Jan 20-22: Social Justice and Economic DevelopmentDISCUSSED TUESDAY

•Putnam, Robert D. "The Prosperous Community: Social Capital and Public Life." The American Prospect, Vol. 4, No. 13, March 21, 1993, pp. 35-42.•Sen, Amartya Kumar. 1999. Development as freedom. 1st. ed. New York: Knopf. (Ch. 2).•(plus briefly on last week’s Mier and Fitzgerald and Leigh)  ------ DISCUSSED THURSDAY

Sugrue, Thomas J. 1998. The Origins of the Urban Crisis. Princeton: Princeton Univ Press. (Ch 5)Juzhong, Zhuang. 2008. Inclusive Growth toward a Harmonious Society in the People's Republic of China: Policy Implications. Asian Development Review 25 (1/2):22

And the debate over inner-city revitalization•Porter, Michael. "New Strategies for Inner-City Economic Development." Economic Development Quarterly, Vol. 11, No. 1, February 1997, pp. 11-27•Harrison, Bennett and Amy K. Glasmeier "Response: Why Business Alone Won't Redevelop the Inner City: A Friendly Critique of Michael Porter's Approach to Urban Revitalization." Economic Development Quarterly, Vol. 11, No. 1, February 1997, pp. 28-38. •Blair, John P., and Michael C. Carroll. 2007. Inner-city neighborhoods and metropolitan development. Economic Development Quarterly 21 (3):263-277.•see also: Savitch, H.V. et. al. “Ties that Bind: Central Cities, Suburbs, and the New Metropolitan Region” Economic Development Quarterly v. 7, n. 4 (Nov. 1993)

-> PLUS: short presentations/discussion of selected economic profiles (Assignment 1)

Gini coefficients

United States

1970: 0.394

1980: 0.403

1990: 0.428

2004 Gini coefficients in selected countries

Hungary: 0.244Denmark: 0.247Japan: 0.249Sweden: 0.250Germany: 0.283India: 0.325France: 0.327Canada: 0.331Australia: 0.352UK: 0.360Italy: 0.360USA: 0.408China: 0.447Russia: 0.456Guatemala: 0.483Hong Kong: 0.500Mexico: 0.546Chile: 0.571Namibia: 0.707

Source: United Nations Human Development Report 2004

Range:1: Maximum inequality0: minimum inequality

UtahNew Hampshire

AlaskaWyoming

IowaWisconsin

HawaiiIdaho

NebraskaVermont

IndianaMinnesotaDelawareMontana

South DakotaMaine

North DakotaNevada

MarylandKansas

WashingtonOhio

MichiganOregon

MissouriColorado

Rhode IslandArizona

West VirginiaVirginia

PennsylvaniaArkansas

New MexicoSouth Carolina

KentuckyOklahoma

GeorgiaNew Jersey

North CarolinaIllinois

MassachusettsFlorida

TennesseeCaliforniaAlabama

MississippiTexas

LouisianaConnecticut

New YorkPuerto Rico

District of Columbia

0.4 0.42 0.44 0.46 0.48 0.5 0.52 0.54 0.56

Universe: HOUSEHOLDS: Gini Index (Estimate)B19083. GINI INDEX OF INCOME INEQUALITY -

Universe: HOUSEHOLDSData Set: 2005-2007 American Community Survey 3-Year Estimates Survey: American Community Survey, Puerto Rico Community Survey

Highest inequality Lowest inequality

1940 1950 1960 1970 1980 1990 2000 2010 20200

0.05

0.1

0.15

0.2

0.25

0.3

0.35

0.4

0.45

0.5

Table F-4. Gini Ratios for Families, by Race andHispanic Origin of Householder: 1947 to 2007 source: http://www.census.gov/

hhes/www/income/histinc/f04.html

Higher GINI scores greater inequality

Sen, Amartya Kumar. 1999. Development as freedom. 1st. ed. New York: Knopf. (Ch. 2)

It is mainly an attempt to see development as a process of expanding the real freedoms that people enjoy. In this approach, expansion of freedom is viewed as both (I) the primary end and (2) the principal means of development. They can be called respectively the "constitutive role" and the "instrumental role" of freedom in development. The constitutive role of freedom relates to the importance of substantive freedom in enriching human life. The substantive freedoms include elementary capabilities like being able to avoid such deprivations as starvation, undernourishment, escapable morbidity and premature mortality, as well as the freedoms that are associated with being literate and numerate, enjoying political participation and uncensored speech and so on. In this constitutive perspective, development involves expansion of these and other basic freedoms. Development, in this view, is the process of expanding human freedoms, and the assessment of development has to be informed by this consideration.

Revisiting Sen…

Sen, Amartya Kumar. 1999. Development as freedom. 1st. ed. New York: Knopf. (Ch. 2)

Conclusion:

“…enhancement of human freedom is both the main object and the primary means of development. The objective of development relates to the valuation of the actual freedoms enjoyed by the people involved.” [p. 53]

“there is a need to develop and support a plurality of institutions, including democratic systems, legal mechanisms, market structures, educational and health provisions, media and other communication facilities and so on.”

Sen, Amartya Kumar. 1999. Development as freedom. 1st. ed. New York: Knopf. (Ch. 2)

“The ends and means of development call for placing the perspective of freedom at the center of the stage. The people have to be seen, in this perspective, as being actively involved-given the opportunity in shaping their own destiny, and not just as passive recipients of the fruits of cunning development programs. The state and the society have extensive roles in strengthening and safeguarding human capabilities. This is a supporting role, rather than one of ready-made delivery. The freedom-centered perspective on the ends and the means of development has some claim to our attention.”

