Prof. Scott Campbell
Urban Planning 539
University of Michigan
http://www-personal.umich.edu/~sdcamp/up539/
Overview:
What is Economic
Development Planning?
and is it more than simply
smoke-stack chasing?
Source: Blakely, Edward J and Ted K Bradshaw. 2002. Planning Local Economic
Development Theory and Practice: Third Edition. Sage. Page xvi.
Local economic development refers to
the process in which local
governments or community-based
(neighborhood) organizations engage
to stimulate or maintain business
activity and/or employment. The
principal goal of local economic
development is to stimulate local
employment opportunities in sectors
that improve the community using
existing human, natural, and
institutional resources.
What is Economic Development?
No single definition incorporates all of the different strands of economic development. Typically
economic development can be described in terms of objectives. These are most commonly
described as the creation of jobs and wealth, and the improvement of quality of life. Economic
development can also be described as a process that influences growth and restructuring of an
economy to enhance the economic well being of a community. In the broadest sense, economic
development encompasses three major are as:
Policies that government undertakes to meet broad economic objectives including inflation
control, high employment and sustainable growth.
Policies and programs to provide services including building highways, managing parks and
providing medical access to the disadvantaged.
Policies and programs explicitly directed at improving the business climate through specific
efforts, business finance, marketing, neighborhood
development, business retention and expansion, technology transfer, real estate
development and others.
The main goal of economic development is improving the economic well being of a community
through efforts that entail job creation, job retention, tax base enhancements and quality of life. As
there is no single definition for economic development, the re is no single strategy, policy or
program for achieving successful economic development. Communities differ in their geographic
and political strengths and weaknesses. Each community therefore, will have a unique
set of challenges for economic development.
Defining Economic Development - from the Economic Development Administration (EDA), part of the
US Dept. of Commerce
Economic development is fundamentally about enhancing the factors of productive capacity - land,
labor, capital, and technology - of a national, state or local economy. By using its resources and powers
to reduce the risks and costs which could prohibit investment, the public sector often has been
responsible for setting the stage for employment-generating investment by the private sector.
The public sector generally seeks to increase incomes, the number of jobs, and the productivity of
resources in regions, states, counties, cities, towns, and neighborhoods. Its tools and strategies have
often been effective in enhancing a community's:
labor force (workforce preparation, accessibility, cost);
infrastructure (accessibility, capacity, and service of basic utilities, as well as transportation and
telecommunications);
business and community facilities (access, capacity, and service to business incubators,
industrial/technology/science parks,
schools/community colleges/universities, sports/tourist facilities);
environment (physical, psychological, cultural, and entrepreneurial);
economic structure (composition); and
institutional capacity (leadership, knowledge, skills) to support economic development and growth.
Definitions That Address Equity and Sustainability
Economic development policymakers and practitioners who are concerned about
economically disadvantaged and depressed communities highlight some different issues
when they define economic development. Community economic development or CED
typically has five goals:
•
Stimulating a self-sustaining process of economic development (the dynamic and
rate of development);
•
Creating jobs at acceptable wages, with appropriate benefits and career ladders for
area residents (the distribution of development);
•
Producing goods and services that meet social needs, like affordable housing,
lowered energy costs, better health care, and accessible day care (the composition of
development);
•
Establishing greater community control, accountability, and participation in basic
economic decisions such as hiring, investment, and location (the control of development);
and
•
Broadening business and asset ownership within poor and ethnic minority
communities.
What is Economic Development Planning?
Two themes:
1. understanding urban and regional economies (geography,
history, economics, sociology, etc.)
Why do some cities grow and others decline?
Why is there persistent inequality across space (race,
gender, class)? …despite all ideas to the contrary?
2. Intervention: How is it done? Why and how is
intervention justified? (and when not?) What are the
consequences? How can we evaluate it? (planning, policy,
evaluation)
In other words:
1.
Why do some communities thrive why others struggle?
2.
What can and should one do about it?
