Economic development research has currently identified five phases, or "waves" of economic development practice. The differences between these waves are shaped by historical factors, the economic climate during historical periods, and leaders' response to these forces, which over time have created five strategies that differ from their predecessors. The five waves have all been designed to accomplish the same goal: to help entrepreneurs and businesses discover and expand markets for their services.Often these waves operate concurrently (thus, overlapping), or within a single economic development plan.
Economic development is the process by which a nation improves the economic, political, and social well-being of its people. The term has been used frequently by economists, politicians, and others in the 20th and 21st centuries. The concept, however, has been in existence in the West for centuries. "Modernization, "westernization", and especially "industrialization" are other terms often used while discussing economic development. Economic development has a direct relationship with the environment and environmental issues. Economic development is very often confused with industrial development, even in some academic sources.
First-wave economic development, or the Growth Promotion Approach,is characterized by a focus on industrial recruitment through financial incentives such as tax abatement and loans in order to lower costs associated with land, infrastructure, and labor. This method of business attraction was first used in the United States in the 1930s as a response to the Great Depression. The economic development activities in this phase are sometimes called "smokestack-chasing."
A tax holiday is a temporary reduction or elimination of a tax. It is synonymous with tax abatement, tax subsidy or tax reduction. Governments usually create tax holidays as incentives for business investment. Tax holidays have been granted by governments at national, sub-national, and local levels, and have included income, property, sales, VAT, and other taxes. Some tax holidays are extra-statutory concessions, where governing bodies grant a reduction in tax that is not necessarily authorized within the law. In developing countries, governments sometimes reduce or eliminate corporate taxes for the purpose of attracting foreign direct investment or stimulating growth in selected industries.
The Great Depression was a severe worldwide economic depression that took place mostly during the 1930s, beginning in the United States. The timing of the Great Depression varied across nations; in most countries it started in 1929 and lasted until the late-1930s. It was the longest, deepest, and most widespread depression of the 20th century. In the 21st century, the Great Depression is commonly used as an example of how intensely the world's economy can decline.
This approach to economic development has its foundation in the "boosterism" of small towns in early North America. Typically in this wave, local economic developers focus attention on attracting one major employer to the region - be it a factory, mine, college, or prison. The first step in smokestack-chasing is to promote the location to the potential employer. Next, the economic developer seeks to improve the likelihood of the employer locating within the area by providing incentives (e.g., cheap land or labor, lax environmental regulations). Detractors of this form of economic development have labeled it haphazard and suggested that smokestack-chasing is "likely to prove ineffective,"while others have said the result of smokestack-chasing is likely mixed, with increases in short-term job growth and per capita income as well as political support.
Boosterism is the act of promoting ("boosting") a town, city, or organization, with the goal of improving public perception of it. Boosting can be as simple as talking up the entity at a party or as elaborate as establishing a visitors' bureau. It has been somewhat associated with American small towns. Boosting is also done in political settings, especially in regard to disputed policies or controversial events.
Second-wave development strategies have their roots in the increase of worldwide competition, the descent of American manufacturing,and the critical evaluations of first-wave techniques of the late 1960s. These critiques labeled first-wave development as a zero-sum game between elites that instead of creating jobs merely transferred opportunities from one area to another at the benefit of "land-based" elites. The first use of second-wave strategies was in the late 1960s and early 70s. In second-wave economic development, practitioners began to use strategies to retain and expand existing firms. They also included a focus on small business development through entrepreneurial tools like loans and enterprise zones.
Third-wave was first identified in the early 1990s, and is marked by a declining emphasis on industrial attraction and retention and an increasing focus on strategies such as public-private partnerships, establishing regional networks,developing industrial clusters, and increasing human capital.
Human capital is the stock of knowledge, habits, social and personality attributes, including creativity, embodied in the ability to perform labor so as to produce economic value. Human capital theory is closely associated with the study of human resources management as found in the practice of business administration and macroeconomics. The original idea of human capital can be traced back at least to Adam Smith in the 18th century. The modern theory was popularized by Gary Becker, an economist and Nobel Laureate from the University of Chicago, Jacob Mincer, and Theodore Schultz. As a result of his conceptualization and modeling work using Human Capital as a key factor, the Nobel Prize for Economics, 2018, was awarded (jointly) to Paul Romer who founded the modern innovation-driven approach to understanding economic growth.
