Large American
cities are in a difficult economic bind, a bind that is especially
tough
on poor and working class Americans, who are disproportionately
black and Latino. The most pressing problem for poor
and working class Americans is that American cities are important
nodes in a hyper-competitive global economy where highly educated,
high income workers consistently beat their poorer counterparts
in the marketplace and politics. The high cost of living
in big US cities is the free market’s way of telling poor and working class people
of all races to leave so as to make room for a vast global pool
of talented workers who want to live and work in urban America. Worse,
the economic logic of the American city forces any urban government
and business community, no matter how progressive, to put the
needs of highly educated, well-off populations – no matter their
race, color, religion or ethnicity – above those of poor and
working class citizens. This bitter class war has a nasty
racial aspect but is, at bottom, primarily about the economic
survival of cities, not race per se.
Does this mean that American
cities are destined to become like their European counterparts,
where
the well-off live within the city limits while working class
men, women and children reside in far poorer suburban labor reservations? No,
but black urban politics and public policy thinking must develop
a new vision that marries economic growth to economic justice
in ways that enhance the global competitiveness of cities while
creating equal opportunity for all within city limits. This
new urban political economy in black will also have to abandon
racial populism and simple redistribution if working class urban
America is to have a future.
Supply and Demand in the Global City
Modern cities are open
trading economies that grow and stay rich by serving customers
all over the world – selling
everything from tourist services like fancy restaurants, museum
exhibits, brilliant instruction at leading universities through
financial and medical services to high quality, specialized manufactured
goods. However, the most important goods and services produced
in modern American cities are high quality goods requiring highly
skilled, highly educated workers. Modestly educated workers
still play a vital role in all processes of production – sales
clerks, bus drivers, line cooks, receptionists, plumbers and
carpenters are essential in any modern society. But workers
with low levels of schooling do not command high wages and bright
job prospects compared to their better-schooled counterparts
on Wall Street, Madison Avenue and in the upper managers’ suites
because of the brutal logic of supply and demand in the global
economy. At this moment in history, there is a nearly insatiable
demand for the products of highly educated workers compared to
a still small supply of these people, while exactly the opposite
is true for modestly educated workers.
The inequality between
high and low income workers in cities affects every aspect of
city life, locking
modestly educated workers out of opportunities and dividing the
city into warring knowledge classes. Landlords and
builders, doctors, restaurant owners and shop keepers, among
others, grow rich by selling to high-income residents. By
contrast, modestly trained workers are increasingly shut out
of all of these markets by virtue of their low incomes.
The economic problem faced
by modestly trained workers is simple to state and tough to address:
workers
with low levels of educational attainment do not produce goods
and services that command a high price in local or global markets,
with the consequence that their incomes are too low for them
to get what they need on their own. This problem lurks behind
most of the troubles of urban America, from affordable housing
to unavailable health care, from crime to bad schools, from chronic
unemployment in black and brown communities to bitter battles
over taxes, spending and the direction of government.
The economy of the modern
global city grows when the number of highly educated, high income
workers
grows, both in absolute terms and relative to the number of poorly
educated workers. The business sector of a global city
is keen to attract the best and brightest workers in the world
with the promise of a vibrant cultural and culinary life, safe
streets, good public services, a fine housing stock and low taxes. The
business sector also attracts capital to the city by the promise
of a large pool of well-schooled labor, excellent public services,
a large tax base and a low tax rate.
Low-income workers can
benefit whenever the inflow of capital and high income labor
creates jobs for
modestly trained workers or improves the quality of shared public
goods. The restaurant boom in major US cities in response
to the growing population of high income workers with cosmopolitan
tastes is a major source of employment for workers with little
formal education, just as improvements in public transit benefit
all workers, well and poorly educated alike.
But the knowledge-class
divide also leads to a class war over the distribution of economic
rewards
in the city as well as the direction of government. Highly
educated workers have a far more limited need for government
to provide jobs, income, health care, housing or other essential
goods than their less-well off neighbors. Highly educated
workers are also less willing to pay for goods aimed at their
poorer neighbors, preferring instead to use their high after
tax incomes for their own purposes. Bemoaning these high
income residents as selfish is beside point: they are acting
in their own self-interest as buyers and voters, just like poor
people who support parties and candidates promising to use government
to redistribute income and opportunity in their direction.
The Perverse Logic of Public Goods in the Global City
The difference between
high income and low income populations in cities amounts to this:
if high income
populations do not get their needs met, they leave the city,
taking the tax base with them. Low income populations
demand high levels of city services that can only be paid for
by high income populations that do not need them or want them. Worse,
the perverse economic logic of global cities makes it hard for
high and low income populations to share a city, even when everyone
benefits from a large supply of high quality public goods.
For example, if New York
City’s deplorable
public schools were to suddenly turned into brilliant academies
for all of the city’s children, many more people of all colors
and classes would want to live there. But highly educated,
high income families with children would gradually push low income
families out of the city by acquiring an ever greater portion
of owner occupied and rental housing, leading to the terrible
situation where improvements in public schooling lead to the
eviction of poor people from New York. Of course, poor
people could stay in New York if better schools were accompanied
by more generous housing subsidies or programs that boost the
supply of low and moderate income housing. However, this
sort of policy would boost the tax rate on high incomes families,
perhaps leading to a gradual exodus of the tax base, diminishing
the capacity of the city to improve either schools or low income
housing.
It is important to remember
that the problem with American global cities is that the economic
logic
of growth for cities makes it very hard to redistribute goods
and services to poor and working class residents while promoting
economic development.
Consider another perverse
aspect of the economics of bad public schools in a global American
city.
