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Posted July 22, 2008Faculty Workshops: In their own words / Kenneth S. Abraham

Mobile Capital, Local Power, and the Commercial Republic

This paper examines local efforts to control, regulate and redistribute mobile capital. The standard economic story is that it is quite difficult (and counter-productive) for sub-national governments to attempt to control capital flows or engage in redistribution. Local governments are said to be particularly disabled because they are relatively small and cannot easily control migration across their borders. Because of inter-jurisdictional competition, local governments have a relatively limited set of policy choices. Mobile capital will flee aggressive efforts to regulate it.  Thus, cities must be “business friendly.”  More importantly, territorially-limited local jurisdictions can only weakly counter large-scale processes like deindustrialization, suburbanization, and globalization. Plant closings, the movement of manufacturing to the south or overseas, the movement of persons out of old, cold cities to new, warm ones, or out of cities into suburbs, while potentially painful, are unavoidable consequences of relatively open economic markets.

Cities nonetheless have long sought to entice mobile capital; they have also attempted to constrain or redistribute mobile capital once it was in place. The latter is my focus here, as cities have recently engaged in a flurry of efforts to redistribute, constrain or limit the entry of capital. These efforts include municipal minimum and living wage ordinances, local health care mandates, local labor laws, and anti-chain and anti-big-box-store zoning ordinances.  Moreover, local non-profits — often in conjunction with organized labor or national anti-poverty groups — have begun to negotiate community benefits agreements that require developers to comply with neighborhood demands or face political opposition. And local groups have prevented entry of large, national retailers altogether. These “site-fights” have attracted a great deal of attention in no small part because Wal-Mart — the largest employer in the world — has been a chief target.  These initiatives and movements are small but notable in part because they tend to cut against the conventional economic wisdom. They are also notable because they represent a nascent decentralized economic order. 

Despite the standard view that redistribution cannot take place at the local level, cities — not principally states or the national government — are the main innovators here. Local economic reform efforts seek to leverage the specific economic advantages of particular geographic places and use those advantages to resist incursions by mobile capital or extract concessions from it. These efforts — often occurring outside the traditional political process — represent attempts to make local claims on transnational corporate actors and assert some democratic control over them. These efforts thus evoke a deep anti-corporate tradition in American law and politics; that tradition sees a direct link between democracy and economy and fears the corrosive effects of certain forms of corporate capital on the democratic process.

The workshop will be July 22 at noon in the Faculty Lounge.