- The Washington Times - Friday, March 14, 2003

WASHINGTON, March 14 (UPI) — Effective solutions to the economic problems of the American heartland are in short supply, according to think tank analysts who follow development issues in the Midwest and Great Plains regions of the United States.

Although some cities in the interior of the country — such as Chicago and Austin, Texas — have strong economies, the rural towns and regions of Middle America have experienced significant economic declines and related population losses in recent years.

"It is a massive policy conundrum," Samuel Staley, president of the free-market oriented Buckeye Institute for Public Policy Solutions, told United Press International. "No one has really figured out how to address the issue of the decline effectively."

Michael Lind, a senior fellow at the centrist New America Foundation, has proposed some interesting and unorthodox ideas for bringing about economic change in the declining rural and agricultural areas of the Great Plains.

Lind says that the problem of economic decline in the region can be traced to shifts in the American population away from rural areas to overcrowded cities on the east and west coasts.

Lind told United Press International that the problem of how to balance urban overcrowding and rural decline is ultimately a question of whether the United States wants to remain a society with a strong and viable middle class.

"I don't think you can have a middle class society of the kind that Americans value (under current conditions)," said Lind. "If you are going to have crowded cities, the only way to maintain a middle class society is for the government to subsidize home ownership and wages."

He said that European and Asian countries are able to maintain middle class populations in cities like London and Tokyo only through such socialist means. He added that this is the direction in which many large American cities are already headed.

However, Lind said that Canada and Australia have shown that you can maintain a vibrant middle class society without the government subsidizing the working class by decentralizing a country's population. To bring about such change in the United States, Lind has proposed that a federal program be established to bring high technology infrastructure to rural areas by wiring the nation with fiber optic cable for high speed Internet access.

This would attract businesses to rural areas and create jobs in the long term, he said. In addition, he said it would help move workers from overcrowded urban areas to less densely populated rural ones, where the cost of living is lower and housing is more affordable.

Lind compared his proposal to the government's building of train tracks in the 19th Century. That effort was successful in increasing trade and population movement into the western states.

He also said that a reduction in federal farm subsidies could pay for the project and related efforts to promote the development of a service and manufacturing sector development in the region.

Staley, whose think tank is located in Columbus, Ohio, said Lind's plan would do little more that stem the tide of decline in rural areas.

"I am skeptical that this kind of approach will help bring about the broad changes needed," said Staley. "What you will be able to do is allow some small businesses to operate in far flung regions, but it will not be the same thing as putting a highway in that allows for the transport of goods efficiently."

He pointed out that satellite Internet access is already available in rural areas and has had no real effect on business development.

In addition, he said several additional fundamental factors — that would remain absent in many rural areas — are needed to encourage business development. These include quality education facilities, a strong transportation infrastructure and quality housing stock.

"I don't think you would find the kinds of synergies you would find in an urban environment that lead to economic growth," he said. "You will not see them in a rural areas simply because there are fiber optic lines."

Staley added that the most important element needed for economic growth is a quality labor force, a component that he says is also missing in most struggling rural areas.

Lind disagreed with Staley's analysis and said his insistence on the connection of labor to business development is a replay of debate over which comes first, the chicken or the egg. He noted that the skilled labor in any region or city does not necessarily originate there.

"Most people in large metro areas were not born and educated there," said Lind. "There were not computer programmers in Chicago before the need existed, but they came from somewhere."

Michael LaFaive, director of fiscal policy at the Mackinac Center for Public Policy, said that labor issues are an important factor in business growth. LaFaive, whose free-market think tank is located in Midland, Mich. said that that many Midwestern states do not have right to work statutes and that this is limiting their economic growth.

"We need to make it easier for labor and management to do business," said LaFaive. "States that have closed (union) shops are losing good workers and manufacturing jobs to the South and West for that reason."

Matt Kane, a policy analyst specializing in regional economics at the Northeast-Midwest Institute, said that the economic declines being felt in the Midwest are not as bad as they are in the Great Plains but that things still need to be done to address the economic declines in those regions.

"I understand the dynamic of looking at the sparsely populated, largely rural Midwest or the western plains region and its declining growth patterns, but I think it is dangerous to paint the middle of the country as a declining empty area that is in dire need," he said.

Kane said that the Midwest has an average person-per-mile density that about equal to Georgia's. In addition, the latest data from the U.S. Census Bureau shows that average family incomes in Minnesota, Illinois, Michigan and Indiana are above the median U.S. level.

He added that the population declines seen in almost every state in the union over the last decade have predominately been slowdowns in growth, not full reversals. Nevertheless, he said that he would welcome federal investment to help economic growth in the Midwest, especially for the rural areas.

Some states and localities are attempting to address the problems in their own way. For instance, there are currently plans in place in Iowa, aimed at attracting immigrants to the state. LaFaive said that if efforts were not made to address the problem of population decline in the region, the continued economic problems in the interior of the country would only get worse.

"I think the middle states will continue to loose people and talent to the southern and Western states," he said.

Despite their disagreement over the effectiveness of wiring rural areas for high speed Internet access, Staley and Lind concur that the taxpayer-funded tax breaks and business subsidy schemes that dominate state and local economic development efforts do not produce long-term economic gains. This, they say, is because such programs are usually company- or business-specific and do not have a broad enough impact.

"Tax incentives and subsidies to businesses have generally not been very effective," said Staley. "You might be able to land an isolated manufacturing plant through these schemes, but they have a very limited effect on development in cities or in rural areas."

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