Unlocking Tasmania's economic renaissance
Tasmania has undergone an undeniable economic transformation over the past six years. The state has its lowest unemployment rate in 23 years, the population is steadily increasing (after declining during the 90s), real estate values have gone through the roof and over $1.5 billion has been wiped off government net debt. Even Access Economics, usually considered a habitual sceptic of Tasmania's economic resurgence, has now declared that the future for Tasmania looks bright.1 In its September 2004 Business Outlook, Access Economics stated that "Tasmania is laying to rest the demons of a decade ago, when structural change sent many of its service sector jobs elsewhere."2
Other indicators show that, economically, Tasmania is moving ahead at a faster rate than the other Australian states - albeit from a starting point well behind. For example, the August 2004 quarterly Sensis Business Index found Tasmanian small and medium sized businesses had the highest level of confidence in the country.3 Furthermore, the survey marked the 16th time out of the previous 18 quarters that Tasmanian business confidence exceeded the national average. The survey also found that of all the states and territories, Tasmanian businesses were the most supportive of their respective government's policies. The main reason cited by businesses for supporting the state government was 'getting the economy going'.4
Tasmania's economic resurgence has come at a time when the state also has experienced significant cultural changes. In particular, Tasmania has gone from a noted bastion of homophobia, where sodomy was still illegal until the early 90s, to a world leader in the legal recognition of same-sex couples (under the state's ground-breaking Significant Relationships framework). Indeed, the late former Premier Jim Bacon argued that the economic and cultural changes taking place constituted the creation of a 'New Tasmania' - a Tasmania that could no longer be dismissed by the old clichÃ©d stereotypes. In essence, he argued that the images which previously defined Tasmania as socially, culturally and economically backward had been replaced by new images in which Tasmania was represented as confident, sophisticated, and mature.
The economic indicators, and the changing tune of the economic forecasters, suggest that there is something special going on in Tasmania. But what? How much of the New Tasmania is real, and how much is rhetoric? And perhaps most importantly, what came first - the rhetoric or the reality? This last question can be something of a chicken and egg problem, but finding the answer may be the key to unlocking the secret of Tasmania's success.
Richard Florida's 'Creative Class' approach
Conventional regional development theory focuses on regional comparative advantage and the role of the 'factors of production'. Essentially, conventional theory posits that regions can encourage economic growth by focusing on areas such as resource security, taxation regimes, the provision of infrastructure, access to markets and the availability of skilled labour. Businesses are assumed to make investment decisions based on cost - therefore the region that can provide the cheapest labour, cheapest infrastructure and lowest taxation regime is seen to be best positioned to achieve economic growth.
This analysis was moved forward by Michael Porter, who developed the concept of 'competitive advantage' and highlighted the role of industry 'clustering'.5 In essence, Porter argued that industries often tend to form 'clusters' around one particular city or region.
Within that 'cluster' exist a variety of horizontal and vertical relationships between suppliers, customers and competitors. Porter stated that 'the phenomenon of industry clustering is so pervasive that it appears to be a central feature of advanced national economies,' and cited examples such as pulp and paper manufacturing in Sweden, fashion in Italy, agriculture in Israel, health in Denmark, chemicals in Germany and consumer electronics in Japan.6 Clusters have a number of benefits for constituent firms, including the ability to attract skilled labour and to stimulate competition and innovation.