Third-wave economic development focuses on “broadening of the foundation for effective economic development.”It also stresses the importance of nurturing and advancing local and sectoral resources resulting in more complex economic development planning. States increasingly see themselves as key players in an evolving international economic competition – one that requires third-wave efforts to shift to an industry-wide perspective, and in many instances improves the socio-economic standing of its citizens through equity planning during the strategic economic development process.
This wave is also called sustainable economic development, and includes strategies that enhance environmental quality and self-sufficiency.In this context, sustainability refers to the process economic developers employ to determine a balanced approach to development that take into consideration "a full range of economic, environmental, and social characteristics that together comprise 'community,'" or development that conciliates historically conflicting stakes: promotion of the economy, equitable distribution of economic growth, and the preservation of the natural environment.
This wave has also been referred to as sustainable local economic development (SLED) because of the emphasis on local community.
Although there are various definitions of sustainability or SLED, most definitions share the following principles:
An example of this approach applied to workforce training is the U.S. program Pathways out of Poverty.
The fifth-wave of economic development began in the 1990s with a two-fold interest in providing market solutions and regional strategies for development. The idea of a comparative advantage has been integral to the development of the fifth-wave. This wave has been marked by economic developers who work to emphasize unmet demand, function as a go-between with government to identify financing, and build partnerships for minority businesses between the public and private sector. The fifth-wave has led to concerns about displacement of impoverished populations due to gentrification.
Sustainable development is the organizing principle for meeting human development goals while at the same time sustaining the ability of natural systems to provide the natural resources and ecosystem services upon which the economy and society depend. The desired result is a state of society where living conditions and resource use continue to meet human needs without undermining the integrity and stability of the natural system. Sustainable development can be classified as development that meets the needs of the present without compromising the ability of future generations.
Smart growth is an urban planning and transportation theory that concentrates growth in compact walkable urban centers to avoid sprawl. It also advocates compact, transit-oriented, walkable, bicycle-friendly land use, including neighborhood schools, complete streets, and mixed-use development with a range of housing choices. The term "smart growth" is particularly used in North America. In Europe and particularly the UK, the terms "compact city", "urban densification" or "urban intensification" have often been used to describe similar concepts, which have influenced government planning policies in the UK, the Netherlands and several other European countries.
Economic geography has been defined by the geographers as the study of human's economic activities under varying sets of conditions which is associated with production, location, distribution, consumption, exchange of resources, and spatial organization of economic activities across the world. It represents a traditional subfield of the discipline of geography. However, many economists have also approached the field in ways more typical of the discipline of economics.
Development theory is a collection of theories about how desirable change in society is best achieved. Such theories draw on a variety of social science disciplines and approaches. In this article, multiple theories are discussed, as are recent developments with regard to these theories. Depending on which theory that is being looked at, there are different explanations to the process of development and their inequalities
The term "sustainable communities" has various definitions, but in essence refers to communities planned, built, or modified to promote sustainable living. Sustainable communities tend to focus on environmental and economic sustainability, urban infrastructure, social equity, and municipal government. The term is sometimes used synonymously with "green cities," "eco-communities," "livable cities" and "sustainable cities."
Community economic development (CED) is a field of study that actively elicits community involvement when working with government, and private sectors to build strong communities, industries, and markets.
Ecologically sustainable development is the environmental component of sustainable development. It can be achieved partially through the use of the precautionary principle; if there are threats of serious or irreversible environmental damage, lack of full scientific certainty should not be used as a reason for postponing measures to prevent environmental degradation. Also important is the principle of intergenerational equity; the present generation should ensure that the health, diversity and productivity of the environment is maintained or enhanced for the benefit of future generations. In order for this movement to flourish, environmental factors should be more heavily weighed in the valuation of assets and services to provide more incentive for the conservation of biological diversity and ecological integrity.
Precycling is the practice of reducing waste by attempting to avoid bringing items which will generate waste into home or business. The U.S. Environmental Protection Agency (EPA) also cites that precycling is the preferred method of integrated solid waste management because it cuts waste at its source and therefore trash is eliminated before it is created. According to the EPA, precycling is also characterized as a decision-making process on the behalf of the consumer because it involves making informed judgments regarding a product’s waste implications. The implications that are taken into consideration by the consumer include: whether a product is reusable, durable, or repairable; made from renewable or non-renewable resources; over-packaged; and whether or not the container is reusable.
