One of the central economic and social challenges of our time is widening inequality over the past generation between superstar cities and their surrounding areas on one hand and smaller cities and rural areas on the other. Geographic inequality has serious consequences: It concentrates economic growth and opportunities in a small number of places, while the rest experience not only economic stagnation, but also declining health outcomes and in many cases rising “deaths of despair.”

Economists on both the left and right tell policymakers that little can be done about this. They say that the agglomeration of economic activity in superstar cities is a natural phenomenon—and a desirable one, insofar as it juices GDP growth—and they advise policymakers to focus on helping people “move to opportunity” or providing subsidies and redistribution to those left behind.

This is incorrect. A potent but often overlooked solution to geographic inequality is regulation. Conservative policymakers who are interested in addressing issues of geographic inequality and expanding economic growth to smaller cities and rural regions should return to the traditional American approach to regulating network industries.

Conservative policymakers who are interested in addressing issues of geographic inequality and expanding economic growth to smaller cities and rural regions should return to the traditional American approach to regulating network industries.

Conservatives have become acutely aware of the need for regulation in the modern network enterprises of “Big Tech,” like social media, search, and e-commerce. Precisely the same rationale applies to scrutinizing the market structure and practices of airlines, railroads, and telecom. Indeed, these latter providers of physical infrastructure are critical to the economic vitality of physical places.

Network, platform, and utility (NPU) industries (for instance, transportation, telecommunications, energy, and banking) usually feature network effects, high capital costs, and tendencies to monopoly or oligopoly. As a result, competitive markets are unlikely to generate investment in these critical infrastructural services across a wide geography. This is intuitive: It is more expensive to send a letter or run scheduled flights to rural Alaska than to Dallas or Detroit; there is simply not enough volume to make regularly scheduled service affordable. Market players will not serve these areas—or if one does, it will likely be a monopolist that can and will charge exorbitant rates, collecting from locals the maximum price they can pay. To use another example, if only one railroad can bring the farmer’s crops to market, it can extract all of the farmer’s earnings for itself. If the farmer doesn’t pay, the crop will spoil and he’ll be left with nothing but debt. Who would want to become a farmer under such conditions?

The American system of regulated capitalism solved this problem. For NPU industries, policymakers in the 19th and 20th centuries established a system of structural regulation to ensure, among other things, broad geographic coverage of the infrastructure for commerce and communications. This system applied, with slight variations, to railroads, telegraph, telephone, postal service, electricity, airlines, and more. The system’s vital, interlocking elements included:

• Entry restriction and corporate privileges. One or more firms were granted a privilege to operate in an industry, with limits on competition—preventing a new entrant from focusing on only the most profitable routes, at which point other firms would have to abandon higher-cost rural and small-town service to compete. In exchange for these privileges, the law also assigned firms critically important duties.

• Universal access and exit restrictions. Firms were required to serve everyone in their geographic area and could not abandon towns or cities without regulatory approval.

• Nondiscriminatory pricing. Firms could not price-discriminate between big and small customers, or between users in small towns or big cities. Railroads were banned from charging more for short-haul freight transportation (relied upon by rural farmers who live between two cities) than longer hauls from one big city to another. Customers in many sectors were also guaranteed uniform rates for service. The cost of a stamp is the same whether the letter goes to Alaska or Dallas. Regulated airline prices were set based on mileage—equal rates for equal miles. This meant there was no penalty for living in a smaller city or less populous region.

In the middle of the 20th century, America was undergoing a convergence in which poorer areas were growing faster and thus geographic inequality was shrinking. After deregulation, convergence halted—in many cases, gaps are now re-widening.

The system worked. In the middle of the 20th century, America was undergoing a convergence in which poorer areas were growing faster and thus geographic inequality was shrinking. After deregulation, convergence halted—in many cases, gaps are now re-widening. Smaller cities like Dubuque, Iowa, are losing air service. To preserve its own air service, Cheyenne, Wyoming, guarantees the revenue of airlines—the same airlines that make billions in profits in flush years and get federal rescue dollars when times get tough.

Policymakers need to talk about how policy choices, and deregulation specifically—not inevitable and irreversible economics trends—have been a disaster for small cities and rural America, and how we can make changes to reinvigorate these areas.

In particular, policymakers who care about geographic inequality should advocate for renewed regulation in the following areas:

• Railroads. Deregulation of rail led to abandonment of rail lines, the shrinking of the once great American railroad network, and the squeezing of countless small businesses and farms forced to rely on a single provider. Deregulation also enabled railroad management to disinvest, returning hundreds of billions of dollars to shareholders while leaving their industry less resilient. A new system of railroad regulation should focus on expanding geographic access and channeling innovation toward safety and technological improvements, not merely cost-cutting that benefits shareholders.

• Airlines. The airline industry is now an oligopoly of only four big airlines. There’s little competition, particularly in so-called “fortress hubs” like Dallas and Atlanta. The airlines themselves are caught in a boom-and-bust cycle, in which they make high profits in the right conditions but then go bankrupt, demand taxpayer bailouts, and consolidate further through mergers. Who suffers the most? The cities and people that airlines have stopped serving. Policymakers should start pushing for new airline regulations that require service to smaller and mid-sized markets, in order to ensure that the nation’s basic transportation infrastructure benefits the entire nation.

• Broadband Internet. Across the country, people have problems with internet access. In many places, especially rural areas, there is no high-speed service, or there is no competition and consumers face exorbitant prices. Monopolist utilities shouldn’t get to price-gouge consumers, because like telephones and electricity, the internet is a utility essential to modern life. Regulation should tame the big telecom monopolies and ensure that they serve rural places with affordable, high-speed Internet.

Americans should not accept infringement of their liberty from too-powerful corporations any more than from too-powerful government.

In framing these issues, the key principles and themes to stress are:

• The American Tradition. The traditional American approach, for generations, was a system of regulated capitalism that spread economic opportunity all across the country—not one that concentrated it into a few big coastal cities.

• Economic Infrastructure. Transportation and communications are the infrastructure of the economy—they are essential for all kinds of commerce, growth, and opportunity. Regulation is essential in these areas to ensure that everyone has access to the building blocks for entrepreneurship and economic opportunity—whether in rural America, in a small town, or anywhere else.

• Constraining Corporations. Proponents of deregulation have tended to present profit-seeking corporations as inherently beneficial and government intervention as inevitably destructive. But when it comes to NPU industries, markets don’t work the way they are supposed to, and Americans should not accept infringement of their liberty from too-powerful corporations any more than from too-powerful government. Sometimes regulation can be the problem, but sometimes it is an indispensable part of the solution.