Theme 1: Module 10: Precis of As Two Ships Chapter One Model

This module is not for the faint-hearted. It violates every principle and precept underlying the Online Study. Proceed at your own risk. There are no graphics. I lose my sense of humor and use more jargon. The module is conceptual and not real world.

This module is OPTIONAL–only for those who wish to understand the mechanics, the engine, that powers the Online History. It is not the complete model–that was to be in a last chapter that never survived the page limitations of my publisher.

This module is a stripped-down precis version of my First Chapter in the History of American State and Local Economic Development published by Edward Elgar May 2017. I have not changed the wording, but have culled out some less essential paragraphs. I have two additional years of research, feedback and evolution on my thought which is included in the Online History. The distinction between External and Inward MED is not in the book, nor are the Wings of Community Development. I have not abandoned or meaningfully modified any of the concepts presented in this module–if anything I feel more certain they are on-target. I am, after all, a stubborn Irishman.

the Precis Chapter One Model

[the Precis starts with my underlying hopes for those who read the book]

Provide Meaning and Order

Our approach is a policy-making one; an approach that incorporates economics, socio-demographics, politics and culture into the economic development story. It is a “bottoms up” approach developed from the experiences of literally hundreds of cities and the fifty states. Understanding state and local economic development requires a framework, an explanatory fabric.

American economic development history suggests three dynamic drivers provide meaning and order to the reader. Some in the Policy World may discern them as “independent variables”. The three “drivers” of economic development deeply affect the agenda and goals of economic development policy/strategy.

There is another, less visible dynamic, however, that “interprets”, “defines”, even “directs” the policies/strategies as they are processed through the jurisdiction’s policy-making system. That second dynamic includes two major elements: the (1) jurisdictional policy system and process, and (2) the values, priorities, and perspectives of the jurisdiction’s political culture(s).

Our model places considerable importance on jurisdictional policy-making/political culture as a filter and a funnel for processing the inputs of these three drivers into policy/strategy outputs.  Digesting driver impacts is the job of the jurisdictional policy system and its participants. The less visible dynamic will follow after our three “drivers” of ED policy and strategy.

Drivers of Economic Development Policy

The three drivers of American sub-state economic development are: industry/sector profit cycle, population mobility, and competitive hierarchies. Throughout our economic development history these three drivers have been consistent factors affecting the course of state /sub-state economic development policy-making. Our three drivers work in tandem. They ebb and flow. There are periods of “digestion”, “building critical mass”, and “dominance” when one is predominant over the other two. In real life they all play off against each other.

I discourage the reader from thinking in terms of which is more important than the other—over time they mostly balance, and in any one period of time, each plays its own role and dynamic. Separating out the drivers, and specifying who did what, and why, and which is the most important, is to me a fruitless endeavor. Whether the chicken laid the egg or vice versa—who cares in a real world that cannot distinguish where one begins and the others end.

The forces of change, our drivers, are hugely powerful; it is very unlikely a city (or even a state) can stop or reverse them. Residents, however, expect that one try one’s best. Fix what can be fixed, take advantage of what is offered by fate, clean up or prepare for future opportunity, and help whom you can help.

Decline is more disruptive than growth; there is a massive ocean that separates economic development in a declining community from economic development in a growth community. One consequence from changes these drivers have exerted is an enhanced need for, and reliance on government. Policy-making in the 21st century is more public policy-making than it was in the first half of the 20th century.

Metropolitanization is a product of the three drivers; metropolitanization expands our conception of the competitive urban hierarchy. As time goes on, global competition intrudes our policy system, and radically reorients the power and the role of sub-state jurisdictions in American economic development.

[the Three Drivers Explained]

  • Industry Sector Profit Cycle

No matter how small the jurisdiction, the jurisdictional-bound economic developer’s life is focused on his/her jurisdictional garden of firms, sectors, and industries growing in his/her jurisdictional economic base. That contrasts with the Policy World perspective that defines economic base from a regional cluster, metropolitan area—or mega city (whatever that is). The Practitioner economic development is fixed in political jurisdictions; Policy World economic development is more an analytic and statistical construct.

Betwixt and between, “economic base” is caught in the middle. However measured, the industry/sector which populate the jurisdiction’s economic base are driven by the evolution of the individual and aggregate industry/sector profit life cycle. The jurisdictional economic base is the “economic” expression of trade-communications-logistics, technology, innovation and entrepreneurship, the industry/sector concentration—and TIME. Jurisdictional economic bases, the sectors of which they are comprised, mature and change over time. That complex an economic base will not let itself be tinkered with easily.

Introduction to Sector/Industry and Jurisdictional Economic Base

Industries/sectors are not randomly distributed across states, regions, or communities. Each “place” develops its mix of industries/sectors. Location advantages, home-brewed entrepreneurship, modes of logistics/transportation, mergers/acquisitions and simple serendipity distribute firms/industries /sectors across geographies. Our bottom up approach exposes economic base variation. Jurisdictional economic bases compare to a fingerprint—no two are supposedly identical. New York City, financier of American manufacturing, had much less of it than Cleveland or Detroit. Each metropolitan area contains a variety of urban jurisdictions, each living off their own industry/sector garden of delight. Suburbs, for example, possess their own jurisdictional economic base, as does their neighboring central city.

