Economic Memo: The potential of clusters

Economic-development officials will tell you that clusters — a geographic concentration of interconnected companies, suppliers, related industries and specialized institutions in a particular field — are important for a region to succeed.

The Puget Sound area has clusters. For example, Boeing and aerospace have been such a cluster for decades — although that may be threatened with the decision on where to build the new 7E7. Much of the biotech hoopla is the effort to create a cluster around that industry. A recent Brookings Institution study indicated that the region is close to achieving that goal. Say what you will about Paul Allen and Vulcan, they are in the process of creating one of the key ingredients — the infrastructure necessary to attract companies in the first place.

But what prompts this column is my recent "special assignment" to delve into the scenarios that might play out in the region, depending on where Boeing decides to place the 7E7 plant. The scenarios will be presented later. What intrigued me now was to think about clusters and then ask this question:

What previously unmentioned world-class institutions do we have in the region that could become clusters?

The key part of the question is the "previously unmentioned." There are the usual ones — the UW, research dollars, software, biotech, environmental services. No, this exercise is designed to think beyond the obvious. This is a regional look. One of the keys to clustering is to eliminate political boundaries as much as possible. So consider the large metropolitan area that now exists between Everett and Tacoma. Here's my list of three and a bit of thinking on each:

• Financial services

The region has two powerhouses: Washington Mutual and the Frank Russell Co. in Tacoma. The two are among the best and largest in their respective industries. With those two companies we should be able to build out a financial-services industry.

There are smaller boutique advisers already operating here. Laird Norton's realignment with Tyee Asset Strategies is a good example. What we lack is a big regional banking giant to round out the field.

One strategy might be to break up the huge 12th District of the Federal Reserve. A new Northwest district — with Oregon, Washington, Idaho, Montana and Alaska as geographic boundaries — with its headquarters bank here could provide that intellectual/policy base that would help make the cluster a reality.

• The developing world

If you combined the Bill & Melinda Gates Foundation and its billions of dollars with such organizations as World Vision, the University of Washington's Marc Lindenberg Center for Humanitarian Action, International Development and Global Citizenship and Portland-based Mercy Corps, you have an emerging cluster in trying to help the developing world.

Add to the mix people like Bill Clapp, chairman and CEO of Global Partnerships, a Seattle-based nonprofit agency that is working to eliminate world poverty, and you have a growing cluster. Clapp, for example, is a respected authority on the role of microlending in developing countries.

But it's a cluster with growth potential. The Gates Foundation alone with its billions could change the region in a fundamental way — it is already attracting some great minds and workers.

• The arts

Most of the time we link the arts to culture, rightly so. But why not think of the arts as a tool for economic development? The arts are like biotech — an "industry" ripe for further development.

The cluster here spans the art world — theater, museums, orchestras, ballet, opera, writers. There's a strong music community here from a vibrant jazz scene to innovative rock bands. The city has been used to try out productions before they went to New York. We now have world-class venues for orchestras and operas.

These can be developed and attract more of those highly valued "knowledge workers." Groups such as the Corporate Council for the Arts have done a good job in raising awareness and needed funds. But to make the arts industry work as economic development, it must begin to be considered an integral part of any economic plan.

Who knows where the Boeing 7E7 plant may go, but the fact that there is such rich cultural life available in Seattle is a big reason to keep it here. Other areas have seen the value of the arts as an economic cluster.

Phoenix recently formed a group of high-powered business and community leaders to develop ways to improve that region's arts and culture as a tool in economic development. Cities such as Atlanta, Denver and Cleveland count the arts as an important part of their economies. Denver levies a small sales tax that generates about $35 million a year for arts groups.

That's my list. It is all about regional competitiveness and how to foster it. The only trouble with any list like this is that it gets lost in the debate about what's competitive and what's not. Robert Reich, President Clinton's policy adviser and Secretary of Labor, once said this about competitiveness: "Rarely has a term in public discourse gone directly from obscurity to meaninglessness without an intervening period of coherence."

But if clusters do count — and I think they do — some creative thinking about what might become clusters in the future can help make the region more competitive, whatever that means.

Stephen H. Dunphy's columns appear Tuesdays-Fridays and Sundays. Phone: 206-464-2365. Fax: 206-382-8879. E-mail: sdunphy@seattletimes.com. More columns at www.seattletimes.com/columnists