By Paul Garza, Jr., Chair, Board of Directors, West Business Development Center
Paul Garza, Jr., Chair, Board of Directors, West Business Development Center
While the full force of the COVID-19 pandemic is still upon us, I believe itâ€™s time to begin thinking about the future of our countyâ€™s economy, one that will be profoundly altered by inevitable changes to our global and national economies. As with all major change, there will be regrettable losses but also opportunities.
What if globalization is dead?
The current pandemic could mark the end of a cycle of rapid and enthusiastic globalization. As a result, a renewed emphasis could arise on developing manufacturing capacity for items deemed essential rather than relying on these goods being made somewhere far away and transported long distances. Leading the list of items to be made â€˜at homeâ€™ would obviously be medical equipment and supplies. We are, however, staring at many other vulnerabilities including electronics, transportation, spare parts, etc. With an end to globalization, one would want to address these vulnerabilities as the cost of not having these items available within our national â€˜graspâ€™ is greater than the benefits of â€˜lowerâ€™ production costs.
With the reversal of globalization, China would be greatly impacted as would India, Indonesia, and other South Asian countries. California, however, would also take a hit because over 60% of all goods entering the US market go through the combined ports of Los Angeles and Long Beach. In short, we would see a much different world.
Another aspect of the reversal of globalization would be an inevitable reduction in the level of international travel. Some of this will be the result of individual fears, but there could also be new restrictions driven by the paranoia of many governments. International travel has grown substantially due to the increased prosperity that globalization enabled and with a reduction in globalization this turnaround could be dramatic. I remember being at the Louvre a couple of years back and almost unable to get a look at the Mona Lisa because of the throng of tourists taking selfies in front of the painting. Having less tourists would be nice for those who want to get a really good look at her, but not good for the hoteliers, tour guides, curio vendors, and restaurants of Paris. One of our unanswered questions here in Mendocino County, due to a lack of current data, is how much similar trends might impact our local tourism.
It is unlikely that Mendocino County would benefit greatly from the return of manufacturing to the US. Instead, I think we need to be thinking about how our county might be able to become part of the supply chain for this new era. What raw materials, finished goods, or processes will have value and could replace items sourced abroad? There will be opportunities. While we donâ€™t expect to see a lot of major industrial activity in this region (i.e. facilities being created), we could still derive some real benefits.
Localization and regionalization on the rise
The trend away from globalization would likely reverse the consolidation of business in general, and manufacturing specifically, that has occurred in the US over the last 30 years. There could be greater emphasis on localization and/or regionalization, and communities that are successful in the future would be those working toward assuring those essential items needed in challenging times be readily available, including the capacity to â€˜ramp-upâ€™ to respond to calamities. Here in Mendocino County there is a strong belief in localization, but that trend in our County has largely been limited to elite items and lifestyle. A strong localization movement focusing on food production would be the bare minimum needed for us to survive. But there are many other essential items needed to make our County more resilient in the face of other shocks that would inevitably come from climate, geographic forces, and short-sighted federal fiscal policies.
We could expect a much greater emphasis from consumers on sourcing their needs in their local community. This would be of significant benefit if our businesses begin to focus more on serving a local market. Restaurants, especially, would want to re-evaluate the costs of items on their menu and think creatively about sourcing what they need locally and possibly forming collaboratives to get the best prices for commodities.
Local stores would want to make sure they are fully on-line, more available to local consumers, and able to ride the â€˜localizationâ€™ trend to compete successfully against the â€˜Amazonâ€™ world. Local government could help by re-examining their tax regulations and land-use policies to reduce costs and improve the competitiveness of our local businesses.
Tourism in the short-term
Among the economic casualties for our, County would be Tourism. It is going to take some time before people begin venturing out to enjoy the beauty of Mendocino County again. We can expect residual fear from the pandemic to remain for a while but also there will be much less discretionary income among consumers in the near term. I am convinced Tourism will come back but it will take some time. Reducing the impact and shortening the term of this reaction will require a lot of cooperative work among the industry, government, and community non-profits to re-establish demandâ€”a kind of effort that we have not seen to date. Robust data collection about tourism in our County is essential for its growth. This lack of quantitative data would have to be addressed if we hope to re-vitalize this major industry. We all have a stake in the revitalization of tourism.
A blueprint for development
One of the very pressing challenges in our County, as we prepare for the changes to come, is that no current â€˜blue-printâ€™ has been created by which local government and non-government organizations (NGOâ€™s) could be guided in economic development. As a result, there is little collective understanding of ways to develop our local economy. As we all reel from the rapid changes brought about by the pandemic, this conversation needs to begin in earnest so we can be ready for the rebound. It is not a conversation that takes places just with local government. It is a conversation in which we all need to participate. We must take very seriously the challenge of building an economy that will work for all of us, be sustainable, and competitive. Such an economy will provide lots of new opportunities for our entrepreneurs. If worked appropriately, it will also reward the County with new, living-wage jobs. We should always keep in mind that nearly one in five families in Mendocino County live in poverty. We can do much better.
Here at West Center, funded by the Countyâ€™s grant from the US Economic Development Administration, we are working on developing the beginnings of such a plan called Move 2030. It will necessitate the development of much better data on our regional economy. We need to identify our best opportunities for growth, understand where our living wage jobs currently are, determine how to expand those and related industries, focus on the creation of living-wage jobs, and identify the kind of training programs that are needed to enable these industries to be successful.
We are certain to experience many surprises-both good and bad in the coming year. But even in the midst of this crisis, we can and must begin to build a stronger, more resilient and more prosperous economy for all. We must not wait! As a first step we need to make sure to support our entrepreneurs, assist them with the best guidance, business processes, increased access to capital, better data about our local economy, and better local government policies that encourage growth. We need to take on the work of developing a blue-print to guide us in developing the kind of economy we all want. When the pandemic subsides, we will see extensive economic damage â€“ meaning lots of our community members will be suffering and that suffering is likely to be acute. Letâ€™s take this opportunity to create a local economy that will minimize those shocks going forward and maximize the new opportunities of a new economic reality.