Developing sustainable local economies

At a 30,000 foot level, economic development is about managing three flows of money. "Good Money" flows into the economy from businesses that trade outside. These are businesses, which account for usually about 30% of the employment in an economy, generate higher incomes. Traditionally, economic developers have focused on recruiting these businesses.

Economic development is also about increasing the velocity of "Neutral Money" that circulates within the economy. When economists talk about a multiplier effect, they are referring to the circulation of Neutral Money within the economy.

Finally, economic development involves "plugging leaks". That means reducing the flow of money (we can call this "bad Money") from the economy.

Increasingly, communities are taking a more balanced, integrated approach of economic development that includes all three flows. (After all, there are no bright lines segregating these flows.)

by Ed Morrison

Full Story: http://edpro-weblog.net/news/2008/9/21/developing-sustainable-local-economies