Below are the first 10 and last 10 pages of uncorrected machine-read text (when available) of this chapter, followed by the top 30 algorithmically extracted key phrases from the chapter as a whole.
Intended to provide our own search engines and external engines with highly rich, chapter-representative searchable text on the opening pages of each chapter.
Because it is UNCORRECTED material, please consider the following text as a useful but insufficient proxy for the authoritative book pages.
Do not use for reproduction, copying, pasting, or reading; exclusively for search engines.
OCR for page 171
9
Rethinking
Urban Policy
National and urban interests in economic development do not always
coincide. When growth rates are high, the tension between these interests
is lower because there is more than enough to go around- almost every
place can expect to grow a little. When growth rates are low or negative
or when some parts of the economy are growing and others are declining,
regional and urban interests can conflict sharply with each other as well
as with overall national interests. States and urban areas pirate industries
and jobs from each other and use their political power to resist shifts of
capital and jobs away from them. Such shifts may well produce a net
benefit to national accounts (although that is uncertain), but they can also
deepen economic hardships for the areas on the losing side of the transfer.
National economic development interests may be served best by encour-
aging fairly rapid adjustments in economic structure. Rapid adjustments,
however, can be profoundly destabilizing for the most adversely affected
urban economies.
One of the central, difficult tasks for urban policy is to help harmonize
these national and urban interests so that they work less at cross-purposes,
to help fashion a framework for urban economic development that balances
two types of policies: (1) those that encourage acceleration of economic
development and (2) those that provide a relatively stable environment
for the places and people left behind, so that changes can occur with a
minimum of hardship and resistance and so that they can develop new
roles in the urban system. We offer no formula for achieving this goal.
There is an inherent tension between the two policy realms because main-
171
OCR for page 172
172
Rethinking Urban Policy
stream policies are often market-reinforcing if not market-forcing, while
policies for those left behind often seek to redirect the market or at least
ameliorate its most adverse effects.
In this report we have tried to suggest some directions policy might
take to advance toward a better balance between the two realms. Here we
summarize the major themes and recommendations of the report and offer
some final observations about the process of using an urban perspective
in making economic policy. We have not attempted to offer a detailed
program. The policy options we have discussed are intended primarily as
illustrations of how the major themes could be carried out. They are by
no means the only approaches possible. The important issue has to do
with the directions that policy should take and the recognition of urban
policy as a worthy perspective in making general economic policy.
A POLICY FRAMEWORK
Neither a pure free market nor a central planning model of economic
or urban policy holds much attraction in light of the economic and tech-
nological transformation that is occurring. The most likely outcome of
leaving the futures of America's urban areas entirely to the marketplace
is an even sharper distinction between the command and control centers
and the subordinate centers. The notion of a centrally planned economy
is equally unappealing. A heavily planned economy tends to ignore the
discipline of the market as a device for winnowing out those sectors that
perform inefficiently. Moreover, the pluralism of the United States and
the American antipathy toward a strong, centralized bureaucracy present
strong barriers to a well-developed system of national planning.
Instead, policies must be fashioned that are able to provide reasonable
options for dealing with economic transformation. Urban policy should
leave room for continuing debate and course corrections. Such an approach
recognizes that public policy has a marginal influence on market forces
but rarely controls the market, at least over a long period. Urban policy
should therefore seek to understand and reinforce the market to train the
tiger but not fully tame it. This view accepts much of the market's un-
certainty in order to retain its energy, and it tries to channel some of that
energy toward achieving limited policy objectives, to give a sense of
direction but not a final destination. Making policy judgments of such
sensitivity requires close consultation with the private sector and with state
and urban leaders. It further requires abjuring quick-fix solutions in favor
of a more incremental, long-term approach to strengthening economic
institutions and governmental processes at all levels of the system. It is,
OCR for page 173
Rethinking Urban Policy
_ _ _ ~ _1 1
173
quite canclcily, a compromise position and, like all compromises, subject
to criticism of where the balance has been struck.
This approach recognizes that each part of the economic and political
system plays an important role in furthering economic development. How
each public and private actor plays its role and becomes a more responsible
partner in economic restructuring and development is the critical issue.
