City Lit: To Market, To Market?

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In 1995, Michael Porter, a Harvard professor and well-known international business consultant, published an influential essay on urban revitalization in the Harvard Business Review titled The Competitive Advantage of the Inner City. Porter wrote that a brighter future for the urban core can be found only through the market, and government and nonprofit programs that ignore or hinder the need for increased business activity are counterproductive. Such programs as public assistance, housing aid and food stamps “undermine” a coherent economic strategy. He called, instead, for a “radically different approach” created by private, for-profit initiatives.

“We must stop trying to cure the inner city’s problems by perpetually increasing social investment and hoping for economic activity to follow,” he wrote. Instead, the inner city has to leverage its unique economic advantages: strategic location, human resources, unmet local demand, and the capacity to become integrated into regional clusters.

Porter’s article launched a flurry of discussion and disagreement among academics and community-based organizations, some of which was captured in a special issue of The Review of Black Political Economy last year. The Inner City is a reprint of this issue, a highly useful and readable critique of Porter’s argument that also provides an alternative vision of economic development.

In the opening chapter, Susan Fainstein and Mia Gray, respectively a professor and Ph.D. candidate of Urban Planning and Policy Development at Rutgers University, point out that government efforts have consistently tried, but failed, to bring capital back to the inner cities in precisely the ways Porter outlines–reduced regulations, denuded environmental laws and massive tax incentives. After the Reagan-Bush years, they write, his plaints about overreaching social programs and the lack of inducements to business are “nothing short of astonishing.”

Gary Dymski, a professor of economics at the University of California, Riverside, goes further, noting that the market forces Porter is so fond of promoting have devastated inner cities. He also notes that racism–hardly mentioned by Porter–can cripple market incentives (“Discrimination is not economically self-liquidating,” he writes–a nice phrase) and that the political climate is hostile to pro-inner city initiatives.

The political climate is not hostile to creating a “good business climate” with billions of dollars in tax incentives going to large corporations in Midtown and Wall Street. In fact, as Arnold Graf, a staffer at the Industrial Areas Foundation, writes, this approach “has lead to a multibillion dollar Marshall Plan for the nation’s downtowns, but has done little for the working poor and the inner-city neighborhoods in which they reside.” In other words, without pressure on corporations to share their gains, little money finds its way into the pockets of workers.

There is such a barrage of intelligent criticism in this volume that one wonders how Porter can maintain his composure in his response. Not to worry–with a few examples, he seems able to justify his thinking to himself, tossing off statements like, “The concentration of poverty in inner cities has led to many programs to serve the poor, which…attract more poor families.” One wonders where the poor were living before they moved to the inner cities to take advantage of government largesse. Certainly not in our heavily subsidized suburbs.

As a model for criticism of one significant article, this volume is exemplary, and it is also very useful as an overview and analysis of economic development over the past few decades, including relevant issues such as white flight and subsequent disinvestment. I particularly liked the chapter by the Georgia Institute of Technology’s David S. Sawicki and Mitch Moody, which makes a cogent argument for the need of both place-based policies, which endeavor to funnel investment to a specific area, and people-based policies, which invest in the local population. Porter’s insistence on pure place-based market strategies is one of his philosophy’s greatest weaknesses.

As the editors acknowledge, however, the book is short on empirical findings or research results In this regard, contributions from Anthony Downs, John Mollenkopf and other obvious missing experts would have been welcome. (One exception is the chapter discussing in some detail how the Urban Investment Strategies Center at the University of North Carolina draws on multiple assets of the community and university to improve inner city neighborhoods.) I also would have liked to see an author discuss Porter’s annoyed attitude toward corporate liability for environmental hazards.

The good news is that Michael Porter has jumpstarted the debate on economic development in the inner city. The bad news is that his so-called radical prescriptions are one more rationale for trickle-down economics: Help the rich and trust the market to help the poor. Unfortunately, that has already done enough to redistribute wealth to the top and bring devastation to the bottom.

Dr. John E. Seley is a Professor of Urban Studies and Environmental Psychology at the City University of New York and the co-director of Community Studies of New York Inc./INFOSHARE.