Recently, the near-simultaneous rejection of Atlanta’s NASCAR bid and acceptance of Georgia’s Kia bid sparked a brief debate for the attention deficit masses on whether governments should engage in economic development initiatives. It’s primarily for the more extreme sides of the aisles to say “no,” though for different (and purely ideological) reasons:
- Some conservatives say government should not get involved in manipulating the economy.
- Some liberals say government should be redistributing money to help the poor, not lining the pockets of the rich.
A more moderate position would be to state the case that economic development initiatives strengthen the local tax base and local economy, and that benefits everyone. I’m not going to try to justify the case here. But I thought that would make for a nice introduction because I’m just opinionated that way.
There are many ways of thinking of economic development. I’d like to take a moment to point out one particular way of thinking about the subject. For a more substantive view, Don Iannone has organized an excellent reading list for beginners. Just reading his blog can also be an enlightening exercise.
Following NASCAR’s rejection of Atlanta’s bid, a storm of suggestions ensued on what to do with the money that would have gone to that initiative. They have included
The list goes on, I’m sure.
What differentiates all the items on the list from the NASCAR and Kia bids is the focus. Again, this is one particular way of looking at economic development. Some money for economic development initiatives focuses on importing jobs, talent or money. Some is focused on growing talent from within. While the two approaches are not mutually exclusive, it is important in the public debate to differentiate between the two.
In the case of NASCAR, the hope was to import new tourist dollars to the local economy. While tourism dollars tend to be a very effective means of boosting the local economy (PDF), quite a bit of money would still have flowed straight to Charlotte. More to the point, much of the money would have gone to the France family without much benefit to either Atlanta or Charlotte.
In the case of Kia, the intent was to import jobs, which is not an entirely bad idea, even given the subsidy the state is paying to import those jobs. When new jobs enter a local economy, the dollars imported into the economy get circulated several times. This is known as the local multiplier effect. (Slightly more technical explanation) (And a slightly more substantive discussion). The public money spent to import jobs presumably has a net benefit to the local economy.
Many of the alternative proposals stated above have more to do with developing and nurturing local talent. A new symphony hall would be a new landmark born, bred and raised right here in Georgia. A civil rights museum and a state museum would both acknowledge Georgia’s (and Atlanta’s) rich, under-appreciated history. A new center for the performing arts with a more local focus than WAC would enrich the local cultural heritage and benefit the local economy.
The typical top-down approach to economic development is the import approach. Political leaders get to claim their little trophies that brought jobs and money to the local economy. Fostering the more grassrootsy approach by supporting more local approaches would strengthen the local economy. The Boston Foundation, for example, found that every dollar given to arts service organizations have a high impact in supporting the local arts community. (My guess is that supporting existing arts service organizations would also be more effective than reinventing the wheel.)
Supporting Community Development Corporations would also carry a higher per-dollar impact in developing the local economy.
Perhaps rather than boasting about big trophies and bowing to the corporatist way, our state and local leaders would be better off by connecting with their local constituencies through these local initiatives.