RETHINKING THE ROLE OF GOVERNMENT
While most economic activity and development is carried out by the
private sector, government is a major direct participant in the. morlern
economy. It is one of the largest of the service sectors and, although it
IS crowing more slowiv then in the nest camp filrth~r Ruth I;
~ _ ~ ~ _ . , .. . . . .... .. . .. .
. .
~ ~ ~ .._J ____., .., -.._ ~,.~.~ ~~- ~1~\ ~1VW[ll 1~111alll~
1 ~ 1 ~ ~ . . . ~ . .
likely. Local, state, and federal governments are major investors in defense
industries, transportation systems, agriculture, and other sectors. Public
procurements make a substantial contribution to a~re.s,~. rlem~nc1 UP_
~ A _~— ~111011~ . I\~
search and development activity is heavily financed by government, as is
most of the educational system. But this direct economic role of govern-
ment is often virtually ignored in discussions of economic development.
Public facilities and services are often thought of only as expenditures for
which no return is expected. Rather, they should be seen as investments
in economic sectors and in urban areas. As investments, some return
should be expected, although it may come in the form of private invest-
ments or improvements in the quality of the labor force.
Public actions affect other economic interests, whether the particular
consequences were intended or not. National economic policy should be
more sensitive to its consequences for different sectors of the economy
and for different types of urban areas. Substantively this requires that two
basic types of policy acceleration strategies end phi 1 i Action ctrntPai-~_
be closely coordinated.
At the national level, acceleration policy requires a conscious strategy
of fashioning tax, credit, trade, monetary, and fiscal policies so that they
~ ~ ~ in_ ~ - ~ ~ ~., ~.4 ~.~e,10O
,
encourage capital to flow toward promising sectors and contribute to the
transition to a more advanced economy. Such a strategy would include
making a modest amount of capital available on a wholesale basis to
leverage private investments in urban development efforts that promote
economic transition. It also would include some mechanism, such as a
national infrastructure bank, to provide leadership for institutional reforms
and to undergird local and state capacities to finance and manage the urban
public facilities needed to support and serve an advanced economy. Na-
tional action is also needed to revise design or performance standards for
infrastructure that are not cost-effective or even within the range of fiscal
. ...
.
OCR for page 174
174 Rethinking Urban Policy
possibility. These market-reinforcing policies could also be strengthened
by establishing a national job information, retraining, and worker relo-
cation system to help reduce barriers to the mobility of the labor force-
particularly the structurally unemployed. Finally, because the future of
the national economy will depend on the quality of the labor force, there
is a substantial need for investments in education and training.
Sectoral investments and labor mobility policies have important urban
consequences, and they provide tools that are necessary for effective urban
development strategy. If they work properly, they will accelerate a shift
toward more modern and competitive industries and more productive jobs.
This will strengthen the urban economies in which such industries and
jobs are located.
Policies designed to accelerate the restructuring of the economy can
result in worsening the short- to mid-term economic conditions of many
manufacturing and other subordinate centers as they strengthen the econ-
omies of the command and control centers. Even in the latter, where much
of the new growth in producer and corporate headquarters services will
be located, there can be severe problems for the workers who are displaced
from declining local industries and who do not find new jobs in the growing
sectors of their local economies. Public policy must understand these
impacts; it should be prepared to ameliorate them in the short run and
reduce them in the longer run.
To some extent, infrastructure investments have a double aspect. They
help build a base for national economic expansion, and they can also
provide an important tool for local economic development and employ-
ment. Without indiscriminately supporting projects that have little long-
term potential for sustaining local employment or making contributions
to national growth, investments can be made in the quality of public
facilities in ways that materially aid a community in stabilizing its own
economy and in providing leverage to build the base required to transform
itself. Financing programs can be structured, for example, to favor making
full use of the existing capital stock instead of the abandonment of facilities
that are still operational and their costly reproduction in new locations.
Leverage capital can also be made available in a manner that encourages
local initiative, flexibility, and growth in the institutional capacity needed
for the long haul.
The national government can make leverage capital, facilities, funds,
and job training and mobility programs available, but strong local eco-
nomic development institutions in individual urban areas are essential to
tailor strategies to meet local conditions. In some cases, neighborhood
revitalization or historic preservation may be a more salient investment
than a large-scale new office complex or industrial park. In others, ren-
OCR for page 175
Rethinking Urban Policy 175
ovation of old industrial plants or even closed public schools to provide
incubator space for new businesses or to provide moderately priced housing
may be the most appropriate strategy for developing a new and stable
economic role. Leverage capital might be used to augment facilities and
amenities and provide an attractive environment for private development,
for investment as an equity partner in a project, or for acquiring a land
bank for future growth.
