We have about 15 minutes for questions from the audience. The floor is open.
(From the floor) Jerome Hodos
I have a question for Gar Alperovitz. The number you gave was that about 60% of the American economy is localized. Can you define what localized means?
The purchases from within and sales to other participants in the community!
(From the floor) Jerome Hodos
Does my shopping at my local CVS count?
(From the floor) Jerome Hodos
In what sense is CVS local?
I don’t know the answer to your question whether your local CVS is or is not within that, but I can give you the references to the studies, if you’d like: they’re in the book!
(From the floor) Audience member
I was at a forum on economic development, just last week, out toward Philadelphia.. There was a lot of noise from the audience about finding more manufacturing style jobs, lower-end wage jobs to fill the perceived gap in the community. But from the statistics that you’re reciting, what’s the point in people putting their energies there?
Well, I think Erik may have some answers there. There may still be some areas where manufacturing is important, you have to look at that case by case, but the larger trends are very clear.
Yes, and I would just add that, in terms of shares of GDP, or productivity in manufacturing we’re going through the roof. It’s not that we’re going to have a death of manufacturing; it’s that it’s certainly not going to be the kind of job generator that it was in the past. We’re likely to remain the world’s manufacturing power for decades, and manufacturing probably will probably continue to be a very healthy sector of our economy, but it’s just not going to provide jobs, except for robots. I mean, that’s frankly what’s going to happen; so that’s a significant challenge. I don’t think we can bemoan the loss of manufacturing jobs. We have to find alternative sources. I mean: the real challenge with this inequality issue is where does a person with a high school education, or without a college education get a job? That is a huge challenge in economic development in the next 20-30 years--because these people used to be able to go to a manufacturing job, and now they make $10,000 a year. That is a problem.
(From the floor) Tony Maynard
I have a question of Erik. I was wondering how we go about achieving diversity here—I mean, in the County, because we do have diversity in the City, but not in the County. I was thinking about your suggestions, and your experience around America, but how do you suggest going about doing that here?
Well, I think when we started thinking about this in the Lancaster Prospers initiative, I think we were less concerned about what to do in order to have a spread of diversity around the county, but more about how to enhance the City itself—and, more importantly, from an economic development standpoint, how to encourage African Americans, Latinos, women: to help them grow businesses, world class businesses, not struggling marginal businesses. And then through those kinds of processes, building a diverse business community, the issue that grows in Lancaster Prospers is to try to make Lancaster a more exciting place for young people. And that’s a challenge a lot of communities face, and that’s what it was about. Nightclubs, entertainment districts, parks, a lot of stuff happening here, and we’re really trying to get some of that moving.
It’s really important to emphasize what you said about manufacturing. The latest projection that I saw had manufacturing employment growing at a rate of 3% over the next 10 years, but manufacturing productivity growing by some 20%; so the manpower implications of this is that fewer people are going to be required, but their skill level is going to be much higher. So, in a community where you have a low education attainment level, that’s where the gap opens up. There are good jobs in manufacturing, but do we have people that are ready to take those jobs and get into those career trends? That’s the difference.
I think I would like to ask a question. I would like to ask of you, Erik, since you spoke about the strength of the political leadership in Lancaster
The business leadership! the community leadership!
Well, I think we have to have some kind of combination of the two. And especially if we’re going to have a new economy, and if we want to promote more skills and more education, we need a culture of innovation. That requires public investments in education, in culture, in all sorts of things; but Lancaster County has been so traditionally conservative. I’ll give an example: a number of years ago, when the Harrisburg Community College was trying to expand because there was such a need in this areas, this community did not want to fund its own community college. So, now, we are serviced from an outside community college, with some possible problems there: because, if you do not have the richness in the curriculum that really can create culture instead of just giving people technical skills, then you can’t really support a culture of innovation, and such. But we are so penny pinching when it comes to the expenditure of monies, and I’m wondering whether, unless that changes, if we are ever going to get to that point of creating that new environment that would make us prosper, whether in the case of entrepreneurial or in terms of these public initiatives. Well, maybe the business leaders need to take that on and tackle the political system.
Yes, we have been trying to do that. I shouldn’t say "we." "They" have been trying to do that. And perhaps the civic-mindedness and the philanthropy and commitment are a reflection of the lack of that political leadership, and kind of fill in the void…
(From the floor) Audience member
Mr. Alperovtiz, how much of this extreme distribution of prosperity is caused by policies, and how much is caused by earning innovations fair and square?
