Developing A Regional Economic Development Strategy

There is no denying that the anger of white working class was a real factor in the rise of Donald Trump and Hillary Clinton’s defeat. Real wages have not budged in three decades while globalization and technology have decimated employment in areas all around the country. Many areas have actually seen a declining standard of living. Part of Donald Trump’s appeal was his promise to protect American workers from the competition of globalization and bring the jobs that have been lost back. The white working class responded to that message, though doing so with a healthy degree of skepticism. But Trump’s promises are empty promises. The fact of the matter is that neither party has any real plan that has a chance to restore jobs and a rising standard of living to those communities already decimated. They haven’t been able to do so in over three decades.

Cities like Bakersfield, California, Youngstown, Ohio, and Bridgeport, Connecticut have been failing for decades. And there is really no sign that they will be getting any better in the near future. Smaller towns that long relied on an anchor manufacturer have seen their companies move away, often abroad, or fail, leaving a trail of depression, suicide, and drug addiction. And the poster child for this kind of long-term economic stagnation has been Appalachia. Paul Krugman had a recent post where he discussed the options to revive these economically depressed areas. Unfortunately, he came up with no good solutions and outlined the failure of regional economic development projects to create any significant long-term changes. He points not only to Appalachia but also to East Germany which has seen a massive economic investment but still faces a declining population.

But it is important to remember that Appalachia was, in fact, helped tremendously by a specific regional economic policy during the New Deal. As Erik Loomis notes, the Tennessee Valley Authority dramatically improved the lives of the people in the Tennessee Valley and neighboring regions. And it was not just the introduction of cheap electricity that brought lights and modern appliances to the community and helped attract new industries that created job opportunities. The TVA itself was also a large local employer. In addition, the TVA helped farmers increase crop yields and helped with ecological conservation by replanting forests and creating improved habitats for fish and wildlife. Similar large government investments improved the lives of rural Americans living other large river basins around the country. Loomis also adds that World War II also created a real industrial policy that improved port capacity and shifted important industrial facilities into different areas of the country in the name of efficiency and security. There was a real regional industrial policy. But by the 1960s, all pretense of that kind of thinking fell away and today it is largely left to the businesses themselves to figure out where they will locate. Today, because of globalization, certain areas like the West Coast and to some degree the South have benefitted greatly, largely at the expense of those Rust Belt states.

As Democrats look to find a way to revive these Rust Belt economies, Matthew Yglesias has a great idea that takes advantage of the pre-existing legacy infrastructure. He proposes moving many federal agencies that currently reside in the Washington, DC area to Midwestern cities. He notes that some agencies have already moved out to the more distant DC suburbs. There is no reason that these agencies couldn’t relocated even further away to the Midwest. He also proposes that agencies that are by statute supposed to be independent from our elected government, agencies like the SEC, FEC, FAA and others could also move far from DC without a serious impact. All of these agencies will not only bring just their employees but also lots of ancillary jobs associated with each of these government agencies. And, for Democrats, it has the added benefit of making it a little bit harder to hate “Washington” and the federal government when the positive effects of federal employment are so close and tangible.

My pet project for regional development would be a national project to insure high-speed broadband access for all Americans at a minimal cost. One of the great advantages that post-war America had was a world class infrastructure and much of that was largely due to the development of the interstate highway system under Eisenhower. This allowed goods to move around the country more freely and at higher speed than ever before, helping our economy to thrive and providing greater access for rural areas. Technology and technological innovation are one of the keys to our economic future. And just as with the Eisenhower highway system, we need to allow all Americans cheap and easy access to the information superhighway. And just as with the Eisenhower highway system, we can create jobs in areas that need employment in order to build this internet access that will benefit us all in the long run. Countries like South Korea and Japan have already done this. It’s time America caught up.

The US has not really had an industrial policy in decades while much of the rest of the world actually does. It is time for government to design specific regional policies that will not only bring jobs to economically depressed areas of the country but also help reduce the income inequality that is threatening the fabric of our democracy. Krugman may be right that these policies will not stem the economic tide. The TVA did not solve the problems that Appalachia still encounters. But it did improve the lives of millions. And a sane regional economic development policy could do the same thing. It may not solve the problem entirely but it will make things better for a whole lot of people. That may be the best we can do right now. It is certainly worth trying.