Moderated by Rick Badie
Georgia’s business leaders say metro Atlanta’s economy has reached a crisis and sits near the bottom of the heap when compared to the speed and strength of recovery in other metropolitan hubs. How can the region regain its economic vitality? Today, a metro chamber executive outlines Forward Atlanta’s new five-year initiative designed to jump-start the economy. And a Georgia Tech economics professor writes that the euro and debt woes in Europe hit closer to home than some of us realize.
Returning sizzle to ‘Hotlanta’
By Sam Williams
Metro Atlanta is in crisis. Our region lags behind our peers in job growth. We are near last compared with other major metros in recovery strength and speed, and we have virtually the same number of jobs now as in 2000. If you adjust for construction and real estate, we have created only 50,000 jobs in the past 10 years.
We are accustomed to being at the top of our peer cities. We were known as “Hotlanta,” but the recession hit our region harder due to real estate and financial services.
We are not recovering as fast as we have in prior downturns.
The business leaders of our region who serve on the Metro Atlanta Chamber board started to research how we could recapture our lost stature.
They knew that big, bold ideas would be required to jump-start our region’s economy. They also concluded that we must be more collaborative in working with other economic development organizations.
MAC engaged the Boston Consulting Group to help us develop a new five-year economic recovery strategy. BCG surveyed dozens of economic development groups in our region, talked to more than 600 chamber members, conducted 120 one-on-one interviews with CEOs and government leaders, hosted more than 10 sessions with up to 100 leaders and spoke with experts in more than 20 metro areas.
Forward Atlanta has a new five-year strategy. Since its inception in 1925, Forward Atlanta has funded numerous business recruitment campaigns, provided seed money for Atlanta’s Olympics bid, helped save Grady Memorial Hospital, launched a Latin-American business campaign, created a China strategy that saw Mayors Shirley Franklin and Kasim Reed lead trade missions, invested in a water action plan and invested in the four-year legislative initiative that set up the July 31 regional transportation referendum.
Our goal with the new Forward Atlanta strategy is simple: reposition Atlanta as a top-tier global city. Collaboration around the region is essential for our success.
The great news is that our region is not starting from scratch.
We have the best airport in the world and one of the nation’s busiest ports. We must pass the transportation referendum July 31 to continue to be competitive.
Atlanta is one of the top six college towns in the nation. We have a business-friendly community. We are the No. 2 metro for lowest cost of doing business of the 27 largest metro areas.
Our strategy is focused on five pillars. First, we must focus on subcluster industries where we have global strength such as wireless mobility, health IT, clean tech, cybersecurity, advanced manufacturing and supply chain.
Second, the Federal Reserve Bank and researchers showed us that start-up companies and growing smaller businesses into larger ones is a sure bet for job growth.
We are partnering small businesses with Atlanta’s Fortune 1000 companies. MAC will make this shift over the next several years to create an ecosystem for start-up entrepreneurs.
Third, we need to continue elevating our quality of life and core infrastructure such as reinvigorating pre-k through college education, ensuring our long-term water supplies and growing the port of Savannah.
Fourth, we need a stronger business relationship with our colleges and universities. More can be done to create jobs from students’ research, build bridges for companies to our universities and look for emerging technologies. Partnerships with our universities also will help develop better courses, generate leadership training and see company creation.
Lastly, we need to tell the story of Atlanta as a city that constantly reinvents itself, pursues dreams and overcomes obstacles.
We stand on the shoulders of giant leaders who have done this for decades. We must find the good and praise it.
During the next six months, our business leaders will form task forces and teams with leaders from business and academia, along with entrepreneurs, government officials and our international partners, to create a detailed five-year action plan in each of these five pillars.
Our region’s business, civic and political leadership, now more than ever, must come together.
Sam Williams is president of the Metro Atlanta Chamber.
European crisis bringing shivers to Georgia
Contagion from the eurozone debt crisis is here in Georgia today. When you read about contagion from the crisis, don’t think of Spain or Italy defaulting and U.S. depositors standing in lines to withdraw cash from the bank. Think of the mortgage note you cannot refinance or the student loan you cannot get.
According to the World Factbook, Greece’s sovereign debt is 165 percent of its GDP. It ranks fourth-highest in the world. Closely following are three other eurozone countries: Italy, 120 percent; Ireland, 109 percent; and Portugal, 103 percent. Spain’s debt is 68 percent of its GDP.
To the average Georgian, the eurozone debt crisis is unfolding thousands of miles away. Furthermore, all the talk about contagion is simply speculation about the fallout that might occur if a nation defaults on its sovereign debt.
The typical perception of contagion is depositors standing in long lines to take their money out of banks in case the bank’s trustworthiness is undermined by bad investments in Europe. While that sounds like a credible scenario, it overlooks one thing: Contagion has already hit Georgia and the United States. It has come in the form of “death by a thousand cuts,” rather than by a knockout punch.
During the fourth quarter 2011, the economy was humming along at 3.0 percent GDP growth and creating more than 250,000 jobs monthly. As the threat of the European debt crisis heightened, U.S. domestic investment and consumer spending plummeted noticeably. Last quarter, the U.S. GDP growth was 1.9 percent and monthly job creation fell below 100,000.
Bank of America has more than $17 billion invested in the sovereign debt of the five eurozone countries most likely to default: Greece, Italy, Portugal, Ireland and Spain. J.P. Morgan and Citigroup each has $14 billion, and Morgan Stanley and Wells Fargo each has $3 to $5 billion. Wells Fargo and Bank of America also have a large presence in Georgia, thus linking the state’s economy to the debt crisis.
The eurozone finance ministers recently agreed to dispense with the requirement that the European Central Bank lend only to sovereign governments. The compromise means that banks can be rescued by the ECB without governments having to go further into debt.
In exchange, the eurozone countries agreed to greater supervision by the ECB and stricter bank regulations.
This agreement goes a long way in relieving some of the immediate economic stress on member states. It is still subject to the ratification of the German Parliament.
The eurozone crisis also affects Georgia’s economy in non-financial ways. Georgia ranks 12th among U.S. states for the dollar value of global exports. Of its $34.7 billion in total exports in 2011, about 18.8 percent went to the European Union, or close to $6.5 billion dollars.
Georgia exports to the E.U. will be much lower next year because the region is at the threshold of a new recession, brought on in part by the strict austerity measures used to address the nations’ deficits. The latest International Monetary Fund estimate of eurozone growth is a shockingly low .2 percent.
Georgia’s top 10 industries for exports to Europe include transportation equipment, machinery (except electrical), paper, chemicals, computer and electronic products, miscellaneous manufactured commodities, electrical equipment, appliances and components, food manufacturers, minerals and ores and agricultural products.
Georgia businesses earned $279 million in European tourist dollars in 2011, a 25 percent decline from 2010.
If you are a small business, think about the expansion plans that are still on ice or the durable goods that your customers cannot finance.
Finally, think of Georgia’s 8.9 percent unemployment rate that has changed very little over the last six months, since the eurozone debt crisis deepened.
Thomas Boston, a Georgia Tech economics professor, is publisher of www.gazelleindex.com, a blog for small and minority businesses.