The Economic Development Lie

The Republic’s Robert Robb penned a great article recently in which he said:

While these two high-visibility projects [First Solar in Mesa, and Apple/GT Advanced Technologies at the same location as First Solar] were going bust, there were 124,000 jobs added in the Valley. Virtually all of them were created by companies you’ve never heard of. Politicians didn’t issue press releases or hold press conferences to take credit for what they did. The economic development bureaucrats didn’t shower them with subsidies. They just went about the grind-it-out business of trying to meet perceived market needs.

A $210 billion economy isn’t going to be meaningfully affected by the pretentions and exertions of our politicians and economic development bureaucrats directed at individual companies or particular locations. Only broad-based policies that affect all economic actors can have a measureable influence. We can debate what kinds of broad-based policies would be best, but that’s the real game, not the give-away sideshows.

F.A. Hayek [economist, philosopher] called the notion that elites – whether political, academic or non-profit – could direct an economy “the fatal conceit.” Rarely has the conceit been as thoroughly exposed as with the serially breathless proclamations about this particular site.

Friedrich_Hayek_portrait

Hayek also said:

The curious task of economics is to demonstrate to men how little they really know about what they imagine they can design.

I’ll mark that as ScottsdaleTrails Quote of the Day. Couldn’t have said it better myself, so I’ll leave it at that. Thanks MK for pointing me to the article.

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5 Comments

  1. The problem with governments giving subsidies to private companies is that in most cases what the government gets in return pales in comparison to what is given away. I think these kinds of programs should attempt to be revenue neutral. But there are other benefits than just the financial side to attracting certain kinds of jobs to a city or state.

    But this isn’t the only way gov’ts attempt to direct the economy. Zoning, taxes, infrastructure, etc. all direct the economy, don’t they? In fact one of the themes of this blog is that the current Scottsdale City Council is directing the local economy in a direction you don’t agree with. In opposing that aren’t you advocating to direct the economy in a direction that you value? If there is a demand for nightclubs or highrise apartment buildings in downtown Scottsdale, why shouldn’t the city allow it? Isn’t that the Hayek and Robb position?

    I do think there is a role for the govn’t in our economy not only because they can’t help but impact it, but also because the market is limited in what it can do and as citizens we should have the means to control our communities.

  2. Gregg S – Here is my quandary, I went to the McDowell Road revitalization meeting tonight at the ‘new’ Tonalea/old Tonto school. The city people said the community wanted more investment in commercial, so what did the city council allow or foster? High density residential. Now I got this baloney line that more people mean more business, that is the field of dreams mantra. But the people did NOT evaporate on the McDowell corridor!

    So not only did the city officials not only confuse residential with commercial, but they tried to gloss over the fact that all this development was done without equal redevelopment in the infrastructure! Oh my, what a disaster in the making! Not only that but these little high density communities are gated! Not to friendly is that?

    So yes, the government should not meddle with the natural process, but they do, but if they are so inept, they just make it worse. So there is NO great desire for high density residential. There is no desire for more bars. That is corruption at work. Plain and simple. Nobody has shown me one study that says that we need more high density residential to revive McDowell or one more bar to revive Downtown.

    This is smoke and mirrors. It is “Bread and circuses” (or bread and games) (from Latin: panem et circenses) is metonymic for a superficial means of appeasement. How is that for a quote for the day?

  3. Edward,

    So what do you think needs to be done to revitalize the McDowell Rd corridor? We don’t need more residential as the people are still there. You say you don’t want government support as it just gets it wrong. What is to be done?

    1. Not to speak for Edmond, but Gregg if you search ST (and elsewhere) for “Los Arcos Redevelopment District, you’ll see that the one constant throughout the two-decade decline of the McDowell corridor has been city government intervention and the inevitable favoritism that entails.

      From car dealer subsidies to the comparatively massive overpayment for the Skysong property, to the gift of same to ASU Foundation (which is a development company, NOT Arizona State UNIVERSITY), city government has been the brown thumb holding back organic, market-driven development and redevelpment…which is, ironically, what Milhaven, Robbins, Klapp, Korte, and Lane have been calling for in their quest to erode zoning restrictions in the area.

      Of course, there’s nothing “organic” about throwing the rules out the window in favor of your friends! Neither is imposing new, stifling restrictions like the LARD or allowing it to remain for no reason other than to benefit a different set of friends.

  4. Gregg S – Sorry for missing your response. So if I had the ear of the city Council, what would I tell them? First, stop with the ‘incentives’ for developers. Yes, it is NOT necessary to give every developer more tax payer dollars to redevelop McDowell Road. The city council has had this bad touch and open wallet mentality and that has only hurt Scottsdale. So first step stop handing out the cash and or height variances to developers.

