MOBILE CAPITAL, LOCAL ECONOMIC REGULATION, AND THE DEMOCRATIC CITY

Abstract

INTRODUCTION 483 I. MOBILE CAPITAL AND LOCAL GOVERNMENT LAW 488 A. The Limited City 489 B. Giveaways and Exploitation 491 C. Reformist Responses to the Problems of Giveaways and 498 Exploitation D. The Post-Industrial City and Mobile Capital 502 II. EFFORTS TO REGULATE MOBILE CAPITAL 506 A. Conditions on Mobile Capital 508 B. Labor-Friendly Redistribution 512 C. Exclusion of Mobile Capital 517 III. A LOCALIST REGULATORY ORDER 520 A. Leveraging Sticky Capital 520 B. Leveraging Translocal Networks 526 C. Leveraging Economic Localism 529 IV. CITY-BUSINESS RELATIONS IN THE COMMERCIAL REPUBLIC 533 A. Local Autonomy 534 B. Local Economic Policy 536 CONCLUSION 539 INTRODUCTION This Article examines municipal efforts to control, regulate, and redistribute mobile capital. The conventional economic story is that it is quite difficult (and counterproductive) for subnational governments to attempt to control capital flows or engage in redistribution. (1) Local governments are said to be particularly disabled because they are relatively small and cannot easily control migration across their borders. Because of interjurisdictional competition, local governments have a relatively limited set of policy choices. Mobile capital will flee aggressive efforts to regulate it. Thus, urban politics must invariably be biased in favor of mobile capital--cities must be business friendly--while robust economic regulation must necessarily take place at a higher level of government. More importantly, territorially limited local jurisdictions can only weakly counter large-scale processes like deindustrialization, suburbanization, and globalization. While potentially painful, 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, are unavoidable consequences of relatively open economic markets. (2) Cities nonetheless have long sought to entice mobile capital. They have also attempted to constrain or redistribute capital once in place. The latter is my focus here, as cities have recently engaged in a flurry of efforts to redistribute capital, place conditions on it, or limit its entry. These efforts include municipal minimum and living wage ordinances, local labor laws, and anti--chain and anti--big box store zoning ordinances. Moreover, local nonprofits--often in conjunction with organized labor or national antipoverty groups--have begun to negotiate community benefits agreements that require developers to comply with neighborhood demands or face political opposition. Local groups have also prevented the 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 private employer in the world--has been a chief target. (3) These initiatives and movements are small but notable because they tend to cut against the conventional economic and political wisdom. Indeed, despite the standard view that economic regulation cannot take place at the local level, cities are the main innovators. This fact should not be entirely surprising. Cities have always played a more significant regulatory role than most commentators appreciate, (4) though this role has been muted in the last century as federal and state governments have expanded and the great industrial cities have declined. …