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The vision behind the Struggling Regions Initiative was best put by Andy Grove, who (before passing in 2016) turned his attention to the incoherence of American industrial policy: https://www.bloomberg.com/news/articles/2010-07-01/andy-grove-how-america-can-create-jobs …pic.twitter.com/Q5jpK3IBe5
America's incoherent industrial policy (which includes raising tariffs on production inputs like steel and aluminum) leads to things like GM's 14,000 new layoffs. As I wrote this morning for @BulwarkOnline, nothing about this is inevitable:https://thebulwark.com/how-to-prevent-the-next-lordstown/ …
I approach development policy through the lens of evolutionary economics. Policymakers aren't great at picking winners and losers, but they can help markets spur new high-value activities in the wake of creative destruction. Think ecosystem management, not synthetic biology.pic.twitter.com/EbhjDwGQdF
Our current approach to economic development policy is a mess. As Niskanen senior fellow @NateMJensen shows in his book, Incentive to Pander, "firm-specific" tax incentives are a recipe for corporate welfare and zero-sum competition, costing $45b+ a year.
https://www.strugglingregions.com/tax-incentives pic.twitter.com/KpDdOePO13
HQ2, Foxconn, the Carrier deal — this is just the tip of the iceberg. As @NateMJensen notes in a recent piece for @BrookingsInst, breaking out of the race-to-the-bottom requires active regional collaboration. https://www.brookings.edu/research/five-economic-development-takeaways-from-the-amazon-hq2-bids/ …pic.twitter.com/cDgGdmPsNd
Economic development cannot be divorced from issues of public finance. Yet in the US, rich-states and poor-states have significantly different tax bases to draw upon. This leads to inequities in public services and diverging economic fortunes, as @JoshuaTMcCabe has long argued.pic.twitter.com/jU5ul6qbh8
Then there's public investment. Declining construction productivity, complex permitting and review processes, and myriad veto points in project approval have all conspired to make US infrastructure costs twice those of comparable countries.pic.twitter.com/oHXixemkQP
Other countries like Germany have chartered banks that expedite public works projects, and help coordinate investments to spur new industries. Michael Lind once proposed the US do something similar, through what he calls public purpose finance: https://www.newamerica.org/economic-growth/policy-papers/public-purpose-finance/ …
Public investment matters for infrastructure but also for innovation. The twin slow-downs in productivity and scientific discovery have been accompanied by declining federal investment in research and development. That should reversed.pic.twitter.com/CRPsFLRj5n
A particularly promising option for struggling rural regions is investments in mid-tier research universities, as @Noahpinion has argued.https://twitter.com/Noahpinion/status/1109138211517816832 …
At the federal level, the US already has a kind of economic development agency — the Small Business Administration. Yet its long overdue for an overhaul:https://www.strugglingregions.com/small-business
The bulk of the SBAs work goes toward guaranteeing loans and capital investments in small businesses. Yet using size as the only criteria is inadequate, and may even stunt economic development, as ITIF's @RobAtkinsonITIF correctly argues:https://www.forbes.com/sites/realspin/2014/07/08/the-u-s-government-isnt-friendly-enough-to-big-business/#60459f8e5684 …
The 2nd problem is that SBA fails to measure performance. It's "job creation" numbers all come from loan applications. They measure *intent* rather than marginal impact. With data the SBA could identify fast growing businesses, and target support to new & high value activities.pic.twitter.com/M9r0H4pRgG
Similar problems plague SBICs, the investment funds licensed to provide leverage capital for small businesses. Yes, they helped spur America's venture capital market, but today they've been overshadowed. With reform they could reorient back to start-ups and take meaningful risks.pic.twitter.com/jcgJJSMXQa
This post from @andrewbatson summarizes the important development policy lessons from East Asia's experience — Focus on tradable sectors; intensify accountability; and use export discipline to drive productivity growth. Right now the SBA fails on all three https://andrewbatson.com/2019/04/09/rediscovering-the-importance-of-export-discipline/ …pic.twitter.com/lwKdFOtQVu
The common theme in development policy is solving coordination failure. Yet the US lacks any serious coordinative institution to help regional development authorities, public investment funds, SBA and related programs work together. https://www.strugglingregions.com/office-struggling-regions …pic.twitter.com/D8m0EWXh8a
Folks like @rodrikdani have been explaining the principles behind successful industrial policy for years. But in the last few months these ideas have found new life in similar proposals from @ModeledBehavior @Noahpinion @Tim_L_Meyer @GaneshSitaraman and others.pic.twitter.com/GyAVgnE25O
Yet the closest we've gotten to integrating development econ ideas into law in recent years the Opportunity Zones program, which gives tax breaks to investments in low-income areas of the country, nominated by governors and certified by the Treasury. It has promise but also peril
For our part, @NiskanenCenter will be constructing objective evaluations of Opportunity Zones as data roll in. They could have a big impact, but many worry their benefits will be largely felt in real estate. And not without reason: https://www.builderonline.com/money/economics/home-sale-prices-in-federal-opportunity-zones-jump-25-yoy_c …
So stay tuned as we flesh out these ideas into concrete proposals, and make the case that neither laissez-faire nor Trumpian neo-mercantilism are the right way forward for reviving America's growth potential:https://www.strugglingregions.com/latest-news
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