Community, Culture, and Economic Development, Second Edition: Continuity and Change in Two Small Southern Towns

2. Theoretical Frameworks

9 2 Theoretical Frameworks A wealth of research chronicles the struggle of American cities, small towns, and rural communities to maintain their fiscal viability in the wake of the global restructuring of markets that has been occurring since World War II. Scholars note that localities compete with other localities to attract industry, jobs, and capital investment,1 and this observation raises important questions for the social sciences. One of the most influential theories in the economic development literature posits that behavior is market driven and interprets the policy choices of local governments as rational responses to economic imperatives. For example, Paul Peterson has viewed cities operating like corporations in competition with other cities to attract mobile capital. In his book City Limits, he argues that this policy not only maximizes profits for local businesses, but, more important, it is essential to the unitary good of the whole community.2 But critics of the market model have rejected its economic determinism and challenged its Utopian assumption that the material well-being of business elites is generally coterminous with some identifiable good of the whole community.3 Market forces, far from resulting in an overarching public good, often inflict social and material harms on some groups while conferring inordinate benefits on others. Therefore, economic rationality , by itself, cannot adequately explain development policy. Clearly, the exercise of political power must be involved. Polanyi was among the first to challenge the neoclassical economic theory on which the market model is based. By demonstrating historically that unregulated market forces are destructive to society itself and thus inevitably arouse resistance and stir up countermovements, he showed that markets, far from ever being “free,” are of necessity created and sustained by public authority.4 There are three principles here, and each deserves emphasis. First, Polanyi exposes the functionalist fallacy in 10 / Community, Culture, and Economic Development classical and neoclassical economic theory by showing that market forces harm society. Second, he shows that, because of the widespread social harms they inflict, unregulated market forces inevitably generate conflict. And third, he insists upon the fundamental role of the state, not only in creating markets in the first place but also in maintaining them through the regulation and containment of their deliterious social effects. Polanyi’s brilliant exposition of the role of political power and public authority in creating and maintaining the so-called free market economy demonstrates the need for a structural approach to the analysis of economic development policy. In other words, he shows why politics matters. More recent scholars have deepened the critique of the market model by attacking its utilitarian underpinnings. Martin Staniland, discussing the variety of responses to market forces in peasant societies, addresses the problem as follows: Calculations of individual interest are not made in isolation, and rationality itself is contingent on a selection of values and preferences . . . why do peasants have some preferences rather than others, and how is their range of values shaped in the first place? Such questions require an explanatory framework that is ‘social’ or ‘cultural’ in scope. To say that individuals ‘pursue their interests’ or ‘maximize their utility’ sounds toughmindedly realistic, but only until we start asking why ‘reality’ is seen differently by people who are presumably equally rational.5 Addressing the same problem, Mark Granovetter also advanced the view that the preferences of individuals are not autonomous or “given” but are instead formed within particular social contexts. This has come to be known as the “social embededness argument.”6 An earlier, related theme that concerns the importance of local political arrangements was developed in the community power literature, beginning in the 1950s with Floyd Hunter’s Community Power Structure.7 Hunter’s work inspired a host of other important community studies, such as Robert Dahl’s classic Who Governs?8 But this once fruitful avenue of inquiry became diverted into a sterile debate between proponents of the elitist and the pluralist schools and eventually faded out.9 Urban Regime Theory Urban regime theory is a development in urban scholarship that began in the 1980s and has strong intellectual roots in the community power Theoretical Frameworks / 11 tradition.10 By adopting a political economy approach, in moves the study of urban politics beyond the pluralist-elitist debate.11 This new paradigm offers a broad explanatory framework that assigns central importance to the informal processes of collaboration between those who control investment capital (and other privately held resources...