Thursday, January 23, 2014

Economic Systems Grow Through Sustainable Reinvestment

Business and cities exist together and follow similar stages of growth and decline. Each invests back into itself to foster higher levels of economic interaction and revenue development. Governments seek to create a net return on tax investments while businesses seek revenue returns on new product/service lines.  Without constant reinvestment and growth, the system eventually declines. 

Sustainability can be seen as a positive return on investment money that allows for reinvestment back into the system for future growth. Governments may reinvest resources in schools, roads, police, WI-FI, fiber optic cables, etc. to realize greater levels of income generating interactivity. The basic development mechanics between business and government are similar even though they take different forms.

Economic hubs must draw in resources to fuel future growth. Resources may come in the form of new business start-ups or existing corporate reinvestment. Private investment increase local revenue streams that raise tax revenue (not tax rate) and create more tax paying employment opportunities (not tax rate). Growth can be seen as the total increase in economic activity and revenue development throughout the hub. 

Young governments and business entities may grow quickly but will eventually move into a mature stage when they reach homeostasis with the market. During this mature stage, a consistent percentage of revenue should be reinvested back into their systems to maintain future growth. This reinvestment ensures that the system continues to develop, improves the lives of its residents, lowers transactional costs, and attracts new investments. 

 When a system is not sustainable, or fails to reinvest back into itself, it declines. The system may begin to lose residents, raise taxes, fail to attract businesses, take unnecessary debt or fall behind on needed infrastructure improvements. Eventually the system may need to painfully revamp itself, seek outside assistance, or perish into history as resources disinvest and make their way into better-managed systems.

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