Discussion Framework: “Inclusionary Growth"

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November 2, 2006

Discussion Framework: “Inclusionary Growth"

Robert Weissbourd, RW Ventures, LLC | November 2, 2006

INTO THE ECONOMIC MAINSTREAM

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November 2, 2006

“We’re at a point where left and right are converging … it’s great that you are doing this. I’ve been trying to do this, but I can’t bring together thinkers on these issues, as the conservatives complain and the liberals won’t talk to me.”

- Conservative Policy Leader

The Process

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November 2, 2006

How Divided are We?

Closely and Deeply Divided

RepublicanDemocrat

Closely but not Deeply Divided

RepublicanDemocrat

Source: Morris Fiorina, “Culture War?”

Public Impressions:

Likely Reality:

At least on political issues, the general public shares much more in common than current rhetoric would imply.

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November 2, 2006

Searching for Common Ground

Market BasedDevelopment

Free Markets

OwnershipSociety

AssetDevelopment

Empowerment

Inclusiveness

Community

Devolution

BusinessInvestment

Individual

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November 2, 2006

Common Goals: Inclusive Economic Growth

Productivity InclusivenessAsset

Development

“I N C L U S I O N A R Y G R O W T H”

Constructive GovernmentConstructive Government

Ownership Society

Ownership Society

Asset-Based DevelopmentAsset-Based Development

Economics & MarketsEconomics & Markets

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November 2, 2006

Elements of Inclusionary Economic Growth

Developing Assets

Expanding Inclusiveness

Increasing Productivity

• Long term economic growth occurs through enhancing productivity of individuals, businesses and institutions (including government)

• Invest in technology, R & D, human capital, knowledge factors that lead to innovation

• Reincorporating wasted “market-ready” assets – such as underdeveloped land, underemployed labor or underserved markets – into the economy can increase efficiency and productivity

• This growth is not just good, but good for business – no trade-off between equity and growth

• Getting assets market-ready also makes economic sense• Also necessary for strong society: healthy economy and democracy

linked

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November 2, 2006

Inclusionary EconomicGrowth is about Markets

We need to find market based solutions or policies that stimulate market corrections, such as creating competition for payday lenders.

– Moderate Policy Analyst

We need to create a market culture that is currently missing in some communities and constituencies …

– CDFI Leader

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November 2, 2006

Common Means: Markets

ExchangeExchange

ProductionProduction ConsumptionConsumption

Market Environment Internal Market Operations

• Markets are how wealth is created and economic growth occurs• Markets determine which assets are included

Other Exogenous Influences:Infrastructure

ResourcesTechnology

Tastes

Institutional Context:Enabling Laws

Prescriptive RegulationEntry Barriers

• Transaction Costs

• Finding Costs• Measurement

Costs

• Productivity• Costs

• Income• Taste

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November 2, 2006

Aligning Markets and Development

Low AlignmentLow Alignment

High AlignmentHigh Alignment

Market Market InterventionIntervention

Market solution Market solution possible if possible if market market operations and operations and environment environment changed changed through public through public policy and policy and advocacyadvocacy

Market Market RedefiningRedefining

Market solution Market solution possible if possible if market market operations and operations and market market environment environment changed changed through private through private activitiesactivities

Market RefiningMarket Refining

Market solution Market solution possible with possible with new information, new information, products or products or networksnetworks

Pure MarketPure Market

Market solution Market solution possible; market possible; market already already generates generates development development outcomesoutcomesNon-MarketNon-Market

No market No market solution; market solution; market is not the is not the appropriate appropriate channelchannel

Adapted from Kahane-Weiser-Adapted from Kahane-Weiser-Weissbourd/Ford CIIWeissbourd/Ford CII

Market InterestsMarket Interests

Development Development GoalsGoals

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November 2, 2006

Aligning Markets and Development

Low AlignmentLow Alignment

High AlignmentHigh Alignment

Market Market InterventionIntervention

Market solution Market solution possible if possible if market market operations and operations and environment environment changed changed through public through public policy and policy and advocacyadvocacy

Market Market RedefiningRedefining

Market solution Market solution possible if possible if market market operations and operations and market market environment environment changed changed through private through private activitiesactivities

Market RefiningMarket Refining

Market solution Market solution possible with possible with new information, new information, products or products or networksnetworks

Pure MarketPure Market

Market solution Market solution possible; market possible; market already already generates ED generates ED outcomesoutcomes

Non-MarketNon-Market

No market No market solution; market solution; market is not the is not the appropriate appropriate channelchannel

Market InterestsMarket Interests

ED GoalsED Goals

Adapted from Kahane-Weiser-Adapted from Kahane-Weiser-Weissbourd/Ford CIIWeissbourd/Ford CII

Make Market Make Market WorkWork

(Addressing (Addressing Internal Internal Imperfections)Imperfections)Change Market Change Market

ParametersParameters

(Using Market (Using Market Mechanisms)Mechanisms)

Change Market Change Market ParametersParameters

(Using Non-(Using Non-market market Mechanisms)Mechanisms)

Vital Work –Vital Work –

but not market but not market based!based!

Market Works:Market Works:

Company profits Company profits while providing while providing Development Development impact.impact.

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November 2, 2006

If we care about markets, what’s the role of government?

The government’s role is to reduce or eliminate market imperfections, and shine a light on areas of need.

– Republican Policy Leader

Structure incentives to bring people back into the labor market, to motivate people to join the mainstream, such as by lowering the payroll tax or expanding EITC.

– Conservative Think Tank

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November 2, 2006

Implications for Government Roles

Degree to which market and asset development goals are already aligned

Getting Assets Market Ready

Moving assets to market (developing

assets in ways which yield

growth)

Non-market objectives (but

market awareness)

IDAs; Brownfield Remediation;Education and

training

Using

Moving markets on their margins

Positive externalities; more efficient approach

to non-market goals (equity, public welfare)Empowerment

Zones;New Markets Tax Credit (NMTC);

CRA (in part)

Improving

Fixing markets

Externalities, information

imperfections, entry barriers

Regulating pollution; education

Enabling

Create optimal infrastructure for

market to perform; increase

productivity

Role

Public goods; market

preconditions

Market Rationales

Property rights;law enforcement;

transportation infrastructure

Examples

What is the proper role and best means for government to enhance market operations towards inclusionary economic growth?

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November 2, 2006

Implications and Issues

Aligning Inclusion with Growth

Customizing to Particular Markets

Expanding Individual Choice: Vouchers + ?

Directly Investing in Productivity

“Development as Freedom” Capacity and Responsibility

Discussion

Robert Weissbourd, RW Ventures, LLC | November 2, 2006