Rebuilding America's Productive Economy

Policy Paper
Oct. 30, 2006

From its inception as a nation, America's great advantage over its global rivals has stemmed largely from the successful development of its vast interior. The Heartland has been both the incubator of national identity and an outlet for the entrepreneurial energies of both immigrants and those living in dense urban areas.

The term "Heartland" is commonly used to describe the region west of the Mississippi River and east of the Rocky Mountains. This region constitutes the primary focus of this report, although we believe our policy prescriptions also apply to other parts of the country that are culturally similar to the Great Plains and the Midwest, including the inland valleys of the Pacific Northwest and California, as well as parts of central Florida and Pennsylvania.

Historically, and with some exceptions -- notably the South -- the Heartland was dominated by capitalist principles and shaped by the forces of innovation, competition, and a continuous search for maximum economic return. The Heartland contributed significantly to America's development as a global economic power. Over the past century, however, the role of the Heartland declined, as the United States evolved from a primarily agricultural to an industrial and finally an information-based economy. With the move toward manufactured goods and high-end services, the focus of economic development shifted from the agricultural interior toward the great metropolitan regions.

In the early 1900s, Americans began leaving rural areas for cities and suburbs. Farms were consolidated, some were abandoned. The country's interior landscape -- from the rural West to the Great Plains to the Eastern Seaboard -- was littered with shrinking towns and villages.

In the 1970s, however, this dynamic began to change. For the first time in decades, the number of Americans moving to nonmetropolitan areas began to grow. People moved first to the areas closest to the big cities, then increasingly to small towns and cities far from the metropolitan core regions. Small towns, from the Great Plains to New England, began to display new signs of life.

Several factors appear to have contributed to this phenomenon. Perhaps the most important has been the rising cost of living, particularly the cost of housing, in the coastal regions of the country, making lower-cost locales more attractive to both business and individuals. Another has been the technological revolution that allows companies in traditionally urban-centered fields -- from high technology services to manufacturing and warehousing -- to consider locating far from the major metropolitan areas.

As the nation's population grows from roughly 300 million today to some 400 million in 2050, these factors will become even more important. High-speed communications, the development of regional airports, and the availability of urban amenities in once remote places will make the Heartland increasingly attractive to immigrants, skilled workers, and entrepreneurs. The recent development of the Heartland has been sporadic, however, and so long as the region lags behind the rest of the country economically, America's national productive capacity will remain far below its potential.

A great opportunity for 21st Century America lies in the Heartland's vast acreage and abundant natural resources. However, we envision the Heartland as far more than an agricultural zone. Certainly, food production -- particularly in high-value products -- will remain an important component of the Heartland economy. But we also see a future in which high-technology services and communications, energy production, and manufacturing and warehousing will become critical levers for new employment and wealth creation in the Heartland.

We believe this new vision of the Heartland is already taking shape. In contrast to the picture of emptying towns and embattled farmers so often conveyed in the media, we see the Heartland as a potential hotbed of capitalist creation and innovation. It is a reality already taking shape in the "technology corridors" in the Dakotas, the "hidden tech" belt of western Massachusetts, and the revived communities along the eastern Cascades, and with the growth of ethanol and biomass facilities across the country.

Realizing the Heartland's full potential will require intelligent public policy. From the earliest days of the Republic, government has played a role in the region's development, whether through the building of roads, canals, railroads, and airports, or the establishment of land grant colleges, conservation programs, and export markets.

According to the American Society of Civil Engineers, the United States needs to invest $1.6 trillion in infrastructure improvements over the next five years. The need for such improvements is particularly acute in the Heartland, especially with respect to transportation and telecommunications. There is also a need for sizeable investment in highly specialized infrastructure, such as highspeed optical networks, university research and laboratory facilities, technology training centers, and research parks. New facilities to distribute the region's energy resources to the rest of the country -- including pipelines to supply the water necessary to propel both energy production and manufacturing -- will also be needed.

America's economy may well be on the verge of a great resurgence largely unacknowledged by pundits, academics, and the media. The Heartland will play a critical role in that resurgence -- if we develop the right policies.

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