Economic Development Policy and Planning - Reading Assignments - Student Notes


PubP 8110S/CP 6231 - Spring 1995 - Last updated 5/17/96

Click to go to notes about readings, prepared by students in the class (Assignment 1).

Return to course outline

Blakely Chapter 1 - "The Argument for Taking Local Economic Development Initiatives"

Andrew Brian Colbow <gt6720c@prism.gatech.edu> Date: Sun, 31 Mar 1996 14:30:29 -0500 (EST)

* Forces Shaping Employment Options and Opportunities in American Communities. Economic Stagnagion and Instability - rule the US economy. Statistics are unsetteling about job creation and growth. Most has occurred in the service industry with low paying jobs. No national policies or programs with an explicit local economic development orientation. National policy tends to drift, with the burden shifting from federal level to state and local entities.

* The Causes of the Changed Circumstances - National debt causes concerns by eroding national productive capacity by keeping intrest rates high, redirecting private sector investment, and imperiling the future of subsuquent generations. Trends in Real GDP per Employed Person 1960-1989. United States growth rate falls behind Japan, Italy, France, Germany, United Kingdom and Canada. This shows slower economic growth.

* Regional and Metropolitan/Nonmetropolitan Shifts in Emloymemt - Jobs have been far more mobile than people. Snow/rust belts to the sun belt syndrome.

* Internaltional Competition - This sector of trade has reshaped the nation's economic picture greately. Future implictions of NAFTA, GATT, and the European Common Market are difficult to assess. Just don't ask Ross Perot or Pat Buchannan.

*** CONSEQUENCES OF THE CHANGED CIRCUMSTANCES -

* Segmented Labor Force - rigid, highly structured, and compartmentalized labor force.

CORE - Primary Labor Market, Adequate Wages and Stable Jobs.

SECONDARY LABOR MARKET - Substandard Wages, Unstable Jobs.

IRREGULAR ECONOMY - Illegal and Quasi-legal "work".

TRAINING SECTOR - Government programs to shift workers to other areas.

WELFARE SECTOR - Payments subsidise families unable to work and employers in the secondary labor market.

* Dual Labor System - Development of Information based economy - replacing old industrial ecomony. (mixed blessing).

* Neighborhood and Community Decline - Inner Cities have been left behind in the transformation of the economy.

- victims of historically segregated housing and commercial patterns.

- lost their retail base to the suburbs.

- federal government has disinvested in these areas forcing severe

implications.

- This chapter is a basic outine of the book reguarding issues the field of economic development faces.


Blakely - Chapter 3. - "The Meaning of Local Economic Development"

Andrew Brian Colbow <gt6720c@prism.gatech.edu> Date: Sun, 31 Mar 1996 14:30:29 -0500 (EST)

Defining Local Economic Development - An "enterprise" state has emerged in modern US history that links local government with the business community to form a partnership of public and private interests to create new jobs and stimulate economic activity in a well defined economic zone.

1- Corporate Center Approach. Emphasis on urban real estate development and industrial attraction.

2- Alternative Approach. Attempts to steer economic development activities to local disadvantaged residents. *This approach is the focus of the Blakely text.

THEORIES OF GROWTH AND DEVELOPMENT

1. NeoClassical Economic Theory - Key terms = Equilibrium and Mobility. Contends that capital will flow from high-wage/cost to low-wage/cost areas, because the latter offer a higher return on investment. translation = Inner-city ghetto's should draw capital because prices. For prpperty and sometimes labor fail to meet the demand of the marketplace. If the model worked perfectly, all areas would gradually reach a state of equal status in the economic system. Basically, a Free Market Model with limited governmental interference.

2. Economic Base Theory - Contends that ecomonic growth is directly related to the demand for goods, services, and products from other areas outside the local economic boundries of the community. The growth of these industries will generate growth and jobs internally. Non-export firms will develop naturally as support network for the exporters and their workers. Focuses on external demand rather than internal need.

3. Location Theory - Location, Location, and Location!!! Theory contends that firms minimize costs by selecting locations that maximize opportunities to reach the marketplace.

4. Central Place Theory - Hierarchy of Places- Each urban center is supported by a series of smaller places that provide resources and require a central clearinghouse to filter into the world marketplace. Central Place Theory was developed by Walter Christaller in Southern Germany many years ago. It surrounds each urban node with a hexagonal shaped service area. These hexagons stack together to form regional, state, and national service areas all at even intervals. It assumes that the landscape does not have natural barriers such as mountains, rivers etc. Mathematical calculations can be done in areas such as transportation, management and marketing. Central Place Theory has recently been the model for the Netherlands "reclemation" project of land previously submerged underwater. They drained the water and formed new communities by locating them by Central Place Theory.

5. Cumulative Causation Theories - Contends that the interplay of market forces increases rather than decreases the inequality between areas. Market forces, by nature pull capital, skill and experise to certain areas leaving voids in other areas.

6. Attraction Models - Communities offer incentives and subsidies to lure industries to area. Assumes that new activity will generate taxes and increased economic wealth to replace the intial public and private subsidies as well as generate a multiplier affect of new internal businesses, jobs, and tax revenue growth.

**** It is important to note that that Development Theory is based on a combination of all of these models. By using the componets of employment, development base, location assets, and knowledge resources, theory can be crafted as to apply to real situations. This chapter contends that the conceptual framework for local economic development emerges from basic development theories.


The Rise of the Entrepreneurial State, Peter Eisinger. C3 &C4

Date: Sun, 31 Mar 1996 18:08:25 -0500 (EST) From: Jenifer Heather Moore <gt3061b@prism.gatech.edu> Subject: Eisinger 3,4

More and more often, economic development is synonymous withe the creation of jobs. The premise that job growth is the most important developmentak issue has influenced local, state, and federal policy more now than ever before. Conventional wisdom holds that "jobs mean fewer unemployed people, more income, greater tax revenues, fewer expenditures, lower-cost government, and a more robust employment multiplier(Eisinger, 34).

Chapter 3: Justifing Economic Development. The two models exenplifing the theories behind economic development are the private benefit model and public benefit model. Both require private investment to facilitate development. Low-wage jobs, though more numerous than their counterparts in capital intensive industries, traditionally create a lower rate of growth in personal income. More importantly, in a service based economy, seasonal work, minimum wage jobs, and part timers contribute less to a communities growth than their counterparts.

Americans traditionally view economic development as necessary only for the third world. However, it is now imperative that the US,facing industrial relocation and geographic disparities, incorporate economic development into public policy and planning. As a result of low growth and unemployment, many states and local governments have developed their own policy to bring private investment in to their community in the hopes of increasing jobs, decreasing poverty, and an overall higher income(43).

As economic development becomes more frequent, negative effects must also be addressed including an influx of job seekers, industrial waste/enviromental problems, and the rising cost of public services. In addition , smaller communities that are embracing private funds must also be able to deal with the potential loss of such capital.

Questions to ponder:

1. If private investors are encouraged to 'breathe life' into a declining community and be the nexus of development, who has control over the community; local government or the industry?

2. How will competition for private investment influence regional stability? Is it a zero-sum battle? How can the communities' needs be met through private investment?

Chapter 4: The Context of Economic Development Policy. Since the end of WWII, the growth of the Sun Belt and the rise of the suburbs/decline of the city are possible the two largest changes in American regionalization. They have been coupled with the 'decenteralization of unemployment(59).' As a result, federal policy on economic development is being challenged by the state and local governments in response to their duty to community welfare. The national government's lack of economic policy coupled with deteriorating federal funds during the Reagan Era, increasing reliance on imports, and decreasing competitiveness, the regions were forced to develop their own policies. A more tangible symptom of the missing federal policy was the growing unemployment rate due to lost American jobs and the financial burden carried by areas abandoned by relocation.

Eisinger points to several assumptions that made privately funded economic development the logical option: the idea that private industry has a certain expertise in regards to effectiveness, they possess the most efficient means of allocation of resources, and the market place is a good testing ground for new enterprises(73).

Questions to ponder:

1. Will both the growth rate of the suburbs and the tendency of plants to relocate to suburbian areas, what will become of the cities?

2. Will national sovernity be challenged by state and local quests for private investment? How should state v. state squabbles be settled?


Werner Sengenberger "Local Development and International Economic Competition."

