Friday, July 16, 2010

Will you be a net exporter of goods or services from the North Bay region?

Will you be a net exporter of goods or services from the North Bay region?


The Sonoma Mountain Business Cluster (SMBC) adopted this question as one of their criteria for inclusion in their incubator. Full disclosure: I understand the SMBC borrowed this mantra from Ohio Economic Development transplant Michael Adler. I am not sure where Michael stole it.


Why is being a net exporter important? First of all, a company that exports goods or services creates jobs. Often $100K jobs. But, more importantly, It brings new dollars into the region. New dollars creates incremental demand. Incremental demand drives economic growth. Economic growth drives even more jobs. The multiplier effect.


What doesn't a net exporter do? A net exporter doesn't necessarily drive primary sales tax revenue. So...cash-strapped cities and counties, with their immediate need for revenue, are more likely to focus Economic Development efforts on retail, tourism, etc. which drive sales tax revenue. Don't get me wrong...tourism and retail are great. Tourism does bring money into the region. And both tourism and retail create jobs. But they create $10/hr jobs...not $100K/yr jobs. 


The irony is that the incremental economic growth driven by net exporters likely drives more sales tax dollars overall. But those sales tax dollars accrue to the region, not one city. So,  cities are generally driven to focus their Economic Development dollars on retail and tourism. I guess it is a prisoner's dilemma. If everybody cooperates, everybody wins. But if one city "cheats", they win more than the others.


More on North Bay regional economic development in a future post.