THE Covid-19 pandemic has imposed economic and broader development challenges as never before.
Job losses, reduced income and lack of access to social protection have pushed many back into difficulties, with the consequence of rising inequality.
To avoid the devastating consequences of such shocks in the future, policymakers need fresh thinking and strategies to improve the resilience of economies, that is, the ability to absorb various shocks and adapt to changes and prevent systemic breakdowns.
Rather than looking back, policymakers should start anew. Instead of turning on the old “doomsday machine” that churns out respectable gross domestic product (GDP) growth figures but struggles during a crisis, they should now “build forward” towards a more resilient, inclusive, competitive and sustainable economy.
There is a need for “bold and radical” reforms.
A way to build forward is to strengthen the local economy. It is nothing new. It has been happening for many years. Community leaders’ primary approach is to grow the local economy through a traditional strategy. Their emphasis is on movement rather than growth. Their focus is on attracting and retaining companies by offering tax incentives, workforce development and infrastructure improvements.
What is being practised is merely economic hunting which is a traditional strategy that just tracks down huge corporations who will invest millions of dollars and create hundreds of jobs.
Landing a major corporation is challenging in today’s environment. More so with the Covid-19 pandemic that has adversely impacted the economy. Its severe implications are evident over long-term unemployment, under-employment and economic growth.
Despite steady economic recovery supported by the stimulus measures, the magnitude and severity of the damage done by this pandemic has opened the door for some sense of realisation.
Hence, it could be the time to look at alternative growth options or should the policy makers continue to develop the local economy focusing on the traditional strategy of economic hunting? And if one is looking at alternative strategies to grow the local economy, what are the likely alternative approaches?
One of the approaches is to focus on small business development organisations. The emphasis will be to serve startups and small businesses by providing information about business plans, cash-flow analysis and succession planning.
An alternative approach to develop the local economy is through economic gardening (EG). It is an economic development model that embraces the fundamental idea that entrepreneurs drive economies.
EG is an economic development strategy that focuses on strengthening local businesses by growing from within, given that this approach is being viewed as an “entrepreneurial approach”.
This approach is carried out by creating and beefing up local companies through the development of a vibrant local business environment that will create wealth and jobs, support economic growth and raise revenue.
It will focus on growth-oriented companies, penetrate new markets, refine business models, develop teams and embrace new leadership roles. All these are carried out by connecting entrepreneurs to resources, encouraging the development of essential infrastructure and providing entrepreneurs with needed information.
The fundamental principle behind the EG approach is to build a business base from the “inside-out”. It is done by providing local businesses with a customised market analysis that includes industry, customers and competitive data.
In this context, the essential support to local entrepreneurs and businesses will include business needs assessments; competitive and market analysis; networking opportunities; training in innovative business practices; and access to additional business services. It is only then will new growth opportunities emerge and nurture local businesses than to entice “big investments” outside the area.
With EG being dubbed as an entrepreneurial approach to economic development, with the strategy of strengthening local businesses, particularly established small to medium-sized firms, what exactly is it?
It is seen as a process by which local companies, primarily those which are in stage two and are fast growing with 10 to 99 employees, are given the tools to expand, be it through new customers or new markets. That includes everything from market research to advertising and marketing. It should work well with such companies, as larger firms typically have access to the type of knowledge gained through the EG programme.
Also, it will benefit the businesses which can be coached and are eager to grow. Such a mindset is vital given that not every business owner will be eager to take their company “to the next level”. Hence, it is imperative to have owners whose goals are aligned with the EG approach to be given the uplift as they will significantly expand, drive economic growth and create jobs and wealth.
However, it is important to take note that this approach is not a quick fix and a silver bullet to address and restore the current issues driven by the Covid-19 pandemic within a short span of time. It is a long-term strategy.
EG is more of a lifestyle change as it moves away from using incentives to keep or lure large companies in a community (“Retention and Attraction”). Its focus is on “growing” the smaller firms in the community by providing them with the strategic and technical expertise that they would otherwise not be able to access.
And so, it will take time to put the infrastructure in place and to get to a scale large enough to make a difference. Also it takes awhile for local businesses to start to grow and add jobs. Patience and commitment should prove to be a viable alternative to the traditional practices of economic development.
Besides, it is important to recognise that preparing a strategy for an EG programme can be complicated. There are many elements that must be developed. It is vital to take into consideration the community’s needs and available resources and gain the support of local officials and other stakeholders.
There is a need to develop a collaborative effort among resource partners; create a system-wide operating agreement; determine the target audience; develop a delivery system to provide services to the target audience; and develop a communication system to gain community support and buy-in.
In short, the EG approach can help create the pathway for companies to grow their potential and move to the “third wave” model of economic development although this alternative option has attracted relatively little attention since it emerged in the 1980s. Nonetheless, it is time to behold the brave new world with EG.
Anthony Dass is group chief economist/head of AmBank Research, and a member of the Economic Action Council Secretariat and adjunct professor at UNE, Australia. The views expressed here are his own.