Community Based Economic Development Strategies I

I have been writing here, and talking on the campaign trail, about developing a “community based economic development strategy.”

I want to explain in a little detail what I mean by that phrase and why it is different from, though perhaps partly complementary to, other strategies for economic growth, such as the tax cutting strategy.

The Goals of Economic Development

To begin with, we need to think for a moment about the goals of economic development.

For some folks, the goals of economic development are obvious: bringing new jobs, new people, and thus new tax revenues to the city. Those goals are important. And I also agree with people who say that bringing new middle and upper income jobs into the city is critically important. As I have argued when talking about the promises and pitfalls of gentrification, we need to attract middle and upper income people back into the city and gentrification—if carried out with the appropriate regulations and guidelines—can help create economically and racially integrated neighborhoods like the one I live in, Mt. Airy.

If that is all we mean by economic development, however, then we will not be serving everyone in the city. We have a large population of poor and lower income working class people and a very high percentage of people without high school let alone college degrees. New jobs in education, health, and high-tech industries will help some but not all these people. And, even more importantly, new jobs in these areas won’t help rebuild the communities in which lower income people live.

Poverty is A Communal Problem

One of the great advances in our understanding of poverty and economic inequality in the last twenty years is our recognition that they are not just, or even primarily, problems of individuals. They are communal problems. To have a low income is to have fewer material goods than other people. But the fact is that few people in America are lacking in the basic material goods: clothing, a place to live, heat and hot water. Indeed, almost 98% of Americans have a telephone and TV.

Poor Communities

The real problem with living in a poor neighborhood is that one lives in a poor community, one with few and high priced stores; with limited government services like recreation centers or parks;, with terrible schools;, and with few jobs or connections to jobs in other communities. These are communities with few banks and lots of pay day lending outlets. Most people who live in these communities are hard-working, responsible people who try hard to be good parents. But they live in communities that are afflicted by perhaps ten percent of the population, people who do and sell drugs, commit violent and non-violent crime, create havoc in schools, and disrespect their neighbors. (I’ve discussed these communities in more detail here.) And both because of the limited economic prospects in these communities and the social disorder created by a small number of people, the children growing up in these neighborhoods are cut off from the economic life most of us take for granted. (Most Americans get their earliest jobs from personal connections and work in their neighborhood. Those opportunities are severely limited in poor neighborhoods.)

It is no wonder that a small but significant number of young people in these neighborhoods are so frustrated by their lack of economic prospects—and so angry—that they become predators on their own community.

Locally Owned Businesses

However the problems in declining communities don’t end there. There is one other serious difficulty. In too many of our most troubled neighborhoods there are almost no locally owned businesses. This sometimes leads to ethnic and racial tensions, as one can see in many black neighborhoods where most of the shops are owned by Asians as they were owned by Jews fifty years ago. Those shops tend to charge high prices, not because their owners are gouging people but because the costs of doing business for a small family owned shop in as poor, crime ridden neighborhoods is much higher than, say, Acme’s cost of doing business in Mt. Airy.

No one who stops and thinks about it wants to force existing businesses out of neighborhoods. But there is a real problem when there are no locally owned businesses. It is these businesses that, in most neighborhoods in the city, provide the uniforms for the baseball and basketball leagues. The provide funds, and leadership, for the civic associations that work to improve the neighborhood. They contribute to the bake sales and car washes that fund school activities. They hire locally. The reinvest in the community even when they could make more money elsewhere.

A neighborhood without locally owned businesses is in trouble. I can’t imagine, for example, what Mt. Airy would look like without the work of our local business leaders—Ken Weinstein and Bob Kaufman, the Bushus, the Fellners, the Eflants, and others. Too many neighborhoods, however, do not have this kind of leadership.

Chains

While locally owned businesses are important, we should also recognize that mid and high end chain stores—stores ranging from Marshalls to Banana Republic to the Gap to Talbots—can also contribute to the redevelopment of commercial districts. (Obviously the story is very different when it comes to Wal-Mart, which tends to destroy small businesses and jobs wherever it goes.) While retail chains are not locally owned, they do give their store managers some autonomy and some authority to contribute to the local community.

In addition, these chain stores frequently provide their workers with career ladders that can be an important path from the working class to the middle class. At many of these companies, you can be hired as a sales associates with just a high school degree. But as you work for the company for a while you can gain not only more responsibility and a higher income, but the opportunity to get an education, partly or wholly at company expense, that can enable you to rise still higher into a management position. (And I should add, some of these chains are unionized which helps keep their salaries high.)

For some people opening their own business is the goal. But most small businesses fail, no group of people work harder than the owners of small businesses. (I know, I grew up in a family owned business) and most small businesses do not make a great deal of money. Recent immigrants to the country often pursue careers in small businesses because they don’t have the language skills to work elsewhere—and because extended families provide the capital to start these businesses, a point to which I will come back in part III of this series. (My family’s business was started with financial help from relatives.)

For people with the language skills to be successful the world of corporate retail chain stores, they often provide a better and more secure economic future. So we shouldn’t overlook the importance of encouraging retail chains to move to commercial districts as a way of helping them revive.

Whether we want to see new locally owned businesses develop or chain stores open up, the proper goal of an economic development strategy is to not just to create jobs but to create communities. an economic growth strategy that focuses just on jobs and ignores communities is going to leave more than half of Philadelphia out. That’s why a community based economic development strategy is so important.

The New Progressivism and the Old Liberalism

The analysis I just developed explains, I think, why the liberalism of the mid-twentieth century largely failed. Simply redistributing money from rich to poor does help people improve their standard of living, but it does very little to improve the communities in which they live. So it is no wonder that as America grew richer in the second half of the twentieth century, poverty in many ways became a greater problem. While the Federal government was expanding the welfare state on the one hand, on the other it was encouraging white and middle income flight from the cities by subsidizing highways and home mortgages in the suburbs while encouraging the redlining of urban areas and neglecting public transit. The result was that welfare became a way of life for many people, which further sapped the spirit of people in poor communities.

So the question is how can we encourage economic development that leads to the rebirth of urban communities in our city? That is the topic of the next post in this series.