22 October 2002
Submitted By:
Christina Castelanelli
Lisa Spadoni
Gregg Strand
Introduction
This paper is written in response to a presentation on sustainable economic development. The presenters discussed the definition of sustainable economic development, why it is important and some methods used to attain it as well as some case studies to further illustrate the concepts. We will further address this issue by linking examples in Northern California with two theories on how to achieve sustainable economic and community development. These two theories are the export-based theory and the import-substitution theory (Hackett 2001).
Central to the export-based theory is the concept of a regional economic base with the level of jobs, income, and other economic activity in a local area determined by the demand for goods and services from outside the local area. Thus, industries add income to the community by exporting locally produced goods and services. The export-based theory consists of the following principles:
· Most communities import goods because they cannot make everything they need.
· The importation of goods results in money flowing out of the community.
· For a community to sustain itself, it must have export-based income to offset import leakage.
· This export-based income then supports a web of supporting businesses such as grocery stores, health care, and restaurants.
· Thus each dollar that is injected into the community from export-based industries is multiplied as it flows through the supporting businesses.
However, just focusing on increasing the number of jobs in a community does not result in sustainability. It can and usually does result in population increases as people migrate to the area looking for work. Economic development policies that can promote a vibrant and dynamic local economy are also important.
The import-substitution theory works to stem monetary leakage from the community by supporting import-substituting businesses. Import substitution focuses on creating products locally to avoid the expenses of importation. Overall, import substitution consists of the following principles:
· Import substitution causes the existing level of injections from exports to have a larger multiplier effect on the local community by stemming income leakage.
· In this way, substitution is also effective in promoting jobs and generation income.
· Import substitution also creates a diversified economy that is more resistant to economic swings.
This strategy can work particularly well in isolated communities since relatively high shipping costs work against the cost advantage of imports. Much of the import substitution created (or having the potential to be created) is in the area of small business and industry, which promotes social capital and community pride as well. One of the disadvantages or difficulties associated with import substitution is the greater expense of manufacturing goods on a small, local scale verses the discounts that large producers can take advantage of and reflect in lower prices.
Beginning in 1916, Lilly production became a profitable contribution to the local economy in Humboldt County. Charles Willis Ward was the first grower in the area, and today his idea has exploded into a multi-million dollar industry of cut flowers that is dominated by a single company, Sun Valley Floral Farms. According to Bill Weigle, one of the few local independent cultivators, Humboldt County has the ideal conditions for bulb flower production, comparable with Holland and Japan. Arcata itself is positioned at the same latitude as Barcelona, Spain, and as a result receives the same solar incidence, while the cool ocean winds provide the necessary temperatures (Weigle, 2002).
During the 1940’s, when U.S. / Japanese relations were strained by war, one of the countries major suppliers of Easter Lilies was cut off, but demand remained. Abraham Werner took advantage of the market opportunity and emerged as one of the nation’s major suppliers (Guion, 2002). In 1960, a small but prevalent company in the industry, Sun Valley, moved from Oregon to Mckinleyville. Followed by the advancement of greenhouse technologies during the 70’s, cut flower cultivation would cement itself as one of the most profitable agricultural activities in the area. The company was bought and sold until, in 1991, it was purchased by a group of Dutch growers who saw the potential of expanding their business to the United States. Since then, Sun Valley has expanded into fifteen million square feet of greenhouses, as well as sixty-five thousand square feet of cooler space. It is now one of the largest distributors of cut flowers in North America (Guion, 2002).
Sun Valley offers a bittersweet flavor to the local community. The company’s net sales average between 25 and 30 million dollars per year (Brady, 2002). This contributes significantly to the local tax base, and also gives the community what we have referred to as a value-added export. Sun Valley also employs over 350 people, although a portion comes from other areas. This employment only considers direct employees, however. Sun Valley also provides a significant amount of business opportunity to the local people. From refrigeration to suppliers to construction, Sun Valley competes on a global market and the business opportunities created through this size of an operation reflects onto our own local businesses (Brady, 2002).
Another significant contribution of Sun Valley, and one that could also be addressed by more stringent zoning codes is its ability to compete financially with developers and ‘protect’ open spaces within the community. The bitter truth is that if Sun Valley were to be displaced today, developers would pry a wedge of housing into the prospect of open space (Winkler, 2002).
