Urban Entrepreneurialism as Process of Actors, Issues, and Outcomes

became more initiatory and entrepreneurial first in the UK and US, in the 1970s and 1980s due to reforms that redistributed tax and reduced the flow of federal or state income to local government. With less income, local governments become more active in attracting tax revenue themselves through a combination of raising taxes and attracting new tax payers, foremost businesses and entrepreneurs, to their area. Cities are competing with each other for the attractiveness as locations for tax payers. Thus, their ability to raise taxes is limited as it may decrease the competitiveness of the city through falling back in benchmark rankings that compare tax rates and costs of other municipal services

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such as energy or water. Stimulating the city’s income through increasing the tax base is chosen over increasing the tax rate, as much as feasible. As a result, even without government interventions in the form of large-scale legislative changes, the decrease of state grants to local governments and inter-urban competition are sufficient to become external coercive forces over individual cities that bring them closer into line with the discipline and logic of capitalist development (Harvey, 1989; Wood, 1998). As Harvey (1989; 4-5) says further, ‘this consensus seems to hold across national boundaries and even across political parties and ideologies’.

Urban entrepreneurialism can also be regarded as a process of actors, such as investors and businesses that are seen as ‘transnational migrants’ and become forces in urban politics and the municipal arena (Sassen, 1998). These often nationally or even globally migrating actors are attracted by the city and participate in round-table discussions and interactions with municipal key persons that are responsive to their ideas in the hope of increasing the competitiveness of the city (Harvey, 2006). Through these processes, transnational migrants contribute to the glocalization process of the city. Harvey (1989:11) points out that ‘the task of urban governance is, in short, to lure highly mobile and flexible production, financial, and consumption flows into its space.’ This argument is in line with Castells (1989; 1996) who says that the modern network society is not constructed of spaces anymore, but rather of flows between spaces, such as information flows, capital flows, flows of symbols, or flows of sound. These flows are purposeful, repetitive, and programmable exchange relationships between spatially disjointed actors.

The competitiveness of a city in the global age depends on its ability to attract the flows of capital, meaning, and symbols that are important to it and it increasingly engages in attracting these flows based on its own initiative.

Attracting new business and investments brings up the question of the role of these transnational and national migrants, and how they become relevant for the local level and decision-making. In this context, the role of actors as elites and their power to change the system and promote commercialization through privatization has been discussed by Harvey (2005). He assigns significant power to actors such as companies, organizations, and private individuals. Harvey (2005; 2006) argues that the main motivation for the financialization through opening of world markets and public sector reform was the top one percent income earner’s need for new income growth. This need for income growth, according to Harvey, could only be achieved through opening new markets and privatizing large portions of the public sector. Thus, Harvey explains the ‘neoliberal turn’

with the elites’ desire to restore its class power. He also asserts a key role to in the collapse of economies to hedge funds, which again, are often managed by individuals (Harvey, 2005).

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Regarding the local level, Harvey could not offer more specific arguments and proof how relevant these global ‘capitalist’ migrants are for the local level. But the lack of evidence in this matter is especially a shortcoming for Harvey’s arguments regarding the entrepreneurialization of local government and its exposure to private sector ‘capitalists’, since most of his arguments about the influence of private actors are derived from a macro level analysis and empirical evidence from the local level is insufficient. This is understandable, considering that in scientific research it is difficult to get access to the elite circles that would be able to clarify the circumstances.

Contrary to Harvey, Stiglitz (2002) has more trust in the functioning of governance frameworks and rejects the idea of small elites of private sector actors are powerful enough to cause change that would primarily serve their own interests. He argues that a broad consent in the financial community as to what constitutes appropriate rates of return and economic activity are the drivers for capitalism, neoliberalism, and privatization. According to Stiglitz (ibid.) the United Nations affiliated agencies such as the International Monetary Fund (IMF) merely reflect the interests and ideology of the Western financial community. Harvey and Stiglitz regard the spread of neoliberalism and capitalism as a manifestation of the increasing power of capital over labor and assign a key role to institutional actors whose goal is to support the world’s hegemonic power, the US. Contradictory to that argument, those who work to promote the set of neoliberal policies (e.g. reliance on market forces, privatization, opening markets, diminishing boundaries for trade and capital) argue that these neoliberal policies simply work better than other policies (Fourcade-Gourinchas and Babb, 2002).

