Jeff Zimmerman's 'Increibles Las Cosas A Se Ven' mural is displayed in the Pilsen neighborhood in Chicago, Illinois on June 7, 2019. (Photo By Raymond Boyd/Getty Images)

Editor’s Note: Raghuram Rajan is the Katherine Dusak Miller Distinguished Service Professor of Finance at Chicago Booth and author of The Third Pillar: How Markets and the State leave the Community Behind. He was governor of the Reserve Bank of India between September 2013 and September 2016. The opinions expressed in this commentary are his own.

As technological change has allowed societies around the world to prosper, others are being left behind.

Though technology has brought down the costs of making and transporting goods, many jobs have been automated away, or outsourced to foreign countries. New jobs are being created, but many of them are low-paying, low-skill jobs in urban areas, such as assembling online orders in a warehouse. And the higher-income jobs that are created, like software programmers, require skills that those who have been laid off simply don’t have.

Faced with the choice of moving to a costly city for a low-paying job or spending years retraining while finding some way to pay the bills, many workers instead stay jobless in their own communities.

Widespread local unemployment, with little hope of economic revival, frequently leads to social breakdown — broken marriages, teenage pregnancies and substance abuse — as well as a precipitous decline in the quality of local institutions like schools. And when the quality of the local school or the community college deteriorates, the pathway to good jobs gets even more difficult. National governments seem to be paralyzed by the magnitude of the problem — no response seems sufficient so they do little.

What is to be done? Policies that stimulate national growth have little effect on disconnected, depressed communities, which each face their own challenges. For one community, the critical task may be to reduce crime so that businesses become willing to invest there. For another, it might be to get access to broadband so that local artists can sell online. And for others it might be to alter the community college curriculum so that it meets the needs of local employers. One-size-fits-all policies created in national or even state capitals typically do not work. Instead, we need policies that tackle the specific challenges of each community. These are more likely to be effective if developed from the bottom-up rather than top-down. Answers lie within communities — not outside of them.

There’s already evidence of this happening. Back in the 1990s in Chicago’s Pilsen neighborhood, 21 different gangs fought each other on a two-mile stretch of the main thoroughfare, with horrific death rates. Locals understood that if Pilsen was to become attractive to businesses, they had to reduce the crime rate. So they lobbied the licensing authorities to close down seedy bars where criminals congregated, encouraged the community to report criminal incidents to the police collectively (so that gangs could not target individual informants) and to come out on the streets after criminal incidents so as to “crowd out” further crime. Business and jobs are now crowding in.

Switzerland, a small country with an extremely diverse population (there are four main language groups, and 25% of the population is foreign-born), has flourishing communities. Local leaders in its 26 cantons, or subdivisions, and community leaders in its more than 2,000 municipalities make many of the policy decisions. For instance, cantons govern what happens in high schools while municipalities have control over primary schools. Because people have much greater visibility and control over their local government, they have a much greater desire to engage in overcoming community challenges. This can help generate the community spirit that is often missing in declining communities.

Success stories like Pilsen’s and Switzerland’s suggest that community turnaround starts with a motivated and empowered local leadership team. The key challenge is to restore links between individual communities and thriving national and global economies so the communities can piggy-back on broader growth. Locals can identify hidden resources as well as critical impediments. When engaged, local residents can effect great change, which is why their involvement is important.

While communities should lead revival efforts, they still need support. The government can help declining communities hold on to talented people. For instance, governments can forgive the college loans of those who return to live in these communities for a number of years, so that college becomes a route to upskilling locals, not a means of escape for the talented. Unrestricted government funds can be sent to the local community so that the community has the equity to seed necessary projects. Private capital, drawn in by government tax incentives, can augment these funds, but it is important that such flows dovetail with local plans. And, of course, the government can provide for infrastructure like broadband access or physical access like highways, tying remote communities to larger national and global markets.

Most importantly, the government can prevent rejuvenated communities from becoming segregated, tyrannical or corrupt by ensuring that national laws against discrimination apply to all communities, and that members have both the necessary information and the democratic right to oust bad local leaders. This will create strong, agile and empowered communities, ready for the world of tomorrow.