Date: Sun, 7 Apr 1996 17:30:32 -0400 (EDT). From: Kelly Leigh Mull <gt2117b@prism.gatech.edu> Subject: Sengenberger article

There are changes taking place in the world today in the geography of production, the distribution of markets and the approach of political governance. The last decade of this century is characterized by "tectonic" dislocations in the territorial nature of the economy, polity and society, with movements occurring both beyond and within the confines of the nation State. They are associated with hopes and expectations of new economic dynamism, greater political stability and stronger social cohesion. But they also give rise to feelings of insecurity, anxiety and fear of loss of jobs, income and identity. The focus of this article is on perspectives for local economic and social development and the opportunities and risks involved. Also, more assertive roles for local communities in the realms of production, employment and industrial relations are discussed. The prospects for generating or extending tripartile cooperation in the local arena is detailed in this article. Also discussed are the policies and institutions that can best foster local development, promote new forms of cooperation and at the same time avoid the ugly faces of location, such as unilateral economic dependence, wide interregional disparities of growth and income, and political parochialism.

Between extremes of market coordination and hierarchical control as means of governance, or the centralist "top-down" approaches and decentralized "bottom-up" approaches to policy-making, there is room for worthwhile new forms of economic organization at the intermediate level. Local development centered on local initiatives and institutions stands as an important example of this approach. It combines the economic vitality which proceeds from the cost-saving effects of agglomeration and the geographical proximity with the social cohesion generated by the mobilization of local resources and the local community. It draws its strength from closer integration of the economic, political, social and cultural spheres of life, and carries the potential for a wider use of democratic practices.

To endorse local development is not to plead for simple decentralization in the scene of shifting decision-making away from the center; this may be pitching expectations too high. But there is a strong case for saying that the underdeveloped potential for action at the local level could be activated as part of an integrated, multi-tiered policy approach, in the interests of greater independence and less fragility in the local economy. If it is to be vital and sustainable, resource inputs need to be supplied both locally and from higher levels. Otherwise there is a strong risk of highly uneven and unequal development among regions and areas. There is also a case for a departure from the conventional bureaucratic or even authoritarian development scheme, in which most of those concerned have no say and consequently feel they have no real stake. Local development can be made the concern and responsibility of many more people and groups representing various interests. Industrial and employer associations, trade unions, consumer groups, civil rights groups, environmentalists and others can take an active part in local economic life. These groups can contribute to selling goals which will be much broader than the conventional target of growth, and emphasize longer-term objectives. For example, full employment and better structured employment with more opportunities for the weak groups in the labor market could be worthwhile targets.


Edward J. Maleki; Economic Growth and Decline: Theories and Facts Chapter 1: Technology and Economic Development

Date: Sun, 7 Apr 1996 18:46:13 -0400 (EDT). From: Alissa Gabrielle Tuyahov <gt0385d@prism.gatech.edu>

The author depicts contrasts in the theories of economic development from the 1950s with those since the 1970s. He explains how the 1970s and 1980s presented a time of dramatic change in the structure of economic change at all scales. Growth in international competition, trade and strategic alliances all served to strengthen both the technological and geographical scope of large enterprises. The rise of Japan's economic success, the stagnation of growth in Europe and the "meteoric rise of the newly industrializing countries (NIC) all set existing theories and policies on their heads". Within advanced economies sharper contrasts and disparities between regions emerged; however, the author states how economic growth and development have always been geographically uneven.

Global Production: Hymer's research on multinational corporations is an important contribution to the understanding of economic activity. His central point: " the division of labor withing corporations corresponds to a geographical pattern - what is now called the spatial division of labor which creates and reinforces uneven development". Technology was an enabling element for the international division of labor. Three main changes facilitated this division:

1. Developments in the technology and organization of production which allowed workers in virtually any location to perform required tasks.

2. Improvements in telecommunications and transportation which rendered industrial location and the management of production largely independent of geographical location.

3. The development of a world wide reservoir of potential labor not penetrated by unions; thereby, having little power to demand wages and fringe benefits. These developments allowed firms to develop global strategy.

Technology, regions, and economic development: Technology greatly effects economic change and job growth. It is the most obvious cause and effect of the cumulative wealth of nations. "Technology also promises, more than any other phenomenon, to bring poor nations out of poverty."

Regions: the arena of economic change: Regions can be sub-national spaces of large countries or aggregates of several nations. The author explores the various definitions of regions from territorial societies characterized by their physical environment to a view of regions that uses local culture and communication patterns as defining characteristics.

Regional disparity: cores and peripheries. Through the process of capitalist development, regions of the world have become defined within an international division of labor. The author references Wallerstein's view of a tripartite international division of labor:

1. Core - characterized by free labor engaged in skilled tasks

2. Semi-periphery - countries that have regressed from core due to deindustrialization and those heading for core status due to rapid industrial development.

3. Periphery - characterized by coerced labor under colonial state power

Dominance and dependence: Within underdeveloped countries, problems persist that are fundamentally geographic. Dualism is the severe contrast between traditional and modern sectors which is so evident in the many cities of the underdeveloped nations. The author reviews the setting in the third world countries as much more complex than the dualistic or core-periphery models. He references a macro-spatial development framework consisting of five components: a world market, an urban formal sector, an urban informal sector, a rural export sector, and a rural peasant economy. This model captures the interrelationships among different groups in an economy. The author then examines how this model is also manifested in Friedman's global urban system and his analysis of an hierarchy of world cities. Although new industries and good jobs tend to gravitate toward cities, the "mosaic of inequality has become more fine grained and the economic prospects vary more from place to place".

The legacy of colonialism: The author discusses colonialism from the perspective of technological influences. He analyzes technological advances that were involved in the imperialism of Europeans in Asia and Africa between 1850 and 1940. For much of the third world, technological underdevelopment had been the norm. "Colonialism brought education, medical care, and mechanical equipment to the colonies, but did not pass on essential skills and knowledge to the indigenous populations".

Growth or Development? The author distinguishes between economic development and economic growth. Growth which is measured with increases in population or quantity of value of goods does not necessarily lead to qualitative improvements in life. Economic development refers to increases in the quality of life associated with changes, and not necessarily increases in size and composition of the population, the quantity and nature of local jobs, and the quantity and prices of goods and services produced locally.

Regional Planning: Regional planning elements tend to concentrate on spatial elements such as infrastructure, population distribution and spatial interaction. However, they must not overlook the social and economic interactions and changes. Regional planning is largely based on growth as a means of change.

Technological Capacity: Technological change is one of the most important elements creating structural change in an economy. Firms and countries that are not near the current "technology frontier" both in science and in production find it increasingly difficult to keep up with changes in other places. "It is the growth and accumulation of useful knowledge, and the transformation of knowledge into final output via technical innovation, upon which the performance of the world capitalist economy ultimately depends". At the heart of regional change is technological capability.


Arthur C. Nelson, "Theories of Regional Development" (Bingham and Meier, Chapter 2)

Date: Mon, 08 Apr 1996 08:43:53 -0400. Sender: Cc: jddkg@mindspring.com

Dr. Nelson begins by defining "regional development" not only in tangible economic terms such as employment, income, manufacture value added, etc., but also in terms of "social development such as the quality of public health and welfare, environmental quality, and creativity. "Several terms are important to understanding regional economic development. The "core" (or center) vs. "periphery" are large scale comparisons such as between between industrial and developing countries, or between regions within a country. "Growth Centers" (or poles) are contrasted with "hinterlands" both within core and periphery regions. "Leading and lagging" economic regions may be regional or global.

The two dominant schools of thought on regional economic development are "development from above" and "development from below". Development from above can be looked at as outside development stimulated by export markets, investment from outside and migration. The "price-equalization" model posits that production will seek locations generating the highest return. Leading regions expand into lagging regions in order to make use of their available resources. These can be natural resources or human resources such as cheap labor. GM assembly plants in Mexico exemplefy these concepts. Development from below is self-determinant regional development achieved through integration of the positive aspects of a region such as climate, culture, resources, and landscape. It seeks to capitalize on indigenous social, economic and political institutions and create a regional identity. Helen, GA is an example of this with its self-created "alpine village" identity which has fueled its tourism and value as a resort area. It is important to note that these two schools are not mutually exclusive.

Nelson outlines several terms and concepts related to development from above. The "regional life-cycle" looks at industry migration as the older infrastructure becomes obsolete or unprofitable. This is described by "dynamic disequilibrium" function of capitalism as it creates new regimes while destroying old. "Autonomous growth centers" develop as development expands from "growth poles" into hinterlands. Leading regions expand into lagging with "exurbs" growing outside of older cities. "Cumulative causation" theory describes the long term effect of policies that are self perpetuating once they are set. This is a "chicken and egg" theory describes the expansion of infrastructures needed to sustain growth, followed by growth, which then requires more infrastructure. Expanded transportation and utility infrastructures favor the spread of growth centers into regions.

