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CED for the 21st Century

CED for the 21st Century. PRESENTED BY DAVID L. DARLING CD ECONOMIST DEPARTMENT OF AGRICULTURAL ECONOMICS KANSAS STATE UNIVERSITY MANHATTAN, KANSAS Spring 2004. CED for the 21 st Century A SYNTHESIS OF CONCEPTS. Today we will:

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CED for the 21st Century

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  1. CED for the 21st Century PRESENTED BY DAVID L. DARLING CD ECONOMIST DEPARTMENT OF AGRICULTURAL ECONOMICS KANSAS STATE UNIVERSITY MANHATTAN, KANSAS Spring 2004

  2. CED for the 21st CenturyA SYNTHESIS OF CONCEPTS Today we will: • Define Community Economic Development (CED) in the 21st century • Establish six CED goals worth pursuing • Identify community functions and six basic forms of capital used in CED • Connect the six forms of capital to five basic economic development strategies • Study how a small, open economy works • Introduce the Total Development Paradigm • Learn a new tool designed for use in CED initiatives – a change model

  3. Community Economic Development • Vision charged civic process • Focuses attention on a set of key issues that when resolved will improve: • Short-term economic health & vitality • Medium and long-term economic health & vitality • Made possible when local assets are effectively used and then matched with outside resources

  4. Six Alternative Approaches to Community Growth and Development • Let the market decide • Let big governments rule • Let the local elite rule • Rely on inside or outside technical assistance • Create a capacity building process guided by community citizens and assisted by outside educators and technical assistants.

  5. Goals Chart Stability Growth Development Quality of Life Building Trust Social Stewardship

  6. Six Forms of Capital A comprehensive approach to community economic development is well planned with adequate resources. These assets are grouped into six forms of capital. They are: • Human Capital • Social Capital • Political Capital • Financial Capital • Engineered Capital • Natural Capital

  7. Human Capitalis the knowledge and skills used in the production process. It includes the skills of production workers, marketing officers, financial managers, and organizational leaders. It includes the work ethic, attitudes, and values of the work force. • Social Capitalis the trust and working relationships in a community, state and nation. • Political Capitalis the access to and influence over state and federal policies and resources. • Financial Capitalcomes in different forms to pay for tasks such as starting a business, expanding a business, or building a school. • Natural Capitalis the endowments of nature.

  8. Six Forms of Capital (Cont.) • Engineered Capitalis 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.

  9. Five Functions of a Community • Living - houses and neighborhoods • Economic - retail , farming, and manufacturing activity • Government - police and fire protection • Services - United Way and other charitable organizations • Social & Cultural

  10. Forms of CapitalCommunityHumanFinancialEngineeredNatural Social &FunctionsPoliticalLivingEconomicGovernmentServiceSocial & Cultural HEALTHY, SUSTAINABLE AND PROGRESSIVE COMMUNITIES

  11. THE ECONOMIC TERMS • 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?

  12. Seven Leaks in the Barrel • Outside Investments • Estate Settlements • Educated Youth • Wasted Resources • Taxes & Social Security • Out shopping • Imports

  13. Dynamic Model • Production-Combining inputs to add value to local outputs • Consumption-Buying local and imported products. • Investment-Recycling wealth, accumulated locally, by reinvesting it.

  14. Formula of Income Multiplier (IM) • IM = 1 / (1- (PCL * PSY)) • PCL: The proportion of new, after tax household income, that is spend locally. This can range from 0.3 to 0.90 in Kansas communities. • PSY: The proportion of household income spent locally which remains in the area’s economy to support other households. This usually ranges from 0.25 to 0.65 for non-metropolitan communities.

  15. Example of Income Multiplier • When the proportion of households spent locally (PCL) is 80%, and when the proportion of an earned dollars that becomes income to local households (PSY) is 50%, then income multiplier (IM): IM = 1 / (1- (0.8 * 0.5)) IM = 1.66

  16. Three Avenues of Support • EARN IT • CAPTURE IT • MAKE IT

  17. ECONOMIC DEVELOPMENT PYRAMID BUILD A FIRM FOUNDATION THAT WILL SUPPORT A SUCCESSFUL ECONOMY ATTRACTION CAPTURE DOLLARS LOCAL LINKAGES FIRM CREATION RETENTION & EXPANSION BUSINESS ENVIRONMENT BUILDING EFFECTIVE PARTNERSHIPS COMBINE SUPERIOR LEADERSHIP WITH EFFICIENT LOCAL GOVERNMENT START AT THE BOTTOM.

  18. Total Development Paradigm The Layer Cake Model EconomicBase Agriculture Forestry • • Manufacturing Tourism & Retirees • • Mining Call Centers • • Industrial Development Physical Infrastructure EconomicDevelopment Major Forces and Trends Water & Sewer Telecommunications • • Roads & Streets Inter - Modal Facilities • • Utilities Waste Recycling & Disposal • • Industrial Parks • Support Systems Health Care Recreation and Parks • • Community Development Retail Sector Community Foundations • • Housing Economic Dev. Org. • • Education Financial Sector • • Human and Social Capital Attitudes & Values Family Stability • • Work Ethic Knowledge & Skills • • Community Spirit Social Trust & Cohesion • • Churches Civic & Youth Clubs • • Leadership Infrastructure Strategic Vision Leadership Training • • Empowering Others Community Dev. Org. • • Leadership Skills Knowledge of Resources & • • Local Government Major Trends • Environment and Natural Resources Source:Source: Mark Peterson, University of Arkansas Extension Service, Little Rock, AR.k Peterson Extension Sp

  19. Economic DevelopmentTen reasons why we should develop and implement an economic development plan. • So our children and grandchildren have a chance for a future nearby. • So our businesses can have a larger pool of people to serve. • So our agricultural producers can be served locally. • To make our community better. New people and new dollars add resources to build the community.

  20. Economic Development Cont… • To capitalize on our educational investments rather than some distant place reaping the benefits. • To utilize our infrastructure investments such as water, sewer, streets, roads, buildings and homes. • To keep our relatives and friends in the community. • To take care of our own population base. • To develop a broad-based pool of informed leaders. • To create a guide for our future. Source: Gary Warren, Aurora, NE.

  21. Building a Middle Class HIGH HIGH Key Stakeholder Benefactor Contributor Employer Investor Independent Self Employed Debt Free Employee Debtor Dependent Impoverished Jobless LOW LOW Source: David L. Darling: K-State Research and Extension, February 2003

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

  23. Abraham Maslow’s Hierarchy of Needs Self Actualization Self-Esteem and Esteem of Others Love, Affection, Belonging Safety and Security Physiological Needs

  24. Sustaining Progress Model • P = A * V * P * R * B where: • A stands for attitudes • V stands for a vision • P stands for the plan • R stands for the resources • B stands for benefits

  25. Community Economic DevelopmentSummary • Vision charged civic process • Focuses attention on a set of key issues that when resolved will improve: • Short-term economic health & vitality • Medium and long-term economic health & vitality • Made possible when local assets are effectively used and then matched with outside resources

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