RETHINKING FEDERAL POLICY FOR REGIONAL ECONOMIC DEVELOPMENT

For decades, numerous government programs have taken aim at spurring economic development in communities and regions. Over the years, many of these programs have changed little. Is it time for a new strategy?

Mark Drabenstott, vice president and director of the Center for the Study of Rural America at the Federal Reserve Bank of Kansas City, examines how federal policy might shift to align with a new global economy in “Rethinking Federal Policy for Regional Economic Development.” The article, which is based on a full-length report the Bank published in 2005, is featured in the first quarter edition of the Bank’s Economic Review.

Drabenstott writes that most federal economic development programs were created for the economy of the 20^th century, not the 21^st century. In the article, he shows that current programs assume all areas grow in the same manner, with federal spending largely focused on physical infrastructure for an industrial economy. He explains that economists, meanwhile, believe the drivers of regional growth have changed dramatically over the past decade, and for a region to grow it must gain a competitive edge in the global market. He then offers three shifts in federal policy that will be important in helping regions hone their competitive edge:

1.                           Make regional competitiveness the goal of federal regional development policy and align federal development programs accordingly;

2.                           Design new efforts to help regions seize innovations and grow entrepreneurs;

3.                           Create an effective delivery system for taking federal programs to regions around the nation.

The full report, “A Review of the Federal Role in Regional Economic Development,” and the summary article are available on the Bank’s Web site: www.KansasCityFed.org.

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