It is important that national urban policy recognize that the national
interest is less in any one form of development than it is in making sure
that funds and programs have high leverage and that those using them
have a coherent and realistic strategy for strengthening the local economy
rather than no plan beyond an isolated project or an effort to prop up an
obsolete activity.
A long-range commitment by the federal government and the states to
equalize disparities in state and local fiscal capacity could be a most
important means of smoothing the process of change. Fiscal equalization
could do a great deal to reduce local and regional political resistance to
economic change by making it possible for communities undergoing such
changes to maintain the services they provide at reasonable levels, es-
pecially at a time when their own taxable resources are in jeopardy. Such
communities could then compete with others for new firms and jobs
without devoting primary attention to self-aggravating processes of urban
decline and to staving off municipal creditors. Fiscal equalization also
furthers a national interest in promoting the decentralization of decision
making and service delivery and recognizes that community integrity is
an important value, deserving of consideration along with national eco-
. . ^. .
nomlc eirlclency.
While a national job information, retraining, and relocation service can
help accelerate economic transitions, many workers will choose not to
move. Labor redundancy promises to be a major national problem and a
crucial problem for many urban areas as the technological revolution
spreads from factory floor to offices, distributive services, and even per-
sonal services. A substantial cluster of national, state, and urban policies
may be required: tax incentives to industries for retraining workers, leg-
islation to require advance notice of major plant closings and to help
support industry-employee-community councils to plan for the transition,
and planning grants to communities to help them identify alternative sources
of employment and to provide for adult, continuing, and vocational ed-
ucation programs to retrain redundant workers. Advance warning of local
structural unemployment could facilitate development of other local strat-
egies, such as the creation of jobs clubs, efforts to attract other employers,
and better use of transitional public employment programs. Redundancy
OCR for page 176
176
Rethinking Urban Policy
planning should reduce the period of unemployment for workers affected
by structural change. It should also help the urban area prepare for the
closing of an employment center and cushion the impact on the com-
munities, residents, and businesses.
Most of the actual investment in education and training will continue
to come from state and local governments, with a growing share being
provided by private employers in training and retraining their work forces.
National leadership and leverage are important, however, if the quality
of urban labor forces is to be improved. Identification of education and
training needs, stimulation of better public education in science and math-
ematics, and the development of computer skills are matters of grave
national concern. Seeding local school budgets for the education of dis-
advantaged children and minorities can affect the overall quality and re-
silience of the labor force as it tries to adjust to change. The federal
government should also continue direct responsibility for special national
programs for the severely disadvantaged, such as the Job Corps.
The federal government cannot create local institutions capable of man-
aging transitions to new economic roles, but its policies can have consid-
erable effect on the climate for them. Access to federal capital sources
for infrastructure and private development, for example, can reasonably
require substantial evidence of public-private cooperation in both long-
term plans and specific projects without impairing local flexibility or
responsibility in the design and execution of policies and strategies.
RETHINKING HOW URBAN POLICY SHOULD BE MADE
Federal Policy Processes
The federal role can be critical without limiting local or private initiative
and strategies. It should, in fact, assist and support them. If federal policy
focuses on measures that accelerate economic change and growth and on
selective strategies for stabilizing urban areas while they undergo change,
it need not make local choices but simply set a clearer policy framework
within which they can be made.
Making urban policy an integral part of national economic policy is no
easy task. No one bureaucratic formula can be guaranteed to work. Various
techniques, in some combination, might be considered. One possibility
would be for the President to direct the Council of Economic Advisers to
explicitly consider urban and sectoral policies and the consequences of
macroeconomic policies on sectors of the economy and on urban areas in
their annual report. In addition, or as an alternative, the President's bien-
OCR for page 177
Rethinking Urban Policy
177
nial report on urban policy might regularly be used as a vehicle for co-
ordinating macroeconomic, sectoral, and urban policy. A more informal
approach might also be effective, broadening the executive policy process
to involve business, labor, regional, state, and urban perspectives. Other
informal devices, such as the National Governors Conference and local
government associations, could also be more fruitfully used. We could
learn some lessons from other federal systems, such as that of West
Germany, where a standing conference of state ministers provides a con-
tinuous consultative mechanism with national ministries and the Bundestag
for discussion of important economic policies with regional impacts. What-
ever devices are used, the objective is to ensure feedback between national
economic policy makers and those involved in the development of eco-
nomic sectors and urban areas. Urban policy should not continue to be
made in a virtual vacuum, but should be seen as the spatial component
of broader economic strategy.
