L.E.D. 1 Planning local economic development, Theory and practice Edward J. Blakely, Nancy Green Leigh Fourth edition, Argument for L.E.D.P - All local entities in a global economy have the challenge and the opportunity of creating their own Economic destinies. - This is true for the poorest as well as the wealthiest localities. - L.E.D.P. is severely challenged the two trends rising inequality and global warming. - It is also challenged by the over whelming force of globalization. 3 The Influence of National and State Policies on L.E.D. The use of national industrial and social policies to simulate and sustain the economy has a long history in the United State and other countries. 4 Three Approaches to National Economic Policy: 5 1. Invokes the past traditions with nationwide reindustrialization. It seek to rebuild the nations industrial stock through: - New set of targeted tax incentives, and: - National financing of infrastructure development. - To limit the power of unions to shape industrial actions. - Refocuses E.D. programs on sectors the nation must remain internationally competitive. - This approach includes the transformation from old to new industrial and commercial activities. 6 Second approach: favors less tax, less- government involvement in economic development: - This include: - Movement to the free market. - Minimum wages either abolished or floated like the currency to absorb unemployment groups in the nations. 7 Third group of planners suggests that both free-market and regulated industrial policy perspective aiming at firms alone are misconceived. This is because they are base on the long-held but increasingly false premise that what is good for businesses is also good for the community and workers. 8 Elements of National industrial policy: for: OConnor (1999-PP ) 1. Focus efforts to eliminate poverty and reduce income inequality through creating better job opportunities and reducing race and tax and discrimination. 2. Reassert a real role for the federal G. at the community and economic problems to the states and cities. 3. Built a political collaboration a way the stakeholders for a progressive agenda, like the labor, civil rights, community and church org. 4. Design a strategy that acknowledge the interrelationship of race and poverty, and seeks to eliminate racial barriers to better housing, transportation and Job opportunities. 9 The OECD, 1986 Support the L.E.D. in order to both: - Organization for Economic Cooperation and Development (OECD) - Moderate the impact of rapid economic change on firm's local likes and individuals. - Revitalize local economic and facilitate their adjustment to the transformation of the national economy. 10 Special objectives of regional and l.E.D. should include: 1. Strengthening the competitive position of regions and localities by developing human and natural resources potential. 2. Realizing opportunities for indigenous E.G. by recognizing the Opp. Available for locally produced good services. 3. Improve employment level and long-term career options for local resident. 4. Increase the participation of disadvantaged and minority groups in the L.E. 5. Improve the physical environment as a necessary component of improving the climate for business development, and of enhancing the quality of life of resident. 11 Policies to accomplish these aims include: - Sustained investment. - Medium and long-term job -creation. - Building the local institutions. 12 Different Policies for economic development: 1. Monetary and Tax Policy 2. Trade policy 3. Welfare to workfare policy 4. Health-care policy 5. Employment policy 6. National policy targeting L.E.D. 13 1. Monetary and Tax Policy: The objectives are: - Controlling interest rate to reduce the high cost of borrowing for the nation business. - Combat inflation. - Reduction of inflation and economic stability has increase business confidence and stabilize wages and prices. - Deal with a high-consumption / low production Economy. - Controlling rapid economic growth. 14 Cont. Tax policy has always been a major component of economic development (E.D.) policy. Taxes are sophisticated instrument designed to steer private investment capital. - A prime example for the benefits of this strategy tax write offs and loopholes has been strong support by congress for the development of the internet without tax inference or government control regulations. 15 2. Trade Policy (TP): - U.S. continues to experience on of the worst balance of payments in the history of the nations. To some extent the T.P. of the European common Market, Japan, and other Major trading partners are not as open as those of the U.S. Market. - Until 2007 the U.S. Dollar as the world currency was maintained a high level that it was difficult for the U.S. Manufactures to complete in overseas marketplace. After 2007, the fall of the dollar, has resulted in greater U.S. exports. 16 Cont. T.P. The U.S. labor unions, farmers and even some business have been calling for the protection of American firms from unfair international competition. New tariffs and trade regulations are now being promotes more frequently as a major component of industrial policy. Another T.P. is the creation of export subsidies for agriculture in the global competition with more heavily subsidized farmers in Europe, Australia and Asia. 17 3. Welfare to workfare policy: National welfare policy is confused policy. The public, including many poor people holds welfare in contempt and view recipient as principally lazy licentious persons (Gotts Chalk, 2001). Workfare, as this approach called aims at making welfare recipients increase their employable skills, in exchange for their dole payment or to have nonprofit agencies employ welfare-eligible people to work in community-serving enterprises. The agency receives the welfare payment plus premium to provide social services and in turn places the welfare-eligible persons in the payroll of a regular but high-subsidized job. This will offers the potential to increase human capital. 18 4. Health-care policy: - It is clear that strong attachment the labor force is no guarantee of access to quality health insurance and care. - To date, there is no consensus on a national policy of health-care reforms to deal with poor problem of health. 19 5. Employment policy: In 1960s employment and training plans were designed to improve the employability of the hard-care unemployed, or to improve the ability of certain areas to enter job market. If there were not enough good job, the training program couldnt solve the unemployment problem. So, training had only marginal impact on the poor people Employment planners became concerned with increasing the number of jobs above the poverty line. Due to the spatial distribution inequity, policy makers assure the need for federal policy to coordinate with the L.D. efforts. 20 6. National policy Targeting L.E.D. The national government played a role in L.E.D. through the legislation, policies, or programs, for which federal budget expenditures are made. Although N.E.P. is important, it is limited in the ability to meet the twin needs of: - Economic sectorial adjustment and - Regional or local economic requirements. 