Ideas in Development

Growth is good. Our business climate is bad we need to cut our UI benefits and taxes. We have too many unions. Our schools must improve. Crime is hurting out business.

All these statements can be political and lead to policy and ideological debate.

Why is this important to point out? Often economic development veils itself as apolitical apple pie and motherhood. Moreover, label something (e.g., welfare, taxes, incentive accountability measures) as harmful or helpful to economic development and you have blessed it or cursed it in most locales. This field does a good job of sharing lessons regarding new tools and a middling job in sharing academic learning, but its political dispositions are rarely addressed in articles, books, and meetings.

This piece will do just that. It will discuss the varied ideological worlds of economic development. First, it states a few theses on why domestic sub-national economic development policy and activities matter. Second, it provides more background on the concept of ideology. Third, it analyzes briefly each ideological perspective, noting its vision, values, theoretical and research underpinnings, programmatic reforms, and constituencies of support.

WHY DOES ECONOMIC DEVELOPMENT MATTER?

Economic development policies, programs, and practices matter to America for a number of reasons.

1. They are big business on the state and local levels, involving billions of dollars in public funds that are directly spent or lost, due to tax incentive. Researcher Timothy Bartik believes that business attraction subsidies for state and local attraction programs generate less national tax revenues than they spend. (Sub-federal jurisdictions may still benefit, of course, depending on who is picking up the bill.)
2. Effective programs can aid those places suffering from economic distress and make development more even. Indeed, according to Dr. Ann Markusen in recent Congressional testimony, there is a growing consensus among economists that there is economic value to the sense of place and that communities in distress have physical and social assets that can be harnessed to new productive activities with timely interventions and guidance.
3. Indeed, well-run micro-economic efforts and strategic investments can raise productivity, foster innovation, correct market imperfections, create more middle-class job opportunities, and promote non-inflationary growth by targeting lagging community economies.
4. Economic development can generate additional tax revenues, which can be used to make priority investments in environmental conservation and protection, better schools and universities, an improved safety net, and so on.
5. Wise economic development should explore more environmentally compatible approaches to growth and job generation.

BACKGROUND ON IDEOLOGY

Michael Freeden in his wonderfully concise, but thorough book, Ideology: A Short Introduction, defines and describes ideology as follows:

• Ideologies are simplified maps of political, economic, and social controversy. They are the average citizen's way of expressing their political world view, philosophy, and positions on the issues of the day.
• They are central to political life and will not go away.
• It is a set of beliefs, values, opinions, ideas that (1) exhibit a recurring pattern, (2) are held by significant groups, (3) compete over providing and controlling plans for public policy, and (4) do so with an aim of justifying, contesting or changing the social and political arrangements and processes of a political community.
• An ideology is a wide-ranging structural arrangement that attributes decontested meanings to a range of mutually defining political concepts. (This means that the proponent of a specific ideology, such as libertarianism, tries to persuade others to buy his definitions of liberty, equality, the American way of life, the importance of free enterprise, the role of the government in supporting markets, and so forth. Decontested means removing other meanings from the contest, that is, this is what the words, ideas, and ideals ‘really' mean.)
• Ideologies compete over the control of political language as well as competing for public policy; indeed, their competition over plans for public policy is primarily conducted through their competition over the control of political language.

According to Freeden, ideologies are not just expressed in words the flag, civic rituals, music, dance, and visual arts can also carry their message. And because they are complex combinations of ideas and values, a particular ideology, such as socialism, possesses continuity, due to efforts by ideologists to make the view more coherent, but can also evolve and even unravel, given certain events (e.g., the destruction of the Berlin Wall) or incisive criticism (e.g., Hayek's critique of socialist pricing mechanisms).

Because any ideology is a complex system of linked concepts, an argument over free trade and NAFTA or state and local manufacturing firm closings can transform itself into a free versus fair trade philosophic, economic, and political debate and spill over into the debaters' views on:

• Ideologies are simplified maps of political, economic, and social controversy. They are the average citizen's way of expressing their political world view, philosophy, and positions on the issues of the day.
• They are central to political life and will not go away.
• It is a set of beliefs, values, opinions, ideas that (1) exhibit a recurring pattern, (2) are held by significant groups, (3) compete over providing and controlling plans for public policy, and (4) do so with an aim of justifying, contesting or changing the social and political arrangements and processes of a political community.
• An ideology is a wide-ranging structural arrangement that attributes decontested meanings to a range of mutually defining political concepts. (This means that the proponent of a specific ideology, such as libertarianism, tries to persuade others to buy his definitions of liberty, equality, the American way of life, the importance of free enterprise, the role of the government in supporting markets, and so forth. Decontested means removing other meanings from the contest, that is, this is what the words, ideas, and ideals ‘really' mean.)
• Ideologies compete over the control of political language as well as competing for public policy; indeed, their competition over plans for public policy is primarily conducted through their competition over the control of political language.

(Thanks to economist David Finn for this list.)

