Growth pole theory in regional planning ppt

Chapter 9

Industrial Recruitment

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In previous classes, we have introduced some US government facts as well as some historical and theoretical background of business-government relations. Starting from this week, we are going to focus on business-government relations in economic development, especially in local context.

Today we will cover chapter 9 = industrial recruitment. We will look a various economic theories, cluster theory, political context of local economic development, and industrial recrtuiment.

Economic growth contributes to an increase in consumption which benefits all sectors of the economic community.
Despite the dynamic in the growth loop, economic growth can not be indefinite (e.g., land is limited).
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An economy will reach a natural equilibrium if capital can flow without restriction
Capital mobility: capital will flow from high cost areas to low cost areas
Equilibrium: overall market and all areas will reach a state of equal status
No government intervention:
opposing government regulations on the movement of firms

attracting capital with community’s resources (e.g., land, labor, infrastructure, financial incentives, etc.)

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Location theory
Factors affecting a firm’s location choice
Government should enhance the location with government performance, policies, and resources
Economic base theory
Local demands vs. external demands
Government should recruit businesses that have a market beyond the local area and encourage export-oriented industries.
Location theory, on the other hand, seeks to explain an area’s competitiveness in terms of firms’ locational orientation—what factors of an area contribute to a firm’s location choice. Location theorists assume that firms, in order to maximize their profits, choose locations that minimize the cost of transporting goods to the market place. Unlike the neoclassical school, location theorists generally assert that government should play a critical role in enhancing the location. A capable, cooperative, and responsive government can potentially better meet business’ needs for land, infrastructure such as transportation and roads, education, and other public services.

Economic base theory analyzes growth from the demand side rather than the supply side. It differentiates the economic activities of an area into two components—those which meet the local demands and those which satisfy the demands outside the community. The former is non-basic, which does not lead to growth, while the latter is basic, which will generate local wealth and jobs.

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Growth pole theory
A dynamic industry with a competitiveness edge in capital, technology and political influence is a pole of growth.
Government should help expand the core industry.
Central place theory
Critical role of urban centers
Government should direct resources to the development of a central place
Growth pole theory rejects neoclassical theorists’ claim that growth “should” flow to less costly regions and argues that indeed the opposite happens unless there is a dynamic industry with a competiveness edge in capital, technology, and political influence (Perroux 1983). Such industries are propelled by poles of growth. A pole or hub is characterized by core industries around which linked industries develop because of the core industries’ demand (from suppliers), as well as its provision of goods and services (to customers). The expansion of a core industry leads to the expansion of investment, output, employment, and new technologies, as well as the emergence of secondary growth poles.

Central place theory focuses on the critical role of urban centers in regional economic development. According to this theory, urban centers contain specialized industries (especially retail stores) that serve a broad area. They are surrounded and supported by a number of small jurisdictions that provide resources and markets for the urban centers. Residents of a small jurisdiction have to go to these central, urban areas for specialized products and services which are not provided in their own communities. Therefore, economic development efforts should direct resources to the development of a designated central place which will improve the economic well-being of the whole region (Bradshaw and Blakely 1979).

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Michael Porter
Harvard Business School Professor
Dr. Porter first introduced the idea of cluster in 1990
His theory led to a large body of research on cluster-based economic development along with hundreds of public-private cluster initiatives throughout the world.
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Clusters are geographic concentrations of interconnected companies, specialized suppliers, firms in related industries, and associated institutions (e.g., government, universities, and trade associations) in a particular field that compete but also cooperate.
geographic concentrations=physical proximity
interconnected= there is an important synergy among them
compete but also cooperate=both factors make them better!
What is a cluster?

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Clusters affect competition in three broad ways
By increasing the productivity of companies based in the area,
By driving the direction and pace of innovation, which underpins future productivity growth,
By stimulating the formation of new business, which expands and strengthens the cluster itself.
Productivity. Being part of a cluster allows companies to operate more productively in sourcing inputs; accessing information, technology, and needed institutions; coordinating with related companies; and measuring and motivating improvement.

