CED for the 21st Century PRESENTED BY DAVID L. DARLING CD ECONOMIST DEPARTMENT OF AGRICULTURAL ECONOMICS KANSAS STATE UNIVERSITY MANHATTAN, KANSAS Spring.

CED for the 21st CenturyCED for the 21st CenturyPRESENTED BY DAVID L. DARLINGPRESENTED BY DAVID L. DARLING

CD ECONOMISTCD ECONOMIST

DEPARTMENT OF DEPARTMENT OF

AGRICULTURAL ECONOMICSAGRICULTURAL ECONOMICS

KANSAS STATE UNIVERSITYKANSAS STATE UNIVERSITY

MANHATTAN, KANSASMANHATTAN, KANSAS

Spring 2004Spring 2004

CED for the 21CED for the 21stst Century CenturyA SYNTHESIS OF CONCEPTSA SYNTHESIS OF CONCEPTS

Today we will:Today we will: Define Community Economic Development Define Community Economic Development

(CED) in the 21(CED) in the 21stst century century Establish six CED goals worth pursuingEstablish six CED goals worth pursuing Identify community functions and six basic Identify community functions and six basic

forms of capital used in CEDforms of capital used in CED Connect the six forms of capital to five basic Connect the six forms of capital to five basic

economic development strategieseconomic development strategies Study how a small, open economy worksStudy how a small, open economy works Introduce the Total Development ParadigmIntroduce the Total Development Paradigm Learn a new tool designed for use in CED Learn a new tool designed for use in CED

initiatives – a change modelinitiatives – a change model

Community Economic DevelopmentCommunity Economic Development

Vision charged civic processVision charged civic process Focuses attention on a set of key issues Focuses attention on a set of key issues

that when resolved will improve:that when resolved will improve: Short-term economic health & vitalityShort-term economic health & vitality Medium and long-term economic health & Medium and long-term economic health &

vitalityvitality Made possible when local assets are Made possible when local assets are

effectively used and then matched with effectively used and then matched with outside resourcesoutside resources

Six Alternative Approaches to Six Alternative Approaches to Community Growth and DevelopmentCommunity Growth and Development

Let the market decideLet the market decide Let big governments ruleLet big governments rule Let the local elite ruleLet the local elite rule Rely on inside or outside technical Rely on inside or outside technical

assistanceassistance Create a capacity building process Create a capacity building process

guided by community citizens and guided by community citizens and assisted by outside educators and assisted by outside educators and technical assistants.technical assistants.

Quality of Life

Growth

Building Trust

Stability

Development

Social

Stewardship

Goals Chart

Six Forms of CapitalSix Forms of Capital

A comprehensive approach to community economic A comprehensive approach to community economic development is well planned with adequate development is well planned with adequate resources. These assets are grouped into six forms resources. These assets are grouped into six forms of capital.of capital.

They areThey are:: Human CapitalHuman Capital Social CapitalSocial Capital Political CapitalPolitical Capital Financial CapitalFinancial Capital Engineered CapitalEngineered Capital Natural CapitalNatural Capital

Human CapitalHuman Capital is the knowledge and skills is the knowledge and skills used in the production process. It includes the skills of used in the production process. It includes the skills of production workers, marketing officers, financial production workers, marketing officers, financial managers, and organizational leaders. It includes the managers, and organizational leaders. It includes the work ethic, attitudes, and values of the work forcework ethic, attitudes, and values of the work force. .

Social CapitalSocial Capital is the trust and working is the trust and working relationships in a community, state and nation.relationships in a community, state and nation.

Political CapitalPolitical Capital is the access to and is the access to and influence over state and federal policies and resources.influence over state and federal policies and resources.

Financial CapitalFinancial Capital comes in different forms comes in different forms to pay for tasks such as starting a business, expanding to pay for tasks such as starting a business, expanding a business, or building a school. a business, or building a school.

Natural CapitalNatural Capital is the endowments of is the endowments of nature. nature.

Six Forms of Capital (Cont.)Six Forms of Capital (Cont.)

Engineered Capital is the collection of human engineered things not already covered as human, social, or financial capital. Hard-engineered capital includes physical infrastructure such as fiber optic cable and soft- engineered capital includes the organizational and institutional infra-structure as well as the governance of these two.

