Can Clinton's urban policies really work? B.E.'s economists weigh the value of empowerment zones and community banks in revitalizing America's cities - includes related article on prospects on jobs and increased incomes for African Americans - Black Enterprise Board of Economists - Cover Story

Black Enterprise, June, 1994 by Frank McCoy

The need is great. Considering the ubiquitous nature of unemployment, endemic crime, AIDS and homelessness, it is not surprising that more than 500 applicant cities are vying for the awards. Completed applications are due by June 30, and winning cities will be selected this fall. Easy-to-describe--but harder-to-accomplish--principles will guide the selection process. The EZs must create jobs, attract private investment and stimulate economic activity in their regions. Each zone's plan must be part of a larger coordinated and comprehensive strategy, including safety, environmental, social and civic components.

The plan is also supposed to be top-down as well as bottom-up in design, coordination and leadership. This means that input from community-based, private, nonprofit, religious, local and state organizations will be as crucial as that from the federal government. Finally, a strategic vision of urban change is supposed to knit these ideas, entities and individuals together.

One concrete part of the EZ plan that entrepreneurs will relish establishes as many as 12 Small Business Administration-backed "One-Stop Capital Shops." These national and regional capital distribution points are slated to provide $300 million to $400 million to small business in the form of private loans and equity investments during the next five years.

Yet despite such positive aspects, the board is not particularly impressed. This assessment is no indictment of President Clinton's sincerity, but rests on a belief that America's current fiscal conservatism and impatience with urban problems may well ensure there is not enough money or time to produce quantifiable positive benefits in the EZs. Margaret Simms, the Joint Center's research director, wonders whether enough money has been allocated for each zone. She is also concerned that the same amount of money will be allocated to each EZ, regardless of how large or small the surrounding city is.

Clearly, $100 million is a lot of cash, but the amount pales when held against the mega-problems and billion-dollar budgets of the nation's largest cities. For instance, if an EZ in Los Angeles is too large, Simms says that regardless of resources, the plan's administrators may find it hard to make a significant difference in job creation, drug abuse programs or education.

"You can't just work on business development and worry about education later," says Simms, "because, clearly, an attraction for business is a skilled and prepared workforce." In the same vein, she adds, the United States "can't just work for education without also working on other problems within the community that may be related to family dissolution."

The notion that EZs may be stronger on paper than in reality also bothers Marcus Alexis. The Northwestern University economics professor and a reputed candidate for a Federal Reserve System governor's chair favors the idea of targeting specific urban areas and involving local small businesspeople and other private-sector elements.