Innovation. In addition to enhancing productivity, clusters facilitate knowledge sharing among companies, provide the capacity and flexibility to act rapidly (source what it need to implement innovation quickly), experiment at lower cost (because suppliers are close).

New business formation. New suppliers proliferate within a cluster because a concentrated customer base lowers risks and makes it easier to spot market opportunities. The formation of new businesses is part of a positive feedback loop. An expanded cluster amplifies all the benefits and increases the collective pool of competitive resources.

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Automobiles, Michigan

Watches, Switzerland

Chocolate, Belgium

Wine, France

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Theme park entertainment, Orlando

Disney in 1971;

Today also Universal, Cirque de Soleil, and Seaworld

Silicon Valley

Standford leased land to high tech companies in 1971;

Intel-Santa Clara, Apple-Cupertino;

Today over 4,000 IT related companies from SF to San Jose along Highway 101

Cirque du Soleil (French for "Circus of the Sun", in English pronounced /sɜrk duː soʊˈleɪ/) is an entertainment empire based in Montreal, Quebec, Canada and founded in Baie-Saint-Paul in 1984 by two former street performers, Guy Laliberté and Daniel Gauthier.

SeaWorld is a chain of marine mammal parks in the United States, with operations in Orlando, Florida, San Diego, California, San Antonio, Texas, and previously Aurora, Ohio.

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http://www.clustermapping.us/

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Bring together a pool of resources—workers, suppliers, related services—that provides depth, security, and choices/diversity for a cluster.

Locality enhances cooperation, since most cluster participants are not direct competitors but rather serve different segments of industries.

Provide local competition that gives fast feedback on innovations, trends, price and quality.

Ironically, entry into a cluster is initially easier because of

great demand for new workers and new ideas.

Clusters facilitate niche specialization that cannot normally be sustained outside of clusters.

Bring together sophisticated local customers who know the state of the art and give tough feedback.

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1.

2.

3. If you are in a cluster, you can’t sit back on your heels. You improve both your operational effectiveness as well as your strategy effectiveness. Easy to be at productivity frontier.

4. Long-term success dependent on hard work, great ideas and strategy, and luck.

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Porter: Companies in cluster can

productivity

Better access to employees and suppliers
Access a deep and specialized supplier base
Access to specialized information
Complementarities: a. products complement one another in meeting customers’ needs; b. enhancing the reputation of a location’ buying from a cluster more attractive
Access to institutions and public goods
Better motivation (local rivals share general circumstances and perform similar activities) and compare performances
Innovation

Better window on the market
More visible opportunities for innovation
Lower cost to experiment
New Business Formation

More easily perceive gaps
Needed assets, skills, inputs, and staff often available
Local financial institutions and investors may require a lower risk premium on capital
Significant local markets
Question: What could be the benefits of cluster to local economy?

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Stimulate economy with natural diversification. Clusters are not a single company or industry but a group of organizations that have a synergy and a related set of products.
Provide renown. Clusters are very good at what they do and get reputations.
Provide local wealth. With local ownership, more money stays in the community.
Generally provide more high paying jobs. Because they are the productivity frontier and doing large volume, clusters generally can afford to pay for the best.
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What are the old and emerging clusters in the Inland Empire?
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Housing

Commercial (Victoria Gardens)

Transportation/logistic [State Bros] (Ontario, Norton Airforce Base)

Wine (Temecula)

Dairy (Chino Hills)

Tourism (Palm Spring >100 golf courts)

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Facilitating cluster development and upgrading,
Reinforcing and building on established and emerging clusters
Helping all firms, not individual firms,
Promoting competition and invite distant/foreign partners
Government can:
remove obstacles, relax constraints;
support resources such as necessary infrastructure;
support human capital development such as education and training programs;
assist export promotion;
encourage local R & D efforts;
sponsor forums to bring cluster participants together;
encourage industrial parks;
sponsor independent testing or certification if it is useful.
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A major role of government is cluster development (according to Porter), “facilitating cluster development and upgrading,” because of the increases in productivity and salary

“Governments should reinforce and build on established and emerging clusters rather than attempt to create entirely new ones.”