Thompson  and others characterize economic base as being composed of basic (export-oriented) and non-basic (serve the local population) firms: “the current [short-term] rate of growth of an urban area is explained more by the growth rate of its export sector than any other single factor” (Thompson, 1968, pp. 1-3). As such, much of our economic development history rests on what economists call “supply side” of urban growth or “the local economy [economic base] comparative advantage in land, labor, capital and entrepreneurship”. The supply side paradigm will dominate our history well into the 1980’s. In future years, economic development would shift to the “demand side” economic base.

Not all American cities developed from industrialization; smaller cities of the South and the not yet born cities of the West developed small manufacturing sectors. A manufacturing-dominated economic base seeded itself chiefly in the Big Cities of the North–the political/military Civil War conqueror. Combining both political and economic power, Northern and Midwestern states established a regional hegemony over the rest of the nation. This hegemony lasted through World War II and would be a defining feature of our history. The future rise of the Sunbelt was based on a new configuration of urban economies based less on manufacturing than technology and service sectors.

In the nineteenth century, industrial, transportation, and financial industries, the gazelles, tended to agglomerate—cluster together–to achieve economies of scale and sector synergies in labor and finance markets. So insurance firms located Hartford and Des Moines, Iowa—and the same could be said for nearly every manufacturing, finance and transportation sector/industry. As new cities formed, engaged in city-building strategies, they too constructed new economic bases from the mobile and fast-growing industrial firms. The initial establishment of firms in a jurisdictional economic base is, therefore, set in a period of time, and tied to the fortunes of its industry and sector. The fates of the sectors in an individual urban economic base shape the jurisdiction’s place in the urban competitive hierarchies and the eventual maturation of the economic base affect its future pattern and timing of change. The urban physical landscape and economic base configuration tend to age together. This translates into the policy agenda relevant to economic development.

Business and labor elites are firmly lodged in their industry/sector dynamics. Since our history views economic development through a policy-making perspective, and since history will reinforce the critical role of business and labor elites in jurisdictional economic development policy systems, it follows that an important factor in jurisdictional policy-making will be the composition of business/labor elites participating in the making of public policy. Differences in jurisdictional economic bases trigger variation in the jurisdiction’s policy-making. This is especially significant as sectors/industries evolve differently, age, undergo innovation at different rates, times, and intensity.

Innovation, disruption, and competition potentially obsolete the initial landscape/economic base and necessitate physical/infrastructure modernization and firm restructuring. This can imply geographical relocation. Firms included in a jurisdictional economic base probably should never be considered a long-term fixed asset—from birth they were potentially mobile. The so-called mobility of capital, the ever-present possibility a firm could move, meant cities competed for industries and sectors every single day in our history.

Industries/sectors (and the individual firms within each sector) enjoy and suffer from a “life-cycle”—they proceed from birth, to middle age, and … maybe death or relocation. That life cycle, based on the firm’s ability to make profits and the internal structure of the industry sector, has proven to be critically important information jurisdictional economic developers need to know.

The Jurisdiction’s Industry/Sector Profit Cycle

Young industries/sectors mature. At some point jurisdictional economic developers discover that they must deal with a new set of middle-age industry/sector concerns—followed later by old age issues and fears. Firms can die and marry (merge). In the jurisdictional economic garden, flowers do not bloom forever. It’s impossible to ignore this life cycle if one is an economic developer.

Accordingly, this history has incorporated into its narrative a life/profit cycle model developed by Ann Markusen (Markusen, 1985). Her model is robust, and sufficiently complex, but includes as few moving parts (concepts-jargon) as are needed to explain industry/sector change within jurisdictions. The model will be developed in the chapters that follow; at this point, a general description will be presented.

Markusen’s approach stresses sector/industry clustering in a relatively few jurisdictional economic bases. This results in boom prosperity and economic growth in early years. Gazelle-like growth, however, is followed by consolidation for most—and for a favored few, a second burst of growth. Industry consolidation provides a slippery slope to oligarchy where fewer and fewer, but larger and larger firms compete. Eventually, firms and industries mature. Mature firms in stable industries face increased sensitivity to price, greater cost intolerance, and require employment adjustments resulting from production efficiencies (productivity). A few fortunate cities can benefit as a firm or two in the sector can merge, acquire, and often eliminate competitors—thus allowing the home firm to expand—but destroying jobs in other jurisdictions in the process.

Maturation requires each firm to maintain profits, without price increases because customers enjoy competing equivalent alternatives to satisfy demand. Cost-minimization and productivity (equipment substituting for labor) becomes a way of life for maturing firms —as does downsizing. Home-brewed firms are acquired and transformed into branch plants whose investment/employment decisions are made elsewhere. Consolidation, relocation, new plants (built to accommodate the latest technologies, innovations and equipment) and plant closures are also likely. A jurisdictional economic developer must provide new forms of assistance to mature firms, helping them minimize costs and introducing greater productivity into operations. This is the heart and soul, meat and potatoes of a business retention program. This is also the picture that takes shape as new regions rise and compete for mature industries.

