This piece was originally published in the Baltimore Sun.
By Robert Cohen
May 5, 2018
President Donald Trump recently proposed a $1.5 trillion infrastructure program. This is a good idea with bipartisan support, assuming we can finance it. But infrastructure alone will not produce the long-term inclusive growth we yearn for. To achieve that, America instead needs a comprehensive economic development strategy.
That means America’s struggling communities have to simultaneously invest in many different types of capital to generate growth: infrastructure, health, education and small business development. Let’s first discuss why and then how to afford it.
Whether in urban Baltimore, rural Appalachia or the open West, stagnation and poverty result not from the singular lack of infrastructure, health, education or jobs. Struggling Americans today face synergistic deficits in all. High-poverty counties in the United States have a lower life expectancy than many developing countries. Education is poor, unemployment is high, and infrastructure — such as the pipes in Flint, Mich., or our 50,000 crumbling bridges — are inadequate.
Contrast this with regions of America that are booming. For example, New York City has a health-enabling environment, a dynamic school system, a thriving job market and the nation’s best public transportation.
Indeed, while jobs are the most important intervention, they are not a magic bullet. The different development sectors mutually reinforce each other. You cannot take advantage of job opportunities if you’re not healthy or if you don’t have the right education.
This theory is well-tested. In the field of international development, where I work, we operate from the principle that multi-sectoral programs synergize for sustainable growth. This multi-sectoral development strategy enabled the 20th century development miracles of Singapore, South Korea and Taiwan, among others. These countries grew from poverty to wealth by investing in their people alongside infrastructure and an enabling business environment.
This was also the United States’ original development strategy; we once led the world in education. It likewise guided the Marshall Plan that helped rebuild Europe after World War II.
We must rediscover this strategy that fostered such success. And in our large, diverse and politically-divided country, local communities should lead the effort. Local ownership fosters employment and a sense of purpose — badly needed in some places — while optimizing the investments for local needs and culture. One community might need infrastructure, another needs a drug treatment clinic, a third needs a high school, and a fourth could need all three.
How can we pay for this necessary but ambitious proposal, since many municipalities lack sufficient funding? Critics will say that large government-funded projects are inefficient at best; they are right. The stimulus legislation of 2009 found too few “shovel-ready projects,” and overhauling national health care in Congress has proved contentious. The federal government’s only comparative advantage is size, so it should merely provide ample funds.
Enter the states. Governors and mayors have strong local credentials and incentives to deliver. States could submit proposals to different cabinet agencies for federal funding for specific projects, augmented by state money. President Barack Obama’s successful education initiative — Race to the Top — followed this model. So does the successful Global Fund to Fight AIDS, Tuberculosis, and Malaria internationally.
Blessed with low interest rates, we can borrow to fund such investment, but a $21 trillion debt means we should minimize borrowing where possible. Tax increases could help but seem unlikely given last year’s tax cut. So instead, public-private partnerships can leverage all that new and old private capital and talent, spur private sector job growth and reduce taxpayer burden.
Such a strategy must target the whole country. Programs that serve everyone — rather than a particular race or class — promote unity and sustainable support. Besides, the whole country needs it.
As in the developing world, corruption and incompetence pose existential threats to development. We’ve learned through pain that the structure of a financing mechanism matters greatly for efficiency, incentives and return on investment. These projects must generate real return or they’re not worth borrowing for.
However, efficient projects that generate real return abound. For example, the economic return from treating a community’s opiate addiction is $12 for each dollar invested. Quality education and infrastructure are similarly profitable and needed in all 50 states.
Family planning is a final crucial investment. The poorest areas of America have the highest birth rates. This stresses the already overburdened health and school systems and increases competition for lower-skilled jobs.
Our challenges today seem staggering, but they’re not. America has recovered from worse. Economic development theory works, and the United States’ boasts the best record in world history. As everywhere in development, our success will hinge on how well we execute. We have incredible talent and resources in this country. We can get this right.