The Creative Economy

THE SUFFOLK SMALL BUSINESS PROJECT

INTRODUCTION

What is it that triggers economic growth? In the past, technological advances have fuelled economic growth. This allowed for the growth of cities in the Nineteenth and Twentieth Centuries; the movement of economic activity away from the home, first into the factory, and then into the office; and it facilitated the development of a market based, cash economy.

With the evolution of the Western Economies from the Industrial Age into the Information Age, a further wave of technological development – the “Computer Revolution” – has changed the basic paradigm of economic production. The Internet has enabled us to move out of the office and back into the home. It is in the process of offering a de-monetised system of exchange, and it has helped facilitate the development of suburban communities.

If the paradigm has changed, then, we might ask, what is the key driver to economic growth? One answer is provided by Professor Richard Florida of Carnegie Mellon University. Professor Florida’s thesis is quite simple. We are in the process of moving from the Organisational Age to the Creative Age. The Knowledge Economy is a phenomenon of the Creative Age. In the Knowledge Economy, the key to wealth creation is the ability to enhance knowledge. Knowledge is enhanced by adding value to what is known already, and this occurs through a creative process. By augmenting knowledge creatively, those who undertake this process have added value to the existing stock of knowledge, and this wealth creation drives economic growth. Professor Florida names those who undertake this process the “Creative Class”.

THE BASIC GROWTH MODEL

The basic growth model is described by Professor Florida’s Creative Capital Theory. It holds that economic growth in a given location is driven by the locational choices of creative people (the holders of creative capital). In one sense, the theory does not represent a radical departure from traditional locational theory.

In traditional theory, economic growth in a given location is driven by the locational choices of firms (the holders of physical capital). However, as the emphasis of the economy moves away from physical capital (land, plant, and equipment) and towards creative capital (or what some might term “human capital”), the locational decisions of the Creative Class become more significant in determining which areas will grow and which areas will not grow.

The Creative Class prefer places that are diverse, tolerant, and open to new ideas. An attractive place need not be a large city. It must be a place where the creative class can find suitable peer groups – “a tolerance for strangers and an intolerance for mediocrity”. This is based on three key principles (Zipf’s Law):

1. Creative agents cluster around creative agents, reinforcing each other’s productivity.

2. Creative agents coalesce to form larger economic units or firms.

These firms locate in areas where they can grow and develop.

The evidence suggests that creative people are attracted by an abundance of high quality amenities, openness to diversity, and opportunities to validate a creative identity.

If this is the case, then why do some places fail in their attempt to become Creative Centres? In many cases, it is due to the public authorities suffering from a lack of vision. They “just don’t get it”, as Florida argues. They fail to create the right environment in which the Creative Class can operate. They can be trapped in their past in a form of “Industrial Sclerosis”. Vested interests resist the forces of change. This will cause the Creative Class to pack up and seek out more congenial locations. Creative agents can be repelled from a location as well as attracted to it.

The evidence also suggests that economic growth in a particular location is driven by the ability of an area to attract the Creative Class, rather than a failure of the existing population to act creatively. It is more a case of allowing the Creative Class to move into an area than of attempting to make a given area more creative in its outlook. This is quite an important point in relation to the policy dimension.

THE MODEL AS A GUIDE TO POLICY

Professor Florida suggests that the public authorities ought to be attempting to foster a Creative Centre. The evidence suggests that if an area attracts the creative talent, the creative jobs will follow. This means that trying to create a Nerdistan - in the belief that attracting the companies to act as a trigger to growth - is unlikely to work because it is using an Industrial Age policy to solve an Information Age problem.

The research indicates that Creative Centres are likely to be located in those areas that exhibit three key characteristics:

1. The area has to be developed as a great place to live. Lifestyle is the key to the creative class, and a location that wishes to attract them must be able to offer choice within the preferred lifestyles of the creative class.

2. The area needs a University to bootstrap creativity within the community. The University needs to be a source of technology (cutting edge innovations that can be spun out as commercial opportunities), talent (attracting the knowledge powerhouses and integrating them into the local business community with the savvy make a profit from innovation), and tolerance (the University needs to foster social tolerance, which is centrally important to the creative class).

The authority needs to generate a good “people climate” in the same way as it fosters a “business climate”. Decision making needs to be “people- centred”.

Each of these conditions is necessary but not sufficient. To have one or two without the others is likely to reduce significantly the chances of success.

HOW DOES SUFFOLK COMPARE TO THE MODEL?

It would be interesting to see how Suffolk compares against each of these measures at the present time. Generally speaking, Suffolk is not currently a Creative Centre and, in many ways, it is not the intention of the public authorities that it becomes one. However, the public authorities do intend Suffolk to become a High-Tech centre, and consider this to be a central part of their Economic Regeneration Programme.

It is our intention to examine this issue more closely, as, if the theory is applicable to the case of Suffolk, any gap between policy intentions and policy outcomes would have a bearing on he future development of the small business community in Suffolk. We shall begin this examination by considering how Suffolk is currently performing against the standard of the four tests that the model lays down.

First and foremost, very few people argue would with the view that Suffolk is a great place to live. There are a number of genuinely world class cultural beacons such as the Aldeburgh Festival and the Newmarket Race Meetings. The regeneration of the Waterfront in Ipswich and the sympathetic development of rural Suffolk are both likely to enhance the built environment. Suffolk has one of the lowest crime rates in the UK, and is considered to be one of the safest urban environments in which to live in the UK. Evidence from the Centre for Business Research at the University of Cambridge suggests that there is evidence of small businesses relocating from London to Suffolk principally for the reason of an improvement in lifestyle.

