Among the brutal but unspoken truths learned since the collapse of 2008 are these: First, economic development is no longer a secondary function of government, suitable for rewarding faithful constituencies and burnishing political legacies. Second, economic development is becoming synonymous with business development.
Set aside your political prejudices for a moment and consider what this means. The primacy of economic development lurks beneath the rhetoric of every campaigning or elected government in the western world. Whether they’re neocons insisting that deregulation and tax reductions will spawn new commerce, or libocrats vowing to spend enough capital to bring industries back from the dead, we’re all slowly coming to the admission that both strategies are failing.
Hosing money at the problem, whether its neocon pre-tax money or libocrat after-tax money, is too crude. In both cases, the gains are more than offset by the impoverishing effect of government debt. In the misery ensuing from each dose of medicine, the public vacillates from right to left and back again in desperate search of relief.
Do you doubt it? Right wing governments cut taxes and suffer revenue shortfalls. Left wing governments raise taxes and then overspend. Debt is debt, and it doesn’t much matter where it originates, or which failed remedy is currently in fashion.
Real economic development begins as ever among innovative and enterprising people who have access to resources. It happens one entrepreneur at a time, one company at a time, in real time, in a specific place, whether the initiative starts from nothing or grows from within a vast corporation. This constant renewal happens more or less abundantly across political jurisdictions, creating competitive advantage or disadvantage for the affected economy. Governments can change the regulatory and fiscal environments, but they can’t manufacture ambition, inspiration, or markets.
Business incubators are one mechanism by which governments can make strategic investments that, unlike bank bailouts and stimulus packages, return far more than they cost. It only makes sense.
“Start making sense,” is the unifying theme of Donald Drummond’s recent set of recommendations about how to cut government spending in Ontario. He’s refreshingly blunt about business development programs and incentives. They are in large part unfocused and ineffective. In his view, they are so ineffective, it’s possible to reduce the amount being spent on them while achieving better results.
Here in Toronto, the City appears to be gearing up for a more targeted investment in business incubators than in the past. This is very timely, in our view. When and where that investment occurs, and the rules of engagement between the government and its incubator partners, will determine their success.
In a previous post, I ranted about how the careless use of language has allowed piecemeal business training and coaching to be mistaken for the intense, immersive, place-based practice of readying the most promising companies for success in the marketplace. Unless I’m badly mistaken, this distinction is going to become more critical in the months and years ahead.