Five Functions of a CommunityFive Functions of a Community

LivingLiving- houses and neighborhoods- houses and neighborhoods

EconomicEconomic - retail , farming, and manufacturing activity- retail , farming, and manufacturing activity GovernmentGovernment

- police and fire protection- police and fire protection ServicesServices

- United Way and other charitable - United Way and other charitable organizationsorganizations

Social & CulturalSocial & Cultural

Forms of CapitalForms of Capital

CommunityCommunity HumanHuman FinancialFinancial EngineeredEngineered Natural Natural Social &Social & FunctionsFunctions PoliticalPolitical

LivingLiving

EconomicEconomic

GovernmentGovernment

ServiceService

Social & CulturalSocial & Cultural

HEALTHY, SUSTAINABLE AND HEALTHY, SUSTAINABLE AND PROGRESSIVE COMMUNITIESPROGRESSIVE COMMUNITIES

Definition: Economic Development is a process of accumulating assets to support and enhance the production of goods and services that improve the community’s quality of life.Strategies: The five basic KSU strategies are ranked from top to bottom. Retention of existing business and industry and other employers is the most import one.Resources: The six basic sources are the types of assets used by the private, public, and not for profit sectors as inputs.Challenges:

1. Identify the current economic strategies. Is the local economic development program using all five strategies?2. Map area assets. Then discover strengths and weaknesses?

THE ECONOMIC TERMSTHE ECONOMIC TERMS

Seven Leaks in the BarrelSeven Leaks in the Barrel

1)1) Outside Investments Outside Investments

2)2) Estate Settlements Estate Settlements

3)3) Educated YouthEducated Youth

4)4) Wasted ResourcesWasted Resources

5)5) Taxes & Social SecurityTaxes & Social Security

6)6) Out shopping Out shopping

7)7) ImportsImports

Dynamic ModelDynamic Model

a)a) Production-Combining inputs to Production-Combining inputs to add value to local outputsadd value to local outputs

b)b) Consumption-Buying local and Consumption-Buying local and imported products.imported products.

c)c) Investment-Recycling wealth, Investment-Recycling wealth, accumulated locally, by accumulated locally, by reinvesting it.reinvesting it.

Formula of Income Multiplier (IM)Formula of Income Multiplier (IM)

IMIM = 1 / (1- (PCL * PSY)) = 1 / (1- (PCL * PSY)) PCLPCL: The proportion of new, after tax : The proportion of new, after tax

household income, that is spend locally. household income, that is spend locally. This can range from 0.3 to 0.90 in Kansas This can range from 0.3 to 0.90 in Kansas communities.communities.

PSYPSY: The proportion of household income : The proportion of household income spent locally which remains in the area’s spent locally which remains in the area’s economy to support other households. economy to support other households. This usually ranges from 0.25 to 0.65 for This usually ranges from 0.25 to 0.65 for non-metropolitan communities.non-metropolitan communities.

Example of Income MultiplierExample of Income Multiplier

When the proportion of households When the proportion of households spent locally (PCL) is 80%, and when spent locally (PCL) is 80%, and when the proportion of an earned dollars the proportion of an earned dollars that becomes income to local that becomes income to local households (PSY) is 50%, then households (PSY) is 50%, then income multiplier (IM):income multiplier (IM):

IM = 1 / (1- (0.8 * 0.5))IM = 1 / (1- (0.8 * 0.5))

IM = 1.66IM = 1.66

Three Avenues of SupportThree Avenues of Support

EARN ITEARN IT

CAPTURE ITCAPTURE IT

MAKE ITMAKE IT

ATTRACTION

CAPTURE DOLLARS

LOCAL LINKAGES

FIRM CREATION

RETENTION & EXPANSION

BUSINESS ENVIRONMENT

BUILDING EFFECTIVE PARTNERSHIPS

BUILD A FIRM FOUNDATION THAT WILL SUPPORT A SUCCESSFUL ECONOMY

ECONOMIC DEVELOPMENT PYRAMID

COMBINE SUPERIOR LEADERSHIP WITH EFFICIENT LOCAL GOVERNMENT

START AT THE BOTTOM.

