The Transition of Appalachia and the Transformation of Prosperity in the United States

This article was published in the July, 2010 issue of Solutions Journal

I. Overview

Nearly two centuries ago, English economist David Ricardo put forth the "Theory of Comparative Advantage" to guide trade policy between nations. The theory posited that nations should specialize in the production of a small number of goods which they could manufacture efficiently, then sell these to other nations in order to generate income needed to buy the things they did not produce themselves. While many countries were quite capable of producing a broad array of products, Ricardo insisted that all would be better off by concentrating on a small number of exports rather than developing broadly based manufacturing sectors. This notion of "specializing in what you're good at" has underpinned the trade and economic development policies of the United States - and most industrialized nations - ever since.

There is no question that the idea of comparative advantage and the policies of economic globalization that it helped spawn have led to an extraordinary proliferation of material goods around globe. There is more "stuff" available, in aggregate and per capita, than ever before. But a reliance on exporting a few things to generate income to import many things has created enormous problems around the globe, particularly in rural, resource-dependent regions like Central Appalachia. In the Appalachian portions of West Virginia, Kentucky, Tennessee, Ohio and Virginia, these problems have included:

· An historic focus on production and export of cheap commodities, particularly energy, wood products and tobacco, as the defining characteristic of both economic and political thinking;

· Economic uncertainty and generally declining opportunities in each of these core sectors, as farmers, workers and businesses are primarily "price takers", unable to compete with less expensive, usually off-shore alternatives;

· Enormous ecological problems as the rich natural resource base is "overused and undervalued" in an effort to compete with low-price alternatives;

· Low levels of community wealth, in spite of the rich natural resource base, owing to some combination of resource and land ownership concentration, a lack of value adding infrastructure, and the political power of the coal industry, often at both local and state levels; and

· A broad decline in self reliance among individuals, households and communities.

Even so-called "alternative economic development strategies" have operated within the same paradigm of global competition and comparative advantage. This has led to an extraordinarily expensive competition for a limited pool of companies, many of which stay less than ten years. The resource that is being "overused and undervalued" in this strategy is people, whose low cost labor is as attractive as cheap timber, at least for a while. As a study by Dr Thomas Lyson of Cornell University demonstrated, those communities that "win" the corporate bidding competition are often the worse for it: Comparing over 200 manufacturing counties around the nation, Lyson found that those with one or two large, dominant industries had higher levels of income inequality, substandard housing, worker disability and crime rates than those with many small businesses (Quoted in Stacy Mitchell, "Big Box Swindle", 2006).

As business writers William Wolman and Anne Colamosca said more than a decade ago, " A hardheaded look at the world suggests that the betrayal of work is only beginning. In the global economy of the mid-1990s no country can stay ahead for very long without continuing strenuous effort on the part of corporations to cut costs, reorganize their workforce, and shed employees. And no country surges to the head of the field without inviting rapid retaliation by its rivals." (Wolman and Colamosca, "The Judas Economy").

Is there a viable alternative to the global comparative advantage model for the Appalachian region, one that can grow beyond demonstration projects and niche markets? This paper will explore this question, beginning with a deeper examination of the problems with the prevailing economic model. Emerging initiatives designed to build community wealth while restoring or sustaining the ecosystem will then be discussed, with their potential to expand and multiply given particular consideration. Lastly, a new model for sustainable rural development will be offered as a framework that might generate significantly better outcomes for people, communities and the environment.