Did we win the war on poverty?

Did We Win the War on Poverty?Fighting the Good Fight – What Still Needs to Be Done?

Chicago Federal Executive BoardJune 16, 2015

Robert WeissbourdRW Ventures, LLC

Launching the War on Poverty

“Our task is to help replace their despair with opportunity.

This administration today, here and now, declares unconditional war on poverty in America.”

- President Lyndon B. Johnson (January 8, 1964)

War on Poverty in the “Great Society”

Nearly 200 pieces of legislation, many of which are still in place today:

"Our aim is not only to relieve the symptoms of poverty, but to cure it and, above all, to prevent it.“

Source: LBJ Library

Economic Opportunity Act of 1964

Food Stamp Act of 1964 (now SNAP)

Social Security Amendments of 1965

Elementary and Secondary of 1965

Housing & Urban Development Act of 1965

Agenda

From Poverty Alleviation to Market Based Development2

Market Based Development in The Next Economy3

The Promise of Inclusive Growth4

Implications for the Federal Government5

Winning? The Numbers 1

Agenda

Official Poverty Measure (OPM)

Source: U.S. Census Bureau, 2014

OPM = pre-tax income against mostly food needs.

Official Poverty Measure (OPM)

Source: U.S. Census Bureau, 2014

By OPM: poverty rate has not declined

OPM = pre-tax income against mostly food needs.

Supplemental Poverty Measure (SPM)

SPM = income + welfare/transfer payments – taxes against basic expenditures

Source: President’s Council on Economic Advisors, 2014

Supplemental Poverty Measure (SPM)

By SPM: welfare programs have reduced poverty rate from 26% to 16%

SPM = income + welfare/transfer payments – taxes against basic expenditures

Market Poverty Measure

By MPM: welfare is significantly reducing poverty,but markets leaving more people behind

Growing market poverty means wages and income are increasingly falling short

Relative Poverty

“In order to participate fully in the social life of a community, individuals may need a level of resources that is not too inferior to the norms of a community.” - OECD

Source: CEPR, 2013

Relative poverty is high and getting worse

Winning? By the numbers:

Major progress, but serious challenges remain:– Welfare works! Programs have kept over 300 million people

out of absolute poverty– Relative Poverty high & rising

Welfare is necessary, but not sufficient – Compensates for market failure & exclusion: alleviates but

doesn’t cure– Often creates alternative, dependency-based, programs,

rather than solving for the underlying market causes

We need to shift towards moving people & places back into the economic mainstream

Agenda

Origins: From “Equity” to … “Equity”

Civil Rights

Empowerment

Economic Development: Assets

Economic Growth: Markets

Putting the ECONOMICS in Economic Development/Growth

Poverty and Economic Growth

“… poverty has no causes. Only prosperity has causes. Analogically, heat is a result of active processes; it has causes. But cold is not the result of any processes; it is only the absence of heat. Just so, the great cold of poverty and economic stagnation is merely the absence of economic development. It can be overcome only if the relevant economic processes are in motion.”

-- Jane Jacobs

Photo from Shelf-Basin Interactions

Therefore, to increase wealth in poor communities, expand market activity to the assets of those communities.

Market Based Development

The economic mechanism for investing in assets is the market

Wealth is created by investing in assets

To address poverty, create wealth

Market Failure inLower Income Communities

• Employment networks• Entrepreneurial opportunities• Business, real estate investment• Expanded products and services• Competitive, healthy

communities

• Undervalued, underutilized assets

Poverty Productivity

Connectedness

Isolation

Elements of Market Based Development

Increasing Productivity• Long term economic growth occurs through enhancing productivity of

individuals, businesses and institutions (including government) • Invest in technology, R & D, human capital, knowledge factors that

lead to innovation

Expanding Inclusiveness

lead to innovation

• Reincorporating wasted “market-ready” assets – such as underdeveloped land, underemployed labor or underserved markets – into the economy can increase efficiency and productivity

• This growth is not just good, but good for business – no trade-off between equity and growth