Physical Infrastructure

Economic Base

Support Systems

Human and Social Capital

Leadership Infrastructure

•Agriculture

•Manufacturing

•Mining

Total Development ParadigmThe Layer Cake Model

•Health Care•Retail Sector•Housing•Education

•Recreation and Parks•Community Foundations•Economic Dev. Org.•Financial Sector

•Forestry

•Tourism & Retirees

•Call Centers

•Water & Sewer•Roads & Streets•Utilities•Industrial Parks

•Telecommunications•Inter -Modal Facilities•Waste Recycling & Disposal

•Attitudes & Values•Work Ethic•Community Spirit•Churches

•Family Stability•Knowledge & Skills•Social Trust & Cohesion•Civic & Youth Clubs

•Strategic Vision•Empowering Others•Leadership Skills•Local Government

•Leadership Training•Community Dev. Org.•Knowledge of Resources &

Major Trends

Environment and Natural Resources

Major Forces

and Trends

Ind

ustrial

Develop

men

t

Econ

omic D

evelopm

ent

Com

mu

nity D

evelopm

ent

Source:Source: Mark Peterson, University of Arkansas Extension Service, Little Rock, AR.k Peterson Extension Sp

Economic DevelopmentEconomic DevelopmentTen reasons why we should develop and Ten reasons why we should develop and

implement an economic development plan.implement an economic development plan.

1.1. So our children and grandchildren have a So our children and grandchildren have a chance for a future nearby.chance for a future nearby.

2.2. So our businesses can have a larger pool of So our businesses can have a larger pool of people to serve.people to serve.

3.3. So our agricultural producers can be served So our agricultural producers can be served locally.locally.

4.4. To make our community better. New people To make our community better. New people and new dollars add resources to build the and new dollars add resources to build the community.community.

Economic Development Cont…Economic Development Cont…

5.5. To capitalize on our educational investments To capitalize on our educational investments rather than some distant place reaping the rather than some distant place reaping the benefits.benefits.

6.6. To utilize our infrastructure investments such as To utilize our infrastructure investments such as water, sewer, streets, roads, buildings and water, sewer, streets, roads, buildings and homes.homes.

7.7. To keep our relatives and friends in the To keep our relatives and friends in the community.community.

8.8. To take care of our own population base.To take care of our own population base.9.9. To develop a broad-based pool of informed To develop a broad-based pool of informed

leaders.leaders.10.10. To create a guide for our future.To create a guide for our future. Source: Gary Warren, Aurora, NE.Source: Gary Warren, Aurora, NE.

Building a Middle ClassBuilding a Middle Class

ImpoverishedJobless

DebtorEmployee

Dependent

Debt FreeSelf Employed

InvestorEmployer

Independent

BenefactorKey Stakeholder Contributor

HIGH HIGH

LOW LOW

Source: David L. Darling: K-State Research and Extension, February 2003

A Good CommunityA Good Community

A definition of a good community is a A definition of a good community is a place where families can easily meet place where families can easily meet their lower order (basic) needs and their lower order (basic) needs and have the time and opportunity to have the time and opportunity to pursue higher order ones such as self pursue higher order ones such as self actualization.actualization.

Self

Actualization

Self-Esteem and

Esteem of Others

Love, Affection, Belonging

Safety and Security

Physiological Needs

Abraham Maslow’s Hierarchy of Needs

Sustaining Progress ModelSustaining Progress Model

P = A * V * P * R * BP = A * V * P * R * B

where:where: A stands for attitudesA stands for attitudes V stands for a visionV stands for a vision P stands for the planP stands for the plan R stands for the resourcesR stands for the resources B stands for benefitsB stands for benefits

Community Economic DevelopmentCommunity Economic Development

SummarySummary

Vision charged civic processVision charged civic process

Focuses attention on a set of key issues Focuses attention on a set of key issues that when resolved will improve:that when resolved will improve: Short-term economic health & vitalityShort-term economic health & vitality Medium and long-term economic health & Medium and long-term economic health &

vitalityvitality Made possible when local assets are Made possible when local assets are

effectively used and then matched with effectively used and then matched with outside resourcesoutside resources