Development creates civic energy. Cranes swinging overhead and buildings rising underneath signify a city on the move. No place demonstrates this more obviously than Nashville. Your GPS has become worthless there as streets and buildings seem to swap space constantly. A quick visit to Nashville’s “crane watch” web page reveals 248 projects under way, with 44 of them running more than $100 million. Can this happen in Memphis?
Over the last 10 years, the population in the Memphis Metropolitan Statistical Area (which includes western Tennessee, eastern Arkansas, and northern Mississippi) has grown from 1.29 million people to 1.34 million people at half the annualized growth rate for the country overall and one-third the pace for Tennessee. While it may be unfair to compare our growth rate with Nashville’s, Little Rock has more than doubled our population growth rate over the last decade. If you are building without growing your population, you are merely shuffling the deck.
The per capita GDP (econospeak for household income) in the Memphis MSA has fallen from $50,024 to $46,260 in the last decade. This measure holds population constant and reveals that our economic standing per citizen has declined over the last 10 years. Oklahoma City, meanwhile, has grown per capita GDP 8 percent over the last decade. If you are building without growing average economic well-being, your investment faces strong headwinds.
To complete our dismal economic assessment, since 2001 the Jackson, Tennessee, economy has grown an inflation-adjusted 11 percent, Chattanooga 17 percent, Knoxville 28 percent, and Nashville 60 percent. Over the same period, the Memphis economy has grown 3.2 percent. To realize our development dreams, our economy needs a plan.
Robust economies have healthy top-down and bottom-up attributes. Top-down attributes include the intentional marketing and promotion of the city, active corporate recruiting efforts of new employers, and coordinated retention efforts for existing employers. As a top-down example, the state of Tennessee has invested more than $150 million into the 4,000-acre Memphis Regional Megasite to lure a big bang manufacturer. On the local level, the Greater Memphis Chamber coordinates corporate recruitment and retention incentives with the Economic Development Growth Engine (EDGE). Unfortunately, this system has become antiquated, bureaucratic, and politicized, creating complexity and disincentives for corporate recruits. We should simplify our top-down economic development hydra (Chamber, EDGE, TNECD, MLGW, TVA, WIN, etc.) and streamline our approval process to ensure Memphis has the most responsive, generous, efficient, and proactive development apparatus in the country. If our top-down system rocked, our economy would roll.
According to a study from the St. Louis Federal Reserve, companies in Memphis between 0 and 5 years old contributed 114 percent of the net new jobs created between 2011 and 2014. This compares with an 80 percent rate for the United States as a whole. In other words, Memphis companies with more than five employees actually shed workers over the time period. Entrepreneurs start businesses to seize opportunities or out of necessity. With our top-down system failing, our bottom-up system has been working overtime out of necessity. Memphis may have a notable startup history but our current ecosystem lacks the funding facilities to seize more opportunities. In response, we built the Memphis Epicenter to channel funding and support to aspirational startups and scale-ups. Boosting our citywide efforts here isn’t an economic development option, it’s an absolute requirement. If our bottom-up system rocked, our economy would roll.
Bottom line: While Memphis has some notable development projects in process, without population or per capita GDP growth, these developments risk depreciation and leave vacancies elsewhere. To support their success, we must honestly assess the business of business-building in our city. While we have gained media attention for being the most generous city in the country, touting the most non-profits per capita, to sustain our generosity we need more for-profits per capita. It’s time to streamline and simplify our top-down mechanism while investing significantly into our entrepreneurs. Ramping up attention and resources in these two areas will surely ramp up resources for us all.
David S. Waddell is CEO of Waddell and Associates. He has appeared in The Wall Street Journal, Forbes, Business Week, and other local, national, and global resources. Visit waddellandassociates.com for more.