thf strategy l)f r ton~! dfvfiopmfnt dl · thf strategy l)f r ton~! dfvfiopmfnt dl prepared for the...
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THF STRATEGY l)F R TON~! DFVFIOPMFNT DL
Prepared for the First Meetinq of the
Federa 1 Advisory Coundl on· Reqi orra l Economic Deve 1 onment
Washington, D. C. October 22, 1968
by
Arlon R. Tussinq Economic Consultant
FEDERAL FIELD COMMITTEE FOR DEVELOPMENT PLANNING IN ALASKA
Anchoraqe, Alaska
REGIONAL PLP,NiHNG IN THE ll, S, ECONOMY
The economy and political institutions of the United States
gre\'J up in a framework of decentra 1 i zed decision rnaki ng. Our commitment
to ~rivate enterprise and the wide range of powers reserved to the
sovereign states severely limit the way in which our people can mobilize
their resources for any complex natio~al goal except perhaps defense.
But as the American eco(lomy has become richer, more complicated, and
more interdependent, the people have demanded an ever-increasing range
of pub 1 i c serv1 ces, so that expenditures and transfers by a 11 1 evel s
of government now amount to cibout three-tenths of the national product.
As a nation \'ie have neither the 1.,ii 11 nor the mechanisms for carrying
out centralized economic planning. Yet government action in its
aggregate is now unquestionably the most important determinant of the
size, shape~ and direction of our economy. To the economic influence
of the government's tax and regulatory activities must be added the
fact that the federal government alone is by far the nation's bigqest
employer and is the biggest customer of American private enterprise.
Inevitably, different programs established at a distance of decades from
one another and different agencies with diverse traditions. structures,
and constituencies have enormous potential to complement and strenqthen
one another or to overlap, compete, and conflict. The process of
gov~rnment reorganization, however sluggish, is one response to these
potentials. Unification of the armed forces and formation of the
departments of Health, Education and Welfare; of Housing and Urban
Development· and of Trans tion are ex les e
tant outgrowth of the need for coordination and planning in government
is the growing importance of bodies without primarily administrative
responsibilities, independent of specific administrative agencies,
whose job is to assist in making the government's total impact
effectively responsive to the nation's total needs. Different parts
of this job fall to the Joint Economic C6mnittee of the Congress, the
Council of Economic Advisers, the Bureau of the Budget, and other parts
of the Executive Offi~e. Together, these bodi~s can offer Congress and
the President frameworks for decision and criteria of effectiveness
broader than those of individual programs or the agencies that administer
them.
Of course, the Council of Economic Advisers is responsible
for economic forecasting as an aid to decision making at all levels of
government; and the Bureau of the Budget is charged with the nation's
fiscal housekeeping. What is distinctive about these agencies, however,
is that they are required to take a hard and comprehensive look at just
what are the nation's goals, what are the priorities and tradeoffs
among them, how can they be reconciled within the government, and how
can they most efficiently be effected.
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While the federal government does have within it some
structural capacity for thinkinq through many kinds of problems which
face the whole nation and are affected by the actions of many agencies,
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together local, state, and federal governments, or even the different
federal agencies, to deal with the problems which are metropolitan or
regional in scope and which require a complex and coordinated attack
from every level of government. O~r failure to organize for the
assault on rural poverty and urban decay overshadows the handful of
outstanding intergovernmental successes in enterprises like river-basin
development.
Local areas are eligible for assistance under several federal
programs depending upon their rates of unemployment, average income •
level, or proportion of their population living below defined poverty
levels of income. Some prominent examples are the provisions of the
Public Works and Economic Development Act of 1965, the Economic Oopor
tunity Act, and Defense ManpO\ver Policy No. 4 (revised).· With this
legislation and policy, the Congress and the government have implicitly
asserted that key aspects of poverty and unemployment are their
community or regional dimensions, and that an important part of the
attack on poverty and unemployment is the attempt to foster economic
development in the areas where these conditions seem to be endemic.
