local economic development in the urban context a missed opportunity

Local Economic Development

in the Urban Context

April 2011

[email protected]

www.miu.org.il

mailto:[email protected]

http://www.miu.org.il/

What is LED? The Old Simple View

• Local Economic Development is

Employment Generation

What is LED? The Current View

• The purpose of Local Economic Development is

– to build up the economic capacity of a local area

– to improve its economic future and

– the quality of life for all.

• It is a process by which

– public, business and non-governmental sector partners work collectively

– to create better conditions for economic growth and employment generation.

Economic Development

before the 1800s…

• …was boring!

– Production followed

Population

Production

The Industrial Revolution

English-speaking

Japan

northwest Europe

the rest of Europe and Europe-dominated

economies in Latin America.

the rest of Asia and Africa.

A Brief History of LED

Nations Regions / Sectors

Cities and Towns

Hard Infrastructure and

Manufacturing Transplants

Attract Foreign Investment and Support Local Businesses

Skills/Education, Attractive Policies

and Public/Private Partnerships

1960s to early1980s

1980s to mid 1990s

Late1990s onwards

Th

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ED

Summary of Outdated Thinking on LED

Top-Down approach

• Central Government conceived, controlled, and directed strategies

• Total dependence on central government

Attract outside businesses

• Promotion and support of big business transplants

• Attract outside investments and outside talent

Focus on regions

• Attempts to jumpstart and support LED over entire regions

• Connect under-developed regions to successful ones

Goal is Employment Generation

Summary of Current Thinking on LED

Participatory approach

• Including all stakeholders and sectors

• Led by local government

Growth of local businesses

• Promotion and support of innovation and entrepreneurship (both business and social)

• Business friendly policies

Focus on cities

• As engines of economic development

• As a great place to live and work

• Urban regeneration as a tool

Goal is quality of life for all

Employment Environment Livibility Social inclusion

Why is LED Important? • Big differences in productivity possible since the Industrial Revolution

Pre - Industrial Revolution Agriculture

10x

64x

144x

Tel-Aviv Metro Area

43% of Population

on 7% of Area

produces 59% of GDP

Urbanization Matters for

Economic Growth • Economic Growth and Urbanization are bi-

directionally causally connected

• ―… no country in the industrial age has

ever achieved significant economic growth

without urbanization.‖

Lecture 27 Urbanization Atanu Dey 10

Economic Growth Urbanization

Opportunities are Focused in

Cities

• The World is getting more urbanized

– Opportunities are focused in Cities where people concentrate

11 Lecture 27 Urbanization Atanu

Dey

Half the world’s population

occupies only 1.5% of the

world’s land area

2 9

3 7

4 8

6 1

15

2 5

3 9

5 4

17

2 4

3 9

5 45 1

6 6

7 3

8 0

4 2

6 1

7 7

8 5

6 4

7 4

8 0

8 7

6 1

7 27 3 7 5

0

20

40

60

80

100

Perc

ent

World Africa Asia Europe Latin

America

and the

Caribbean

Northern

America

Oceania

1950 1975 2003 2030

The World is Getting More Urbanized

12 Lecture 27 Urbanization Atanu Dey

Israel 92%

Cities Have Natural Economic Advantages

• Doubling city size will increase productivity by 3%-10%

• Successful cities grow to metros

• Metros grow to mega-metros (>5M pop) – 1955 – 11 Mega-Metros

– Today - 50 Mega-Metros

– 2015 – 60 Mega-Metros

• Mega-Mertos are at the core of Mega-Regions

13

1955 - 11 mega-metros 2015 - 60 mega-metros

Cities Have Natural Economic Advantages

• 40 Mega-Metro Regions Today – A resident of a mega-metro region is 8 times as productive

in goods, and 24 times as productive in innovations

14

Population Economic Output Innovations

Economic Output is Focused in City-Metros

Cities are Engines of

Economic Development and Growth

• Why is this so?

– Economies of scale and of agglomeration


Urban Economies

• Sharing of fixed costs by a large quantity of outputs

• Input-sharing and competition within the industry

• innovation and exchange of ideas and technology


The 12 Urban Economies Type of economy of scale Example

Internal

1. Pecuniary Being able to purchase intermediate inputs at volume discounts

Technological

2. Static

technological Falling average costs because of fixed costs of operating a plant

3. Dynamic

technological Learning to operate a plant more efficiently over time

External or

agglomeration

Localization

Static

4. ―Shopping‖ Shoppers are attracted to places where there are many sellers

5. ―Adam Smith‖ Outsourcing allows both the upstream input suppliers and downstream firms to

profit from productivity gains because of specialization

6. ―Marshall‖

labor pooling

Workers with industry-specific skills are attracted to a location where there is a

greater concentration

Dynamic

7. ―Marshall-

Arrow-Romer‖

learning by doing

Reductions in costs that arise from repeated and continuous production activity

over time and which spill over between firms in the same place

Urbanization

Static

8. ―Jane Jacobs‖

innovation

The more that different things are done locally, the more opportunity there is for

observing and adapting ideas from others

9. ―Marshall‖

labor pooling

Workers in an industry bring innovations to firms in other industries; similar to

no. 6 above, but the benefit arises from the diversity of industries in one location.

