Hello Everyone:
Yours Truly is back after spending an adrenaline-fueled afternoon in Downtown Los Angeles. Blogger needed some serious downtime before returning to the blog and just in time for the latest updates from Washington D.C. First, the Department of Justice' inspector general, assigned to look into allegations of political bias in the investigation Trump campaign ties to Russia, released his report. The conclusions, the investigation may have been sloppy but no political bias. Naturally the president was quick to tweet is anger over another of his favorite conspiracy theories was debunked. Second, the House of Representatives Judiciary Committee released two articles of impeachment. The Blogger Candidate Forum will be back tomorrow to discuss the articles and a possible alternate to a trial in the Senate. In the meantime, let us talk about growing the wealth of poor neighborhoods.
| Example of a distressed neighborhood in the United States fortune.com |
One of the most intractable problems plaguing contemporary United States today is revitalizing distressed communities. Richard Florida writes, "Whereas concentrated poverty has long been a problem in urban centers and parts of the rural South, today it has spread into the suburbs and across many more parts of the country" (citylab.com; Nov. 26, 2019; date accessed Dec. 10, 2019). Concentrated poverty has deepened so much, that the middle class has declined.
A recently published report from Drexel University, Towards a New System of Community Wealth (drexel.edu; date accessed Dec. 10, 2019) by researchers Ross Baird, Bruce Katz, Jihae Lee, and Daniel Palmer outlines a potential solution. The co-authors defined community wealth as,
...a broad-based effort to build equity for low-income residents, "which could unlock" hundreds of billions in market and civic capital "to revitalize struggling places across America" (citylab.com; Nov. 26, 2019).
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| 2018 map of distressed communities eig.org |
The Drexel University report was assembled in conjunction with the school's Nowak Metro Finance Lab, investment platform Blueprint Local (blueprint-local.com; date accessed Dec. 10. 2019), and Los Angeles Mayor Eric Garcetti's Accelerator for America (acceleratorforamerica.com; date accessed Dec. 10, 2019). In the body of the text, the co-authors note that "concentrated distress did not just happen, but is the resultr of a long history of class and racial division, and policies both underfunded and ill-advised" (citylab.com; Nov. 26, 2019).
Thus, African American entrepreneurs are less likely than their Caucasian counterparts to receive venture capital funds or small business loan, and when they do receive the funds, they are usually for smaller amounts. For example, a Black-owned business averages less than white-owned businesses: $58,000 versus $546,000 (Ibid). This is not only detrimental to the distressed community but to the overall economy. The co-authors also cite another study that "found the U.S. economy would have 1 million additional businesses and 9.5 million more jobs if minority entrepreneurs started enterprises at a rate similar to white entrepreneur" (Ibid).
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| Map of American opportunity zones eig.org |
The co-authors write that "Solving such deep-seated inequity will require shifting from an older model of community development to the new paradigm of community wealth building,..." (Ibid). The old model was characterized by top-down federal programs that frequently bypassed neighborhood problems and assets. This strategy typically focused on housing while de-emphasizing economic development. Whatever programs and initiatives were often too narrow in scope and siloed. The funds were insufficient in order sustainable institutions and holistically solve problems.
Ross Baird, Bruce Katz, Jihae Lee, and Daniel Palmer believe that effectively growing community wealth is founded on four pillars:
- Growing individual assets in distressed places. Upgrading job skills can enable residents to buy their own home and invest in entrepreneurial opportunities.
- Growing collective neighborhood-based assets. Strengthening community institutions will create, capture and deploy value for local priorities and purposes...
- Improving access to private capital. The co-authors believe that communities should consider attracting socially conscious investors, willing to make a long-term commitment and have reasonable expectations for financial returns.
- Enhancing inclusions. Ensuring that all the residents have an opportunity to participate in economic opportunities and share the newly created wealth (Ibid)
| Economic revitalization example reports.jpmorganchase.com |
Community wealth building is not just a government function. Richard Florida writes, "In fact, the most productive actors are universities, medical centers, and other anchor institutions; local investors; and neighborhood and civic organizations" (Ibid). Bruce Katz and the late Jeremy Nowak's 2018 book The New Localism (thenewlocalism.com; date accessed Dec. 10, 2019) argue that "bottom-up efforts have been key to rebuilding cities across American and the world" (citylab.com; Nov. 26, 2019).
The Drexel University paper, Towards a New System of Community Wealth, argues that current federal Opportunity Zone legislation can jump start positive change. Mr. Katz emailed CityLab,
Opportunity Zone emphasize equity investment as opposed to direct federal subsidies and debt financing; their projects are broadly interdisciplinary as opposed to project focussed; and they require investors to take a long-term investment posture of a minimum ten years to realize the maximum tax benefits of the programs (Ibid).
On paper, opportunity zones sound like a great idea, but this is not always the case. Recent news reports (nytimes.com; Aug. 31, 2019; date accessed Dec. 10, 2019) have exposed abuses (Ibid; Nov. 6, 2019) in the program Mr. Florida reports, "Because they incentivize large-scale investors and developers, opportunity zones run the same old risk of displacing local businesses with chains and corporations" (citylab.com; Nov. 26, 2019). Therefore, making Opportunity Zone policies work for distressed communities requires rigorous regulatory guidance and restrictions. Economist Tim Bartik argues (Ibid; Nov. 14, 2019), "we need a combined national and local commitment to placed-based policies" (Ibid; Nov, 26, 2019). These types of policies have a proven record of enhancing job skills; supporting and nurturing local entrepreneurship; providing services to small- and medium-sized businesses; investments in community assets such as schools, parks, and public safety.
Richard Florida posits that community wealth build is the most important issue facing contemporary America. He is right to a point because community wealth is not a panacea, instead it is a driver of closing the social and economic equity gap. Community wealth building is part of an overall shift from grant-funded federal money for urban policy towards a more localized, entrepreneur-driven approach. Unlocking community wealth also means taking a more inclusive approach. The new community entrepreneurial organizations must make a concerted effort to extend urban revitalization benefits to the people and places that, thus far, have been left behind.
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