APPEL: How To Build Synergy In A Reborn New Orleans Economy

With the advantage of looking back over my own history, I have written many times about the decline of New Orleans as a major economic player. Starting after World War II and going forward through the 1970’s, New Orleans was, if not the top, then close to the top of the list of southern boom towns.

Building a diverse economy upon energy, transportation, corporate business, and aerospace attracted many young highly educated, highly paid families. Business prosperity attracted more and more businesses. Added to that was a small but growing tourism sector. The synergy of a growing economy fed upon itself to the benefit of all.

Suddenly starting in the early 1980’s all changed. Energy decamped to Texas, aerospace slowed, and the population started to decline. With the advent of containerized cargo, port employment dwindled and was made worse by the closure of most of the manufacturing that was dependent upon port cargo.

At the same time the nation saw the burgeoning of the New South. The only problem was Louisiana and New Orleans were left out. Cities like Atlanta and Houston grew exponentially. Other cities like Miami and Dallas sucked away what had been New Orleans job producers. When high employment, heavy industry such auto manufacturing moved South they avoided New Orleans and Louisiana. The last phase in the decline was when banking and other white-collar industries left New Orleans to follow corporations to so many other southern cities.

Into the vacuum, as the new economic driver Louisiana and New Orleans’ leaders promoted and invested heavily in tourism. Tourism is fine, but the jobs are low-paying and the opportunities for attracting other business through synergy do not exist. Poverty supplanted prosperity as the controlling political and economic factor.

OK, that was our history, a history that offers much in the way of research material for economists to learn from. I suppose that the story could end there, a poverty-afflicted tourist town offering little opportunity to keep its own best and brightest.

But if by some chance there comes a time when leadership arises that is motivated by recapturing what was once New Orleans’ economic vitality, where would they turn? Leadership that recognizes that what had once made New Orleans a powerful city, location, access to energy, regional growth potential, climate, raw materials and so on, still exists under layers of detritus. How would they go about re-igniting the flames of prosperity?

Clearly all the elements of a strong economy still exist but, just as it took decades to unravel the New Orleans economy, so it would take decades to rebuild it. The obvious first step is a commitment to do so. If the people are happy with malaise, nothing anyone can do will change the inexorable decline that is the course of history.

If that hurdle is overcome the next thing to look to is that word: synergy. Houston and Silicon Valley grew strong simply because of Capitalism 101. Companies realized that they stood to make more money for their shareholders if they were in proximity to their customers as well as finance, legal, marketing, engineering, and even their own competitors. Business breeds and feeds off others within its region. That is the definition of synergy.

New Orleans has so few corporations and has lost so many support businesses that it offers little in the way of synergy. So, the first step must be a long-term goal to lure back or build new support corporations. Banking and finance, insurance, marketing, data services, the list is long. But instead of pouring resources into low-opportunity tourism, our city and state must build a foundation of corporate business.

At the same time as developing the mechanism to attract support business, the other key to a synergy strategy will be to define a collection of core business fields and align all efforts to attract a few large business entities from within these fields. Importantly we must not go after other cities’ niche business fields. We must create for the New Orleans region a raison d’etre, to my thinking a reason to be special. To do otherwise will result in attracting only high-risk, low-potential companies that are looking for outside support to break them out of their own troubles. No, the focus must be on fundamental businesses that align with our assets and with our strategy and are not someone else’s yesterday’s great idea.

These two steps form the classic problem of which comes first, the chicken or the egg. Larger businesses will only go where there is ample support, and support will only go where there is ample business for them. So, the city and the state’s efforts must be to align these two needs.
The final element of the synergy strategy is to capitalize upon what assets are currently in the region and build on them.

For instance, many times I have written on the failure of Louisiana to take advantage of its Mississippi River port complex by not focusing on it with the same kind of effort and investment that it focuses on energy and tourism. The ports offer wide ranging opportunities for value-added manufacturing, distribution, and international and support businesses. We also have other great economic assets much like the ports in fishing, shipbuilding, oil and gas exploration, the use of the products of our huge chemical complex in secondary manufacturing, and so on. What we do not have is the long-range vision of how to capture these assets into a synergy that attracts or grows all forms of businesses that pay good wages.

Perhaps there are many strategies like my synergy strategy that could be used to re-ignite a declining economy. Based upon the extent of our dormant assets, I believe that synergy is the one that offers the most obvious path to success. Few regions have such assets. Some, like Atlanta by constructing its intercontinental airport, create theirs from scratch. We do not have to do that; we only must redirect our efforts into a logical strategy to capitalize on our assets.

And we must forget about the amateurish efforts that have been used in the past to attract businesses. As noted, business goes where it can make the most money for its shareholders, that is it. I cannot say how many times I have attended recruitment meetings with senior business executives in which all our leadership talks about is our culture, Mardi Gras, and such.

Businesspeople like to have fun, but then they go back to where they can make the most profit. Its all about profit, we must come to realize that “culture” and all the other politically-correct catch-phrases have no impact on decisions when profit is the driver. And most importantly of all, we must realize that there is no compelling reason that business must be here. Instead of bureaucrats and politicians presenting the benefits of our region to business decision makers, we should have the leaders of the biggest corporations in the region take the lead. Business to business, instead of bureaucrat to business, is powerful stuff.

Obviously, a strategy to recapture New Orleans’ economic glory will take commitment. It will take leadership, elected and private, that is unabashedly and courageously committed to the long-term prosperity of the City and Region. Houston, Atlanta, and Nashville have not built prosperous economies by allowing anyone defending the status quo to get in the way. Anything else will result in our relentless decline into irrelevancy.



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