Resource constraints and regional development policy

Abstract

Regional development policies in the United States-as well as those in Great Britain, several Western European countries, and some countries in South America-were formulated at a time when economists and policy makers focused almost exclusively on demand considerations. The task, as it was then envisaged, was one of stimulating the regional demand for resourcesespecially human resources-in excess supply. Out of this approach came a variety of programs to encourage investment in depressed areas. In most countries regional development policy presupposed continued growth of the national economy. Specific policies were designed in some countries to direct part of the new investment insured by growth to areas of above-average employment and below-average income. In the U.S., the initial approach (under the Area Redevelopment Administration) was one of direct public investment in productive facilties in depressed areas, with the caveat that these facilities were not to draw down existing capacity in other regions. In Great Britain, however, the policy was one of directing new investment away from crowded areas to those with excess labor. Similarly, Brazil developed a unique fiscal incentive program to shift investment from the expanding South to the lagging North [Hirschman, 1968]. Later, in the U.S., under the Economic Development Administration, policy shifted from direct investment to investment in public facilities in development areasJ In all cases, however, the emphasis was on stimulating aggregate effective demand-in the Keynesian sense-in development areas. This paper will evaluate these policies within the framework of emerging supply constraints. Georgescu-Roegen's entropic bio-economic analysis of the economic process is used as a background for the discussion of regional policy. The paper concludes with an extensive discussion and critique of U.S. regional policy, and with the direction-as I see i t tha t future regional policy should take.