Developing Assets

Expanding Inclusiveness

lead to innovation

• Reincorporating wasted “market-ready” assets – such as underdeveloped land, underemployed labor or underserved markets – into the economy can increase efficiency and productivity

• This growth is not just good, but good for business – no trade-off between equity and growth

• Getting assets market-ready also makes economic sense• Also necessary for strong society: healthy economy and democracy

linked

Low Alignment

High Alignment

MARKET INTERVENTIONMarket solution possible if market operations and environment changed through public policy and advocacy

MARKET REDEFININGMarket solution possible if market operations and market environment changed through private activities

MARKET REFININGMarket solution possible with new information, products or networks

PURE MARKETMarket solution possible; market already generates ED outcomes

NON-MARKETNo market solution; market is not the appropriate channel

Activities to Align Markets and Development

Market Interests

ED Goals

Adapted from Kahane-Weiser-Weissbourd/Ford CII

Low Alignment

High Alignment

MARKET INTERVENTIONMarket solution possible if market operations and environment changed through public policy and advocacy

MARKET REDEFININGMarket solution possible if market operations and market environment changed through private activities

MARKET REFININGMarket solution possible with new information, products or networks

PURE MARKETMarket solution possible; market already generates ED outcomes

NON-MARKETNo market solution; market is not the appropriate channel

Market Interests

ED Goals

Adapted from Kahane-Weiser-Weissbourd/Ford CII

Make Market Work(Addressing Internal Imperfections)Change Market

Parameters(Using Market Mechanisms)Change Market

Parameters(Using Non-market Mechanisms)

Vital Work –but not market based!

Market Works:Company profits while providing Development impact.

Activities to Align Markets and Development

NEXTOLD

Intervene:Low Income Housing Tax Credit

OBJECTIVE: Affordable housing

Large-scale, publicly-owned & operated, wholly subsidized

development

Tax credit to enable market development of affordable units

Image Sources: Art Gray (Flickr)

NEXTOLD

Redefine: YearUp

OBJECTIVE: Human Capital Development

Provider orientation. Disconnected from market

demand. Outputs vs Impacts.

Tailored, demand-driven training linked with direct

placement opportunities and career pathways.

NEXTOLD

Refine: ShoreBank

OBJECTIVE: Comprehensive Neighborhood Development

Heavily subsidized, fragmented, one-off deals.

Development activities disconnected from market.

Holding company with bank, venture fund, housing developer, & non-profit

– specialized knowledge and tools enabling mutually-reinforcing market

based investment.

Agenda

A Fundamental Change in the Economy

23 Source: Brookings (data from Moody’s analytics)

No more “business as usual”

• Human capital• Information technologies• Product innovation; flexible

customization• Firm, consumer and knowledge

networks• Increasing returns; divergence

The Global Economy is Undergoing a Fundamental Transformation

24Source: “Greenspan Weighs Evidence and Finds a Lighter Economy,” Wall Street Journal

Driven by Knowledge Assets

$s lbs0%

600%GDP Growth, 1950 - 2000

1920s 1990s0

20406080

Years Spent on the S&P Index

The Economy is More Dynamic(and Global)

25Sources: Newsweek, Manyika, Lund and Auguste, “From the Ashes,” 8.16.2010; Brookings Institution

15% 17% 19% 21% 23% 25% 27% 29% 31% 33%0%

10%20%30%40%50%60%70%80%90%

Churn and GRP Growth by MSA

Firm Starts and Closures (Churn) as % of All Firms

1920s 1990s0

20406080

Years Spent on the S&P Index

The Economy is More Dynamic(and Global)

25Sources: Newsweek, Manyika, Lund and Auguste, “From the Ashes,” 8.16.2010; Brookings Institution

21.4%Global GDP (2010)

BIC Countries

20.2%US

15% 17% 19% 21% 23% 25% 27% 29% 31% 33%0%

10%20%30%40%50%60%70%80%90%

Churn and GRP Growth by MSA

Firm Starts and Closures (Churn) as % of All Firms

25.8%Global GDP (2015)

BIC Countries

18.3%US

…and Centered in Metropolitan Areas

Population

Employm

Personal Income

ledge Industries (GD

Metros Share of U.S. Total

Source: Brookings Institution; Bureau of Economic Analysis, U.S. Patent and Trademark Office

Gross Product

Patents

…and Centered in Metropolitan Areas

What Makes Metropolitan Regionsmore Productive in the Next Economy?

