The seventies: the world turned upside down
When Cornwallis marched out of 1781 Yorktown, his band allegedly played “The World Turned Upside Down.” During the 1970s that tune should have been on top of economic development’s music chart. The 100-year-old Big City hegemony came to an abrupt end. Implosion of hegemonic Big Cities, however, was only one of four major disruptions discussed in this chapter that toppled economic development’s classical Mainstream Era. If hegemonic Big Cities and their Northern state hegemony collapsed, that meant the 50-year struggle of Big Cities to stop or control their suburban hinterland was effectively over (the Policy World, of course, never got the memo); it also meant the South and the West were on their own, and, to rub salt in hegemonic wounds, they were growing spectacularly. In the seventies, the attention focused on the South—unleashing a battle within economic development that amazingly still flares from time to time.
The profession/policy area also witnessed the hyperbolic rise of American community development, threatening, if not actually breaking, the predominance of Mainstream, Privatist, business-centered economic development. It had taken awhile, but the seventies’ American ED landscape included many varieties (wings) of community development, and during the seventies and eighties they were at their peak. Finally, cities, and the nation’s intelligentsia finally realized that our manufacturing economic base was faltering—badly. Our economy was shifting, toward service sectors, FIRE, and—the gazelle of the next 50 years—technology, in its many forms and industries, was replacing manufacturing as our growth sector and professional “target.” A several decades-long national debate, the Reindustrialization Debate (Chapter 19), had begun.
Without knowing it at the time, American economic development had entered a “Transition Period” during which it incrementally recognized, and dealt with, a series of economic, political, social, and professional dynamics/forces (including generational change and Big Sorts) that effectively displaced the old Classical Era, but were so poorly understood, and new changes so constant and disruptive, that a new order (Contemporary Economic Development) could not jell into late in the 1990s and the turn of the century.
Abrupt it may have been, but evidence of its decline can be traced to the 1920s. Reversing decline had been the chief problem Big City sub-state economic development had been tasked to solve since then. What abruptly changed was not the perception of decline, but hopes to counter it. Hope was replaced with denial, and that was replaced with despair—and blame.
Moreover, without completing sensing its importance to economic development, the definition of “growth” was changing. Politics changed its tone—and so did economic development policy and strategy. Decline was attributed to suburbanization, “the Negro Problem” and slums/ghettos. Optimism had sustained the physical urban renewal paradigm—obsolescence and blight could be fixed by public housing, slum demolition, building highways and CBD-focused urban renewal; but optimism was overwhelmed by the Great Migration, “Dark Ghettos,” white racism, riots and its obvious failure. Politically correct or not, it was perceived by many by 1970 that:
The ills of the central city in the 1960s … became almost exclusively attached to the Negro. As Nathan Glazer wrote in 1970 “Almost every problem in the United States has a racial dimension, and the racial dimension in almost every problem is a key factor. The Negro was situated at the core of physical deterioration, white flight, anemic capital investment, crime, poverty, poor schools and unemployment.” (Beauregard, 1993, p. 164)
The 1970s’ battleground was the ghetto—no longer a slum. Racial discrimination mainstream/chamber-led ED, its hopes pinned on CBD urban renewal and traditional retention and attraction strategies, had little to offer. A rejuvenated community development approach, focused on urban neighborhoods, seemed more helpful. In the section below, the various CD wings and movements of the 1970s will be described.
For those who look back and see a half-century of wage stagnation, increased inequality, and decline of the middle class, this is the decade when it started. During this decade Americans woke up to the computer and technology—they also drove Hondas and Toyotas, not Fords and Chevys. Manufacturing was clearly sick, the disease still unnamed (until 1982); but foreign manufacturers were doing well, and technology was hot. Something called the service sector, or producer services, was on the rise, and that offered some hope—although suburbs seemed to be doing better in those sectors. In sections below we will introduce the rise of technology, and the emergence of new jurisdictional economic bases saturated with service, FIRE industries, the so-called “producer services”—and outline the development of a new “Auto Alley.”
