Thursday, July 3rd, 2014

Do Cities Really Want Economic Development?

My latest column is online in the July issue of Governing Magazine. It’s called “Do Cities Really Want Economic Development? My conclusion is that in all too many places, the answer is No. The status quo is actually preferred, no matter what people might say.

All we have to do see this is to apply Occam’s Razor to the condition of our cities. What’s the simplest explanation that explains the facts? In any number of places, if you just assume that civic leaders and maybe the broader community itself actually want the place to go down the tubes or at least stay the same, everything else falls into place.

Now it may be that this is really an emergent property of the social system rather than intentional. What’s that saying? “The system is producing precisely the results it is designed to produce.” Maybe Abilene Paradox style, no one really wants the city to fail but collectively everyone ends up choosing decline. But then you see so many examples of crookedness, cronyism, criminality, and self-dealing that pop through into the public view, and the benefit of the doubt starts to crumble.

In any case, here’s an excerpt:

Economist David Friedman once told this joke: “Two economists walk past a Porsche showroom. One of them points at a shiny car in the window and says, ‘I want that.’ ‘Obviously not,’ the other replies.” That is, if the first economist had really wanted the Porsche, he would have bought it. Our choices tell us more than our words about what it is we really want.

Problems are problems, but they are also sometimes solutions to certain sets of questions. One of these is how to mobilize, allocate, and deploy community resources and power. Fighting decline has become the central organizing principle in many places.

Jane Jacobs took it even further. As she noted in The Economy of Cities, “Economic development, whenever and wherever it occurs, is profoundly subversive of the status quo.” And it isn’t hard to figure out that even in cities and states with serious problems, many people inside the system are benefiting from the status quo.

They have political power, an inside track on government contracts, a nice gig at a civic organization or nonprofit, and so on. All of these people, who are disproportionately in the power broker class of most places, potentially stand to lose if economic decline is reversed. That’s not to say they are evil, but they all have an interest to protect.

Consider one simple thought experiment: If a struggling community starts booming, that would eliminate a big part of the rationale for subsidized real estate development, which constitutes the principal form of economic development in all too many places, and which benefits a clear interest group. It might also attract highly motivated, aggressive people from out of town, folks who are highly likely to agitate for better than the current inbred ways of doing business. This would inherently dilute the positions of the current powers that be.

Read the whole thing.

Topics: Economic Development, Strategic Planning, Urban Culture

11 Responses to “Do Cities Really Want Economic Development?”

  1. Matthew Hall says:

    This dynamic is very true in Cincinnati. As downtown and some other central neighborhoods of Cincinnati are getting more privately-led genuinely for-profit development, the old guard is panicked about losing control of ‘their’ town. Cincinnati’s Mayor, John Cranely, openly complained to the local media recently that GE didn’t even talk to him before announcing a new division headquarters to be located in a new office tower to be built in downtown Cincinnati. He was clearly incensed to have been out of the loop. He bends over backwards to gain the support of P & G executives, but works very hard to prevent the building of new market-rate housing in downtown; who want hundreds of new residents who won’t vote for you, right? Cranely doesn’t want growth, he wants control. He’s largely failing in his attempts, but that’s his motivation.

  2. Chris Barnett says:

    They have political power, an inside track on government contracts, a nice gig at a civic organization or nonprofit, and so on. All of these people, who are disproportionately in the power broker class of most places, potentially stand to lose if economic decline is reversed. That’s not to say they are evil, but they all have an interest to protect.

    Trust me, it would be much more lucrative (i.e. in my personal financial interest) to work in market-rate redevelopment projects than having to push and pull subsidies together AND raise money for overhead, on a nonprofit salary. I know someone half my age with far less experience who makes more at an entry-level job in a private development firm.

    Maybe I’m the lone CDC executive who thinks he should be working himself out of a job in a place. But that mindset opens up two distinct career options over time: (1) private development deals in that same place, leveraging specific past due diligence and city/neighborhood goodwill (i.e. ground knowledge); (2) a CDC in another part of down, based on a successful track record leading the effort to turn a neighborhood or area around (i.e. system knowledge).

