Most Tucsonans see economic development as a desirable pursuit. How to go about it, on the other hand, is another story.
Let’s start with a look at the broader term “economics.” In his book, “Basic Economics,” Thomas Sowell uses British economist Lionel Robbins’ definition, saying that “economics is the study of the use of scarce resources which have alternative uses.”
So, how do all these resources end up being used in a good way? Free markets have a natural organic way of influencing decisions regarding the use of resources. The consequences of everyone’s purchasing decisions steer resources. Every person contributes a share, much like a vote, through his own pursuits.
On the other end of the spectrum, government-run markets are controlled by committees of highly intelligent and educated people who, for example, set prices for all goods, decide where and what to manufacture, etc. Of course, No panel of mere mortals can possibly know enough to pull this off. In the Soviet Union, the State Committee on Prices (Goskomtsen) set the prices for all goods, which numbered around 24 million items. It did not go well for them.
Pima County, the city of Tucson and other government entities like to get into the economic-development act, though it is my opinion that they should refrain from doing so. It is not a question of legality. Counties and cities in Arizona are permitted to spend money on economic development within parameters set by state law. It is more an issue of incentive structure.
If a county or city spends money either subsidizing a startup or luring a corporation to town, the leadership is congratulated, held in high esteem and maybe gets a few more votes. If it develops into a disaster, the same leadership gets thanked for trying. The best part for the leadership is that they put taxpayer money at risk instead of their own.
The less obvious problem is that this same leadership knows that there is nothing in it for them personally if they spend money maintaining parks and roadways, so there is an incentive to abandon basic responsibilities in favor of high-profile economic-development endeavors.
So what about the private sector? I had an opportunity to speak with Tony Ford, director of Venture Development Programs at Startup Tucson.
Ford told me that Startup Tucson helps Tucsonans develop growth-minded small businesses that employ people, usually in higher-paying jobs in the tech field. In addition to employing Tucsonans, successful startups can sell worldwide and bring money into Tucson. He told me, “Over the last three years, by surveying the people who come through our programs, we’ve been able to demonstrate over 100 new full-time-equivalent positions created in Tucson. If you had somebody bring a hundred new jobs to town, that would probably get an article in the paper.”
Startup Tucson works with Desert Angels, a local group of high-net-worth accredited investors who specialize in funding startups. They often fund companies that have gone through Startup Tucson’s development process.
I asked Ford what role local governments should assume regarding local economic development. He said that funding training programs and providing low-cost physical space would be very helpful. He added, “Maybe to train anyone who could go into a $10-an-hour call center job, but with 16 weeks of software training could be making $60,000 a year right here in town.”
It seems to me that local governments ought to focus on funding the basic services for which our taxes are collected, and if they feel the need to dabble in economic development they should assist successful private-sector programs like Startup Tucson.