Government should help all firms generally.

Government must not attempt to set policies that help individual firms, distorting market

Government should promote competition and invite distant/foreign partners

Government can:

remove obstacles, relax constraints;

support resources such as necessary infrastructure;

support human capital development such as education and training programs;

assist export promotion;

encourage local R & D efforts;

sponsor forums to bring cluster participants together;

encourage industrial parks;

sponsor independent testing or certification if it is useful.

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Population
Human capital productivity (e.g., education)
Innovation (e.g., process improvements or inventions)
Land intensification (low yield agricultural to high yield, or plentiful agricultural to in-demand housing)
Resource availability (e.g., minerals, specialized workforce, or natural resources such as forests)
Transportation (access to roads, rivers, canals, airports)
Climate (suitable climate and suitable conditions)
Culture and amenities (e.g., desirability of location, products from a location)
Synergy among factors (e.g., cluster theory)
(more)

Land intensification measures the degree that population, affluence, and technology interacts with land.

A business cluster is a geographic concentration of interconnected businesses, suppliers, and associated institutions in a particular field. Clusters are considered to increase the productivity with which companies can compete, nationally and globally.

clusters have the potential to affect competition in three ways:

by increasing the productivity of the companies in the cluster,
by driving innovation in the field
by stimulating new businesses in the field
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General government policies (non-business policies affecting peace and stability, public safety, quality of life, welfare)
Government policies specifically related to business
Regulatory
macro: fiscal and monetary policy, trade policy;

micro: planning, zoning, and inspection for environmental, safety, and quality of life factors

Promotional policies (e.g., corporate subsidies, infrastructure enhancements, risk protection [insurance], seed money and incubation funds, etc.)
Government contracting
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A coalition of people
interested in the development and re-development of land, such that unused land is developed for highest present value
By increasing the overall development or

By intensification of land use

generally brought together with government power and financial subsidies.
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Intensification means converting farm and open space to residential and commercial, or lower class housing to “high-class” commercial.

Land intensification: degree of $, people, & technology interacts with land.

Composition:
land developers
financiers
local governments interested in greater property and sales taxes
residents interested in increased land values or public flagship projects
Philosophical underpinnings:
commercial capitalism (mercantilism, Hamiltonian democracy)
Government is a major economic “player”

Community benefits from increased wealth

Hamiltonian Democracy: strong government

Government plays an active role, a major economic “players” should drive the economy and the future. Hamilton, on the other hand, advocated strong, central institutions of government at the federal level. Only through effective government and the rule of law, he said, could freedom of the individual be assured. Commercial capitalism is another word for mercantilism. Mercantilism suggests that the ruling government should advance its goals by playing a protectionist role in the economy and encouraging exports and discouraging imports, notably through the use of subsidies and tariffs respectively. The assumption was that trade is a zero sum game.

Jefferson democracy: strong citizenry

was portrayed as an idealist for the small state, where government takes a low profile in the interests of strong, confident citizenry.
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A powerful consensus among key groups who collectively promote economic growth.
A true growth machine includes:
large public entrepreneurs connected to the community,
a generally supportive public, and
a strong support base in government (especially the city council or board of supervisors)
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A related concept to pro-growth

For example, in a city, the GM is a coalition of local business and local government. Those players come together to pursue an agenda of urban growth and intensification of land use.

The GM often dominates city politics because it is able to establish and maintain a political consensus that growth is good for all.

