Monday, March 17, 2014

The role governments can take in revitalizing their economies

Venture capitalist Fred Wilson posts on how governments can rebuild their local economies (AVC):

We’ve seen that things can be turned around. The economic and cultural juggernaut that is Brooklyn right now is a perfect example. The grandchildren of the people who fled Brooklyn in the fifties and sixties are now coming back in droves, attracted to its lifestyle, its coffee shops, bars, restaurants, art and culture, parks, and affordable real estate. And the tech companies are coming too. Attracted by all the talent that is there.

I’ve been asked by civic leaders from places like Newark, Cleveland, Buffalo, and a number of other upstate NY cities that have suffered a similar fate how they can do the same thing. They all talk about tax incentives, connecting with local research universities, and providing startup capital. And I tell them that they are focusing on the wrong thing.

You have to lead with lifestyle. If you can’t make your city a place where the young mobile talent leaving college or grad school wants to go to start their career, meet someone, and build a life, all that other stuff doesn’t matter.
But I don't think Wilson has the whole picture. At a more macro level, Stephen Green blogs about failing Abenomics. In doing so, Green may have struck one one of the biggest barriers to change that can result in economic growth (via Instapundit):
Deregulate. Simplify the tax code. Protect the value of your currency. Those three steps are all it takes to achieve prosperity, but as Glenn Reynolds like to say, politicians don’t like them because they provide too few opportunities for graft.
Brooklyn's renaissance was driven by cheap real estate and a reduction in crime but also obviously, easy access to its neighbor borough - Manhattan. There's been another discussion on HN over one startup's decision to build their business outside the US (, in a country with substantially higher taxes after the hurdles to compliance and visa restrictions made it effectively prohibitive to do so.

I think people make conscious trade-offs in value. Explicit dollar figures aren't the only costs being analyzed. There's real value to lifestyle but people need jobs first (having been one of the people who once made the commute into Manhattan from Brooklyn). Making regulations simple to understand and follow also goes a really long way in reducing the barriers to entry for businesses of all stripes and is probably the least (explicitly) expensive step for communities to take.

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