Want to know how to grow the local economy? First, don’t listen to the mayoral candidates or Jim Schutze

Writing on the Dallas Observer’s blog today, Jim Schutze is correct when he says attracting new businesses in Dallas doesn’t do that much for the local economy, but he’s wrong on the reasons why.

About a quarter of a century ago, I teamed up with one a fellow by the name of Hylan (Hy) Lyons, easily the most brilliant individual I have ever had an opportunity to work closely with over an extended period of time. We were charged by the North Texas Commission with finding out ways to boost the local economy.

We studied local economies around the world with emphasis on local U.S. economies and we discovered re-locating companies, as Schutze pointed out, is not the answer (which is the main reason I can’t vote for either Ron Natinsky or Mike Rawlings for Dallas mayor because they are still convinced it is). But it has nothing to do with, as Schutze argues, the relocating companies’ property tax rates, although Schutze is correct when he says cities “give away the store” in tax and utility breaks to get companies to relocate. The main reason relocation doesn’t work is because it doesn’t create jobs and job creation is the chief ingredient in improving economies. Relocating companies also relocate their employees, so no local or, at best, minimal hires are required.

What Hy and I discovered is that those economies that improved the most where those where new businesses sprang up and, as they grew, they had to hire more people and construct bigger headquarters. I’m not going to bore you with how he and I went about creating an atmosphere that led to all the high-tech startups that Dallas hosted during the mid-1980s, but it’s that type of thinking that’s needed today and that’s not the thinking I’m hearing from any of the mayoral candidates. Which is why I’m planning to sit this election out.

It would be fascinating — and somewhat scary — to imagine what Dallas might be like today if there had never been a Texas Instruments.

There are two ways to grow the local economy — the very, very, very slow, but more sustainable, way, and a somewhat quicker fashion.

The slow way is to create and maintain a top-tier research university. New businesses, new industries come from research. Research conducted at Texas Instruments was responsible for many of the new businesses created here in the 1980s, even if many of them quickly relocated to the Silicon Valley after they were created (to be closer to the research being conducted at Stanford and Cal-Berkeley). But creating a research institute, as the cliche goes, is much, much easier said than done.

The second way is to create an atmosphere conducive to incubators. Here’s what I would do if I was in charge. The City has a department called Economic Development. I would force that department to get into the business of economic development. First I would create a special office within the Department of Economic Development to partner with SMU’s Cox Business School (one of the four or five best business schools in the whole U.S. of A.). The Cox School has a number of what it calls “Centers of Excellence” and one of them is the Caruth Institute for Entrepreneurship. The Caruth Institute designates fellows to form the alliance with the new office I’ve created in the City’s Economic Development Department. Now I would instruct this partnership office to solicit proposals for startup businesses. And I’m not talking about a proposal for another paint and body shop. They should be something that no one else is doing right now. For example, I have this idea for a business that would offer total support services for an industry desperately in need of such services. (I won’t go into more detail because I don’t want someone to steal my idea).

Anyway, the purpose of this joint City of Dallas-Cox Business School would be to find ways to to discern the best of the proposals and find ways bring those business ideas from concept to reality, companies that would grow, add jobs, build bigger headquarters — all those things that really drive the local economy. You never know — one of them could be this century’s Texas Instruments. Now wouldn’t that be a jolt to the local economy.