ABSTRACT
Academic economists have long frowned on government-directed development programmes that seek to recruit or develop particular industries within local communities. The standard argument is that public sector decisionmakers are ill-equipped to cherry-pick industries with strong future potential, and many examples exist of inefficient and wasteful uses of taxpayer funds to recruit businesses from elsewhere. The escalating public expenditures per job created in the automobile industry exemplify the high and growing public cost of such industrial recruitment efforts. A common related argument is that there simply are too few business owners seeking new locations in a given year, compared to the large number of communities offering industry location incentives, to justify or make worthwhile the recruitment effort. Nationally, and indeed internationally, the debate about the proper role of government in economic development culminated in the so-called Washington Consensus of the 1980s. This consensus, which has since fallen apart, held that “getting policies and prices right” at the national level and allowing markets to function freely would place countries on a path of economic growth and prosperity. Even if this prescription was necessary and sufficient as a national policy, it made no allowance for regional or local variations within countries.