Programs based on this premise are administered by the departments of
Health, Education and Welfare; Labor; Commerce; Agriculture; Housing
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and Urban Development; the Office of Economic Opportunity; and even by
the Defense Departrnent in its procurement nreferences. Funds of federal
origin, broadly directed at regional or community development, are
as v1e I.
is no agency or level of government generally charged with maximizing
the complementarity and minimizing the duplication and conflict among
these efforts. There is generally no agency or level of the federal
government on a st&te, regional, or metropolitan basis charged with
thinking about the economic and social dynam"ics of the region and
evaluating alternative strategies for coping with its problems. This
·1 believe should be the primary function of any regional development
agency established by the fed era 1 government .
. Shortcomings of the Title V Approach
The regional corrrnissions established under Title V of the
Public Works and Economic Development Act of ·1965 are not clearly
designed to undertake this planning function. Their shdrtcomings arise
from a failure to identify the problems to be solved and the failure to
specify explicitly a theory, philosophy, or strategy of economic develop-
ment. In the absence of explicit definitions, strategies, and measures
of success, the Title V approach rests on the im.plicit premise that each
of the development regions has high unemployment rates and low average
incomes because of a lack of aggregate demand in the region, and
particularly because of the lack of investment in plant and equipment
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and public facilities. A further assumption is that these circumstances
can be r-eversed by "seeding" (according to the language of a generation
ago, "pump priming") with strategic public expenditures. Finally, it is
csc:;umed that regional economic developmGnt stimul in thi hi
will in fact improve the opportunities and income of those people whose
plight invited concern in the first place. These prepositions are all
plausible,and each of them contains more than a kernel of truth; yet as
a basis for regional development strategy, their general apolicability
has not been demonstrated.
Many of the areas of the United States which seem economically
.stagnant, or which are declining either absolutely or relative to the
nation as a whole, are in svch circumstances·for good economic reasons
and are irreversibly so. What these areas, including the existing
development regions, have in conmen is a heritage of several generations
of underinvestment in hwnan resources, so that significant sections of
their population are not prepared to seize upon new economic ooportuni
ties whether they appear close to home or far away. Foi the mountaineer
of eastern Kentucky it may not be critical whether the modern job in a
nevi factory or office occurs in his home county or in the outskirts of
Cincinnati; for the Eskimo of the Kuskokwirn Delta it may not matter
whether the factory is close by in Bethel or hundreds of miles away in
the Kenai petrochemical complex; what is crucial is the kind of job it
is--whether he has the education, skills, and attitudes to be hired and
to succeed in it.
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My purpose here is not to substitute one oversimplified or
unsu:ported hypothesis for another but to emphasize that the problem of
regional und~rdeveloprnent requires a great deal of economic sophistica
tion 2nd a multi-faceted aorroach, of which an i ral
scent in the region is only a small part. In each of the existing
develop~ent regions the federal government is already spendinq at least
a billion dollars per year, and these expenditures are already the most
important single determinant of the pace and direction of economic
activity in these regions. The ability of the regional planning body
to irfluence the disposition of these funds is far more important than
is its control over a few hundred thousand dollars or even a few
million dollars in supplemental grants for its own projects. For this
reason, I believe that supplemental grants and independent funding
authority are more a handicap to a regional planning body than they are
assets, because they will inevitably compromise its objectivity and
independence and its relationships with the states and with federal
age:.cies.
Each state and each community is eager to receive federal
m~ney. and federal agencies themselves are seldom known to oppose the
establishment of new programs under their jurisdiction or to argue for
the reduction or elimination of existing ones. No agency or level of
government should be expected objectiv~ly to compare the merits of its
existing or projected programs with alternatives under other auspices.
Nor is it realistic to expect one agency to participate wholeheartedly
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in cooperative planning which subordinates its activities to the
objectives of other parts of the government. To function effectively,
the regional planning body must be free of administrative responsibili-
tiec; anrl should he i 1
loans, or inter- or intra~government transfers.