More recently, American academic Richard Florida moved the regional development discourse further towards the 'non-economic' or cultural factors that affect economic growth.7 Florida argued that the regions which thrive in modern economies are those which best attract a certain type of resident - members of what he called the 'Creative Class'. He identified two components to this group:
The Super Creative core of this new class includes scientists and novelists, artists, entertainers, actors, designers, architects, as well as the thought leadership of modern society: non-fiction writers, editors, cultural figures, think tank researchers, analysts and other opinion makers ... Beyond this core group, the Creative Class also includes 'creative professionals' who work in a wide range of knowledge-intensive industries such as high-tech sectors, financial services, the legal and health care professions and business management.8
Florida argued that these people share an important economic role in driving innovation and growth. What's more, they are increasingly mobile, and are often able to choose where they want to live and work. Most importantly, Florida argued that members of the Creative Class also tend to share a common set of values, and are attracted to places that are seen to embrace those values. Florida therefore argued that the reason certain cities prosper over others, and over rural areas, was essentially a product of their social environment:
These places are open and easy to enter. They are where people can find opportunity, build support structures and be themselves. And they also provide the habitat that is conducive to creativity in its many varied forms.9
By conducting interviews with people who fitted into his description of the Creative Class, and asking them why they chose to live in one location over others, Florida found six consistent themes. These themes can be seen as 'hallmarks' of locations that are attractive to the 'creative class'. The six hallmarks were:
1. Thick labour markets - by which Florida meant the availability of jobs at the same 'level' but across different workplaces, rather than work opportunities within the hierarchy of one corporation; 2. A '24/7' lifestyle; 3. Opportunities for social interaction; 4. Diversity - as a marker of a place where it is easy for all people to fit in; 5. Authenticity - in terms of originality and difference, or a sense that a place is real and individual rather than homogenous or an imitation of somewhere else; and 6. Identity - in that people tend seek places that embody the values they want to see in themselves, such as creativity and status.10
Arguments against Florida's approach.
To some extent, Florida's notion of the 'Creative Class', and his focus on the social demands of this group of people, leaves him open to the charge of being an apologist for the excesses of self-important 'yuppies'. Indeed, American writer Steven Malanga stated that the Rise of the Creative Class 'reads more like a pop cultural social history of the Internet generation than an economic-development treatise.'11 But apart from attacking Florida's unconventional writing style, Malanga made the more fundamental charge that Florida's correlation between Creative Class migration and regional economic growth was simply wrong. Essentially, Malanga argued that the cities nominated as 'creative centres' by Florida had not actually experienced above average levels of growth - in fact he argued those centres were relatively poor economic performers.
Malanga stated that:
A generation of leftish policy-makers and urban planners is rushing to implement Florida's vision, while an admiring host of uncritical journalists touts it. But there is just one problem: the basic economics behind his ideas don't work.12
Malanga also argued that Florida's focus on 'new economy' workers at the expense of workers in the service sector and the traditional working classes, lays the foundation for what he called a 'new form of class warfare.' Similarly. Anthony O'Donnell recently raised a similar criticism of Florida in an opinion piece in The Age newspaper.13 O'Donnell noted that the growth in the so-called Creative Class occupations has been overshadowed by an even greater growth in Service Class occupations - both coming at the expense of those working class jobs such as trades, labouring and manufacturing. O'Donnell asked whether or not these two trends are causally-linked:
After all, looking around at the Creative Class, the question should surely arise: Who looks after their kids, cares for their ageing parents, cleans their houses and offices, and serves in the kitchens of their favourite inner city bars?14
The need for a service-based underclass - a poorly-paid, non-unionised workforce doing the jobs that members of the Creative Class don't want to do is something that Florida did acknowledge as a serious challenge. As Florida noted:
Affluent Creative Class people who move into racially, ethnically or economically diverse neighbourhoods cannot simply assume that their presence automatically revitalises these places. For many working class and service class residents, it doesn't. Instead, all it does is raise their rents and perhaps create more low-end service jobs for waiters, housecleaners and the like.15
Another potential problem with Florida's analysis is its focus on cities, and seeming disinterest in the prospects of regional areas, which appear to have far less to offer to his mobile 'creative' workforce. Florida also acknowledged this urban bias in the creative class model. Indeed, he expressed concern that the social shifts he observed were creating a new social divide. Florida stated that:
I fear we may be splitting into two distinct societies with different institutions, different economies, different incomes, ethnic and racial make-ups, social organizations, religious orientations and politics. One is creative and diverse - a cosmopolitan admixture of high-tech people, bohemians, scientists and engineers, the media and the professions. The other is a more close-knit, church-based, older civic society of working people and rural dwellers.16
For places other than big cities, Florida's prescription, at best, offers serious challenges, and at worst presents a bleak picture of how regional economic disparity is reinforced through social patterns, such as migration, and the inexorable 'brain drain' of skilled people from country areas to big cities. Nevertheless, the Creative Class approach does explain some of the cultural forces that are often overlooked in regional development literature, and offers some clues as to how regional areas can address the 'brain drain' and find new innovative ways of encouraging growth other than through the provision of tax breaks. Furthermore, Florida's model fits into a tradition of regional development theory, going back to Weber, Schumpeter and Veblen, that emphasises the role of innovation and entrepreneurship in generating growth.17 In essence, Florida shows how recreating the image of a city or region to incorporate the six 'hallmarks' can help to attract the footloose members of the Creative Class, thus stimulating higher levels of entrepreneurship and innovation, and contributing to the development of a stronger regional economic base.