One of the many reasons that schools in major American cities
are so bad is that there is a fundamental conflict between the
needs of residents for good schools and the needs of business
for good workers. Businesses in major cities can attract
good workers by offering competitive wages and good working conditions
at least so long as cities are attractive places to work and
play. City governments can further enhance growth by offering
high quality public services to highly educated workers. This
means that cities can grow by attracting workers educated by
other governments – whether located in suburban New Jersey
or in New Delhi. By contrast, rebuilding a solid system
of public education is an expensive proposition that is not likely
to bear fruit for many, many years. Why should the
business sector and highly educated residents of a major city
tax themselves to educate the children of their poorer neighbors
when a virtually unlimited supply of highly trained labor is
at the city’s doorstep?
Economic Justice in the Global City
Is there no way out for
poor and working class residents in global cities? Of course there
is: poor and working class men and women in global cities can
build a durable new social contract between themselves and their
high income progressive neighbors – if they pay attention to
economic reality and take a moderately long view of economic
development. In particular, left-leaning, equality enhancing
supply side approaches to public policy can combine economic
growth with economic justice by improving the economic competitiveness
of local capital and labor in the global economy. Further,
progressive urban governments can improve the well-being of poor
and working class populations by using smart policy in conjunction
with free markets to make it lucrative for the private sector
to serve hitherto unprofitable populations. In both cases,
progressive government can promote equality and development by
creating the right conditions for widely shared growth across
the knowledge class spectrum, thereby binding the city’s residents
together into a new commonwealth.
The new urban agenda requires
everyone to understand that economic development must be the
common project
of all citizens if the city is to become a good place for everyone. In
turn, this means that the city government must find ways to enhance
incentives for all citizens to improve their capacities to compete
in the global economy instead of relying on government to redistribute
money from high to low income residents. The primary goal
of cities under contemporary conditions is to increase the tax
base by bolstering the capacity of residents and businesses to
earn the highest possible incomes. That in turn requires
cities to increase the skills and asset ownership of the vast
majority of residents so that they can earn the highest possible
return on their labor or their property, thereby sharing in the
economic bounty flowing to competitive cities.
The most descriptive label
we can assign to this strategy – progressive development – puts the right emphasis
on the mix of earnings and wealth growth required for the creation
and maintenance of a fair yet competitive city economy. Under
progressive development policy, most forms of government taxation
and spending policies are aimed at increasing the earning capacity
of all workers as well as enhancing asset ownership among low
income populations – particularly home ownership and business
development. An economically sensible city government will
do everything it can, within fiscal reason, to help poorly schooled
workers move from low wage to higher wage jobs through education
and job training, as well as to increase the extent of home ownership
among this rising group of workers.
The key point here is that
cities can create a broad-based investment climate that increases
the capacity
of all working adults and business owners to bolster their income
earning capacity. The corollary of this strategy is that
governments do the wrong thing when they devote substantial resources
to subsidize the consumption of populations that either cannot
or will not participate in the investment activity of the community. The
contemporary economic situation of cities is not unlike those
of small, trade dependent countries like Singapore, or when things
go very wrong, Haiti. Singapore grew rich because its citizens
and business sector pursued an aggressive program of skill development,
technological advance and business expansion, thereby allowing
the city’s residents to earn higher incomes in an ever-richer
city that could afford more and better public services as time
went by. US cities can create a climate of growth
with widely shared benefits if, but only if, government supports
skill creation, skill enhancement, business formation and business
expansion activities.
The approach advocated
here could also be called the redistributive development state
to the degree
that government uses its tax and spending powers to tax high
income populations in order to promote the skill and earning
capacities of lower income and asset poor groups. The flip
side of this strategy is that populations with little or nor
capacity to develop greater skills or earning power will find
themselves receiving less attention and fewer resources, at least
in the initial stages of the program. This situation is
not due to any inherent disdain for people who are unable to
earn a living, or who cannot support themselves at a level consistent
with human dignity. Whenever possible, the city government
should try to provide a decent minimum level of support for those
citizens who are truly unable to make it on their own. However,
contemporary economic conditions simply do not permit cities
to subsidize activities that do not create assets or yield a
return in the near or more distant future. An ethical
and progressive city can only provide a real safety net for its
weakest citizens when it is rich and growing, and when the vast
majority of its citizens are truly well-off enough to take care
of their weaker neighbors. However, the weakest
among us are obliged to improve ourselves to the greatest extent
possible so that we too can offer our labor, intelligence and
earnings to the common task of building a good city.
So here is the challenge that the economically
sophisticated and relevant urban left faces: build a progressive
development society
that widens the circle of home and business ownership, enhances
skill development, creates excellent schools and provides other
public goods that can be widely shared across knowledge class lines
while enhancing the well-being of the City’s poorest and weakest
citizens. This is a tall order, one that will require innovative
thinking and political will. It will also require a black
urban leadership class willing to see the American city as a premier
location in a global system that rewards ability with wealth while
punishing weakness and social conflict with poverty. Above
all, the new black political class must be willing to write a new
social contract across the knowledge divide between highly educated
and poorly educated workers, showing everyone that the cities they
love will die unless they build a competent commonwealth that is
fair to all.
Marcellus Andrews is an economist and senior
research fellow at the New America Foundation. Dr.
Andrews writes on economic policy and economic justice for
academic and popular
audiences, including The Political Economy of Hope and Fear:
Capitalism and the Black Condition in America (1999, NYU
Press) and Taking Back Capitalism: A Capitalist Road to
Economic Justice (forthcoming, NYU Press). Dr.
Andrews received a PhD in economics from Yale University and
has taught economics at Wellesley College as well as the City
University of New York. Contact him at [email protected] |