SwampFox

Swamp Fox Response to Governor Sanford: Plato started a 2,400 year old fad in knowledge based economic development

Submitted by: John Warner on Dec 28, 2008 at 12:29 am Tagged with: Economic Development Source: Swamp Fox

Swamp Fox Note: This op/ed was also published in the Greenville News.

Recently Governor Sanford expressed concern that we have been “chasing the latest trends in economic development [from]… "clusters" [to]… "headquarters"… [to] "knowledge-based." He recommends eliminating all economic development incentives and depending on the market to work. For those of us who still have faith in the invisible hand of the market in spite of the recent gale of creative destruction, this is an enticing argument. But is the clear cutting of economic development most likely to lead to the growth of a prosperous economy? Might we be better off planting seedlings likely to grow into a healthy and vibrant economic forest?

Plato observed 2,400 years ago that everyone in his city needed food, shelter, and clothing to survive. Each individual can work each day to meet all of his individual needs. But if some will be the farmers, they can develop specialized tools and knowledge, becoming more productive and growing more food than individuals taking care of their own needs collectively can. And if some will be the builders, they can specialize and build more housing than individuals taking care of their own needs can. And if some will be the tailors, their enhanced productivity allows them to make more clothes. Then if the city’s citizens trade with each other, each has his daily needs met with a surplus left over.

Enhanced education leads to specialization, which increases innovation and productivity, growing income and wealth. With this insight, the entrepreneur Plato operated one of the most important schools in Western Civilization, the Academy in Athens. Plato taught his knowledge based economic development strategy, so students could grow their income and invest resources and time back into their studies at the Academy. Most successful economic development strategies are based on the enlightened self-interest of individuals, who produce public goods that also benefit the entire community.

Increasing the overall level of education does not just benefit the other guy, but rather it is in each person’s enlightened self interest. Living with innovative and productive farmers and tailors allows the builders to focus on making the building cluster the most innovative and productive it can be, growing the builder’s income and wealth which they can spend on a better quality and variety of food and clothing at lower cost.

While investing in enhancing education makes economic sense, any given individual is tempted not to contribute, but to let everyone else fund education. So citizens in Plato’s City form a local government to collect taxes from everyone and invest it in raising the overall education level, which grows personal income and wealth for everyone in the city.

Is there evidence that a knowledge based economic development strategy actually works today? The most successful strategies develop the strongest existing assets we have. Several decades ago, we began with a workforce with a solid work ethic and developed one of the best technical college systems in the country to enhance workforce skills to attract branch manufacturing. This strategy has been very successful, and the crown jewel was the recruitment of BMW Manufacturing, which has brought with it a large supply chain of vendors relocating to our region.

We recognized that in a global economy, we can not stand still and must take our level of knowledge to another level. Clemson partnered with BMW and Michelin, to endow research chairs at the International Center for Automotive Research to attract preeminent scholars in areas strategic to industry we have today. One of Michelin’s three research facilities globally is in Greenville, and the partnership with Clemson helps Michelin research be more innovative, which keeps Michelin production in the region more globally competitive.

BMW located their Information Technology Research Center at CU-ICAR, and Timken located a research facility there as well, to tap into the specialized knowledge and resources. Recently, American Titanium Works announced they are building the world’s first world-class titanium mini-mill in Laurens County and locating a research facility at CU-ICAR, which can spawn an entire new industry cluster here. Clemson research has spawned several high-impact entrepreneurial start-ups, including Selah Technologies and SensorTech, which have been supported by SC Launch! and connected to investors and global corporations here through InnoVenture.

Like many things, the Greeks first discovered the basic principle that people become more prosperous by pursuing a knowledge-based economic development strategy focused on specialized clusters of expertise and resources, so this is hardly the latest fad. Growing specialized knowledge in focused areas is a proven path to prosperity.

John Warner is CEO of Jute Networks, which promotes innovation and entrepreneurship in the southeast through the Swamp Fox Community and the annual InnoVenture Southeast conference. He can be reached at JohnWarner@SwampFox.ws