State and Local Government and Private Sector Processes
Just as the process of making urban policy at the national level must
be rethought and adjusted to the new economic realities, so must that of
the states, local government, the private sector, and nonprofit institutions.
On the supply side, all are involved to some extent in capital investments,
the quality of the labor force, and local capability for research, devel-
opment, and innovation. On the demand side, they purchase products and
services produced in the local economy and other areas, and their wages
fuel local consumer demand. Together they also create and maintain the
public environment, including the quality of services, the physical and
social infrastructure, amenities, and the regulatory system.
One of the first tasks of urban area strategists is to develop an intelligence
function capable of systematically using information to obtain and keep
a grip on local and national economic reality. Independent and reliable
information, professional research capability, and linkages to similar in-
stitutions in other areas are almost prerequisites for sound planning, nec-
essary course corrections, and effective action.
As the economy becomes more advanced, the comparative advantages
of particular urban areas flow less from natural location and resources
than from man-made (or enhanced) factors. This gives many urban areas
more latitude than they had in the past to create their own comparative
advantages. For headquarters and producer services, these advantages
include cultural, recreational, and educational opportunities and the quality
of public services. For almost all sectors, the quality of the local labor
OCR for page 178
178
Rethinking Urban Policy
force is a vital consideration. This again suggests a major concentration
of local effort on improving education and training systems. Access to
national and international transportation systems is also important to many
firms, although this advantage may decline in importance as communi-
cations technology advances.
State participation in urban strategy is of growing significance. Only
states can provide localities with the authority they need to carry out major
programs of investment and development in cooperation with the private
sector. States are the source of land use and acquisition powers, tax
powers, and regulatory policy. They are often the principal source for
financing facilities, housing, and other programs. Education, particularly
higher education, is a major state responsibility.
The time has come for more states to pursue aggressive urban policies,
a role that only a few have thus far taken. Several initiatives seem es-
pecially ripe for major state contributions. Perhaps the most obvious and
important is to equalize the fiscal capacities of local units of government,
whether through the reallocation of functions, revenue sharing, boundary
changes, more rational tax structures, or other means. A second major
state initiative could be to establish statewide infrastructure banks that
could be related to a national infrastructure bank. A third role for the
states might be to oversee, provide technical assistance to, and occasionally
reconcile conflicts among local economic strategies to avoid unproductive
interjurisdictional rivalry. State government can play a special role in
smaller urban areas that lack the resources to develop their own intelligence
systems and development institutions. In such cases the state may need
to become directly involved in providing analysis, technical support, and
capital for development.
State leadership could be particularly helpful in those subordinate cen-
ters in which the managers of local firms and branch headquarters lack
the autonomy to provide effective leadership within the private sector.
The state may be able to convince home office executives from other
cities in the state to empower their branch managers to play larger roles
in community affairs and may also be able to buttress the leadership of
local public officials. State involvement is also necessary before there will
be broad improvements in public education; the state could provide the
resources needed by postsecondary community colleges, training centers,
and urban universities to play more effective roles as urban institutions.
The states and the federal government together can provide many of
the powers and resources employed in the development process. The
heaviest burden for producing specific strategies and carrying them out,
however, falls on local government and other local leadership institutions
in the private and independent sectors.
OCR for page 179
Rethinking Urban Policy
179
Except in the relatively few places where the problem is largely to
prevent the destruction of the area's environment and original advantages
by the waste products of runaway growth, the would-be local development
strategist starts from behind. Pockets of decline or abandonment already
exist. In some cases the decline of traditional manufacturing firms may
be pervasive. There is already a large number of redundant workers as
well as a population of virtually unemployable young people. Substantial
parts of the public facilities system have deteriorated. Fiscal resources are
scarce and the revenue base is static or in decline due to economic con-
ditions and prior political decisions. Existing patterns of law, behavior,
and thought have considerable inertia, creating a civic culture (and some-
times a civic vacuum) that must be changed.