For some of the local, environmentally concerned citizens, it goes without saying that Sun Valley is not exactly the poster child for local concerns. The company falls under what many refer to as agribusiness. Dutch investors import Dutch technology to achieve, in the end, a profit. Such an accusation is legitimate, but as it will be addressed, ‘profit’ cannot be limited to an investors return.
Another concern, and perhaps one that has more potential for change, is the issue of pollution. Sun Valley has been surrounded by controversy with its use of Methyl Bromide, a toxic soil sterilizer that is currently being phased out in the United States. According to Sun Valley, they have completely replaced Methyl Bromide with steam sterilization techniques (Brady, 2002). Lilly cultivation, however, employs other environmentally harmful chemicals and techniques. One example would be their practice of altering the soil composition by adding large amounts of sand to their fields. This is done so as to be able to take advantage of the farming techniques and equipment that have been developed in Holland, where the soils are sandy in composition (Weigle, 2002). As far as chemical use, Sun Valley definitely has room for improvement. Accounts of types and amounts of chemicals used can be attained from the County Agricultural Commissioners Office. With apology, “room for improvement” will be as detailed as we get here. The same applies to energy use. One and a half million square feet of greenhouse and 65,000 square feet of cooler space is an energy issue to say the least. Again, there is much room for improvement.
To conclude, the question we should ask ourselves is not “should Sun Valley stay or go?” Even if this were a feasible choice to be made, we should not be so quick to dismiss all of the benefits that come with such an industry, yet others should not be so quick to dismiss environmental concerns, either. Instead, criticism should be driven by the constructive search for better cultivation techniques – techniques that reduce harmful chemicals, energy consumption and alterations to soils that compromise future agricultural uses. As the subject suggests, we are attempting to promote, as much as possible, a sustainable local economic and community development. If compromise is indeed the lose-lose situation, we should look at Sun Valley/community relations as a cooperative. By no means should a community bow to the presence of economic opportunity without concern for environmental factors, but to presume that environmental concerns alone can defeat the influences of a global market leaves us open to the harsh reality that sustainability does not exist in a closed loop of strictly local concerns. This is not to suggest that objections to Sun Valley’s procedures are futile, but the goal is persistent questions, challenges and improvements in efficiency and environmental standards, and to decrease as much as possible our dependence upon imports while increasing our ability to produce value-added exports. This, in an increasingly global community, is a more sustainable alternative to a polarized locality that refuses to acknowledge its influence to and fro the outside world.
Humboldt County’s agricultural base leads naturally for many residents from an import substitution scenario to a value added export industry of specialty foods manufacturing. The Arcata Economic Development Corporation (AEDC) made an effort to foster the growth of this industry by opening the Foodworks Culinary Center in 1991. The center was a micro business incubator that had kitchen space for 13 specialty commercial food processors as well as a fully equipped FDA approved commercial kitchen for rent by the hour. The mission of Foodworks was to support economic diversification throughout Humboldt County by fostering the growth of small food-related businesses (Foodworks 2002). The goal of the Foodworks Center was to help small businesses get started by offering an inexpensive operating facility (hourly rent was between $6 and $9 dollars), and providing management, technical, and clerical support. Each of the businesses that leased a Foodworks kitchen was expected to “graduate,” and relocate in the open marketplace.
Vegan Dream, a company founded by Mark Turman, is an example of a small business started through Foodworks. Mark Turman began making soy based jerky in his home in 1995. Friends kept pressuring him to go commercial and when he heard about the Northwest Food Festival in 1997, he thought it would be the perfect opportunity. However, he needed an approved facility to manufacture his jerky. Through word of mouth he discovered the Foodworks rental kitchen and used it to create enough jerky, nicely packaged, for the festival. After success at the festival, he decided to go commercial and began leasing a kitchen space at Foodworks. In April of 1998, Mark sold the company to his friend, Eleanor White, who has expanded distribution from Ukia to Crescent City (Vegan Dream 2002).
