Calypso

By

Richard M. McGahey, “Regional Economic Development in Theory and Practice”, in Richard M. McGahey and Jennifer S. Vey (Editors), Retooling for Growth: Building a 21st Century Economy in America’s Older Industrial Areas, Brookings Institution Press, Washington, D.C., 2008.


“To sail on a dream on a crystal clean ocean
To ride on the quest of a wild raging storm
To work in the service of life and the living
In search of the answer to questions unknown
To be part of the movement and part of the growing
Part of beginning to understand”

— John Denver

Throw a rock out of any window these days and you’ll hit something written about regionalism, clusters, knowledge-based economy or innovation. Choosing to review any of these topics is an invitation to have your eyes burst from the strain of having to review the literature in order to choose an appropriate work to discuss. McGahey’s Regional Economic Development in Theory and Practice is in the Curmudgeon’s opinion one of the better discussions on regionalism that has been published in recent years. This is not meant to be faint praise, but rather an observation that much of the research he observed is quite redundant, often ideological, and frequently too specialized or theoretical for the non-academic/think tank reader. For the most part McGahey avoids these pitfalls and offers a readable summary of the issues important to current regionalist dialogue.

The Curmudgeon’s first encounter with regionalism, as an assistant to a city manager in Missouri in the mid-1970’s, was to drive a pickup truck to HUD St Louis in order to deliver our A-95 review required as a component of a HUD grant. So many copies were required that it filled up the bed of the pickup.The Curmudgeon graduated from college (imagine that?) over forty years ago; he was reading then about the desirability, indeed, necessity of regionalization and at the time he thought rascally thoughts on how to overcome the evil dinosaurs and corrupt selfish interests which opposed these cutting edge new opportunities for growth in a global (back then we used the word international) economy. Nothing much seems to have changed since those early carvings on stone tablets from which the Curmudgeon read, except now the tablets are made of plastic and silicon and the Curmudgeon is the dinosaur.

McGahey commences his discussion on regional economic development by commenting both on globalism (briefly), and for some strange reason, economic development subsidies, as primary drivers of current thought regarding regionalism. Actually, this is, in the Curmudgeon’s opinion, an important insight into current regional thinking. It also forces the Curmudgeon to backfill the reader on a wide variety of past regionalist initiatives, each one distinctively inspired by a then in vogue perspective of why regionalism was desirable and necessary. The tale has evolved over the years, but in many ways seems to have remained in its essentials, rather constant.

The Curmudgeon’s first encounter with regionalism, as an assistant to a city manager in Missouri in the mid-1970’s, was to drive a pickup truck to HUD St Louis in order to deliver our A-95 review required as a component of a HUD grant. So many copies were required that it filled up the bed of the pickup. Regionalism, then, meant planning coordination to prevent duplicative and hence unnecessary grants to the same geography. Later forms of regionalism (in no particular chronological order), moved to regional planning itself (and its heritage left a series of regional planning agencies nested nicely in almost every one of our fifty states. Even Washington DC has one). Other forms of regionalism, such as CEDs (EDA-inspired) evolved and focused regional planning into specific policy areas such as economic development.

The Federal Government was obviously a leader in these early, now ancient, regionalist initiatives, and it remains so today. That the Feds have taken this position, however, for their own reasons, is made obvious by describing my second encounter with regionalism in practice. Asked to serve as an advisor to a Missouri county regional planning board, the Curmudgeon drove up one evening to the county hall to attend its first session. He was met in the parking lot by four county citizens, with rifles, who explained to him they would accompany the Curmudgeon and his car back to the county line. They then proceeded to do so, blocking the road so he could not return. Ah the good old days, but, anyway, the Curmudgeon learned a lesson that regionalism was not always what community residents wanted.