Firms in a maturing industry/sector sometimes cannot adjust to change. Firms do have some say (corporate strategy) in their profit life cycle. The state business climate or the unwillingness of a jurisdiction to respond to the cost-minimization imperative, can compel a firm to relocate. In this atmosphere, the political culture may play an important role in a jurisdiction’s ability to respond to industry maturation. The power of policy actors in the jurisdictional policy system may also inhibit the jurisdiction’s ability to understand and deal with an aging economic base.

As an industry/sector reaches the last stage of its life cycle, survival is in question. With the right conditions and cost structure, a mature/elderly firm can persist for a surprisingly long period of time—stagnant, but employing a constant, probably lower wage workforce. But usually plant closedowns and run away plants are the inevitable result. If an entire industry undergoes maturation and decline as manufacturing did in the post-World War II period, it will be given a name, and spawn a set of reactions from affected economic developers. Deindustrialization happens. Entire regions suffer from decline in its former cutting-edge sectors.

Shift from Manufacturing to Service Sector and Rise of Technology

All good things come to an end sooner or later. Over the last half of the twentieth century the American economy shifted away from manufacturing (basic) to service (non-basic) industries. The service sector was pretty unfamiliar territory for most economic developers–and urban policy-makers as well. The shift from manufacturing to service and then technology required a “change of character” in our profession.

The service industry, responsive as it is to local-metropolitan demand, residential discretionary income, and being less cyclical, presented challenges quite different from those associated with an industrial economic base. Other important elements, nonprofit hospitals and education emerged. If, and how, economic developers could, or should get involved was an open question as these shifts occurred. Familiar tools and strategies no longer fit quite so well. It took the better part of a decade for the Policy World and other commentators to get their hands around the transition—a lot of blame was tossed around, and ideology and partisanship as well. In that manufacturing did not die out (indeed many forms of technology deeply involved manufacturing) meant the old world of economic development persisted in the new world.

The Perfect Storm had struck economic development. Regional change was perceived as the cause behind deindustrialization and industry shifts. A long-simmering Second War Between the States erupted. The long-standing settlement of suburbs compounded the plight of Big central Cities, increasingly Black and led by Black Mayors. Suburbanization acquired negative connotations as an intra-metropolitan competitive war commenced. An urban fiscal crisis trumped economic development in priority–the two quickly became linked. The federal government entered the picture—and then pulled back.

The twenty year period from 1965-1985 became the nadir of American economic development. The profession and the character of economic development that emerged after 1985 looked and acted remarkably different from its pre-1965 predecessor. It will become our “Contemporary Economic Development”. When the smoke cleared, our jurisdictions’ diverse economic gardens had changed dramatically—as did their physical landscape, competitive hierarchy and population demographics. Our profession shifted into new directions, addressing new concerns.

 

  • Population Mobility

Economic developers get paid to tinker with the economic base, but responding to population movements is another story. Our history screams out that population movements creates cities, transforms small ones into big ones, and big cities into smaller. Perceptions of community viability and its competitiveness with other communities are strongly determined by the ebb and flow of its residential population. It isn’t the Bureau of Labor Statistics that gets the attention of citizens and media; it’s the Census Bureau detailing movement in and out of our communities that wreaks havoc on the jurisdictional economic development policy agenda.

Americans are, and always have been, a mobile people. A 2013 report by Jed Kolko asserts that between 1945 and 1980 20% of Americans moved each year (Kolko, 2013). New residents bring new attitudes, experiences, beliefs, and value priorities to their community—former residents presumably leave behind empty buildings. Hopes for a new job and/or a better life, and the obvious converse, a previous location couldn’t satisfy either, expresses the bitter-sweet reality underlying the movement of peoples. Hope and fear underscore that population mobility is a movement of the young—and the desperate. Throughout this history the geographic movement of generational cohorts is often evident. Fleeing the old family unit is ageless.

It should not be forgotten that political culture travels on the feet of its young. Economic development has been affected by generational population movements. Whether the city gain or lost population, the policy system must respond. Hope and fear, push and pull affect the decision to move or stay; but once people arrive at, or leave, a jurisdiction, the story involves economic developers.

We all know the effects of decline, but growth causes congestion, new entrants into public policy process, and tension with past identity, resident lifestyles and traditions. Gentrification and sprawl are derivatives of population growth—and both are fairly controversial. Sub-state economic developers have virtually nothing to do with the flows. Their task is to manage the fallout.

American Population Mobility: Immigration and First Settlers

Population mobility is usually thought of as two distinct patterns: foreign immigration and internal domestic migration. Non-Native American population movements started in the early seventeenth century—and they continue to this day. These folk poured foundations of Big City neighborhoods, fought on both sides to create the Northern regional hegemony, settled the West, and provided the labor force for our twentieth century economic expansion. Ethnic and racial groups moving into and across the USA are as American as apple pie. Since this history draws upon political culture as a vital ingredient to economic development policy-making, new groups could be quite unsettling (pardon the pun) to our jurisdictional political cultures. And in many ways, of course, it has. Melting pot or stew pot the interaction of values, beliefs and attitudes, histories, and experiences has wedged itself into most every jurisdictional policy system—and into our history.

Early chapters of our history describe how people movements created cities. Economic developers seldom reflect that the initial strategy for any jurisdictional economic developer sitting alone in an empty plot of land is to con some fool or business into moving next to him. City-building is a dominant theme in the history. City-building is not usually thought of as economic development strategy—but it most certainly is.