Manufacturing shifts from the "core" to the "periphery" (such as from to the Northeast to the South), and from the growth centers to hinterlands, but these areas are constantly being redefined. Suburbs and exurbs continue to expand dramatically and become more functionally integrated with the centers. Many factors influence the choice of firms to move out including low taxes, availability of non-union labor, and quality of life issues with a strong emphasis on public education.

The "development from below" is the opposite of economic imperialism. This school aims for "generative" growth and includes three approaches: 1) territorial development which seeks to integrate growth centers with their hinterlands, 2) functional development which seeks to organize a region through a principle function to higher stages of development--eg. TVA and 3) agropolitan development which fosters regional social and political identity which meshes with economic development toward a sustainable economy.

Questions for thought: Places such as Orlando and Las Vegas have distinctive identities not based on natural resources. What factors influenced their growth?

Economic development tends to raise the value of land in a region. What situations would cause a landowner to oppose growth?

What factors serve to make a region economically stable?


Date: Sun, 14 Apr 1996 05:51:39 -0400 (EDT) Sender: owner-econ-dev@spam.gatech.edu From: Michael John Charles Boehm <gt2995b@prism.gatech.edu> Subject: Blakely, Ch. 2

Edward J. Blakely, Planning Local Economic Development, Chapter 2: National Policy Options and Local Economic Development, Summary and Review

By Michael Boehm

As the title suggests, this chapter deals with the interaction between the federal government and local governments in economic development terms. At the same time, however, he stresses that local governments and national governments are having less and less to do with each other. As many municipalities derive more of their economic activity abroad, their dependence on the federal government decreases. This, however, is just as well, as Blakely sees federal aid to localities being frequently misguided or ineffective, designed to affect the economy as a whole and not to aid specific regions.

A large part of the economic development debate is ties in with the classic argument of more government versus less government," according to Blakely. Some feel that aggressive, no-holds barred approaches such as the Tennessee Valley Authority project and the land-grant college system, are the way to go. Others feel that economic development will happen all by itself if government were just to get out of the way. Most peoples opinions, however, tend to fall somewhere in between the extremes. Blakely definitely falls a bit left of center, his main complaint being with the ad-hoc nature of current economic development initiatives.

An important element in this debate is the concept of picking winners and losers. Can and should the government decide which technologies and industries to support and which to discard? Blakely feels that the U. S. government ought to identify sunrise industries and offer tax breaks to emerging corporations to help them compete in the world market. If HDTV is any indicator, however, governments are not very good at identifying emerging technologies that will stick around. At this point Blakely breaks the American economic development down into several broad categories, offering his critiques and suggestions for each:

MONETARY AND TAX POLICY - The U.S. has taken an aggressive stance on this front in the last few decades- witness Alan Greenspan and his re-confirmation. While this has helped keep inflation down it has not been enough; it has allowed severe trade deficits to develop. Blakely is a strong proponent for an aggressive monetary policy at the local as well as national level, especially for taxing foreign firms and investments, and using that money to help fund economic development programs.

WELFARE AND SOCIAL POLICY - Breaking from the liberal mold Blakely had begun to set himself in, he sharply criticizes current welfare policy and calls for an elimination of it in its current form. In its place he proposes workfare, where jobs and training are provided by employers and subsidized by local government, eventually leading to full reintegration of the indigent into the workforce.

EMPLOYMENT AND TRAINING POLICY - Past attempts at job-training programs have failed mainly because the local economies could not absorb the influx of new, semi-skilled workers, in Blakely's analysis. The new approach is to combine skills training with job creation. This would not be through large increases in jobs among a few large, regional employers, but rather by small increases in employment among many small, local employers.

TRADE POLICY - When the U. S. had an international trade surplus, we decried tariffs and other barriers as protectionist. Now that we have a severe international trade imbalance, we are hearing more calls for tariffs and other protectionist measures to save domestic industries. Blakely is downright schizophrenic regarding this issue. He calls it an important current remedy for current problems, but at the same time declares it a short-sighted solution that will cost more than it saves in the long run. On the whole, Blakely is against tariffs and quotas, albeit admitting the political power such a concept can wield.

REGIONAL/LOCAL DEVELOPMENT POLICY - Traditionally, the federal government has approached regional economic development from an infrastructural point of view. The Tennessee Valley Authority project is an excellent example of this. However, in this modern era of shrinking budgets, the build it and they will come philosophy just does not work any more. The federal response has been to allow the local governments more discretion over how to use he limited funds. While this is an improvement in the delivery methods, the local governments should not be lulled into a false sense of security by their newfound authority. These funds are rapidly drying up, and it is up to local government planners to start looking for local sources of economic development funds.

NATIONAL ECONOMIC DEVELOPMENT POLICY - What is the proper role for the federal government in economic development policy? Blakely is a strong adherent to the think globally, act locally approach. As a part of this, he sees the national government as having two main roles: ensuring the equitable distribution of development opportunities, and coordinating local development strategies to maximize their effectiveness. This will simultaneously allow local governments efforts to mesh with those of the federal government, and allow the federals to have an active role in economic development while acknowledging the limits to federal resources. The fact that this framework has not developed yet does not deter Blakeley; he sees the local-government movement as naturally evolving into this model.

NEW CHALLENGES AND OPPORTUNITIES FOR LOCALITIES - Finally, Blakely begins to get down to the nuts and bolts of his model. The first step is for localities to make a realistic assessment of what they can and cannot do. They cannot- and should not waste resources trying- save a dying industry or attracting new manufacturing plants. The old practice of smokestack chasing does not work in an era when the percentage of the workforce employed by manufacturing firms is dropping consistently. Rather, communities must diversify their employment base; the one-factory company town is a thing of the past. Communities must improve education and job-training programs and develop a specialized technology-oriented infrastructure to have any hopes of competing in the new international economy.

COMMUNITY TYPES AND OPPORTUNITIES - In this final section, Blakely divides all communities into three broad categories. These are growing, restructuring, and declining communities. Growing communities are the Edge Cities that are booming at the perimeter of existing metropolitan areas thanks to stagnation of the downtown area or other more complicated issues. Examples of this would be Atlanta's Marietta or Dekalb area, the San Francisco Bay Area's East Bay and South Bay regions, and Glendale or Irvine in the Los Angeles area. Restructuring communities are those who have suffered moderate economic setbacks but are diversifying their economies and have managed to reclaim some measure of the ground they have lost. Possible examples would include Sacramento or perhaps Saint Louis, or even the Atlanta downtown area. Declining communities are those who have lost major economic bases and are witnessing a continual shrinkage of the economic and, thus, the population base. These are the places where people growing up can't wait to get out of. They have enough to worry about just trying to stabilize their economy and maintain civic services without trying to pursue economic development. An example of this might be Troy, NY.

General assessment: While some of Blakely's suggestions are questionable (such as selecting the "sunrise" industries), in general he offers some very useful as well as timely advice as to how local governments and the federal government can work together to promote economic development. Stylistically, the only criticism I could level at Blakely is that the last section seems to be tacked on to the end of the chapter and does not mesh with the discussion up to that point. Possibly, Blakely had a pet theory he could not resist putting into the book somewhere, and this chapter was the closest fit. All told, though, an easy-to-read, thought-provoking commentary.


Date: Sun, 21 Apr 1996 21:37:27 -0400 (EDT) From: Robin Beth Still <gt0198e@prism.gatech.edu>

Eisinger, Chapter 7 Eisinger

Geographically targeted Policies on the Supply Side - There exist a increasing numbers and a growing use of economic development tools on the supply side designed to distribute firms to particular locales within a state. Three methods...Site Development Programs; Financial assistance to firms in distressed area, thru TIFs ; State Enterprise Zones. Needy communities are often unattractive locations for investment. Some indicators that are looked at are: Unemployment Rates, Blighted Real Estate, Rapid in/out migration, Deterioration of Infrastructure, Declining Public Services, Above Average Poverty

Industrial & Commercial Site Development

One of the most simple economic development approaches is to offer land to private firms at a reduced cost by subsidizing, performing acquisition preparation, providing infrastructure, or providing landscaping. Two major site development programs: Subsidized Industrial Parks and Land Banks.