Customize: Build on Distinctive Assets

Develop Institutional Capacity and Intentionality

Invest in Complementary Activities That Create Synergies

Metros Concentrate People andFirms to Achieve Efficiencies

Leverage Points

for Sustainable and Inclusive

Prosperity

EnhanceRegional

Concentrations/Clusters

Market Levers on the Next Economy

Functional clustering Shift towards SMEs More deliberate, open,

flexible, collaborative

Leverage Points

Prosperity

DeployHuman CapitalAligned with

Job Pools

EnhanceRegional

Mobility and matching

Segmented, continuous, contextual training

Occupational-technology-firm pools

Leverage Points

Prosperity

Job Pools

EnhanceRegional

DevelopInnovation-

EnablingInfrastructure

Cluster restructuring new entrepreneurship and SME opportunities

Innovation Districts

Leverage Points

Prosperity

Job Pools

Create EffectivePublic & Civic

Culture & Institutions

EnhanceRegional

DevelopInnovation-

Formal and informal economic networks

Cross Sector Initiatives

Transparency, openness

Leverage Points

Prosperity

Job Pools

Increase Spatial

Efficiency

EnhanceRegional

DevelopInnovation-

Formal and informal economic networks

Cross Sector Initiatives

Transparency, openness

Move towards compact, well-connected urban form

THE NEXT ECONOMY ENTAILS A FUNDAMENTALLY DIFFERENT APPROACH TO ECONOMIC GROWTH

From the “Old Economy”…

Cities are centers of poverty and problems …

…To New Principles forthe Knowledge Economy

Cities are the solution, ripe for investment

“Urban” is not a four-letter word

From the “Old Economy”

Chicago MSA Job Growth/Loss, 1995-2010

3,498,0002,861,000

176,000

Costly and one-off firm attraction

From the “Old Economy”

Chicago MSA Job Growth/Loss, 1995-2010

Net: -697,000 811,000 5,000

Source: YourEconomy.org; CAREFUL re: interpretation due to methodological issues concerning attributions by category.

3,498,0002,861,000

176,000

-4,195,000Opened/(all) Closed

-2,050,000-171,000

Expanded/Contracted Moved In (time of)/Moved Out

Stop competing to grow…

Costly and one-off firm attraction

…and start growing to compete

Concentration of workers with IT &

design skillsHighly ranked

engineering schoolRelevant university

research activity

Strengthen entrepreneurial support

and ecosystem

Strengthen university-industry connections

commercialization and firm innovation

Innovation Accelerator (catalyze technology

commercialization, support new & existing firm growth)

Build on existing strengths and unique assets

Competing on low cost

Compete on value added

Chasing the “Big Deal”

Be strategic – understand your place and path in context

Deals as a tactic, driven by an underlying strategy

Source: World Business Chicago’s Plan for Economic Growth and Jobs

Focus on Consumption

Focus on Production

Bureaucratic, top-down, inside-out government

Transparent, outside-in, networked collaboration across sectors, subjects and borders