For economic developers, city-building is history—“no more than a dream remembered … now gone with wind”.  But America constantly creates new cities: suburbia-exurbia, Dell Webb-style retirement communities, new urbanist communities (Seaside Florida), and planned communities (both private and public) such as Columbia Maryland, the Woodlands Texas, and Irvine California. Los Alamos and “The Girls of Oak Ridge Tennessee” also come to mind. Gold rushes have been replaced with oil/gas fracking, and Silicon Valley provides a place for geeks to “dream such stuff as dreams are made of” (Prospero in the Tempest—not Hilary Duff).

Population movements forged our infamous jurisdictional political culture. Settlers built cities, approved state constitutions, and obtained the original municipal charters. City-building is what inspired boosterism and community image attraction programs. But City-building is not just attraction; it also requires infrastructure. Infrastructure must be installed to accommodate new populations and firms. Infrastructure is “the gift that keeps on giving”. Its initial installation is just the beginning and, putting aside upgrade and modernization, infrastructure is sensitive to population mobility. Reverse population movements created a present-day crisis in our rural communities, and bombed out neighborhoods in Detroit. Decades after 1990 another huge burst of immigration exerted major effects upon America’s labor market and offered the potential that by 2050 the ethnic makeup of America would be vastly changed.

The plight of immigrants launched a series of reform movements, several of which —housing, garden cities, public health, parks, playground and recreation–dovetailed into a mighty stream of contemporary economic development (community development). Immigrants compelled port cities to create port authorities—the first governmental economic development agency. Immigrants created the workforce for the new industrial city— threatened revolution, social instability, labor unions, and social mobility. We owe a lot to population movements.

Internal Population Migrations

There are all sorts of internal migrations described in the subsequent chapters. The famous half-century long Great Migration for example, arguably impacted economic development and our cities as much, or more, in the twentieth century than immigration. Consider as “alternate history” what our cities would be without the Southern Diaspora. Also population mobility engendered by the federal government’s dispersion of manufacturing and military facilities during World War II made the subsequent rise of the Sunbelt practically inevitable. Less noticed has been a “return” migration which repopulated the “New South” and continues to fuel growth in the South and Southwest. Florida’s foundations rest on internal population migration and now upon immigration; it is our third largest state.

And then there is suburbanization. Seldom associated with “population migration”, that is precisely what it was (is). By 1950 more Americans lived in suburbs than Big Cities. By 1970 nearly twice as many Americans lived in suburbs than central cities. Suburbanization, as far as economic development goes, not only means suburban economic developers received pay checks, but that all economic developers must contend with people and firms having alternatives within a metropolitan area. Consider also as an exercise in “alternate history” if annexation had worked, and there were no suburbs? That would have been wonderful—wouldn’t it??? Wait a minute, does that mean all those mediocre, conformist, boring, rich, racist Neo-Liberals would now live in the central city?

In this history, I develop a type of internal migration that has proven important to economic development.  I label it “generational or cohort mobility”. Generational mobility refers to the continual “coming of age” of young adult cohorts seeking a new start to better express the values and world view forged by events and dynamic forces prominent in their formative years—either that or they want to put as much distance as they can from their parental units.

Generational mobility could be Richard Florida’s “creative class” (Florida, 2002), and Horace Greeley’s “Washington is not a place to live in. The rents are high and the food is bad, the dust is disgusting and the morals are deplorable. Go West young man, go West and grow up with the country” (Greeley, New York Tribune, July 13th, 1865) as well. The Great Migration’s human tale described by Isabel Wilkerson’s, the Warmth of Other Suns (Wilkerson, 2012) demonstrates the complexity of motivations associated with population mobility and support our belief that generations coming of age was a significant factor in the transformation of the polity and economy of the South.

Decline in population (the dark side of the force) elevates the priority afforded to economic development in the jurisdictional policy process. Chronic job loss and population decline is the visible expression of a deeper loss in economic meaning. This fear troubles those of us who love what are now labeled as “legacy cities”. “Place” in these instances no longer seems to matter. These cities no longer enjoy access to the economic engine of the national economy. While job creation in this environment may well be a chimera, the economic developer is tasked with it anyway by a community desperate to regain its former position in the urban hierarchy. Population mobility creates winners and losers.

 

Competitive Urban Hierarchies

Municipalities and counties are the system’s floor, and by definition, they are the sliced and diced fragments of dispersed power and diluted impact. Worse, sub-state jurisdictions are perceived as primarily service-delivery vehicles—they manage the after effects of higher status policy approval. Yet, local communities feel the effects of social and demographic change first, and are closest to the values, expectations, and beliefs that constitute a political culture upon which a nation rests. In economic development policy, a sub-state jurisdiction is, “as a ship”, charting its own course, confronting the turbulent seas of capitalism and global change.

The reality behind this metaphor is obvious. If the turbulent seas get it into their mind to sink the ship—it’s sunk. Don’t screw with Mother Nature. Sub-state jurisdictions are not the master of their fate—but they can, indeed must, make their way through the seas as best they can. That is the bottom line metaphor for sub-state (and state) economic developers. They cannot let themselves simply bob and plunge, driven by waves, winds and currents as mere flotsam. Municipalities, counties, and states must figure out where they want to go, and plot how best to get there. Their ships have rudders and engines; that is what economic development strategies, tools, and programs provide to the community. But if global economics were not sufficiently dangerous, there is yet one more force reaping potential havoc on state/sub-state jurisdictions—they compete with each other.