Mainstream business-focused ED moved from chambers to government and nonprofits—but the tools and strategies were still pretty much the same as before. Chambers focused, maybe specialized is a better word, more on the downtown and tourism in these years. In this decade, mainstream ED was left holding the Big City bag, dealing with plant shutdowns, workforce retraining, Band-Aid retention though loans, industrial parks, and the old perennials—targeted physical redevelopment and tax abatements—amid broken, riot-torn neighborhoods. States picked up their game, and backstopped the locals. During this decade the most promising cutting-edge strategies came from business itself: corporate strategy, business management, teambuilding, Sigma Six. Productivity and process, retooling lean and mean, and all that good stuff. That should put a stop to Japanese imperialism.
POST Great Society COMMUNITY DEVELOPMENT
Unlike mainstream business-focused economic development which had congealed around chambers and port authorities, postwar community development seemed more like a herd of cats, each attending to its own business. Within community development there were always wings: settlement houses, housing reformers, recreation and community centers; neighborhood mobilizers, new towns/suburbs, slum clearance, and public housers. Community development lacked a stable core; it was mostly a fluid collection of policy whirlpools—with sympathetic allies such as planners, architects, and Progressive capitalists/managers, who drifted in and out of the disparate CD policy coalitions. If there was anything that functioned as a core, a barely adequate one at its best, it was foundations and Policy World theorists such as Mumford or Bauer.
Despite its remarkable success in passing the 1937 Housing Act, CD housers’ pre-1940 timing couldn’t have been worse. They rode a wave of popular enthusiasm generated by a genuine housing crisis in the midst of a Depression. The 1937 Housing Act raised slum clearance, neighborhood renewal and public housing as the preeminent CD strategy. By 1941, however, war production worker housing effectively ended low-income public housing for a decade, while popular opinion shifted to combating the perceived deterioration perceived in Second Ghetto slums. In the ensuing Washington policy stalemate that characterized the 1940s, CBD-oriented real estate and chamber groups “stole” or “shared” (depending on one’s perspective) neighborhood slum clearance and diverted (over the 1950s) much of it into CBD/commercial center, “eds and meds” urban renewal. The bitterness fostered in those years between this early “growth coalition” and CD housers/community mobilization activists still remains today. Lost in the mud-slinging was that both sides were desperately attempting to combat suburban decentralization—Alice O’Connor’s “crisis of metropolitanization” (1999, p. 96).
Neighborhood succession during the forties and fifties was an increasingly brutal process. The incredible destruction unleashed by mid-1950s’ federal-funded highway construction made it even worse. Ethnics simply moved out to peripheries and suburbs. Migrants from the Great Migration moved in, developing what today is labeled the Second Ghetto. This Second Ghetto presented a very different situation from the First (ethnic immigrant). Alinsky’s CD community organizing approach, for example, was essentially a First Ghetto strategy and it didn’t work well in the Second Ghetto with white organizers mobilizing African-American neighborhoods. White and union community organizers like Alinsky (who had moved from active community organizing in 1942) increasingly found themselves on the outside looking in, using AfricanAmericans as their foot soldiers in an unstable alliance that quickly ended (see Chicago’s Woodlawn). By War’s end, CD neighborhood-focused strategies/wings were facing an almost existential crisis as to how to apply community development to the Second Ghetto.
Solving that existential crisis is essentially what the Ford Foundation, Gray Areas, and Cloward and Olin were attempting to do in Chapter 16. Their experimentation produced the War on Poverty and LBJ’s Great Society. Great Migration blacks decidedly fought slum clearance, high-rise public housing, and racial discrimination, especially in real estate, often tolerated by City Hall. While Alinsky had avoided partisan community organizing, Second Ghetto community mobilization attacked City Hall, real estate developers, universities, and whoever was part of the coalition bringing slum clearance to the neighborhood.
Second Ghetto Community organizing had little choice but to sink its roots deep into the political culture, economics, and politics of the distressed neighborhood. The resistance and bitterness generated by Second Ghetto neighborhood succession, its reaction against racism and discrimination, and the unifying catalyst of slum clearance dislocation provided a fuel to community organizing that, when linked to a 1960s’ northern civil rights movement, and Great Society community action and maximum feasible participation, fostered new wings of African-American-oriented Community Development.
