A different way to think about slow growth communities
We often define economic development success in terms of growth rate. But growing slowly might be a better strategy.
Happy weekend readers! A recent statistic caught my eye: The world population recently topped 8 billion. When I was a kid, it was roughly 5 billion. While the West wrings its hands about slower economic growth and declining fertility, the rest of the world has no problem picking up the slack.
But should we really be fretting so much about our slower growth? Put another way, maybe we’re putting too much emphasis on growth as the arbiter of economic success. This week, I’ll look at reasons why slow growth can be a good thing for cities and towns.
Faster growth usually isn’t equitable
New research by the Lincoln Institute of Land Policy takes a swing at the traditional models for economic development and warns they can often create or exacerbate inequities. In her working paper, Moving Beyond Conventional Economic Development Practice, policy analyst Haegi Kwon points to flaws in common assumptions about economic development.
Take the tendency to search for economic development answers by looking outside a community. City leaders usually love the idea of luring high-tech firms to relocate because the “assumption is that high-tech workers, once clustered together, will create an environment conducive to…innovation and more local economic growth,” Kwon writes. “However, while the high-tech sector may benefit local economies as a whole, the jobs it attracts and generates tend to require higher levels of education, which does little to employ lower-income and less educated residents.”
Kwon’s research adds that notions such as “a rising tide lifts all boats” and that all cities (no matter the size) should employ conventional economic development practices also “may exacerbate inequalities within and between cities and regions.”
Related reading
“Just because there’s overall economic growth at the city level, it doesn’t mean those benefits trickle down,” Kwon told the Lincoln Institute’s Land Lines.
That’s because faster growth tends not to be shared, according to Morningstar economist Bob Johnson in a 2013 interview. “More of the money and more of the growth has gone to the very top of the income curve,” he said, adding that the wealthy tend to invest or hold on to their money. “As more growth and income accrue to the people at the top, it’s worse than if it accrues to the people at the bottom that spend every dollar that they get.”
The same can be true from an economic development perspective: When we focus just on just GROWING already, that tends to lead to big, dramatic efforts. It’s no wonder then, that the size of tax incentive packages has been climbing since the 2000s, according to the tax subsidy tracker and nonprofit, Good Jobs First.
Related research
How Has Income Inequality Changed over the Years? - St. Louis Fed
Literature review on income inequality and economic growth - PubMed Central
More isn’t better. Better is better.
Faster growth has other downsides. For one, more people and economic activity have an environmental cost. It’s also not free—to accommodate growth, governments need to pay for more schools, hospitals and transportation maintenance (to say nothing of investment).
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