We have no doubt that the effectiveness ofthe Federal Field
Corrrnittee for Development Planning in Alaska vwuld have been badly
comoromised had it been just another agency comoetina for project
funding. Exactly the same considerations require the commissions to
be in fact independent in judgment and responsibility. 11herever in the
.government the commissions are located for housekeeping purooses, their
primary responsibility must be to the Executive Office of the President,
to the Bureau of the Budget, and to the Congress. Although there is now
no such precedent, I vtould suggest the addition to this 'list of the
Council of Economic Advisers. I would propose that the Council be
mandated to make appropriate economic foreca~ts to evaluate the fiscal
impact of government in each state or in each of the deve1opment
regions.
The crucial question in considerinq renewal of the authoritv
granted under the 1965 Act is whether there are unique tasks for the
commission which cannot be served just as well by other aqencies or by
the several states. Only the intellectual tasks--oversight, research,
planning, and persuasion--stand out. Supplemental fundinq of state or
agency projects might \'/ell be sponsored or supported by the conmission;
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indeed, one of its most important jobs ought to be to suggest and
independently to evaluate such projects; but the need for a new level
of government.with its own funding is not apparent.
Whether or not the commissions and the coordinati 1
ought to be within the Department of Commerce depends on whether the
ciepcfi.,ment has the a.bi l ity and vii 11 take the 1 eadershi p in economic
development policy nationa'lZ.y. At present, a good argument mi9ht be
that the regional planning function would have greater independence and
greater authority somewhere in the Executive Office of the President.
The most serious of our regional underdevelopment problems
a.re really national, problems: structural unemployment, underinvestment
in human resources, and the culture of poverty exist throu9hout the
United States. Our urban crisis is in large part generated by the
export of people, together with their economic and social handicaps,
from the countryside. The problems of rural stagnation are worsened by
the fact that the metropolitan growth centers cannot absorb and employ
these people at their present levels of education, skill," and accultura
tion. It is ludicrous to draw the boundaries of development regions
deliberately to exclude these metropolitan centers. Finally, if the
concept of development planning bodies is valid for the seven estab
lished regions, it is valid for every other section of the United
States.
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Al~ska's Requirements for Development Planning
Nine years after achieving statehood, Alaska's development,
industrial and human, still depends uniquely on the policies of the
federal government. Almost one-fifth of the state's population are
military personnel and their dependents. BetvJeen one-fourth and one
fifth of civilian jobs are directly with federal agencies. The Alaska
Railroad and the state's long-line telephone and telegraoh facilities
are government ovmed. Even the grm,;th of private industry in Alaska
depends almost wholly on development of minerals, timber, and scenic
. and wildlife resources--land resources in a state where 97 percent of
the land is still in the hands of the federal· government. This list
does not exhaust the \'lays 11hich Alaska is exceptionally influenced by--
benefits or suffers from--the activities of the federal government,
but it suggests the magnitude of federal responsibility. /
Obversely, the national interest in Alaska is uniquely
large. Ninety-seven percent of Alaska's area is public land, but by
that fact Alaska also contains half the nation's remaining public
do~ain. Alaskans may be discouraged by the fact that most of their
state is today of little use except ~s scenic wilderness; on the other
hand~ Americans in general may see Alaska as ho1ding the vast bulk of
the nation's increasingly precious supply of scenic wilderness.
Alaska's oil reserves, in large part on public lands and on the outer
Continental Shelf, are the state's most valuable commercial assets
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2nd its assurance of fiscal viability. If they are as gigantic as
they now seem, however, their importance to the nation may tower above
their regional significance. They may dominate the nation's petroleum
and of energy. on the nation's strategic self-sufficiency, and on the
bslance of payments and balance of power.
When Alaska became a state it became the state with the
smallest population a~d lowest population density of all the states.