Advantages to Industrial Parks

Land Banks

Both industrial parks and land banks represent an effort to attract firms to particular sites that, left undeveloped, might otherwise be rejected by investors as too costly, too inconvenient, or too encumbered by "inner-city" problems

Targeted Financial Assistance for Capital & Infrastructure

These programs make economic distress a condition of economic development financing. Tax abatements/Capital Subsides - available only to firms that locate in areas of high unemployment or characterized by blight; Tax Increment Financing. A number of states have chosen a different devise to provide land subsides in blighted areas, TIFs. TIFs offer a greater degree of geographic flexibility and perhaps a higher proportion of initial investment recovery than land banking

- perceived as efficient, versatile, cost effective development tool

- can be encumbered by its perceived complexity, and its controversial reliance in inter-local subsides

- allows a muncipality to earmark all of the anticipated increases in property tax revenue that will result from a new development project to back bonds that go to help finance certain elements of that project

- usually for a designated period, once bonds paid off TIF is dissolved

State Enterprise Zones

Enterprise zones are geographic areas which are designated with special incentives to attract businesses. Lower costs are granted thru tax incentives. Job Creation Grants. Cheap Capital and Land. Emphasis on encouraging new businesses not bringing already established business into area. Various Tax Incentives remain at heart of most enterprise zones. Incentives also include: New Job Credits/grants; Local Property Abatement; Exemption from state sales tax on materials purchased for construction.


Sun, 21 Apr 1996 21:44:30 -0400 (EDT) From: Michael Paul Bosi <gt5638a@prism.gatech.edu>

Eisenger - Chapter 8

Does supply-side inducements important enough in the calculus of investment to make a difference in drawing firms and capital to a particular place. This is the question of importance for public policy makers and planners. Each has to make a distinction between the two aspects of growth- the general and the particular for understanding the issues of policy impacts.

Eisenger breaks down the stages of regional comparisons in business locating decisions. These issues concern factors that lead to economic growth and the factors firms use when evaluating an area such as taxes, transportation cost, and other major inputs. Eisenger states that focusing on adjusting your policies of incentives on a national level is to costly and ineffective. The policies should be judged or based within the region for a greater impact or effectiveness.

He next goes on to examine whether government is able to influence costs of factors to an extent that makes an important difference in firm decision to migrate. Firms place the labor force as the chief criteria for evaluating a potential site. Second was access to market. Favorable labor translates as the absence of a union. Job training programs have annually ranked low. He states that Schmenner has illustrated the general minor role of taxes in location decisions. Eisenger then talks of other factors that play a role such as climate, and energy cost. Eisenger concludes that the critical factors in deciding where firm make investment among competing regions are essentially beyond the control of the state and local governments, and because of the experience of the supply-side tradition that the entrepreneurial state has emerged.


Sun, 21 Apr 1996 21:44:30 -0400 (EDT) From: Michael Paul Bosi <gt5638a@prism.gatech.edu>

John Blair and Robert Premus, "Location Theory" (Bingham and Mier Chapter 1)

Location theory evolved from simple transportation cost minimization models and as the theory evolved other factors such as production cost, regional amenities, and technological capabilities have been incorporated.

Transportation cost minimization models. A one-input, one-market model uses the ideal or locational weights to help evaluate the influence exerted on the locational decisions of firms by their need to have access to raw material sources and output to markets. Weight-losing production processes tend to be oriented toward the input. Market-oriented activities tend to have final outputs that are hazardous to transport, and will locate near their market, an end point location. In the case of multiple inputs the firm locates near the dominate input, and if neither has a dominate weight than a physical balance will be achieved. Ideal weights can be used to explain the location of retail activities. Transportation cost have dramatically fallen in the determination of location, but with the reduction of transportation cost have been replaced with more complex location models.

Labor factors are critical aspects in location decisions. Common indicators of labor costs are average wage, productivity, and labor environment. Taxes, incentives, and the business environment play a role within location theory. Also, aspects such as government, amenities and quality of life are factor in location

The chapter then discusses agglomeration economies, which refer to benefits that emerge when firms locate in proximity to one another. These can occur between firm that are interrelated in production or firm that compete within the same market.

The chapter closes by saying location theory has been extended beyond static profit maximizing models, and is used by analysts seeking insight into motives behind firms decisions to locate in certain areas.


X-Sender: jddkg@pop.atl.mindspring.com Date: Sat, 27 Apr 1996 17:47:19 -0400 From: david dunagan <jddkg@mindspring.com>

Bennett Harrison, "Lean and Mean", Chapter 2,"The Myth of Small Firms as Predominant Job Generators"

Very revealing title, is it not?

We are all aware of corporate downsizing. As large firms displace workers they more to smaller firms or start their own. So, strictly in terms of numbers of employees, small firms are becoming more important. This does not necessarily indicate a growth in net jobs, and has not resulted in equivalent employment in terms of compensation, benefits, and security.

Alternative Explanations for the Apparently Growing Importance of Small Firms:

1. Vertical disintegration--large companies contracting to purchase goods and services, formerly produced in-house, from generally small companies.

2. Closures concentrated among the largest companies and units.

3. A shift from manufacturing (with generally larger facilities) to services (with generally smaller facilities).

4. Corporate downsizing to retreat to core competencies.

Harrison advances the explanations above, while discounting #5. "A genuine disproportionate growth in the activity of small firms.

Small Firm Dynamics: Many of the new small firms are symbiotic with the large firms which shed them so that while technically independent, they are de facto branches of the larger firms. Production may be decentralized, but capital, power, and control are still concentrated. In 1987, only 1% of all U.S. companies had over 500 employees, but this 1 % employed 41% of the total private sector work force. In the manufacturing sector, the figures were even higher: the largest 1% employed 70% of all manufacturing workers. The majority of start-up companies fail. In 1985, there were 245,000 new firms. By 1988, 75% of the employment gains were in just 735 of these firms. The most successful were those born with over 100 workers.

Working Conditions and Wages: Face it--things are not as good in the small companies. Insurance, retirement, and a stable corporate environment are frequently absent. These "contingent workers", i.e. temps, contract workers, and small firm employees w/o stability and benefits, are not full participants as economic consumers, and as such, may constitute a drag on the economy. (The last concept was developed in Chapter 1). "In short, small, per se, is neither unusually bountiful nor especially beautiful, at least when it comes to job creation in the age of flexibility."


Date: Mon, 29 Apr 1996 03:15:38 -0400 (EDT) From: Laura Frances Beall <gt0549a@prism.gatech.edu>

Blakely, Edward J. - Chapter 8, "Business Development."

Business Development is the process of expanding and securing the amount of business activities by attraction, creation, or retention. The objective as a component of economic planning is to establish and maintain a healthy local economy. A strong business climate is considered the determinant of a local environment conducive for business location. Published business climate study results have a high profile for local governments. Four basic dimensions comprise a local business development strategy. These are: to encourage new business start-ups, to attract new firms to the area, to substain and expand existing businesses in the area, and to increase innovation and entrepreneurship within the community. The basic tools or techniques considered to be fundamental to a business development strategy are described below as defined by Blakely.

*One-Stop Centers - the traditional role is as an information center to serve as a contact point between businesses and local government. The information provides key economic indicators for location of new firms such as labor statistics, development policies, land availibility, finance options, and regulations.

*Start-Up and Venture Financing Companies and Development Banks - Local Investment Companies (LIC) can provide venture capital to selected eligible small firms by allowing local people to invest in local intitiatives. Local Initiative Support Corporation (LISC) provides loan funds or capital support for community development or community enterprise funds. Local groups become shareholders in viable firms with potential.

*Small Business Development Centers - predominantly functions as a training center providing management training, counseling/consulting, and research services to small firms.

*Group Marketing Systems - the main economic factors that lead to establishment of a group marketing operation are: limited economies of scale in production; large economies of scale in marketing and distribution; need to survive a common external threat, such as high-import; positive attitudes toward business collaboration.

*Women's Enterprise - assists women in developing small enterprises through an intensive self-help program. Low- and moderate-income women experience a 7-week training session to identify strengths and interests, and build confidence.

*Promotion and Tourism Programs - due to the fact that the tourism industry does not make up a significant portion of national economy, the impacts are undetermined for the implications of new growth. Tourism will not provide a solution for areas with no growth or decline and should not be promoted as such. Programs must be well organized, focused, and have active support from all local parties to be successful.

*Micro-Enterprises - the concept is to loan funds to a group of borrowers who plan to go into very small labor-intensive businesses in the same community.

*Research and Development (R&D) - intensive high-technology enterprise requires an increase in the knowledge base for industry and production.

*Enterprise Zones - a defined area with financial incentives to prospective developers or occupants to promote new firm location in that specific area in the community.

*New Entrepreneur Development Activities - programs to encourage and develop skills for entrepreneurs; youth business programs are common examples in schools.


Date: Mon, 29 Apr 1996 03:19:05 -0400 (EDT) Sender: owner-econ-dev@spam.gatech.edu From: Laura Frances Beall <gt0549a@prism.gatech.edu>

Eisinger, Peter K. - Chapter 12, "The Search for New Markets: State and Local Export-Promotion Activities."