There is a need in every community, to use James Rouse's phrase, for
an "entrepreneur in the public interest," a person or group who can
visualize a more satisfying future and who serves as a catalyst for mo-
bilizing resources to achieve it. This function can occasionally be per-
formed by an individual, but it needs an institutional base so that a strategy
of constructive change can be pursued for a long time. No formula exists
for creating and sustaining this role. Persistent, stable, and active official
leadership or cooperation is a critical ingredient. Extensive cooperation
by corporate and community leaders is also necessary. But leadership
cannot be empty of resources; mere boosterism will not suffice when an
economy must be transformed in an environment of heightened compe-
tition from other places.
Effective leadership, then, requires clear understanding of the back-
ground forces at work in the economy. It needs to know how local firms
fit into their parent corporations, their industries, and regional, national,
and international markets. The leadership needs to know how the area
functions in the urban system, its hierarchical relationship to other areas,
the reasons for existing relationships, and who its competitors for specific
kinds of development may be. Urban strategists must be enabled to think
globally so they can act locally. The information and ideas that shape
their thinking must then be packaged and disseminated in forms that their
constituents and clientele can understand in order to build a new consensus
on which to base policy. Finally, the strategic information system should
contain a feedback loop that monitors and evaluates the effects of decisions
that have been made so that a timely basis for course corrections exists.
Intelligence is not strategy; it is a precondition for it. A mechanism or
process is needed for setting goals and priorities and defining the means
of achieving them. Whatever form the mechanism takes, the private sector,
nonprofit institutions, community groups, and universities should, at a
minimum, be part of it. Strategy making involves power, consent, and
OCR for page 180
180
Rethinking Urban Policy
ideas, and it is a means of building a strong underlying consensus for any
plan of action. This makes it easier to mobilize the necessary public and
private resources.
Private financial institutions are particularly essential in mobilizing pri-
vate capital for investment to expand existing businesses and to finance
new enterprises. Major industries must be involved in any system of
redundancy planning, both in training dislocated workers and as part of
the relocation process. Nonprofit institutions can often be used as bridges
between the public and private sectors, as a means of financing or man-
aging activities, such as community revitalization efforts, education, and
service programs, and as development instruments. Local philanthropy
may provide the financial glue needed to maintain an effective strategy-
making process.
As to the content of strategies, many urban areas will need to rethink
their economic functions in the urban system and identify the functions
they might realistically expect to perform in a restructured national econ-
omy. This may lead to substantial redesign and rebuilding of some parts
of the urban area so that it can attract or accommodate different activities.
Design changes may improve access to jobs, services, and cultural or
recreational opportunities and may help create centers of interest and
activity that in themselves foster economic and social development.
Not all urban areas can or should have single dominant, strong centers.
Some functions may be performed better in a polynuclear form. The critical
quality in this process is to avoid stereotyped thinking about what an urban
area must be and instead to survey the assets and opportunities that are
there and build on them.
Nothing that we have discussed is more important to the resilience of
an urban area than preparing and maintaining a trained labor force for an
increasingly knowledge-centered economy. This demands a heavy con-
centration of local resources and leadership attention on many aspects of
education and training: public schools, technical and vocational training
institutions, the transition from school to work, the role of public em-
ployment as part of the labor force strategy, retraining programs, the
system of higher education available in the area, and the relationship of
the higher-education system to the labor force, research, development,
. . .
and Innovation.
CONCENTRATING RESOURCES
The Strongest Sectors
At both the national level and in urban areas, it makes sense to build
an economic development strategy around the strongest sectors of the
OCR for page 181
Rethinking Urban Policy
181
economy, those that seem likely to provide growth in employment and
income in the years ahead because of their ability to compete effectively
in national and worldwide markets. To be sure, there will be good reasons
to support some other activities because of their intrinsic value or their
importance to national defense. But in an economy with scarce amounts
of private and public capital to invest, the prudent course is to encourage
investments to flow toward economic sectors that have some reasonable
promise of a strong future.
