Newsom's bad economics

ON MARCH 22 , Mayor Gavin Newsom proudly trotted out Lisa Harper, chief executive officer of Gymboree, to announce that she was moving company headquarters – and 350 jobs – from Burlingame to San Francisco. That is the centerpiece of Newsom's announcement of a new economic development plan, aimed at attracting new businesses to the city and retaining existing companies.

A lot of this was just political flash and dazzle: all Newsom has actually done so far is re-create the Office of Economic Development (which will now be called the Office of Economic Development and Jobs). He announced his staff will soon meet with the heads of the 100 largest and fastest-growing companies in town.

But as Matthew Hirsch noted on sfbg.com (dev.sfbg.com/politics/archives/000100.html), Newsom's strategy isn't that new and different. What's he's talking about, really, is the old San Francisco Chamber of Commerce strategy: use tax incentives and promises of cleaner, safer streets to convince big out-of-town companies to move their operations here. He wants to focus on the life sciences industry (read: biotech) and the area around the new UC San Francisco campus at Mission Bay.

There are two problems with that approach, both of them well proven. For starters, it doesn't do much to create jobs for the people in San Francisco who most need them. Gymboree isn't hiring 350 new people; most of its current employees will probably keep their jobs and simply commute to the new location, maybe 15 miles from the old one. And unemployed biochemists aren't the city's most pressing problem.

It's true that large employers bring economic benefits to the city, and attracting new business is better than losing existing business. But top-down economic development doesn't work. Small, locally owned, independent businesses have always been the big job generators in San Francisco (the Bay Guardian first demonstrated that in 1985, with a major study by Massachusetts Institute of Technology economist David Birch, and it's every bit as true today).

The San Francisco Board of Supervisors took a step in the right direction last week by approving Sup. Matt Gonzalez's ordinance limiting chain stores in the neighborhoods. The so-called formula retail ordinance is a measured, reasonable control on the influx of chain businesses. Contrary to the superheated rhetoric of chamber members, the measure banned chains only in a four-block area of Hayes Valley, created a more detailed planning review in parts of Cole Valley, and simply required notification in the city's other neighborhood commercial districts.

What it also did was send a message that the city wants to protect and encourage independent local businesses – and that's where any sane economic development plan should start. Sups. Bevan Dufty and Sophie Maxwell, to their credit, joined the board's progressive majority in creating a veto-proof 8-3 vote – but new supervisor Michela Alioto-Pier (whose district, the Marina, is full of local merchants who could be threatened by chains) sided entirely with the chamber, leading the battle against the measure. That alone suggests that she needs a strong, community-based challenger in the next election.

Newsom ought to demonstrate his support for small businesses by signing the law. And if he wants to be successful in turning the city's economy around, he needs to move away from the failed policies of the chamber and the downtown crew and start looking at what works. Instead of putting city money into wooing out-of-town companies, why not invest in the city's existing small companies and in helping San Franciscans start new businesses? Instead of making a big public show of a new Economic Development Office, Newsom should pay attention to the neglected Small Business Commission and replace former mayor Willie Brown's eleventh-hour appointments to that panel with people who have a local vision and are independent from the chamber.

Newsom promised change and new approaches during his campaign. He can do better in office than rehashing the tired rhetoric and failed approaches of big corporations that see San Francisco less as a community than as a place from which to extract wealth.