Does Local Economic Development Work?

Writing in City Journal, academic Mario Polèse calls local economic development strategy an "urban-development legend". He reviews the prevailing economic development strategies employed over the last century -- up to and including the prevailing "Creative Class" approach associated with Richard Florida -- and concludes that these "grand theories do little to revive cities," and often end up doing damage to the local economy the theory seeks to stimulate.

The author of the article is Mario Polèse is a professor at the Centre Urbanisation Culture Société at Montreal's Institut National de la Recherche Scientifique.

Polèse writes harshly about economic development agencies: "Local business-development corporations remain a staple of city strategies. But no methodology exists for verifying that the jobs they purportedly created wouldn't have emerged anyway. This fuzziness, in fact, is one of their political strengths. Once funded, even temporary initiatives tend to become permanent."

Polèse looks at several examples, including Philadelphia:

"On a corridor wall in Penn's Wharton School building was plastered a huge input-output table of the Philadelphia economy, which would help planners make the right choices. The direct and indirect employment effects of any investment could be precisely predicted. It was all very scientific.

The unfortunate results of that optimistic epoch were large industrial complexes, often in petrochemicals or steel, which created jobs but little subsequent growth. It turned out that input-output models were essentially static, limited to one-shot income and employment effects. Over the long term, in fact, investing in supposedly strategic industries frequently had a negative effect on growth; for example, those large plants tended to be unionized, which pushed up local labor costs and drove employers away."