The 1960s’ instability (both policy and political) created by the almost seven years of urban riots also served as an incubator for different community development strategies. For all the controversy associated with Great Society community action and CAAs, community action brought about more “empowerment” than economic growth or social assimilation. CAA’s raft of comprehensive services included local action plans, and in their short three years of effective existence they never really got anything substantial done. CAAs, after all, were advisory and had no power to compel social service, housing, welfare bureaucracies, never mind school systems, to follow CAA direction. Maximum feasible participation set in stone the principle that low-income neighborhood residents possessed an inherent right to participate in matters concerning their individual and community’s life. The wedge CAAs inserted into the heretofore impenetrable urban bureaucracies provided leverage and optimism that community organizers would shortly tap.
In this regard, CAAs “created or fostered scores of new affiliations and organizations—single issue coalitions, tenant organizations, legal services, public interest law firms” (Halpern, 1995, pp. 113–18) that served as vehicles for community mobilization initiatives. As community development entered the 1970s it encountered a world totally different from that of a decade earlier. Moreover, they had regained their federal partner, able and willing through a federal agency, HUD, to provide resources and support policy advocated by a greatly expanding, mostly Washington-based CD Policy World. No longer did Mainstream economic development enjoy anything close to a monopoly in ED jurisdictional policy-making.
The sections below will outline the Community Development renaissance that was the 1970s and even the Reagan 1980s. CD was vibrant and, true to its heritage, exhibited a variety of wings and approaches mostly centered around the neighborhood. Most importantly, an African-American political culture produced new forms of community development to attack the problems of the Second Ghetto. A new CDO, the Community Development Corporation (CDC), emerged as the CD structure of choice. Community mobilization approaches were popular; their variety and flexibility facilitated their dispersion into the West and the New South—as vehicles for new immigrants to access municipal policy-making. Finally, strategies able to operate within the capitalist economic fabric, mostly housing-focused, were devised to restore as best as possible economic markets amid the collapsing economic base of Big Cities and the growing economic bases of a resurgent Sunbelt. During this period an emerging Third Ghetto (in which deindustrialization imploded any reasonable hope of employment as a strategy to neighborhood prosperity) almost surreptitiously appeared.
In spite of its remarkable success during these decades, community development could not escape nor overcome its seemingly inherent bias toward forming numerous autonomous streams (wings) that could never quite link themselves together to sustain a single mighty river. In the spirit of mixing metaphors, so prevalent throughout this history, community development remained a herd of individual cats, however professionalized, each following their inner light.
Black Capitalism
In Chapter 6 this history noted a bi-modal African-American economic development policy culture: individual achievement and assimilation into society and the economy (Booker T. Washington) versus separate development/removal of colonialist institutional domination, and community-wide achievement through socialist/community-based enterprise (Du Bois). The King-led civil rights movement mostly conformed to the former, with Du Bois-like Malcolm X and Stokely Carmichael advocating the latter.
Integration and jobs were the March on Washington’s twin goals, and black capitalism, skills training, and integration into new neighborhoods and schools were King’s principal ED strategies. The Ford Foundation, even Woodlawn’s TWO, and the Kennedy administration’s urban guerilla boutique (War on Poverty) pursued goals congruent with economic, social and political assimilation (Cross, 1969, pp. 136–58). Johnson funded the Job Opportunities in Business Sector (JOBS Program) to train the hard-core unemployed, with the National Alliance of Businessmen locating actual employment opportunities.
Senator Robert Kennedy, after he and Jacob Javits walked through the newly established Bedford-Stuyvesant CDC neighborhood (1967), submitted legislation to attract corporate elites to locate branch plants in the ghetto (offering tax credits, accelerated depreciation, wage subsidies and training allowances). Hiring of residents, supply/services contracts and stimulation of neighboring service businesses—not to mention occupational training—were hoped-for consequences. Kennedy followed up with additional legislation pledging tax credits, accelerated depreciation and wage subsidies, but the bill languished (Harrison, 1974, p. 16). His rival, President Johnson, sent a letter to 600 large corporations asking them to invest in the ghetto. IBM located a 600-worker plant in Bed-Stuy (Cross, 1969, p. 74). Both claimed credit. In any case, the strategy never took root; the results were poor, and of the few plants that opened, many eventually closed down (Tabb, 1972).
