to a time of fiscal austerity and smaller government. It is also a strategy
compatible with ideas about people taking responsibility for their lives.
What better way to relieve government of some of its social welfare burdens and at the same time build a competitive economy for the future than
by encouraging members of the labor force to gain the skills that will enable them and the firms they work for to carve out a place in the international marketplace? Besides, the idea of boosting the institutional capacity
of local government and private actors is appealing at a time when demands on state resources for health care, law enforcement, prisons, environmental protection, higher education, and property tax relief preclude
heavy investment of discretionary revenues in economic development.
If Third Wave ideas do indeed attract consensus, then the intense involvement of states and localities that marked the 1980s will give way to a
certain detachment. In the realm of economic development, states and their
local governments will come increasingly to serve not as funders or
grantors or micromanagers or even deal makers, but as catalysts and facilitators. This is how the Third Wave policy theorists see the future:
Government, they suggest, will look more like a wholesaler in the economic development domain and less like a retailer of grants and programs.
There is considerable debate over the validity of this proposition, but the
most plausible research finding is that state economic development efforts may
slow, but not reverse, economic decline. See
Raw data were furnished to the author by the U.S. Conference of Mayors
covering the period from 1981 to 1993.
Occasionally, a state will contract out the development of its strategic plan to
a consulting firm.
Tax reduction was a major theme (though not the only one) of a number of
early strategic plans, including those generated in Wisconsin and Iowa in the
mid-1980s. But contrast this emphasis with the following passage from Oklahoma's strategic plan of 1988: "While everyone desires low taxes, many experts
believe that increased taxes in Oklahoma would help rather than impede economic development, if wisely invested in appropriate public services" (
Department of Commerce 1994: 87).
Tax abatements provide temporary relief from property taxes for certain
qualifying real estate projects. Tax increment financing uses the anticipated increment in value from a development project to back bonds that in turn raise capital to help finance certain aspects of the project, such as infrastructure and land
The belief that small firms were the primary job generators was the product
mainly of work done by
David Birch ( 1979). Subsequent research, however, has
called into question the role of small business.
Harrison ( 1994), for example,