Thus our third driver is something labeled “Competitive Urban Hierarchies”. Competitive Hierarchies comes in several forms ….

Economic development strategies can be hugely affected by competitive hierarchies. Urban renewal, for instance, was utilized to preserve the primacy of Big central Cities within the regional hegemony over their growing metropolitan suburbs. Business climate, a well-known principally state-level economic development strategy, is primarily driven by perceived pressures and opportunities flowing from competitive geographic and market hierarchies. In the twenty-first century economic developers in many cities seemingly cope with a perceived control of municipal politics and economic development policy by capitalist elites (Neo-liberal, Two Cities, and Luxury City) (Brasch, 2011). Economic hierarchies, we discover, tend to be ideologically perceived.

The relentless grinding of sectors and industries by a comparative advantage/free trade global market hierarchy is only the latest manifestation of hierarchical competition that tosses our two ships in seas such as made the “Edmund Fitzgerald” famous. But hierarchies also provide good fortune for those they favor. The now-forgotten “rise of the sunbelt” carried with it not only the toppling of the old-Civil War regional hegemony, but an opportunistic “we have arrived—deal with us” grab of status, image and power by younger, often Privatist, cities and metro areas. To them successful economic development made a statement to the world, or at least to their former Northern oppressors.

Observing how jurisdictions have actually responded to competitive hierarchies reveals that despite the deep-seated tendency to see competitive hierarchies in negative images, such as troubled seas and vulnerable, almost desperate ships, the reality is more complicated. Some jurisdictions see opportunity, and in other cases aspire to preeminence over perceived rivals. Most cities are content to successfully cope with competitive hierarchies. Others, however, resent the pressures of competitive hierarchies and strive to repress or displace competitive feelings. Such cities seek to create an “island”, a sanctuary, where the vicissitudes of the outside world are minimized if not repealed. They try to protect their disadvantaged who are the ones most abused by competitive hierarchical intrusion. It is in these varied responses that we more clearly see our Mistoffelees of political culture in economic development policy-making.

…. 

Rational and Irrational Contexts of Competitive Hierarchies

A sports team unexpectedly leaves town. The Census Bureau reports loss of population. A TV comic ridicules a community and depreciates its residents. A storm dumps sixty inches of snow or a fire burns down homes on a hillside. A city goes bankrupt or threatens to. A resident’s son or daughter leaves town. A factory closes down, a new firm moves in. Neighborhoods change. Negative events (Lebron goes to Miami—and comes back) cut into a community’s fabric and bring it joy or pain. Cities tend to be inward looking; except for sports. Seldom are they the least bit aware of what’s going on in the city down the road–except when media alarm bells ring! Facts, emotions, and past, present events and future hopes and fears are interwoven into economic development policy-making.

Urban residents personalize events and take them to heart. However they feel about its politics or quality of life, the city is their home. There is such a thing as civic patriotism. Residents have their own sense of where their city fits into the cosmic scheme of things—and when it doesn’t fit that image, residents want someone to do something about it. Disruptive forces hit states and municipalities in ways that obscure their nature, clouding assessment and perception. Drips of new residents appear, sons and daughters leave for college and come back only to visit, a deteriorated neighborhood reaches a tipping point, more and more cars are on the road, streets flood, companies close down—all of which, with each passing year intensifies, and builds on itself.

The Policy World may struggle with boosterism, self-interest, greed and parochialism; they exist and they are not going away. When change occurs, positive or negative, the demands and supports underneath a city’s policy process shift ever so slightly. City elites react and citizens/ residents may, or may not; but, many will sense that something’s afoot. Coping with perceived change and reaction to change is what economic development is all about. Ours is mostly a reactive “profession”.

Sometimes change hits with a sledge hammer; other times it’s like slowly boiling the proverbial frog. Residents attach meaning to symbols and outward manifestations, as symptoms, of a much deeper problem. Just what has gone wrong or right may not be evident, except in hindsight—defining a problem or opportunity will evolve as the situation persists. Even if correctly identified, which appears rare in our history, change, as we are fond of saying, does not come with an instruction manual. When it comes to confronting change, jurisdictions can make mistakes. Communities undergoing change task their economic developers with addressing symptoms, waging past wars and symbolic-emotional fears–missing the solution to the problem. Change when it occurs affects city residents and elites differently, at different times—not surprisingly they will expect different solutions.

Our history suggests that economic development frequently fights the wrong war or constructs an imagined war that exists mostly in the minds of the residents and policy-makers. Early definitions of problems/opportunities are incomplete and often mostly incorrect. Cities define their problems differently; and, to no surprise, respond differently. Our history strongly suggests that the Policy World plays an important role in the quest for problem definition and solution. Both definitions and solutions, however can follow from the then-Policy World paradigm of “what’s happening now”. And Policy World definitions and solutions can suit the purposes of jurisdictional “players”. The ideology du jour usually sneaks in, identifies evil ones responsible, and victims—policy outputs, programs and strategies follow. The cycle seems endless in our history.

