2000 Census: TM-P067. Percent of Persons Below the Poverty Level in 1999 Source: American Factfinder (accessed Oct. 21, 2003)

2000 Census: TM-P067. Percent of Persons Below the Poverty Level in 1999Source: American Factfinder (accessed Oct. 21, 2003)

2000 Census: TM-P067. Percent of Persons Below the Poverty Level in 1999Source: American Factfinder (accessed Oct. 21, 2003)

DETROIT

2000 Census: TM-P067. Percent of Persons Below the Poverty Level in 1999Source: American Factfinder (accessed Oct. 21, 2003)

SAN FRANCISCO

2000 Census: TM-P067. Percent of Persons Below the Poverty Level in 1999Source: American Factfinder (accessed Oct. 21, 2003)

CHICAGO

2000 Census: TM-P067. Percent of Persons Below the Poverty Level in 1999Source: American Factfinder (accessed Oct. 21, 2003)

CHICAGO

2000 Census: TM-P067. Percent of Persons Below the Poverty Level in 1999Source: American Factfinder (accessed Oct. 21, 2003)

NEW YORK

2000 Census: TM-P067. Percent of Persons Below the Poverty Level in 1999Source: American Factfinder (accessed Oct. 21, 2003)

CENTRAL PARK

NEW YORK

NEW JERSEY

NEWARK

BROOKLYN

Teitz, Michael B., and Karen Chapple. 1998. The Causes of Inner-City Poverty: Eight Hypotheses in Search of Reality. Cityscape 2 (2).

“In brief, the eight hypotheses on inner-city poverty are:1 Inner-city poverty is the result of profound structural economic shifts that have eroded the competitive position of the central cities in the industrial sectors that historically provided employment for the working poor, especially minorities. Thus demand for their labor has declined disastrously.2 Inner-city poverty is a reflection of the inadequate human capital of the labor force, which results in lower productivity and inability to compete for employment in emerging sectors that pay adequate wages.3 Inner-city poverty results from the persistence of racial and gender discrimination in employment, which prevents the population from achieving its full potential in the labor market.4 Inner-city poverty is the product of the complex interaction of culture and behavior, which has produced a population that is isolated, self-referential, and detached from the formal economy and labor market.5 Inner-city poverty is the outcome of a long, historical process of segregating poor and minority populations in U.S. cities that resulted in a spatial mismatch between workers and jobs when employment decentralized.6 Inner-city poverty results from migration processes that simultaneously remove the middle-class and successful members of the community, thereby reducing social capital, while bringing in new, poorer populations whose competition in the labor market drives down wages and employment chances of residents.7 Inner-city poverty reflects an endogenous growth deficit that results from low levels of entrepreneurship and access to capital, especially among minority populations.8 Inner-city poverty is the unanticipated consequence of public policy that was intended to alleviate social problems but has, in fact, caused them to worsen in some respects.” [pages 36-7]

Can we assess the relative causal strength of each of the eight hypotheses? …. We would assign the greatest weight to the first two hypotheses: industrial transformation and human capital. Without employment opportunities and adequate human capital, there is little prospect that the situation of the inner-city poor will improve. Following these two causes, our assessment is that the evidence shows that segregation, the spatial mismatch, and employment discrimination are very significant factors. In general, we are inclined to give less weight to migration and cultural behavior as explanations. However, the role of the social system within which the inner-city poor live remains open to debate. Whether it constitutes an iron cage or a rational adaptation to a harsh environment, and whether (and how) it must change before poverty can be alleviated, are now in the realm of ideology, though good ethnographic research is revealing the weaknesses of some underclass arguments. The question of endogenous growth in low-income communities appears to be important, but it is sadly deficient in rigorous research. Finally, we see public policy as a contributing but not a dominant factor that, in principle, can be alleviated.

[page 59]

Michael Porter, "The Competitive Advantage of the Inner City" (Harvard Business Review, May-June 1995: 55-71).

This article, which led to much publicity and debate, argues that past policies have failed to help the inner city because they were based on a "social model built around meeting the needs of individuals." Porter argues for a radically different approach "through private, for-profit initiatives and investment based on economic self-interest and genuine competitive advantage -- not through artificial inducements, charity, or government mandates."

The larger context:a. what to do with the inner cityb. the sources of poverty and inner-city despair and unemployment (supply vs.

demand side) [is this a supply side approach?]c. the role of the government: here, it is limited, and to set the right business

climate. (but should not business set the business climate?)

Themes: self-help, emphasis on human capital, limited government, innovation, public-private partnerships, responsible business (though without sanctions). integrating the inner-city into the rest of the regional economy.

Theme and Variationsold anti-poverty programs addressed the problem indirectly.

Needed: strategies that address the problems directly. To be precise: strategies that address the problem of the isolation of the inner-city economy.

To be the same success as elsewhere, inner-cities must play by the same rules (economic) as elsewhere. the same competitive rules of the marketplace. (govt policies treat the inner city as if it should be insulated from the rest of the regional and national economies, when this insulation is exactly the problem. hence CDCs, welfare, etc., are isolating policies.) Therefore, use what works in successful economies.

the trick is to find the real competitive advantage of the innercity.