21 National policy N.P. are designed to facilitate overall E.D. rather than to address specific pop. Groups or locations. And because of that the N. government has been adopting more regionally E.D. strategies including: 22 More E.D. strategies - Regional economic policies. - Neighborhood revitalization and - Community development banks. 23 N.E.D Policies However, N.E.D. policies targeting localities are not new, National policy can have unintended and negative consequences for E.D. 24 Coordination of local and national development efforts: Communicates all over the nations are developing their own industrial policies, using various approaches. Industrial policies at the national level means little unless there is companion policies, at the local level to take advantage of available federal resources. The role of federal government in the poorest regions has been to provide the physical conditions and infrastructure to include development rather than direct in there firm in the private sector. National government should remain in the background, using its money but not its muscle to bring out economic change. 25 New policy: The national government has given local official more authority to deal with fewer resources. This gives many local resident the impression that local policy makers have more options to cure local problem, but the truth is that there are more problems than there is money. The new policy structure is still emerging, it is too early to tell whether this set of policies will have the desired impact. 26 State economic development approaches: Phases of E.D.: 1. Industrial recruitment Characterized by political critiques of local economic practices that began in 1960s. 3. Increasing the real competitive advantages of the state in national and international terms achieving high level of productivity. 4. Sustainable economic development, it called on to be environmentally sensitive. 5. Characterized by two approaches 1990s. A. Relying on market solution. B. Promoting metropolitan or regional strategies. 27 Challenges and Opportunities inherent in E.D. Policy Making: 1. E.D. will be much less about community having lower costs of production than about a high quality of life. Such, quality housing, educational system, mobility health, and culture facilities. 2. American communities could once relay exclusively on their regional and national market positions to determine local economic stability, but this is no longer the case. 28 Concepts and theories of local E.D. Definition of L.E.D.: It is a great mistake to equate E.G. with E.D. The blind pursuit of E.G. can destroy the foundation for economic development. 29 For example: If an economys growth based on a exhaustible natural resources supply (e.g. timber, seafood, coal, Retro) then it will eventually come to a halt, and the community, can enter a death spiral. 30 What is rejected The same scenario applies in the case of one-industry or one-factory town. We need to reject also the blind pursuit of E.G. if it is only to create more wealth and jobs if it lead to: - Income inequality. - Irrevocably harm the environment. - Worsen the plight of marginalized groups. 31 What is unethical Economic growth that is based on exploitation of workers with few or no alternative employment options is not only unethical but may violate fair labor standards and other laws, this can destabilize the economy and the society. The source of growing in equality are multiple, but often reflect a failure in E.D. leadership. 32 Development and Sustainability Now will the use of the term development need to be qualified by sustainability. We offer here part definition of sustainable local economic development that focuses of desired end state rather than growth-defined objectives: 33 Definition: local E.D. is achieved when a community standard of living can be preserved and increased through a process of human and fiscal development that is based on principle of equity and sustainability. 34 Three essential elements in this definition: 1. E.D. establishes a minimum standard of living for all and increase the standard over time. 2. E.D. reduce inequality. 3. E.D. promote and encourage sustainable resource and production. If E.D. does not incorporate sustainability goals, then its process can create inequality between present and future generations. 35 Theories of growth and development Most of theories that explain regional or local E.D. has not made the distinction between E.D. and E.G. 1. New Classical Economic Theory. 2. Economic Base Theory. 3. Product Cycle Theory. 4. Location Theories. 5. Central Place Theory. 36 Translation theories into practice: 1. Attractive Models. 2. New Markets Model. 37 Theories, Models, and Fads in L.E.D.P Theories of E.D. can be influenced by any of the following disciplines: - Business. - City and regional planning. - Demography. - Education. - Economic. - Geography. - Political science. - Public policy. - Regional science. - Sociology. 38 Overall, E.D. professional are action oriented. Indeed, their jobs often depends on producing results. A particularly notable example occurred during the 1980s, when David L. Birch put forward the theory that small Business in the true engine of the economy and job creation, and the true source of innovation. - 80% of the jobs created between 1969 and 1976 were produced by business with fewer than 100 workers, and nearly 2/3 of firms with fewer than Cont. This lead to create new centers and programs to faster S.B. Encouraging S.B.D. is not a bad E.D. idea. Firms that create new markets will bring sustainable E.D. to location. 40 The concept evolution of E.D. theories into local practice Four concepts sized by various theories: 1. Locality. 2. Business and economic base. 3. Employment resources. 4. Community resources- to create new foundation for local E.D. 41 Four concepts: 1. Locality: Old: Location near natural resources, transportation, markets. New: Quality environment and strong community capacity. 2. Business and E. base: Old: Export base industries and firms create jobs. New: Competitive industries linked to a regional network of all types of firms 42 Cont. 3. Employment source: Old: More firms create more jobs, even if many are minimum wages. New: Comprehensive skill development and technological innovation lead to quality jobs and higher wages. 4. Community resources: Old: Single-purpose organizations can enhance economic opportunities in the community. New: Collaborative partnership of many community groups needed establish abroad foundation for competitive industries. 43 Profession and Professionals The Local Economic Development (LED) Profession and Professionals: Ask a hundred E. developers how they got into the field? 95% will tell you by accident (water house 1997-P.84). 44 practitioners and planners E.D. practitioners and planners now belong to recognized profession. Within the E.D. profession, there is a state association of E. developers found across the U.S. as well as national and international associations. These associations are distinct from E.D. agencies and organizations, such as chambers of commerce or S.B. centers or the U.S. E.D. administration. 45 The international council of Economic Development (IEDC) is the most sig. E.D.A. in the U.S. While individuals of any academic background can become certified E. developers, the E.D. field does have academic roots in the applied disciplines of geography, business administrator, public finance, political Economics, and Urban and regional planning. 46 47