led in the urban context for mayors institute - english

Local Economic Development

in the Urban Context

The Israeli Mayors’ Institute on City Renewal

September 2011

[email protected]

www.miu.org.il

mailto:[email protected]

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

• What is the current thinking on LED and how did it develop?

– A bit of history

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

Prior to WWII

• Economic Development was

focused by each nation on

developing their own economy

– Included trade with other

nations

– Included investment in

territories, colonies and other

nations directly or indirectly

under the control of empires in

order to exploit their resources

Post WWII

• A new concept was born - Economic

Development aid to other nations

aimed at improving quality of life

without altering basic social structures

(conquering)

– Driven by multiple factors:

• The recognized need for global

stability – to avert another WW

• Political influence – the ―cold war‖

• Create bigger markets for goods and

services – globalization

– Creation of the UN, the WorldBank,

the IMF, ITO / GATT / WTO

– The Marshall Plan

– Creation of USAID

• Continued investment in own LED

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

The s

uccess o

f th

e M

ars

hall

Pla

n k

icked o

ff

thre

e w

aves o

f LE

D

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 so much invested and so little accomplished?

– The outdated view of LED in Israel

Summary of Outdated Thinking on LED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

Typical Shortcuts proposed for LED

• Attract:

– Outside investment

– Outside transplants

– Outside talent

– Outside residents

• Connect:

– Under-developed regions to successful ones

… if only LED was so easy…

Attract Big Outside Business Transplants • How

– Provide incentives to big businesses to move to your city

– New industrial parks at the outskirts of city

• Why it doesn’t work

– Good candidates for transplant are bad at helping develop the local economy…

• Good candidates for transplant, need to be relatively independent of local suppliers,

customers, talent, financers, etc…

– Demand for transplants is so high relative to the supply that the price to be paid

to attract them (through incentives) is higher than the benefit.

– Supply of industrial parks is higher than demand

– Economic development depends more on business variety than on size

• Better to have many small different businesses than a few large businesses

• What can be done instead?

– Later in the presentation

Attract Outside Talent / Affluent Residents

• How

– Lavish marketing, branding and advertising campaigns that

focus on outsiders

– Incentives to relocate to your city / town

– New ―luxury‖ neighborhoods on the outskirts of the city / town

– Regional colleges and universities in fenced off campuses

outside of cities / towns


– Talent enables mobility

– Demand for talent is so high relative to the supply that the price to attract them

(through incentives) is higher than the benefit

– People talented in one area expect talent in all other areas that effect their life

• work, school, services, goods, entertainment, recreation and culture

– Demoralizing message to existing residents – ―you are not good enough‖

– Regional colleges do not create a strong connection to any city / town


– Later in the presentation

Connect Under-Developed Regions to

Successful Ones • How

– Highways from the furthest towns and cities to the center

of Israel

– Trains also, with stations on the outskirts of cities and

towns


– Commute times of over 60min a day are hard to sustain long term for a

significant population

– It is more common that successful cities develop goods and services that

remote towns need than the other way around

– ―Great Cities‖ develop the towns in the region that surround them from the

closest to the furthest, in that order

• The influence of the ―Great City‖ will be felt in a town only after the towns closer to the city have

been influenced significantly


– Later in presentation

Economic Development is not ―Fair‖

• The strong get stronger

– Successful cities / towns create and attract more talent,

investments and businesses and become more

successful…

• LED is incremental

– It develops based on the existing local economy

– There is NO shortcut!

– But, when it works, the process can be fast…

~15% bonus in economic

output for doubling city size!

How do you leverage natural

development forces?

• Why do people gather together in cities?

– to survive and develop

The World is Getting More

Urbanized

• Opportunities are focused in Cities where people concentrate

16 Lecture 27 Urbanization Atanu

Dey

Half the world’s population

occupies only 1.5% of the

world’s land area

29

37

48

61

15

25

39

54

17

24

39

5451

66

73

80

42

61

77

85

64

74

80

87

61

7273 75

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

17 Lecture 27 Urbanization Atanu Dey

Israel 92%

More Big Cities and

Big Cities are Getting Bigger

• Successful cities grow to metros

• Metros grow to mega-metros (>5M pop)

– 1955 – 11 Mega-Metros

– Today - 50 Mega-Metros

– 2015 – 60 Mega-Metros

18

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

~15% bonus in economic

output for doubling city size!

Economic Output is Focused in City-Metro Regions

• 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

19

Population Economic Output Innovations

• Why is development focused in cities?

– Urban Economies

Cities Have Natural Economic Advantages Urban Economies

Scale

• Sharing of fixed costs by a large quantity of outputs

Localization Agglomeration

• Input-sharing and competition within the industry

Urbanization Agglomeration

• Innovation and exchange of ideas and technology

Lecture 27 Urbanization Atanu Dey

21

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

• Why focus on city design?

– Cities have natural economic advantages

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

• What about other economic advantages?

– City design, the neglected opportunity

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

• Why focus on local businesses?

– LED is incremental

Why focus on Local Businesses?

LED is incremental It develops based on the existing local economy

• 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

What is the difference between

Economic Development and Economic Growth?

• Economic development depends more on business variety than on size

– Better to have many small different businesses than a few large businesses

• Why LED in the context of cities?

– Different strategies for 4 types of cities

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

• What can be done differently to make LED more effective?

– Some strategies and tools that leverage development forces

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




The Five Economic

Forces

Exerted by Cities on Their Own

Regions

City markets

City jobs

City developed technology

Transplanted city work

City generated

capital


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

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

• Outdated thinking

– Attract:

• Outside investment

• Outside transplants

• Outside talent

• Outside residents

– Connect:

• Under-developed

regions to successful

ones

• Current thinking –

Focus on

– Local businesses

– Local residents

– Local connectivity

LED in a Great City




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

How?

Attract Big Outside Business Transplants • How

– Provide incentives to big businesses to move to your city

– New industrial parks at the outskirts of city

• What can be done instead? Focus on local businesses

– Offices, retail and other non-polluting businesses in the city center

– Retention and growth of existing local businesses – a great place for business

• Renewal of city center

– Development of new local businesses based on existing businesses

– Development of local businesses for existing needs (import replacement)

• Plugging the leaks, keep the money circulating in your city

– Development of local businesses that leverage local and regional advantages

– Economic development office

– Attract outside business transplants from a neighboring ―great city‖

• only if you are in the region of a ―great city‖ and are ―next in line‖

Attract Outside Talent / Affluent Residents

• How

– Lavish marketing, branding and advertising campaigns that focus on outsiders

– Incentives to relocate to your city / town

– New ―luxury‖ neighborhoods on the outskirts of the city / town

– Regional colleges and universities in fenced off campuses outside of cities / towns

• What can be done instead? Focus on local residents

– Retention and growth of existing talent – a great place to live and

develop

• Renewal and intensification of existing neighborhoods

– Education and training for new talent growth

• Colleges without fences in city centers

– Attract outside talent from a neighboring ―great city‖

• only if you are in the region of a ―great city‖ and are ―next in line‖

Connect Under-Developed Regions to

Successful Ones

• How

– Highways from the furthest towns and cities to the center of Israel

– Trains also, with stations on the outskirts of cities and towns

• What can be done instead? Focus on local

connectivity

– Transportation in the metro region of a ―Great City‖ and just beyond

– Transportation between towns and cities in remote areas

• To leverage regional advantages and to provide a bigger local market

– ToD at train stations or strong connection of train stations to town

center

– Connect remote developing town to a successful city market

• Only if the town has developed a very high value product or service and is

transport limited for distribution

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

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.$44.9B 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

Laboratory for Urban Intensification as a LED Tool

or

How to increase Density, Variety and Access

• Tools for the intensification and renewal of

deteriorating urban residential

neighborhoods in Israel, while reinforcing

the quality of housing and urban variety.

• Aging residential projects, built by the

government cheaply and quickly following

massive waves of immigration in the 50s,

60s and 70s, constitute the largest part of

Israel’s housing stock, yet they are also the

most neglected, and are characterized by:

– small residential units – cramped quarters

inappropriate for growing families

– uniform housing stock – all apartments are of

the same size and plan

– low-quality construction – improvements

within apartments are expensive, and

improvements to the building as a whole are

even more so

– lack of access to amenities, community

services and good consumer products

• The tool is based on Merhav’s 10 Principles

for Good Urbanism

Plugging the leaks

• Keep the money circulating in your city

http://www.neweconomics.org/default.asp

Thank You and see you in November 2011

[email protected]

September 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








Backup Slides

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

• Create a great place to live and to develop economically

• 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

• Create a great place to live and to develop economically

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

LED in a Great City




How to start 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?

What is LED? The Old Simple View

• Local Economic Development is

Employment Generation

Cities are Engines of

Economic Development and Growth

• Why is this so?

– Economies of scale and of agglomeration

Lecture 27 Urbanization Atanu Dey 55

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 57

Economic Growth Urbanization


• 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.

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.

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

tools for local economic renewal • bizfizz

– BizFizz is the leading business support model in the UK in which Coaching is the preferred methodology for offering business support to entrepreneurs living in areas of economic decline. Over the last seven years, BizFizz programmes have provided coaching to entrepreneurs across England and Scotland. The Civic Trust and new economics foundation are delighted that Coaching and supporting entrepreneurs by developing local resident led networks has been recognised by national government.

• plugging the leaks – The issue is not necessarily that too little money flows into a

neighbourhood. Rather, it is what consumers, public services and businesses do with that money. Too often it is spent on services with no local presence, and so immediately leaves the area.

• local multiplier 3 – LM3 has been tried and tested across the UK, from agriculture to

social enterprise to local government procurement, to determine how money coming into your community is then spent and re-spent. 'The Money Trail' shows you how to use LM3 to find out what's really happening in your local economy, and how you can make it better.

http://www.neweconomics.org/gen/tools_top.aspx

http://www.neweconomics.org/gen/tools_bizfizz.aspx

http://www.neweconomics.org/gen/tools_plugging.aspx

http://www.neweconomics.org/gen/tools_lm3.aspx

http://www.neweconomics.org/gen/tools_lm3.aspx

http://www.neweconomics.org/default.asp

led in the urban context for mayors institute - english

Design

led goal

outskirts of cities

great cities

outskirts of city

great city

outside investment

city renewal

city havebeen