Jim Bacon and the New Tasmania
The Creative Class approach also can be seen as shedding some light on the Tasmanian experience. Indeed, I would argue that Jim Bacon's approach to regional development, and in particular his vision of a New Tasmania, corresponds quite closely with Richard Florida's model. This is because, in essence, the rhetorical device of the New Tasmania represented a fundamental change to the state's image - dispelling the myths and stereotypes about Tasmanians and building a new image of Tasmania as mature, sophisticated, open and creative.
The rhetoric of the New Tasmania first appeared in the run-up to the 2002 state election. Over the next two years the concept evolved, and slowly gained currency in both the media and the community. It was certainly a consistent theme in the weekly From the Premier's Desk radio addresses that Bacon recorded throughout 2002 and 2003. The New Tasmania theme was used to place Tasmania's changing social and economic landscape into a coherent picture. The purchase of Tasmania's three Spirit of Tasmania Bass Strait ferries, for example, was often used as a symbol of the New Tasmania that 'lifted the lid' on access to and from the state. The Bass Strait ferries effectively overcame the state's geographical isolation, while also celebrating it at the same time. Instead of being a barrier to tourism, the trip across Bass Strait therefore became part of the experience.
Other aspects of the 'New Tasmania' that Jim Bacon referred to in his public speeches included:
Â• the Ten Days on the Island festival, and the significance of Tasmania's arts sector; Â• increasing exports; Â• decreasing crime rates; Â• the state's improving credit rating; Â• the Duke energy natural gas project and the Basslink project, which have connected Tasmania to the national gas and electricity networks; Â• wind energy developments; Â• the state's real estate boom; Â• Tasmania's Significant Relationship legislation - which gave Tasmania the most progressive framework for recognising same-sex couples in the country; Â• the 'Tasmania Together' project - which set community-driven goals and benchmarks for the state to achieve, including the goal of phasing out clearfelling old growth forests by 2010; Â• massive growth in visitor numbers; Â• aboriginal land hand backs; Â• playing AFL football matches in Tasmania; and Â• the deregulation of shop trading hours (after many years of divisive community and political debate on the issue).
Essentially there were three key elements to this overall vision of a New Tasmania:
Â• A regional economy that flourishes on the back of its reputation for producing high-quality products; Â• A tolerant community built on a progressive social framework; and Â• A region that embraces its status as an island - and does not consider its geographical separation from other Australian states as a barrier.
Furthermore, virtually all of these elements of the New Tasmania can be placed within Florida's six hallmarks of a creative community. For example, the emphasis on the arts as an important contributor to the state economy is born from a recognition that a healthy arts sector is essential to the broader cultural goal of encouraging creativity and innovation. It also reflects the lifestyle aspirations of the Creative Class, given that Florida identified a distinct and localised arts culture as one aspect of a place's so-called 'authenticity'. Similarly, land hand-backs to the Aboriginal community can be seen as contributing to Tasmania's sense of difference and 'authenticity' - preserving a place for the Indigenous population in Tasmanian culture, while also contributing to our cultural diversity. The Significant Relationships legislation was a huge step forward for the state in terms encouraging diversity and tolerance in the community. And the deregulation of shop trading hours, enabling Tasmanian businesses to choose their own operating hours, can be seen as embracing the modern, flexible, 24/7 lifestyle that Florida talked about.
