Latest Poverty Spike: A Commentary

Recent government data point to a growth in poverty. Maybe poverty is our leading growth industry in the world. Seriously, we need some perspective on this issue. Here is a review of what most of us already know in economic development.

Poverty follows many paths. The research that I believe out there says that the single most powerful factor in stemming the long-term poverty cycle is e-d-u-c-a-t-i-o-n. People's ability to occupy knowledge-based jobs and earn more lies in increasing their education. Those with the least education and the formal job training are those most susceptible to unemployment and poverty.

Industry and corporate restructuring account for most of the actual job loss, or job destruction, (short and long term) in all industries (from high to low tech) today. Restructuring is caused by: increased market competition--especially international, technological shifts, decline of old and growth of new world markets, public policy (especially laws that create unintentional costs that must be bourne by the market, including consumers), and even unethical corporate behavior--ala Enron and a big piece of the 1990s dot.com economy that gave rise to thousands of businesses with no foundation or substance--only dreams and promises of access to the "Net". This job loss erodes incomes, which causes a spike in poverty.

Many now are blaming China for the latest wave of job losses, income disruptions and poverty. In some low-skilled and labor-intensive industries this is true. In my humble view, China is as much opportunity as threat to the US and other national economies out there. We've been asking companies and this is what they tell us.

There is also a longstanding argument that a "culture of poverty" exists, causing some segments of the population to be structurally disadvantaged in terms of economic participation. This argument says that minorities and ethnic groups are most likely to be impacted by the culture of poverty.

There are also the "silent job killers" out there, which include inhospitable government regulations (including many of the laws designed in the first place to protect workers), environmental regulations, and now political instability--including terrorism and cultural wars taking shape on many fronts in our world.

And actually, m-o-n-e-y is a source of poverty. It attacks jobs and incomes through exchange rates and shifts in currency rates. That's why some folks are clamouring about the Chinese juan and other currencies. If you recall, we complained about the yen in much the same way in the 1980's.

The question is how should local communities respond to these issues. Do we have a fighting chance, especially if our community is highly cost and trade-impact sensitive business location--meaning that it costs more to do business here (or we produce less value for the costs that must be paid than competing locations) and our existing industry base is very sensitive to imports, world currency fluctuations and other trade-related developments. Manufacturing is most sensitive to these factors.

There are no easy answers or silver bullets for American communities. Long term, hang your hat on efforts to increase overall educational attainment with a special emphasis on our disadvantaged population. We need to restructure the educational system to accomplish that and change how we "teach" and "learn." We talk a good game of "lifelong learning," but in practice we have just scratched the surface.

In the intermediate term, the answer is further economic diversification of local economies, which includes building more less trade-sensitive industries, and in the short term, all of us need to become stronger "dealers in hope," attentive fixers of many many small things, and work now on setting the stage for systemic change in our local economy. Right now, we have many local economies that are "dogs that just won't hunt."