Here’s something to keep in mind when you hear mayors making plans for things like designated green energy zones or tech clusters:
Q: Has anything surprised you about downtown’s recovery?
A: This was always a financial center. Now we have a lease for a million square feet from Condé Nast. That is a change. The diversity has been a surprise to me.
That’s from a Crain‘s interview with Larry Silverstein, whose firm is building the 1 World Trade Center. It’s going to be a big building, no doubt, but it’s not a neighborhood. If Larry Silverstein couldn’t predict what kind of company would be the anchor tenant in this one tower, how can we trust cities to pick the futures of entire neighborhoods? Some of the plans – call them neighborhood industrial policies – can be quite elaborate. Vancouver Mayor Gregor Robertson’s Greenest City 2020 Action Plan, for example, calls for a “technology centre” with a “food processing enterprise incubator.”
But how often does this sort of government urban-industrial planning work out? Silicon Valley (computer technology) and Singapore (biotech) both had their genesis in state-funded universities, though Singapore’s biotech sector was much more intentional than Silicon Valley’s tech industry. Financial hubs like London and Delaware and trade hubs like Hong Kong also required a certain amount of government foresight, in the form of good – i.e., laissez-faire – financial regulations and trade policies.
But Vancouver isn’t a city-state, and Mayor Robertson can’t found a university or opt out of Canada’s federal patent laws. Most of these sorts of zones are implemented solely on the local level, which generally means targeted tax breaks, subsidies, and zoning set-asides. But while these might make great ribbon-cuttings and talking points, they are tepid policy tools at best, and I don’t believe any major agglomeration has ever been borne out of these methods. Can any readers think of any examples?
I don’t know of any examples of successful top-down cluster development either, but can you think of a crazier policy idea? As we are seeing rust belt cities struggling and losing population because their economies are based on one industry, to artificially lead cities to lack economic diversity? Makes no sense to me.
Detroit is trying to leverage its universities and cheap land into an industry-neutral small-business incubation zone. I’ve heard nothing but good things, although it’s still a fairly new effort.
How would you measure success? By the fact that the goal was reached, or that the benefits to the locality exceeded the costs?
There is a lot of micro industrial policy that brings in a factory, megastore, or a sports team. Whether it is worth the cost in tax giveaways and other incentives is a another question, that most econ research answers in the negative. If something as simple as those examples can’t be done in a manner that actually benefits the public, how likely is it that any grander scheme will?
Great post, useful information. Have a great night.
It’s hard to create clusters. It’s much easier to support them with the kind of “glue” (support systems for capacity building and incubation) that the free market doesn’t always develop independently, i.e., the kinds of “agglomeration economies” that derive from clustering. This is something I am intending to write about sometime, maybe this month, based on the ideas of incubation and the typology of artists spaces (which is generalizable to other sectors) outlined in this report from Creative City Network of Canada: http://www.creativecity.ca/english/component/content/365?task=view