All Pennsylvanians Prospering Together (APP): A Pennsylvania Economic Development Strategy for the Long Term
State efforts to boost the economy--economic development--first came to Pennsylvania in the 1950s with the establishment of the Pennsylvania Industrial Development Authority (PIDA) low-interest loan program used to recruit manufacturers to Pennsylvania, including devastated coal regions.
Since that time, economic development in Pennsylvania and other states has evolved through several waves. The 1980s saw the emergence of “grow your own” strategies, which sought to nurture and grow local businesses – mature and new – rather than recruit businesses from elsewhere. In Pennsylvania, the Ben Franklin Technology Partnership (BFTP) and Industrial Resource Centers (IRCs), established in the early and latter part of the 1980s respectively, were at the heart of efforts to grow new businesses and help existing small and medium-sized ones become more productive.
The 1990s and 2000s saw the emergence of multi-pronged strategies based on investing in “regional assets.” One prong of this “building on strength” approach emphasized mapping and supporting strong, high-wage, regional “industry clusters.” Other prongs highlighted assets such as higher education research institutions, unique culture and history, or natural beauty.
In recent years, there has been increasing emphasis on “innovation.” In part, this takes discussion back to the late 1970s frustrations with the interaction between research universities and industry that led to the creation of the BFTP as a vehicle for “tech transfer” – getting the brilliant ideas out of the academy and into commercial products that would fuel job growth. But the discussion now is broader – focused on innovation eco-systems – mindful of the over-simple conception of the phrase “tech transfer” (in many industries most innovation comes from within the industry, even if consulting academics sometimes help a bit).
In the past, new “waves” of economic development – and new approaches to state collaboration with the private sector – have tended to come at moments of economic distress, such as the mammoth job loss in the Pennsylvania steel industry and the broader erosion of manufacturing in the 1980s. Economic distress created both the demand for new approaches and the political will within state government, business, and the broader community to step back, to diagnose the roots of economic malaise, and to make a fresh start on the state’s support for the private sector.
We are at such a moment of distress and opportunity now. The U.S. and Pennsylvania economies are finally recovering from the Great Recession but virtually none of the benefits of that growth have gone to typical families. There is also an urgency about discussions of innovation and global competitiveness. The U.S. has lost ground in technology sector after technology sector and a gnawing concern exists that, at some point, if the production of new products is mostly offshore the U.S. will lose its research advantage. The last part of the opportunity is the beginning of a new gubernatorial term, which in the past has always been when new waves of economic development practice emerge.
In this context, the present document outlines a new state economic strategy, All Pennsylvanians Prospering Together or APP Together. The focus here is on the medium to long term. In addition, the report focuses on economic development relatively narrowly defined – the programs largely within the purview of the Pennsylvania Department of Economic and Community Development (DCED),although there is a brief discussion of skills development in the manufacturing sector. This narrow focus means that transportation infrastructure is not discussed. Nor is how the state can maximize the economic payoff of any given level of responsible shale drilling (e.g., by spurring value-added processing or using cheap energy to boost manufacturing).
The report recommends that economic development in Pennsylvania going forward embrace four core principle one of which stands out as the most fundamental: invest in “public goods” that deliver public benefits. Too often in the past, traditional economic development based on giving subsidies to individual companies has been – or appeared to be – politically driven, with state funds subsidizing private profit with little evidence of public benefits. Under a governor who routinely uses the phrase “public good” the state has its best opportunity ever to reorient economic development policy towards investments that do deliver a public payoff. Of course, the challenge here is practical as well as philosophical. While it’s easy to see that education and infrastructure are public goods, it is not always as easy to discern which economic development investments meet the public good test.
Other core principles of the strategy outlined include that the state should invest in growing its own businesses, building on assets, such as dynamic technology industries and higher education institutions. A fourth core principle is that Pennsylvania should pursue a “good jobs strategy” – or, to borrow a phrase from Gov. Wolf’s inaugural address, seek to increase the share of companies in each industry that provide “jobs that pay.” This recommendation emerges from research which shows that, in every industry, job quality varies widely, with some companies pursuing good jobs strategies (think Costco), while others in the same industry do not. Intervening smartly to support more companies in capitalizing on the payoff that comes from maintaining a well-paid, well-trained, and experienced workerforce is a so-far unutilized economic development approach.
Most of this document is nitty-gritty. It has detailed suggestions in four broad areas.
A. Economic development strategy, resources, and accountability.
- Pennsylvania should have a strategy.
- That strategy should be fleshed out at the state and regional level through engagement with stakeholders, which will improve both the final plans and the ownership of those plans.
- Pennsylvania should invest adequately in economic development. Business and economic development organizations need to champion raising the revenue for that investment.
- Pennsylvania should develop and recruit world-class economic development practitioners and policymakers.
- Pennsylvania should promote transparency, accountability, and high returns (high performance) from its economic development investments.
B. Invest in innovation
- Pennsylvania should implement “Manufacturing Innovation 2.0”, supporting
- low-cost networking among university and industry researchers,
- industry economic development partnerships that solve coordination problems and network failures that hold back multiple firms,
- supply chain initiatives aimed at more collaborative supplier-customer relations and reshoring more production to PA suppliers
- 21st century manufacturing workforce initiatives
- Make Pennsylvania a “magnet for entrepreneurs” by creating a world-class state and regional innovation system for startups including
- low-cost networking among university researchers/students and startups
- replicating Pittsburgh’s AlphaLab Gear startup accelerator
- expanding funding for startups
- helping startups attract and retain great employees
- Expand capital for innovation
C. Invest in Pennsylvania’s cities, towns, and landscapes, including
- Restoring community and regional development funding to $74 million via a multi-purpose Keystone Communities Fund
- Providing block grants to incentivize bottom up regional revitalization
- Partnering with regional smart-growth coalitions to advocate legislative changes that enable individual counties or multi-county groups to regionalize
- Reinvesting in Community Landscape Initiatives (CLIs) in rural regions
D. Promote a Pennsylvania good jobs strategy
- Create a Pennsylvania industrial performance center to deepen knowledge about good jobs strategies and how to diffuse them
- Seed-fund industry councils to develop consensus strategies to increase jobs that pay
- Set aside five percent of technical assistance funds to assist companies in low-wage industries improve jobs
The APP Together strategy echoes in a number of respects the governor's campaign policy on economic development: e.g., the emphasis on capitalizing on Pennsylvania's unique assets, on innovation and manufacturing, and on investing in Pennsylvania's core communities. This overlap reflects both our policy agreement with the thrust of the Wolf platforms and our pragmatic intention to offer a menu of specific options that help the new administration flesh out its approach.
(For ease of cross-referencing, we have uploaded (see below) two Wolf campaign economic development platforms)
For more detail on the history of economic development in Pennsylvania and “waves” of state economic development policy and practice, see Maria Cristina Herrera, Stephen Herzenberg, and Michael Wood, Good Jobs, Strong Industries, a Better Pennsylvania: Towards as 21st Century State Economic Development Strategy, Keystone Research Center, March 16, 2010; online at http://keystoneresearch.org/sites/keystoneresearch.org/files/KRC2010report_0.pdf