Julian Wood

By Julian Wood - 07/02/2018

Julian Wood

By Julian Wood -

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What can be done? | Smart Growth Two

DISCOVERING DEVELOPMENT OPTIONS BASED ON INTERNATIONAL BEST PRACTICE

“Ahipara needs a boost. It needs to grow.” Then he [Malley] smiles. “But I’m glad it hasn’t as well. It keeps the surf uncrowded.”[1]

Fortunately, there is a rich regional development literature from both New Zealand and abroad that outlines an abundance of policy options for places to consider. In this section we will explore these options, discern how they might work together, and assess their overall likelihood of success. To help make sense of the potential pathways, we have created a framework for analysing these options, focussing on the two primary approaches: Smart Growth and Smart Decline policies (see Figure 4 below).[2]

We have grouped smart growth policies into three components: local resilience and productivity; the local labour market; and the local capital market. Smart decline policy options have been broken down into two components: policy aimed at “de-growth” and policy aimed at relocation or exit. This section is structured following this five-part framework. We will begin by discussing smart growth policies and then transition to smart decline options.

Smart Growth 2: Improving investment in the local community

The second component of smart growth policies is a cluster of policy incentives aimed at attracting new capital or investment to a place. We have divided these into non-financial and financial incentives (See Figure 8):

  • Non-financial strategies aim to make the location a more desirable place to undertake work or invest through social, environmental, infrastructure, flagship investments, or rebranding improvements. While not transferring money to firms, some forms of non-financial incentives like fast-tracking approval of permits through local government do aim to lower the cost of undertaking business in a particular location.
  • Financial incentives provide some form of monetary incentive for firms or individuals to invest locally. They can be innovation, industry, or location-based.

In practice, financial and non-financial strategies are used side-by-side and are hard to delineate. Monetary incentives, for example, may be provided to revitalise social housing stock or the local shopping environment through “main street” beautification. Similarly, a flagship building like an opera house, theatre, or gallery may be partially or wholly funded through public funds to attract creatives.

Smart Growth 2.1: Non-financial strategies

Non-financial strategies usually aim to revitalise a place by making it a specific location more attractive to live or work in—be it “hard” infrastructure investments like building new bridges or roads, or more “soft” or social infrastructure like improving ethnic or social diversity. There are wide range of case studies from around the world that examine small place revitalisation.[3] Because each place studied has a different set of challenges, local conditions, and slightly different solutions, care must be taken when analysing the policies. Overall the results tended to be mixed, with many initiatives ushering in a short-term positive boost to employment or population that was reversed soon after. Very few initiatives successfully enabled a community to overcome a negative trajectory.

Building things (physical infrastructure investment) to attract investment is the costliest form of intervention and tends not to arrest population decline

Studies from Switzerland and Germany highlighted that efforts to revitalise housing and school infrastructure were very high cost compared to most other forms of social intervention, and when tried in isolation often failed to have successful long-term impacts.[4]

In Japan’s mountains, the focus of assistance has often been to build heavy regional infrastructure like roads, bridges, and highways, within a centralised “build it and capital/people will come” approach. As Thomas Feldhoff outlines, however, “economic growth has failed to materialize” and these efforts seemingly caused a second problem as access to these public works has “aggravated regional economies’ dependency on central government-controlled construction works.”[5] Overall, in Japan, as these infrastructure subsidies have been scaled back, small towns have quickly transitioned to marginal settlements and then shortly afterwards a process of regional abandonment and collapse.

Success stories often hinge on local leadership

The central role of local leadership and vision for small towns to realise their potential was evident in nearly all the regional success stories. Leadership took the form of a key person or champion for the community. Local communities were also, more often than not, funders of their own revitalisation. Many decided to co-operatively purchase or fund an important local asset, such as the local pub in the case of the Old Crown in Cumbria UK or a local service station in New Zealand.[6] Another example was private benefactors previously employed at the local timber mill in Kawerau invested in a business and community hub initiative which has proven to be an ongoing local success story.[7]

Harnessing external expertise to overcome local gaps in knowledge is important

Aligning well with the earlier discussion on the levels of absorptive capacity in local communities, studies from Australia,[8] United States,[9] and Germany[10] also suggest that places benefit when they seek outside expertise to help them navigate wider networks to find allies, information, or potential funding sources. This was particularly pertinent when there were multiple and complex layers of local, regional, and federal government and university funding sources available. The localised knowledge available to fill out all the forms or tick all the boxes needed to make a change simply wasn’t available.