With the increase of import competition to the manufacturing industry, states and local governments have made advances in the economic development strategies. From 1970 to 1984, the growth rate for exports and foreign investments rose dramatically. Seeing these increases take place, new evidence became apparent of an expanding international markets for American products. The prospect of saving domestic jobs and industries was possible from gaining additional foreign investment.

State and local governments have adopted two forms of pursuing the interest in international trade. A supply-like approach is to encourage "reverse investment," which is to promote the locality as a climate for the particular foreign investment and offer subsidies. The more recent and entrepreneurial approach is to stimulate export trade for local businesses, that is to create demand by discovering the international markets with niche for the local product. Many states have established overseas trade offices in order to identify new markets. As early as the 1960s, a few states had set up offices in the capitals of known European trading markets. Now, offices are represented on many continents.

In addition to overseas trade offices, another element of state entrepreneurialism in the international scene is the effort to market new products as a way of stimulating new tastes and new demands. By the immense size and numerous new markets recently opened for American trading, there has been an effort to deemphasize the competition of states for economic development opportunities. The international economy represents an expanding opportunity; thus, lessening the competitive nature of states for foreign markets.

The Shift from Supply-Side to Demand Strategies in International Trade

State policy has shifted from the approach of luring foreign investments with incentives to efforts of promoting local products to capitalize on opportunities in export trade. It became an acceptable practice for state governors to take prospect trips abroad as an extension of the state to induce interstate industrial location. In 1971, the National Association of Sate Development Agencies, backed by the U.S. Department of Commerce, launched its Invest in U.S.A. programs, which directed support towards multistate investment missions abroad. The efforts to encourage reverse investments established the first overseas offices as a base. By 1984, expenditures on foreign trade programs had grown from $3.2 million in 1976 in 25 states to $27.5 million in 42 states. The shift to a demand-side strategy had taken place. The purpose of the overseas trade offices changed to reflect this shift. They have become center of publicity marketing their states' industries.

Justifying State Intervention in Foreign Trade

Export trade attracts state and local government development officials as productive means for business expansion and job creation. However, smaller companies are excluded from potential export trade by the institutional barriers of financing and by the high cost of overseas market analysis. To gather information on market conditions and the export process can be expensive and difficult to attain for businesses. Government intervention is justified to give small and medium firms a leg up on international trade markets. Small businesses often find themselves left out of the credit market. Their needs are too small to attract larger banks and small financial institutions do not have the capacity to handle international business deals. Also, the high-risk factor deters investors from assisting smaller firms due to the political uncertainty, transportation problems, and complexity of international trade policy and currency exchange. The process of overseas export trading is complex enough to discourage most businesses. The components include: identifying markets conditions, adjusting products to foreign specifications, setting prices, marketing, establishing a network of distributors, transportation, customs, foreign regulations and licensing, paying tariffs, and servicing the product. The difficulty, more significantly, is that these procedures are in a foreign language and culture.

The Federal Backdrop to State and Local Export Activity

The Carter years first launched the federal efforts to encourage state export activity by urging the National Governors' Association to establish a committee to focus on international trade issues. With the Small Business Export Expansion Act in 1980, the Department of Commerce was able to award grants to public and private entities. In 1982, the Export Trading Company Act allowed the formation and operation of export trading companies, which is an intermediary organization specifically to help small business export activity by buying goods for overseas sale and then assuming all the risks of the export process. Major involvement in state and local export-promotion capacities in Washington is through the International Trade Administration of the Department of Commerce.

Federal support for states' initiatives in export trading stems more from the responsibility to maintain its sovereignty. As more states enter into trade agreements with foreign governments, the question of constitutional violation is at hand. The constitutional prohibition in Article I, Section 10, expresses against any state entering into a treaty, agreement, or compact with a foreign power. Article VI, the supremacy clause of the Constitution, prohibits tax concessions as a violation of the General Agreement on Trade and Tariffs.

State Export-Promotion Programs

Programs to aid local businesses facilitate the provision of services and market development functions. For small firms, seminars, one-on-one counseling and export handbooks are common service programs. In addition to providing information, state export financing, capitalized by bonds or by appropriations, is aimed for small businesses that are unable to obtain other means of financing. Gubanatorial support from overseas trips has emerged as a marketing tool as an agent and broker of local firms. The role of the state government is the legitimacy and credibility of a product. Problems that can arise from the governors' publicity is the promotion of a poor quality good on the reputation of the state, charges of favoritism from other firms, and conflict-of-interest issues.

Conclusions

Export-promotion programs must confront obstacles in the small business community that pose a threat to the success of these efforts. The process of export trading is so complex; many firms even with leads and path laid out will shy away from entering the market. The American markets do not openly support the import-export broker. Foreign trade is not a standard part of the regular business practices. The export trade business makes up a small portion of the finance industry in the U.S. These factors are societal and institutional barriers for state and local officials to address for successful implementation of international economic strategies.


Date: Mon, 29 Apr 1996 19:34:35 -0400 (EDT) From: Kevin Lewis Hall <gt7725c@prism.gatech.edu>

Chapter 9 - Eisinger

"Demand-Side Concepts and Their Policy Implications"

The switch of local governments from supply-side approaches for economic development toward demand-side approaches requires government to play the role of the entrepreneur. In other words, instead of solely relying on the private sector to create economic opportunities for a community, the local government is able to mobilize existing resources in a way that promotes public benefits. Eisinger goes on to write about the principles of export base theory. One principle is that local economies will grow in response to increases in exogenous demand for the output of that particular locality.

In Eisinger's opinion, the focus should be on expanding markets in general, whether they lie beyond or within a community's borders is irrelevant. In his words, "Growth is assumed to come about not only through the infusion of exogenous income to pay for exported goods but also by offering goods that stimulate spending of indigenous income". According to Eisinger, exporting activities and demand-side approaches to economic development go hand-in-hand. It is the role of the local government to promote its services abroad and report to local firms that a market exists for their goods. Therefore, with the demand-side approach to economic development, instead of searching for the big name industries and luring them into the community, localities mobilize the internal resources of their existing industries. This would generate exogenous income and take advantage of a particular community's comparative advantages. The emergence of foreign-export trade possibilities, combined with the inability of most American firms to capitalize upon those opportunities is one factor that has spawned the interest in this arena of local economic development. Also, the demand these days for high-tech capabilities make this sector a focus of action for local governments.

Eisinger goes on to mention that job generation begins "at home". He states, "Efforts are best concentrated in helping local businesses expand and encouraging potential entrepreneurs to establish businesses, rather than in disbursing public resources in the effort to attract the rare mover". There are three policy directions that demand-side approaches are taking: venture capital, high-technology development, and foreign export. Venture capital policies involve the subsidy of private capital in various sorts of private ventures, most of which are aimed at the creation and growth of small businesses. High-technology development involves helping the private sector develop new products, and supporting the process of technology transfer from the lab to the marketplace. Finally, export trade involves both the promotion of local products in foreign markets and subsidizing exporters within a community.

Chapter 10 - Eisinger

"State Governments as Venture Capitalists"

Eisinger explains that state governments eventually came to the realization that fostering the establishment of a multiplicity of small companies rather than competing for a single major employer seemed to make more sense and offered a more effective path toward stable development. Therefore, small businesses are increasingly being encouraged to develop. There does exist a problem, however with the expansion of small businesses. Rarely do these companies have enough capital initially to become competitive in the marketplace. Commercial banks are very reluctant to offer long-term-debt financing to such companies because of the risk factor involved. State governments have concluded that the most effective way to capitalize these businesses is to provide equity backing to undrwrite the processof business planning, product development, initial production, and marketing. In other words, "venture capital" is the term used to denote the high-risk financing of small businesses at the gestation and early-expansion periods of development.

Usually, venture capitalists are highly informed institutional and individual investors willing to take risks. The possibility of issuing public stock as financing is virtually impossible at this stage of a business' development. Therefore, venture capital is used as a kind of "pre-public" financing. What does the state have to do with venture capitalism then? Well, Eisinger brings up three problems that have arisen in the private venture capital industry:

States employ five general types of venture capital programs:

  1. Development Credit Corporations - These institutions are privately funded and managed, but they enjoy a state tax credit for their investment.
  2. Venture Capital Loan Programs - These programs are state-administered and are capitalized by state legislative appropriations and Title IX grants from the federal Economic Development Administration.
  3. Product Development Corporations - These corporations have an arrangement whereby the state provides financing for the development of a new product by an existing firm in return for a royalty later on down the line. Very risky!
  4. Pension Fund Venture Pools - This is the most common state venture capital arrangement. It involves earmarking a certain percentage of public employee pension funds to be invested as venture capital in local companies.
  5. Venture Capital Corporations - These companies provide venture loans and equity backing for small businesses in designated distressed areas in the state. Projects are chosen for their potential for offering steady work at prevailing wages for area residents. The corporation works in conjunction with local community development corporations, which typically also own a share of the firms financed.