SIX IDEOLOGICAL WORLDS OF US ECONOMIC DEVELOPMENT

The economic development arena boasts a number of ideologies. Like my recent article on Economic Development as Metaphor, this is an interesting place to begin exploring the nature and impact of the economic development field and policy. This is more of an exercise in political theory, rhetoric, and platforms, than it is an investigation of the pros and cons of the scholarly theories and models in academic economic development studies. (These theoretical and empirical research concerns, advances, and unknowns are important and will be treated in future articles.)

Given the scale of the issues involved, I temporarily ignore federal policy and focus initially on the economic development roles of America's states, from Hawaii to Maine. The following discussions are very broad-brush. And I have arranged them, roughly from most conservative (if you count libertarians as such rather than radical) to most radical (e.g., left-wing and/or green).

1. The limited government perspective. This camp believes that a smaller public sector, low taxes, and more business-friendly regulation are the key elements of a growth economy. Its slogan could be: Government is usually the problem. Get out of the way. Regarding distributional issues, it is merit-based, not need-based. Divided to some extent by the business incentives question (some do not like the industrial targeting that goes on, the unfairness to unsubsidized firms, corporate welfare features, etc.), other limited government advocates see tax-based development subsidies as a means of shrinking government and the revenue bite of the state. This is a supply-side economics strategy with a heavy concentration on the importance of motivating sufficient savings and capital investment. Economic base theory supports the views that strongly embrace attraction and incentive strategies. Public choice theories have generally captured this group's allegiance, resulting in a very cynical view of elected officials and public bureaucrats. The public interest is also not a concept that these folks embrace. They tend to side with former Prime Minister Margaret Thatcher, when she said that there was no such thing as society only individuals with their narrow and enlightened self-interests. Like the neo-conservatives, they are big on pointing out the dangers posed by unanticipated negative consequences of well-intentioned reforms. (Good intentions are not enough.) This group views liberals, progressives, and socialists as too entranced with the potential of social engineering. They emphasize freedom from more than freedom to. The limited government camp possesses a strong confidence in the market and private property as the best mechanism for raising the standard of living, fostering innovation, rewarding hard work and sacrifice, and avoiding governmental tyranny. They almost always can be counted on as pro-growth in any development debate over the pros and cons of a new industrial, commercial, and residential development. In summary, this is a right wing view and vision, running the spectrum from a largely stateless anarcho-capitalism to a moderately conservative neo-classical view.

   Principal strengths: Get government to focus on a few things it can do well; in particular, creating a good climate for markets and enterprise. Although a bit overdone, recurrent conservative dispositions and assumptions such as: human imperfections, epistemological modesty, instincts to conserve institutions conservation, custom, family, faith, and individual initiative and responsibility, should have their place in even those liberal of thinking, planning, and acting.

   Weaknesses: Underestimates the harms caused by markets. Insensitivity to the dangers posed by increased inequalities of wealth and income. Libertarianism's vision of a stateless society seems very questionable politically.

2. Economic development as a profession. Here we are talking about state, regional, and local economic development practitioners. Their slogan? Let me do my job and give me another tool to attract, grow, or retain industry. The social capital that they represent is critical for place-based development. They tend to be more than a bit behind the academic literature and to operate more on the basis of habit, norms, intuitions, salesmanship, and copying what seems to work. Their job description is getting increasingly challenging as they are supposed to possess skills ranging from group facilitation and consensus-building to location marketing, from analyzing socioeconomic data to designing and overseeing a revolving loan fund. Divided souls, they tend to support new government programs, more funding, and experimentation with new tools (e.g., tax increment financing, etc.), strongly endorse the prime directive to improve workforce skills, recognize the importance of amenities for development, and wish that they worked in a world without incentives. Yet, they tend to line up politically with preserving and expanding business subsidies, tilt in the direction of tax cuts in all circumstances, and generally support curbing environmental and land use regulations.

   Principal strengths: They are on the frontlines. They can be very practical. They possess many if not most of the skills for 21st century development.

   Weaknesses: First is the tendency to shoot at anything that flies and claim anything that lands. They are inordinately focused on attraction strategies, to the detriment of other approaches. They often pay little attention to who really benefits from a development project, overestimate the trickledown from conventional approaches, and are at times insensitive to the needs of the economically struggling and disadvantaged. Indeed, they are not as nonpartisan as they make out to be and they could be doing much more to embrace the need to link workforce development with their work and throw their weight behind pre-K, K-12, and post-secondary education reforms and support.

3. The New Democrat entrepreneurship and public goods camp. This label is a bit type-casting and misleading. Their slogan might be: We can make markets work for the greater good as the era of big government ends. This framework is best expressed in Roger Vaughan's classic work, The Wealth Of States. Its model of a dynamic and inclusive economy is one-part an Austrian economics view of the entrepreneurial discovery process, a second part that emphasizes the importance of clear, minimally distorted prices, information, and incentives, a third part of investment in public goods, and a fourth part of greater awareness of the inevitable trade-offs between different policies environment versus jobs, safety net versus moral hazard. It often supports some of the Public Choice view on the dangers of governmental rent-seeking. It has lost the Democratic Party market phobia and embraced a re-invent government ethos. Theory-wise, they tend to support academic frameworks, such as New Growth Theory, Flexible Specialization, Innovation Economics, and Entrepreneurship. This school is also very focused on human capital strategies.

