The Role of Urban Regimes in the Political Economy

by: Yudo Anggoro, University of North Carolina at Charlotte

The term political economy has been playing central role in understanding the dynamics of city as metropolitan area. This term may essentially illustrate how city grows; attracts people and industries to come; or even explains how city declines. In order to define the importance of political economy on the development of city, this essay will start by explaining the history of early cities in the United States. Later, this essay explains the role of growth machine and the city limits that are important to a discussion of political economy in the city.

History of Early Cities in the United States

Understanding history of early cities is essential to comprehend the context of all phenomenons that occurred in the cities. History also reflects to all the root causes of what happens today. The history of cities in the US began in accordance with the early industrialization era.

Around 1840-1860, the industrial cities began in several cities. These industrial cities were mostly in the northern region of the US, such as Chicago, Pittsburgh, St. Louis, Philadelphia, and Cleveland. Krugman (1991) calls these industrial cities as the manufacturing belt. After the civil war, these industrial cities reached their top speed to grow rapidly.

This rapid growth of industrialization also brought impact to the labor market. These industries required massive labor to work in the factories. The data in 1957 showed that these industrial cities contained 64 percent of US employment, only slightly reduced from its 74 percent share at the beginning of the century (Krugman, 1991). For the purpose of getting many labors, these industries used a lot of immigrants as the source of cheap labor. Industries preferred using these immigrant workers because they were overly supplied. For example, during 1820-1920, 33.5 million people migrated to the United States. In this labor-industrial relation, over supply of labor was favorable because it could maintain the cost of labor as low as possible.

Due to the civil war and for the purpose of looking for new markets, industrial cities expanded to Southwest region of the US, or from Frostbelt cities to Sunbelt cities. This movement also brought innovation to transportation, most importantly for railroad system and water transportation. In determining new places to expand, location is the most determining factor. Location is important because it determines the access to utility and access to market (Krugman, 1991). Business is going to locate where the best to do business persists.

The era of early industrial cities also changed the social structure of early cities in the US. Early cities in the US were few in numbers of population. Business owners and merchants dominate these early cities. This condition led to further class segregation and income disparities in the cities. Due to the domination of business owners, they can also influence the government. In these early cities, local government equals to rich people.

These rich people want government to serve public needs, or in a more specific way, their needs. As a result, the first public service provided during this time was sanitation in rich neighborhood. In 1840, the first police department and fire brigade were formed in New York City to bring safety to the people in the city. Due to this domination of business owners and rich people in the early cities, anti-urban feelings grew. This was the beginning of city regimes era.

City Regimes

Stone (1989) argues that what makes governance in a city effective is not the formal structure of government, but rather the informal partnership between city hall and the downtown business elite. This informal arrangement is often referred as regime. Regime may work effectively in the city governance because the local government only has limited authority due to the restrictions from the law or tradition. This informal institutional arrangement is common because formal arrangement does not have enough energy and resources to accomplish all the goals of organization.

In the later development, regime becomes an informal group that has access to institutional resources that enable it to have a sustained role in making governing decisions. In describing the role of regime, Stone (1989) states that a regime is empowering. In the case of political machine, it is in many ways the example of governance in which informal arrangements are vital complements to the formal organization of government.

In urban area, this regime becomes urban regime. It is the set of arrangements by which a community is actually governed. It is also the informal arrangements by which public bodies and private interests function together in order to be able to make and carry out governing decisions. The member of this urban regime usually consists of the formal machinery of government and the private ownership of business enterprise. For example, urban regime may consist of business elites, influential politicians, bankers, sports team owners, real estate developers, agents, media, and worker unions. In the case of city of Charlotte, urban regime may represent Bank of America, Duke Energy, Levine family, and Wells Fargo.

Why do these actors cooperate together? The urban regime tends to agglomerate together because city is the capital generator. City is also a lucrative profit maker. This is the reason why business elites are interested in joining this coalition. Business elites need to encourage business investment in the city in order to have an economically thriving community. City is also a growth machine. When there is economic growth the money will come in the form of investments and capital. This makes city as an attractive form of investment for business elites. Another reason is that business elites need to control over resources that have strategic impact on their business.

The political economy analysis on the urban regime phenomenon works when politicians need wider network in order to spread their influence. At the other side, business elites need political back up to favor their business. This supply and demand side matches each other when these two actors collaborate to gain economic advantage over available resources. This condition makes economic development in cities cannot be separated from politics. City is limited to politics.

