Appalachia's new region-wide CDFI : building local community with global capital?

Abstract

The Appalachian Regional Commission is currently working with a major foundation on the development of a new regional Community Development Financial Institution (CDFI), Appalachian Community Capital. By connecting Appalachia's small businesses to large external investors, will this CDFI bring more community development capital into the region, and help alleviate poverty? Or, as the neoliberal era deepens into the "Age of Austerity", is this but the latest use of market logic to attempt to solve public, political problems, fraught with the shortcomings of such an approach? I argue that the new CDFI may bring capital into the region. But because it does so using market logic, it cannot ensure that the money will go to the neediest areas, or that it will be invested in a manner which actually creates jobs for existing residents, in locally owned businesses (thereby keeping profit in the region), or in sustainable industries. It also cannot address the problems posed by a dysfunctional civic culture, in part the legacy of big coal's historic corporate paternalism and subsequent disinvestment, as corrupt local elites "other" the mostly white mountain poor as an intractable, permanent underclass. Further, even if the new entity could surmount these issues, I argue that it does not address the underlying challenge: the ongoing outflow of capital out of the region. Due to both regulatory barriers and industry economies of scale, institutional and individual investors ship most of Appalachia's capital out to major national financial centers, where it is disbursed around the world. These levels of exported capital stock dwarf the small volumes of community development capital that any CDFI might hope to reinvest locally. For the region's poverty level to decline, this challenge might be addressed through the removal of regulatory barriers and creation of local institutions and investment platforms to invest both community development capital specifically, and other forms of capital, as well. These institutions and platforms may not be most appropriately constructed at the geographic scale of the Appalachian region, given the economic diversity in the region, and given the value-laden history of the social construction of the term Appalachia itself.