Sunday, November 12, 2017

Phased Tax and Investment Incentives for Economic Growth

Governments are always looking for new ways of enhancing the economy and putting it on a competitive stance. Throughout the years there have plenty of ideas that came and went. Ideas are often as plentiful as the politicians that bring them forward and the business investor class that seeks to make profit off of change. The opportunities to grow the economy why creating a strong return on investment from investment opportunities makes the fundamental difference between those cities that can grow and change and those that will die.

The entire cluster acts as a organism with lots of working parts. It is always adjusting, moving, creating, destroying, and working to fulfill its ultimate purpose. For the businesses in the area the purpose is return on income while for residents that may lay with quality of life and opportunity. Because collective organisms grow and change they have different needs to fulfill their existence. As they decline and change new money and ideas is needed to grow them again. If investment opportunities meet growth cycles the entire system can grow quickly.

Cluster stages of development have different needs at different times to help them grow healthy. Similar to company stages such as introduction, growth, maturity and decline a cluster will also grow and decline through different stages. In the beginning it will need entrepreneurs and angel capital. When it is in the growth stage it will need an influx of capital and supplier businesses. Eventually, when the companies within the cluster no longer produce meaningful products they will decline without reinvestment and rejuvenation of purpose.

Each stage needs its own type of investment at a particular time. As these stages grow and change investment in the infrastructure of the system, as well as investment in the companies within the cluster, will be needed to create the biggest impact. Investment in companies that exist within a growing sector will help the entire network of companies grow while investment in the infrastructure will allow the entire system to grow.

Infrastructure investment improves the overall growth prospects of all companies within the system. For example, providing investment in entrepreneurial creative spaces may help launch ideas but investment in education leads to long-term growth once these business have developed to a point where news skills are needed. The same can be said for high speed Internet, roadways, social places like bars and restaurants, housing, parking and just about everything else the clusters need to grow. Different times, have different, needs as the company moves through the different stages. While a random market hand may work government can apply the right pressures at the right time to speed up this growth.

Providing tax incentives and other incentives relevant to the stage of growth based on the needs of industry clusters encourages a coordinated boost to economic growth. Government should seek to maximize on existing trends and do so in a way that the return on investment is greater than any cost to public resources. Through strategic and scientific approaches government can continuously grow their coffers to catalyze additional growth into the future. As the investment pays off in terms of new money, employment taxes, and generated commerce it can reinvest this money through additional incentives and infrastructure improvement.

Coordinated institutional investors can create a big impact on the potential success of the companies. Their profits are derived from the ability to return greater value. In clusters, that value is created when multiple interrelated businesses attract new profitable business.  Pack investing can put the needed capital at important places within the cluster network that have the greatest return. They can "light up" the cluster network with injections of cash and liquidity to ensure that the growth stages are well lubricated and have what they need when they need it. Investing in groups of clustered businesses enhances all of their performance because they work in the market in collaboration as much as they do in competition.

Industry and government can work together to create something new that profits business, people and government. Yet they need to think about proper coordination of their efforts. When clusters move through different stages government can catalyze growth by providing the right incentives to attract growth and investment that later leads to "profit" through economic growth and tax revenues for government and greater returns on investment for investors. Research and awareness into how economic systems work opens the door to new possibilities of economic rejuvenation.

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