Streets of Gold or Pathways to Poverty: Reviving America's Cities

Streets of gold look a little more like pathways to poverty. American cities have been on the decline for decades as investments diverted from urban areas to emerging countries that rolled out the red carpet. The infrastructure that was built when American cities were at the height of their economic might is still mostly intact waiting for visionary investors. Getting investment interest and better city governance can lead to mutual growth for business and job-hungry residents if the two can come to a mutual understanding.

Pick any major city in the country and follow its historic rise and fall. You may notice that as people moved to the city, built homes, and invested their resources these collections of people grew in wealth and influence. The collective action of small and large investors created a synergy of growth that pushed profit margins to higher levels. Money, government, and people had a mutual self-interest in development.

As international competition rose, technology changed, and poor government policy stagnated these cities; they became ghost lands that are a pale comparison to their previous glory. Where opportunity flourished a few decades ago, some cities have grown dilapidated virtual prisons. The poorer a family was, the more likely they were stuck in a cycle of poverty. American men, women, and children were left behind.

Bleakness doesn’t need to be the norm. Cities that still retain their basic infrastructure are ripe for renewed development that not only produces higher returns on investment (ROI) but offers new opportunities for residents. When opportunity grows, hope also grows, and new economic life is born with it. The marriage of investors and government  into pro-growth policies can nurse new opportunities.

Consider the mass investment draws to places like Eastern Europe, India, China, and other emerging nations where red tape restrictions are little but returns are high. American cities offer many of these same opportunities as the low cost of buildings, motivated work force, and reliable infrastructure found in combinations will grow once the right capital levers are applied.

Stakeholders will need to look at the global market and existing local competencies to determine where the best investment growth potential can be realized. When capitalists engage in pack investments and create spawning clusters of business activities to capitalize on existing competencies and infrastructure, growth is not far over the horizon. Economic wastelands can become investment wonderlands with a little good old fashion spit shine.

Many proposals such as new recreation centers, additional funding, tax allocations, etc...have been tried at one time or another. They were short-lived because they were not profitable and often came with long-term commitments with difficult to measure results. Building investment hubs fixes the foundations of poverty that lead to better housing, additional tax bases, better education and more community support.

The problem isn’t so much that investors are not willing to invest in these cities but that awareness is lacking, and local government is often short-sighted in their policy development that inadvertently restricts future opportunities. Revamping the way we think about investments, government, and education/training helps to ensure that struggling cities look more like diamonds in the rough. Enlightened government starts where partisan politics ends.

Book Review: Capitalism, Socialism, and Democracy by Joseph Schumpeter

Joseph Schumpeter’s book Capitalism, Socialism and Democracy brings forward some interesting concepts pertaining to the nature of economics and governmental forms. He believes that Socialism will eventually outstrip Capitalism as a system once the owners of production reject the capitalistic system that made them successful (1).  The early period pure competitive methods that fostered growth will become stagnated as the system fails to change.   

The book seeks to reconcile in part the differences between democracy and capitalism. The best method is the rule of people to create collective governance of society. However, as capitalism grows the average citizen doesn’t have much say in day-to-day politics and becomes more of a support to the legitimacy of others (2). 

To this point it is important to understand that the very core nature of society is to allow some to move forward while others to stay in followership. Difficulties can arise when those with the basic skills and abilities are inherently locked from moving up the social ladder thereby creating two separate societies of existence. As the divide between the two societies grow so does the problems. 

Democracy works when people have sufficient power to vote out and demand changes by elected officials (3).  The official becomes a type of business owner that seeks to find customers to his/her leadership focus. When customers are serviced properly they will re-elect their officials thereby creating opportunities for proper societal alignment. 

The biggest fear capitalism faces is, “the very success of capitalist enterprise paradoxically tends to impair the prestige or social weight of the class primarily associated with it [i.e., the entrepreneurial class] and that the giant unit of control [i.e., large corporations] tends to oust the bourgeoisie from the functions to which it owed that social weight”.

Larger entities will naturally write the rules that lead to the destruction or damage of small business that foster economic freedoms. Without the developing of new and revolving businesses, within the circular creative destruction explained by Schumpeter, the nation will turn to socialism. 

There is much to agree and disagree with in the book. It should be remembered that the book was produced in the 1930’s when world wars were raging, capitalism was threatened, and change was rampant. 

To further Schumpeter’s ideas it is beneficial to include a couple of concepts beyond this book that lead to the success of Capitalism and its governing form called Democracy.

-Upward Social Movement: It is important to foster small business and upward financial movement to encourage motivation in society as well as the development of new ideas and concepts. New businesses and intra or inter-organizational entrepreneurial activities lead to greater innovative and economic growth. 

-Open Dialogue and Information: Democracy requires the voting in and voting out of governmental representatives through proper information and open dialogue. Information should be free flowing, provide alternative points of view, and foster critical thinking. 

-Enhanced Legal Structures: All legal structures should enhance the population and encourage upward social movement. By encouraging greater human advancement it lowers the incentives of crime and costs of dealing with that crime.   Legal structures should not unnecessarily protect monopolies or unjustly restrict human advancement.

-Political Aeration: Allowing new members to enter the political sphere offers the opportunity for continuous adjustment to the will of the people as well as better decision-making matrices among leaders. Stagnated political networks damage long-term development by failing to adjust to world realities.