Economic growth, economic diversity, these are buzzwords in North Dakota and in Minot right now. The City’s NDR application talks about it; our consultant on the project, CDM Smith, even has a $300,000 budget to create an ‘Economic Development Strategic Plan for Minot & Ward County’.
We also have the MAGIC fund, a sales-tax-funded pot of money earmarked toward providing ‘incentives’ for primary sector businesses. Luring new businesses with incentives has been a practice in Minot for decades, and there are some success stories. But it’s fair to say, our record attracting successful, long-term members of the business community is far from perfect.
I’m not a fan of our current economic development model; I’m not convinced it creates job growth, but I hope you get my larger point — our local governments are investing heavily in trying to make Minot’s economy grow. And if we can solve the equation that results in a growing, self-sustaining, economy, then our community will be a lot better off. We’ll certainly be more resilient to energy and commodity price swings. There’s no debate about these last points.
But as the science of economics advances, as we learn more about how economies work, we’re also starting to get a picture of the ingredients that contribute to a growing economy. And that new evidence supports the long-standing theory of ‘creative destruction’.
When it comes to business competition and economics, we used to think that when one company innovates or develops a new technology or efficiency, they just take a share of the pie away from a competitor. But a new study from Stanford’s Graduate School of Business suggests that business innovation doesn’t just reallocate the pie, at actually makes the pie bigger.
It’s a big deal because a bigger pie represents a growing economy; a bigger pie represents new jobs and more money circulating. Here’s the quote from Amit Seru, one of the paper’s authors that captures the idea:
If innovation were only about McDonald’s getting ahead of Burger King, we wouldn’t really care, but our study shows that something more important is happening. When firms innovate, they are expanding the pie, and we see increased aggregate growth.
How would this information affect Minot? If we were to accept it at face value, it would point us — at the very least — toward adding a new element to our economic development plan. It suggests there’s more than one way to grow an economy. It suggests that if we work toward creating a business climate that encourages innovation (innovation is a byproduct of healthy competition) among our existing firms, the natural by-product will be a growing economy and new jobs.