Useem (1984) conducted a study on the power of private sector elites that provides a perspective that stands somewhere between Harvey’s and Stiglitz’ approaches. Based on extensive empirical research, Useem argues that business elites are drivers of free-market policies and liberalization but that they do not merely act based on their individual self-interest. Instead, they represent class-wide business interests. These class-wide interests are ‘involving considerations that lead to company decisions beneficial to all large companies even if there is no discernible, direct gain for the individual firm’ and for most part they have evolved without conscious design (Useem, 1984:5). This means that the influence of elites exists but it develops in a more unplanned manner and outcomes are difficult to be directly associated with certain actors but they are rather a result of class-wide action based on values and beliefs that develop over time.

To summarize these arguments of Harvey, Stiglitz, and Useem, the role of actors in the commercialization of the public realm has mostly been investigated from a macro-economic perspective and lack empirical data collected at the local level. Therefore, it is hard to say whether private sector ‘capitalists’ are acting consciously, self-interested, and are successful with it (as Harvey argues); whether it is the broad consent of the financial community that drives the commercialization (as Stiglitz explains); or whether private sector elites are in fact powerful enough to affect the system but they do it because of

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class-wide interests that evolve over time without conscious design and rather unplanned action (as Useem argues). In any of these cases, the role of private sector actors in the commercialization of the public realm has been the main focus, while the role of government as actor has been somewhat neglected. Regarding the levels of analysis, there is more information relating to the global and national governance frameworks and how private sector actors interact with them, while the local level has not received sufficient attention.

To conclude my discussion about urban entrepreneurialism, I would like to discuss some gaps in that theory based on my own arguments and on those of others. In his review and assessment of urban entrepreneurialism, Wood (1998), for example, pointed to a number of theoretical and empirical gaps in Harvey’s theory of urban entrepreneurialism, and Hall and Hubbard (1996) also called for more theoretical and empirical work on the subject. These scholars’ arguments include references to the lack of research on the implications of urban entrepreneurialism for the broader process of economic and political transformation, and to the lack of evidence as to how changes of urban governance actually facilitate that processes. It has also been argued (see in Wood, 1991) that Harvey underplays the active role of local government in driving urban entrepreneurialism while overstating the capacity of private interests to engender change (Wood, 1991:122). It needs to be noted that, for example, Castells (1989; 1996) describes the role of the local governance level in its own commercialization as more pro-active than Harvey, who regards the public sector as a more or less willing accomplice of the pro-active capitalist elite. Furthermore, Castells and Harvey agree that with less income, local governments become more active in attracting tax revenue themselves through a combination of raising taxes and attracting businesses and entrepreneurs as new tax payers to their area.

In addition to the criticism by other scholars, I would like to point out that Harvey’s arguments on the influence of private sector actors as drivers of urban entrepreneurialism and privatization lacks support from empirically grounded data. In addition, although the transformation process of local government towards a more entrepreneurial attitude is fairly well-documented, its implications for local public services and water services in particular are unclear. The commercialization of local water services has mostly been studied from the perspective of privatization and the role of private companies and because of that, we know fairly little about the commercialization of local public water services in the absence of privatization and in the presence of urban entrepreneurialization. These are the gaps in theory to which my study aims to contribute to by developing a theory of local public water services commercialization. The nature of these questions also demands an appropriate methodological approach that is able to identify the relevant actors over time, their roles, logics, interactions, and the outcomes of the commercialization process. In the following chapter I will explain my methodological approach in detail.

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