What will the future economy look like, and what will drive it? While economist Richard Florida didn’t claim to have a crystal ball with all the answers, he gave a crowd full of economic developers a detailed picture of what he saw during a keynote speech at the 2012 International Economic Development Council conference in Houston.
Florida’s vision looked a little like this: Megaregions connected by bustling downtown cores and vibrant, walkable suburban areas driven by economies fueled by talented people, entrepreneurial networks, and local leadership and innovation.
“What will distinguish us and the key to our economic growth is creativity,” Florida said. “It’s our ability to innovate and create new industries … it’s creativity that is mobilized by the coming together of our communities.”
According to Florida, there are two forces that will drive our nation out of economic crisis into full recovery: innovation and city, or community, building.
In this post-Recession, post-industrial age, “the real source of economic growth comes from communities and cities,” Florida says. “It’s industries, organizations, entities and networks combining and recombining to create new energies.”
Already these megaregions make up a growing share — two-thirds, currently — of economic growth, and the most profitable ones have found ways to build off of each other’s strengths and link to each other’s networks.
To stay competitive, not just as a community, but also as a state, region and nation, “we have to build denser, more integrated, stronger, more connected communities,” Florida says.
In the past, companies were the key containers of economic growth and wealth, but is no longer the case, Florida says. Globalization, technology and competition from lower-cost nations have changed the old order building things — cars, houses, even industries — to a new order of creating things.
The economic development model of providing “land, labor and capital” to companies may have been successful in the past, but it’s becoming outdated because “it’s human infrastructure that we know propels growth,” Florida says. “It’s investing in people where we know they can compete.”
Florida was already observing these shifts when he penned his 2002 book “The Rise of the Creative Class,” but the Great Recession — or the Great Reset, as Florida refers to it — accelerated what was happening and changed the economic landscape permanently.
As Americans, “we had put our faith in trading in the stock market” and had forgotten that “the key to building the economy is being builders,” he said. The ensuing financial crisis spurred the deepest Recession in U.S. history, but like other financial crises of the 1870s and the 1930s, it has also given way to a surge in innovation.
“It’s always been innovation, not industries that pulls America out of crisis,” he said.
Community building, or investing in infrastructure, also helped America rebuild after the Great Depression, with the “rise of suburbs that fueled the engine of consumption.” Then at least half of all Americans worked in blue collar industries, many of which offered high-paying manufacturing jobs.
Today, just 6 percent of the workforce touches the products that are made. Though reshoring is bringing some of those production jobs back, manufacturers are hiring fewer workers and requiring a higher skill level than before.
What communities should be focusing on more is the growing number of skilled service workers — some of whom do well but a larger group who average about $25,000 a year.
Economic developers should “not just be creating jobs, but working in communities to upgrade service jobs,” Florida said.
Even more important than boosting the service sector is building open-minded communities “with a diverse outlook that tap the talent of everyone there,” he added.
“What has set America apart is that we have attracted the best, brightest, most hard-working people from around the globe,” he said. “And that’s what will keep us competitive.”