“The conventional approach to economic development … is based on a technocratic illusion: the belief that poverty is a purely technical problem amendable to … technical solutions.” ~ William Easterly
Under significant political pressure from the left and the right, the Texas Legislature last year let expire the Chapter 313 “economic development” program that allows Texas school districts to offer property tax abatements to politically connected businesses. Now, big business interests are joining with many of those politicians to bring the program back to life, despite evidence of the great harm it has caused.
According to Dr. William Easterly, programs like Chapter 313 are economically and ethically flawed. In his book, The Tyranny of Experts, he explains there are two different approaches to economic development. One is authoritarian development, a technocracy in which “well-intentioned autocrats advised by technical experts” focus on technical solutions to economic development while ignoring the “rights of real people” (p. 5). The second approach he calls “free development,” which gives free individuals with political and economic rights “the right to choose amongst a myriad of spontaneous problem-solvers, rewarding those that solve our problems” (p. 6). Here, I’ll refer to them as technocratic development and free-market development.
Technocratic Development
Easterly describes a technocratic development project led by the World Bank in Uganda:
The soldiers had arrived on the morning of Sunday, February 28, 2010, while the farmers were in church. Hearing gunshots, the farmers had rushed to their houses, which by then were already immersed in flames. While some soldiers kept the farmers at gunpoint from rescuing their homes, others poured gasoline over the recent grain harvest in the barns and burned that as well. One eight ear-old child was trapped and died in the fire. The dairy cows were dispatched more quickly and humanely with a burst of machine-gun fire. Then the soldiers marched the more than 20,000 farmers away at rifle point. Never come back, they were told; the land is no longer yours.
The farmers, many of whose homesteads had been in their families for generations, were unhappy to learn that a British company was taking their land with the help of the soldiers. The company was going to grow forests and then sell the timber. The farmers were even more distressed to learn that the World Bank, an official international organization combating global poverty, had financed and promoted the project by the British company (p. 3).
We might think that something like this could never happen in America, but the same type of projects forcing people out of their homes take place here. If you don’t believe it, take a look at Poletown.
Poletown was a neighborhood in Detroit which took the name of the Polish immigrants that had at one time lived there. However, by the 1970s, it had become a predominantly black neighborhood.
About that time technocratic development planners in Detroit came up with the idea to stem Detroit’s ongoing economic decline by turning Poletown into a General Motors plant. They put the plan in motion, using eminent domain to force people out of their homes and businesses. Once the Michigan Supreme Court sided with the city in 1981, 4,200 residents in Poletown were displaced and 1,400 homes were destroyed. The Court’s reversal of its Poletown decision 23 years later came too late to help the residents.
Another example took place when in 2005 the Dallas, TX city council decided that Ross Avenue was much better suited for upscale apartments and condominiums than the numerous auto repair shops and used car lots that occupied it at that time. So the city re-zoned Ross Avenue, turning many of the existing businesses into “nonconforming uses.”
Overnight, businesses like Woodard Paint and Body Shop could no longer legally operate on Ross Avenue, despite the fact that in Woodard’s case it had occupied its location since 1976. The Texas courts wouldn’t help owner Allen Woodard, but he put up a political fight and at a cost of close to $100,000 was able to operate on Ross Avenue longer than most of his neighbors. However, Woodard finally closed his doors, eight years after the Dallas City Council started its campaign against his business.
In both of these cases, we have local politicians working with city planners using the technocratic economic development process to decide how to best increase prosperity while the rights of affected property owners, residents, and workers are trampled.
This is the moral problem inherent in the technocratic economic development approach. In all cases the technocratic approach can only function by taking property from citizens, whether it is in the form of real property or hard cash. Yet its inherent moral problem hasn’t stopped the technocratic approach from being adopted throughout the world, including in the United States, which was formed in large part to stop these assaults on our inalienable rights of life, liberty, and property.
