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    Local Economic Development
    Some lessons from the USA

    from The Jobs Letter No.97 / 26 March 1999

    SEAN BEVIN of the Napier City Council last year travelled to the South Eastern US States of Florida, Georgia, and Tennessee to study their approaches to local economic development (LED). His report on the US trip, given to the NZ Society of Local Government Managers (SOLGM), outlines many valuable lessons for both national and local economic development policy in New Zealand.

    The three States which Bevin visited are among the fastest growing parts of the US, and also have virtually "full employment". Their successes in job creation are especially significant when considered in the light of their history as relatively impoverished agricultural States. Since World War II, however, job creation has been the primary focus of a local economic development strategy underpinned by new industrial growth.

    Bevin believes that the successful job creation track record is mainly due to the sustained commitment given by these States to local economic development. Bevin: "The obvious success of the three states in generating major employment increases over time, demonstrates the wisdom of maintaining a high policy priority on this economic objective and should be a timely lesson for NZ economic policymakers ..."

  • Bevin says that the fundamental goal of LED is to improve the overall "quality of life" of a local community. This approach acts as an umbrella to such factors as employment opportunities, economic growth and standard of living. LED is a process to achieve these goals and is not necessarily an end in itself.

    Bevin: "LED is essentially about maximising spending injections (exports) into a local economy and minimising leakages (imports) from the economy. From a business development perspective, this translates into retaining existing businesses, encouraging their expansion and attracting new businesses to the area. LED is not an "overnight sensation"... it involves a deliberate, planned and long-term approach to building community capacity for new economic activity ..."

  • The LED initiatives in the South-East States are very much a community-wide effort. State governments lead the way in providing specialist economic development departments, financial assistance and access to a variety of tax incentives, specialist LED agencies and support to develop the labour force.

    Private sector involvement includes the extensive LED work of regional Chambers of Commerce, corporations, public utilities and economic development consultancies.

    The LED agencies provide a wide range of equally important programmes and activities:
    -- the provision of land and buildings for industry development,
    -- the provision of advice and assistance to smaller businesses,
    -- the provision of financial assistance and access to financial incentives,
    -- area marketing and promotion, labour-force development,
    -- business sector visitation/consultation (70% of net job creation is from existing businesses),
    -- provision of economic information, analysis and performance monitoring.

    While job creation is a driving motivation for the LED work, Bevin reports that the local governments have not reduced their commitments with the recent achievement of near "full employment" and relatively high rates of economic growth. The focus for LED in these States now is on increasing the range and quality of jobs, labour-force education and training, and income growth.

  • One important player in the region is the Georgia Power Company which provides a pro-active facilitation involvement in all LED activities in Georgia. This is driven by its desire to see net job creation from existing and new businesses and the consequential revenue generation from new electricity sales.

    For example, the power company's "Community Resource Manual" is a publication which provides a basic range of information about a local community, or an "executive summary" for prospective business investment. It includes: key assets/strengths of the community, basic information on local authorities, taxation details, transportation, utilities and communication linkages, financing opportunities, incentives, education, `quality of life' features, labour-force characteristics, research facilities, available industrial sites, and support services.

    Bevin says this is a good example of a constructive private sector `investment' in the LED process, and a model that New Zealand power and other utilities could profitably study.

    Also of interest to NZ agencies is the use of a computer software package that measures the economic impact of local economic development policies. The "LOCI Advantage Local Impact Model" assists local government and economic developers in evaluating the community economic impacts of, for example, fiscal incentives, new infrastructural developments, major industry start-ups and tourism sector developments. Bevin believes this model could be readily adapted for the NZ scene.

    The overall lesson for Sean Bevin is that local government in NZ has a critically important leadership, facilitation and infrastructural role to play in the LED process. If local government establishes well led, resourced and focused LED policies, it can have a significantly positive impact on the performance of local economies.

    Local government also has an important role in mobilising the energies of all the key sectors public, private, education, utilities, industry associations, sports, tourism and the community in the LED process, co-ordinating their involvement and encouraging collaboration.

    Sean Bevin's study report "Local Economic Development Practice in the USA the South-Eastern States approach" is available from the Napier City Council.

    Sean Bevin was the 1998 recipient of the SOLGM Study Award.

    Sean Bevin on local economic policy, growth and employment creation

    from The Jobs Letter No.97 / 26 March 1999

  • Economic development policy in the US is largely the responsibility of State and other "local" jurisdictions. In New Zealand, economic policy is highly centralised and "captured" by a few and, as a result, considerably insensitive to the circumstances and needs of individual local economies.

    "In contrast to the US position, formal economic policy in New Zealand neither includes, nor acknowledges the credibility of, a local economic development approach. "In my view, there is a need for this situation to change, in order that a more balanced and effective overall economic development policy in New Zealand can be achieved..."

    In contrast to the US position, formal economic policy in New Zealand neither includes, nor acknowledges the credibility of, the LED approach. In my view, there is a need for this situation to change, in order that a more balanced and effective overall economic development policy in New Zealand can be achieved.

  • In the South-East US States, State government plays a lead role in the LED process. This is consistent with the high priority accorded to the process in these areas. State governments undertake an economic overview role, as well as being actively involved in the delivery of economic development and employment programmes out in the field.

    In contrast, successive New Zealand governments, since the advent of de-regulation in the mid 1980's, have increasingly withdrawn themselves from an active and direct economic development involvement, other than assisting in maintaining an appropriate broad macroeconomic environment. The latest in a long list of examples of this was the recent removal of the Government's Business Development Board programme.

    I believe that a key reason for the success of LED policies in the South-Eastern US States is the major involvement and support of State governments. Their contribution is not only for purely economic reasons but also for important allied social considerations such as reducing unemployment, greater income equity, environmental enhancement and improving the overall "quality of life" of people.

  • Another important strength of the US approach to LED is the preparedness of State governments to allocate significant levels of direct financial assistance for economic development purposes, with the objective of, among other things, increasing their long-term tax-base. This includes the use of incentives to either attract new business or encourage expansion of existing enterprises. Given the far greater understanding in the US of the benefits of LED, the community is prepared to accept such state government support policy.

    In New Zealand, Government economic policy appears to have long forgotten the important principle of "investing" in new economic development. Instead, central government has become almost myopic about containing or reducing public expenditure and costs generally, rather than implementing policies to expand the demand side of the equation.

  • In one area, economic policy in New Zealand is consistent with the US and that is in relation to facilitating labour-force development, that is, education and training. However, the contexts are very different.

    The South-East States have virtually full employment and are at the forefront of technology development and use. The emphasis of LED policy has now changed from purely job-creation to increasing the range and quality of jobs, as well as earnings levels.

    By contrast, New Zealand has an enduring major unemployment problem and the achievement of higher levels of formal qualifications does not necessarily guarantee employment opportunities.

  • In the South-East States, there has been a clear and unequivocal commitment to economic growth and employment creation, and all the evidence that I obtained during my study visit points to considerable success in achieving these fundamental objectives.

    In New Zealand, these traditionally important components of the overall economic policy objectives package appear to have been dispensed with, along with most of the other macroeconomic objectives. Price stability and fiscal surpluses appear to be the only explicit objectives of Government economic policy.

    The US experience would seem to suggest that its successful economic and employment record at the local level is strongly related to its major economic (and social) commitment to employment and growth.

    Source - "Local Economic Development Practice in the USA - the South-Eastern States approach" study report by Sean Bevin Napier City Council, SOLGM Study Award Recipient November 1998

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