A typology of skills and materials for the course
Finding the balance
between the big picture of
structural economic
change and the
idiosyncrasies and
minutiae of ED programs.
Flint Sitdown Strike, 1936-37
Related: finding a balance between structure and
agency -- between the extremes of belief:
Agency:
Structure:
All local economies
are simply the byproduct of larger,
global economic
forces that local
planners can hardly
alter.
Synthesis? Perhaps Anthony
Giddens’ “structuration” [link]:
The interaction between social
structure and human action.
Larger policies
matter little: Who
wins and who loses
in local economies
invariably comes
down to individual
initiative (human
agency).
How is Local ED different from the traditional study of
economics?
»Don’t assume perfectly functioning markets (and their
prerequisites) --that is, the parameters (starting
assumptions) of economics are the variables of urban
planning
»Space is not reduced to
transportation costs (“friction
of distance”)
»More local/place based E.g.,
local trade, local/regional
product, etc.
»More applied, hands-on,
eclectic
»More interventionist
The Role and Experience of Local Economic Development
within the Field of Urban and Regional Planning
1.
Understanding how economic development is both an
integral part of urban planning but also deviates in certain
areas, such as:
•Defining the public interest
•The relationship between the public and private sectors, and
one’s willingness to work within the market, be entrepreneurial
and/or pragmatic.
•Tools used
•Where one stands on the equity versus efficiency debate
•Where one stands on the policy intervention versus market
incentive debate
The Role of Space (Place, Geography)
Economies are not just aspatial (universal) systems that
happen to operate in space,
Instead, space is integral to the workings of economies.
Therefore: “urban economics” is not simply the mapping
of national economic processes onto the local level…
2. Understanding this relationship through the history of
urban planning as a profession
•The shift to the social sciences away from architecture
•The history of housing reform and social activism in planning
•The roots in the New Deal, and Depression-era priorities on
job creation and poverty.
•The difficulty of helping the physical neighborhood without
helping its economy.
•The shift away from government programs making economic
development more entrepreneurial, more involved in publicprivate partnerships, in business-like tools, etc.
3.
the frustration of the field
•hard to know if serving the public interest, or just business
-- is one giving away more than necessary to effect
change?
•Limited resources to tackle massive, complex problems
•hard to just the impacts of the work
•inefficiencies of the programs
•often difficult to generalize (or clearly define reproducible
“best practices”)
•Skepticism from some others in the field (e.g.,
environmentalists, community activists)
(can it be otherwise? Can it be made more a science? Or because planners
are but one player with limited tools in a complex, open-ended politicized effort,
the process will invariably be more complex.)
4.
But also the rewards
•Creating jobs for people in need; Helping those who fall
between the cracks of the market
•Stimulating other planning benefits: such as more
resources for street projects, housing, etc.
•Often other planning tools (land use, urban design,
transportation, etc.) can only work well if the economic
development tools are in place
•Addressing the huge inequality that is place-based: city
suburb, urban rural, north south, 1st vs. 3rd world.
Optional slides – skip forward to survey
Twenty Really Useful Concepts in Understanding Local
Economic Development
•agglomeration economy
•cumulative causation vs.
equilibrium models
•cyclical versus structural change
•deindustrialization
•equity vs. efficiency
•linkages (forward and backward)
•location theory
•market failure
•multiplier (and basic vs. non-basic
employment)
•opportunity costs
•Externalities (both positive and
negative)
•“leaky bucket” theory of money
flows in local economies
•globalization
•growth vs. development
•innovation (process versus
product)
•public-private partnerships
•spatial division of labor
•supply-side vs. demand-side
approaches
•value added
•zero-sum game
Com m o n c ri t i c ism s o f loc al e c ono mi c de v el op m e n t :
1. a wa st e o f m o ne y
2. a t b e s t a z er o s u m g a m e
3. d is t o rt s th e o p tim al o ut c o m e o f th e f ree ma rk e t ( subo p t in al
o ut c o m e s )
4. am ou nt s t o a f re e g ive aw a y to b usi nes s e s ; at b e s t , w e llin t e n ti o n e d ; at w o rs t , b rib e s a n d kic kb a c k s .
