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Prof. Scott Campbell Urban Planning 539 University of Michigan http://www-personal.umich.edu/~sdcamp/up539/ Week 2: History, Concepts, Politics In-class small group exercise ANSWERS to the question ….. 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 _____________________”. 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. 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.) Com m o n c ri t ic 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 ic i e nt ( es p. sm al l sc al e o p er a t ion 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 iet 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 . 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. 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 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 The readings for this week: Jan 13: History, Concepts and Politics I •Richardson, Harry. 1979. “Introduction,” Regional Economics. pp.17-37. [c-tools] save for later. •Krugman, Paul. "Localization," in Geography and Trade. Cambridge, Mass. MIT Press, 1991, pp. 35-67. [Library reserves] •Glaeser, Edward L. "Why Economists Still Like Cities." City Journal, Vol. 6, No. 2, 1996, pp. 70-77. [Library reserves] •Flammang, R. A. 1979. “Economic growth and economic development: Counterparts or competitors?” Economic Development and Cultural Change 28, 47-62 [c-tools] -- NOTE: in ctools "Resource" section Jan 15: History, Concepts and Politics II •Wolman, Harold, and David Spitzley. "The Politics of Local Economic Development." Economic Development Quarterly, Vol. 10, No. 2, May 1996, pp. 115-150. [Library reserves] •Fitzgerald, Joan and Nancey Green Leigh. 2002. “Introduction” and “Redefining the Field of Local Economic Development.” In Economic Revitalization: Cases and Strategies for City and Suburb. London: Sage Publications. [c-tools] •Mier, Robert. Metaphors of Economic Development, in Bingham, Richard D., and Robert Mier, eds. 1993. Theories of Local Economic Development. Newbury Park: Sage. (Chapter 14, pp. 284-304). [c-tools]