More typical of the sixties were programs supporting development or support of black-owned businesses (51 percent). Such programs fell within definitions of “black capitalism,” which meant encouraging black-owned startup and profit maximization for existing firms. Federal (and government) programs, such as SBAs almost always pursued “black capitalism” as their formal strategy. In 1969 Nixon established the Office of Minority Business Enterprise (OMBE) by executive order. In that year that office and the Census Bureau conducted the first national survey of minority-owned firms. The survey uncovered over 322,000 MBE firms producing over $10 billion in sales, one half of which were black-owned. OMBE grants helped establish a national network of minority business-assistance nonprofits, including the National Minority Purchasing Council, the Hispanic Chamber of Commerce and the National Council of La Raza. SBA in 1969 also renamed and refocused its SBIC program to establish the Minority Enterprise Small Business Investment Company program (MESBIC), which, while usually white-owned, provided venture capital through purchase of stock in minority-owned firms.
Black capitalist strategy was not only adopted by governments; many examples can be also be found of local African-American led initiatives, such as Rev. Leon H. Sullivan’s Opportunities Industrialization Center in Philadelphia (1964). The Center, an employment training program tied to the Rev. Sullivan’s church, was funded by his 10–36 plan (parishioners contributed $10 for 36 months). The proceeds established the Zion Non-Profit Charitable Trust which, with endowment support, started a number of subsidiary programs, probably the most notable being the Progress Investment Associates which built moderate-income housing. Finally, philanthropies such as the Taconic Foundation, which founded in 1967 the Cooperative Assistance Fund, a fund capitalized by infusions from nine other foundations, intended to invest in minority business firms. The Ford Foundation cooperated with this fund (Von Hoffman, 2012, pp. 23–4).
Another example (1968) was Pittsburgh’s Dorothy Mae Richardson and her block club. Originally formed to fight rats and landlords (redundant?) and improve access to housing loans, the club allied with a local bank and together set up an innovative program to make home loans and provide technical assistance to low-income neighborhood residents. They called their new program the Neighborhood Housing Services (NHS), which by mid-1970 had blossomed into the nationally renowned NHS program to be further described later. Other examples of local black capitalist programs include the East Los Angeles Mexican-American Community Union (TELACU); Cleveland’s Hough Area Development Corporation; and Father Louis Gigante’s South East Bronx Community Organization Development Corporation to serve Puerto Ricans. (von Hoffman, 2012, pp. 26–7).
Not without its successes, black capitalism, however, lost momentum rapidly. In a very short time, it was overwhelmed by a Du Bois-like African-American community development: community economic development.
Community Economic Development
Early Great Society/community development-related initiative programs struck a discordant note among many in black ghetto neighborhoods:
The rapidly weakening economic and social connections between the minority poor in inner-city neighborhoods and the larger world outside the neighborhoods [shifted over the following years] to a focus on self-reliance, separate development, and community control of public institutions … driven simultaneously by feelings of abandonment and an effort to assert pride and dignity in a distinct identity.
The shift sadly seemed to isolate/separate the neighborhood from racially mixed neighborhood initiatives/CDOs (Halpern, 1995, p. 84). But the Second Ghettos, Clark’s “Dark Ghettos” (Clark, 1965) were literally torn asunder or burnt down just as soon as new residents arrived. The southern Civil Rights Movement not only raised expectations, but also taught how political power could be used for social and political change. Prodded by the urban renewal Negro removal, facilitated by Community Action Programs, and triggered by ad hoc events—constant injustice, an increasingly sputtering Big City economy—these “communities within communities” organized and struck at the power arrayed against them, be it Robert Moses, city hall, bureaucrats, business, whatever. Dark Ghettos resurrected earlier notions about African-American neighborhoods as colonies, and, as Halpern noted, assimilation and black capitalism lost appeal; but, more importantly, they lost meaning to many—especially the younger generations.