(Porter emphasizes "real," "authentic", etc. as if to say that inner-city policies up to this point have not been real, but rather distorting, artificial, etc.) Relate to the economist's complaint that govt. intervention distorts the real economy and replaces it with an artificial set of rules -- to be real is to compete in the real economy.

an emphasis (p. 57) on clusters, agglomeration economies. [relate to Gunnar Myrdal's cumulative causation].

4 true advantages

1. strategic location LOCATION

2. local market demand (e.g., spending power per acre is still high, even if per capita is lower than elsewhere) DEMAND

3. integration with regional clusters (linkages) INTEGRATION

4. human resources. LABOR

real disadvantages1. land assembly2. building costs3. other costs (higher regulatory costs)4. government problems are obstacles

(linkages payments, etc.) regulations, environmental liability, etc.

stress partnershipstrickle down (66)class-based, not race based policies (68) (though he doesn't use the term class, but rather economic need.)shift from CDCs to traditional, mainstream banks to help business. Business is best to help business.

Mistakes of current ED efforts PORTER’s ALTERNATIVE

Just meeting existing needs ; Fail to understand the real competitive advantage of inner cities

Address long-term competitiveness.

tries to buffer the inner-city from competitive pressures of the larger regional, national and global economies,

Need to compete; integration with larger economies the only way towards sustainability.

Exceptionalism assimilation

Too broad and confusing a notion of ED: leads to confusion, unnecessary controversy

ED should keep the eyes on the prize: for-profit business and job development.

Defy market forces Harness market forces,

An emphasis on altruism Profitability of the inner city will drive its revitalization.

ROLE OF GOVERNMENT: direct intervention and heavy reliance on operating subsidies to attract companies (that distort the market and don't create long term development)

ROLE OF GOVERNMENT: Create a favorable environment for business (schools, job training, infrastructure, streamlining regulation)

Assembling parcels of land; environmental remediation, better public safety.

Genuine, long-term, structural advantages.

Government: "a marketer" [44]

So: artificial, distorting, temporary benefits

Access to capital: loan pools, etc. "the only viable solution is to harness market forces and the resources of the private capital markets." [43]

COMPETITIVE ADVANTAGE OF INNER CITIES

MYTH REALITYLow cost labor (cheaper in rural and3rd world)

Strategic location [NB: yet we nowsee a non-contiguous space of realestate and economic linkages emergein addition to global city advantages --very selective advantages of contiguousspace.]

Cheaper real estate (also cheaper inthe suburbs)

Integration with regional clusters(agglomeration economies; regionalinstitutions)Unmet local demand (e.g., in retailand services) e.g., national chainstores in the inner city, such asFairway in Harlem. Substantialpurchasing power.Banks (CRA)Human resources -- though needstraining.

Myths about the inner city

No work force willing to work

A lack of entrepreneurship (the key is to shift their emphasis onto for profit businesses, not just on non-profits and social services)

Skilled minorities will leave once they have a chance. (relate to WJ Wilson)

High crime

Needs / Strategies

Stop diluting the competitive advantages of inner cities with poor policies and leadership.

Improve communication between entrepreneurs and companies.

"The best (and only) way to develop the economies of inner cities is to make them attractive and welcoming places in which to invest and do business, both for residents and nonresidents." [39}

"eliminate the tax on capital gains an dividends from long-term equity investments in inner-city-based businesses (or subsidiaries) that employ a minimum percentage of inner-city residents." [43]

additional tax revenues would outweigh the lost revenues.

Simplify, but don't abandon, regulation. [43]

[Implicit: US-born minorities should act more like immigrants] [38]

Community Based Organizations (CBOs): very useful, but need to refocus their efforts. [44] should work more closely with the private sector. Use a business-based model. Don't duplicate existing private sector business services (which are inherently better anyway). Be intermediaries between business and communities, rather than opposing business. EXAMPLE:

Local-hire regulations can backfire [45]

"A more productive approach is to understand the needs and perceptions of local businesses and to develop programs to address them." [45]

Some Concerns1. too much supply side: sees that the solutions are all to be found in the inner city (implying

that the causes of unemployment are there as well).2. underplays the role of discrimination, spatial inequality and segregation. and the impact of

suburbanization.3. asks for businesses to be responsible, to hire locally, etc. (all good things), but then does not

follow through with govt. programs to implement this/enforce it. (voluntary?)4. he underestimates the real disadvantages and overestimates the real advantages of the

innercity.5. will the private sector really step in to fill the vacuum left by a shrinking public sector in the

innercity? [67]6. Porter “wants his cake and eat it too”: he stresses the need for a new rethink and new

directions, but if he won't let government or CDCs lead the change, who will? If business is in business to do business, and they are quite happy to ignore the innercity now, what will make them change?

7. Overall, however, the argument is appealing, and infusing into the debate a sense of freshness, innovation, and entrepreneurship. (similar to the argument against using the term "underclass" as marginalizing, Porter opposes the marginalization of the innercity, arguing that it must play by the same rules as others.)