Partnering with outside expertise and higher levels of government can also provide a level of accountability that helps maintain the goals of the intervention over time, in turn overcoming the long-term capture of public spending by early participants. This type of capture was evident in London’s Coin Street development, where over a 25-year period early public investments resulted in gentrification of the area, enabling neighbourhood associations to benefit, rather than maintaining the “social equity and redistributional priorities” that formed the basis of the interventions in the first place.[11]

Focusing on creatives and creative industries only works if all other considerations are equal

A number of small towns have sought to make themselves more attractive to creatives and creative industries as a way to attract inward investment. Initiatives like Wellington’s focus on becoming “Wellywood,” Nelson as the birthplace of the New Zealand World of Wearable Arts awards, or Dublin becoming a hub for media and computer game design are examples of this. Unfortunately, the results from Ireland are not encouraging.[12] So-called “hard” factors like the availability of skilled labour, good transportation, decent communications infrastructure, and market accessibility usually won over “soft” factors like “levels of ethnic or social diversity, cultural and social facilities,”[13] or levels of tolerance and openness. A place can certainly improve its soft factors, but if it is in competition with a similar location that has better hard factors, the evidence suggests firms will put emphasis on the latter. All else being equal, however, soft factors will help a location be more attractive to creatives.

Flagship developments and rebranding should not be seen as isolated or one-off solutions

Rebranding a location alongside some form of flagship development like building an opera house or technology park is another non-financial method used to attract inward investment. The rebranding of post-industrial Manchester is often heralded as proof of this concept as both population and economic growth followed its ongoing implementation. However, as Assistant Professor in Architecture and Built Environment Fernando Ortiz- Moya point outs, contextual factors like Manchester’s location at the heart of a globally-connected growing region played a huge role.[14] “New” Manchester transformed its image not just through multiple initiatives and flagship projects but also through more localised neighbourhood renewal projects, not all of which were successful. The neighbourhood renewal projects were often required to counteract to the sustained, and in some cases deepened, inequality and social exclusion created by the flagship projects.[15]

Overall, while this model had success in Manchester, it isn’t easily replicable. Simply building a stadium or a pool will not be a guaranteed success, particularly without local neighbourhood renewal projects. Indeed as Ortiz- Moya summarises:

Cities trying to replicate the ‘Manchester Effect’ should find their own brand based on their own local heritage. Rather than following generic strategies to become a ‘creative city’, a ‘techno city’ or a ‘cultural city’, policymakers should find their city’s inherent assets and develop their strategies around them.[16]

Smart Growth 2.2: Financial strategies

Financial strategies incentivise firms to locate in a particular place by offering money or tax credits based on their locational choice (these locations are then often known as special economic zones). These incentives can also encourage particular types of industries, say heavy manufacturing or high technology firms, to cluster within the zone. The evidence suggests these types of incentives, at least in the short term, tend to work as firms seek to take advantage of the financial windfalls.[17]

While firms appear to do well, the overall benefit for the host location is however, far less compelling, and often highly dependent on the domestic firms (usually outside the zone) being able to quickly learn from the international frontier firms that locate in the zone. They can do this in different ways: first by becoming part of the global value chain and hence becoming part of the knowledge chain; or by employing staff previously employed in the “in zone” firms. Unfortunately, this is far easier said than done.[18] It is also well documented that as subsidies or financial incentives dry up, firms can and will choose to relocate to another place as demonstrated by the Polish mining city Wałbrzych’s attempt to attract new non-mining industries into a special economic zone. Firms that initially chose to locate inside the special economic zone announced they would be relocating to new zones as the Wałbrzych one ended.[19]

There is also good evidence of the costs to overall economic efficiency of special economic zones, especially if the firm was likely to be based in or near the area anyway, or if market signals are blunted. The experience of France in No-Pas-de-Calais[20] offers an example of the former, as their special economic zones were found to have caused the relocation of firms from areas close to but outside the zone rather than any form of overall regeneration of regional growth. Subsidies given to revitalise rural housing and business premises under the rural renewal scheme in Ireland is an example of the latter. The subsidies initially stemmed population decline, but in the longer term created an oversupply of housing, and decline returned.[21] More generally, the OECD has argued that the combination of these two costs mean that the use of spatial financial incentives like special economic zones is “wasteful from a social welfare point of view.”[22]

Smart Growth 2 – Conclusion

Overall, the literature highlights that if non-financial initiatives are to attract investment, they should be seen be complements to other development policy options. Small place revitalisation efforts resulted in a short-term boost to employment or population. Where places were successful, their success often hinged on exceptional local leadership and the ability to harness external expertise to overcome local knowledge and funding gaps. Policy that focused on building local physical assets like school buildings was costly and unable to arrest decline. The use of heavy infrastructure investment in Japan crowded out local solutions. Rebranding and flagship developments required a good consideration of local conditions and that the initiatives fit with underlying comparative advantage. Along these lines, aiming to improve local cultural and social facilities and levels of tolerance and openness was not, in isolation from a consideration of hard factors, seen as a viable way to attract creatives and thus creative industries.

