Child Development Is Economic Development
A Conversation with Economist Art Rolnick
Abstract: The public dollars spent to stimulate economic development would be more wisely invested in child development programs, according to two different streams of research. Brain research shows the impact of experiences and environments on the developing brain architecture, with weaker architecture leading to increased vulnerability to later problems ranging from anxiety and depression to cardiovascular disease, diabetes, and stroke. Longitudinal studies show that high-quality early childhood programs reduce the number of low-income children who later need special education, public assistance, or incarceration, and increase the number who have well-paying jobs and high school degrees. These studies show a long-term rate of return of up to 16 percent for every dollar spent, making programs such as these a smart economic development strategy.
Council Member Arthur J. Rolnick, Ph.D., is senior vice president and director of research at the Federal Reserve Bank of Minneapolis. He also serves as an associate economist with the Federal Open Market Committee, and as an adjunct professor of economics in the MBA program of Lingnan College, Guangzhou, China, and at the University of Minnesota’s Carlson School of Management. As a top official of the Federal Reserve Bank, he regularly attends meetings of the Federal Open Market Committee—the Federal Reserve’s principal body responsible for establishing national money and credit policies. He is past president of the Minnesota Economic Association and he serves on several nonprofit boards, including the Minnesota Council on Economic Education, the Center for Economic Progress, the Citizen’s League, and Ready 4 K, an advocacy organization for early childhood development. He is also on the Minneapolis Star and Tribune’s Board of Economists, and is a member of Minnesota’s Council of Economic Advisors.
The best investment in economic development that government and the private sector can make is in the healthy development of children, says Art Rolnick, Ph.D, senior vice president and director of research at the Federal Reserve Bank of Minneapolis. Judging by where the money now goes, such thinking is unconventional. For decades, state and local governments have annually spent billions of public dollars to stimulate economic development. Their primary tool: subsidies, in the form of tax breaks, free land and other incentives to companies that locate or expand their businesses in hometown markets.
Has the traditional strategy paid off?
“No,” says Rolnick, a contributing member of the National Scientific Council on the Developing Child. “I’m speaking for myself here, and not necessarily for the full Council. But our research shows that, nationally, the traditional approach creates no new jobs or businesses. The bidding war among communities to attract companies is, at best, a zero-sum game that distorts market outcomes and diverts public funds from more productive investments in economic development. Here in Minnesota, one suburb invested a huge amount of money luring a big-box store from another suburb.” Rolnick questions the wisdom of that investment.
A New Approach for Long-Term Economic Growth
Whatever one thinks about traditional economic development strategies, focusing on child development could become a new and positive approach for long-term economic growth, says Rolnick. He and research associate Rob Grunewald, an economic and public policy analyst for the Federal Reserve Bank, propose that society adopt the perspective of child-development-as-economic-development, based on two independent streams of research.
One comes from the institutions that study brain development and the impact of experiences and environments on the developing architecture of the brain. This research shows that a large percentage of the brain is built by the time a child reaches age five, and that a child’s home and community environment play a critical role in the formation of a strong or weak brain structure. If, for example, a child is raised in an environment of toxic stress, or suffers a psychological trauma, the architecture of his or her brain can be severely compromised; the body can release harmful chemicals in the brain, potentially impairing physical growth and making it more difficult for neurons to form connections with each other.
The weakening of the brain’s architecture, in turn, weakens a child’s ability to respond positively to future stresses, including normal life obstacles, and can increase a child’s vulnerability to later problems, ranging from anxiety and depression to cardiovascular disease, diabetes and stroke. The child’s ability to learn and interact positively with other children is therefore diminished. (For more information on stress and brain development, see “Stress and the Architecture of the Brain”.)
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