The argument of city politics is limited politics is coming from Peterson (1981). He observes that city has political limits. What are the limits facing cities? The limits are on the interactions within the urban regime and business elites, owners of capital. Cities have important role in the creation of capital. Cities are the source of investment and economic growth; cities are attractive to the capital to come.

However, capital is too fluid; capital does not recognize city limits. Therefore, the political machines and urban regime need to ensure the city can be attractive enough for capital to come. Another constraint of cities is that cities are limited to economic development and redistribution of capital. If cities can not attract people, people will move out from the cities. When people move out from the cities, cities lose their revenue from the tax that people pay. This is why every time people move out from cities; it will be a major concern from the city governments. They will try to recapture those people. This situation leads to the phenomenon of suburbanization.

Baumol (1967) illustrate this condition where cities lose their people, and this situation brings damages to the cities. Baumol (1967) illustrates that as the city population increases, the costs also increase with the square of the population size.  As a result, as the cities grow people leave the higher costs of the urban areas for living in the suburbs. But the problem gets worse.  The people leaving are the ones who ‘care and can afford to care’. They are the ones paying the taxes and imposing the least costs on the society.  As they leave, they further drain the urban economy and cause blight and urban decay.

In order to encounter this worse situation, the city raises taxes in an effort to try to recapture the lost tax revenue (of those who fled) but this only makes the situation worse because more and more people will try to flee the higher taxes and higher costs of the city and living in the suburbs that have lower taxes and lower costs. This is what Baumol (1967) calls the ‘cumulative processes of flight.  It increases the financial pressures on the urban areas and cities end up with cumulative decay. In the case of political economy, the movement of production and consumption factors will follow the movement of people. This is the responsibility of urban regime to keep the city attractive for both capital and people to live.

The decay of urban area because of the failing of urban regime to maintain people and capital occurs everywhere in the US. Fogelson (2001) illustrates this situation that happens in St. Louis, Missouri. In 1950, Greater St. Louis stereotyped American cities with ailing central business districts.  The office buildings were in decay; some department stores were moving to business districts in the periphery; downtown property values were on the rise, but assessed values were lower than in 1930; one in five residents visited the city on weekdays, but traffic was congested and parking was insufficient. The center city was also surrounded by slums. Nevertheless, efforts were being made to revitalize St. Louis.

Other cities in the United States were facing the same challenges. Millions of Americans were moving to the suburbs and smaller numbers visited the downtown areas. Property values were rising more slowly in the central business districts than they were in the outer business district. Cities like San Francisco and Detroit experienced further decline in their stagnated mass transit systems. In downtown Detroit, riding habits dropped by nearly 50% in six years. In addition, the 60% increase in the numbers of suburban motels between 1948 and 1954 meant that more human traffic was diverted away from the center cities. At about the same time, cities were losing their shares of retail trade to the decentralization trend. Worst of all, were the impacts of the new regional shopping centers and the decentralization of office space.

Following this movement of people, business and entertainment were also moving to the suburbs. They move to where the demand was. Between the late 1940s and early 1950s, a lot of regional shopping centers were built in the suburbs. They accommodated hundreds of shops, several thousand shoppers and their several thousand cars. These shopping centers offered “one stop shopping” where people could satisfy their shopping and entertainment needs without having to go downtown. In this case, business elites act as entrepreneurs. Entrepreneurs concern on the exchange value rather than use value (Logan and Molotch, 1987). Entrepreneurs maximize exchange value; they initiate the infrastructure to boost economic growth. They bought inexpensive land in the suburb, and developed the land into what we call now as “suburban dream”.

Some corporations were also relocating their headquarters to the suburbs area. They argued that they faced exorbitant office space prices in the city centers; they were tired with the noise and congestion downtown; the improved conditions would help them attract and retain employees; the suburban offices were easier to access for (executive) staff who already lived in the suburbs; and central business districts were obvious targets in the event of nuclear war.  Some business owners claimed that these moves did not represent competition with the city, but rather additional business in the metropolitan districts.

