Lou Mitchell's, the Merc, and Bill Testa's Economic Clusters
Back in the 70’s I’d have breakfast every morning at Lou Mitchell’s on west Jackson. Lou would open at 5:45AM and the place would fill with workers from the Mercantile Exchange.
I went back a few weeks ago for breakfast. Lou’s gone but breakfast still great and business booming with customers from the now gentrified near west side. All of the exchange workers had moved further east along Jackson.
Bill Testa at Chicago’s branch of the Federal Reserve keeps a blog on the Midwest economy and posted recently on Chicago's Exchanges Look to the Future, and writes about economic clusters of
...local assets like a deep pool of talent and supportive service firms, including local banks that understand their businesses, legal/consulting firms with specialized knowledge to service them, and local universities that produce new workers and new product ideas from finance professors. Might such a clustering of firms and assets have carried Chicago’s exchanges through a period when they were otherwise hobbled by their own outdated organizational structures?Testa concludes noting in the case of Chicago's exchanges,
Local public policy is not a dominant force in determining the success of a local cluster such as this. Yet, it seems to me that it is worthwhile for us to understand our local industry clusters so that we continue to support—as appropriate—their supporting industries, their work force requirements, and their public service needs.I hope our candidates for Gov can name a few of these clusters in Illinois and will describe what they would do to support them. I hope that support isn't another subsidy for sprawling and now obsolete plants like the Motorola's in Harvard. Illinois needs some creative thinking on what government does best and how it supports industry's public service needs. Of course, a good Greek place for breakfast should be part of the scheme.
5 comments:
In any of these subsidy programs, such as putting Motorola in Harvard, there should be a repayment requirement, if the operation isn't there long enough to repay the subsidy.
Cal, I agree with your replayment concept, but shouldn't there be some caveat for unforseen situations? I'm not saying that Motorola didn't know the market was shakey (I don't know for sure if they did or didn't), but it doesn't seem exactly right to demand repayment for something beyond the control of the company. On the other hand, if they did know or speculate, it should have been disclosed at the time of the application for the grant.
Interesting.
Motorola has recently improved. Motorola has gained market share. The market for cell phones is huge globally - around 800 million units per year. It is also growing, and people replace cell phones often (every 1-2 years or so). So Motorola could be a huge growth engine for Illinois in the future. It is very competitive and hard-to-forecast. Nokia, Samsung, Blackberry, and convergence with iPod and other products loom on the horizon.
So let us hope Motorola continues to make good products and does well financially in the future.
There are at least two sides to clustering
1. price
2. cost
In regards to price, if you cluster and co-opt competition by including it in the cluster, you can sometimes improve quality of the product for consumers and charge a higher price.
In regards to cost, this is achieved through sharing and collaboration, scale (high volume), learning and experience (more experience =lower costs in some instances), and other things.
We need to think about the price and cost side to clustering.
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