ECONOMIC DEVELOPMENT QUARTERLY
LOCAL GOVERNMENT AND
ECONOMIC DEVELOPMENT
INTERPRETATIONS:
ENABLING AND CONSTRAINING FUNCTIONS
BY LEE PUGALIS, PROFESSOR OF URBAN STUDIES, UNIVERSITY OF TECHNOLOGY SYDNEY
INTRODUCTION
The role of government in economic development
continues to divide opinion, influenced by views
about market failure, equity and efficiency.
Nonetheless, it is difficult to find a unit of
government that does not have objectives and
aspirations to support and grow the economy.
Recent years have been marked by a conveyor belt
of formal debates, initiatives and reforms, intended
to help clarify and improve the effectiveness of
different branches of government in promoting
economic development. In Victoria, for example,
there was the 2012 inquiry into local economic
development, which was proceeded by the 2015
review into regional economic development
and services. Most recently, the House of
Representatives Select Committee on Regional
Development and Decentralisation is, amongst
other things, inquiring into best practice approaches
to regional development. Notwithstanding the
many positives outcomes associated with these
endeavours, there is little agreement about the
scope of economic development. In turn, debate on
the role of government in economic development
is troublesome, politically divisive and ridden
with conflict. This condition serves as a barrier to
meeting economic growth objectives and broader
social, economic and environmental outcomes.
This article draws upon recent research conducted
by the Centre for Local Government, which
examines the role of local government in local and
regional economic development (Pugalis & Tan,
2017). The objective of the article is threefold: i) to
survey different framings of economic development,
ii) to demonstrate how these interpretations
influence local government practice, and iii) to draw
out the implications for policy. The research findings
may prompt the local government sector together
with other actors and institutions to reflect upon
their role in economic development.
THE NATURE OF LOCAL
GOVERNMENT
Absent from the Commonwealth Constitution, local
governments are legislated for in state/territory
government constitutions. Hence, no single system
of local government exists in Australia, but a variety
of different systems. From a legal standpoint, local
government has no status or powers of its own: its
existence and powers are derived from ‘above’.
As a result, councils are typically understood
as the third tier of government in Australia, but
conversely they could be understood as the first tier
of government due to their close connections and
everyday interactions with citizens and businesses.
Within the Australian system of governance, local
government is politically, fiscally and legislatively
heterogeneous. All states and territories (except
for the unitary system of the Australian Capital
Territory) have a local government system. As
of May 2016, there were 561 local government
areas in Australia (see Table 1). The role of local
government in Australia and its raison d’être is
perennially being questioned and reformulated –
evidenced by ongoing structural reforms, including
forced amalgamations.
Local governments are a diverse sector; ranging
from very large metropolitan to smaller rural
organisations in terms of population coverage.
Paradoxically, some of the most geographically
expansive local government areas are some of the
most sparsely populated. For example, the Shire
of East Pilbara in Western Australia, which covers
380,000 sq km, is larger in area than Germany,
but has only 10,591 residents. Councils differ in
the wide range of services they provide, although
general functions, including infrastructure, building,
planning and community services, are often directly
relevant to economic development pursuits. Thus,
it can be claimed that ‘[l]ocal government underpins
economic development efforts in this country’ (Beer
& Maude, 2002: x).
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