The newest cover story in The Economist deplores the situation of cities in developed countries that are left behind in terms of economic development by the digitized, globalized economy. One such is Scranton, Pennsylvania, where, since 2007, the local government has spent over $6bn on corporate subsidies in an effort to encourage redevelopment and boost local infrastructure. Such places and their disengaged, disgruntled workers are also fueling the rise in anti-globalization rhetoric which has propelled several new faces into the political arena in the US, France, and Britain, and produced unexpected election results.
The Economist suggests three new avenues for reviving these economically laggard cities, all of which involve heavy-handed government policies: (1) spreading know-how to better help local firms, (2) help colleges train local firms in mastering new technologies, and (3) using tax incentives and subsidies to encourage local investment.
But the premise on which these suggestions are based is entirely flawed: it is not sweeping globalization that has kept these cities behind, but government policies.
This post was published at Ludwig von Mises Institute on Oct 23, 2017.