5. inef f i c i e nt ( es p. sm al l sc al e o p er a t i on s )
6. b e ne f i t s to fir m g re at e r th an b e n e f its to s o c i et y .
7. lead s t o e v e n m o re u n e q u al di s t ribu ti o n o f reso u rc e s .
8. w ron g o n pri n cip le: gov e rn m e n t sh oul d n o t g et inv o lv e d in
t he pr iv ate se c t o r.
9. b e ne f i t s h e lp o u t si d er s , n o t th e c o m mun i t y re si d e n t s
t h em s e lv e s .
PRO ECONOMIC DEVELOPMENT
PLANNING
CONTRA ECONOMIC
DEVELOPMENT PLANNING
Market f ailu res: public goods,
prisoners dile mma, risk and
uncertainty; lack of i nformation;
externalitie s.
Creates market inefficiencies
Market optimality ­ social
optimality.
[cite Fogelsong's property
contradiction; also: the need for
zoning.]
Inequitie s require intervention
Infringement on individual
freedoms (laissez-faire)
Public-private partnerships
(broadly defin ed) are needed in a
mixed social economy.
Creates opportunities for
corruption, exploita tion. Adds
an extra layer of c ost.
Citi es "compete" like firms, so
you either have to play the game
or lose out. [compare to Tiebout
idea]
One can't "pick winners"
As the economy becomes more
technologically and
organizationally complex, more
planning -- both public and
private -- is required.
The market is more
sophisticated and dynamic and
fast moving than any govt can
be; EXAMPLE: Sili con Valley
was not c reated by public
planners.
historical evolution of the field
from not part of planning, to one specialization, and for
some even another step: as an integral part of planning
or even as a new core of planning (though this likely a
minority view).
Recent roots: dealing with deindustrialization, the
retreat by the government in traditional urban renewal
funding; the need for partnerships and public-private
entrepreneurship; persistent income inequalities;
global competition and the great pressures on
communities; a blurring of public and private roles (so
that the public sector sees economic activity as more of
its domain).
THEMES by Era (partial list):
1930s Keynesian New Deal policies to stimulate demand and create jobs
1940s wartime mobilization and postwar adjustment, conversion of military
capacity; deconstruction of New Deal policy interventions
1950s industrial expansion; suburbanization; highway building; Cold War;
anti-communism taints planning; US dominant in the world market.
1960s beginning of the structural crisis; early days of deindustrialization;
white flight from cities;
1970s plant closures (and legislation); the rise of services.
1980s high tech, flexible specialization, post-Fordism; Sunbelt over
Frostbelt; public-private partnerships; post Great Society downsizing of
government.
1990s globalization; capacity building; entrepreneurship; boom in
construction; high-tech expansion; biotech
2000s neo-liberalism; sustainability; rise of China; Internet commerce;
financial crisis; housing crisis
Three Waves of Economic Development
Source: Blakely, Edward J and Ted K Bradshaw. 2002. Planning Local Economic Development Theory
and Practice: Third Edition. Sage. Page 45: Table 2.3
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
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 ...
Multiple Goals
Boosterism, Place Marketing
Investing in comparative advantages
Human capital development
Developing markets
Creating clusters, agglomeration
economies
Infrastructure (physical, technical,
social)
Smokestack chasing, Business
attraction: taxes, etc.
Partnerships
Employment
Higher wages
Lower poverty
Reduce inequality
Increase human capital
Increase living conditions
Job attraction and retainment
Capacity building
Increase multipliers
Sustainable growth
Survey results…
3.Please list any work-related experiences with economic development:
As a Consultant at Deloitte, I worked on a project and paper for the Ohio Department of
Development. I designed, administrated and analyzed the results of a survey and assisted in running
focus groups to determine emerging industries in each of Ohio's geographic regions.