Accordingly, where the Federal Government had sufficient sway, regionalism prospered, but where residential approval was necessary, the track record of regional initiatives was at best mixed, with a decidedly negative overall tone. This is best demonstrated by the various forms of jurisdictional and agency consolidations and mergers (city-county being most prevalent) which usually resulted in brutal electoral campaigns in which regionalism lost more than it won. Usually efficiency and economy (in the sense of lower costs) were the prime rationales for these efforts and, in the Curmudgeon’s memory, these rationales weren’t always persuasive to those affected.

And so here we are in the twenty-first century, and McGahey is now explaining his view on the need for regionalism to occur now. Quickly citing a variety of national and global forces/dynamics which would seem to encourage a community to embrace regionalism if only for self defense, McGahey launches into a nearly ten page description/analysis of the various evils associated with economic development subsidies and the seemingly endless critics which always correctly observe how wasteful, counter-productive, unnecessary and inefficient these inducements were and how they distorted the body economic. Problems such as government fragmentation, competition among governments, buffalo-hunting, smokestack chasing, and market distortions are cited as chronic deficiencies of an “unreformed” non regional metropolitan area.

The track record of regional initiatives was at best mixed, with a decidedly negative overall tone. This is best demonstrated by the various forms of jurisdictional and agency consolidations and mergers (city-county being most prevalent) which usually resulted in brutal electoral campaigns in which regionalism lost more than it won.Somehow, in the midst of this critique of economic development subsidies, McGahey wanders into Michael Porter and cluster theory which is “also critical of purely cost-driven (economic development) strategies aimed at individual firms” (P.7). His assessment of Porter’s cluster theory (see our January issue for the Curmudgeon’s take on Porter and clusters), however, eventually returns to the regionalism theme by linking clusters with regionalist initiatives. “… cluster approaches held promise for increasing economic opportunity for poor cities, regions, and workers, if policy-makers and businesses could realign existing practices and programs.” (P.10) This realignment would limit economic development subsidies by requiring “sophisticated coordination and implementation across a wide variety of often-uncoordinated institutions and organizations. (P.10) This linkage of regionalism with the cluster approach was not surprising to the Curmudgeon. Clusters provide an economic development meaning and purpose to regionalism. If regionalism is only meant to curtail those horrible subsidies, where is the constituency needed to adopt regionalism supposed to come from.

McGahey then returns to four more pages dealing with the “persistence of subsidies”. Since our topic du mois (month, for you unsophisticated Anglophiles) is not subsidies and/or their persistence (see March’s Journal issue for that), but regionalism, we will spare the reader any further anguish reading about the continued persistence of this most durable, pervasive, if perverted, economic development tool: the subsidy. At a later point in his article, McGahey will again return to economic development subsidies and determine that for a number of reasons they are likely to continue in use but in lieu of their reduction a series of “guideposts” are offered to limit their negative impacts. These guideposts include: increasing transparency, tie subsidies to specific, measurable benefits, align economic and workforce programs with regional, not jurisdictional boundaries and work with groups of firms, not individual businesses.

This linkage of regionalism with the cluster approach was not surprising to the Curmudgeon. Clusters provide an economic development meaning and purpose to regionalism.An insight, however, we glean from McGahey is that the ultimate motivation underlying regionalism in the 21st century is the need to end these subsidies and that can best be accomplished through regionalism. A second insight which also emerges from McGahey is the almost congenital, joined at the hip, relationship of regionalism and the cluster approach.

The Real Progressivism

From our perspective, the more purer and most constant drive for regionalism in our metropolitan areas is an almost Progressive (in the sense of the early 20th century reform movement) attack on the evils of politically inspired waste, inefficiency, if not immoral corruption which inhibited a rational, if not scientific, more comprehensive, and efficient allocation of goods, benefits and services delivered from public bodies and agencies. According to this perspective, a reformed metropolitan area is one administered by a regional entity which because of its elevated placement in the federalist hierarchy would be best able to counter the selfish and parochial interests of its component elements, the fragmented local jurisdictions. Since currently the most hated abuses are subsidies to an individual firm, a reformed regional metropolitan area would be better positioned to reduce or eliminate them.