Free-Market Development
The technocratic development approach stems not only from a willingness to assault property rights but also from a flawed misunderstanding of how economies work. Economies flourish only when property rights are protected and the division of labor allows people to specialize. Because of this, we no longer have to grow our own food, build our own houses, or make our own tools. But for specialization to work, we need a complex system of exchange. Factory workers can’t eat tractors and farmers can’t use corn cobs to plow their fields. The complexity of getting corn cobs to workers and tractors to farmers is far beyond the ability of centralized planners to comprehend.
Yet politicians assume just the opposite when they endorse technocratic economic development. They believe that either they or government planners can best determine what technology has the best chance of success, which jobs and products best supply society’s needs, and where best to expend scarce supplies of capital. They believe that they just can’t sit back and let real people solve the real problems of this world. Instead, they have to take money and property from citizens in order to apply their technocratic solutions to save us from ourselves.
This ivory tower approach to economic development stands in stark contrast to the ongoing economic development activities taking place each day in the real world. Millions of consumers (attempting to satisfy their endless needs) haggling over prices with hundreds of thousands of suppliers (trying to determine the most profitable mix of jobs, products, and capital allocation) is the best way to help the economy grow. Central planners can’t make sense of this all. Entrepreneurs are what is needed to make this system work. Only entrepreneurs are capable of providing the coordination needed to ensure that we do not waste our precious supplies of labor and capital. To place these entrepreneurial decisions into the hands of technocratic economic development planners is nothing less than gambling with the money of taxpayers.
Shawn Ritenour explains the importance of entrepreneurs in economic development:
Waste is possible, because production decisions in the present are based on a forecast of uncertain future market conditions. If the producer forecasts incorrectly, he will use his capital making something people do not want. He will also be unable to sell his output at the price needed to cover his costs.
Entrepreneurs need to use economic calculation if they are to direct factors of production toward their most valued uses. Market prices allow entrepreneurs to make meaningful comparisons of social value between different consumers’ and producers’ goods because prices are all expressed in terms of the same good. These same objective prices are determined by the subjective preferences of buyers and sellers:
If the expected price of a final product is greater than the sum of the prices of the factors of production, the entrepreneur will produce that good
When entrepreneurs reap a profit, they do it precisely by providing those goods that people value the most in the least costly manner
One cannot neatly sever the components responsible for economic expansion from one another and find a single key that explains economic progress
A highly developed division of labor would be impossible without the accumulation and use of capital goods
Likewise, the entrepreneur must invest real capital in the production process and if he errs in his market forecast, he can indeed reap large losses
At the same time, capital per se never guarantees economic progress either, because it must be wisely utilized.
Economic progress is the happy consequence of a highly developed division of labor, taking advantage of an increasing capital stock wisely invested by entrepreneurs. (Ritenour 2014)
This is the real-world process of economic development. It is folly to pretend that government can improve upon this through its immoral, technocratic approach. In fact, just the opposite is true. Every dollar taken from the pockets of taxpayers for technocratic economic development programs decreases the economic efficiency of the entrepreneurial process and consequently reduces economic growth.
Conclusion
As Dr. Easterly notes:
The conventional approach to economic development … is based on a technocratic illusion: the belief that poverty is a purely technical problem amenable to such technical solutions as fertilizers, antibiotics, or nutritional supplements.
What used to be the divine right of kings has in our time become the development right of dictators. The implicit vision in development today is that of well-intentioned autocrats advised by technical experts, what this book will call authoritarian development. The word technocracy (a synonym for authoritarian development) itself is an early twentieth-century coinage that means “rule by experts.”
The technocratic approach ignores what this book will establish as the real cause of poverty—the unchecked power of the state against poor people without rights.
Despite the poverty-inducing flaws with state-run “economic development” programs, they remain the favored approach in most states across the nation. Perhaps Texans can put enough pressure on their elected officials during the upcoming session of the Texas Legislature to bring about the end of at least one of them.
Various “Economic Development” Programs in Texas
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