The factors that made Rochester a bustling, growing center of economic activity in the 19th and 20th centuries are no longer relevant.
Founded around a river that emptied into the busy shipping lanes of the Great Lakes and connected to the Port of New York by the Erie Canal and railways, Rochester was a shining light on the western frontier in the early 19th century. Its fortunes rose during the second industrial revolution as George Eastman founded Kodak, an enterprise that not only was a center of innovation but also attracted human capital.
Our city has always occupied a middle space between urban centers like New York, Chicago and Los Angeles and rural company towns that rely on one major employer for their economic well-being. In the last quarter century, Rochester has been treading water while manufacturers in company towns migrated their workforce to low-wage countries, leaving these communities to the ravages of economic irrelevancy. Some have taken matters in hand, however, embracing 21stcentury industry and creating conditions that promote prosperity.
Magnets for investment
At the end of every supply chain is a consumer. We buy goods and services depending upon our whims and capacity of our wallets. Companies competing for our dollars have moved us from cable TV to streaming video, from landline phones to mobile and from postage stamps to email. The home cities of firms driving those changes benefit from the downstream effects of their success. Those cities—Boston, Seattle, Palo Alto—attract the attention of investors and the momentum of investments creates boomtowns.
It’s possible for smaller cities to become magnets for investment too. Chattanooga, Tenn., (population 179,000) transformed itself from fading Rust Belt casualty to tech center boomtown by investing $330 million to bring no-latency internet to citizens and businesses.
The nonprofit Kauffman Center outlined three intertwined layers leading to the success of the initiative. The drive for 21st century relevance began with the mayor’s vision of his low-cost-of-living hometown as a magnet for technology startups. Abandoning the usual dogma of the left and right, business and government worked together cooperatively to obtain a federal grant to fund one-third of the project. Not satisfied with “if you build it, they will come,” city government sweetened the pie with financial incentives for IT professionals to move to their city. Small though it may still be, Chattanooga’s population has grown 6.5 percent in the last decade.
Charlotte, N.C.—once the same size as Rochester and now two and a half times its size —attracted new businesses and jobs the old-fashioned way. Lower taxes and proactive city and state governments worked for decades to make the city what it is today. Rochester could duplicate that success. We have a highly qualified workforce, entrepreneurial energy and an enviable array of colleges and universities.
A heavy burden
So, how do we Rochesterians (and New Yorkers) ensure we get a larger slice of the economic pie?
A group of local business organizations has created ROC2025. Describing itself as a “powerful new alliance of economic development organizations,” its members have declared themselves in favor of Mom and apple pie. It’s difficult not to support any of ROC2025’s initiatives: workforce development, support for existing businesses, enhancing new business attraction and so on. But, in the end, we’re just whistling past the graveyard. The overhead of high taxes, a heavy regulatory burden and a city school system that doesn’t graduate students prepared for the real world of work is simply too much for our local economy to bear.
A prominent feature of Gov. Andrew Cuomo’s administration has been economic development programs targeted at Upstate New York. And, for good reason. The state only shows good economic results by virtue of the overwhelming success of Wall Street. The governor took office as the nation (and Wall Street) was climbing out of the deep hole dug by the Great Recession. So, while he loves to tout his record of having “created” over a million jobs during his reign, it is noteworthy that the rate of job growth is below the national average. Also noteworthy is that over 70 percent of those new jobs were created in the New York metropolitan area.
The non-partisan Citizens’ Budget Commission estimates the state spent roughly $10 billion on economic development in 2018. Nevertheless, New York leads the nation in population loss. Business interests and the conservative Empire Center claim the high tax and abysmal regulatory environment is the culprit (a claim with which I agree). The governor claims it’s our lousy winter weather. Whatever the reason, it’s fair to say that so-called investments by government haven’t created a booming Upstate New York economy.
Government is unduly influenced by special interests and even the best and most ethical participants are unlikely to get it right for one big reason: They don’t have their own money invested in the enterprises they endeavor to help. As for the enterprises, those seeking money from the government would rather spend the taxpayers’ money than their own as they should or would otherwise.
Economic prosperity is rooted in private capital invested in promising enterprises. Rochester could create the conditions that enabled Chattanooga’s success with local leadership embracing a vision and seeing it through. But without change in Albany, that vision—whatever form it takes—would be undermined by a state government addicted to the notion that prosperity should and can only be enabled by central government.
John Calia is an executive coach and author of “The Reluctant CEO: Succeeding Without Losing Your Soul.”
Mr. Calia puts forth mostly the conventional wisdom we have heard for decades , less regulation and taxes , for a successful economy. To his credit Mr. Calia does mention offshoring jobs as factors that created this mess . Corporations , Banking , and their political benefactors sold a false premise that American Corporations , selling American products and services , to Americans , with dollar an hour offshored labor without environmental regulations was Ricardian , win-win trade . No , this was not English wool for Portuguese wine , but a redistribution of wealth to the top at the expense of workers , farmers , and small business . The same must be said about the recent $1.5 trillion tax cut . Corporations don’t hire because they received a tax cut , they hire to meet increased demand .
The cut taxes and regulation mantra never explains why California with high taxes and more regulation continues to be the fifth or sixth largest economy in the world year after year . It never explains how at least seven countries , with much less wealth per capita , have a higher standard of living than we do , for everybody , even though they pay much higher taxes and have much more regulation around high wages , workers rights , and health care .
Mentioned in the article are the use of Federal tax dollars used to help Chattanooga and Charlotte . Not mentioned in our high taxes is that some of that money came from NY . Both those cities are in states that year after year receive more money from the Feds than they pay in taxes , while NY pays $25 to 35 billion more in taxes than we get back year after year .
I am one who always thought James Carville’s ” It’s the economy stupid ” was a bit off the mark . It’s about economic justice , and it always has been .
BTW I disagree that high taxes are the reason we can’t foster innovation. California’s taxes are higher than ours. And yet they have some of the most powerful and successful innovation centers in the world. We gain many advantages from our high taxes other states do not have. Let’s work on maximizing advantages and monitoring strategic investments (instead of for instance investing tax dollars in gyms and workout centers). Let’s work on developing the STRENGTHS of our region, and taking advantage of our fantastic resources instead of continually moaning about how you have to pay a tax that benefits all.
Another point – 70% of jobs were created in NY city? Well 66% of the state’s residents live in the NYC region. So that’s not out of line with their population. In fact, if you look at all NY urban areas the bulk of the jobs were created in those areas – not in rural NYS where there is the lowest population density. So I’m not really sure what your point is there.
I find it ironic that you bemoan the idea that New York’s anti-business climate is not the reason for upstate New York’s moribund job growth, but offer no alternatives other than the usual platitudes of “let’s develop our strengths”, “maximize our advantages” and “monitor strategic developments”…Yeah, that’ll make a difference.
Might I suggest reading the book “Jump-Starting America” which identifies Rochester NY as it’s #1 target for developing the next generation of middle-city economies. We are better positioned than ALL THE OTHER CITIES IN OUR CATEGORY IN AMERICA to take advantage of the proposals in this book, which include policy proposals that pay the community back directly for their investment in centers of excellence. It also means that we need to eliminate “partisan ownership” of such centers by political, business or educational institutions. It means a unified front where the state, the county, the surrounding suburbs and even locally connected cities and the city itself all cooperate and are on the same page.
You can find the book here: https://amzn.to/2OZt76M
And join the growing group of business owners and influencers getting behind this movement here: https://www.jumpstartrochester.com
So, what’s the point? This might be the most disappointing thing I’ve read on The Beacon. Is it a rant? Are you suggesting actionable solutions, other than berating Albany? What is Roc 2025 doing?
My point is that there is economic change going on here but it is not measured by old school industrial standards like expenditures on capital equipment. Digital technology companies and the businesses that work with them don’t make these kinds of investments, nor do they go to the Chamber or COMIDA or the state for money. There is a ton of business growth going on here that is simply under the radar because they have no reason to be on the local or even state radar. A fifty person software company can be a global leader in their field and no one here even knows they exist. That standards being applied simply no longer apply. I keep waiting for someone to understand this change. There are Rochester based companies raising huge amounts of money for emerging technologies, like Cleriovision, run by the Beacon’s publisher. We don’t hear about them because local attention (and this is my observation as a marketing person) has little value to them. So we run around bemoaning our lack of change, but it is literally all around us.