Top-Down Economic Development: Why It Doesn't Work

Posted on May 11, 2005
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In the latest federal budget, President Bush has proposed elimination of community-development block grants, and it couldn't come soon enough. As part of the failed War on Poverty initiatives, these grants have cost around $100 billion, "with little to show for the effort," points out Steven Malanga in the Spring 2005 issue of City Journal. "Local officials squandered the billions by financing unworkable projects that often went bust, investing in new businesses that couldn't survive in depressed neighborhoods, and funding social programs with little idea of how they might actually strengthen their communities." Because they lacked accountability and were subject to more politicking than policy analysis, they served only to reinforce the poor practices of declining cities.

This tends to be true of any ham-handed, yet "targeted" approach to development. While the intentions of the federal block-grant program were noble, a good policy it does not make. Moreover, final elimination of these grants should leave wary those local developers who use federal funding as a benchmark for the desirability or future success of their favored project, such as, say, light rail.

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