Progressivism, despite its now one hundred year plus history has not run out of steam. The word has seemingly come to characterize the left wing of the Democratic Party. Progressivism as a chronic reform movement is much more than that. Aside from its Democratic Party linkage, however, the word has pretty much disappeared from our vocabulary. From the Curmudgeon’s perspective, however, progressive reformism has been so engrained into our political character and dialogue, that we no longer recognize its almost pervasive impact.

Accordingly, we fail to see that progressivism has run on steroids during the post 1970 period when the Progressive reform agenda was applied to political parties, elections, primaries, and campaign financing restrictions (all of which through the law of unintended consequences, backfired). The earlier mentioned regional planning and government consolidation initiatives are further examples of this sustained Progressive assault on the body politic.

But, it is interesting, to the Curmudgeon at least, that while the Progressive attack on elections and parties was major league successful, the assault on government structures (excepting city manager, at large city council and mayoral-administrative officers) was not. In essence, current progressivism is trying to substitute region for council district. Back in the 1890’s-1940 the evil jurisdiction was the district council from which the Boss and the party hacks produced corrupt largesse, log-rolling, wasteful and inefficient legislation–all to the detriment of the city as a whole. The solution was the city-wide or at large council. The region today is viewed much the same as the at large council was back then, and the jurisdiction the source of waste, subsidies, parochialism and politics is the equivalent of the district council. But while all voters knew what the city included, the region to the popular mind has no natural boundaries. It was too uncertain a reform proposal and too threatening for others.

And in this vacuum is why the Curmudgeon finds the “congenital linkage” of regionalism with cluster approach most interesting. Clusters are the concept which provides new meaning, rationale, support and impetus to the older Progressive-like regionalism initiative.

Regionalism and Clusters

Clusters and governmental regional restructuring may not, however, be the marriage made in heaven. Clusters are inherently a micro economic approach to economic development. Micro economics is based on cost-reduction and the internal dynamics of a single firm. Cluster approach programs offer economies, infrastructure, resources and efficiencies—to the individual firm within the cluster. Cluster-based programs offer, at least theoretically, advantages to a class of firms within the cluster, but it is, and will always be, the individual firm which consumes these benefits. And some individual firms will benefit more than others. If so, in what way does the cluster approach limit the persistent abusive subsidies to individual firms. It merely disguises the subsidy in more acceptable clothing.

The cluster approach in each of these alliances was an important instrument with which to link the new constituency to a regionalist initiative.Oh, but cluster advocates will correctly contend that the cluster approach is a lot more than curtailing abusive subsidies. True Believer Advocates (TBA) will offer that clusters are an incredible tool to promote economic growth for those communities and jurisdictions within the cluster. It is not, they will contend, primarily, or otherwise, a strategy for political and structural reform. Perhaps?

Regionalism does not inevitably correspond to economic growth and performance; and, clusters, although micro-economic (and hence non-political) in nature would logically seem to require some form of regionalism and a regional platform for service delivery and planning. The two concepts derive meaning from each other and their linkage is quite understandable. Therefore, McGahey’s next section, Engaging Other Stakeholders, almost predictably calls for working with larger constituencies in promoting all sorts of regional initiatives.

Acknowledging that “The difficulty of changing economic development practice through government actions alone means that other nongovernmental stakeholders need to be involved on a sustained basis” (P.14). Identifying Business, Workforce and Philanthropy as his principal targets, McGahey describes how each, for their own reasons, can be effective allies in the quest for a regionalism initiative. The cluster approach in each of these alliances was an important instrument with which to link the new constituency to a regionalist initiative. For instance, “… there is an emerging generation of regional business leaders, often strongly influenced by Michael Porter’s work, which accepts the need to focus on the regional economy. (P.15) or “Several (workforce) programs have a natural affinity with cluster-based economic development strategies) (P.17). The author extensively describes several examples of programs, states and regions which have successful regionalist-based initiatives.