Transportation

Tax Benefits

Education

Infrastructure

Job Placement

Delivering disconnected programs

The whole is greater than the sum of its parts

Transportation

Tax Benefits

EducationInfrastructure

Job Placement

Act in context, with integrated solutions

Lack of education

Investment

Homelessness

Lack of money

Unemploy-ment

Markets

Ownership

Connected Communities

Addressing poverty as isolated problem

…To EmbracingNext Economy Dynamics

Productivity InclusivenessAsset

Development

“I N C L U S I V E G R O W T H”Constructive Government

Economic Place Making

Asset-Based Investment

Economics & Markets

Move people & places into the economic mainstream

SUCCESS = Dynamic

Economic Growth

SUCCESS = Short Term

Subsidize companies

Reduce taxes

Train the unemployed

Municipal competition

Government-led

Traditional economic development

New economic growth planning

Leverage regional strengths

Add value

Connect trainingto jobs

Regional collaboration

Public-private partnerships

New Principles for Economic Development

Agenda

Why Inclusion Matters

Why Care Causes of Exclusion Fixes

ValuesSocial Erosion Moral Imperative

Values

Governance

Social

Political

Erosion

Corruption of Political System

Moral Imperative

Political Economy

Values

Governance

Prosperity

Social

Political

Economic

Erosion

Returns to Capital

Moral Imperative

Political Economy

Inclusive Economic Growth

Values

Governance

Prosperity

Social

Political

Economic

Erosion

Returns to Capital

Moral Imperative

Political Economy

Inclusive Economic Growth

The Inclusive Growth Paradox

Drivers of growth exacerbate inequity

0.05.0

10.015.020.025.030.035.040.0

Changes in Share of Total Household Income, 1979 - 2007

1979 2007

Nonfinancial Corporations Sector

Labor Share

01940 1950 1960 1970 1980 1990 2000 2010 2020

2013 research.stlouisfed.org

Index 2005=100

Profits

0 .1 .2 .3 .4Poverty Rate (1990)

Inequity is bad for growth Drivers of growth exacerbate inequity

0.05.0

10.015.020.025.030.035.040.0

1979 2007

Sources: Federal Reserve Bank of St. Louis; Congressional Budget Office; RW Ventures Analysis

Labor Share

01940 1950 1960 1970 1980 1990 2000 2010 2020

Index 2005=100

Profits

0 .1 .2 .3 .4Poverty Rate (1990)

Inequity is bad for growth Drivers of growth exacerbate inequity

0.05.0

10.015.020.025.030.035.040.0

1979 2007

Sources: Federal Reserve Bank of St. Louis; Congressional Budget Office; RW Ventures Analysis

INCLUSION is a

BUSINESS IMPERATIVE

Labor Share

01940 1950 1960 1970 1980 1990 2000 2010 2020

Index 2005=100

Profits

What is Inclusive Growth?

Distribution of Wealth

What is Growth?

Change in Height (Accumulation)

What is Equity?

Change in Slope of Line (Distribution)

Change in Accumulation and Distribution

Change in Accumulation and DistributionHow can we enable this growth….

…with a more equitable distribution?

The Growing Exclusion of the Poor

$1,133

-$439 -$354

Difference in $

Principles for Poverty Alleviation through Inclusive Growth“It’s the Economy” Focus on opportunities (specific assets, markets & growth drivers)

to leverage (not supplant) markets to create value.

to leverage (not supplant) markets to create value.“Skate to Where the Puck Is Going to Be” It’s the next economy. Stop putting poor people in old economy

jobs and businesses!

jobs and businesses!New Civics Embrace new cross-sector partnerships, networks, and institutions

to inform and implement work.

to inform and implement work.Act in Context Activities & geographies succeed or fail in context of each other &

their interactions in place. Strategies and initiatives need to be aligned, integrated & mutually reinforcing.

to inform and implement work.Act in Context Activities & geographies succeed or fail in context of each other &

their interactions in place. Strategies and initiatives need to be aligned, integrated & mutually reinforcing.

Inclusion is Not a Separate Economic Practice It’s an intentional, integral design principle for every growth activity.