Fundamentally, the fear is that the community is flotsam on the sea of global change—coping, seizing opportunities is what economic development can offer. Cities, our home communities, to some extent ought to be captains of their fate. The perception of being able to impact fate and temper/harness outside forces is what jurisdictional economic development is all about.  The belief that economic development can accomplish this herculean task is nothing but foolish arrogance. Fortunately a very large gene in our professional DNA is foolish arrogance.

 

Policy System, Process and Culture:

[the Chapter One Module is little more than a fleshed-out Eastonian systems model. It doesn’t pretend to be otherwise. That’s where political culture comes from. Our stress on culture as a prime influence on ED policy-making no doubt takes some getting used to. The structure of the state and local policy system begins with political culture, which I assert comes in two “macro” flavors, with a host of variations or sub-types. Individuals and policy systems can be hybrids expressive of each simultaneously. Boston has Privatists and Houston has its Progressives. The roots of political culture run deep, and while a policy system’s dominant culture can obviously change or shift, the old one leaves its legacy, and change by definition is not permanent. I begin with the two “macro” flavors of political culture]

 

Privatism and Progressivism

The second fabric to offer meaning, order, and explanation to our history is the jurisdiction’s policy system and process. The jurisdictional policy system is a book of its own, so it is not possible to examine all its features and contributions in our economic development history. Instead, this history shall, actually must, concentrate on two principal elements of the policy system: the (1) the impact and explanation of how political culture has fostered two rival ways of conducting sub-state economic development, and (2) the role of elite policy actors in the making of policy. These two elements are selected for inclusion in our history because each has played an observable, consistent, and incredibly important influence in the events and the activities detailed in the chapters.

The Political Cultures of Economic Development Policy-Making

From the start the reader should understand this history asserts there is no single way to do American sub-state economic development; there are, at least, two—and they have been evident throughout our history. These “two ways” are the proverbial “ships passing in the night”.  Each ship has a name: Progressivism and Privatism. They do not much like each other! It should not be surprising that each of these two macro-political cultures has “supported” or “generated” its own approach to how economic development be conducted. That will not be apparent at first; it will only become obvious well into Part I of this history. For various reasons Privatism will dominate the nineteenth century, and from Privatism a “mainstream” or “classic economic development will emerge. In its good time a Progressivist approach economic development, called community development” will appear[i]. Each approach to American economic development chases its own goals, embraces different strategies and programs, and operates in its distinctive network of EDOs and CDOs. Each serves different constituencies. They do not like each other. Presently they are at war. …

it’s worth specifying distinctive elements which separate them. The two cultures result from choices between whether:

  • economic development should be led by, and conducted through, (1) private-sector leadership and public-private EDOs or (2) government and government-directed EDOs
  • (1) economic development directly benefits private firms so that hard-working, risk-taking individuals can acquire wealth from which the community as a whole can prosper and grow; or (2) economic development that directly benefits the community, not the private sector, preferring instead to benefit people, principally thru non-profit and community-based organizations
  • (1) the community competes against other communities for wealth, status, and economic growth—and that without growth community decline is inevitable; or (2) economic development should empower economically/politically disadvantaged residents unable to effectively compete in society, the economy and politics,
  • (1) economic development will be most effective if its initiatives are congruent with capitalist principles and processes by enhancing profit-making by firms, or (2) should follow from rational planning and analysis that addresses gaps and weaknesses that flow from capitalism and company decisions

A Privatist jurisdiction is wary of government being the primary agent of social and economic change. Limited government is preferred and business elites are invited to participate in the making and implementation of economic development policy. Private leadership is preferable to government in economic development; limited government preferable to activist, redistributive government. To a Privatist, prosperity and economic growth are best achieved by a dynamic private sector which creates wealth and opportunities for citizens and residents. The community will prosper through individual hard work, innovation, risk-taking and entrepreneurship. The community benefits from providing a supportive infrastructure and low cost environment to private enterprise.

For a Privatist, inequality provides motivation for individuals to participate more fully in the economic sphere. The community should level the playing field for firms so they can compete with firms in other communities, or create a supportive risk-taking environment (often characterized as low taxes, a willing and cheap labor force and less regulation). In this perspective government can partner with business or business can direct economic development to the benefit of the private sector and the community. As business competes with other private firms, the community competes with other communities for limited resources, population, wealth-creation, and economic growth—failure to compete leads to stagnation, decline and in the worst case, a community “death”.

Progressive communities, conversely, see the jurisdiction, not only as their place of residence, but as polis, in which citizens working together benefit individually/collectively, achieve individual meaning and economic prosperity–together. “It takes a village” taps this conception that individuals achieve personal empowerment by inclusion in a caring community-polis. If each element of a community “does her thing” well and provides benefits to community, members of the community will prosper and provide meaning and support to its members. Business is a member of the community and its actions and decisions must reflect community interests and values.

Progressivist economic development confronts inequality resulting from residents unable to effectively participate in community prosperity. A requirement imposed on Progressive economic development is that it must empower the least advantaged. That requirement is also expected of its private sector and firms. Raising the capacity/prosperity of the least advantaged may be the ultimate purpose behind Progressive economic development. Progressives see the private sector less as an engine of growth and innovation, than as society’s vehicle for distributing the benefits of growth and prosperity to community members. There is mistrust of the profit motive, propelled as it is by greed, is perceived at cross purposes with community economic development goals.