The Prospects for Regionalism

One of the best features of the McGahey article is that it departs from the endless and hopelessly predictable flood of research which advocates and details the need for regionalism, countless benefits derived from regionalism, or the escape from the eighth hell of Dante (there isn’t one, but I made it up) the incredibly wasteful, inefficient, fragmented, parochial current structure set by shortsighted and politically driven jurisdictions. McGahey is far more realistic and sensible, even if he is obsessed with evil subsidies.

Unlike subsidies which are inconveniently durable and persistent, regionalism requires much more than just saying yes. He offers his best hope for regional initiatives in the previously mentioned alliances with key stakeholders. “The many incentives for governments to engage in short-term competition with each other, or simply not to coordinate their economic, infrastructure, and workforce policies within a single economic region, mean that change will need other engaged stakeholders”. (P.25)

How does one engage stakeholders? McGahey offers the following suggestions:

  1. Regions need effective business organizations that engage with other stakeholders on regional policy. Most importantly a strong business organization is essential to a successful marriage with the cluster approach.
  2. Strategies must engage and work with, but NOT BE CAPTURED BY, government. Government is too important to be ignored, especially in its roles with education, infrastructure, taxation and regulation, but its inherent limitations (limited time horizons, electoral cycles, short-term budgeting, fragmentation and competition, and a difficulty in maintaining a long-term focus).
  3. Philanthropy can play a key role. They can convene regional stakeholders and subsidize them. They can provide some insulation from political backlash generated by important but controversial regional initiatives.
  4. Different institutions can take the lead. “There is not a single formula for who should convene and lead (regional) efforts” P.26).
  5. Build a Common Regional Identity. Information about and measurement of your regional economy are critical and encourage regional cooperation, joint initiatives.
  6. There is no single ‘best’ starting point (i.e. issue) with which to launch a regional initiative. Networking is crucial, and issues selected should be focused.
  7. Equity and inclusion are critical for success, but are not (usually) well developed or integrated into (regional) strategies.

This gradual, incremental growing of regionalism, in a very happy and functional marriage with clusters, will hopefully over time create an atmosphere where true and complete regionalism will prosper and we can bypass, if not curtail, the sub-regional jurisdictions.In essence, think regionally, get outsiders to think of you as a region, and encourage joint regional networks and initiatives while limiting whatever incentives exist for jurisdictions to remain competitive and fragmented.

The Curmudgeon Concludes:

As we stated earlier, McGahey is frank about his motivation for regional government: elimination of imprudent economic development subsidies. As such this is one more example of a long list of abuses which emanate from dysfunctional fragmented, partisan parochial and short-term political jurisdictions. The need is to create a new structure which separates politics and its associated ilk from the administration and implementation of its programs and policies. In the arena of economic development this can best occur when the new structure includes the entire regional economy, thereby permitting the new structure to bypass its dysfunctional core elements: the fragmented, competing political jurisdiction. This is the modern variant of a very old political movement we used to call Progressivism.

While progressivism enjoyed substantial success in the political arena, it has not been victorious in establishing a paradigm of regional structures which deliver economic development programs absent the dirty baggage associated with jurisdictions. Hence the logic is to expand the dialogue to include new stakeholders and with them to slowly evolve a regional identity and regional network which thinks and acts in ways regional. To this end, the linkage with cluster approach is a natural. Clusters provide meaning, direction and purpose to the proposed regional structure. This gradual, incremental growing of regionalism, in a very happy and functional marriage with clusters, will hopefully over time create an atmosphere where true and complete regionalism will prosper and we can bypass, if not curtail, the sub-regional jurisdictions.

In the meantime, we must put up with the sad and dehabilitating effects of democracy, voting, federalism, and the wishes of voters and residents. “Ignore those people with the rifles”, “they don’t know what’s good for them”.

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