Anti-Amazon graffiti in Long Island City, Queens. In February 2019, a few days after this photograph was taken, Amazon announced it was abandoning its plan to create a new headquarters in the community, citing the opposition of some local political leaders. (CREDIT: Spencer Platt/Agence France-Presse — Getty Images)

Unhappiness today arrives carrying various banners — Trump, or Brexit, or the “gilets jaunes.” Its origins typically lie in the march of technological change and globalization.

Though these have been enormously beneficial for society, the benefits have been distributed unequally. An investment manager in a global hub like London can make trades all over the world instantaneously, and her salary reflects it. In contrast, people in small towns are left devastated when global competition forces the only large manufacturing plant to shut down. Healthy national indicators like low unemployment conceal the presence of communities in pain, some that have historically been disadvantaged, some that are newly so.

For such communities, the loss of jobs is just the beginning. As economic opportunity departs, social disintegration moves in. There are fewer marriages, more divorces and more single-parent families. Despair can lead to alcoholism and drugs, and sometimes to crime. The declining community can no longer support local institutions like schools and community colleges, and as these deteriorate they can’t help the unemployed retool their skills. Without good schools, the young have only bleak prospects. Those with the means leave for thriving areas elsewhere, taking their children with them. This secession of the successful leaves the rest further mired.

What can be done? Community turnaround is so hard because communities have become disempowered. As trade within a territory increases, corporations push the national government to take regulatory powers away from communities, hoping to create a more seamless common market. Similarly, as trade between countries has accelerated in recent decades, international bodies like the European Union have appropriated sovereign powers in an attempt to harmonize business environments among members. But international bodies and national capitals do not have the local knowledge or effective policy tools to turn distressed communities around; lower nationwide interest rates won’t increase investment in towns where crime has pushed businesses out.

Place-based tax incentives for distressed communities might not bring in the right kind of jobs. In New York City, local leaders rejected Amazon’s decision to build a new headquarters in Long Island City, Queens, which the company said would have brought in 25,000 jobs, at an average annual salary of $150,000. Too few in the community were thought to have the skills to land those jobs, while the influx of skilled outsiders might have driven up rents and property taxes, pushing out longtime residents.

Rather than relying on top-down policy initiatives, community revival has to come from the bottom up, identifying and repairing broken links to thriving national and global economies, and piggybacking on their growth. Consider these five critical elements: leadership, engagement, empowerment, funding and infrastructure.

Clear the Way for Local Leadership

The Pilsen neighborhood on Chicago’s Lower West Side was a war zone in the late 1980s; 21 different gangs fought each other on a two-mile stretch of the main thoroughfare, with horrific casualty rates. Pilsen needed to bring down crime to have any hope of revival, but who would take the lead?

Failing communities need leaders who can bring local administrators, educators, businesspeople and residents together to effect change. Finding them is difficult because existing leadership is often paralyzed, and so many capable people have already left.

In Pilsen, new leadership emerged out of despair. In 1988, a young man was shot across the street from a Catholic church; when the pastor asked the congregation how long they could continue to see the downward spiral as someone else’s problem, a group of young community members responded. They chose one of their own, Raul Raymundo, to lead the aptly named Resurrection Project, and three decades later he is still there.

We need creative ways to draw capable people back into their communities, to increase the talent pool from which leaders can emerge. For example, could college loans for those who return to distressed communities be forgiven, so that higher education could be a route to gaining new skills to take home, not just a means of escape for the talented?

Engaged Communities
Are Strong Communities

Pilsen’s leadership engaged the community in lobbying Chicago’s liquor-licensing authorities to close down the seedy bars where criminals gathered.

They involved local businesses in the creation of training opportunities. They encouraged their neighbors to report criminal incidents to the police as a group, so gangs could not target individual informants, and to make themselves visible on the streets at night.

As Pilsen started to crowd out crime, businesses started crowding in. Pilsen is far from wealthy today, but residents have decent livelihoods, the community is much safer and prospects have improved for its children.

Social media now allows leadership to crowdsource ideas and give willing volunteers more responsibilities. In turn, this engaged community can use information technology to monitor officials, and curtail corruption and laziness.

With Empowerment Comes Ownership

Why can’t community leaders choose which taverns to license, or which businesses to welcome, and with which tax incentives and regulations? Empowered communities can attract businesses more appropriate to their needs. And information technology enables corporations to manage local differences in regulation and taxation at a lower cost.

Local empowerment is not a utopian ideal. In Switzerland, citizens speak three different national languages and a quarter of the population is foreign-born. Many decisions are passed from the center to 26 administrative subdivisions, or cantons, or even further down to the 3,000 or so municipalities, based on the principle of “subsidiarity.” This requires that governmental decisions be delegated to the lowest level capable of considering them effectively. For example, the Swiss federal government is responsible for institutes of technology; the cantons are responsible for high schools; and the municipalities control primary schools and kindergartens.

Decentralization and more democratic engagement do not solve everything. Switzerland makes its share of decisions that are poorly informed or unfair to local minorities. But there are legal checks and balances to guard against egregious errors. Moreover, the right to decide — and even to make mistakes — gives the community ownership of its decisions, and with it an incentive to do better.

Freedom in No-Strings Funding

Communities in economic decline may have limited ability to raise new taxes. Financial support from the regional or national government or from private philanthropies, if free from constraints, can help to seed local projects.

As a community revives, local assets become more valuable, allowing for continued financing if the community can maintain ownership. In Denmark in the 1990s, Copenhagen sold land for private development and used the proceeds to construct a metro system. This enhanced the value of the land it still owned in the vicinity of the new metro, which could then be sold to expand it further.

Infrastructure: Rethink and Refurbish

New infrastructure — a refurbished downtown, an accessible waterfront, inviting new parks or trails, enhanced digital connectivity — can turn a community around. Sometimes, simply reconfiguring the existing infrastructure can make it more useful. A study published by the Federal Reserve Bank of Philadelphia in 2018 found that for residents of a neighborhood at the midpoint between two counties in northern Pennsylvania, only 12 percent of suitable jobs were reachable by bus within an hour, even though 73 percent of those jobs were within a 15-minute walking distance from a bus stop. Why? Because most regional transit systems take passengers first to a central hub, regardless of their destination. Bus routes that link residential areas directly to work locations would help low-income workers get there quickly, a key to coping with household emergencies while holding a job. Community input in matters like configuring local transportation is essential.

Healthy communities are more than economic necessities. In many countries, national populism can inflame the majority with fears that the established culture is being diluted, urging a return to tradition and new checks on immigration. There is an alternative: celebrating culture within the community itself rather than striving for an impossible national homogeneity. Some will choose monocultures. Others will choose multicultures. Any choice should be respected, as long as all are united under shared national values and no one is deliberately left out. National governments can help, by acting to prevent rejuvenated communities from becoming segregated, and enforcing laws against discrimination. Rather than looking to politically fractured national capitals for answers, we should grant communities the ability to exercise more powers locally. This might just be the way we make technological change and globalization work for all.

© 2019 Raghuram G. Rajan. Distributed by The New York Times Licensing Group

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Raghuram G. Rajan, Governor of the Reserve Bank of India from 2013 to 2016, is Professor of Finance at the University of Chicago Booth School of Business.