   Principle strengths: Entrepreneurship developing new products and services is almost synonymous with the dynamic of innovation and rising productivity that characterizes healthy market economies. It carves out an easier job removing barriers and creating the right conditions for development and not trying to blue-print results as industrial policies seek to do.

   Weaknesses: Sometimes letting the gales of creative destruction happen and waiting for the upswing of new businesses and products will be too slow, hazardous, and painful. They tend to downplay the value of saving and modernizing existing industry.

4. The Old Democrat Populists. To be honest, few state-based policy groups in the progressive EARN (Economic and Analysis and Research Network) and SFAI (State Fiscal Affairs Initiative) networks really have an economic development agenda except to curb business incentives and invest in education, training, and infrastructure. Most are content to push for their traditional safety net protection efforts around health care and unemployment insurance, progressive taxation, and minimum and livable wage campaigns. So, it's more accurate to describe their platform in this arena as an economic and social agenda. Their slogan could be: It's far better to be real Democrats than counterfeit Republicans. The citizens know the genuine article. Although they are, in my opinion, on the side of the angels, they are frequently inhibited by constituency pressures, habit, and even fear from embracing progressive new approaches. (They worry that we will lose what we have in place, inadequate that some of it is.)

   Principal strengths: Their integrity and concern with social justice. Their working families agenda is spot-on for recreating today's version of a movement of the majority.

   Weaknesses: Badly in need of a jobs strategy to better answer bad business climate critiques.

The High Road. This is a more interventionist view, which does not trust that our highest standards for sustainable development will be achieved unless we close off the low road of union-busting, tax-avoidance, lobbying, risk shifting behaviors in the business community, while we create incentives for the high road of a pristine and viable environment, greater equity and opportunities for the economically disadvantaged, and high levels of productivity and employee motivation. Although the ‘high road may not entail pursuing industrial polices that were debated in the late eighties when the industrial Northeast-Midwest was pulverized by restructuring, closings, and downsizing, incentives and expertise will need to be marshaled to move average American business practice to best practice. This camp is serious about strategies, involving additional R&D spending, better technology transfer, improved development finance intermediaries, serious investments in workforce skills, close partnerships with the private sector and refocused business trade associations, employee ownership and profit sharing, high performance workplaces, pollution prevention and waste reduction, and lifelong learning. Higher environmental quality will be achieved via carbon auctions, bio-regional Nature Conservancy-style habitat protection plans and partnerships, and a steady move toward greater energy independence. Its slogan could be: Pave the highroad, close the low. Their song: Get Your Kicks on Route 66.

Principal strengths: Great realism need for carrots and sticks. Firms need outside help to embrace high road market coordination solutions, deal with free riders and traitors.

Weaknesses: Inadequate talent pool to pull it off in many places. Heavy lifting politics to get corporate stewardship standards imposed will be required. Doing the latter will also create challenges in getting real business participation.

5. The small is beautiful Community Economics crowd. Although it shares many elements in common with the high roaders, it's much more dedicated to decentralization and community and regional self-sufficiency in its policy choices. Its animus against materialism is greater than the other camps. It is very uncomfortable with any cooperation with mid-sized and big business. Opposed to the WTO and almost the entire globalization policy agenda (including the conservative and liberal versions), it tends to be protectionist. A big believer in social entrepreneurship, its hope is probably to see most of the American economy sustained by the enterprising efforts of nonprofits, producer, buyer, and worker cooperatives, community development corporations, credit unions, land trusts, and a comeback of the mutual institutions of days past. The small is beautiful bunch is also intrigued by the opportunities for import substitution, an increased reliance on public procurement choices to encourage more appropriate technologies and strengthened small businesses, ways to keep firms small by the use of tax and regulatory powers. The perspective also reflects a tough stand on sufficiency, intense anti-materialist feelings, deep ecology ideas, and the need for radical lifestyle changes in rich nations. These sorts of changes would transform the US economy and encourage a de-construction of the transnational corporation. Slogan: Still Small is beautiful Economics as if People Mattered.

   Principal strength: Attractive slogan. Homegrown economy strategies can happen anywhere at any time. CDC and community-based economic development (CED) network is a big plus, helping to mainstream this approach and connect with people of color communities.

   Weaknesses: Community and social enterprises cannot run an economy that is America's scale. Dispositions to not take advantage of division of labor, trade, and specialization among some is too autarchic. If you can't get them out of their SUV's, you won't get a near-term adoption of simplicity. The CED movement is stronger on community development and asset building than economic development.

CONCLUSIONS

• Trying to frame its basic message succinctly and accessibly;


• Distill their model of the economy and evaluate it;


• Outline their implicit theory of political and economic change and assess its merits;


• Describe a typical policy platform; and


• Sift through its strengths and weaknesses politically and economically.