Federal Reserve Bank - regional study of Biotech industry in San Antonio, Austin, Dallas, Houston
corridor.
For a summer I was an intern for MSU Extension in the area of economic development. In this
position I largely supported the office director as she managed several local economic development
projects.
Housing Counselor, Internship in Sri Lanka w/ a community development corporation that did small
business development with refugees.
I don't have any work-related experience directly related to economic development, however, I spent
3 years teaching in an inner-city low resource school in Houston, Texas and therefore was made very
aware of economic issues involving large urban cities and particularly how these issues affect housing
development, land use, and obviously education.
I worked for the City of Chicago Dept. of Planning and Development as an intern for 2 years from
1999-2001. My main duties were related to land use planning, but I was also able to work on the
creation of a TIF.
Industrial policy analysis of Pearl River Delta, Economic Strategy of Jing-Jin-Ji Region
Interned at a private economic consulting firm where I did research for clients around economic
development issues.
Internships with the Philadelphia Industrial Development Corporation (the city\'s quasi-public,
primary economic development agency) and the Department of Planning and Economic Development
for the City of Saint Paul, MN.
Q4: Please note your knowledge of these methods/topics below.
accessing and analyzing US Census data
cost-benefit analysis
economic base / multipliers
measures of poverty & social inequality
policy / program evaluation
tax increment financing
industrial classification systems
shift-share analysis
1
no experience
1.5
2
Some experience
2.5
3
extensive
house - block -
100
101
102
neighborhood
103
-
city - region - nation-state - continent - globe
104
Meters (log scale)
105
106
107
108
What scales of economic development are of interest? (by program)
100%
90%
URP
80%
Public Policy
70%
60%
50%
40%
30%
20%
10%
0%
neighborhood
city
metro / regional
state-level
national
Q6: What is your interest in the following topics?
sustainable economic development
social justice and economic development
evaluation of economic development programs
infrastructure projects as economic development policy
innovation strategies
responses to factory closings, deindustrialization
local economic development finance
workforce development
economic development OUTSIDE the U.S.
tourism as an economic development strategy
performance arts / fine arts and economic development
sports as an economic development strategy
the structure and future of the auto industry
1
None
2
modest
3
significant
4
very strong
7.Please list any other economic development topics (social challenges, policy questions,
theoretical questions) that you would like addressed in the course.
Career opportunities/strategies in the field of local economic development.
Economic issues/conflicts involving inner ring lower income communities and growing communities
in developing and high resource regions.
How do we integrate environmental sustainability into economic development efforts? How do we
enable city/business leaders to realized that green/sustainability has a greater payoff in terms of return
on investment? (Can we show this is true?)
I'm interested in hearing more about the economic research involved to coax business interests into a
neighborhood. A friend working for the Detroit Economic Growth Corporation related one of her
projects to me in which she had to make a case for grocers to move into neighborhoods where there
were no food markets within walking distance (aside from quik marts in gas stations). Generally, my
interests lie in Detroit development issues.
Unconventional economic development ideas. Not merely limited to the basic strategies of sports
stadiums, workforce development, or convention centers.
variation in success/failure of econ development strategies at different points in the business cycle
Innovative ways of working between government and business to propel economic development Including examples of programs and cities nationally or internationally that have successful economic
development strategies and why - Career opportunities in economic development - Mid-career
training/ \"retraining\" programs for workforce - Integration of education policy and economic
development policy
In-class small group exercise
Form groups of 4-6 students and discuss and answer these questions:
1. Identify at least 3 ways that local economies differ from national
economies
1. What are the implications of your answer to Q1 on how localities
and regions can and should respond differently to the current
economic crisis?
1. Complete the following sentence: “The Southeast Michigan
economy, currently suffering from the near-collapse of the auto
industry, high unemployment, stagnant population growth and
depressed housing values, will experience a resurgence in growth
and vitality in the coming years only if _____________________”.