  3. Chris Barnett says:

    *another part of town

  4. Well put. Dynamic commonly observed regarding nations and empires, but first time I’ve read applied to cities.

  5. Alon Levy says:

    Eh. I think the problem with the article is that you’re essentially stating a few theses – public choice theory, the strong form of revealed preference, and the resulting blame of poverty on the poor (or their representatives) – without really providing any backing for them. A few times, you show that urban NGOs and such have an incentive to keep the city declining, but that by itself doesn’t show that they choose policies that further decline. By analogy, the Obama administration had an incentive to fake the BLS job numbers in the run-up to the 2012 election, but that doesn’t mean the administration did in fact fake the numbers.

  6. John Morris says:

    Yes, Aaron’s post is based on public choice theory. At the very least, one should be open to the idea that public leaders have these motivations. Why do places repeat the same failed policies? Why does the government prescribed solution to most problems always involve more power and control?

    There is a big difference between blaming the poor and blaming these “representatives”.

  7. pete-rock says:

    Maybe someone here is saying the same thing in a different way, but I don’t see the economic development leadership actively committed to economic decline. What there committed to is economic expansion, but inclusion and control at the same time.

    I think most economic development specialists really want more people, with money, to do more of the things they like. They don’t really want someone to come in with an innovative idea in an unfamiliar industry cluster, because they control it and can’t expand their own influence. Better to keep searching out the people and companies that do more of what you like and hope it improves economic prospects for everyone.

    A failing model.

  8. Chris Barnett says:

    There is also commonly in cities the idea that real estate development/redevelopment = economic development.

    They aren’t the same.

  9. Alon Levy says:

    John: of course one should be open, but the question is, why theorize without offering any example? By analogy, I think that we should be equally open to the notion that cities are governed by racists who look for excuses to underinvest in nonwhite neighborhoods (except when meant to promote gentrification), but when I write about it, it’s because I have flagrant examples, like Boston’s sandbagging the Silver Line railstitution, New York’s decision to only SBS-ify the M60, and the hostile relationship between the Sadik-Khan-era NYCDOT and Harlem even when Harlem wanted more bike lane infrastructure than the city offered rather than less.

  10. Ralfff says:

    The only specific city you cite is Detroit, but obviously people there do not like the state of affairs because they are leaving. What’s more, it’s impossible to tabulate how many Detroiters voted for a terrible leader, like Kwame Kilpatrick, didn’t like the results, and fled, dumping their share of the problems on people who stayed. Now cities that are struggling are often surrounded by suburbs that aren’t, and there is a political struggle between a city that needs to actually defeat its suburbs economically, versus suburbs that typically have gerrymandered political strength. Detroit was a city that identified with the automobile more than anywhere else, and went particularly crazy with highways and wide roads that enabled the better-off to flee to the suburbs but commute into the city by auto. The concept of a relatively dense city of over a million is incompatible with a car in every driveway (and the suburbs which sprawl in every direction now), but that remains the Detroit ideal today.

    Also too, white flight, redlining, block-busting, etc weakened central cities (accompanied by the unintentional possible effect of leaded gasoline contributing to disproportionately high crime in cities) destroyed inherited wealth in many of the cities in this country. They’re much more powerful forces than this or that small-minded, incompetent mayor.

  11. Paula says:

    Wish I’d known you were spying on some of city council meetings recently! Real estate “interests” attached to a 1985 “success” model win every round, while the actual place circles the drain.

The Urban State of Mind: Meditations on the City is the first Urbanophile e-book, featuring provocative essays on the key issues facing our cities, including innovation, talent attraction and brain drain, global soft power, sustainability, economic development, and localism. Included are 28 carefully curated essays out of nearly 1,200 posts in the first seven years of the Urbanophile, plus 9 original pieces. It's great for anyone who cares about our cities.

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Aaron M. Renn is an opinion-leading urban analyst, consultant, speaker, and writer on a mission to help America’s cities thrive and find sustainable success in the 21st century.

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