Date: Mon, 13 May 1996 00:20:49 -0400 (EDT) From: Miles Nathanael Gilmore <gt9239a@prism.gatech.edu>

Rosenfeld, Chapter 5

In analyzing rural economic policy, Rosenfeld looks at two areas in Italy and Denmark and then contrasts them with the United States. The first, Terza Italia, or Third Italy, is a small manufacturing area in northern Italy which produces an astounding volume of hosiery and ceramic tiles. Denmarks North Jutland county, an agrarian area with high unemployment due to the demise of the fishing industry, attempted to learn from the successes of northern Italy and promote technologically-advanced companies. Both Italy and Denmark are relatively high-cost areas, so further specializing and concentrating on quality and consistency made good sense.

Northern Italys boom is attributable largely to two things: collaboration between and among companies and clustering of industry to spur innovation. Areas with similar economies were grouped together in compresorio, coalitions of governments with aligned interests. Trade associations shared influence with the compresorios. Finally, Regional Boards for Economic Development (ERVET) ran service centers which supported specific needs for the region.

Several elements fostered the growth of the industries. First, the area had been imbued with an entrepreneurial spirit which was centuries old, spawned originally by the areas peasant farmers losing their livelihood and being forced into becoming artisan craftsmen in native industries. That inclination was enabled by the presence of a prominent silkworm in one region, enabling hosiery manufacture, and deposits of red clay needed to make tile. Further, the entrepreneurial spirit of the present area residents forebears seems even more ingrained on the youth; young people are far more inclined to either stick with their parents companies or start their own than in other areas.

One example of this entrepreneurial spirit is the formation of the company System, founded by a twenty-one year old electrician with no formal education. The company exports roughly 50% of its product. Its success is due to innovation and originality in product development and continued investment in research and development.

Trade associations bolster the industry too. These organizations actively promote the products of its members and host large trade shows across the globe. The public sector has promoted the American equivalent of enterprise zones to encourage the development of industry in certain areas. Additionally, university research centers provided invaluable knowledge to the companies.

Castel Goffredo, a small city and industrial center for hosiery manufacture, used many of the above described tactics. The owners of the companies felt increasingly compelled, with the advent of low-cost competitors in Korea, Turkey, and elsewhere, to upgrade, innovate, and provide a high-end product. They were enormously successful, and today produce about 40% of all hosiery sold in Europe.

Denmark, a country which has a large percentage of SMEs and a very advanced education system, wanted to use these assets to promote small business development in a lagging region. Showing little of the hesitation of a Hamlet, the government established a program called NordTek, the strategy of which was to let one hundred flowers bloom. These flowers consisted of centers for services to accommodate the acceleration of industrial modernization. They borrowed heavily from the Italian experience; collaboration was encouraged (and indeed flourished), joint ventures became more frequent, and efforts to market Danish exports to the former-USSR and Latin America were initiated.

One of the most salient points of the article is the contrast with the policies of the American South. The South usually promotes the influx of businesses from the outside; Italy and Denmark sought to promote businesses already within the area to do better in selling their goods to the outside. Of course, the American workforce is very mobile, in contrast to the rooted Italians and Danes. This attachment to community can be an asset as well as a liability, though, as many of the areas residents feel more inclined to invest locally for the benefits that it would provide the community. Skill levels, too, are higher in Europe generally than in the US, and there is less a pool of chronically unemployed.

Chapter 9

Rosenfeld proposes a new paradigm which includes more or less constant innovation and improvement, concentration of effort to certain industries located within certain areas, and training of workers. Americans tend to see research as a way to uncover breathtaking discovery; far more important to business is incremental innovation, in which many smaller discoveries and improvements, usually discovered by workers and managers, are used to better a production process. New technologies are important, but should not be used only as comparison with a regional competitor; a neighbor may be less advanced while an overseas competitor is overtaking the entire region.

Rural southern companies are largely run very traditionally, with the owner making decisions in isolation and with inadequate access to information needed to make sound decisions. This knowledge is readily available, but has to be more readily provided to business owners.

Smaller firms are, based on the Italian experience, more able to adapt quickly to a changing marketplace. They also have flatter organizational structures and tend to be more responsive to inter-departmental issues (marketing, production, etc.). Concentration of industry has worked wonderfully (although somewhat inadvertently in some areas) to promote innovation and sharing of resources. This concentration often leads to networks and strategic alliances which strengthen the sharing arrangement and sense of common interests. Finally, a skilled workforce is essential to the success of any areas industry; and it may not be a highly specialized worker who is the most successful, but a renaissance technician, one who is generally schooled but has the capacity to solve problems and think logically.

The public sector can act as catalysts and brokers to ensure the success of industry, gathering and dispensing data and promoting partnerships. One of the most notable successes in the US is in the area of agriculture. The government has fostered research, promoted good education in the area, provided aid to farmers in selling their wares abroad.

Americans could learn a great deal from their European counterparts, Rosenfeld argues, by promoting healthy industry within their borders, using some of the tactics described above, rather than chasing after industries to relocate.


From: Robin Beth Still <gt0198e@prism.gatech.edu> Date: Sun, 12 May 1996 00:46:04 -

Lean and Mean, The Changing Landscape of Corporate Power, in the Age of Flexibility, Bennett Harrison - Chapter 1

Introduction

Recent reports concerning the loss of competitive advantage of the "larger size" firms (ie. Xerox, IBM, GM, and Sears) tell only part of the story. Although we are constantly told that technological change now systematically favors (or is mainly the product of) small companies, this is simply not correct. Despite the fact that many may preach the virtues of small firms as engines of economic growth and exploiters of technological advantages, the facts show that smaller firms do not do as well as larger firms. According to the author, small firms tend to be systematically backward when it comes to the use of technological advances, and on the whole, larger companies are far more likely than smaller firms to invest in and utilize certain types of advanced technology. Besides utilizing more advantaged technology, larger firms can also produce goods for two types of markets (mass and niche).Smaller firms are at a disadvantage in this situation because they typically can only produce goods for niche markets.

Concentration without Centralization: How the Big Firms are Reorganizing Global Capitalism

The author asserts that the locus of ultimate power and control remains concentrated within the larger institutions, multi-national corporations, key government agencies, big banks and fiduciaries, research hospitals, and major universities with close ties to business. Thus, the author tends to characterize the emerging paradigm of networked production as one concentration without centralization. Meaning...concentrated through down-sizing and lean and mean production and decentralized as departments and experts are scattered over a wide area. Large firms retain their competitive advantage over smaller firms by:

1) the vigorous paring down and mix of activities and employees. In house operations are dispersed and work is farmed out to outside suppliers and a lean and mean approach to production is implemented.

2) finding ways to use computerized technology to ease communication and interaction within a company

3) forming strategic alliances within smaller firms, suppliers, or manufacturers

4) attempting to change the perception of workers, increasing workers productivity and flexibility

But the success of larger firms has not come without some repercussions. Including-

1) The polarization of labor markets in larger firms. This polarization manifests itself in terms of money, status, and economic security of its workers.

Why Small Firms do not drive economic growth & create jobs?

We have been told that large companies have become dinosaurs, increasingly unable to compete and even further that small enterprises have rushed in to fill the void by creating most of the new jobs. But hard evidence shows that the importance of small businesses as job generators and as engines of technological dynamism has been greatly exaggerated. We are told that small firms are more competitive because they capture certain economies of scale.

Why are we so ready to accept the small firms story? The belief that smaller firms are more competitive and productive than larger firms has prompted many elected and appointed officials to shift their attention from old fashioned efforts to attract new branch plants of multi-national corporations to promoting the incubation of small businesses.

What's wrong with the small firms story? What's been left out of their success story is:

- Large firms have greatly contributed to the success of smaller firms due to the outsourcing and subcontracting of small firms to provide services

- The types of jobs that small firms have created are inferior. In fact, studies have shown that workers who are employed in larger firms typically enjoy better benefits, greater job security, and higher wages.

- Larger firms typically perform more profitable than smaller firms

- Small firms can create pockets of polarized labor forces composed of highly skilled workers and unskilled/underskilled poorly paid workers

Suggestions

In order to be competitive and productive in the long run, local governments must concentrate economic development activities away from solely promoting small business development because:

1) small businesses development does not promote the development of network forms of production.

