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Surviving and thriving in the new normal

Are you (we) ready for the future? Probably not . . .

But with insight, strategic new thinking and hard work, we can be. However, we’ll need to go beyond what we’ve been good at in the past.

Jim Capraro

There are two very interesting articles in the current issue of The Economist: “The Comeback Kid” and “Points of Light.” Together, they predict that America is poised to move towards robust long-term economic growth after two to three more years of pain.

They argue, though, that the drivers of our economy over the past three decades—housing and consumer buying power—will not be the drivers in the future.

In fact, they believe that the current (and they say short-term future) economic doldrums are actually caused by excesses in these two sectors after 30 years of activity. In short, Americans are simply “over-leveraged” when it comes to housing and consumer debt.

During the 17 years from 1990 – 2007, the American debt-to-income ratio climbed from about 85 percent to 133 percent. That’s when the economy and housing prices collapsed, causing the double shock of unemployment and overleveraged, “underwater” homes. Since 2007 the inflated market has been correcting itself and the debt-to-income ratio has come down to its current 115 percent level, with the correction still under way.

So what does this have to do with our cadre of comprehensive community developers?

Most local community development work has focused on housing production and retail corridor development. But what if these two sectors have “peaked”?

Consider the fact that community development “grew up” during this same 30-year period and our highest volumes of community development activity mirrored the drivers in the economy—housing and consumerism. Most local community development work has focused on housing production and retail corridor development.

If these two sectors have “peaked” and will no longer be the key economic drivers of the overall economy, they may no longer be the centerpiece, high-volume activity for successful community development work.

If this is true, then what’s next? 

The Economist articles project that a resurgence in America’s export capacity will buoy our economy in the future. On June 20th the Institute for Comprehensive Community Development and the Federal Reserve Bank co-sponsored a six-city “tele-seminar” on the subject of linking neighborhood revitalization to the regional economies.

Economies are usually thought of in a geographical context from very large (i.e. global economy), to very small (i.e. neighborhood economy) and all levels in between (the American economy, the Chicago regional economy, etc.).

A more traditional way to speak about economies linking to or relating to each other is to talk about “trade” (as in trade surplus/deficit) and “export/import.” Consider the words of urban thought leader Jane Jacobs from her 1969 book The Economy of Cities:

“When the exports of a settlement increase, the local economy grows. This local growth results from "the multiplier effect”; that is, each additional job created by export adds other jobs in the local economy, to supply and serve the growing numbers of workers and their families. And there is more work to be done supplying goods and services to producers of the growing exports. The larger the collection of various local industries that supply the producers of export, the larger the total multiplier effect.”

For three decades our community development work has been effectively producing the results of “the multiplier effect.” We have been hard at work supplying and serving workers (and non-workers) with housing and retail goods. It will be important to continue to do so.

But in most of our communities we have not created strategies nor work that actually create exports from the community to outside. Jacobs attributes growing export capacity to growing the numbers of workers. Many, if not most of our communities have experienced a stagnant and shrinking local or accessible job base. Our past work depends on the existence of a strong economy, as opposed to creating one.

Hmmn, creating a strong economy, or “developing” a strong economy—flip the words and you have “Economic Development.”

Continuing to do only what we know how to do is good work that will serve some people. But don’t expect it to create the rising tide that will lift depressed neighborhoods.

We need real export-driven strategies. We have some good examples: the Evergreen Cooperative in Cleveland, Recycle Force in Indianapolis, the Green Exchange in Chicago and others. Note, no two of these projects are alike.

If The Economist is correct, when it comes to linking our neighborhoods to the larger growing economies of the future we will have to “put our thinking caps on” to keep adding to that list of examples.

Jim Capraro is a senior fellow at the Institute.

Posted in Commercial and Economic Development, Thinking Out Loud

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