Saturday, April 28, 2001

New Economy

Cincinnati gets dubious rating for New Economy readiness

        How does Cincinnati rank on new economy readiness? A new report ranks the region just 34th among the nation's 50 largest cities.

        Cincinnati falls behind cities such as Buffalo, Orlando, Charlotte, Indianapolis and Cleveland. This report — from the Progressive Policy Institute and the Case-Western Reserve University's Weatherhead School of Management in Cleveland — has naturally gotten under the skin of many locals who've worked hard to build efforts such as Main Street Ventures and the Regional Technology Initiative.

        Let me say that I don't have high tolerance for rankings like this. A decade ago, Money magazine ranked Wheeling, W.Va., as the second-best place in America to live, which convinced me no Money editor had ever actually been to Wheeling. This new report, The Metropolitan New Economy Index (, doesn't exactly set a standard.

        The impression is that right here, right now, Cincinnati is in the bottom third among large metro areas. That cannot, however, be concluded from this study.

   1. San Francisco
   2. Austin, Texas
   3. Seattle
   4. Raleigh-Durham, N.C.
   5. San Diego
   6. Washington
   7. Denver
   8. Boston
   9. Salt Lake City
   10. Minneapolis
Others in the region
    19. Chicago
    29. Indianapolis
    33. Cleveland
    34. Cincinnati
36. Columbus
    37. Pittsburgh
    42. Dayton, Ohio
    46. Louisville
    Source: The Metropolitan New Economy Index, by the Progressive Policy Institute and the Case-Western Reserve University's Weatherhead School of Management.

        Only two of the 16 measures used in the index use data as recent as 2000. Seven of the measures date from 1998 or earlier. That barely captures the beginning of the Internet rush and certainly captures none of the decline seen in the past year.

Other problems

        Beyond that, there's a few other problems:

        • The study's measure of each metro's “globalization” is export sales per manufacturing employee, based on 1998 data. Cincinnati ranks well, at 15th, with $40,000 in sales per manufacturing employee. Unfortunately, that figure is wrong, about 15 percent too low.

        • One measure of “economic dynamism” is the number of initial public offerings in a region. The report says, “IPOs are important because they indicate the degree to which an economy is producing companies that have long-term and substantial growth potential.”

        The authors confuse the New Economy with the Internet bubble, and end up rewarding those regions that spawned the most clones.

        • In the index weightings, the number of Internet domains in a region gets the same weight as work-force education. So, not only does Cincinnati get the same credit for as Dallas gets for, but that all seems to matter as much or more than Cincinnati State's excellent technology program.

        You get the idea. Did we really need another report to tell us the best places for high tech are San Francisco, Austin and Seattle? Of course not.

Measuring innovation

        But the rankings serve as an introduction to what the authors think needs to be said about public policy in this realm: The New Economy is synonymous with innovation. Regions need to be supportive of innovation, and that means the old goals of economic development — to create jobs — fall short of the mark.

        “The new goal of economic development,” the report says in bold type, “should be to raise average per capita incomes through higher-wage jobs, while working to reduce poverty and expand opportunities for economically disadvantaged residents, all the while boosting the region's quality of life.”

        That's news? It is to some, unfortunately. Ask why we continue to give economic incentives to companies to create jobs when we don't have enough workers. We were ready to give The Gap millions of dollars in incentives to create 800 low-paying warehouse jobs in Harrison, at a time when the unemployment rate was 3.5 percent. (The Gap canceled that project in February.) That's a Rust Belt mentality that Cincinnati can't seem to shake.

        The report makes more specific recommendations, for instance:

        • Know your region's economic function in the global economy.

        • Create a skilled work force.

        • Invest in an infrastructure for innovation.

        • Digitize government.

        • Take regional government seriously.

        Every one of those has been seriously discussed here in the past two years, and the Regional Technology Alliance will make specific recommendations on some of those in about a month.

        No one should be wringing hands over the Progressive Policy Institute's odd ranking. What matters is there's been much intelligent debate locally about what this city needs to upgrade its economy. The only concern now — and it's not insignificant — is whether the debate produces leadership and action.

       E-mail John Byczkowski at or call 768-8377. Find a list of local New Economy companies at

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