Sunday, April 20, 2014

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'Economic leaks' are costly

DALLAS — What does Polk County need to do to expand and keep more money flowing locally? Discover an unexplored innovation or facet of the local economy?

The wine industry is just one of many that may be able to help plug “economic leaks” in Polk County’s local economy by finding local providers for production needs.

Jolene Guzman/Itemizer-Observer file

The wine industry is just one of many that may be able to help plug “economic leaks” in Polk County’s local economy by finding local providers for production needs.

January 28, 2014

DALLAS — What does Polk County need to do to expand and keep more money flowing locally? Discover an unexplored innovation or facet of the local economy?

That's not as likely as people would like to think, according to Bruce Sorte, an Oregon State University Extension Service economist and OSU professor who has researched and consulted in most regions across Oregon.

"Economic discoveries are really, really rare," he said during a presentation at Monday's Dallas Area Chamber of Commerce monthly luncheon. "I've been paid for 15 years now, at least, to go around in somebody's community and discover something that they could do that would make it successful."

By "finding something," he means a new idea that could have an impact in a short period of time.

"I'm here to tell you, I have never done that," he said. "I have never discovered that in the way they want me to."

He said that doesn't mean that the work of chambers of commerce and economic development organizations are for naught. It just means meeting economic goals may take more work than expected.

One of those objectives should be plugging "economic leaks." An economic leak is when an item or service is purchased from outside the community instead of from a local provider.

There are reasons for that, including availability, cost, quality and the increasingly globalization of the economy.

Sorte said in decades past communities were more isolated, so money would circulate more. For example, a dollar spent at the feed store would then be spent at the local doctor only to be spent again at the town grocery store and so on.

"But you have seen what has happened to our economies; they have opened wide open," he said.

With "commuter communities" like Dallas, one major leak is high-end service providers, such as doctors, dentists and lawyers.

Sorte said people will find a doctors or lawyer in the community they work in, not the one they live in. To change that dynamic, high-end service providers may need to change their hours to better fit customer schedules.

Polk County's growing wine industry is an example of a sector that "imports" a large amount of products and services — including advertising, bottling and packaging, and transportation.

And Sorte isn't just picking on wine.

"There are lots of opportunities just in this one sector, and every sector looks like this," he said.

Plugging those leaks isn't just a matter of buying local, but strategic growth to establish local sources while still maintaining the products the region exports to other places, Sorte said.

"The gain in this type of production is growing the production," he said. "You have to grow the economy to plug those leaks and keep those exports."

Sorte warned that is not easy. Developments of that nature require ideas, collaboration, a long-term commitment and, inevitably, money, he said.

"Very few communities do even a modest job of import substitution," he said. "The markup will not do this for you. You can't discover something. So what you will need to do is be more strategic than that. You will need to take your resources … and say, 'OK, what do we need to do next?'"

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