The Bathtub Analogy

Keith McBride on November 10, 2014 in Ec. Dev. Challenges, Entrepreneurship, Practicing Ec. Dev.

I am a Chris Gibbons fan, unapologetically.

Chris developed a system for economic development called Economic Gardening, and because it is a systemic approach to economic development, rather than an anectdotal one, I can’t possibly summarize it in one sentence.  Quite frankly, it’s a topic for another post.  But as the name implies, it centers around the idea of growing a stronger economy by supporting the community’s existing assets rather than by trying to recruit and attract new businesses or investment from outside.  In the meantime, I would encourage a visit to Chris’ National Center for Economic Gardening or to their partner, the Edward Lowe Foundation, to read more about it.

Whenever I hear economic development strategies being discussed, I find myself trying to understand the speaker’s geographical parameters.   Is it an approach targeted at the entire nation?  The state of Maine?  A county?  One town?  Maybe even just one town’s Main Street?

This is critical; it’s your bathtub.

I am also a long-standing member of Chris’ e-mail listserve, in which he and other practitioners and scholars discuss various issues impacting economic development.   I’ve even been brave enough to post a response from time-to-time.  In a recent e-mail on that listserve, Chris utilized a bathtub analogy to explain the relationship between Economic Gardening initiatives and Main Street strategies.  I think the analogy is equally useful to explain the importance of identifying geographical parameters for any economic development  strategy.   And while that seems almost too obvious to be worth mentioning, it gets lost and muddled in the conversations about convoluted state, local, national and industry-specific economic systems, each of which have their own moving parts, actors and inputs.

To paraphrase Chris’s bathtub analogy:

The bathtub represents the target area, be it a neighborhood, an entire nation, or anything in between.  The faucet is the source of wealth/resources coming into the community; the drain is the wealth/resources leaving the community.  The drain doesn’t necessarily mean waste, it could represent the talent/expertise in employees who can’t find jobs to use their skills inside that geographical area, or a manufacturer’s need to purchase raw materials from outside the bathtub area, because they’re not available within.  Simply stated, economic development is successful when it raises the water level in the tub.  When a community’s wealth and resources are exported faster/more frequently than wealth and resources are imported, the water level falls, and the economy in that geographic area is failing.

If the bathtub were partitioned into water-tight sections, each section would represent a different industry sector (or even individual businesses) in the area.   When one company in the area does business with another, it’s a zero-sum game for the larger area, as a whole.  An individual partitioned segment might increase its water level in this fashion, but another would decrease, and the total amount of water in the tub has not increased.  In other words, the overall economy of the entire community has not grown.  It’s stayed neutral.   So, that water hasn’t gone down the drain, but it didn’t come directly from the faucet, either.

Chris uses this analogy to show why Economic Gardening, as a strategy, focuses on Stage-2 companies selling innovation to external markets.   These companies are poised to increase the flow of water at the faucet.   I agree with that.   But it also illustrates an even simpler point that gets lost so often in the mire of economic development rhetoric:  defining the bathtub.

I love working for a town, because I get to know my bathtub.  Towns are well-defined, which means it’s easier to understand what new resources and wealth are coming through the faucet, and what is being lost in the drain.  Crafting an economic development strategy for a larger geographic area, like the ENTIRE State of Maine, is much more complicated because of the grander scale.  Obviously.   But the goal is still the same, and there’s really only two ways it can happen: by increasing the flow at the faucet, or by plugging the drain.

Raising the water level for my community.  This is really what it’s all about.