Eight key factors which support economic prosperity

Having studied urban planning and economics, I’ve been interested to watch how conservative governments over recent years in most western countries have been going in delivering their common theme of economic prosperity based on getting their country, state or region moving again, being “open for business” and similar catch phrases. They generally sought to do so by prioritising economic development, reducing red and green tape, and facilitating specific industries.

In part, this focus was a response to the years of relative economic doldrums that followed what is called the global financial crisis (GFC) in Australia (which in turn followed probably the longest sustained economic boom of modern history). It was also borne of a desire to turn against the environmentally focused policy priorities of previous governments.

Many of these governments have struggled to deliver that agenda; and are also not doing well in opinion polls. In Queensland, we have seen the conservative government go from a record majority election victory to losing government in one term. Our federal government seems to be following a similar path. At least in part, I think that might be because in pursuing this agenda, there seems to be little understanding of some basic economics and planning about how to create prosperous communities. Cities are also central to our economic performance. Getting them working well is vital to our economy.

For an economic development approach to be successful, I reckon a focus on the following eight factors would be a great start:

1. The importance of a properly balanced transport system to a well functioning economy. This means all modes of transport (private vehicles, public transport/transit, walking, cycling) are facilitated, in the best mix to ensure people, goods and services can move efficiently. In doesn’t mean only more roads – indeed, it usually mean a different mix of transport using the existing space available for transport (mainly roads in most places). This is really just mathematics – roads space is not an endless commodity and we need to use it efficiently. This much used diagram shows why other modes help do that:

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2. The economic benefit of a sufficient range of housing in the right places. This means housing is available in locations that allow people the option of living close to economic production areas and at a price that people working in those areas can afford. It does not mean endless suburban expansion, which can be a heavily subsidised drag on long term economic performance.

3. The economic dividend of well designed cities which offer quality urban environments, including a diversity of land use mix and well designed public realm of attractive and lively areas that add interest, enjoyment and diversity to city life.

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4. The health and therefore economic dividends of cities that promote integration of land use with balanced transport outcomes, and integration of nature into the urban environment.

5. That economics is about the wise and efficient use of resources. Those resources include our environment – our air, water, land and natural ecosystems. Using them unsustainably doesn’t make economic sense either.

6. The economic drivers of the future in the western world are largely not those of the past. Manufacturing in these countries is largely no longer competitive in the world economy, and new industries and economic opportunity are about knowledge and technology, and thrive in clusters such as education, health and technology. These clusters thrive in well designed city environments, which is most obvious in the move back downtown by major players like Twitter in San Francisco and Amazon in Seattle.

7. Inequality is a hindrance to economic success, and many of the policies that have been proposed, such as budget proposals in Australia to move our higher education and health systems more towards the US models, will drive inequality. Education is one of the real opportunities for productivity gains and a long term investment in our prosperity. Making it harder to access does not make economic or socIal sense.

8. The market economics ideology underpinning much of this reform is based is dodgy. Any first year economics student could tell you that the assumption of a well functioning free market is based on all participants having equal information and power, and that this doesn’t occur when a small number of entities dominate the market and become an oligopoly. But many Australian markets are dominated by a small number of large interest, including banking sector, our grocery sector, and increasingly, our development sector. It is the proper role of governments to make sure these markets work as they are intended, rather than allow them to be distorted by oligopoly power used to improve the position for only those with the power.

Getting these things right will make a big difference in delivering an agenda of prosperity based on economic development.

Greg Vann
February 2015

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