Friday, December 4th, 2009
My latest post is online over at Forbes. It is called “The Mayor as CEO” and it is about how cities need to create strategies that are unique to them in order to find sustainable success over the long term.
As always, I’ll offer more commentary here. So many people on the right seem to believe that all you need to succeed as a jurisdiction is low costs/taxes. Cost efficiency is of course important in business and in government. But how many businesses have a strategy that is simply “low costs”? Usually they have some ideas about a target market, brand position, and value proposition they are delivering. Unless you are the low cost producer in a commodity market, low cost is generally not a sufficient strategy. And alas, our core cities are structurally high cost producers (usually higher taxes, more crime, worse schools, and older infrastructure) that cannot compete for jobs with their suburban regions purely on price.
On the other hand, too many on the left lack concern about costs and taxes. There are lots of ideas about what can and should be implemented, but too-seldom and appreciation for the negative impact high taxes, costs, and regulations have on the attractiveness of a place to prospective residents and investors.
In the ideal world, cities would combine the best of these approaches, keeping a keen eye on the bottom line and cost competitiveness while making targeted investments aligned with a focused strategy for success. Too often, however, we get the worst of both worlds in the form of highly subsidized boondoggles.
To illustrate the dilemma facing the central city mayor and how that is so different from other governance challenges, let’s compare the case of Indiana and Gov. Mitch Daniels with Indianapolis and Mayor Greg Ballard. Gov. Daniels is one of America’s premier fiscal conservative leaders. His belief is that Indiana’s attractiveness to business needs to be rooted in low costs, low taxes, and lean government. Now, when you are in his office and survey the world, you see your state surrounded by the likes of Illinois, Ohio, and Michigan. It is easy to see how you can envision yourself having a price advantage over those states. Indeed, while Indiana can never beat the China’s of this world on cost, it is very feasible for Indiana to be one of the lowest cost states in America and probably the lowest cost state in its region. This makes a cost-led strategy appropriate and doable for Indiana. (I should note that Daniels is also investing in infrastructure and elsewhere, but clearly his primary focus is the fiscal realm. If you want to know more about his philosophy of governance, the Indy Star just did a 15-minute video interview with him. I would have embedded it, but the video unfortunately auto-plays).
Mayor Ballard takes a look out his window and sees a very different world. Thanks to the state’s low costs and other factors, his region is very attractive to business. But instead of being surrounded by a collection of high cost states, his city is surrounded by very low cost suburban counties. These greenfield locations have brand new everything, great schools, extremely low crime, and lower taxes. No matter what Ballard does he’s not going to be able to change this. So how does he attract people and business to his part of the region? That’s a very different challenge from the one facing the state or one of those suburban counties. What’s more, many of the people and businesses he might target are those that are also being aggressively targeted by many cities around the country. Simply adding things like bike lanes, trails, and stadiums aren’t likely to produce a particularly compelling offering on a national basis. How do you make yourself stand out in the crowd? It is one of the toughest leadership challenges out there.
So many central cities, particularly those in the Midwest are struggling today. They need to reinvent themselves to recreate relevance for themselves in the 21st century. As the quote at the top says, cost and efficiency are a necessary, but not a sufficient condition to make that happen.
Here is some further reading on this topic: