Major recessions often obscure fundamental changes in the base economy.
While the understandable focus is on job and investment losses, subtle but important changes are usually underway. Failure to recognize and make adjustments in strategic direction could be fatal if not merely unprofitable when the economy recovers.
Prior to the recession of early 1980s, my then-employer's primary revenue was timber though ‘stumpage sales'. We would put out for bid the rights to cut on our timber farm and make big bucks as a result of the hot Asian export market.
The export market imploded with the recession and has never fully recovered. After the recession, our only revenues for several years were successfully suing insurance companies for the performance bonds posted by companies who bought our previous sales.
Definitely not a sustainable business model.
Fortunately, my economic development department led an effort to start a marketing enterprise that fully internalized the risk and reward for cutting our own timber. This enterprise exists today and has returned millions of dollars of profits, jobs and investment to that rural community.
I believe that these same sort of fundamental changes have occurred in the national and local economy and warrant a similar response by economic development organizations. Trends that started in the early part of the decade will emerge full formed after the recession.
The Columbia River Economic Development Council is embarking on a strategic planning process because I am convinced that if we in Southwest Washington continue to practice economic development as we did earlier this decade, we will fail in this new environment.
I am unsure of the outcome, but I am sure of the direction.
I have been thinking about one trend as an example of the need to course-correct coming out of this recession – online retail commerce and its impact on the demand for commercial development.
Emerging from the dot-com bubble, e-commerce was still in its relative infancy.
In 1997, Jupiter Research estimated online retail commerce would grow from $24 billion in 2000 to $182 billion in 2010 – more than 650 percent. Online sales penetration of computer hardware would grow from 22 to 43 percent of sales – goodbye, CompUSA and hello, retail vacancies.
To some degree, this type of shift in American buying habits is being experienced across all retail categories. The question a new economic strategy should answer is if overall retail sales are growing in the low double digits and online sales in the triple digits, do we plan and recruit for shopping center development or warehouses and customer services centers?
This is but one example of the types of shifts occurring in the global economy. The region needs a new strategic plan to drive economic and job growth in the decade coming out of this recession.