A coalition interested in slowing or stopping various types of development because the effects of fast growth are considered too negative:
Sprawl,
Traffic congestion,
Environmental degradation
Insufficient infrastructure,
Excessive cost shifting to current tax payers for development projects,
Degradation of existing communities by downgrading current use, and
Other special interests
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Sprawl,
Traffic congestion,
Environmental degradation (especially creation of brownfields)
Insufficient infrastructure (e.g., parks, drainage systems), excessive cost shifting to current tax payers for development projects (i.e. SB stadium, multiplex theater, enterprise zones),
degradation of existing communities (residential or commercial) by downgrading current use.
Other special interests: historical preservation, zoning protections (urban growth boundaries and encouragement of in-fill, appropriate mix of uses, etc.)
Sprawl is
“the process in which the spread of development across the landscape far outpaces population growth” (Ewing 2002)
“poorly planned, low-density, auto-oriented development that spreads out from the center communities” (the National Trust for Historic Preservation)
Sprawl: the process in which the spread of development across the landscape far outpaces population growth.

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Creates sprawl and its negative effects [Ewing, et al.]
More cars
Less public transit
More traffic fatalities
Poor air quality
Aesthetic ugliness of sameness, and strip malls
Duplication of infrastructure which leads to lack of sustainability [Wiewal et al.]
Decline and abandonment of the central city, as well as inner suburbs
Environmental degradation and creation of brownfields
Cost shifting of development to current taxpayers
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Start: So let’s look more at the quality of economic development

Three urban density functions with Ewing views of compact development and of sprawl.

The first, G & R's compact pattern, is European in its very high central densities, high average densities, and abrupt urban-rural boundary. This is a straw man par excellence, since it is as yet unseen in the United States.
The second pattern, my version of sprawl, has few significant centers, low average density, and wide gaps in the urban fabric due to leapfrogging. This is no straw man. It is a common urban form, and many planners and policy makers object to it.
The third ---a clear indication of how much our concepts of sprawl differ. This pattern is multicentered, has moderate average densities, and is continuous except for permanent open spaces, or vacant lands to be developed within the standard planning time frame.
Higher rates of driving and vehicle ownership

Increased levels of ozone pollution

Greater risk of fatal crashes

Depressed rates of walking and alternative transport use

No significant differences in congestion delays

Residential density:
A population that is widely dispersed in low density development
Neighborhood mix of homes, jobs, and services:
Rigidly separated homes, shops, and workplaces
Strength of activity centers and downtown (centeredness):
A lack of well-defined, thriving activity centers
Accessibility of the street network:
A network of roads marked by huge blocks and poor access
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Residential density: most recognized; amount of land used per person

Mix: segregation of land uses which requires more car travel, especially home vs. job

Centeredness: is the degree to which residential development is located close to the central business district of the area (also, supports multi-purpose trips for shopping and services)

Accessibility of street network: disconnected network; few extremely busy arterials must carry all traffic; few alternate routes

Similar but not identical to Wolman et al. who have five dimensions:

Density—average # of residential unit/square mile of developable land in an area

Concentration—degree to which housing units are located disproportionately in a relatively few square miles of an area

Centrality—degree to which residential development is located close to the central business district of an area

Nuclearity—the extent to which the built environment of an area is characterized by a single, highly dense node pattern of development

Proximity—degree to which across area observations of a particular land use or pair of land uses are close to each other, relative to the distribution of all land comprising the study area.

Riverside:

few areas serve as town center—66% pop lives over ten miles from a central business district

Little neighborhood mixing of home with other uses: only 28% residents live within ½ block of any business or institution

Residential density is low: less than 1% pop lives in communities with enough density to be served by transit

Street network is poorly connected: 70% of its blocks are larger than traditional urban size. (SR91, Bedroom community)

Impact fees
Charges imposed on developers
Growth management
Constraints on the intensity of development
Design and capacity standards for lots and buildings
Requirement of adequate public facilities or imposition of impact fees
Reductions in the supply of land open for development
Regional governance (e.g., SANBAG, SCAG, CVAG)

Reducing regional disparity by joining them in one governmental body
Redevelopment of older areas
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Impact fees lead to better initial infrastructure, less cost shifting to other taxpayers (to cover cost of roads, utilities, sidewalks, wastewater, public cemeteries, solid waste facilities, new public buildings such as police precinct stations and fire stations)
Growth management local zoning such as city comprehensive plans; even better is regional zoning but very hard to accomplish in American model
Ewing:

Reinvest in neglected communities and provide more housing opportunities

Rehabilitate abandoned properties

Encouraged new development or redevelopment in already built up areas

Create and nurture thriving, mixed-use centers of activity

Support growth management strategies

Craft transportation policies that complement smarter growth

http://www.sanbag.ca.gov/about/index.html San Bernardino

http://www.scag.ca.gov/index.htm Regional COG: Southern CA

http://www.wrcog.cog.ca.us/ Western Riverside COG

http://www.cvag.org/ Coachella Valley Association of Governments

Composition:
Residents, who fear that their area will be neglected, degraded, or are offended by the “ugliness factor,” excessive arterial strip commercial development;
Commercial interest groups, who feel that the new growth will unfairly compete with local businesses
Environmentalists, who fear the loss of farmland, open spaces, wildlife preserves, natural ecosystems, and land-air-water degradation by profligate use
Taxpayers, who feel that excessive or inefficient subsidies are being used to support development, or that public entities will bear excessive costs over time
Local governments, whose land is all largely in use and whose values are relatively high
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Composition:

residents who fear that their area will be neglected (siphoning off of resources),
degraded (e.g., inner city neighborhoods with a nearby flagship project or wealthy communities by apartments), or are offended by the “ugliness factor,”
excessive arterial strip commercial development; commercial interests who feel that the new growth will unfairly compete with local businesses (e.g., WalMart, a new mall, etc.);
environmentalists who fear the loss of farmland, open spaces, wildlife preserves, natural ecosystems, and land-air-water degradation by profligate use (e.g., low-density residential development);
taxpayers who feel that excessive or inefficient subsidies are being used to support development, or that public entities will bear excessive costs over time;
local governments whose land is all largely in use and whose values are relatively high
No Growth:
Emphasizes that an area has reached saturation and only gentrification should occur;
Has extremely strong preservation emphasis
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An urban advocate represents a poor neighborhood that needs jobs and wants to encourage businesses to relocate downtown. (pro-growth)
The advocate learns of a stadium project that would demolish part of the neighborhood, sporadically increase congestion, and bring few jobs. He becomes vehemently slow-growth.
A wealthy developer spends an enormous amount of money and time getting land rezoned from open space to residential, and getting zoning variances to allow high rises and commercial exemptions downtown.
When a high-rise condominium complex is proposed in extremely affluent residential community, the developer becomes outraged and personally appears at the planning board meeting to oppose the measure.
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Question: based on your city’s current economic status and your own interest, are you in favor of pro-growth, or slow growth, why?

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LA and Southern CA founded on pro-growth
Last unrestrained push (of business/government collaboration): under Bradley (mayor) from 1974-85
Declining after Bradley Administration
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Mark Purcell: The Decline of the Political Consensus for Urban Growth: Evidence from Los Angeles

Thesis: Growth interests in LA have been lacking the political coordination to effectively accomplish their projects in recent decades. The reason is not that growth machine has collapsed, just that it has ceased to be a juggernaut or unstoppable force that it was during its heyday.

Possible factors leading to deterioration:

The fall of the Bradley regime:
1. Prop 13; 2. federal grant cut; 3. development spread outward to other areas of the city
broad ethnic alliance with federal subsidies with pro-growth to “pay” for benefits to many groups; as funding became tighter (prop 13 and fewer fed $), the coalition faltered
Globalization:
assertion that most growth machines need strong local economic interests because otherwise global interests may be seen as profiting from local good; fewer local benefits
Branch operations: businesses in a given locality are branch operations of large firms rather than entirely indigenous firms. They have fewer multiplier effects: employment is often recruited outside the local area, raw materials are more often purchased in other places, and employees are more likely to be replaced by technological advances that large firms can afford. They bring fewer real economic benefits to the place in which they locate.
Resistance to growth:
residential and environmental interests; profit not the only or even primary reason for growth
Geographical fragmentation of local growth elite: regional interests serve as an umbrella under which a wide array of smaller groups operate
areas within the city compete with one another (San Fernando Valley with other areas similar to squabbles among cities
City government as a failing partner in the growth machine: 1. secession 2. legitimacy crisis (low voter turnout) 3. fiscal crisis (Prop 13) 4. council of strong ward structure (15 wards)
ascension of slow-growth council people; reemergence of strong ward system with strong local interests and competitiveness; allows for sniping (short fire from concealed place)
Local concern for open space, residential amenities, and planned growth; underlying preference to keep Redlands the same
Friends of Redlands (1978)
The Redlands Association (1986)
a grass-roots group advocating for slow-growth
http://www.ci.redlands.ca.us/community/plan.html

