The other night (Thursday, January 28, 2010) I was watching the local news and there was an excellent story on the role that entrepreneurship has and will continue to play in Nevada’s economic recovery from the current recession. Dr. Mark Pingle, economics professor at the University of Nevada, Reno, was interviewed by Channel 4 KRNV News about the types of jobs that will be central in the recovery of Nevada’s economy. Interestingly, Dr. Pingle didn’t really point to a single industry or type of job (although he did mention that service sector jobs will continue to play an important role). Instead, Dr. Pingle pointed that entrepreneurship in general will play a central role in the ongoing economic recovery. I thought I’d start this year’s series of economic development blogs by exploring this issue in more detail.

Many contemporary economists and policy analysts and makers have argued that “green technology” jobs will pave the way for the state’s and the nation’s short-term economic recovery and eventual return to long-term economic growth and prosperity. Even the President, in his January 27th, 2010 “State of the Union Address”, placed great emphasis on the role “green technology” jobs will have in helping the nation recover from the current economic recession and help the United States regain its title as the most prosperous and innovative nation in the world. In Nevada especially, many economists, policy analysts, and policy makers have argued that Nevada’s abundance of geothermal, solar, and wind resources comprise a 21st-Century goldmine for Nevada’s future.

Certainly, there is a lot of truth behind the assertion that today’s investment in alternative energy resources and other “green technologies” can be a goldmine for both Nevada’s and the nation’s long-term economic interests. If anything, the successful investment in alternative energy resources and other “green technologies” can reduce our local and national dependence on foreign sources of energy and who knows what other applications today’s investment in alternative energy and other green technologies might render. Keep in mind that some of the most significant discoveries in the world, like the discovery of penicillin, were made by complete chance and the result of other non-related research.

Perhaps that’s the main point that Dr. Pingle was trying to make last night when he said, “I don’t think the future lies in green jobs or computer technology or any one thing. If it were that simple, someone would have already done it.” Dr. Pingle is not “as alone” as the news story suggests. In fact, many scholars, practitioners, and professionals in the field of economic development have argued for decades that the problem with contemporary entrepreneurial economic development policies and contemporary business retention, expansion, and attraction programs is that they often limit themselves to one or two primary industries with little realization that local, regional, state, and national economies are far more complicated and are comprised of numerous inter-related industries. Think about this in your own case. Do you just consume energy? Or do you also buy clothes? Do you go to the movies? Do you drive a car to work or take public transportation? How many cups of coffee do you have a day? Do you get your hair cut? Do you like to go skiing? See. Your own economic life is far more complicated than just the energy you consume. Our public economic development policy should keep that in mind and we shouldn’t be so quick to put all our economic eggs into a single basket.

By focusing on just one or two primary industries – like green technologies, renewable energy, or computer technologies – a local, regional, state, or even national economy can become highly susceptible to the ebbs and flows of a market-driven economy where periods of boom and bust can threaten the dominance of the primary industry. Let’s not forget that over the past 50 or so years the Nevada economy was, and still is, primarily dependent on the gaming and tourism industry. The Nevada gaming and tourism industry is, by all accounts, passed its prime as Nevada no longer has the monopoly on gaming that it once enjoyed. Almost every state in the country, and many nations across the world, has invested heavily in the development of their own gaming and tourism industry. This changed reality has left Nevada’s long-term economic health exposed and weakened. Economic diversification, through a well defined and crafted economic development strategy and plan, strives to make the economy of interest – a local economy, a state economy, a national economy, etc. – less dependent on any one industry but encourages economic growth through the successful development and growth of several industries that are inter-related but can also be successful without the other industries.

Southern California is a perfect example of what happens when economic development policy is designed to favor a particular industry or set of industries while ignoring the wider economic development interests of the region. For much of the Cold War between the United States and the U.S.S.R., state, regional, and local policy makers throughout Southern California took exceptional policy steps in promoting an aerospace industry. In a very short period of time, the aerospace industry became one of the largest, if not the most dominant, employer and most profitable industries in Southern California. For decades the aerospace industry was relied upon to provide Southern California, and really the entire state, with a never-ending supply of highly skilled, high paying jobs. No one thought that it would ever end. And then the Cold War ended and the aerospace industry in Southern California considerably shrank. So much was invested in the aerospace industry that when it collapsed it left millions unemployed. The impacts of the collapse of the Southern California aerospace industry are still felt today – nearly 20 years after its peak.

This is the lesson that Nevada economic development policy makers should keep in mind. Replacing one dominant industry (i.e. gaming and tourism) with another dominant industry (i.e. renewable energy, green technologies, or computer technologies) is not a long-term plan for long-term, stable, economic growth. Believe it or not, something else will come along in the unforeseeable future to replace these emerging industries. Certainly, policy makers in Nevada should strive to develop the natural resources – i.e. geothermal, solar, and wind – that are abundant throughout the state and help encourage reasonable growth in these areas. But, as Dr. Pingle pointed out last night, Nevada policy makers should also consider wider and more complex entrepreneurial policies, programs, and strategies.

We should be considering how we can support innovations and invention – IN GENERAL. We should not worry about what specific field or what specific uses these future innovations and inventions can serve. The International Economic Development Council (IEDC) argues that the primary goal(s) of economic development policies, programs, and strategies should be to create mid to high skill level job opportunities that offer mid to high level pay, offer individuals meaningful opportunity for general upward mobility, and contribute to a community’s overall quality of life. Nothing in that definition mentions renewable energy, green technologies, or any other industry.

In order to create those mid to high skill level jobs, that offer mid to high level pay and offer individuals meaningful opportunities for general upward mobility and contribute to our state’s overall quality of life, we first have to embrace the vast complexities of our state, regional, and local economies. In doing so we have to talk seriously about our state’s fiscal system, our education system, our infrastructure and transportation system, and the many other things that contribute to our collective long-term economic growth.

This entry was posted on Friday, January 29th, 2010 at 1:05 am and is filed under Economic Development, Uncategorized. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a comment, or trackback from your own site.