Economic Development: Managing three flows of money
Economic development is about managing three flows of money. "Good money" flows into an economy from businesses that trade outside the community or region. These businesses (which economists call an economy's economic base).
"Neutral money" represents the flows circulating within the economy. Economists measure this velocity in terms of an economic development multiplier. "Bad money" leaks out of the economy when talented people leave or residents make purchases outside the economy that they could make locally.
An economic development strategy should outline a path to increase the flow of good money; increase the velocity of neutral money; and reduce the flow of bad money.
I've used this explanation of economic development to break us out of our old patterns of thinking in silos: community development, rural development, economic development, workforce development.
These old categories are reinforced by traditional federal government programs: community development (Department of Housing and Urban Development); rural development (Department of Agriculture); economic development (Department of Commerce); workforce development (Department of Labor).
The categories create cleavages within a regional economy that undercut sensible strategies. They are made worse by the lack of experience that federal agencies have in collaborating with each other.