Best Old Town to Walk and Shop

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Friends of Redlands (1978) (Redlands Association)

Passed a series of very strong slow-growth ordinances:
Proposition R (1978):
Redlands' first growth management initiative

intended to limit the pace of residential growth to 450 new housing units per year

Measure N (1987):
limited 400 new dwellings a year

each permit highly scrutinized,

very high development fees

Measure H (1995):
would have further limited development; narrowly defeated

Measure U (1997):
establishing principles of managed development;

encouraged low density housing and maintenance of citrus

The Redlands: Slow-growth case

Proposition R (initially successful until about 1983 when planning board was granting too many exceptions); prop N tightened up a lot!!
Proposition N (1987): limited 400 new dwellings a year, nearly impossible to convert agricultural land, each permit highly scrutinized, very high development fees
1995: Measure H would have further limited development; narrowly defeated
1997: Measure U passed; establishing principles of managed development; encouraged low density housing and maintenance of citrus
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Definition: “an urban planning and transportation theory that concentrates growth in the center of a city to avoid urban sprawl; and advocates compact, transit-oriented, walkable, bicycle-friendly land use, including mixed-use development with a range of housing choices.”
Goals of Smart Growth:
To focus on long-range, regional considerations of sustainability;
To achieve a unique sense of community and place;
To expand the range of transportation, employment, and housing choices;
To equitably distribute the costs and benefits of development;
To preserve and enhance natural and cultural resources; and
To promote public health.
Source: Wikipedia

Mixed-use: mix use of jobs, homes, and stores (working, residential, commercial)

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Overarching principles:
balance public/private interests and
ensure sustainability
Recommended practices:
high density, mixed land use,
strong use of planning with clustered development and protection of agricultural and open space,
integration of affordable housing and social equity concerns,
traffic grids allowing for alternate routes,
more emphasis on non-automotive means including pedestrian walkways and bike paths,
narrower streets,
full costing and implementation of infrastructure at beginning of construction
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Private: profit

Public: amenities, aesthetics, affordability, equity, safety, community (social capital)

Private&Public--sustainability

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We have now looked at the strengths of economic growth and the successes of economic development, but we have also looked at the challenges and problems too!

Question: so what do you think could be the groups of people for and against growth?

Now let’s look at the politics and ideology of growth and economic development, especially the ideological disparities between the pro-growth and the slow or no-growth.

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In previous class, we covered the four intellectual models of government business relations, government’s role in economic development, and how government funds economic development. Today we will cover how government interact with business.

Industrial recruitment
Governments subsidize businesses to lure more investment in their jurisdictions.
Entrepreneurial strategy
Governments adopt policies that promise to increase public revenue, focusing on new firm and technology development.
Privatization (especially deregulation)
Governments delegate businesses its public duties.
Last week we introduced the concept of economic growth. We define ED as a government activity to “encourage private investment in a particular jurisdiction for the purpose of generating or retaining jobs, expanding the tax base, and increasing the general level of economic well-being.”

We also talked about the methods government used to finance ED. Government may subsidize firms through grants, loans, and various forms of interest subsidy. Government may also give business tax breaks, provide infrastructure, offer information or technical assistance. In addition, government also involve business in PPP to induce ED.