from Renewing America

Reviving the Economy of America's Small Towns: Is It Possible?

Davis, West Virginia (jmd41280/flickr).

July 17, 2012

Davis, West Virginia (jmd41280/flickr).
Blog Post
Blog posts represent the views of CFR fellows and staff and not those of CFR, which takes no institutional positions.

More on:


DAVIS, WV -- Can American small towns be revived? And is this something governments should even try to be doing? I’ve been pondering these questions on a brief working escape from this year’s especially oppressive summer heat in Washington, DC.

The decline of small towns has been an inexorable, century-long trend. The mechanization of agriculture emptied out most of the small towns in the Midwest. The exhaustion of natural resources like timber, minerals, and coal spelled the death of others in the west and the Appalachians. The small manufacturing towns of the Northeast declined as factory jobs first moved south and later overseas. And big box retailers like Wal-Mart and Costco have often put out of business what little remained of the old downtown retail cores.

The remaining options for these towns are few. Davis, whose population peaked at over 3,000 during the West Virginia lumber boom in the early 1900s, now has a population of 648, according to the latest Census data, down from about 800 two decades ago (though with an interesting uptick from fewer than 600 since the outbreak of the recession in 2008). The town, which sits on the beautiful Canaan Valley plateau, has tried to remake itself as a winter ski and summer outdoor destination for visitors from Washington, Pittsburgh, and other nearby cities. It has been a modest winter success, though ski seasons have been growing shorter with warming weather; and sadly, despite magnificent hiking and biking trails, the summer tourist traffic is small. Thanks largely to the late Senator Robert Byrd, the long-time Senate Appropriations Committee chairman, the state is close to completing a long-planned four-lane highway that will connect the town and others in West Virginia with Highway 81 in Virginia, cutting perhaps an hour off travel time from the DC metro region.

I am generally skeptical of the advisability of governments trying to change the location of economic activity. Location subsidies of different sorts rarely work, and even if they do relocate some businesses, they bring no aggregate benefits for the country. In Canada, for instance, billions of dollars and decades of federal economic development initiatives in the Maritime provinces had little impact reducing the inexorable population decline that followed the collapse of the fishing industry.

The modern history of West Virginia shows the same. Despite government spending at federal, state, and local levels that totals more than half the entire economy, West Virginia remains among the poorest states in the country.

So what can these towns do? In some cases, probably nothing. In his superb Renewing America working paper on North Carolina, Roland Stephen argues that, while every community is eager for help, “growth more often comes from bolstering already successful initiatives, even at the cost of increasing inequality among different regions.” Governments, he argues, should invest in “open-ended initiatives” such as education and infrastructure, while local regions need to leverage local assets in tourism or natural resources. Attracting immigrants may be a winning strategy as well; Canada’s Maritime provinces have begun to grow recently largely because of immigrant inflows.

And the same technological innovation that killed some small towns may, in theory, offer some hope for their revival. The commercial possibilities of the internet and modern communications mean that many jobs, particularly in business services, can be done remotely. In all likelihood, companies have only begun to experiment with the cost savings that could come from allowing more employees to work from home or at cheaper satellite offices. New, small-scale manufacturing technologies using 3-D printing could also begin to decentralize manufacturing. With high housing prices and traffic congestion plaguing many cities, an escape back to small town living would seem to be attractive to some – as long as there is a way to make a living.

Connectivity is key to any of this happening. This is the theory behind the Obama administration’s National Broadband Plan. The 2009 American Recovery and Reinvestment Act, more commonly known as the stimulus, allocated $7.2 billion to expand broadband capability in rural America. The evidence to date is mixed.  While internet connections may create some local jobs, they could also eliminate others – when, for instance, residents begin to shop online rather than in local stores. But on balance, as a recent study from the Public Policy Institute of California showed, there appear to be modest gains in employment for towns and regions that are better connected.

Broadband is the sort of open-ended infrastructure that makes sense for government investment in regions where the private sector lacks the incentive to build it out, though in practice it is often difficult to distinguish exactly where public investment is necessary. Broadband offers the possibility, though not the guarantee, of connecting remote regions of the country in a new way to the national and global economy, much as rural electrification did in the 1930s.

Will this be enough to reverse the decline of America’s small towns? Probably not. As Jane Jacobs argued so elegantly, cities are powerful economic engines, and the opportunities of urban life continued to draw in people. But it is at least possible that technological innovation, which for so long has favored cities, could begin to tip the scales in the other direction.

More on: