Revitalizing inner cities: B.E. Board of Economists Report

Black Enterprise, Jan, 1996 by Mark Lowery

THERE HAVE BEEN NUMEROUS GOVERNMENT and privately sponsored attempts to revitalize this country's inner cities, where most African Americans reside. But none have made a real impact on the tremendous problems of unemployment, hopelessness and despair. And, certainly, none have led to any sustained urban rebirth.

Nearly three decades after the Kerner Commission Report that described two distinct Americas--one white, one black, one rich, one poor-and many well-intentioned programs to address such problems, the $64 billion question remains: How can America's inner cities be reborn and all its citizens fully utilized?

A proposal by Harvard professor Michael E. Porter--a highly regarded economist and a marketing guru--is gaining much attention. Porter argues that past efforts, everything from affirmative-action programs to empowerment zones, have failed largely because they stressed social investment more than sustainable economic development. "[Previous programs] have had some success," explains Barbara J. Paige, co-executive director of Boston's Initiative for a Competitive Inner City, which Porter founded to pursue his economic model. "But what they have not produced, if you simply look back over the history of the last 20 to 30 years, is a sustainable economic base."

If this country's inner cities are to be revitalized, Porter believes, they must be viewed as fertile development areas with distinct advantages. And the development must be driven by private industry, not government. Porter's model for economic development of inner cities stresses commercial relationships between entrepreneurs in the inner cities and larger businesses. It targets existing businesses with 15 or more employees and more than $1 million in revenues. Such relationships, he believes, will help integrate inner-city entrepreneurs into the mainstream economy.

Is Porter's model worth pursuing? Or is his plan full of erroneous premises and naive assumptions wrapped in Harvard mystique?

Many economists are skeptical of Porter's analysis, especially when he faults spending on. social programs. "Businesses need steady customers and reliable employees. People who are ill-housed, ill-fed or just plain ill can't be either, says Bennett Harrison, one of Porter's Harvard colleagues who disagrees with his ideas. "Programs that produce affordable housing, distribute food stamps and staff and equip health clinics materially contribute to the local business climate."

The BLACK ENTERPRISE Board of Economists (BEBE) recently met in Washington to discuss Porter's plan. Participants included regular BEBE members David H. Swinton, president of Benedict College in Columbia, S.C.; Margaret C. Simms, research director at the Joint Center for Political and Economic Studies; Cecilia A. Conrad, an economics professor at Pomona College; and BE publisher Earl Graves. Guest BEBE members included Lucy Reuben, dean of the School of Business at South Carolina State University, and Thomas D. Boston, an economics professor at the Georgia Institute of Technology.

A SHAKY FOUNDATION

Much of Porter's plan is based on his theory that inner cities have not been sufficiently developed because their competitive advantages have not been properly identified and exploited. Once these advantages are identified, Porter believes that entrepreneurs could pursue businesses that make sense for inner-city locations, and private industry would be more likely to partner with such businesses.

As an example, Porter cites Be Our Guest, a catering supply business in Roxbury, Boston's inner-city area. The business, founded in 1984, supplies party equipment and rents linens to caterers. Porter says the company's easy access to downtown Boston allows it to offer a higher level of service than similar companies in Boston's suburbs. He believes that Be Our Guest, which has $1.2 million in annual sales and employs 36 full-time workers, is an example of a company exploiting the advantages of its inner-city location.

Paige, who presented Porter's plan to most affluent neighborhoods the world. It's affluent because the people who live in it are affluent, not because of where it's located and its advantages", Swinton said.

Even if a particular inner-city area has certain competitive strengths that businesses can take advantage of, BEBE members questioned how anyone could guarantee that the community's residents would benefit. "You can help these businesses and create a cluster that completely displaces the community that existed before," explained Boston. Or, as Conrad put it, "you could have economic development in the inner cities and not actually benefit any of the inner-city residents."

Swinton pinpointed another major problem with Porter's plan: its failure to recognize the role that race plays in economics. According to Swinton, inner cities are not undeveloped because of their location--they're undeveloped because the people forced to live there don't have the same opportunities as others. "The failure to see [the race factor] is going to doom this effort."