Incentives and Austerity: How Did the Great Recession Affect Municipal Economic Development Policy?

Abstract

In addition to cuts in social programs, the Great Recession also affected government expenditures once considered less vulnerable to austerity, such as economic development. Using a comparative case study approach, we examine economic development policies and practices in two cities, sampled for similar economic and fiscal conditions: Fresno, California and Milwaukee, Wisconsin. We find that declining state support and local autonomy weakened the municipal economic development function while leaving entrepreneurial logics largely intact. In the face of significant economic and fiscal stress after the Great Recession, both Fresno and Milwaukee remained committed to conventional approaches to stimulating private development, even as their capacity to do so was severely constrained by state pre-emption and cuts in intergovernmental aid. The elimination of city-controlled economic development programs, rescaling of incentives, and state-imposed regulatory restrictions provide a counter-narrative to those claiming that a “new localism” enhanced the role of cities as economic actors after the crisis.