Financial strategies to attract inward investment through the use of special economic zones, while often initially successful, were also associated with overall efficiency losses to society in the long-term. The ability of the local community around the special zone to learn from firms within the zone or become part of the global value chains associated with them was critical for success. Often, however, these zones tended to redistribute rather than reinvigorate economic activity. Place-based subsidies run the risk of blunting market signals and creating secondary negative effects.


To read the other smart growth policies, and smart decline policies, click below. 


This is an extract from Julian’s research paper “Taking the Right Risks | Working Together to Revitalise our Regions” Policy Paper. (Released 2018) 

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READ THE WHOLE PAPER

 

ENDNOTES

[1] David Fisher, ‘Heartbeat: Ahipara, Where Not Much Has Changed since the GFC Stopped the Boom-Town Talk’, New Zealand Herald, 23 August 2017, http://www. nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=11900276.
[2] In practice, many of the policy options discussed below are not as neat as this framework may suggest. It is inherently difficult to delineate and separate one from another, as they are often inter-related. The groupings, then, are the author’s best attempt at ordering a vast and complicated literature.
[3] Including a study of small Australian towns and communities Peter Kenyon, Alan W Black, and Rural Industries Research and Development Corporation (Australia), A Kit for Small Town Renewal (Barton, A.C.T.: Rural Industries Research and Development Corporation, 2001).; mountain and rural areas in Japan see Feldhoff, ‘Shrinking Communities in Japan’.; rural renewal schemes in Ireland see Menelaos Gkartzios and Michelle Norris, ‘“If You Build It, They Will Come”: Governing Property-Led Rural Regeneration in Ireland’, Land Use Policy 28, no. 3 (July 2011): 486–94, https://doi.org/10.1016/j.landusepol.2010.10.002.; initiatives in small towns in Germany see, Hans-Jörg Domhardt and Gabi Troeger-Weiß, ‘Germany’s Shrinkage on a Small Town Scale’, University of California Berkeley, Institute of Urban and Regional Development, IURD Monograph Series, Berkeley, 2009, 161–68.; neighbourhoods in Switzerland see Walter Schenkel, ‘Regeneration Strategies in Shrinking Urban Neighbourhoods: Dimensions of Interventions in Theory and Practice (Switzerland)’, in Demographic Change and Local Development: Shrinkage, Regeneration and Social Dynamics (OECD Local Economic and Employment Development, 2012), 179–86.; housing initiatives in Netherlands see Lieke Dreijerink, Laura van der Noort, and Jaap Kortman, ‘Sustainability and Shrinkage: Three Case Studies in Zuid-Limburg (Netherlands)’, in Demographic Change and Local Development: Shrinkage, Regeneration and Social Dynamics (OECD Local Economic and Employment Development, 2012), 71–78.; studies in rural America see University of North Carolina, ‘Small Towns, Big Ideas: Ayden’, accessed 10 November 2017, http://www.iog.unc.edu/programs/ cednc/stbi/cases/pdf/ayden.pdf; University of North Carolina, ‘Small Towns, Big Ideas: Bakersville / Hayesville’, accessed 10 July 2017, http://www.iog.unc.edu/ programs/cednc/stbi/cases/bakers_hayes.php.; see also Caru Bowns, ‘Shrinkage Happens… in Small Towns Too!: Responding to de-Population and Loss of Place in Susquehanna River Towns’, Urban Design International 18, no. 1 (2013): 61–77.; see also University of North Carolina, ‘Small Towns, Big Ideas: Cape Charles, Virginia’, accessed 10 July 2017, http://www.iog.unc.edu/programs/cednc/stbi/cases/cape_charles.php.; see also University of North Carolina, ‘Small Towns, Big Ideas: Branson, Missouri’; see also Anirban Adhya, ‘From Crisis to Projects; a Regional Agenda for Addressing Foreclosures in Shrinking First Suburbs: Lessons from Warren, Michigan’, Urban Design International; Basingstoke 18, no. 1 (Spring 2013): 43–60, http://dx.doi.org.ezproxy.auckland.ac.nz/10.1057/udi.2012.31.; England