Arlington’s Economic Base: Butler to the World’s Economy

The conception of every city became from some function in which it served the economic world. The economic base (EB) is the function served. The EB is often called the export base because the EB in inherently a description of exported goods and services that are purchased by others outside of the subject city much like a heart exports blood (Archer, Ling 122). The easiest way to understand the basic economics of a city is to draw it down to a lower common denominator for comparison, such as a butler to a household.

When guessing what the EB of a city is, one may be surprised at the answer. Take a moment and write down your best guess of the foremost EB of Dallas, Fort Worth, and Arlington Texas as individual cities (answers at end of essay). Arlington exists to serve the world’s economy much like a butler exists to serve the needs of a household. Arlington, as an economic servant, has specific skills and resources which are employable. Transportation, management, information, and wholesale industries are Arlington’s primary EB which fosters growth, secondary activities, and wealth. Arlington’s EB was its means for successful conception and is the mean for its continued existence.

The economic base is determined by an indicator called the location quotient (Archer, Ling 126). The location quotient is computed by dividing the national employment average of a certain industry by the city’s employment average of the same industry. If the outcome is larger than 1.2, the industry is considered to be producing a surplus capable of export (Hansz). Arlington’s EBs had location quotients of 1.652, 1.563, 1.351, and 1.318 respectively. The data used to provide the aforesaid information was drawn from American Fact Finder and is derived from 2000 decennial census (http://factfinder.census.gov/ ).

These 2000 figures, however, probably point to an EB that is quite different than the EB during Arlington’s conception. About 150 years ago Arlington drew its growth and prosperity from EBs such as frontier center, agricultural center, horse racing, and gambling (http://www.ci.arlington.tx.us%20/history/index.html). As quantified by the location quotient, these qualities would have to be substantially unique to Arlington for them to constitute an EB. For instance, if every city and town offered gambling, no person would bother to come to Arlington to spend their money, and therefore Arlington would not receive their “paycheck for butler services” rendered to the world.

As previously stated, the EB fosters growth, secondary activities, and wealth. To measure the fostering potential of the EB the EB Multiplier (EBM) is used. The EBM = Total Employment / EB Employment. Arlington’s EMB = 175,452/38,852 = 4.52. For every EB employee there are 4.52 times more employees in the subject city (4.52emb X 38,852eb= 175,452te. Mathematically this formula expresses how the EB drives local economic activities (Archer, Ling 123). The greater the EBM, the greater influence EB has on the city’s economic activity as a whole, viz., employment. Following this logic, if ten EB employees are laid off, Arlington’s total job population would decrease by forty five employees.

If Arlington wants to maintain its position as a butler to the world, it must maintain skills and resources that are employable. Certainly the EB activities of Arlington 150 years ago (frontier center…gambling) do not serve as an EB today. Between the historical reference and today Arlington has adapted by adopting new skills and resources to continue growing. The alternative to growth is a potential six foot decline.

Growth in a city adds to the secondary activities that exist to support the EB. Some examples are restaurants, hotels, flower shops, hair shops, pet stores, and dry cleaners. In the example of Arlington, growth of the EB provides for 4.52 times the result toward the total employee population.

The aforesaid conditions are directly related to wealth. As a city grows economies of scales develop, and the retention of value amidst this competitive advantage become more possible and numerous. Many individuals and companies realize this, and keep their ear close to the track to see what may be coming or not to avoid danger and embrace opportunity. Cities realize the value of the EB and acknowledge that the decline of the EB may be an albatross that is very hard to shake. A healthy economy is sought and desired. Ignoring the root of these fruits can, however, be catastrophic. The EB must be considered.

The EB of a city can and will change. As it is the root of growth, secondary activities, and wealth, it must be considered. The disappearance of any one of Arlington’s EBs would produce 4.5 times as much damage to the employment base (on average). This decrease will also translate into a decline in the population as: Basic Employment X EBM X Population/Employment = Population (Hansz). Businesses and governments on all levels are aware of this, and therefore take the aforesaid into consideration.

An example of a company that considered the EB is the Texas Commerce Bank – Arlington in the 1981 Arlington Statement of Economic Conditions, prepared by Moore Diversified Services, Inc. (Moore). The statement described major businesses, growth, secondary activities, and many sets of data. “Major businesses are of importance in evaluating the economic viability of a municipality because they: 1) Are Employers of the City’s residents. 2) Represent a large contribution to the tax base. 3) Trigger economic multipliers and generators “(Moore 2-5). This document is a good representation of how company can employ the EB to help a business make an educated decision.

A parallel example of an entity that has considered the EB is the State of Texas though the Texas Economic Development Corporate Expansion and Recruitment, published on June 26, 2002 the publication “Doing Business in Texas” explicitly cites the implications of the EB. “In 2001, Texas exported $4,455 in merchandise for every man, woman and child in the state. That figure is more than 72% higher than the comparable U.S. average of $2,591 in per capita exports” (Texas 12). This is a unique business activity that directly related to employment, economy, and population. This statement substantiates the fruits of all growth, secondary activity, and wealth.

In conclusion, the EB is extremely important when considering the continued existence of a city. Growth, secondary activities, and wealth are all function of an EB. By ignoring the EB an entity exposes themselves to great risk and foregoing the opportunity of comprehensive and intelligent forecasts. The EB is the root of the fruit tree. The city’s EB is much like a Butler, exporting skills and resources to serve the world beyond the city’s boundaries. A positive EB produces growth, secondary activities, and wealth. A negative EB leads a city toward a pit that is six feet deep

Dallas EB: Management @ 1.97 (58% Female) w/ a component EBM of 936 (information derived census 2000 data): (http://factfinder.census.gov/)

Fort Worth EB: Transportation @ 1.46 (71% Male) w/ a component EBM of 22(information derived from census 2000 data): (http://factfinder.census.gov/)

Works Cited

US. Census Bureau. Ed. System Support Division. Feb 2008. October 27, 2008 <http://factfinder.census.gov/ >

City of Arlington, Texas. Ed. City of Arlington April 2008. October 27, 2008 <http://www.ci.arlington.tx.us%20/history/index.html>

Archer, Wayne. R, and Ling, David, C. Real Estate Principles: A Value Approach. New York: McGraw, 2008.

Hansz, Andrew. J. Ph.D. CFA. Oct 28, 2008 Lecture. “REAE 5311.” Real Estate Analysis, Dept. of Real Estate and Finance. University of Texas at Arlington.

Moore Diversified Services, INC. The 1981 Arlington Statement of Economic Conditions. Dallas: Moore, 1981.

Texas Economic Development. Doing Business in Texas. Austin: Texas, 2002.

Works Consulted

State of Texas, Office of the Attorney General. Handbook on Development laws for Texas Cities. Austin: Texas, 2000.

Wyman, Sherman and Weaver, Robert. Texas Economic Development in Transition: Opportunities for Public-Private Collaboration. Arlington: UTA, 1989.