Small Town Bringdowns and Economic Failure

Market ForcesThere are varying states of “failure” in economics. In Microeconomics for example, we have market failures, which can have almost nuclear effects (as we saw in 2008). On a more Macro level, we can have “failed states,” which are nation-states whose economies are so destroyed (from war, famine, or disease) that they need the UN and IMF to survive. Yet there is no “mezo” state of economic failure, such as on the local or regional level. So what would “economic failure” look like on a more mezo scale?

The best place to look is in rural communities. While most people in the western hemisphere live in cities, which can also fail, a larger proportion of land mass is rural, and plenty of people live there.

Some indicators of Economic Failure are:

  • a local economy that cannot support enough market activity to provide for the basic material needs of its residents (like choices in food, clothing or shelter)
  • a local economy that has inadequate labour markets (also known as “no jobs”) for its population
  • a local economy who cannot provide basic public goods (roads, clean water, access to schools, etc)
  • A local community that looses future human capital (also known as “brain drain”)

To be sure, there are varying levels of market failure. For example, the 2008 financial meltdown was seen as a “total” market failure, while the bubble burst in 2000 was only a “partial” market failure through imperfect information. Economic failures on a memo scale follows the same lines: a community may provide basic infrastructure but there may be no places to buy food or clothing. Or perhaps there is only ONE place to buy food, and no places to buy clothing.

With varying levels of economic failure comes varying levels of social costs, which must be borne by the local governments, such as:

  • Increased crime rates
  • Increased domestic violence rates
  • Lowered education levels
  • Increased use of social safety nets
  • Increased health costs
  • Lowered life expectancy

Just to name a few.

That means that Small Town Bringdowns are largely economic in nature, and economic development must include addressing those economic failures for the betterment of society as a whole.

And let’s be realistic; there are many cities that are failing economically for all of the same reasons. Cities like Detroit (for example) are so economically destroyed that it cannot even provide clean water for its residents – a human right.

Since neither cities nor rural communities fall into the categorization of microeconomics, or can receive “failed state” status under current convention, this is an important concept to understand.

This entry was posted in Economics, Health, Markets, Political Economy, Public Policy. Bookmark the permalink.

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