10. ―Adam Smith‖

division of labor

Similar to no. 5 above, the main difference being that the division of labor is

made possible by the existence of many different buying industries in the same

place

Dynamic

11. ―Romer‖

endogenous

growth

The larger the market, the higher the profit; the more attractive the location to

firms, the more jobs there are; the more labor pools there, the larger the

market—and so on

12. ―Pure‖ agglomeration Spreading fixed costs of infrastructure over more taxpayers; diseconomies arise

from congestion and pollution

Cities have natural

economic advantages

Poor city design

• can undermine these advantages and create barriers to economic development

Good city design

• can enhance these advantages and catalyze economic development

Improving City Design is a neglected opportunity

for Economic Development in Israel

Typical Faults in City Design that

Undermine Economic Advantages

• Highway that cuts the city in half

• Universities and Colleges in fenced off campuses on the outskirts of cities

• Employment parks on the outskirts of cities

• Train stations on the outskirts of cities

• Retail malls on the outskirts of cities

• Lack of a city center that encourages interaction of people

• Tree-like street network undermines accessibility vs. simple grid

• Car based sprawl and zoning vs. people based compact mixed-use development

• Low densities that require huge investments in infrastructure and operation costs

• Fences, fences and more fences

Highway that cuts the city in half

Chicago vs. Tel-Aviv

Highlights of Smart Growth Economic Benefits

Source: Growing Wealthier,

Center for Clean Air Policy January 2011

Infrastructure Savings (construction and operation)

• Compact development reduces infrastructure costs and saves money.

– Average annual cost to service a new family of four (police, fire, highway, schools and sewer):

• Compact suburban Shelby County, KY = $88

• Sprawling Pendleton County, KY = $1,222 – Sources: Brookings Institution

$-

$200

$400

$600

$800

$1,000

$1,200

$1,400

Sprawling Compact

Annual Cost to Service a New Family

The Neglected Opportunity

People and Talent

Policies and Institutions

Place and Infrastructure

• Education and Training

• Business and Social Entrepreneurship

• Financial and Business

• Stability and Security

• Social Justice and Inclusion

• Health and Wellbeing

• Land Use and Planning (Real-Estate and Infrastructure)

• Urban Form and Real-Estate

• Transportation and Communication

• Energy, Water and Waste

• Natural Resources

The Basic Structure of the Economy

What is the difference between

Economic Development and Economic Growth?

How Does Economic Development Happen?

D + nTE + A nD

• Existing work generates new work!

– D is a Division of work

• The work required to provide a

product or service is made up of

Divisions of work

– A is Additional work

• An existing division of work inspires

a new Additional product or service

– TE is Trial and Error

• Generating new work requires

much Trial and Error

LED in the Context of Cities from the easiest to the most difficult

LED in a Great City

LED in the Region of a Great City

LED in a Town Outside a Great City Region

LED in a City that is not Great

A Great City generates much more wealth than it consumes for mere existence.

A Great City generates enough wealth to support growth in the city as well in its surrounding region.

LED in the

Context of Cities

LED in a Great City




Beer-Sheba

LED in a Great City

• What is the role of Urban Planning and Transportation in creating a

great place to live and to develop economically?

It can become a LED generator

If the City provides

Density Mixed use Mixed age buildings

Small Blocks

LED in a Great City





• Create a great place to live and to develop economically

• Provide attractive and efficient access to The City

• The City will do the rest

LED in a Great City




The Five Economic Forces

Exerted by Cities on Their Own Regions

City markets City jobs City

developed technology

Transplanted city work

City generated

capital

Leveraging the five forces to

accelerate LED in the region of a

Great City ToD in the Center of Regional Towns of a Great City

Stockholm The Gr Stockholm Transit

Oriented Metropolis The Gr Copenhagen Transit Oriented Metropolis

The 1961 National Capital Plan for Gr Washington BC

Is Beer-Sheva a Great City?

What about rail stations in

the center of the towns?

LED in a Great City




Source – Prof. Danny Gatt

LED in a Town Outside a Great

City Region

• Need to become a Great City (or wait for a Great City to develop nearby)

Jumpstart the economy

• Produce and sell something of value to a solvent market by turning any advantage into an opportunity

Leverage initial sales to

• Earn Imports

• Replace imports for yourself and for economically similar towns through innovation and improvisation

• Repeat last two steps forever

How?

• Leverage current thinking on LED


• In the existing center of town

LED in a Great City





• Need to become a Great City (or wait for a Great City to develop nearby)

Jumpstart the economy

• Produce and sell something of value to a solvent market by turning any advantage into an opportunity

Leverage initial sales to

• Earn Imports

• Replace imports for yourself and for economically similar cities through innovation and improvisation

• Repeat last two steps forever

How?