2) small business development often does not seek to find ways to maintain civilized labor and living standards

3) small business development does not focus on developing a strategy to manage global demand and economic growth and global markets

4) small business development could distract localities from the need to continually monitor and regulate the behavior of multi-national enterprises


Date: Wed, 15 May 1996 04:36:03 -0400 (EDT) From: Michael John Charles Boehm <gt2995b@prism.gatech.edu>

PLANNING LOCAL ECONOMIC DEVELOPMENT, by Edward J. Blakely, Chapter 9, Human Resources Development

This chapter focuses around getting people to work. Not only in increasing the net numbers of jobs available, but also in terms of increasing the employability of the workforce. It describes many different ideas, both theoretical and practical, that could be tried to improve the welfare of a population of un- or under-employed people. Some of these have been tried out in the real world, and several extensive case studies illustrate some successes.

MATCHING HUMAN RESOURCE DEVELOPMENT PROGRAMS AND OBJECTIVES

Before launching into the different employment-enhancement tools, Blakely stresses the importance of local human resource development programs. Blakely states that while there are many more ways to enhance employment on the macro level, such methods are not discussed here because local governments are not in a position to execute such changes.

CUSTOMIZED TRAINING

The first idea articulated is that of customized training. In this, the local government trains local workers at local facilities in skills required by local businesses. For example, a city might teach a job in arc welding at a local community college if the city has a large number of sheet-metal working shops. Blakely cites Ohio's High Unemployment Population Program (HUPP) as a successful example of this approach.

FIRST-SOURCE AGREEMENTS

Under this system, the local government grants businesses some concession (such as property-tax breaks) in exchange for an agreement by the firm to hire local citizens in preference to non-locals. This basically mandates the local geographic area as the firm's first source of new hires.

EMPLOYMENT MAINTENANCE

With this tool, the money that would ordinarily have been an unemployed person's welfare check is instead used to subsidize his or her salary at market-viable levels. For example, an unemployed person could get a job as a teacher's aide or playground supervisor at a public school, where the unemployment payment is combined with what would otherwise be a very meager paycheck.

SKILL BANKS

In this In this elegant and wonderfully optimistic concept, a survey is made of local unemployed people to determine what skills they possess. This information is then entered into a database and when a local employer is looking for a certain skillset a computer search can be run. It can also be used proactively, as trends in skillsets among the local population can be determined and employers requiring these skills can be encouraged to relocate to the community. The one most obvious problem, however, is how to prevent surveyed people from overestimating their skills.

TRAINING PROGRAMS

This is by far the most widely-employed of all Blakely's tools. A training program can teach basic skills (such as GED) as well as applied. Furthermore, skills to be taught should match those required by local firms and industry. Blakely recommends the formation of local training councils to guide and direct such programs.

PRIVATE INDUSTRY COUNCILS

Private Industry Councils (PICs) are groups of people drawn from both the local pool of employers as well as the local economic development community. These boards are a hybrid cross of the training program councils and the standard economic development board. They approach the problem from both directions: first, they encourage development of enterprises that match the skillsets of the local population, and they also coordinate training efforts to match local needs. Furthermore, they work to eliminate discrimination in hiring and employment practices.

YOUTH ENTERPRISE

This type of program seeks to foster an entrepreneurial spirit within the local youth community. The youth create their own jobs by coming together to form enterprises that match their skills. Local government can offer more than just direction and encouragement; they can offer direct support in terms of space at a community center or loaned equipment. Furthermore, they can coordinate local volunteers to share their skills and experience with the youths.

SELF-EMPLOYMENT INITIATIVES

These are initiatives to encourage unemployed people to start their own businesses. The unemployed person comes to the development council with an idea for a new enterprise. If the council determines that the idea is valid and supportable, and that the enterprise contributes to the good of the local community, and that there is a need for that which the enterprise offers, then they will provide start-up assistance in the form of low-interest loans or even grants. Furthermore, until the start-up is able to sustain itself, the community will continue making unemployment payments to the would-be entrepreneur. The main criticism of this is that the people who would be the most helped by this (i.e., the chronically unemployed) would be the least capable, in that they tend to have low skill and education levels. This would most likely be best used in combination with an extensive skill-training program.

DISABLED SKILLS DEVELOPMENT

The final tool hypothesized here is that of getting the disabled back to work by finding useful employment for them within their limitations. This program supposes the existence of a Disabled Placement Officer (DPO) whose job it would be to find employment for disabled people. The DPO would also be well-versed in legislation pertaining to disabled people, such as regulations about access. There are two things about this proposal I find disturbing. First, Blakely states that the DPO would focus on seeing Òhow the work environment can be made to fit the (disabled) person rather than the person fitting the job. It would seem to me that any job would involve concessions from both sides. As an employer, if I knew I would have to make radical changes in my workplace if I hired disabled people, I simply would not hire them. And if I was forced to hire them, and then to make expensive refits, I might be forced to relocate. While it is very virtuous and civic-minded to help out the disabled with employment opportunities, it must be balanced with its imposition on employers. The other objection is that this seems like a very expensive thing to do; a DPO would be a full-time employee who could handle at most perhaps ten cases at a time. Hiring a whole department-full of DPOs (who, with all of their knowledge and skills would not come cheap) would be daunting for any local government.

CASE STUDIES

THE MACHINE ACTION PROJECT (MAP)

This program was begun in Springfield, Massachusetts, in 1988 to address the needs of the local population. At the time, local large manufacturing facilities were relocating offshore, leaving the town with high unemployment. This project discovered that rather than there being a simple ebb of manufacturing jobs, there was a growth in flexible manufacturing jobs in firms that specialized in high-value, small-batch items. This sector was currently suffering from a dearth of employable workers. However, these jobs required higher skill levels than the old mass-production facilities required. So the MAP set about coordinating a series of training programs to bring the local manufacturing workers up-to-date on the skills required to work in the high-tech, small metalworking shops that were springing up around the area. The local firms paid nominal fees into this program in order to have a role in setting curriculums and standards. It was also funded by the Massachusetts Department of Education, the National Tooling and Machining Association, and the U. S. Department of Labor.

THE INVERCLYDE TRAINING TRUST (ITT)

This case study focuses on the town of Inverclyde, a small Scottish town near Glasgow. Traditionally a shipbuilding region, the area suffered from economic depression due to the cutbacks in shipbuilding jobs. In 1986 the ITT was founded by the Scottish Development Agency. They recognized that the shipbuilding jobs would not be coming back and the local workers would have to be retrained in completely different disciplines. They acted as training coordinators instead of providers, pulling together local resources as well as employers and potential entrepreneurs. It also encouraged displaced workers to try self-employment. While the program itself accomplished a 95% completion rate amongst its students, it had difficulties placing its alumni; only one-half of former shipbuilders and one-third of graduates from other backgrounds were able to get jobs after completing the job-training program. Studies showed that it was the indirect benefits of the program- a restoration of confidence and self-esteem in the individual- that helped a person more than the actual skills learned.

EMPLOYMENT PLANNING AS ECONOMIC DEVELOPMENT

The subject of this case study is the northeastern (US) manufacturing town of Eastport. This community witnessed a hemorrhaging of local manufacturing jobs that resulted in a depressed economy. This effort is to focus on job creation and revitalization of the local downtown. The first step in this process was to combine all the disparate agencies with a stake in redevelopment into the Employment and Economic Policy Administration (EEPA). THe EPA would coordinate job-training efforts and refer trainees to local firms. However, the EPA got a reputation for referring poorly-skilled workers. They overcame this problem by involving local employers more directly in the job-training program, using their input to reshape the curriculum. There have been other efforts as well- for example, one building in a new downtown industrial park was turned into a full-time training center. The EEPA also worked with other stakeholding organizations to provide contacts for its employees. It also provided small low-interest loans to entrepreneurs for start-up businesses.

MOVING THE POOR OFF WELFARE

Holyport, California is a largely Hispanic community in Southern California plagued with economic strife. Margarita Majitas was one person who was able to move out of the cycle of welfare, poverty, and chronic unemployment with the help of the city's and state's assistance programs. Under this program, welfare recipients are encouraged to attend a job-training program and a government-subsidized job. These jobs allow private employers to hire low- to moderately-skilled employees while paying them wages that the employer can afford. The state makes up the gap between what the employer can afford and what the employee needs to be self-sufficient for the first 6 months of employment. Furthermore, the Holyport Community Development Corporation (CDC) owns a number of local businesses directly, where it employs Spanish-speaking welfare recipients at above-minimum-wage levels.

YOUNG NEED A JOB- MAKE YOUR OWN!

