Overview:What is Economic

Development Planning?

and is it more than simply smoke-stack chasing?

Prof. Scott CampbellUrban Planning 539University of Michiganhttp://www-personal.umich.edu/~sdcamp/up539/

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.

Source: Blakely, Edward J and Ted K Bradshaw. 2002. Planning Local Economic Development Theory and Practice: Third Edition. Sage. Page xvi.

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, economicdevelopment 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 uniqueset 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:

Structure:All local economies are simply the by-product of larger, global economic forces that local planners can hardly alter.

Agency:Larger policies matter little: Who wins and who loses in local economies invariably comes down to individual initiative (human agency).

Synthesis? Perhaps Anthony Giddens’ “structuration” [link]:The interaction between social structure and human action.

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 public-private 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

• Externalities (both positive and negative)

• “leaky bucket” theory of money flows in local economies

• globalization• growth vs. development• innovation (process versus

product)

• linkages (forward and backward)• location theory• market failure• multiplier (and basic vs. non-basic

employment)• opportunity costs

• public-private partnerships• spatial division of labor• supply-side vs. demand-side

approaches• value added• zero-sum game

Common criticisms of local economic development: 1. a waste of money 2. at best a zero sum game 3. distorts the optimal outcome of the free market (suboptinal

outcomes) 4. amounts to a free giveaway to businesses; at best, well-

intentioned; at worst, bribes and kickbacks. 5. inefficient (esp. small scale operations) 6. benefits to firm greater than benefits to society. 7. leads to even more unequal distribution of resources. 8. wrong on principle: government should not get involved in

the private sector. 9. benefits help outsiders, not the community residents

themselves.

PRO ECONOMIC DEVELOPMENTPLANNING

CONTRA ECONOMICDEVELOPMENT PLANNING

Market failures: public goods,prisoners dilemma, risk anduncertainty; lack of information;externalities.

Market optimality ≠ socialoptimality.

[cite Fogelsong's propertycontradiction; also: the need forzoning.]

Creates market inefficiencies

Inequities require intervention Infringement on individualfreedoms (laissez-faire)

Public-private partnerships(broadly defined) are needed in amixed social economy.

Creates opportunities forcorruption, exploitation. Addsan extra layer of cost.

Cities "compete" like firms, soyou either have to play the gameor lose out. [compare to Tieboutidea]

One can't "pick winners"

As the economy becomes moretechnologically andorganizationally complex, moreplanning -- both public andprivate -- is required.

The market is moresophisticated and dynamic andfast moving than any govt canbe; EXAMPLE: Silicon Valleywas not created by publicplanners.

historical evolution of the fieldfrom 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 jobs1940s wartime mobilization and postwar adjustment, conversion of military capacity; deconstruction of New Deal policy interventions1950s 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; biotech2000s neo-liberalism; sustainability; rise of China; Internet commerce; financial crisis; housing crisis

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

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.

shift-share analysis

industrial classification systems

tax increment financing

policy / program evaluation

measures of poverty & social inequality

economic base / multipliers

cost-benefit analysis

accessing and analyzing US Census data

1 1.5 2 2.5 3

Q4: Please note your knowledge of these methods/topics below.

no experience Some experience extensive

house - block - neighborhood - city - region - nation-state - continent - globe

101 102 103 104 105 106 107 108100

Meters (log scale)

neighborhood city metro / regional state-level national0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%What scales of economic development are of interest? (by program)

URPPublic Policy

the structure and future of the auto industry

sports as an economic development strategy

performance arts / fine arts and economic development

tourism as an economic development strategy

economic development OUTSIDE the U.S.

workforce development

local economic development finance

responses to factory closings, deindustrialization

innovation strategies

infrastructure projects as economic development policy

evaluation of economic development programs

social justice and economic development

sustainable economic development

1 2 3 4

Q6: What is your interest in the following topics?

None modest significant 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

2. What are the implications of your answer to Q1 on how localities and regions can and should respond differently to the current economic crisis?

3. 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 _____________________”.