It was located an enorir,ous physical and economic distance from the rest
of the country. Prices and costs vtere exceptionally high, and the
state's economic base was virtually limited to national defense and
rni1 i tary construction together v.1i th salmon fishing. There was no
regional economy as such; the. economic links among the various Alaska
communities were far weaker than the ties of each of them with Seattle
and the rest of the 11LorJer 48. 11
The big task for the new state was the creation of an economic
ba~e which would make self-government meaningful. The Statehood Act
transferred a number of formerly federal responsibilities to the state
government. provided for trans iti ona 1 grants, and permitted the state
to extend its potential revenue base· by selecting up to over 100 million
acres of unappropriated public land within its boundaries. These provi
sions themselves, however, did not provide the capital and enterprise
v-1hich were a prerequisite to the growth of permanent emoloyment and
revenues.
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All of the problems Alaska faced at statehood are still with
her, but their relative urgency has changed. The specific weight of
federal activities in Alaska remains the highest of any of the states.
But private industry in Alaska has clearly entered the 11takeoff to
sustained growth. 11 There has been a steady expansion in the forest
products industry so that about two-thirds of the state's total
allowab~e cut is now committed to production. While the older salmon
fisheries remain in chronic disorder, Alaska-based fisheries have
successfully expanded into new species and new markets. The most
spectacular aspect of economic growth within the state has been the
development of oil and gas reserves of remarkably low discovery and
production cost per barrel. Alaska is now one of the top oil states
and, within four or five years, rnav well be number one. The natural •
gas reserves in the Cook Inlet Basin have attracted the beginnings of
a petrochemical industry. And Alaska's proximity to Japan and under
development have attracted both markets and capital from that country
as well as from the United States for the products of her timber,
fisheries, and petroleum industries.
These economic developments, together with the logic of
self-government itself, have strengthened the links among the state's
economic centers, attracted a host of supporting. industries, and
provided some of the economies of scale necessary to reduce the price
and cost differentials between Alaska and the rest of the country.
The state is entitled to select land under mineral lease or with
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potential mineral value, and participates in mineral and timber
revenues from federally owned lands, so that a rapidly growing revenue
b~se for government seems assured. Accordingly, neither the state's . , . l f l
longer seriously in doubt.
Alaska still has serious obstacles to its healthy economic
grmvth -and still requires intelligent planning at every level of goverr.
ment. Yet it is the very success of economic develooment efforts in the
state which point up the most critical and most difficult task for
development planning in the foreseeable future. Rural Alaska, and
particularly the state's Eskimo, Indian, and Aleut oeoples, still hanq
precariously between traditional subsistence livelihoods and the urban
culture and market economy .. As a peoole, Alaska's Natives are simply
not participating in or benefiting from the state's spectacular economic
grov,;th. \J.i th few exceoti ons, A 1 aska I s Natives are not property ovmers,
nor do they have the acculturation, the education, or the skills to move
into the job opportunities created by Alaska's growth industries. In
~any cases their plight is compounded by overt or unconscious discrimina
tion, or by indifference fostered by their physical isolation from the
state's centers of progress. In almost every measurable asoect, the
relative economic position of the state's Natives has worsened since
statehood. Ironically, unemployment and poverty in rural A.laska entitle
the state or its subdivisions to participate in a number of special
federally funded programs, but it is not clear that the benefitis of all
these programs do in fact reach Alaska's rural poor.
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This paradox, of course, is not unique to Alaska. Several
years ago, before the United States became massively involved in
Vietnam, the national rate of unemployment was staying above 5 percent
rven 1 i A
then in the government and among economists whether the key to reducing
unemployment was to be found in increasing demand through fiscal and
monetary means or in 11structural II factors. Looking back, it is obvious
that both sides in this debate we~e more than half right. Five years
of expansion of demand, led by a $40 billion increase in annual federal
spending and a $40 billion increase in the money supply, have in fact
created almost 8 million new jobs. But structural unemployment is still
with us as are our-rural and urban ghettos an·d the_ culture of poverty.