In order to return the function of central business districts, in the early and mid 1950s The Urban Land Institute sent panels to a dozen cities to find solutions to the problems. Periodicals focus groups of merchants, realtors, planners, and engineers to share thoughts and ideas for action; professional groups devoted parts of their annual meetings to engaging the problem; and businessmen and property owners also established voluntary associations to promote the interests of the central business districts. These groups believed that downtown is the “heart” and “hub” of city and metropolitan life. They argued that downtown is a major source of revenue, and is also a city’s most striking feature by which it is judged and evaluated. In this case, these groups represent the urban regimes that have concern to bring the glory of Central Business Districts as the center of economic growth in urban areas.

The role of Urban Regimes in the Political Economy

City is the driver of economic growth. Therefore, the main role of urban regime in the development of a city is to maintain the economic development in the city. They need to attract more businesses to invest in the city so that this investment can create new jobs in the city. New jobs creations invite people to work and live in the city. The people who work in the city need to pay tax for their income and spending. In turn, this will bring revenue to the city. These are all about growth. When there is growth, the money will come in the form of investments and capital.

The urban regimes may choose several strategies to attract capital to come to their cities. For example, offering tax abatement for investors to come and invest in their cities. Another effort is by giving low tax rate to the industries to open their factories in the cities. Cities also can offer to give land or property to those who can generate property value in the area, or by applying land zoning that favors for certain industries.

Another strategy for the urban regime to bring economic development to the city is by building infrastructures. Infrastructures such as highways, entertainment parks, ports, and airports create massive new jobs that attract people to come. Airport, as an example, brings huge revenue to the city from their activities in serving passengers and cargos. For example, Charlotte Douglas International Airport also becomes the hub for US Airways. This brings many benefits to the city since the airport will be always busy. Another example is the Hartsfield–Jackson Atlanta International Airport in Atlanta, Georgia that becomes the home base for Delta Airlines.

Business elites also have power to lobby and influence legislation to favor for several business proposals. Kantor and Savitsch (1993) illustrate this role of business elite. In the summer of 1989, a major airline, United Airlines, made public its plan to construct a maintenance hub that would attract close to a billion dollars in investment and generate more than 7,000 jobs for any region that gets the facility. The ripples that emerged were no less than a competition which involved serious lobbying by officials in more than 90 localities in a bid to win United Airlines over. So much that local governments were willing to offer incentives to the tune of $120 million. This is an opportunity for business elites to lobby the government for deciding to bid for this proposal.

The urban regime also has the power to mobilize political support. A recent example for this is on the 2012 Democratic National Convention that will be held in Charlotte. In order to win Charlotte as the host of the 2012 Democratic National Convention, Charlotte urban regime that was led by CEO Duke Energy, James Rogers, put their extra effort to lobby the Democratic Party. This political event is another opportunity to bring millions of dollar come to Charlotte, and create jobs and economic growth during the event.

Conclusion

All the explanations and illustrations above are outlining the importance of political economy to bring economic development in urban regions. The urban regimes represent the political effort from some influential actors to gain economic advantage from the growth of cities.

To conclude this essay, we need to also remember the view of city in ecological and Marx perspective (Gottdiener and Feagin, 1988). The urban regimes represent the view of city as ecological entity. It means that city and business move in, exchange, and get equilibrium condition, But the problem is, there never be an equilibrium condition in reality, unless the city has already declined. The view of city as ecological view is what people usually call as Chicago School view.

In Marx’s perspective, city gain the advantage from the low income individuals who own the production sectors. In this condition, the exchange value will never happen because citizen own the production means. In Marx perspective, urban regimes will never exist in reality.

References

Baumol, W.(1967). Macroeconomics of Unbalanced Growth: The Anatomy of Urban Crisis. The American Economic Review, 57(3): 415-426.

Fogelson, R.M. (2001). Downtown: Its Rise and Fall, 1880-1950. New Haven: Yale University Press pp. 381-394.

Gottdiener, M. and J. Feagin.(1988).The Paradigm Shift in Urban Sociology. Urban Affairs Quarterly, 24(2): 163-187.

Kantor. P., and Savitch, H.V. (1993). Can Politicians Bargain with Business? A Theoretical and Comparative Perspective on Urban Development. Urban Affairs Review, 29 (2): 230-255.

Krugman, P. (1991). Geography and Trade. MIT Press, Cambridge, Massachusetts.

Peterson, P. (1981). City Limits. The University of Chicago Press.

Stone, C.N. (1989). Regime Politics: Governing Atlanta 1946-1988. The University Press of Kansas, Lawrence, Kansas.