vs. township/suburb rumbling for the time being.

So while you can read more about this flip-flap in today's Youngstown Vindicator here, one line in particular got us here thinking about the varying definitions of what exactly economic development is in the first place:
“Wal-Mart could have actually hired more than 25 percent from the city, but by doing this and stopping this project, no one in Mahoning or Trumbull County will see any additional jobs,” Stoyak said. “We are starving for jobs in this area, and this project is being held up by the mayor. Unfortunately, I don’t think Mayor Williams realizes that Wal-Mart is not going to play games with him.”
aside from the ongoing verbal sparring and rhetoric...

Linking the construction of a Wal-Mart to regional (I guess Mahoning + Trumbull counties in this case) job growth is probably incorrect unless:

a) people from outside of Mahoning and Trumbull counties shop for Wal-Mart goods inside Mahoning and Trumbull counties.

b) people from inside of Mahoning or Trumbull counties who normally shop outside of their home counties now shop locally.

While either of these two options most probably fall under the "not bloody likely" category, this reminds me of some wise words on the subject of regional economic development from Ed Morrison:
Economic development involves three types of money.

"Good money" comes from businesses that trade outside your region. They generate wealth. (Michael Porter's work at Harvard suggests that wages for these traded businesses are about one-third higher than "sheltered" businesses.)

"Neutral money" comes from businesses that circulate revenues within an economy. You buy haircuts from me, and I buy lawn care from you.

"Bad money" comes from business transactions that export wealth from an economy. Many people think that Wal-Mart falls into this category. Except in relatively rare cases, casinos fall into this category as well.

Unless someone can help me understand this issue better, how does building a Wal-Mart push regional job growth as was claimed in the article?

How does a project like this help the entire region, as opposed to a single political entity, regardless of who exactly the immediate winners and losers within the region are?

5 comments:

Liz said...

Exactly.

Phil Kidd said...

Very good post.

mike gesing said...

Maybe some of the lessons/issues of the Wal-Mar at Steeltown in Cleveland could be applied here. Bill Callahan had quite a series of posts on the subject. Here's one:
http://www.callahansclevelanddiary.com/?p=428

mike gesing said...

Maybe some of the lessons/issues of the Wal-Mar at Steeltown in Cleveland could be applied here. Bill Callahan had quite a series of posts on the subject. Here's one:
http://www.callahansclevelanddiary.com/?p=428

Mike Prelee said...

Good analysis. Building the Wal-Mart at the southern end of Belmont helps develop that area of Liberty but it won't bring in more dollars to the area. On the other hand it's not another massage parlor so...