Tasmania's changing population base
After his tragic death from lung cancer earlier this year, it was often said that Jim Bacon was a wonderful 'salesman' for Tasmania. Indeed, he made selling the New Tasmania a hallmark of his premiership, and population trends over the past six years bear testimony to his success in this area. An information paper on Tasmanian population trends released in 2003 by the Tasmanian Department of Treasury and Finance shows how the election of the Bacon government coincided with a sharp turnaround in the state's rate of population growth, which had been steadily declining through the 1990s and had reached negative growth territory during 1997.18 By 2001, Tasmania's population was on the rise again. The most recent population figures from the Australian Bureau of Statistics, released in September 2004, showed that Tasmania's population rose by 1,496 people in the March quarter - Tasmania's sixth consecutive quarter of population growth in line with the national rate.19
Tasmania's Population 2003 stated that 'the key factor in the recent emergence of an increase in Tasmania's population has been the reduction in net interstate migration loss.'20 This means fewer people are leaving Tasmania to live elsewhere, while more people are moving into Tasmania. The net interstate migration growth of 753 people in the March quarter of 2004 was the seventh consecutive quarter of growth in this area, bettered only by Queensland, showing that Tasmania has definitely turned the corner in terms of population growth.
The breakdown of the age profile of departures and arrivals, however, tells an interesting story. Tasmania's Population 2003 stated that:
Over that past few years, while the overall number of interstate arrivals into Tasmania has increased, this has mainly been caused by increased arrivals of people in the older age groups. The number of interstate departures has remained relatively steady over the past five years, but continues to be characterised by a high proportion of people in the 15-29 age bracket.21
Tasmania's Population 2003 also modelled population trends against a range of economic and employment indicators, and found that 'relative housing affordability was the only variable that appeared to be strongly correlated with interstate arrivals.' 22 Conversely, the number of departures were 'found to be strongly correlated with the relative percentage of the population as a whole, comparing Tasmania with Australia as a whole.' 23 These causal factors reflect the different priorities of people at different stages of their lives: the older age group that makes up a strong proportion of people moving to Tasmania is more interested in finding affordable housing, while the younger people leaving Tasmania before they start families are generally looking to for new employment opportunities.
The next round of census figures may complicate this scenario, however, as although home affordability in Tasmania has fallen significantly during 2004, population growth has increased. This suggests that the age profile of interstate migration may have changed during 2004, with greater numbers of people in the younger age brackets, who tend to move for lifestyle and employment reasons, rather than housing affordability. In any case, housing affordability itself is insufficient as an explanation of Tasmania's increasing population, as housing values in Tasmania were at best stagnant during the 1990s, while population was falling. Before people became interested in taking advantage of Tasmania's cheaper housing, they first of all needed to become interested in living in Tasmania.
When considered in light of the Creative Class approach, Tasmania's increasing population therefore suggests that the state is doing much better at attracting 'talent'. By redefining Tasmania as a Creative Class centre, Bacon therefore not only lifted Tasmania's profile, he helped to attract a new wave of talented people into the state, and these people are now making a significant contribution to the state's economic resurgence.
Threats to the New Tasmania
Rebuilding the image of Tasmania hasn't been without its challenges and difficulties, and many of these challenges are also consistent with the flaws in the Creative Class thesis. It has to be acknowledged that trying to remake country Tasmanian towns in the image of a 24/7 creative class mecca simply isn't realistic. Nevertheless, many Tasmanian towns, particularly on the coast, have experienced the 'seachange' phenomenon, where people have moved in to take advantage of the slower pace of life, relatively lower property values, and to enjoy the physical beauty of the Tasmanian environment. In places like the Huon Valley, this has led to some social tensions - especially between the 'seachangers' and people involved in 'traditional' rural industries such as forestry. It is likely that these divisions in the Tasmanian community will get worse before they get better, as the Creative Class continues to move into working class areas, and as it exerts greater political pressure on the forestry industry.
