Overview:Economic Development Policies

Prof. Scott Campbell

Urban Planning 539

University of Michigan

Typologies of ED policies

Place-based vs. industry-based vs. occupation-based, etc.e.g., what are you emphasizing?

a friendly business climate; agglomeration economies; a good offering of local amenities to attract a highly educated workforce; low-cost labor and land; a tight network of innovative firms; aggressive economic development tools (e.g., IRBs, TIFs); proximity to universities, research parks, airports, etc.; active neighborhood-based involvement; protectionism; free-trade; to name just a few.

Choices / Priorities in ED Policies

•How do you define the public interest?•How you view the relationship between the public and private sectors, and one’s willingness to work within the market, be entrepreneurial and/or pragmatic.•What tools do you use?•Where do you stand on the equity versus efficiency debate?•Where do you stand on the policy intervention versus market incentive debate?•How much risk can you handle?

Component First Wave Second Wave Third Wave

Location assets Discount them to attract outside business

Reduce taxes and provide incentives to all businesses

Build regional collaboration

Business focus Outside firms Assist all local firms

Create context for better relations among firms

Human resources

Create jobs for local unemployed people

Develop training programs

Utilize workforce training to build businesses

Community Base

Physical resources

Social and physical resources

Leadership and development of quality environment

Three Waves of Economic DevelopmentSource: Blakely, Edward J and Ted K Bradshaw. 2002. Planning Local Economic Development Theory and Practice: Third Edition. Sage. Page 45: Table 2.3

Another historical view….Fitzgerald, Joan and Nancey Green Leigh. 2002. Economic Revitalization: Cases and Strategies for City and Suburb. Sage. pp. 10-26

PHASE Selective characteristics

1. State Industrial Recruitment (starting in the 1930s)

Create good business climate (taxes, loans, infrastructure, etc.) • “greasing the skids” for business • corporatist paradigm

2. Political Critiques of Local Economic Development Activity (starting in the late 1960s)

Focus on who is paying and who benefits. ED actors as political agents • political economic analysis • critique of “smokestack chasing” • recognition of tension between footloose capital and communities •

3. Entrepreneurialism and Equity Strategies Two separate movements: Promoting high tech (mimic Silicon Valley) and pushing equity/redistribution (e.g., Mayor Harold Washington’s initiatives in Chicago, 1980s).

4. Sustainability with Justice Balancing economic development, social justice and environmentalism. Brownfield development.

5. Privatization and Interdependence Market solutions (e.g., Michael Porter’s competitive inner cities) and regional/metropolitan strategies.

Multiple Strategies and ...

Boosterism, Place MarketingInvesting in comparative advantagesHuman capital developmentDeveloping marketsCreating clusters, agglomeration economiesInfrastructure (physical, technical, social)Smokestack chasing, Business attraction: taxes, etc.Partnerships

Multiple Goals

EmploymentHigher wagesLower povertyReduce inequalityIncrease human capitalIncrease living conditionsJob attraction and retainmentCapacity buildingIncrease multipliersSustainable growth

Susan E. Clarke Gary L. Gaile, The Next Wave: Postfederal Local Economic Development Strategies, in Blair and Reese, 1998. (originally in EDQ in 1992)

Theme: the rise of the entreprenurial, risk-taking, partnership-making local state

Changes:•a shift away from state and federal funding•a rhetoric of devolution, local control and local entrepreneurship.•A blessing in disguise? More local funding means more local control. [166]

This study: from 1978 to 1989: did federal cuts affect the level of local economic development efforts. and if funding sources shifted to localities, were the localities more risky or cautious?

So: initial data suggests that cities using these ED tools are faster growing, with lower taxes, fewer government employees and government expenditures.[NOTE: could this be a spurious relationship? That is, other factors are influencing both variables?]

Trends

•a shift from traditional federal sources (e.g., UDAG, EDA) to public-private partnerships, revenues from redevelopment projects, TIF, revolving loan funds, one stop permit shopping, below market rate bonds, enterprise zones, trade missions abroad, etc. [see table 13.2, page 169] [see also Table 13.3, p.170]•with the federal withdrawal, the local setting is more competitive, fragmented•emphasis on entrepreneurial, market based strategies [167]•a shift from wealth creation rather than subsidize locational decisions or employment strategies.•Greater tolerance for risk: public capital used for its investment potential. A view of economic development projects as a "portfolio" (some are winners, some are losers).

•Shift to entrepreneurial interest in generating new businesses, not just retaining old ones.

More Trends

•More specialized, custom-tailored deals•Use of linkages•With the creation of all these new specialized (dedicated) funding tracks (e.g., TIFs, enterprise zones, etc.) the result is: funding stays within economic development, rather than getting put into general revenues. [171] •A shift from social criteria to market feasibility [173]•The reemergence of downtown as a locus of development•Greater use of non-profits

“Assessing Readiness for Economic Development Strategic Planning: A Community Case Study” Christine M. Reed; B. J. Reed; Jeffrey S. Luke JAPA 1987

Beatrice, Nebraska