A low-carbon economy (LCE), low-fossil-fuel economy (LFFE), or decarbonised economy is an economy based on low carbon power sources that therefore has a minimal output of greenhouse gas (GHG) emissions into the biosphere, but specifically refers to the greenhouse gas carbon dioxide. GHG emissions due to anthropogenic (human) activity are the dominant cause of observed global warming since the mid-20th century. Continued emission of greenhouse gases may cause long-lasting changes around the world, increasing the likelihood of severe, pervasive and irreversible impacts for people and ecosystems.
Sustainability is the process of maintaining change in a balanced environment, in which the exploitation of resources, the direction of investments, the orientation of technological development and institutional change are all in harmony and enhance both current and future potential to meet human needs and aspirations. For many in the field, sustainability is defined through the following interconnected domains or pillars: environment, economic and social, which according to Fritjof Capra is based on the principles of Systems Thinking. Sub-domains of sustainable development have been considered also: cultural, technological and political. While sustainable development may be the organizing principle for sustainability for some, for others, the two terms are paradoxical. Sustainable development is the development that meets the needs of the present without compromising the ability of future generations to meet their own needs. Brundtland Report for the World Commission on Environment and Development (1987) introduced the term of sustainable development.
Local Economic Development (LED) is an approach to economic development, of note in the developing world that, as its name implies, places importance on activities in and by cities, districts and regions. This involves added micro-economic measures at the local level to complement macro-economic measures at the national level. LED encompasses a range of disciplines including physical planning, economics and marketing, all with the goal of building up the economic capacity of a local area to improve its economic future and the quality of life for all.
Environmental governance is a concept in political ecology and environmental policy that advocates sustainability as the supreme consideration for managing all human activities—political, social and economic. Governance includes government, business and civil society, and emphasizes whole system management. To capture this diverse range of elements, environmental governance often employs alternative systems of governance, for example watershed-based management.
The International Economic Development Council (IEDC) is a non-profit membership organization serving economic developers. With more than 5,000 members, IEDC is the largest national and global organization of its kind.
Workforce development, an American approach to economic development, attempts to enhance a region's economic stability and prosperity by focusing on people rather than businesses. It essentially develops a human-resources strategy. Work-force development has evolved from a problem-focused approach, addressing issues such as low-skilled workers or the need for more employees in a particular industry, to a holistic approach considering participants' many barriers and the overall needs of the region.
Sustainability organizations are (1) organized groups of people that aim to advance sustainability and/or (2) those actions of organizing something sustainably. Unlike many business organizations, sustainability organizations are not limited to implementing sustainability strategies which provide them with economic and cultural benefits attained through environmental responsibility. For sustainability organizations, sustainability can also be an end in itself without further justifications.
The Sustainable Urban Development Network (SUD-Net) has as a goal to help impoverished areas gain access to food in a sustainable manner even in urbanized areas. SUD-Net plans to “contribute to livable, productive and inclusive cities which embrace social harmony, economic vitality and environmental sustainability…”
The City of Oakland, California, adopted a Zero Waste Strategic Plan in 2006, detailing a road map for the City to follow toward the implementation of a Zero Waste System by 2020. As stated in a City Resolution, introduced by then Mayor Jerry Brown, Zero Waste principles:
Type II partnerships were developed at the Johannesburg World Summit on Sustainable Development in 2002. Arising in opposition to the state-centred eco-governmentality of previous approaches to sustainable development policy, the partnerships facilitate the inclusion of private and civil actors into the management of sustainable development. The partnerships are employed alongside traditional intergovernmental mechanisms in order to effectively implement the United Nations' Agenda 21 and Millennium Development Goals, particularly at sub-national level. Although widely acknowledged as one of the most innovative and effective developments in global environmental governance in recent years, the partnerships have faced criticism due to fears of a lack of accountability, and the risk that they may exacerbate inequalities of power between Northern and Southern states. Despite these reservations, there is a general consensus among state and non-governmental actors that Type II partnerships are a significantly progressive step in global environmental governance in general, and sustainable development discourse in particular.
Michael Jacobs is currently the director of the Commission on Economic Justice at the Institute for Public Policy Research and a visiting professor in the Department of Political Science and School of Public Policy, University College London. He was previously a special adviser to former UK Prime Minister Gordon Brown, Co-Editor of The Political Quarterly and the head of the Fabian Society. He has three children, each of whom attend, have attended or will attend Oxford or Cambridge.