In this sense, national and local interests converge. Such investments
include support of the industrial seedbeds of research and development,
new business incubation, and the development of technology and processes
that can be expected to generate new products and services or to increase
productivity, the quality of goods and services, and the quality of working
life. It also means a major investment in the training and education system,
because most of these new and promising activities are more knowledge-
intensive than traditional industries and occupations have been. Keeping
ahead of the competition, developing new products or ways of making
them, and servicing an economy dependent on knowledge requires an
education system capable of exploiting the nation's intellectual capital.
There seems good reason to suppose that increasing the level of knowl-
edge among the labor force can be part of a self-generating growth curve,
because a more competent labor force demands more interesting work and
invents more things that require more knowledge to produce. With the
revolution in office and factory technology, most gains in value added in
products and services will be through their knowledge content rather than
the final stages of their manufacture or delivery to ultimate consumers.
The value of an organ transplant is not in the number of hours it takes
the physician to perform the operation or in the materials used but in the
knowledge represented by the technology and training that makes the
operation possible. In manufacturing, there is every prospect that the direct
costs of production will decline sharply as a result of using industrial
robots, but the products themselves may become more valuable because
of the knowledge represented in their design and the design of the systems
used to make them.
Given all the trends in technology, economic organization, and de-
mography that we have considered, it appears that the growth of the
nation's economy and the economic future of American cities and urban
areas rest on accelerating the restructuring of the economy and in em-
bracing a role of leadership of an advanced economy. It is in the national
interest for our cities to be dominant centers of international corporations
and services. Therefore, policies that promote industries, as such, need
to be complemented by policies that help produce the urban environments
in which the activities of an advanced economy can flourish.
OCR for page 182
182
Rethinking Urban Policy
The Least Resilient Areas
This refocusing of urban development and national economic growth
strategy on opportunities for market leadership does not in itself solve the
problems of the urban areas that are caught in the backwash of this massive
structural transformation. It is clear that pockets of severe economic dis-
tress can exist in a generally prosperous nation. It is also clear that the
complex social, cultural, and economic problems of the urban disadvan-
taged cannot be overcome in a short time or with few resources. We have
therefore suggested that resources also be concentrated on the least resilient
urban areas in an effort to improve their capacities for adjustment and to
accelerate their progress into the mainstream of an advanced economy.
Those areas that are already considerably advanced and have begun to
demonstrate that their growth is somewhat self-propelling already have a
head start. In many cases, capital is available to them to help bring about
their own transformation. There is less need for public leverage, and its
impact is more marginal. They also need less external assistance. Within
their own strategies, however, they too should divide their attention be-
tween those sectors that are strongest and on which they must build their
future economies and the workers and neighborhoods that are least resilient
in making the adjustment.
Particularly in the older manufacturing cities, there is a need for external
support to help develop a higher degree of economic autonomy, institu-
tional capacity for managing the transition, and bargaining power for
investment capital. It is here that redundancy planning is most needed
because the economies tend to be so narrowly based. Making it possible
for some communities to reduce their size, close down some underused
infrastructure, and reorient their resources requires more than exhortation
and goodwill. Ultimately, labor forces must be retrained, education sys-
tems vastly improved, parts of the capital stock replaced, and sections of
the city rebuilt or renovated to perform new functions. The purpose of
concentrating resources on such cities is to make the transition they must
undergo smoother and to empower them and their residents to have more
choice about their future.
CONCLUSION
As powerful as the forces reshaping the economy are, their results for
specific urban areas are not predetermined. It is impossible to freeze our
urban areas in time, to preserve them as they were, but there is considerable
latitude for transforming them into livable places that perform important
functions. While natural forces still limit economic choices to some extent,
OCR for page 183
Rethinking Urban Policy
the same forces that have made capital so mobile and have increased the
importance of human resources also make it possible for cities to have
greater choice in what kinds of places they will become.
Local and national economies are inextricably linked to each other.
Consequently, national policy must be much more cognizant of its geo-
graphic consequences and national urban policy must be integrated into
national economic policy so that it can provide a perspective that is now
largely missing. As the service occupations increasingly dominate em-
ployment and as the changing nature of work demands that more people
be trained better than ever before, the nation can ill afford urban areas
that lag far behind others. The idea that one area can benefit only if others
suffer should be rejected as a basis for public policy. Such a zero-sum
policy contemplates a long period of waste for human and physical re-
sources in competition that does little to support overall national growth.
183
Representative terms from entire chapter:
rethinking urban