Leverage Points

Prosperity

The Next Economy Offers Huge Opportunities for Aligning Poverty Alleviation and Growth

Leverage Points

Prosperity

EnhanceRegional

Inclusive Clusters:Chicago FOOD

Leverage Points

Prosperity

Job Pools

EnhanceRegional

Targeted inclusive training for emerging industries: YearUp

Leverage Points

Prosperity

Job Pools

EnhanceRegional

DevelopInnovation-

Doer-Maker Space: Blue1647

Leverage Points

Prosperity

Job Pools

EnhanceRegional

DevelopInnovation-

Neighborhood/Sub-Regional Business Planning: Greater Chatham Initiative

Leverage Points

Prosperity

Job Pools

Increase Spatial

Efficiency

EnhanceRegional

DevelopInnovation-

Neighborhood/Sub-Regional Business Planning: Greater Chatham Initiative

Industrial land reuse:Casey-Atlanta

Historically “Neighborhood of Choice” for Middle-Class African American Population

Regional Role: Home to many AA-owned

businesses Deployed workers into gov’t.,

mfg, middle mgmt., etc. Primarily bedroom community

Neighborhood Characteristics: Multi-generational families Quality, affordable homeownership Family-friendly – safe, good

transit/transportation, quality schools, strong commercial corridors

Threatened by Convergence of Global, National and Local Dynamics

Hollowing out of middle class Frozen housing market Demographic changes/incoming population

Source: RW Ventures analysis using Dynamic Neighborhood Taxonomy, 2000 and 2010

The Role of Neighborhoodswithin Regions

Neighborhoodsof Choice

Neighborhoods as collection of amenities – housing, retail, public goods, etc. – interacting in place

Whole greater than the sum of its parts

Emphasis on quality of life

The Role of Neighborhoodswithin Regions

Neighborhoodsof Choice

Neighborhoodsof Opportunity

Neighborhoods as collection of amenities – housing, retail, public goods, etc. – interacting in place

Whole greater than the sum of its parts

Emphasis on quality of life

Neighborhoods as collection of assets – labor, land, businesses, etc. - nested in larger markets

Function = develop and deploy assets into larger systems

Emphasis on economics

Building a Community ofOpportunity & Choice

16 mutually-reinforcing strategies– Tying neighborhood assets to regional markets– Ranging from appraisal gap financing, to middle-skill placement to

cluster supply chains.

Building a Community ofOpportunity & Choice

16 mutually-reinforcing strategies– Tying neighborhood assets to regional markets– Ranging from appraisal gap financing, to middle-skill placement to

cluster supply chains.

Modeling new partnerships & programs designed to be replicable across region

New institutional infrastructure:– Engaging community & regional stakeholders from public, civic,

and private sectors– Accountable to community & markets– Flexible, distributed work, and entrepreneurial

Transformative Initiatives

Integrated Workforce Center,

with targeted regional employer

partners

Small Business Capacity Building, for firms in cluster

supply chains

Single Family Rehab

Investment Fund

Anti-Violence Marketing Campaign

Extended After & Out-of-School Programming

New Institutional Infrastructure

Agenda

Multiple Roles

Enabling

Create optimal infrastructure for

market to perform; increase productivity

Public goods; market preconditions

Market Rationales

Property rights;law enforcement;

transportation infrastructure

Examples

Multiple Roles

Improving

Fixing markets

Externalities, information

imperfections, entry barriers

Anti-discrimination; data, platforms for

market efficiency (e.g. credit scoring; securitization)

Enabling

Market Rationales

Examples

Multiple Roles

Moving markets on their margins

Positive externalities; more efficient

approach to non-market goals (equity,

public welfare)

Enterprise Zones;New Markets Tax Credit (NMTC);

CRA (in part)

Improving

Fixing markets

Enabling

Market Rationales

Examples

Multiple Roles

Degree to which market and asset development goals are already aligned

Getting Assets Market Ready

Moving assets to market (developing

assets in ways which yield growth)

Non-market objectives (but market

awareness)

IDAs; Brownfield Remediation;Education and

training

Moving markets on their margins

Positive externalities; more efficient

approach to non-market goals (equity,

public welfare)

Enterprise Zones;New Markets Tax Credit (NMTC);

CRA (in part)

Improving

Fixing markets

Enabling

Market Rationales

Examples

Affordable Housing

Workforce Training

Small Business

Assistance

Upgrading Roads and

Export Strategy

HUD Section 8

Dept. of Labor

Workforce Inv. Act

Dept of Commerc

e Int’l. Trade

Admin.

