Today’s guest columnist is Daniel Coleman.
Since returning to Birmingham full time in late 2017, I have made a conscious effort to integrate myself into the day-to-day life of my hometown.
I joined the boards of three companies and four non-profits, worked closely with the finance department at City Hall, joined Birmingham-Southern College as an adjunct professor, and then, a year later became its 16th president.
Over the past five years, I have come to better understand our fundamental problem as a metropolitan area: We are not growing.
In 2008, Nashville’s GDP was $ 82,386,365 and Birmingham’s was $49,698,987. For 2020, Nashville’s GDP was $136,058,470 and Birmingham’s was $62,830,706. Over this time, Nashville’s GDP grew by 65% and Birmingham’s GDP grew by 26%.
During this time, the Nashville’s metro area has grown by 400,000 people and the Birmingham metro area’s population has shrunk by 30,000 people. On a per-person basis, Nashville’s GDP is $69,373 compared to Birmingham’s $57,500. In other words, Nashville’s economy is not only 2.2 times bigger than Birmingham’s, but its GDP per person is 21% larger.
On per-person basis, Nashville has 21% more revenue to work with to solve its problems. On economy basis, Nashville has the scale to attract and create diverse economic opportunities.
Other Southern Cities
We can make similar comparisons with Atlanta, Charlotte, and Tampa. Moreover, if we look at the growth rates of the economies of Greenville, Chattanooga, and Huntsville, it is a matter of time before these metro areas have larger economies than Birmingham.
If the Greenville metro economy continues to grow over the next 10 years at the same rate as the last 10 years (4.4%), its economy will be larger than Birmingham’s economy (growing at 2.6% for the last 10 years) by 2035.
No equity without growth
Many leaders in our community talk about “growth with equity.” I think that comment misses the point. It is hard to have “equity” without growth. With little to no growth, the economy is a zero-sum game. For one person to win, another has to lose. A growing economy is not a zero-sum game.
The $12,000 per person GDP differential between Nashville and Birmingham reflects growth. It provides more revenues per person for municipal services, for philanthropy, and for private investment. In fact, growth begets growth. Zero-sum games usually create downward spirals.
To grow, we have to disrupt. We have to innovate. We cannot stay the same. One of the charming things about Birmingham is that it doesn’t seem to change, but that lack of change can also be Birmingham’s greatest problem. The price of stability is high. It leads to inertia which in turn leads to stagnation.
Impact of economic growth
Here is the impact of economic growth: The combined budgets of the City of Birmingham and Jefferson County total about $1.45 billion, or 2.28% of regional GDP. If this ratio is constant, this budget would grow to $1.65 billion after five years at the current growth rate of 2.6%.
If our growth rate were to double to 5.2%, this budget could grow to $1.87 billion after 5 years. In the second example, we would have an extra $220 million. Not only could more services be provided, but taxes could also be lowered so more money is invested back into growing the economy.
Economic growth provides additional resources for governments and philanthropic organizations. Most importantly, it produces capital and jobs. Every metropolitan area wants more jobs. Every politician promises more jobs. While jobs are critical to dealing with issues like poverty, jobs alone not are the answer to Birmingham’s problem. It is the combination of creating capital AND jobs that creates real value for a community.
Birmingham’s colonial economy
For generations, Birmingham has had a “colonial economy,” in which the jobs have been here but much of the profit has gone elsewhere. Generally speaking, decision-makers reside where the capital goes.
If you look at the top 25 employers in the Birmingham metro area, and you exclude government entities, subsidiaries, and hospitals, only three are headquartered here: Regions, EBSCO, and Blue Cross Blue Shield of Alabama.
We are still a “colonial economy.” Even as we fight to attract jobs from companies like Amazon, the profits and the decision-makers will continue to be on other side of the country.
Only when the capital is created here and stays here we will be able to take charge of our own destiny as a city. Growing our economy will enable us to break this cycle. Reinvesting capital here with decision-makers here can only happen if there are deserving opportunities here. Much of our energy needs to focus on creating these opportunities or, at the very least, not discouraging them.
To understand why we are falling short, we need to be able to answer a few questions:
- Why is Huntsville the only Alabama metro area whose economy is growing at over 5%?
- Do the institutions of this city and state support growth?
- Or do they inhibit it to protect the status quo?
- What are the seeds for economic growth? How can we cultivate them?
I want my children to want to move home after college without sacrificing their ambitions.
I want them to be able to pursue opportunities that are as exciting and competitive as opportunities around the country.
I don’t want them to wait four decades like I did. (If they do, I will be in my late 90s.)
This is the 2nd of a 5 part series by guest columnist Daniel Coleman on fundamental issues that make Birmingham different and how our zero sum game mentality is killing us.
Daniel Coleman, a Birmingham native with more than three decades of experience in finance, is Birmingham-Southern’s16th president. Coleman, who was CEO of the global financial services firm KCG Holdings until its 2017 sale, earned his B.A. in English at Yale University and his M.B.A. from the University of Chicago.
David Sher is the founder and publisher of ComebackTown. He’s past Chairman of the Birmingham Regional Chamber of Commerce (BBA), Operation New Birmingham (REV Birmingham), and the City Action Partnership (CAP).
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