Cummins: ‘Economic Development’ Has Lost its Meaning

November 29, 2018

by Ryan Cummins

The truth is there is no accepted definition in Indiana now of what constitutes “economic development.” And that is part of the problem. For when something like economic development can mean anything, which it often does, then it can just as easily become meaningless, which it often is.

Economic development should mean the actions undertaken by individuals or groups of individuals to improve the short-term and long-term economic conditions for themselves, their families and their communities, all underpinned by adherence to property rights and voluntary exchange. This definition does not preclude actions by government, but the importance of property rights and voluntary action cannot be stressed enough in evaluating those actions and understanding real economic development.

Government-driven local economic development (LED), as currently understood in Indiana, however, is quite a different animal in 2018. For this article, it can be defined as actions by government to intervene in the economic decisions of individuals, or groups of individuals, and to do so in order to achieve a political end.

LED always involves the abrogation of property rights and the disruption of the voluntary choices that many people would have otherwise made. This is the nature of government whenever it moves beyond the essential functions of protecting life, liberty and property.

While it is the norm in all cases to couch such actions in terms that most citizens would support (create jobs, expand opportunities, encourage prosperity, improve quality-of-life, etc.), the reality is they are based not on property rights or individual liberty/autonomy but on the opposite. Tear away the gauzy, feel-good language and there will always be, in every single instance, the force and coercion of government, the State, behind every LED proposal.

Again, this doesn’t mean that every action taken under LED is nefarious or has ill intent. It can be the opposite, and the eco-devo bureaucrats and politicians may very well intend to do good. Nonetheless, it is a fact, it is a reality, that the intention to “do good deeds” or “make life wonderful” when coupled with the force and coercion of government can lead to serious unintended consequences. Perhaps the “war on drugs,” the “war on poverty,” or the “war on terror” might have at one time had some good intentions but it is hard not to argue that they have become an all-out war on your property, your freedom and even your life.

Think of your downtown in your city. Since the establishment of the Interstate Highway System, downtown areas have seen their preeminent role in the economic life of a community chart a long slow decline. Again, to hasten the decline of downtown areas in cities across Indiana was never an intention of interstate highways, but it is an unintended consequence.

So what can be done? There are two paths a community might take. One would recommend that the downtown property owners and businesses respond to changes in the preferences of consumers by adjusting where and how they do business. In light of new competition brought in by the interstate (or the new bypass or the new Walmart), the downtown property owners need to determine what their comparative advantage is over the new competitors and in the new situation.

It might involve nostalgia or history but it probably also involves parking, access, pricing and every other customer preference that any business must meet to remain viable — in other words, a market response to changed conditions and preferences. The entire character of business activity in an older downtown area may change from department stores or other high-intensity retail to something entirely different. The downtown may very well evolve into something that does not at all reflect the downtown of 30 or 50 years ago. In this case, it is the customer (i.e., the market) and not the government that makes the decision as to what the downtown will become.

What I am describing is the employment of the economic means to the problem of the economic decline of a particular area. And this is exactly the challenge that Hoosier downtown areas were and are facing. Yes, it might be difficult. There is no doubt a fair number of businesses wouldn’t be able to meet the challenge. Hardship and upheaval will take place. Joseph Schumpeter described it as “the perennial gale of creative destruction.”

The process in the end, however, will be what a community actually wants and is willing to pay for — voluntarily. To my mind, this is real economic development or re-development, as the case may be.

Ryan Cummins, an adjunct scholar of the Indiana Policy Review, is co-owner of a family business in Terre Haute and the former chairman of the Appropriations Committee of the Terre Haute Common Council.


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