The Engine of Economic Development Policy: the Jurisdictional Policy System

The three drivers of economic development policy (the industry/sector profit cycle, population mobility and competitive urban hierarchies)—and the two political cultures (Progressivism and Privatism) are raw ingredients for economic development policy outputs. These dynamics in conjunction with the jurisdiction’s intergovernmental environment are processed into strategies, tools, and programs—the outputs of economic development policy-making–by the jurisdiction’s policy system.

The policy system is stolen from political science and policy analysis. But as promised earlier, the reader will need to be familiar with only a few concepts to draw understanding from our history.  Each unit of local government (counties, villages, cities, towns) by definition contains a “policy system” (an unincorporated area usually has a county for its jurisdictional policy system). So for all practical purposes, every square inch of the nation falls into someone’s policy system. “Strategies, tools, and programs”—are the outputs of the policy process produced by each jurisdiction’s policy system. They shall be defined below.

The jurisdictional policy system is grounded in a specified, boundary-defined geography. This is what is meant by “place-based economic development”. Our federal constitution determined that sovereignty over sub-state entities is exercised by state government, defined by state legislation and enforced by the state judiciary. Sub-state jurisdictional policy systems are “creatures” of the state policy system—and the reader should recognize contemporary sub-state economic development, despite notable federal initiatives and laws, still firmly remains lodged in the fifty state jurisdictional systems. …

A jurisdictional policy system contains the network of structures, actors and processes within a specified geography that make decisions concerning policy areas such as education, criminal justice, welfare, housing, land use/planning/environment, tax/fiscal, civil rights—and economic development. A policy[ii] is defined as “the behavior of some actor or a set of actors, in an area of activity” (Anderson, 2006).

Anticipating that most readers will instinctively equate government with a policy system, I suggest that would only be a partial description of the typical American sub-state policy system, at least as it applies to economic development. Through most of our history, private entities made economic development-related policy decisions and government willingly and consciously has delegated economic development decision-making and program implementation to private and semi-private entities. That is why I do not refer to the “public policy system”, but rather call it the “policy system”.

There is considerable variety in types of policy systems found at the local level over the course of our history. The chief influences in the character and configuration of a municipal policy system is (1) its form of government; (2) the coalitions that supported it; (3) the elites elected/appointed/ instrumental to policy-making; (4) and the various other participants/actors in the formation and implementation of its policies and programs.

Until surprisingly late in the nineteenth century, American municipal government possessed insufficient “capacity” to operate a modern policy system. This incapacity of pre-Progressive Era municipal government to formulate and implement independent economic development policy meant that it was usually handed off, delegated to private EDOs and individuals in various government hybrid, public private bodies, authorities, independent commissions and the like. Indeed, through the nineteenth century—and well into the twentieth—the search for structures that allowed for a public-private partnership between private and government was an important feature of our economic development history.

During and after the Progressive Era, a number of policy systems developed—for example an amazing variety of political machine dominated policy systems, a weak mayor system, social reform mayor, a strong-mayor system, charismatic mayor, commission, city manager and a number of hybrids. Each system constructed policy using its own processes, decision rules, electoral systems, bureaucratic configurations, different combinations of policy actors with varying degrees of access into decision-making. For the most part it will not be a primary area of concern in this history to elaborate on the characteristics or distinctive outputs of each type of policy system.

Economic Development Outputs: Strategies, Tools and Programs

Outputs, relevant to economic development are strategies, tools and programs. These outputs deal with, and seize opportunities from, the drivers or forces of change that arise from the policy system’s environment. Outputs, in theory at least, are intended to accomplish certain “goals”. But goals, as conventionally known, are an obstacle for understanding sub-state economic development. State and sub-state jurisdictions are diverse and complex; they face multiple problems simultaneously thus inhibiting a composite Holy Grail-style single goal. Economic developers seek many Grails. Any community simultaneously pursuing multiple goals entrusts its EDOs with several motivations/ goals/strategies for each of its programmatic initiatives. An attempt to posit one or two system-wide goals (such as job creation or raising taxes) does not match reality “on the ground”. That is why we speak of economic development strategies—not goals. A strategy, by definition, can combine several “goals” and thus serve purposes of many policy system actors.

A variety of “goals” flood the economic development policy area and policy systems. These, include population growth, increased tax revenues, competing with relevant cities, aspiring to a level of status in the regional/national hierarchy of cities, developing clusters or diversifying one’s economic base, job creation, neighborhood revitalization, people-empowerment, wage growth, infrastructure upgrading, physical modernization, innovation,  creating the “right” kinds of jobs, and fostering a proper “business climate”. There are other potential goals that can enter into a strategy or program. It is possible that a single speech/press release describing an economic development initiative might touch on many of these “goals” before the speaker leaves the podium to cut the ribbon. Any quest to find ‘THE goal” is certain to be as elusive as searching for Monty Python’s Holy Grail.

A Strategy

Economic developers function around strategies. IEDC certification is chiefly demonstrated by mastery of several key economic development strategies. The standard economic development strategies are: city-building, attraction, business climate, economic gardening, tourism, business retention, infrastructure, development and redevelopment, workforce and labor base skills training, specific firm assistance (loans and other assistance), entrepreneurial, small business and start up development, innovation and knowledge-based economies, planning, and sub-municipal (neighborhood/CBD) development/ revitalization—and community development. There are others.

