Gail Garfield Schwartz, president of the Washington economic consulting firm Garfield Schwartz Associates, first learned about urban enterprise zones while having a beer with a British friend in Glasgow.
"My friend," she recounted, "said that the problem with the British approach to economic development was that nobody in London seemed to realize that the problem wasn't that no one was investing in Glasgow. The problem was that no one was investing at all."
Schwartz was one of about 150 economists, urban planners and city officials meeting yesterday to dissect the enterprise zone, the device billed as the centerpiece of the Reagan administration's urban renewal policy. The gathering, organized by Washington's chapter of the American Planning Association, was the largest the area has seen on this highly controversial policy. The prevailing attitude was perhaps best summed up by Schwartz: "It's certainly worth a try, even though it may not work."
The idea behind the urban enterprise zone is to help the nation's blighted central cities follow the development trail blazed by the industrializing countries of Asia.With their cheap labor, low taxes and minimal regulation, nations such as Taiwan have been able to achieve a high rate of income growth.
Advocates of the enterprise zone hope to pull the cities out of their slump by offering similar incentives for private businesses. Proposals call for business setting up shop within a zone to benefit from a lower minimum wage, lower income or property taxes, and relaxation of regulations governing building and other activities.
The first enterprise zone measure was introduced at the federal level more than one year ago by Reps. Jack Kemp (R-N.Y.), and Robert Garcia (D-N.Y.). Responding to a storm of criticism, the two modified and reintroduced the bill early this month. "This is clearly not a purist market approach," said Kemp's aide Mary McConnell at yesterday's gathering. "It began with the assumption that the market alone will not solve the city's problems."
McConnell said the bill's capital gains tax exemption will prove especially effective in drawing firms to the zones. "We're interested in attracting growing companies, and it's the growing company that is interested in the big capital gain," she said.
But even the advocates at yesterday's conference qualified their support. "Politically, there could be problems with the appearance of favoritism to some areas of the city," said District City Council Chairman Arrington Dixon, who this March introduced a measure to make it easier to set up enterprise zones. Dixon sees his blll not as a way to "replace other urban development programs, but to experiment."
One participant warned that the enterprise zone would be deserted by its most important supporter -- President Reagan. "The president has endorsed the phrase, not the program," said George Sternlieb, director of Rutgers University's Center for Urban Policy Research. "What you have in the enterprise zone is a somewhat limited Christmas tree. This is in direct contravention of the administration's view, which is to fix things nationwide so that you won't need these Christmas trees."
Another potential problem is that devastated urban communities may not have the resources necessary for a zone's success. Businesses in a zone will need infrastructure, Schwartz said, "trained labor has got to be there, and they're all going to go belly up if they don't have management skills." Technical and financial assistance as well as manpower training may be a prerequisite for the most impoverished areas, she said.
"I don't think that the enterprise zone could have a fair chance of working," Schwartz said. "But any program will need a good deal of handholding."