If you are not familiar with the differences between the definitions and goals of traditional economic development strategies and microenterprise development strategies, please see the previous article prior to continuing.
The following two questions represent the main topic of this article:
1. How effective are traditional economic development strategies at achieving their goal of improving economic conditions?
2. How effective are microenterprise development strategies at achieving their goal of ameliorating poverty?
Please note that we are asking “how effective” these two strategies are at “attaining their program goals,” not whether the programs themselves are good or bad, or whether these programs should exist. Answering those questions, although quite important, will be left for future articles. This is why it is important to know the definitions and program goals of each strategy.
Traditional economic development strategies:
In short, traditional economic development strategies are more effective at improving economic conditions for an entire region than for a particular city. Research has shown that cities that offer large incentives to attract companies under the guise of creating jobs actually incur financial losses in the long run. This is because, in part, adjacent cities compete with each other to attract a specific company, which raises the cost of the incentive. Further, there is no way of ensuring that the jobs will go to that city’s residents. Therefore, the economic improvement is realized by the entire region, not just one city, so traditional economic development strategies are not very effective at attaining their goal for a particular city; they might be more effective when practiced on the state level.
Microenterprise development strategies:
Briefly, microenterprise development strategies are not very effective at ameliorating poverty because finding those who live in poverty is not easy. They usually do not have Internet connections and access to other sources of information, and they might not even have a telephone, so how is a city to find them? How are they to learn about the program? Additionally, simply providing credit or business training to someone who lives in poverty may not provide them with everything they need to get out of poverty. In other words, many factors contribute to the cycle of poverty, and breaking that cycle usually requires more than credit and business training.
Traditional economic development strategies should be practiced with caution. In other words, cities should not simply offer large incentives to companies assuming that this is a winning situation. Microenterprise development strategies should concentrate on targeting the poorest of the poor within their communities, and not simply offering credit and business training to those who would probably start their own businesses or get jobs anyway. However, please note that these are very complex issues, and that my comments herein are rather general.
A final note contributing to the ineffective results seen by both of these strategies is the way in which they are evaluated. In other words, there are many methods of evaluating public programs, and the ways that these two strategies are normally evaluated may not necessarily reflect the true effectiveness of these programs. Therefore, although these programs are usually not extremely effective at achieving their program goals, methods of evaluating them are sometimes inaccurate or inappropriate, making them look even less effective.
These two development strategies can be extremely effective if they are implemented (and evaluated) properly!