Wednesday, September 12, 2012

Who does the best job of directing local economic development?

Who does the best job of directing local economic development?

Last week Greg Williams, the new Chief Executive Officer of the Lawrence Chamber of Commerce, spoke to the members of the Lawrence Association of Neighborhoods.  In his remarks, Williams stated that the “best” local economic development agencies are run by Chambers of Commerce, not by local government.

This seems like an empirical question which should be informed by looking at the published research on local economic development.  What does that published research have to say on this question?

Wolman and Spitzley find that local economic development decisions are made through a political process masquerading as a rational process.  A political “growth machine” exists that is a coalition of interests who benefit from real estate development, rather than real economic growth.  Led by business interests such as real estate developers and the Chamber of Commerce, this growth machine maneuvers to take control of the economic development process (Harold Wolman and David Spitzley. 1996. The Politics of Local Economic Development, Economic Development Quarterly 10(3):115-150.)

Rubin finds that when economic development is directed by a Chamber of Commerce, the deals are structured to benefit the businesses, often at the expense of the taxpayers.  When economic development is directed by a local government, the deals are structured to benefit the community as a whole.  When local government turns over the administration of local economic development to a special interest group, such as the Chamber, that special interest group generates a systematic bias in favor of the Chamber’s constituents (Herbert J. Rubin, 1988, Shoot Anything That Flies; Claim Anything that Falls: Conversations with Economic Development Practitioners, Economic Development Quarterly 2(3):236-251)

McGuire finds that economic development is a collaborative process, but the form of the collaboration is important.  With the Chamber is in the lead role, it will direct the process to the benefit of its constituents, its member businesses (Michael McGuire. 2000. Collaborative Policy Making and Administration: The Operational Demands of Local Economic Development. Economic Development Quarterly 14(3): 278-291.)

Opening up the process can be beneficial.  KU’s own Elaine Sharp finds that “Public officials in tax-stressed communities who are wary of the potential consequences of popular mobilization may be relieved to find that heightened citizen involvement can actually enhance the climate for economic development policies . . . “(Elaine B. Sharp  and David B. Elkins. 1991. The Politics of Economic Development Policy. Economic Development Quarterly, 5, 126-139.)

No one can serve two masters, and the Chamber of Commerce is no exception.  It works for its membership as a special interest group advocating for businesses. 

If the City of Lawrence wants to pursue economic development policies that are beneficial to the community as a whole, it needs to both depoliticize and professionalize the process.

The Chamber of Commerce receives over $400,000 in taxpayer dollars each year from the City and the County.  The record of accomplishments for this large annual taxpayer subsidy is very poor.  The Chamber led the City into 17 tax abatements of which only 35 percent met expectations, the remainder failed outright or did not produce the jobs, wages or investment promised.  The Chamber led the City into violations of the Kansas Open Meetings Act in attempt to broker a deal without the taxpayers’ knowledge.  This caused the members of the City Commission to be censured. The Chamber consistently supported more and more real estate development on the false belief that supply creates demand.  They were wrong, and now the City is stuck with a large inventory of vacant housing, retail stores, and offices.

The City and the County should take this money and spend it on professional planners who report to the elected officials.  These planners would bring professional skills to their work and would serve the community as a whole.   The Chamber should be at the table when economic development policy is designed and implemented, but it should not be paid large sums of public money to be at the table.  The Chamber can sit at the table as an equal, interested and unsubsidized partner. 

Who does the best job of directing local economic development?  Professional planners working for the community do the best job, not the Chamber of Commerce working for its business constituency.