Economic Development

Two International Finance Centre designed by César Pelli in Hong Kong is the tallest building on the skyline completed in 1998 at the end of the Asian economic crisis. Multiple owners hold a stake and the building is occupied by influential local banks to corporations from across the globe including Ernst & Young and the Blackstone Group. To be fair, there are no naming rights to the building. Hong Kong since before its handover to China in 1997 is a leading example of Westernized values of economic development being exported globally. The territory has even influenced similar development in China's mainland.

A multitude of perspectives define and shape economic development as we proceed into the 21th Century. Economic development affects all realms of life, economic, political and philosophical. It is policy in practice and a goal in process, yet there is no end point. This book will help you explore and understand what is meant by this term and how it affects the world and your local environment.

Questions that will be explored include:

• How can economic development best be stimulated?
• What sort of business regulations are most conducive to quality economic development?
• How can regulations be developed to maximize the benefit for both the people of the state and the businesses and their customers?

It should be clarified, this book is not about the Principles of Economics, nor to explain the mathematical formulas and functions which govern the actions of governments. Though numbers will enter into the discussion, economic development is more a theory and philosophy of what works best and what is needed, as opposed to, how does it work and how should we manage our economies. It is suggested of course that a reader should familiarize themselves with the principle measures of the economy and the financing actions of enterprise.

Lastly, this book does not attempt to provide an entire global examination of economic development as it uniquely occurs in each country, but to generalize and provide a basic view of its process as it occurs and changes in the Western world. As stated, economic development continues to be re-defined and each era marks a different interpretation as technology and circumstances change in the world. Hopefully this text will attempt to weave common elements together and present the situation as it exists today.

What is economic development?

Definition Economic development has several definitions from local to global perspectives. Professor of Economics and Public Policy Alan Deardorff at the University of Michigan as part of his International Economics Glossary calls it: "Sustained increase in the economic standard of living of a country's population, normally accomplished by increasing its stocks of physical and human capital and improving its technology." At the local level, the term is brought to a more reachable level. For example the UrbanPlan curriculum states: "Economic development—A term generally applied to the expansion of a community’s property and sales tax base or the expansion of the number of jobs through office, retail, and industrial development." An interesting Cornell article expands: "Economic development is typically measured in terms of jobs and income, but it also includes improvements in human development, education, health, choice, and environmental sustainability. Business and economic developers in the US are increasingly recognizing the importance of quality of life, which includes, environmental, and recreational amenities, as well as social infrastructure such as child care, in attracting and retaining businesses in a community." In each of these definitions, the focus is on growth of the physical and social sphere of life. As well there is an inherent goal, that such growth achieves a greater "standard of living" or "quality of life." Important to note is that residential development is a separate component. Lastly, the field does presume one common fact, that what is there is not providing what that community needs.

In government structure Economic development (ED) is seen both as a policy and a profession. In the United States, most local governments have an economic development authority that oversees and guides enterprise in states and cities. Many states have multiple layers of such groups. For example, a neighborhood might have its own non-profit to help small businesses establish storefronts. The municipality's economic development department would help major corporations locate into city limits. Most cities have metropolitan regions, and such regional authorities can promote entire areas of a state for new companies. The state's workforce and employment department would then overlap all of these, tracking job growth and ensuring Federal funds may be available for job programs and assistance. ED many times is an expected part of government function because cities and regions are constantly competing for jobs which no longer need a specific location.

As government policy As policy, ED is frequently noted in the news as a function of a country's government to improve the welfare of its citizens by providing and literally building opportunities. The skyscrapers and dams being fervorently built in China's coastal cities and rural west have become a symbol of ED. The term started for American cities in the advent of suburbia in the 1970s but had not exactly entered American politics until the economic boon of the 1990s. ED has traditionally been applied to major projects such as a new industrial zone or enclosed shopping mall as well as waterworks projects and freeway expansion. However suburbia by the 1990s began to realize that the capitalist micro-economies of downtowns were not going to remake themselves and the term gained full footing to ensure stability in new cities by carefully planning and plotting the location of potential retail, services, and office. ED has also become familiar with medical and hospitality industries, seeing hospital campuses and hotels as valuable as an office tower. The main goal with ED as government policy is that jobs must grow in the end, much like how private companies ultimately wish to gain profits from new investment.

As a profession As a profession, ED Directors and Business Specialists work with business owners and much like courting deals in the private sector, will try to provide opportunities to entrepreneurs. These may include qualifying special new business loans, offering tax breaks on a piece of land, or ensuring planning officials can compromise to approve a project. While ED personnel are generally "on the ground," they also do extensive research and quantitative analysis as to potential sites which may accommodate future employers. Regularly they perform many urban planning and community development functions such as identifying properly zoned areas for commercial or industrial and the accompanying codes and variances that could suit a business model. With these goals, ED staff may also influence planning decisions and encourage the establishment of Enterprise Tax Zones which specifically encourage businesses to locate in a particular geographic area.

The city and the hinterland

The basis for urban economies is in understanding the relationship of cities and the hinterland. The hinterland has been used since the 20th century by geographers to describe rural land, the "empty" and "wild" space between cities. Eugene van Cleef would better define it in "Hinterland and Umland," tracing its Germanic routes as the land extending from the coast. The best equivalent is "back country." Though with a slight negative connotation, the hinterland has become an appropriate term to describe land areas that do not necessarily have a city or urbanized function but are not necessarily rural lands. For example much of the central to western United States is unincorporated or not in use at all due to natural features. As well hinterland encompasses all natural lands even those in protected status.

The need to understand the relationship between the city (meaning both urbanized and metropolitan areas) and the hinterland, is helpful to understanding the cycle of urban economies and flow of investment and assets.

Urban economies: cycle flow and assets

Urban economies seen through input and output, are essentially machines in themselves. Urban means dense or close together and the proximity allows economic activity to blossom. Flour milling was an early American economic industry that was inherently urban. The multiple costs of each component limited millers to draw from local economies.

• Flour milling
  • Administration
    • Human resources
    • Migrant workers (embassy)
    • Sales
    • Material buyers
  • Workers
    • Wages
      • Restaurants
      • Bars
      • Shops
      • Real estate (housing)
  • Equipment
    • Iron-fabricators
    • Machine shop
    • Civil engineers/city crew
  • Production
    • Materials
      • Rail line jobs
      • Truck drivers
    • Packaging
      • Flour sack makers
  • Delivery
    • Rail line jobs
    • Truck drivers
  • Sellers
    • Bakers

Author resources

The Author resources page of this book lists some potential information sources for authors (and readers).

Local development

This Wal-Mart in Madison Heights, Virginia is one of nearly 2000 stores in smaller communities of the United States. By the 1990s, the "big box" store became a regular icon of economic development in rural areas where typical retail found in major cities would not establish. By the turn of the century, Wal-Mart's effects on these communities was marked by the downfall of local retail and criticized labor practices. Corporate expansion into undeveloped areas is an example of incompatibility between city and hinterland.