Unfortunately, in the last several years a debate has arisen in Arcata as to the fate of the Foodworks facility. The Arcata Economic Development Corporation, which founded and managed Foodworks, owed the City of Arcata $465,000 from the original loan to build Foodworks, as well as an additional $194,128 from a later loan. In July of 2002, the City of Arcata finalized plans to buy the facility from AECD. The City plans to lease Foodworks to College of the Redwoods and the college plans to run a culinary arts program at the center to prepare students for careers in tourism and hospitality (Watson 2002). So although the Foodworks center will no longer be a micro business incubator, it will continue to contribute to the economic development of the community through business and technical education.
A Method of Sustainable Energy as an Import Substitution - Bioenergy
Import
substitution is a strategy that has enjoyed little explicit practice and
limited academic study. The place of import substitution within economic
development is typically as a justification for a program, and it may be only
one of several justifications. The ways in which import substitution
efforts may be carried out are varied and malleable. Import substitution
strategies are rarely enacted in isolation, but tend to form one facet of a
broader strategy, becoming inextricably linked with other development goals and
programs such as economic self-sustainability, entrepreneurial development, or
location incentives. Quite commonly, the import substitution portion of a
program or strategy remains implicit or even incidental, and import
substitution is not acknowledged as an underlying basis for the economic
development measure. In some cases, it may not even be considered as a
potential justification.
In the energy production environment, import substitution theory is the tool that allows us to separate the “implicit” method of substitution from other goals and strategies and judge it in isolation. Theory allows the consideration of import substitution apart from the differing levels of enactment and enthusiasm present in the practice of economic development. This is not to argue that theory is sufficient to provide a thorough understanding of the topic and its application; rather, theory gives a starting place, from where it will be possible to consider import substitution examples in practice.
In combination with a significant
energy efficiency effort, there is almost nothing better for the local economy
than increased reliance on biomass fuels.
From a macroeconomic perspective, there are two different engines that
can be applied to drive local economic development, import substitution and
efficiency improvement. An
example of an import substitution for energy production would be the
alternative energy produced from methane digesters. Methane is a gas that contains molecules of methane with one atom
of carbon and four atoms of hydrogen (CH4). It is the major
component of the "natural" gas used in many homes for cooking and
heating. It is odorless, colorless, and yields about 1,000 British Thermal
Units (Btu) [252 kilocalories (kcal)] of heat energy per cubic foot (0.028
cubic meters) when burned. Natural gas is a fossil fuel that is often found in
association with oil and coal (Brown, 2002).
Anaerobic digester system costs vary
widely. Systems can be put together using off-the-shelf materials. There are
also a few companies that build system components. Professionals whose major
focus is research, not low cost, have designed sophisticated systems. Factors
to consider when building a digester are cost, size, the local climate, and the
availability and type of organic feedstock material.
In
the United States, the availability of inexpensive fossil fuels has limited the
use of digesters solely for biogas production. However, the waste treatment and
odor reduction benefits of controlled anaerobic digestion are receiving
increasing interest, especially for large-scale livestock operations such as
dairies, feedlots, and slaughterhouses. Where costs are high for sewage,
agricultural, or animal waste disposal, and the effluent has economic value,
anaerobic digestion and biogas production can reduce overall operating costs.
Biogas production for generating cost effective electricity requires manure
from more than 150 large animals (Castelanelli, 2002).
Belowground,
concrete anaerobic digesters have proven to be especially useful to
agricultural communities in parts of the world such as China, where fossil
fuels and electricity are expensive or unavailable (Milbright, 2002). The
primary purpose of these anaerobic digesters is waste (sewage) treatment and
fertilizer production. Biogas production is secondary.
Energy sources and systems produce various combinations of costs and benefits; no energy system is completely positive or negative in all respects. Biomass energy systems, however, often provide many significant benefits compared to the fossil fuel systems they are likely to replace. Biomass energy systems can play very important roles as integral parts of broader community strategies intended to promote biodiversity, energy efficiency, sustainable development, and waste management (Milbright, 2002).
A million dollars worth of biomass
cogeneration goes further than a million dollars in utility scale power plants,
in terms of the amount of energy provided.