Dept. of Transpo.

SAFETEA-LU

Programs

Small Business Admin. Loans

From fragmented, top-down programs …

DevelopInnovation-

Job Pools

EnhanceRegional

Concentrations

Increase Spatial

Efficiency

Comprehensive Metropolitan Strategy

HUD Section 8

Dept. of Labor

Workforce Inv. Act

Dept of Commerc

e Int’l. Trade

Admin.

Dept. of Transpo.

SAFETEA-LU

Programs

Small Business Admin. Loans

From fragmented, top-down programs …

DevelopInnovation-

EnablingInfrastructureCreate Effective

Public & CivicCulture &

Institutions

Job Pools

EnhanceRegional

Concentrations

Increase Spatial

Efficiency

Integrated Investment by Federal Government,States and Others

White House Office of

Urban Affairs

HUD Section 8

Department of Labor Workforce Investment Act

Small Business Administration

Department of Transportation SAFETEA-LU

Programs

Department of Commerce

International Trade Administration

Cross-Agency Regional Teams Pooled and Flexible Funding Support for Regional Capacity Building “New Federalism” Partnership

DevelopInnovation-

EnablingInfrastructureCreate Effective

Public & CivicCulture &

Institutions

Job Pools

EnhanceRegional

Concentrations

Increase Spatial

Efficiency

Integrated Investment by Federal Government,States and Others

White House Office of Urban

Affairs

HUD Section 8

Department of Labor Workforce Investment

ActSmall Business

Administration Loans

Department of Transportation

SAFETEA-LU Programs

Department of Commerce

International Trade Administration

Producing Results

Promise Zones

White House Manufacturing

Institutes

Strong Cities, Strong

Communities

Partnership for

Sustainable Communities

DOE Innovation

White House Office of

Urban Affairs

Neighborhood Revitalization

Initiative

Regional Innovation I6

Challenge

Enable, Improve and Use Markets; Prepare Assets for Next Economy

New legal forms tailored to next economy wealth creation,e.g. community/crowd-sourced investment

Infrastructure reconnecting people & places to economic mainstream, e.g. BRT in low-income communities

New intermediaries to strengthen inclusion, e.g. demand-driven workforce intermediaries, inclusive clusters

Public goods that lower barriers to entry, e.g. open source data, open networks and platforms

Invest in inherently inclusive markets, advanced industries e.g. R&D grants for “blue collar” STEM; TA-backed finance for priority industries

Investment vehicles for next economy assets and opportunities, e.g. social impact funds

Sit at the Local Table…

Local cross agency teams oriented towards helpingimplement comprehensive local strategies

The Future of The War On Poverty

Focus on market-based inclusive growth and bring more Americans into the economic mainstream.

Need-based programs matter! Keeping manypeople out of poverty.

Welfare doesn’t solve for the underlying causes of poverty, which are being exacerbated in the next economy.

NEED-BASED PROGRAMS

ECONOMY

MARKETS

Did We Win the War on Poverty?Fighting the Good Fight – What Still Needs to Be Done?

Chicago Federal Executive BoardJune 16, 2015

Robert WeissbourdRW Ventures, LLC

Case Study:Greater Chatham Initiative (GCI)

Pilot “Comprehensive Neighborhood Growth Plan” to refine neighborhood role as—– Community of Opportunity, with assets that are aligned & deployed into the

regional economy– Community of Choice, that offer attractive housing & amenities to attract &

retain residents

Integrates market analytics with regional & local “civic” engagement to identify economic opportunities & challenges

Produces initiatives, infrastructure, and objective strategic foundation (the Plan) for community transformation and growth

Did we win the war on poverty?

Economy & Finance

Transcript of Did we win the war on poverty?

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