• Leverage current thinking on LED


• In a small focused area of the city (urban acupuncture)

LED in a Great City




How to unlock the cycle of city

development

Density Variety

& Access

Innovation &

Culture

Development Intensity

Opportunities

Quality Of

Life

People

The

―handle‖

LED in a Great City




How do you

advance ever closer

to your vision of a

successful town,

based on daily

decisions and based

on existing budgets?

E.g. - The Main Street Program's Success

Economic Statistics:

• 1980-2007 Reinvestment Statistics

• Dollars Reinvested:- Total amount of reinvestment in

physical improvements from public and private

sources.$44.9 Billion Average

• reinvestment per community: $11,083,273

• Net gain in businesses: 82,909

• Net gain in jobs: 370,514

• Number of building rehabilitations: 199,519

http://www.mainstreet.org/content.aspx?page=1&site=1

http://www.mainstreet.org/content.aspx?page=1&site=1

City Center Renewal as a LED Tool or

How to increase Density, Variety and Access

First stage:

• Surgical urban intervention plan in the public space

Second stage:

• Renewal of the public space

Third stage:

• Private Development Construction and Renovation near the public space

Use the ―charrette‖ collaborative planning

tool as the basis of a LED program •Create a great place to live for local

residents

•Create a great place to succeed for local

businesses

•Leverage the true identity of the city / town

as seen by the local residents

•Local residents strengthen their sense of

belonging by planning their town

•Leverage existing budgets for

public building projects to

implement the plan

•Local residents are

empowered by seeing their

plans adopted and

implemented

•Provide loans to accelerate

private storefront and

residence renewal

Thank You and see you in November 2011

[email protected]

April 2011

www.miu.org.il

כנס אשקלון־מרחב לפיתוח כלכלי עירוני "העיר כמנוע לצמיחה כלכלית"

mailto:[email protected]

http://www.miu.org.il/

http://miu.org.il/MIU_v4/docs_activities/Conference 2011/index.html

http://miu.org.il/MIU_v4/docs_activities/Conference 2011/The Ashkelon-Merhav Conference h v2.pdf









• Including all stakeholders and sectors

• Led by local government


• Promotion and support of innovation and entrepreneurship (both business and social)

• Business friendly policies

Focus on cities

• As engines of economic development

• Urban regeneration as a tool


Employment Environment Livibility Social inclusion

The critical role of Merhav in

LED in Israel


• Charrette – collaborative planning with all stakeholders

• Quality in Density Toolbox for all sectors

• Mayors Institute


• Making the local environment great for the locals

• Compact, quality and sustainable cities provide opportunities and breed innovation

Focus on cities

• We view the city as the key mechanism that provides people the opportunities to fulfill their inherent potential


In order to improve the quality of living in Israel, while contributing to the global sustainability effort, the MIU promotes quality urban living based on compact,

quality and sustainable urban environments.

Which Programs Do Not Work

(But We Still Keep Using Them!)

• Unfortunately there are countless examples of failed LED strategies and projects. These include: – Expensive untargeted foreign direct investment marketing

campaigns

– Supply-led training programs

– Excessive reliance on grant-led investments

– Over-generous financial inducements for inward investors (not only can this be an inefficient use of taxpayers money, it can breed considerable resentment amongst local businesses that may not be entitled to the same benefit).

– Business retention subsidies (where firms are paid to stay in the area despite the fact that financial viability of the plant is at risk)

– Reliance on "low-road" techniques, e.g., cheap labor and subsidized capital

– Government-conceived, -controlled, and -directed strategies http://web.worldbank.org/WBSITE/EXTERNAL/TOPICS/EXTURBANDEVELOPMENT/EXTLED/0,,print:Y~isCURL:Y~contentMDK:

20185187~menuPK:402643~pagePK:148956~piPK:216618~theSitePK:341139,00.html

http://web.worldbank.org/WBSITE/EXTERNAL/TOPICS/EXTURBANDEVELOPMENT/EXTLED/0,,print:Y~isCURL:Y~contentMDK:20185187~menuPK:402643~pagePK:148956~piPK:216618~theSitePK:341139,00.html















Infrastructure Savings (construction and operation)

• Compact development reduces infrastructure costs and saves money.

– Average annual cost to service a new family of four (police, fire, highway, schools and sewer):

• Compact suburban Shelby County, KY = $88

• Sprawling Pendleton County, KY = $1,222 – Sources: Brookings Institution

• Nationally, the U.S. can save over $100 billion in infrastructure costs over 25 years by growing compactly.

• Chicago can save $3.7 billion over 20 years by growing compactly.

• Charlottesville, VA can save $500 million in transportation costs with compact development.

– Sources: Urban Land Institute, Chicago Metropolis 2020; Thomas Jefferson Planning District Commission

local economic development in the urban context a missed opportunity

Design

average annual

great city

great city

economic development

local residents

fixed costs

great city

led create