Broadband May Help Cities Compete in Economic Recovery

The nation's communities need more than an economic stimulus to address their challenges.

by / September 22, 2009

As of this writing, economic recovery is nowhere in sight. In June, unemployment rose to 9.5 percent, with almost another half million (467,000) jobs lost in the month. More than 100 urban areas now have unemployment rates higher than 10 percent, as do many regions.

And according to Mortimer Zuckerman, chairman of U.S. News and World Report, the economy is worse than these numbers indicate. Not counted in the official unemployment rate is at least another 1.4 million people who have given up looking for work and the 9 million workers who have taken part-time unemployment because they cannot find full-time work.

This is terrifying news for cities that have been reeling from reduced revenues for much of the year. As of early February, the National League of Cities (NLC) reported that "unprecedented economic conditions facing the nation are increasingly straining the ability of cities to meet their financial needs." The NLC reached this conclusion based on its latest survey, which found that 84 percent of cities reported facing fiscal difficulties -- up from 64 percent only six months prior. This was the highest percentage in the history of the NLC's surveys, which date back to 1985.

According to the NLC's report, cities are responding to the recession by implementing hiring freezes and layoffs, delaying capital expenditures and cutting services.

"Cities are responding as best they can," noted Donald J. Borut, the NLC's executive director, upon releasing the report. "Their citizens have increasing needs for services just at the same time that revenues are declining."

City finances tend to lag behind the overall economy by 12 to 24 months. So even if the economy suddenly makes a robust recovery this year, cities will continue to feel the degrading economic conditions through 2009 and likely through most of 2010, according to the NLC. And a recovery doesn't appear to be on the horizon anytime soon.

Road to Recovery

Developing a sure formula for economic recovery presupposes that one knows what one is recovering from. And there are growing indications that this isn't simply another recession. The country has already endured the longest recession since World War II. The National Bureau of Economic Research dates the current recession as starting in December 2007. Previously the longest U.S. recession was 16 months, with the average being about 10 months.

If this were simply a normal cyclical recovery, the recession should have ended months ago. Some blame the stimulus package for not providing the immediate economic jolt the Obama administration had been hoping for. But there's far more going on, as the failing U.S. auto industry serves to indicate. President Barack Obama has repeatedly spoken about the need to fix education and deploy world-class broadband more widely to make America more globally competitive.

That's the bottom line that ultimately will determine the fiscal and social health of the nation's communities as they move forward -- effectively competing on the world stage to the extent that most Americans can share in an abundance of generated wealth.

So while most cities vie for a share of stimulus package money and in the meantime hope that recovery won't be too prolonged, even economists are uncertain -- if not skeptical -- about how effective the stimulus will prove to be.

Cities as Engines of Prosperity

If anything is wrong with this picture, it's the notion that federal actions alone can provide the needed remedies. This is the old economic thinking that author and urban theorist Jane Jacobs originally challenged in her books The Economy of Cities and Cities and the Wealth of Nations. As John Barber

noted in the Toronto Globe and Mail at the time of her passing in 2006, "At a time when classical economics made no provision for the role of cities -- indeed, took no notice of them at all -- she used a pile of newspaper clippings and her own sharp observations to propose a novel theory that turned Adam Smith on his head by identifying the creative milieu of a diverse city as an essential prerequisite for economic growth.

"It was decades before economists, confronting the same limits to the classic theory identified by Ms. Jacobs, began to read her," Barber added. "But when Harvard economist Edward Glaeser tested the Jacobs model of growth against theories promulgated by world-renowned economists, he concluded hers was the only one that actually worked."

Today, of course, Jacobs' view of the economic role of cities is not unique. "We must support our nation by recognizing that strong cities and towns serve as a backbone to economic growth," Borut noted at the time the NLC's most recent survey was released. "If the nation is going to see economic recovery, then we must support and promote the financial health of our local communities."

One Global Perspective

We talk almost glibly about a global economy, but who among us has a real awareness of what that really means practically?

One person who has this kind of firsthand sense is Jim Rogers, who founded the Quantum Fund with George Soros in 1970 -- one of the first truly international funds that gained 4,200 percent over the next 10 years, while the Standard & Poor's advanced about 47 percent over the same period.

In 1980, he "retired" and traveled around the world on a motorcycle. He spent time as a guest professor of finance at the Columbia University Graduate School of Business. Between 1999 and 2002, Rogers made a Guinness World Records journey through 116 countries, covering more than 152,000 miles with his wife Paige Parker in a custom-made Mercedes. Imagine how the realities of the global economy appear to Rogers after such experiences and background.

After all those travels, once Rogers had children, he sold his New York City mansion and moved to Singapore so they could grow up speaking Mandarin Chinese as well as English. He believed that would best prepare them for the realities of the 21st century. (He chose not to move to a Chinese city like Hong Kong or Shanghai because the air pollution was so bad.)

In a TV interview, Rogers said: "If you were smart in 1807, you moved to London, if you were smart in 1907, you moved to New York City. And if you are smart in 2007, you move to Asia."

Reinventing Communities

For years, the phrase "reinventing government" captured the challenge of harnessing IT to transform government processes. This ongoing process has been one of the success stories of the last 20 years.

The question is: Does the nation need the same kind of overall approach to "reinvent our communities" for the 21st century?

We've begun to see a call for just this on many fronts. In the article Reinventing America's Cities: The Time Is Now in The New York Times earlier this year, Nicolai Ouroussoff noted: "The country has fallen on hard times, but those of us who love cities know we have been living in the Dark Ages for a while now. We know that turning things around will take more than just pouring money into shovel-ready projects, regardless of how they might boost the economy. Windmills won't do it either. We long for a bold urban vision.

"With their crowded neighborhoods and web of public services, cities are not only invaluable cultural incubators; they are also vastly more efficient than suburbs. But for years they have been neglected,

and in many cases forcibly harmed, by policies that favored sprawl over density and conformity over difference."

He pointed out that correcting this imbalance will require a radical adjustment in how people think of cities and government's role in them. And he suggested that people start listening to those who have spent the last decade imagining, and in many cases planning, for more sustainable, livable and socially-just cities.

But reinvention of a community goes far beyond the physical space of a city or county. It's also about rethinking how people approach almost every aspect of life -- how they organize work and workplaces, teach their children and tackle economic inequalities. It's about minimizing resources to fix problems and maximizing resources to produce goods the world wants to buy.

Real reinvention would be shortchanged if it were limited to what people can imagine now. Just as invention is a process of creative discovery, so is reinvention. And where that might lead no one can say until society gets there.

But that's the journey ahead if citizens are going to do more than cope with continual decline.

Blake Harris Editor