With the New Year upon us, we at Magnale find ourselves optimistic about our collective prospects for 2008. This is our third and last post in this series, Commerce: The Rules Of The Game Have Changed. This post completes our contextual framework for a shared community understanding. It is our hope that the observations and insights outlined in this three part series serves as a community call to action and a foundation for development of a Regional Strategic Action Plan for your regional communities.

Our community call to action is based on our optimism and understanding of the opportunities available to our nation's regions. Our optimism is tempered by the practical realities of our situational analysis of the national economy:

• Over the next 10 to 20 years the nation’s economy and the federal government is facing a gauntlet of dire economic challenges that we are ill-equipped to address... static revenue, an aging population, crumbling infrastructure and increasing program costs like Medicare to name a few.
• Regions will be forced to manage their own destiny with little help from the federal government to support local initiatives.
• Most states will continue to struggle with budget priorities, rising cost of service delivery, and limited resources to support the current market transition to a post-industrial society.
• Given the mobility of labor and the enterprise they will continue to locate (at an accelerating pace) to the regions where it is most advantageous and in their best interests.
• Commerce will continue to aggregate to regions of specialization because of structural cost advantages and economic incentives.
• Regions will continue to struggle with budget priorities, rising cost of service delivery and maintaining standards of living for their citizens.
• Regions will continue to compete against regions, globally.
• The current class segregation among the nation’s regions is accelerating resulting in regional economic disparity the likes of which we have never experienced.
• The market shift to a Post-Industrial society leaves behind an unprepared workforce to compete in a knowledge based economy.

The harsh reality of our economy is that the current transition creates great opportunity for those few enlightened regions to manage abundance while it leaves the other regions to deal with the issues of scarcity and a diminishing standard of living. The current market opportunities require aggressive regional leadership to navigate the structural shift to a Post-Industrial economy to create an increasing standard of living as measured by per capita income but time is of the essence.

We are not worried about the $9 trillion national debt*, or the $200 billion annual budget deficit, estimated. What keeps us up at night is the increasing ratio of these numbers to the gross domestic product (GDP). As a nation, we are mortgaging our equity to satisfy short term debt obligations. This is not sustainable.

According to Congressional Budget Office (CBO) the nation’s debt, currently about 40 percent of the GDP, will grow to 2 to 5 times the GDP over the next 20 years. Medicare spending alone will represent in excess of 10 percent of GDP.

As an optimist, the pending crisis can be prevented. It is generally recognized by leading economists and the Federal Reserve that if the federal government did nothing to curb spending, it can keep the nation’s deficit and debt manageable through tax increases. Our tax rate is well below other leading industrialized nations.

The bad news, given that the political planning horizon is the next election cycle; none of the practical or prudent solutions are likely to happen. When have you last seen a major political candidate campaign on a platform of raising taxes, or reducing services, or cutting assistance to the elderly, or rationing health care?

The consequence of doing nothing is dramatic. If the global markets lose faith in the U.S. economy, the U.S. government won’t have buyers of debt and won’t be able to borrow money to finance current operations. The government will have two choices:

• Default on the debt, or
• Print money and cause runaway inflation.

The financial markets will experience a dramatic correction, currency value will decrease dramatically, and a severe recession will be followed by several years of slow growth and a national reduction in our standard of living.

You need to win the economic development race, securing a category-leading position for your top industries before anyplace else does. You need to leverage your region’s unique strengths, capitalizing on them faster and at lower cost to drive high-wage job growth. You need to attract and retain businesses and professionals that can grow your industry and occupational clusters with innovative products and services. And you need to develop the community capacity to get your best minds working together – from among your region’s businesses, entrepreneurs, government officials, chambers of commerce, academic institutions, and economic and community development agencies. If your best minds can’t collaborate, they can’t innovate. And if they can’t innovate, your region loses.

Look to the public-private partnership (PPP) model to deploy technology infrastructure and access capital that can help drive a regional approach to economic and community development to support your existing and emerging industry and occupational clusters. Address the unmet needs of your businesses, including technology assistance, risk mitigation and access to private and public capital, data, intelligence, and tools to grow your strengths -- faster and at a lower cost.

You need to recognize that in a Post-Industrial Society the structure of power has fundamentally changed. The resources to drive regional prosperity are knowledge and capital. The central dominant figures that hold this power are individuals, scientists, and researchers. The universities and research institutions now play a critical role in regional prosperity. Education, mobilization, and cooptation are now the primary means of access to power to drive regional prosperity.

Community Capacity must now be pro actively managed. There are four interdependent categories of capital that define community capacity:

• Human Capital: education, skills, experiences, and abilities of local residents to meet workforce needs.

• Social and Cultural Capital: ability and willingness of residents to work together to solve problems or create opportunities.

• Physical Capital: sewer systems, transportation systems, business property, developable land, technology infrastructure, and other community infrastructure to facilitate investments in current and future industry sectors.

• Financial Capital: municipal budgets, income of residents, access to loans and grants, operating funds, and other such resources to entice investment in the community and its physical capital.

We can overcome institutional fragmentation, build community capacity, and improve public-sector service delivery through regional deployment of low cost technology infrastructure. With a shared technology infrastructure integrated with advanced market intelligence, we can leverage economic incentives and structural cost advantages to make smarter investments in smarter growth, retaining and attracting businesses that are growing in high-wage jobs.

We need to challenge ourselves to once again dream big dreams, exciting dreams and challenging dreams. Only these dreams, filled with passion and purpose, give meaning to life. Only these dreams that motivate us and move us to action truly matter. Only the really big dreams ever unite us in solidarity to achieve great things.

These observations and insights need to be at the forefront of any regional strategic discussion; our point is... what choice do we have?


* Edited from original post which had a misprint.