In the US, calls for improving infrastructure and the business climate, nurturing entrepreneurs, developing industry and skill clusters, and giving local support to globally-competitive firms have been made by US think tank Brookings Institution, in a recently released report entitled, remaking economic development. Authored by Amy Liu, vice-president and director of Brookings Metropolitan Policy Program, the report said: “top-line growth does not ensure bottom-line prosperity”. Ms Liu cited wage stagnation and widening economic disparity as contributors to a lacklustre US economy. She called for reforms in the philosophy and practice of economic development organisations in order to create growth, prosperity and inclusion.
“The purpose of economic development should be to put a regional economy on a trajectory of higher growth by increasing the productivity of firms and workers that raises standards of living for all,” she wrote.
The report makes calls for a broad-based shift in practice, from incentive-based corporate relocation towards more a diversified, market-based and localised approach. “Firms that take an incentive are not more likely to create jobs than those that move into a state or region without one,” the report stated.
Ms Liu noted that states and localities spend $50bn to $80bn on tax breaks and incentives each year in the name of economic development, despite a mountain of evidence showing that tax incentives produce mostly marginal returns. She said: “Generative work must occur within metropolitan regions because metro areas represent the basic unit and geography of the economy – and the nexus of public and private networks that shape regional economic ecosystems and address highly local market failures.”
Ms Liu argued that leaders must start with the basics. She offered five key principles for implementing this vision of economic development which were to set the right goals, grow from within, boost trade, invest in people and skills, and connect local communities to regional jobs, housing and opportunity.