- April 2, 2020
- Posted by: matt
- Category: Newsletter
The Long and Winding Road: Recovering from the Coronavirus Crisis
As we wait out the resolution of the Coronavirus crisis, Iâ€™ve been closely following various pundits and experts as they offer their perspectives on how to respond and how the pandemic will come to an end. While tempted, I donâ€™t intend to offer my own take on whatâ€™s happening now. Iâ€™m willing to admit that I have no clue, and Iâ€™m just as confused and scared as the next person. However, I do have some experience and expertise when it comes to how communities recover from economic shocks over the long-term, whether from a natural disaster, a unique event (such as a military base closure), or from a major industry downturn (e.g. the ongoing decline of the coal industry). In this issue of EntreWorks Insights, I take a crack at what communities can and should do to ensure that they recover as quickly as possible from the current COVID-19 triggered economic downturn.
None of us have been through something like the current COVID-19 related economic shock, but its impacts have some similarities to past economic shocks. The best place to get started is an excellent 2017 book, Coping with Adversity: Regional Economic Resilience and Public Policy. In this work, the authors assess how every US metropolitan area has responded to economic shocks over an extended period from 1978 to 2014. This dataset includes events such as the downturn of the steel industry, the Great Recession, the 1980s savings and loan crisis, the 2001 dot.com crash, and numerous natural disasters
This history suggests that economic shocks are unavoidableâ€”at some point, every community faces some kind of major downturn. While we canâ€™t avoid shocks, we can build resilient communities that recover quicker and better. In general, most communities do recover. In fact, 47% of affected communities recover fairly quickly. Another 36% of affected regions recover, taking an average of 2.9 years to replace lost jobs and economic activity. But, sadly, 17% of regions stagnate, and never really get their economic mojo back.
So, the challenge going forward is how to ensure that your region avoids stagnation and decline, and instead thrives and recovers. Here, we have a good amount of information and evidence about what makes regions more resilient and better able to recover from economic shock, even from intense events like COVID-19.
There is no â€œsecret sauceâ€ for economic resilience. Itâ€™s based on doing the basic blocking and tackling of good economic and community development, with a dual focus on both the short and long term. Where possible, fill gaps and address immediate needs. But also embrace the art of the long view by investing in core infrastructure and talent development.
Three key sets of policies are associated with effective community recovery strategies. Talent development is job one, so continued and expanded investments in workforce and education programs are essential. Recovery occurs when talented people build great companies who generate new jobs and new wealth for the community.
A related set of strategies focuses on improving the competitiveness of local firms. Enhancing the local talent base will help here, but firms will also benefit from strategies that help them capture new markets, develop new products and services, and learn new skills. We have lots of excellent programs in our toolkit already. These include Federal programs like the Manufacturing Extension Partnership, which provides consulting support to small manufacturers, the Small Business Development Center network, and various export promotion programs that help firms identify and capture new global markets. At the local level, various Business Retention and Expansion (BRE) programs help provide opportunities to check in and invest in strengthening local companies.
These long-standing programs may not be new or sexy, but they have a proven track record and a great return on investment in terms of new job and wealth creation. Finally, resilient regions invest in amenities largely as a corollary to local talent development efforts. Amenities can take many forms, such as excellent local infrastructure, recreation facilities, great schools, and the like. The COVID-19 crisis has made it clear that broadband is the missing amenity in many rural locales, and closing this gap needs to be top priority for any underserved location.
Finally, resilient regions invest in amenities largely as a corollary to local talent development efforts. Amenities can take many forms, such as excellent local infrastructure, recreation facilities, great schools, and the like. The COVID-19 crisis has made it clear that broadband is the missing amenity in many rural locales, and closing this gap needs to be top priority for any underserved location.
Unfortunately, we are still in the disaster phase of the current COVID-19 crisis, and current measures to save jobs, help distressed families, and save lives must be our current top priority. But, we will get through this, and we will need to rebuild and revitalize our local economies—hopefully in a manner that lifts all boats and builds more resilient regions along the way.
Going forward, weâ€™ll need a strong policy toolkit that should include the following priority items and investments:
1) Robust Investments in Core Business Assistance Programs: If weâ€™re indeed serious about helping business recovery, we need to back our intentions with real money. That means major new infusions into the Federal business support toolkit, with big budget increases for programs run by MEP, SBA, EDA, USDA, and others. In addition, state and local government efforts will need additional support that can quickly deployed through existing program infrastructure, such as the Community Development Block Grant (CDBG) or the Community Development Financial Institutions (CDFI) program. All of these programs have a proven track record, and can provide an essential lifeline to struggling businesses.
2) Digital Infrastructure Fund: Americaâ€™s rural broadband gap was a disgrace prior to the COVID-19 crisis. We now have many American communities where children must forego basic education because they donâ€™t have internet access. Going forward, this must end. We will need to support a digital infrastructure fund that finally treats broadband as truly essential infrastructure. This is the right thing to do, but it also matters for national security, personal development, and community health. Just as the national highway system was developed (in part) to enhance national security, we must build out our digital infrastructure for larger national purposes as well.
3) Renewed Commitment to Localism: Weâ€™re definitely going to see a continued return to localism and an emphasis on supporting local business. I plan to write more on this topic in coming weeks, but here Iâ€™ll just highlight one idea: Building Third Places.
As more people work from home or pursue independent work, the hunger for connections will also grow. Local economic developers should invest in third places where home-based workers can convene, connect and collaborate (in safe manner, of course). These new third places, which might be coworking sites or other convening spaces, will serve as a lifeline for local workers and help to build stronger business networks as well. (I discussed this topic in previous EntreWorks Insights here).
4) Reshoring and Supply Chain Resilience: Major global firms were already rethinking the globalization of supply chains before COVID-19, and efforts to reshore and secure supply chains will only accelerate further now. Economic developers will need to better understand where local companies already fit or could fit in new supply chain structures.
5) New Thinking about Talent Investments: Prior to COVID-19, most of our discussions on talent development related to training and education. That emphasis will remain relevant, but weâ€™re also going to have to think more broadly about how to provide a stronger social safety net for workers, especially those engaged in the gig economy or the independent workforce. Communities and regions might consider their own social safety net programs (e.g. such as housing or health care support or subsidies) as one means to attract or retain talent. Investments in community amenities (as noted above) will also be a core part of these talent-focused strategies.
In the past few weeks, I have received hundreds of emails about various resource websites related to COVID-19. So, Iâ€™m reluctant to add to that list. But, if youâ€™re looking for resources on long-term economic recovery, check out the OECDâ€™s useful sites on how its member nations are responding to the crisis. The compilations on small business support programs and social policy are especially helpful. The Urban Institute and Upjohn Institute and Restore Your Economy also support good resource sites on longer-term recovery strategies.
Be safe, be healthy, stay home and wash your hands!
Whatâ€™s New at EntreWorks Consulting?
Normally, I like to fill this â€œWhatâ€™s Newâ€ section with my current and upcoming travels and new business engagements. Sadly, much of that fun and rewarding work has been overtaken by events. And, probably like you, Iâ€™ve been hunkering down at home, trying to stay busy, and hoping for the best. As the essay above suggests, I remain optimistic about the long-term prospects for community revitalization, and that hope will drive my workâ€”and my lifeâ€”in the coming years.
We hope to move forward with a much-needed webpage revamp and refresh in the coming months. We also continue to provide more regular news and updates at the EntreWorks blog at http://entreworks.net/blog. Recent posts have discussed the new approaches to layoff aversion, food systems, the gig economy, and other timely issues of the day. You can also access blog updates at our Facebook and LinkedIn pages.