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This report, titled “EXPLAINING THE NEW SPATIAL INEQUALITY Regulatory Policy and Local Economic Capacity” by Susan Christopherson (May 1991), argues that increasing spatial inequality in the U.S., evidenced by income disparities, unemployment rates, and access to basic services, is not solely due to changing market conditions. Instead, it’s a result of political-economic explanations that consider the changing role of the nation-state intersecting with market changes. Key points include:
- Shift in State Role: The U.S. government has diminished equal access to certain services (transportation, communication, health care), withdrawn state intervention in social welfare and place-based development policies, and altered its regulatory role, particularly in the financial system. These changes, often framed as deregulation, are more accurately policies making the economy sensitive to market fluctuations.
- Fiscal Crisis and Adjustment: The report explores two scenarios for why the federal government has moved away from universal service and place-based development policies. One suggests a “fiscal crisis” due to the high cost of supporting mass production-oriented economic policies. The second emphasizes the U.S. response to the international division of labor and a gradual shift in the state’s role concerning capital interests, leading to an accelerated movement toward a political economy dominated by market principles.
- Spatial Consequences of Deregulation: The document highlights how deregulation, particularly in financial services and retail, has exacerbated spatial inequality.
- Financial Services: Deregulation has made capital markets hyper-sensitive, leading to increased volatility, concentration across sectors, and a focus on short-term profits. Financial institutions now strategically target profitable populations and communities, potentially draining capital from less accessible areas.
- Retail: The non-enforcement of anti-trust laws has accelerated mergers and acquisitions, leading to the “Wal-Marting” of rural America. This has resulted in decreased sales tax revenue, increased unemployment, and reduced local investment in many non-metropolitan communities.
- Dismantling of the Social Welfare State: There has been a significant shift of social costs from the federal to the subnational level, particularly concerning health care. Federal cuts have disproportionately affected “in-need” populations and places, while defense spending has favored high-tech metropolitan counties.
- Implications for Regional Development: The new economic realities mean that local economic development initiatives face significant constraints. The report contrasts the U.S. approach (emphasizing inter-regional competition) with the “territorial governance” model seen in successful industrial districts (emphasizing strong, intervening local states and “municipalism” to foster innovation while blocking labor exploitation).
- Call for Rethinking State Intervention: The author concludes that effectively addressing the challenges faced by areas outside the favored growth circles requires rethinking the forms and nature of state intervention, potentially involving redrawing regional boundaries, redistributing resources, and tying job training to local government contracts. The goal is to reconnect local producers with markets while potentially sacrificing some notion of equal access if not carefully managed.
