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Broadband May Help Cities Compete in Economic Recovery

September 22, 2009 By

As of this writing, economic recovery is nowhere in sight. In June, unemployment rose to 9.5 percent, with almost another half million (467,000) jobs lost in the month. More than 100 urban areas now have unemployment rates higher than 10 percent, as do many regions.

And according to Mortimer Zuckerman, chairman of U.S. News and World Report, the economy is worse than these numbers indicate. Not counted in the official unemployment rate is at least another 1.4 million people who have given up looking for work and the 9 million workers who have taken part-time unemployment because they cannot find full-time work.

This is terrifying news for cities that have been reeling from reduced revenues for much of the year. As of early February, the National League of Cities (NLC) reported that "unprecedented economic conditions facing the nation are increasingly straining the ability of cities to meet their financial needs." The NLC reached this conclusion based on its latest survey, which found that 84 percent of cities reported facing fiscal difficulties -- up from 64 percent only six months prior. This was the highest percentage in the history of the NLC's surveys, which date back to 1985.

According to the NLC's report, cities are responding to the recession by implementing hiring freezes and layoffs, delaying capital expenditures and cutting services.

"Cities are responding as best they can," noted Donald J. Borut, the NLC's executive director, upon releasing the report. "Their citizens have increasing needs for services just at the same time that revenues are declining."

City finances tend to lag behind the overall economy by 12 to 24 months. So even if the economy suddenly makes a robust recovery this year, cities will continue to feel the degrading economic conditions through 2009 and likely through most of 2010, according to the NLC. And a recovery doesn't appear to be on the horizon anytime soon.

Road to Recovery

Developing a sure formula for economic recovery presupposes that one knows what one is recovering from. And there are growing indications that this isn't simply another recession. The country has already endured the longest recession since World War II. The National Bureau of Economic Research dates the current recession as starting in December 2007. Previously the longest U.S. recession was 16 months, with the average being about 10 months.

If this were simply a normal cyclical recovery, the recession should have ended months ago. Some blame the stimulus package for not providing the immediate economic jolt the Obama administration had been hoping for. But there's far more going on, as the failing U.S. auto industry serves to indicate. President Barack Obama has repeatedly spoken about the need to fix education and deploy world-class broadband more widely to make America more globally competitive.

That's the bottom line that ultimately will determine the fiscal and social health of the nation's communities as they move forward -- effectively competing on the world stage to the extent that most Americans can share in an abundance of generated wealth.

So while most cities vie for a share of stimulus package money and in the meantime hope that recovery won't be too prolonged, even economists are uncertain -- if not skeptical -- about how effective the stimulus will prove to be.

Cities as Engines of Prosperity

If anything is wrong with this picture, it's the notion that federal actions alone can provide the needed remedies. This is the old economic thinking that author and urban theorist Jane Jacobs originally challenged in her books The Economy of Cities and Cities and the Wealth of Nations. As John Barber

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