Local Government’s Role in Economic Development

June 25, 2010 at 12:06 pm Leave a comment

What is the proper role of city and county government in economic development? This question has been asked for many years across the U.S. and abroad. My friend Mike Lugar (formerly at UNC Chapel Hill and now at the University of Manchester in the UK) did a good job in exploring the options in terms of roles.  He says this:

“This paper summarizes the sense of the literature about the role of government in local (regional) economic development, focusing mostly on the U.S., using examples from North Carolina. But the lessons are more broadly applicable. The main take-aways are: (1) economic development is so entrenched as an activity of government there is little debate about its legitimacy; (2) all levels of government have been involved in economic development, but the balance of responsibility and types of intervention have changed over the course of history; (3) in the knowledge economy of the 21st century, traditional types of intervention (providing water, sewers, and roads, or even conventional tax incentives, for example), may not be enough for lagging regions to compete—attention needs to be focused on the development of knowledge infrastructure that allows regions to attract R&D dollars and become more innovative; and (4) several “stylized” rationales for government intervention can be applied to the activities we observe.

The third of these observations has considerable import for policy-making. Unlike the presence of a deep-water seaport, proximity to natural resources, or accessibility to markets, for example, which are largely “natural advantages” that accounted for the growth of America’s largest cities through the 20th century, the presence of universities, research centers, and cultural amenities can be enhanced anywhere. The Research Triangle Region of North Carolina, the Huntsville- Birmingham corridor, and the Daejon region in Korea, to name just three of many examples, were economic backwaters at one time. But have become successful high tech regions through strategic action. Those actions can be justified by several of the arguments listed above, including their ability to be “transformational,” and to generate net welfare benefits.”

I would add my view, which is that city and county governments should play a role in economic development as strategic investors and policy-makers. Lugar talks about the need for local governments play a role in making things happen in economic development when and where the private market is not ready to move. I would agree with that, but I believe this role must be fully coordinated with private sector-based economic development efforts. The two cannot be working in different directions. Nor should they be redundant.

Click here to read Mike Lugar’s paper.

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Entry filed under: Best Practices, Local Government (City & County), Local Government Role in Economic Development. Tags: , , .

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