    Second step, infrastructure, infrastructure, and infrastructure! Yes, I am looking at the roads, the sewer, transportation system, police, fire, etc. What has Scottsdale done lately? Well nothing of great note. Oh we want to say the great islands of rock and trees? Wow, great street decorations, but what about the stuff we use? What is going to bring business back to the road? The people are here, but what about the links to the people? Where is it?

    So you have rotting buildings, closed bus stops, infrastructure from the 50’s, and the city wants people to invest? So this is what a bad TV show – Flip McDowell Road! NO. Invest in the city wisely. Show that you care for the city and do the right thing. Upgrade the sewers, invest in an upgraded bus system, and show that the citizen can get around without needing a light rail. See people will want to invest there again.

    So no free developer handouts, the infrastructure is getting addressed. Will that bring McDowell back to life? Yes, that is a good step. With that step some businesses will come, because the businesses will see the city is ready to give them access to the customers. The people will see they can use the bus system and don’t have to worry about light rail destroying their local stores and can get to the new businesses.

    OK, that did not happen and we got more apartments, so what now? Well you still do what I said. STOP the handouts and start improving the infrastructure. You need to do that. These apartments are still on aged stuff, it will be overloaded and break down. Then what? We become like the city of Mesa? Yep, we get the wonderful smell of sewage as the pipes break and the ground water gets tainted. Does that sound nice? It doesn’t sound nice to me.

    My background is in information technology. One of the biggest failures in IT is capacity planning, and that is the same case here. The city council and city employees did not plan for the increased capacity of the apartments on the commercial properties they converted. Remember Los Arcos, where the Sky Song property is located on, was commercial property. It never would put the load that high density residential will. Now look at all the new apartments. They are all on formerly commercial property. They never were residential property, again never setup or designed for that load.

    So the city never told the developers to pay for or upgrade the infrastructure, so the new dwellers get to ‘plug in’ and start to dump in an increased load into a smaller pipe. What do you think is going to happen?

    That is why the infrastructure needs to be upgraded ASAP! It will fail. Now to bring back the true Scottsdale desired character, we need more businesses. That would mean we encourage the development of local artists and educational opportunities. Yes, that means the real ASU and community colleges. Not residential opportunities, but educational and commercial.

    Think of this, at the Tempe Marketplace there are store fronts for ASU arts programs, why not have the same thing here? What is stopping the migration of the arts programs to the McDowell Road area? What is stopping Papago Plaza from becoming an artist’s mecca? How about partnering with SCC or Rio Salado? They could also partner with SUSD or even with the charter or private schools.

    Who would not love to walk to Papago Plaza and see working artists working with students of all ages? It can involve the community and show that McDowell Road is becoming part of the community and giving back to education at the same time. That can be supported by federal dollars at the same time. Don’t you see how this is a win on so many levels?

    McDowell Road also can become a great resource for the older community. We can bridge the generation gap by showing that not only the arts span all ages, but everyone can help each other. The city has this mentality of developing for ‘Millennial’s’, how about developing for everyone? Yes, integrate the community. There is a study where a term is used NORC.

    A NORC is a Naturally Occurring Retirement Community. Now you can say, well I do or don’t live in one, but look around, many people do live in one to some extent. Many people around McDowell Road are of that age. I bring this up as this is a benefit, because when the community gets funding from either private or government sources you can get education, healthcare, homecare, and so on funded for these NORCs.

    What does a NORC have to do with revitalizing McDowell Road? Have you seen the demographics of the residents around McDowell Road? There are many mini and not so mini NORCs around it. So that community needs services, and they are not getting them right now. That is a shame! So what can we do for them and help the greater community at the same time? Think beyond a community center. Think of a ‘super community center’ but one that can energize or band together commercial and nonprofit business.

    I know I wrote quite a bit, but think about it. The city does not need to give away cash or our tax dollars, the city needs to invest in the infrastructure, and the city needs to address the ageing in place population. All of those issues need to be done on the McDowell Road corridor. Those can bring businesses back. They will help the entire community. They will show the residents that the city still cares. It will bring investors back and show the rest of the city that McDowell Road can adapt from car sales to education, arts, and care of people. It doesn’t need to just stuff people in buildings, but care for those new residents and those who already live here.

    It takes a little bit of smart investing in infrastructure, but no handouts. The federal government already has programs and funds that we can tap into to help this, but we (as a city) are missing out. We need to grab on to this opportunity and not shove out those who already live here, but embrace all ages and show that Scottsdale is still the West’s most Western Town and cares for the young and old.

    PS – As a disclaimer I am only 44, but I care for my neighbors and my schools. I have lived in Mesa, Phoenix, Tempe, and Scottsdale. I have brought my family back to Scottsdale for a reason. I want to help my community.

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