Alaska is exceptional only in the relative magnitude of the •
problem. Alaska Natives make up about a quarter of the state's
permanent civilian population. Their cultural distance from urban
industrial America is probably the greatest of all our minorities. But
Alaska Natives have now brought forth a young and increa~ingly sophisti
cated political leadership which is demanding restitution of or compen
sation for their ancestral lands and waters and a real share in the
economic progress originating in the state's resources. These claims
have brought a halt to the state's land-selection program and have cast
a shadow over the prospects for further development of the state's
natural resources. They can conceivably be 11settled 11 in adversary
proceedings and on the basis of legalistic formulas. But such a
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settlement is not guaranteed to provide adequately for either the
development of rural Alaska1 s human resources or for the wise manage
ment of the state's natural resources. Alaska1 s economic development
so far has largely igno
on the land. But the future of the state's resource industries and
the future of the state 1s Native population are now intimately inter
twined .. These aspects of Alaska's development require more than a set
of discrete programs pursued by the several federal and state agencies,
but a philosophy and a strategy of development implemented by a
coordinated set of policies and programs.
As I remarked above, America's traditions and institutions
do not permit centra 1 p 1 anni ng of the 11command11 variety. Nor do I
believe the situation requir~s such a drastic innovation. Alaska is
fortunate that, among the established development regions of the United
States, it is composed of one state and of the whole of that state.
There is, therefore, a natural locus in state government for the major
share of the regional planning effort. The state ought to have a
particularly large role in the formulation of its own development
philosophy and the general strategy of development which follows from
that philosophy. For instance, the question of whether the bulk of
development effort and public works should be concentrated in the more
advanced 11economic core 11 of the state, where their returns would be more
palpable and more immediate, or whether the priority should be in
investment to 11open up11 the more underdeveloped areas admits of no
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clearly correct answer and is largely a matter of values and
philosophy. Similarly, the degree to which Alaska's development
should preserve the frontier's laissez faire attitudes, the extent to
i rh i • 1 1 I
its fishermen, prospectors, homes tea de rs, 1 oca 1 merchants, and other
small entrepreneurs as a refuge from giant capital, bureaucracy, and
the technology of the future, is clearly a matter for political decision
within the state so long as the decisions do not clearly damage paramount
national interests. Since stateh6od, Alaskans have moved far on the
road to developing, at least implicitly, answers to these questions.
~uch remains to be done at the state level in developing the mechanisms
of planning and in arriving at the details of devel9pment strategy;
but if one compares the state's accomplishments with both its needs . and fiscal and population base--the latter rou~hly comparable to that
of Augusta, Georgia; Madison, Wisconsin; or Stockton, California--its
progress has been remarkable.
The continuing large role of the federal government in
Alaska's economy, the huge national interest in the wise development
of Alaska's resources, the national commitment to equality of oppor
tunity for the nation's disadvantaged communities, and the still
limited fiscal capacity of the state call for a regional development
planning body within the federal government. Its job should not be to
direct the work of other federal agencies, much less those of the state,
but should be above all a place where the federal establishment as a
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\'/hole, assisted by a staff of exceptional imagination and competence,
can think about the total impact of government on the total development
of the region· and about the development of the region as a whole within
regional development commissions as a whole are also applicable to the
Alaska instance. The povrnr of the planning agency,both within the
federal ·government and outside it, should be that of analysis,
recommendation, and persuasion. \\f.ithout the encumbrances of responsi
bility for program administration or for the disbursement of funds, the
regi ona 1 body can speak with equa 1 authority to federa 1 administrators
in the field, to department heads in Washington, to the Bureau of the
Budget, to the -state, and, on request, to the Congress. Its authority,
then, will rest not on an abi~ity to command performance but on the
competence of its staff, the intelligence of its thinking, and the
clarity of its presentation.
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