This final case study focuses on another economically depressed, predominantly minority California community, this time called Crestview Park and inhabited mainly by Vietnamese and Cambodian refugees. A local entrepreneur by the name of Tung Ng began Youth Action at the local Vietnamese Family Life Center, a program designed to encourage the local youth to start their own businesses. Internships at local businesses and job-training classes were offered. Then, each youth or group of youths was encouraged to come up with a business plan. This plan was then reviewed before a panel of representatives from local Asian businesses. If the plan was seen to be business-worthy, and a benefit to the community, it was seed-funded with $2000 of local money, contributed by the local businesses. This program has spawned a wide range of successful businesses, from a catering company to a word processing service to an answering service. However, perhaps the most important things the youths learned was self-reliance and confidence in their abilities. They took a pro-active stance and were able to get done what needed to be done. not only has this given them a head start amongst the community, but it gave them the internal skills needed to prosper.


Date: Wed, 15 May 1996 13:19:03 -0400 (EDT) From: Alissa Gabrielle Tuyahov <gt0385d@prism.gatech.edu>

Alissa G. Tuyahov, Graduate School of Public Policy, Summary of "The Three Jobs of the Future", Robert Reich, The Work of Nations.

This article explains how the U.S. economy and American workers no longer face a common fate or a common enemy. In the emerging international economy, fewer and fewer jobs are associated with a particular firm, industry, or sector, or are connected within the boarders of our nation. A global web is more typical in which corporate battle lines no longer correspond with national boarders. Americans are becoming part of an international labor market, and the competitiveness of Americans in this global market is coming to depend, not on the fortunes on any American industry or corporation, but on the functions that Americans perform - the value they add- within the global economy. Americans will face global competition even more directly when it is unmediated by national institutions. It is also important to note that successes and failures will not be shared equally by all U.S. citizens.

Next, the authors assess categories of American jobs in order to further understand the real competitive positions in the global economy. In contrast to traditional job categories dating back to the 19th century classifications created by the U.S. Census Bureau, the authors have created three new jobs of the future which correspond to the changing landscape of the American corporation and economy. The past classifications made sense when the economy was focused on high-volume, standardized production, and when status and income depended on one's ranking in the standard corporate bureaucracy.

Three broad categories of work are emerging which correspond to three competitive positions in which Americans find themselves.

  1. Routine productions services
  2. In-person services
  3. Symbolic analytical services

Routine production services although often thought as traditional blue collar jobs, now include routine supervisory jobs, such as foreman, line managers, clerical supervisors, and section chiefs. The information revolution has produced a large number of routine producers which process information and enter data in repetitive tasks. By 1990, routine production compromised about one-fourth of the jobs performed by Americans and the number was declining.

In-person services also involves repetitive work; however, the difference being in-person services are provided person to person and thus are not sold worldwide. In-person services are in direct contact with the beneficiaries of their work. Examples include janitors, cashiers, hospital attendants, waiters, and security guards. By 1990, in-person services accounted for 30% of the jobs performed by Americans, and their numbers were growing.

The third type of job of the future is symbolic-analytic services, which includes all the problem solving, problem-identifying, and strategic brokering activities. Like routine production services and unlike in-person services, symbolic analytic services can be traded worldwide. Examples of such jobs include engineers, investment bankers, lawyers, real estate developers, consultants and writers. Their careers are not linear or hierarchical and they rarely proceed along well defined paths to progressively higher levels of responsibility and income. Symbolic analysts account for no more than 20% of American jobs. In total, these three categories account for 75% of American jobs.

The authors emphasize how creative and original thought is important to gaining competitive advantage. Traditionally as young people in generations past ascended career ladders with comfortable predictability, original thought was not necessary, and in some extreme cases, could even be hazardous to career growth. In today's global market such predictability will ensue vulnerability to worldwide competition. The authors conclude that the only true competitive advantage lies in skills involving solving, identifying, and brokering new problems.


Date: Thu, 16 May 1996 12:54:31 -0400 (EDT) From: Amy Cathryn Zeller <gt7098d@prism.gatech.edu>

The Economic Development of Neighborhoods and Localities, Bingham & Mier Chapter 4, Wim Wiewel, Michael Tietz, Robert Giloth

1. Four Bodies of Theoretical Work

There are four bodies of theoretical work concerning neighborhood economic development.

2. Neighborhood Economic Development Practice
3. Linkage to the Neighborhood and Regional Economy
4. Sociopolitical Conditions and the Basis for Action and Success
5. What Does a Theory of Neighborhood Economic Development Need?

Theory should concern itself with the neighborhood economy and its linkages. Second, it must also be sociopolitical, because the activity which it is rooted in is a form of social institution.

Additional requirements for a theory:

6. Problems and Potentials in Community Economic Development Theory

Virtually none of the approaches contain essential elements of instrumentality. The nature of the field itself gives rise to serious conflicts in objectives among its proponents.


Date: Tue, 21 May 1996 23:55:49 -0500 - jkim@dmsmith.iac.gatech.edu (Jaechang Kim)

Bingham and Mier Chp.10, Summary of the " Citizenship and Economic Development" by Elaine B. Sharp and Michael G. Bath

Forms of citizen participation include electoral involvement, protest and complaint activity, and various problem-solving behaviors. A number of influential theories have been developed to account for the various forms of political participation. Elaine and Michael divided those theories into three types: psychosocial theories; rational calculus theories; and institutionalist theories.

1. Psychosocial theories: -emphasize individual attitudes and social groupings that condition the development of individual attitudes, beliefs, and so on.

2. Rational Calculus Theories: -assume that individuals are mobilized into group-based political action on the basis of their objective assessment of the impact of proposed policies or existing arrangements.

Note: Participation as a form of problem solving activity is drawn upon a typology of "exit, voice, and loyalty"

3.Institutionalist Theories: -emphasize the importance of various institutional arrangements in either fostering or limiting citizen's access of governmental decision-making arena.

4. Combination Theories -draw insights from combination of psychosocial, rational, and institutionalist perspectives.

Elaine and Michael contend that the tendency of those theories focus on who participates or the conditions for political mobilization rather than the character and direction of citizen involvement which is a more substantial problem for the economic development study. They present four categories of citizen participation.

Viewed in this way, most theories of citizen participation have limitations to apply. Elaine and Michael constructed Developmental Participation Theory on the basis of an expanded version of Jones's Need Awareness theory. It posit that, (a)if political awareness is sufficiently high, and (b)contingent upon the mediating effects of institutional arrangements such as reformism, governmental fragmentation, citizen participation

arrangement, and quasi-public development bodies, (c) the propensity for and character of citizen participation in economic development is a function of community and individual needs in the developmental sphere. It also suggests that the dynamics of citizen participation in economic development are substantially different in economically distressed and economically advantaged communities.

In the economically distressed communities, city leaders faced with such conflict face with two possibilities;

In relatively prosperous cities

Two cases in economic development are presented, one for economic distracted community and the other are for relatively prosperous cases.

Case #1. Economic Development in Pittsburgh

-defuse the conflict rooted in negative use value impact.

-Community organization mobilized against government program turned to collaboration with government.

Case #2 Economic Development in Prosperous Communities

A. Gainsville, Florida.

B. Lawrence, Kansas.

Conclusion: Most of theories have been developed from the political science side, not for the economic development side. Nevertheless, Jones's (1980) need awareness theory offers useful springboard for a synthetic theory, and it gives useful tools to explain the response of citizens respect to the economic development initiatives.


May 21, 1996 - Mike Bosi

Emil Malizia - Modes of Planning Economic Development

The chapter begins by stating that in the U.S. planning traditionally focused upon planning and management of physical development. The chapter presents two modes of planning to accommodate and enhance local initiatives, contingency and strategic planning. These modes are producer oriented and rather than representing a general plan for all locations they are specific to each individual location. Each unit is one piece in a system of organizational plans which must be jointly executed. The author argues against localities focusing on general plans and states they need to focus on individual objectives and assessing those objectives to proper agencies to be effective in the promotion of economic development.

The author moves on to examine contingency and strategic planning. Contingency planning is conditional planning, with future events not forecast but anticipated. It focuses on responses to specific events. The author spends the next five pages describing contingency planning, again a reactive not pro-active approach to planning. It seems that it has nothing to do with economic development, but rather looks to guard against negative changes in the economic activity of the local. It does nothing to bring about or initiate activities which may lead to economic activity. In his discussion on strategic planning, Malizia, states that the planner must plan for their particular local development organization, with plans for the community at large resulting in general and inconsistent outcomes. Under strategic planning the planner assesses the LDO, it's resources, and it's capabilities, and from this assessment looks outward to determine the activity the LDO should undertake to best affect the local economic development. The final part of the chapter addresses design and analysis techniques. Design techniques are brainstorming and scenario writing, which deal with exploring all possible routes and alternatives to a problem. Analysis techniques are economic base, input-output, and shift-share analysis. All of which help determine the affect different economic activities will have upon economic system.


To top of page
Return to course outline