Modernization of State Government: Entry into New Policy Areas
In the United States there are fifty distinctive (state) economic development policy systems (SSS), each with idiosyncratic sub-state relationships/dynamics, distinctive sets of EDOs, and biases toward certain strategies, tools, programs, and service delivery patterns. How that “state” of affairs came to be was first approached in discussion concerning values incorporated into state charters/constitutions and the nineteenth century gift and loan clauses. Dillon’s Law ensured the state could not escape playing a significant role in municipal-level economic development. The evolution of the state SSS into an economic development policy system that is a conscious attempt by the state to play an independent and formative role in joint state-local economic development is primarily a post-1900 development.
In the early twentieth century state governments modernized bureaucracies and rationalized decision-making to deal with realities of an industrial and increasingly global economy[1]. Budgets, planning, and above all administrative reorganization were fairly commonplace in the North and Midwest. Cabinet departments and regulatory commissions were established as formerly independent bureaus and helter-skelter, hodge-podge offices were consolidated into a policy area and placed under managerial control–usually the governor’s, but sometimes the legislature. Financing through bond issuance linked to budgeting, auditing and accounting standards were key innovations. Legislatures also modernized. States, like municipal governments, had finally had developed modern bureaucratic structures and administrative capacity for the first time in their history.
The policy areas that benefited initially were infrastructure (transportation) and education. Directly relevant to economic development, the 1916 Federal Highway Aid Act encouraged the few states that did not already have state highway agencies to create them. World War I sped up the need for enhanced logistical and transportation improvements and so by the early twenties, with the arrival of the Model T, state-financed highway construction was on steroids. Critics of suburbanization contend interwar highway sprawl played a large role in the demise of street cars and suburbanization that followed. In any event. Transportation infrastructure installed during these years was uneven.
Between 1921 and 1931, the surfaced mileage under state control in the United States rose from 84,000 to 258,000[miles] …. With remarkable rapidity the states had constructed a web of paved highways to replace the dirt roads prevalent just twenty years earlier. The pace of development had been uneven, with Michigan pioneering the construction of superhighways and Mississippi barely entering the age of concrete pavement. In fact, the highway programs of the 1920’s pointed up one of the flaws in twentieth century federalism. Some states were more than able to shoulder the demands of the age with no help from Washington D.C. whereas others were too poor or sparsely populated to handle the task…[2]
Also developed in these years were state parks–sparking enhanced tourism initiatives at both state and local levels. For example, “From 1924 through 1928, twenty-eight new state parks were created” in New York by Robert Moses and his Long Island State Park Commission. California tried to keep up with Moses [hiring Olmsted Jr. to survey the state]) and their burst of state park development occurred in the thirties. Other states, in fits and starts, entered into the policy area as well. The later involvement of the Civilian Conservation Corps (CCC) fleshed out many state park initiatives during the rough years of the Depression. State park development was almost exclusively a state-led initiative[3]. Enhanced state involvement in education, K-12, especially was also significant in this period and served as an important pre-condition for future education and workforce economic development initiatives. Between 1910 and 1930 states were active in highways, transportation, airports, education and even pollution control. State taxation structures were also enhanced.
Do Herds Diffuse?–Horizontal Federalism
Because of Dillon’s Law economic development programs/tools require state authorization to legally exist. State empowerment is a necessary first step in sub-state economic development innovation. Over the years academic literature has attempted to understand the diffusion of states approving economic development empowerment legislation. Richard C. Feiock[4] summarizes the motivation-process for adoption of economic development policies:
… categorized under one of three different headings. The first set of explanations views the enactment of development policy as a response to the social and economic conditions of states and localities. The second type of explanation suggests that the organization and structure (degree of party competition or strong governor) of government institutions may either facilitate or impede adoption of development policy instruments. The third set of explanations focuses on the internal dynamics (politics) of state and local political systems and the organization of business interests (growth coalitions).
Our impression is that all of Feiock’s explanations are valid, but they are not mutually exclusive. I also have observed state herd behavior is more likely than not when an economic development “innovation” appears. The issue with state economic development empowerment legislation is how much importance to attach to it. Better to copy and empower sub-state jurisdictions to act than to let your competitor roam freely over the competitive landscape. If the arrow is used, fine–if not, fine also–it’s there if you need it and no one can say the state is negligent in matching the competition. States (like sub-state jurisdictions) hold an “arrow in my quiver” mentality in adopting innovations from other states and regions. Some states will use the arrow intensely; others less intensely; and still for others the arrow never leaves the quiver. The issue to me is not diffusion, but the intensity of innovation’s use after diffusion, and whether the innovation “travels well”, i.e. is a carbon copy of the original innovation, or tailored in some way by the imitating state.
The Development of a State SSS
Starting in the early 1900’s, and continuing into the 1950’s, states and state legislatures, while often reluctant to empower Big City municipalities and fearful of charismatic Big City political leadership, hesitantly moved into the economic development sphere. Some of this was forced upon them by municipal pressures for empowerment and/or other urban legislation necessitated by Dillon’s Law. Also, the federal government, especially in the Depression years, thrust the states into the modern era by essentially compelling a serious modernization of state political/bureaucratic structures and processes. Pushed by economic and demographic changes as well, states deliberately entered into several policy areas (transportation and education) important to economic development. In other instances, several states on their own initiative, gently, but noticeably, set up bureaucratic structures and commenced several important economic development policy initiatives/strategies. One such foundational initiative was to either establish or place formal economic development-like programs into a state-level bureaucratic entity(s)—in effect setting in place the first state-level EDOs. Accordingly, our future treatment of the independent state role in economic development we shall conservatively restrict our prime focus to the following types of activities and programs:
- The evolution of single function economic development agency(s) or department(s)—and a multi-function department/agency which serves the states’ lead economic development role.
- The establishment/empowerment of economic development strategies-programs-tools intended for sub-state EDOs to be created specifically for implementation of these program—the SSS.
- State regulation of industry sectors, legislation which affects the factors of private production and profits, attracts/retains resident population—all of which set a more or less distinctive business climate vis-à-vis other relevant states.
- The evolution of economic development programs, activities/strategies (often lodged within the state CEO (governor’s) office) and conducted independently apart from sub-state jurisdictions.
The first step in this development of the state SSS was its modernization of political/bureaucratic structures and process sufficient to establish sufficient state government/bureaucratic/political capacity to develop policy-making systems relevant to economic development.
[1] Jon C. Teaford, The Rise of the States: Evolution of American State Government (Baltimore, Johns Hopkins Press, 2002); Chapter 4.
[2] Teaford, the Rise of the States, op. cit. p. 105.
[3] Teaford, the Rise of the States, op. cit., Chapter 5.
[4] Richard C. Feiock, “The Adoption of Economic Policies by State and Local Governments: A Review“, Economic Development Quarterly, volume 3, Number 3 (August 1989), pp. 266-270
Ron W. Coan 