see André Mulder, ‘A Place to Be Proud of: Heritage and Social Inclusion in Shrinking Cities (Germany and United Kingdom)’, in Demographic Change and Local Development: Shrinkage, Regeneration on and Social Dynamics (OECD Local Economic and Employment Development, 2012), 273–80; Gert-Jan Hospers, ‘Urban Shrinkage and the Need for Civic Engagement’, 2012, http://repository.ubn.ru.nl/handle/2066/124197.; and Wales see Michael Woods, ‘Power, Partnership and Participation: Engaging Communities and Community Assets’ (Inverness, United Kingdom, 23 November 2010), http://slideplayer.com/slide/4764753/.
[4] Hans-Jörg Domhardt and Gabi Troeger-Wei\s s, ‘Germany’s Shrinkage on a Small Town Scale’, The Future of Shrinking Cities–Problems, Patterns and Strategies of Urban Transformation in a Global Context.–Р, 2009, 161–168; Walter Schenkel, ‘Regeneration Strategies in Shrinking Urban Neighbourhoods: Dimensions of Interventions in Theory and Practice (Switzerland)’.
[5] Feldhoff, ‘Shrinking Communities in Japan’, 105.
[6] Isaac Davison, ‘Heartbeat: Eketahuna Makes a Community-Led Recovery’, New Zealand Herald, 29 August 2017, http://www.nzherald.co.nz/nz/news/article. cfm?c_id=1&objectid=11912215.
[7] Authors interview in 2017.
[8] Kenyon, Black, and Rural Industries Research and Development Corporation (Australia), A Kit for Small Town Renewal.
[9] Bowns, ‘Shrinkage Happens … in Small Towns Too!’; University of North Carolina, ‘Small Towns, Big Ideas: Ayden’; University of North Carolina, ‘Small Towns, Big Ideas: Bakersville / Hayesville’; University of North Carolina, ‘Small Towns, Big Ideas: Cape Charles, Virginia’.
[10] Hans-Jörg Domhardt and Gabi Troeger-Weiß, ‘Germany’s Shrinkage on a Small Town Scale’.
[11] Fainstein, S. 2010. The just city. Ithaca: Cornell University Press, 128, cited in Justin B. Hollander and Jeremy Németh, ‘The Bounds of Smart Decline: A Foundational Theory for Planning Shrinking Cities’, Housing Policy Debate 21, no. 3 (June 2011): 363, https://doi.org/10.1080/10511482.2011.585164. It was seen that over time as these neighbourhood associations gained from the initiative as the area rose in value, that they became increasingly less likely to maintain “social equity and redistributional priorities.”
[12] Enda Murphy, Linda Fox-Rogers, and Declan Redmond, ‘Location Decision Making of “Creative” Industries: The Media and Computer Game Sectors in Dublin, Ireland’, Growth & Change 46, no. 1 (March 2015): 97–113, https://doi.org/10.1111/grow.12086.
[13] Murphy, Fox-Rogers, and Redmond, 100.
[14] Fernando Ortiz-Moya, ‘Coping with Shrinkage: Rebranding Post-Industrial Manchester’, Sustainable Cities and Society 15 (July 2015): 33–41, https://doi. org/10.1016/j.scs.2014.11.004.
[15] Some have argued that these inequalities led to brief riots in the heart of Manchester 2011, see https://www.theguardian.com/news/datablog/2011/aug/16/riots- poverty-map-suspects
[16] Ortiz-Moya, ‘Coping with Shrinkage’, 40.
[17] Dieter Rink et al., ‘Governance of Shrinkage: Lessons Learnt from Analysis for Urban Planning and Policy’, D13, D14 and D 14 (2012): 41, https://www.ufz.de/export/ data/400/39029_WP7_D13_14_15_FINAL_2.pdf.
[18] Thomas Farole, Gokhan Akinci, and World Bank, eds., Special Economic Zones: Progress, Emerging Challenges, and Future Directions (Washington, DC: World Bank, 2011). This overall impact once again highlights the important role that a particular places absorptive capacity plays in overall development.
[19] Tadeusz Stryjakiewicz, Przemysław Ciesiółka, and Emilia Jaroszewska, ‘Urban Shrinkage and the Post-Socialist Transformation: The Case of Poland’, Built Environment 38, no. 2 (2012): 197–213.
[20] Roos Galjaard, Leo Van Wissen, and Kim Van Dam, ‘European Regional Population Decline and Policy Responses: Three Case Studies’, Built Environment 38, no. 2 (2012): 293–302.
[21] Gkartzios and Norris, ‘“If You Build It, They Will Come”’.
[22] OECD, ‘Innovation-Driven Growth in Regions: The Role of Smart Specialisation’, 12.

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