That’s a very difficult question to sort out. One of my colleagues at the University of Maryland Prof. Linda Williams, just published an extraordinary book which won three national prizes in the last year. And it’s about the racial divide. And what’s very interesting about the book--and it’s a public policy book, it’s all about public policy, is as follows. We often think of racial discrimination as a matter of policy; in the South, for instance, where it was state policy. Or, during the New Deal, for another example, many agriculture programs were not available to Blacks, and redlining prevented them from housing ownership--and so forth. So, often, we look at those public policies as discriminatory and negative for the Black population. What she did in this book, and I commend her for it, is to say: no, take another look at those policies; flip the coin; they are all public policies to enhance white ownership, they are beneficial to white people, they get better loans for housing, they get better agricultural loans, they get better education and so forth. So that it is a matter of public policy, it isn’t only discrimination, it is specific people having gotten specific benefits from the public treasury. So part of the answer on the distribution of income goes to that set of questions. It is a particularly powerful way of thinking about wealth. If a grandfather somehow got hold of a farm or house, then the kids might inherit enough to have of their own, that didn’t happen in many parts of the Black community. As a result, Black financial wealth is, on the average, 30% of white financial wealth, and Hispanic and Black net-worth is, on the average, 11% of white financial net-worth. The other part is of course, tax policy. And I happen to think that current tax policy is very beneficial to the top 1/3 who gain from them, because the more you can accumulate by not having to pay taxes the more you can invest and so forth. There are many sources of the concentration of income and wealth. Some significant part of it is wealth ownership.
I can’t resist. I’m doing a book on the following subject. In my next book, I’m going to ask people to think about this question--you don’t have to answer it or agree with it here. Here’s the paradigm: 200 years ago, if you worked a 40-hours week and had as many years of education as someone today working 40-hours a week, you would today make 17 times as much in real income as that person was making then. Now what did you do to benefit more than the other person? Nothing! You inherited the accumulated technological knowledge of 200 years that were given to you as a free gift, in your wages. Most of what we’re talking about in terms of current income is a legacy of long past private and public investments: arithmetic, calculus, chemistry, the whole engineering, which we inherit, as the leading historian of technology says, as a "free lunch." We get it for nothing. Who gets to benefit now, in very high terms or low terms, is in fact who gets most of the free lunch. So my own view is there is a radical maldistribution of what we all inherit, and it appears as high incomes and low incomes, high wealth and low wealth. But that’s the next book, but I wanted to throw it into this discussion.
(From the floor) Shirlyn Kamara
I don’t know how to ask this question, but I guess I’ll relate it to myself. For 10 years, it’s been … like I’ve been running in circles … trying to get something off the ground, trying to start a cooperative for young troubled people, to train them, to develop business opportunities for them. How do you get out of that loop of running around in circles, and how do you get people to get on board as a community, how do you get supporters…
I don’t know how the answer to your specific situation, but let me try to take this from a big picture scheme. One thing we know is that there is an intense cultural aspect to some of these issues. And I am referring by that to the way people think about business and communities; and that really plays itself out in two ways: are people in the community open to risk and how do people respond to failure in a community? So, I mean, I’ll take from my own personal example. A lot of communities have this dysfunctional culture where people are not encouraged to take chances because they might fail--and if you fail, there’s all this kind of negative stigma around that. I grew up in it, if I had wanted to start a business when I came out of high school in 1979--I love my parents, but they would have killed me. They would have said it’s too risky. That was the culture that I grew up in, and it probably was the culture here in Lancaster then too. But that has changed some; so we can’t downplay this kind of cultural aspect and so a lot of what we work on in development policy is to try to change people’s perspective and often that starts in the schools, it’s about seeing opportunities, going after opportunities, taking chances. And when you’re in a place where people say: go for it, you know, you have nothing to lose…at least they’ll give you a shoulder to cry on. That’s a much different environment than a place where it’s you know, "are you sure you want to do that? You might fail, and…" So you cannot downplay that kind of cultural…as we think about this. That doesn’t answer your specific question…I want to say the challenge you see is something we see all around the United States.
Public policy can help too, if it wants to. Technical assistance, loan funds, training, help with balancing, all that can be done by public policy, and universities can help a lot. All of this has ample precedents if the community wants to do it. So there’s a political policy question at the heart of all of this, which has to be confronted directly and is partly a matter of will, whether people actually say "we want some of this to happen," rather than let it slide.
Maybe we can take one more question and then have a break; otherwise we will run into the time of the next session…
One thing that you haven’t discussed—but I’m sure that you can, between the two of you--is that every community has its own 1% of wealth. You talked about municipal authorities developing business investments, but have you found, in your research, any communities that have made a considerate effort to gather together those who have the investable capital to localize things more, either through foundational gifting or through a venture investment.
Yes, and in fact you have a tremendous likeliness of that right here in this community. You have a very powerful effective community foundation; you have one of the smallest communities in the United States that has an organized "angel investment" network. If you look at places that have organized angel forums, I can tell you, Lancaster is about a quarter of the size of the typical place that has that sort of network in place.
And it is not that local as far as investments go. We bring the investables from far and around. So it is still largely one way. I think of Professor Alperovitz’s point here: we should look at the factors and benchmarks of local investors which are kind of hidden. We don’t really know them.
I just want to say Amen to that! In every community there are people with wealth that care about the community. And a lot of them don’t, I don’t want to whitewash this at all. But those who actually care about the community, could do what I think you’re suggesting, and they could actually get serious about some of these alternatives that I’m talking about, and this woman has asked about. And if I’m correct, and I think I’m at least partly correct, that restabilizing the local economic environment is important to the local community, and that’s critical. Not just the other pieces, which I’m not against, folks like yourself could take a real initiative and it would be terrific to see happen. And one model that’s successful could go elsewhere.