The strategy is the “why”, the rationale, the theory justifying what we do. Strategies are often rhetorical in nature and typically are found in economic development plans, political campaigns, party platforms, on web sites and all sorts of collateral material, and media press releases. Strategies are the front door of American economic development. A strategy of the same name can differ widely in its specifics and purposes as implemented across cities, states and regions and can easily change with the appearance of a hot, sexy book such as this one.

Strategies, over time and place, come and go—like Michelangelo.

A Tool

Tools are the workhorses of economic development; the microprocessor of all economic development programs. Tools make a strategy operational and credible. EDOs are usually a creature of the tools in its arsenal—arrows in its quiver. Most EDOs were originally established to house the tools necessary to accomplish its initial purposes/strategies. Eminent domain, tax differentials, grants, venture capital, business counseling, revolving loan funds, bond issuance, zoning/land use regulations, property ownership/management/leasing, tourist site or event, a training course or curriculum, infrastructure installation/upgrading, construction management, and property write downs  are examples. Tools often require state authorizing legislation, invite legal regulation, and require specialized expertise. Tools are housed in an economic development organization (EDO) that is legally empowered to use the tool.

Tools are the instruments that economic developers employ to implement economic development strategies and programs. The same tool can be used one day for one strategy, the next day for another. Customizing a tool merely requires adjusting eligibility, terms and conditions, marketing and underlying rationale. Probably tax differentials are the most common tool. One of the more important lessons derived from our history is that while economic developers think and talk in terms of strategies, our history has usually revolved about tools.

A Program

A program is constructed from strategies around staff, resources, and one or more tools with defined terms, eligibility, service area and other such administrative factors. Programs are the core unit of policy implementation. There are way too many programs to list. Examples are a TIF district, an EDZ, export financing, MEP, accelerator-incubators, a visitation program, branding, a media placement, web-database demographic sites directory,  MBE loan fund, a downtown event, basic skills training class, venture capital placement, an innovation workshop, a waterfront redevelopment project, etc. Programs are the meat and potatoes of economic development.

Programs reflect the political culture of the jurisdiction, the State policy system, and most often are shaped by the tools/resources available to the EDO. Throughout this history the reader will encounter the expression “a rose is not a rose”. This is a takeoff on Gertrude Stein’s quote and it is meant to convey that programs, tools, and strategies with the same name/title vary enormously among states and even jurisdictions within the same state. For example, all but three states have an authorized a TIF program; but TIF in practice and design varies hugely among states, and intensity of its use by jurisdictions within a state also varies. A realistic understanding of economic development policy-making lies in appreciating its variation, why variation exists, and what effects that variation cause—rather than mindlessly citing the meaningless fact that forty seven states have passed something they call TIF and they share x or y statistical commonalities.

The dynamic element of a program is the tool(s) required for its use. Tools have been around forever. Practitioners build their careers around tools, the expertise in using tools, and fitting tools into programs and strategies. National associations exist, based on tools (bond issuance). What tools an EDO commands arguably define its constituency, expertise, and its visibility to the outside world.

 

In many ways, this history is a history of economic development tools, clothed in programs, and wrapped in strategies.

Policy Actors

This history will seldom involve itself in the internal dynamics of the urban policy system—that is reserved for another book. Harder to ignore, however. is the role of various individuals/public officials/government bodies/institutions/EDOs/ and policy participants in the description or telling of the history. “Stuff” does not happen without policy actors getting involved. The label “policy actor” is attached to “players” who make, advocate, formulate, and implement economic development policy and strategies, operate tools and programs. Our history is saturated with policy actors. Some policy actors appear more often than others: chambers, the so-called one percenters, various EDOs, mayors and city councils, labor unions, growth coalitions/regimes, and various segments of the “business community”. These are the individuals and entities that trash it out within the policy system and through their efforts fashion the various policy outputs described previously.

In anticipation of what lies ahead, the reader is alerted that (1) the most consistent, and impactful, participants in the economic development policy system are business and government elites; and (2) an important factor in how “open” the jurisdiction’s policy system is to different elites and actors is affected by the dominant political culture/or cultural consensus of the community. Privatist political cultures raise the status of private elites and business, in effect putting hurdles in the way for other participants. Progressive political cultures actually tend to push business out of the policy system, and open access to other participants like unions, neighborhood and community organizations, citizen and advocacy organizations and non-profit/government bodies.

To argue from this that economic decision-making is “closed” probably overstates the situation; but, bias and impediments do constrain the involvement and participation of elites, never mind citizens and taxpayers. One should not think the economic development policy system is “open”. The effective mechanisms for citizens and taxpayers are elections, political parties and elites you can access. The nature, composition, sector configuration and culture/value/policy predisposition of the typical jurisdiction’s business community/economic base varies over time and place. There is no justification for believing that “the business community” in one city or state is necessarily identical to that of another city or state—particularly in different periods of time. This is a serious issue for us in this history. …

[i] The reader is warned. There are Privatist forms of Community Development and Community Developers can use Privatist tools and strategies—but they serve different goals and constituencies.