On the other hand, Suffolk does not have a significant research University and is unlikely to develop one over the horizon that we are considering. There are some links with the University of London and MIT through the IP-City initiative, but none of these initiatives have led to the development of a sizeable student population that is integrated into the host population. Furthermore, respondents to our Small Business Survey indicated that the feelings of the small business community are that the IP-City Initiative, based around the BT-Exact site at Martlesham Heath, is very remote from the small business community, and is not sufficiently integrated into that community for there to be an effective transfer of technology from the laboratory to market-place. This is in sharp contrast to the evidence that we collected on our trips to Princeton and Stanford Universities in the USA.

Our research indicates that there is a small Bohemian cluster in central Ipswich, but that this cluster has not reached the critical mass necessary for the development of a vibrant creative cluster. It only represents 1.7% of the population of Suffolk, way below the 20% threshold suggested by Professor Florida. Indeed, the close proximity of London (just an hour or so from Ipswich by train) attracts creative talent away from Suffolk to what would appear to be, from the perspective of the Creative Class, a more attractive lifestyle. Our Small Business Survey indicated that many of the creative class who we interviewed viewed Suffolk as a great place to live, but saw London as an even better place at which to work.

Our research indicates that Suffolk is dominated by two lifestyles – the traditional Country Dwellers and an accumulation for more suburban lifestyles (Suburban Semis, Blue Collar Owners, High Income Families, Independent Elders, and Mortgaged Families). Whilst the “Country” and the “Suburban” are an important part of the make-up of the Suffolk population, and whilst they both contribute much to what makes Suffolk a great place in which to live, we have to suspect that they are actually inimical to the development of Suffolk as a Creative Centre. The lifestyles are essentially conformist and resistant to change, and both of these features act to retard creativity. In many ways, the controversy surrounding Maggi Hambling’s scallop sculpture on Aldeburgh beach (a tribute to the composer Benjamin Britten) represents the clash between the conformist and the creative – the Bourgeois and the Bohemian.

It is hard to assess the question of whether or not Suffolk has a good “people climate”. Such a judgement is very hard to assess because it is so subjective. Rather than not tackling the issue, we decided to deal with it in a roundabout way. Our Small Business Survey included two questions on this issue – What makes Suffolk a great place in which to do business? And: What hinders business in Suffolk?

In response to the first question, many of the respondents replied that Suffolk was not a great place in which to conduct business. When asked why that was not the case, the responses indicated that the Suffolk business community tends to be narrow in perspective, inwardly focused, risk adverse, unwilling to try anything new, and price-sensitive. These are all characteristics that we would associate with the “Country” and “Suburban” lifestyles.

In response to the second question, whilst the top two hindrances to business in Suffolk were much as expected (the transport infrastructure and the roll-out of broadband coverage), the third main hindrance – the attitude of the people of Suffolk towards business – as something of a surprise. The main attitudes that were seen as a hindrance were risk aversion, a conservative nature, and a poverty of vision from the public authorities. Once again, these are all characteristics that we would associate with the business side of the “Country” and “Suburban” lifestyles.

To sum up, our view of the current state of Suffolk is that it doesn’t fare too well with regards to the development of a Creative Centre. Whilst being a great place to live, Suffolk does suffer from not having a major research University, and it does appear to be antipathetic towards a Creative Class. This being so, what might that mean for the future?

WHAT WOULD THE MODEL PREDICT THE FUTURE OF SUFFOLK TO BE?

If the model is correct, then Suffolk would continue to be a difficult environment in which to operate a small business for some time to come. There is every reason to believe that the county would continue to be a great place to live for some time to come, if only by virtue of the Information Revolution, like the Industrial Revolution, passing it by.

There are moves to establish a University in Suffolk which may come to fruition within the time horizon of the current project. However, even if a University is established, it is unlikely to have a beneficial impact for the development of a Creative Centre within our time horizon. It takes time for a new institution to bed itself into the existing fabric of a community and it would take even more time for an institution, from scratch, to reach the level of excellence needed for it to act as a beacon and attractor for the Creative Class.

Our demographic research leads us to predict that the current trend is for the Country lifestyles within the county to be replaced by the Suburban lifestyles. If this does come to pass, then there may be scope for the development of a more Bohemian section of society, but this development is unlikely to be sufficient to reach the critical mass necessary for the development of a Creative Centre.

However Futures Research is not about what we expect to happen, but about what might happen. It could be the case that the model is wrong. It could be the case that the research is flawed. It could be the case that some unforeseen circumstance changes the parameters within the model. From our perspective, the only firm conclusion that we would draw with any confidence is that we have identified a critical uncertainty to the development of the Suffolk Small Business community.

If, for whatever reason, Suffolk does establish itself as a Creative Centre, then it can reasonably expect to develop a Small Business community as an engine of a modern High-Tech economy, with high value-added jobs, enriched by the creative sector, and leading to high economic growth. If, on the other hand, Suffolk does not establish itself as a Creative Centre, then it can reasonably expect the development of a Small Business Sector characterised as backward-looking, dominated by the service sector, with low value-added work, and resultant sluggish economic growth.

It is up to us to decide which future we want for ourselves by the actions that we undertake today that impact upon tomorrow.

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