Juzhong, Zhuang. 2008. Inclusive Growth toward a Harmonious Society in the People's Republic of China: Policy Implications. Asian Development Review 25 (1/2):22

For future policy choices, what is important for the PRC is to avoid (i) focusing only on economic growth while ignoring the inclusiveness of growth, and (ii) relying excessively on redistributive policies in order to achieve equalization of incomes. International experience has shown that neither of these policies is good for efficient and sustainable economic growth and development.

Sugrue, Thomas J. 1998. The Origins of the Urban Crisis. Princeton: Princeton Univ Press. (Ch 5)

13July, 1967

the debate over inner-city revitalization

Blair, John P., and Michael C. Carroll. 2007. Inner-city neighborhoods and metropolitan development. Economic Development Quarterly 21 (3):263-277.

Rich region

Poor neighbor-

hood

Just a problem of economic isolation (and thuspromote policies of integration with prosperous region?)

Rich region

Poor neighbor-

hood

“This study examines whether the poorest neighborhoods are economically integrated into metropolitan regions so that improvements in regional welfare also benefit poor neighborhoods.

This is an important topic. It is a component of the larger question: Does a rising tide lift all boats? Furthermore, regional development policies often imply that benefits from economic gains filter through metropolitan areas. Projects are often said to be “good for the entire community.”

However, if poor neighborhoods receive no direct benefits from regional programs and if they are excluded from economic networks that might create indirect benefits, other policies may be necessary to ensure that metropolitan growth is shared.”

Rich region

Poor neighbor-

hood

Scenario A

Scenario B

Rich region

Poor neighbor-

hood

Rich region

Poor neighbor-

hood

Implications:

1. What are the mechanisms that allocate/distribute/transfer economic activity through the region? (e.g., linkages)

2. To what extent do these linkages pass through or bypass poor neighborhoods? (and aren’t they in part poor because they are poorly integrated economically in the first place?)

3. How do you measure these linkages?

4. What policies would build stronger linkages in these neighborhoods?

the “leaky bucket theory”

Leaks fast Leaks slowlyLo

ts o

f mon

ey fl

ows i

nLi

ttle

mon

ey fl

ows i

n

Arrow size = Rate of leaking

Arrow size = Rate of in flows

What slows leakages?

Protectionism? (plug the leaks)

or

well-developed local & regional networks that circulate money(complicate the path of money from entering to exiting the bucket)?

Seven Explanations of Urban Poverty:

Human Capital and Behavioral ExplanationsDirect Racial DiscriminationSpatial Mismatch Explanations Selective MigrationArrested Internal Development Accommodations to CapitalismPublic Policies

Gunnar Myrdal (1898 – 1987)

“Spread and backwash effects”

spreadback wash

S t a r ti n g c o n d i ti o n s

Gunnar Myrdal (1898 – 1987)

“Spread and backwash effects”

spreadback wash

a ft e r t h e e ff e c t s t a k e p l a c e

Multiple-Regression analysis

Cases: MSAs, 40 with a population of 500,000 or more were selected. thepoorest census tracts in each of the 40 MSAs (metropolitan statistical areas) with a population of 500,000 or more. “The poorest tracts were defined as those tracts with the lowest median family incomes in 1990.”

Dependent variable: change in family median income in the poverty census tract between Census 1990 to Census 2000, CTCHANGE

Independent Variables: Two key independent variables served as global indicators of metropolitan economic prosperity: • the change in MSA family median income between Census 1990 and Census 2000 (MSACH)•the change in the MSA dependency rate (DEPDRTCH).

STARTING PREMISE: If the parameters for the key independent variables are positive, we conclude that change in the regional economy has had positive spread effects on the poor areas.

Regression variables, results, and cases used

TM-P067. Percent of Persons Below the Poverty Level in 1999: 2000 Current Data Set: Census 2000 Summary File 3 (SF 3) - Sample Data

Porter, Michael. "New Strategies for Inner-City Economic Development." Economic Development Quarterly, Vol. 11, No. 1, February 1997, pp. 11-27.

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

WHAT HAS BEEN DONE (old anti-poverty programs)

addressed the problem indirectly

WHAT IS NEEDED: strategies that address the problems directly.

(I.e., strategies that address the problem of the isolation of the inner-city economy.)

4 true advantages1. strategic

location LOCATION2. 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.

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 assimilationToo 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

1

Mistakes of current ED efforts PORTER’s ALTERNATIVE

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]

2

COMPETITIVE ADVAN TAGE OF INNER CITIES MYTH REALITY Low cost labor (cheaper in rural a nd 3rd world)

Strategic location [NB: yet we now see a non-contiguous space of real estate and economic linkages emerge in addition to global city advantages -- very selective advantages of contiguous space.]

Cheaper real estate (also cheaper in the suburbs)

Integration with regional clusters (agglomeration economies; regional institutions)

Insufficient local demand Unmet local demand (e.g., in retail and services) e.g., national chain stores in the inner city, such as Fairway in Harlem. Substantial purchasing power. Banks (CRA)

Human capital inadequate – no one will hire

Human resources -- though needs training.

"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."

Harrison, Bennett and Amy K. Glasmeier "Response: Why Business Alone Won't Redevelop the Inner City: A Friendly Critique of Michael Porter's Approach to Urban Revitalization." Economic Development Quarterly, Vol. 11, No. 1, February 1997, pp. 28-38.

Critique of Porter

Sources: http://wtfrandom.files.wordpress.com/2007/11/grand-central_mkt.jpg

http://www.csulb.edu/~odinthor/BusyBway.jpg