The Creative Class thesis, however, also shows that Tasmania must be careful not to become overly reliant on its rapidly growing tourism sector. Furthermore, Florida's theory undermines the argument promoted by some that Tasmania's tourism industry is the key to the state's economic future. Florida, in his analysis of American cities, noted that:
Some Service Class centres - mainly tourist destinations like Las Vegas - are attracting people and creating jobs rapidly. But many of these are low-wage dead-end jobs. A job cleaning hotel rooms or even dealing cards in Las Vegas does not offer much of a ladder up into our economy's jetstream. I suspect the Service Class centers will too become increasingly separated from the economic engine of our society.
Florida's warning indicates that while the service sector, and in particular tourism, does have an important place in the Tasmanian economy, it should not be seen as a key driver of long-term sustainable growth.
There are a number of factors behind Tasmania's economic improvements. Indeed, this analysis has overlooked the important role of former Tasmanian Treasurer David Crean in bringing the State Budget back under control, leading to the dramatic reduction in the government's debt and its subsequent credit upgrades from both Standard and Poors and Moody's. Dr Crean was also the driving force behind the state's Industry Development Plan, which took a strategic approach to removing barriers to growth across the Tasmanian economy. Furthermore, it is undoubtedly true that Tasmania has benefited from national and international economic trends. Nevertheless, the Creative Class model shows how cultural factors can influence regional development, and offers at least a partial explanation as to why Tasmania has outperformed the Australian economy since 1998. It also suggests that the rhetoric and the reality of the New Tasmania are causally linked. By recreating the image of Tasmania in the mould of a 'Creative Class' centre, the rhetoric becomes something of a self-fulfilling prophecy by attracting more talented people to live in the state, and therefore increasing diversity and stimulating further economic growth.
The Creative Class or human capital approach is far from the definitive explanation of Tasmania's economic resurgence, and Jim Bacon's efforts to create a vision of a New Tasmania were only one part of the picture. However that shouldn't distract us from properly examining Jim Bacon's approach, and what his legacy means for the field of regional development, especially in light of Florida's model. In this respect, Jim Bacon's talk of a New Tasmania was more than just political 'spin'. Indeed, the New Tasmania can be seen as a successful example of how Richard Florida's Creative Class model can be applied in practice, and how it can make a genuine difference to regional economic outcomes.
Stewart Prins has worked as a Speech Writer and Media Adviser for the Tasmanian Government, and currently is employed as an Adviser to Victorian Minister for Transport, Peter Batchelor MP. In 2004 he completed a Masters of Arts by research at the University of Tasmania, his Masters thesis examining the relationship between regional identity and regional development.
1. Access Economics, Business Outlook, September 2004, p. 117.
2. Ibid, p. 98.
3. Sensis Business Index - Small and Medium Sized Enterprises, August 2004.
5. Michael Porter, The Competitive Advantages of Nations (New York: The Free Press, 1990).
6. Ibid, p. 149.
7. Richard Florida, The Rise of the Creative Class (New York: Basic Books, 2002).
8. Ibid, p. 69.
9. Ibid, p. 281.
10. Ibid, pp. 223-231.
11. Steven Malanga, 'The Curse of the Creative Class,' City Journal, Winter 2004.
13. Anthony O'Donnell, 'Just who works for the new creative class,' The Age, Monday 2 August 2004, p. 11.
15. Richard Florida,Rise of the Creative Class, p 325.
16. Ibid, p. 281.
17. Stewart Prins, "Power, Identity and Prosperity: Why Image Matters in Regional Economic Development" (MA Thesis, University of Tasmania, 2004) pp 62-64.
18. Tasmanian Department of Treasury and Finance, Tasmania's Population 2003.
19. Australian Bureau of Statistics, Population by State, September 2004.
20. Tasmanian Department of Treasury and Finance, Tasmania's Population 2003, p. 10.
21. Ibid, p. 14.
22. Ibid, p. 37.
23. Ibid, p. 42.
Also on the Evatt site:
· The boundaryless cluster: Information, communications & Ireland, by Roy Green, James Cunningham, Imelda Giblin, Mike Maroney & Leo Smyth.