There are important secondary multiplier effects based on the fact that
biomass energy systems cost less to begin with, and even more because biomass
fuel is cheaper. Users spend less on
energy, and almost anything else they do with their dollars - instead of buying
energy - is better for the area’s economy.
The same is generally true for any state or country that is a net
importer of energy. Thus, biomass
energy tends to be very, very economically beneficial. Unfortunately, biomass systems seldom get
installed unless they do have significant economic benefits. Unless systems are projected to pay for
themselves in about 8 years or less, few will ever be built (Castelanelli,
2002). This is even more evident in
locations where there is no instate production of fossil fuels.
The environmental impacts from biomass energy systems using waste wood as a fuel are quite positive. Biomass contains far fewer greenhouse gases and chemicals that lead to acid rain compared to coal or oil, and it even compares quite favorably to natural gas for air emissions. Furthermore, using biomass in energy systems often means significantly improving environmental effects.
There have been attempts to use
environmental damage functions to come up with an estimate of the incremental
costs of pollution that are not a part of the transaction between buyers and
sellers in energy markets. These are termed the "externalities" of
energy production and consumption. The study has been criticized because of
concerns that they did not use the correct dollar values, but even though
absolute dollar values are difficult or impossible to determine, the relative
positions of the fuel types as shown are quite accurate.
Conclusion
The import substitution theory and the
export-based theory were used to demonstrate and create strategies for the
production of a sustainable community.
Using the Arcata community as an example, the Sun Valley Farms exhibit a
value added export, however, it is not a sound representation of a sustainable
industry. It was suggested that to
improve the sustainability of Sun Valley’s practices, criticisms should be
driven by the constructive search for better cultivation techniques –
techniques that reduce harmful chemicals, energy consumption and alterations to
soils that compromise future agricultural uses. This would help insure that this industry, which contributes a
substantial amount to our economy, could be part of the development of a
sustainable community. An additional
example of both an import substitution and of value added exports are the local
community farms. Humboldt County’s
agricultural base was demonstrated to be an import substitution, which leads
naturally for many residents to a value added export industry of specialty
foods manufacturing.
In addition to the benefits Arcata can
get from the revenue generated from Sun Valley, it was suggested that
sustainable energy production be integrated into the system. This sustainable energy production would
promote sound environmental practices and greater self-reliance. In addition, biomass tends to displace much
dirtier fossil fuels. Biomass energy
systems also offer fuel diversity, and help to minimize the risks associated
with over-reliance on any one-fuel type; whether it is coal, nuclear, natural gas,
or oil. Having a significant presence
of biomass energy sources in an area helps to mitigate the risks of rapid fuel
price increases and potential supply disruptions. Because biomass energy systems often improve the economics of
forestry operations, they can help to create revenue streams that can leverage
efforts towards sustainable forestry, and maintaining biodiversity. This is not to say there are no
environmental concerns with biomass energy, but it does seem clear that
potential problems can be avoided with well planned systems and biomass systems
can benefit the environment by encouraging better forest and waste management,
and supplanting the use of more polluting coal or oil fueled energy systems
(Brown, 2002).
This paper, which was written in
response to a presentation on sustainable economic development, discusses the
definition of sustainable economic development and why it is important. Some methods used to attain sustainability
were demonstrated using case studies that further illustrate such
concepts. In further discussion, the
paper addressed these issues by documenting examples in Northern California
with the two theories, import substitution and export based theory, and how
they help to achieve sustainable economic and community development.
References
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Brady, Bruce. Sun Valley Director/Sales and Marketing. Interview. 12 Oct. 2002.
Castelanelli, Larry. Dairyman/A Methane Digester Owner. Interview. 12 Oct. 2002.
Guion, Arnetta. “Bulb Farms”. Online. Humgardens. 2002.
Hackett, S. 2001. Environmental and Natural Resource Economics: Theory, Policy, and the Sustainable Society, 2nd Ed. M.E. Sharp, Armonk, NY.
Hight, J. Prosperity Review: building economic, social and environmental wealth on the North Coast. The North Coast Journal. October 3, 2002.
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Weigle, Bill. Independent Lilly grower. Personal Interview. 12 Oct. 2002.
White, E. Vegan Dream. 14 Oct. 2002. http://www.vegandream.com/
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