Community economic development reemerged in the mid-1960s out of a growing conviction among a subsequent generation of inner city community leaders that the economic renewal of their communities was of little concern to the private sector or to government. … the goal of integration as a chimera and the American ideals of social and geographic mobility and equal opportunity as irretrievably corrupted … Community economic development thus served at first as a concrete expression … in an old idea in the African-American community, that of separate development … including an insistence on local control of as many social institutions … and self-reliance [as] an affirmation of black identity. (Halpern, 1995, p. 128)
Bennett Harrison saw such community economic development as “institution-building,” not as merely increasing per capita income or individual achievement. He saw it as “a substantial expansion of black businesses (particularly through cooperative forms of ownership) [and the] large-scale transfer to property to ghetto residents.” For him, community economic development involves “pre-vocational [remedial] and skill training” by these firms—and local control of schools, police and health facilities (Harrison, 1974, p. 13; internal citations omitted). The distinction to grasp is that community economic development can “look like” a black capitalist or traditional housing strategy. Its key purpose, however, is not integration and individual entrepreneurial success, but the advancement of a community, and its residents, as a whole.
What did follow from community economic development was its reliance upon the CDC as a flexible structure that could flow with trends, developing needs and entrepreneurial opportunities. In this view, CDCs are not merely bureaucratic structures, however; they are dependent upon a political and resident support for their success and continuity. While CDCs may not follow a community-organizing, path they must create “a solid base of political support within the community … to present a solid front to outside agencies” (Harrison, 1974, p. 22). The infusion of “political support” in a community economic development strategy, however, alters the criteria employed in the practice or implementation of programs and tools. This is most vividly expressed in the vast difference between mainstream ED business lending and community economic development. In the former the company that receives the loan is expected to pay the loan back; loans are made to firms with a reasonable expectation they can do so. This is not necessarily true for community economic development lending, which is less concerned about the loan be repaid than that the loan enables entrepreneurism, resilience, community visibility and a variety of social-psychological and identity factors of benefit to the larger community.
Community economic development as well as other CD approaches share a common need for a structure sufficiently flexible and suitably empowered to formulate, advocate and implement its strategies, and to utilize tools and manage programs. The nonprofit community development corporation (CDC) arrived on the CD scene during the 1960s and has remained the workhorse organization (CDO) of community development since. Accordingly, it is helpful to step back and examine what has become a cornerstone EDO for most American communities of size.
Community Development Corporations
The post-1960s’ CDC explosion and the huge variety of programs they administered make it impossible to single out any one as “typical.” One of the first CDCs to form was associated with an “asset-based development strategy and structure.” The Harlem Commonwealth Council (HCC) formed as a CDC in 1967 with assets of $15 million. HCC included “an office building, a factory manufacturing wood, metal and plastic interiors for supermarkets, an office equipment and furniture company, a dataprocessing facility, a foundry, a contract construction company, a pharmacy and a sewing/hi-fidelity store” (Harrison, 1974, p. 18). HCC’s “major purpose is the economic revitalization and on-going vitality of Harlem, enabling residents to actively participate in that vitality” by developing “assets/businesses” to provide employment, services, and quality of life to the neighborhood (Harrison, 1974, p. 18). The HCC conglomerate is still around (and vibrant) as I write this history. Many may think of CDCs as poor but poverty-stricken, store/church-front nonprofits. The HCC proves the opposite also was true.
Whether HCC was the first, who cares; earlier in 1964 the Ford Foundation made a sizeable grant to the Allegheny Council to Improve Our Neighborhoods (ACTION), founded in 1955 by Mayor David Lawrence and Richard King Mellon (our old urban renewal heroes) to improve city housing. The grant to ACTION was intended as a “proxy for local government, concentrating much more on economic development (than social services), and on residential and commercial building and renewal.” It was, as Domhoff asserts, a “distinction of considerable significance … An attempt to create an organizational structure relatively independent of local government for improving conditions in the inner city” (Domhoff, 2014, p. 7).
In 1965 another Ford grant was made to City Crusade against Poverty to train neighborhood leaders; and in 1966 yet another to the Bedford-Stuyvesant Restoration Corporation, intended to unite corporate and neighborhood leaders in an effort to bring sizeable private firms into the ghetto to create jobs (“Jobs to People”). That, of course, was the CDC RFK and Javits funded, discussed earlier in the Black Capitalism section.
From its inception, the CDC was a structure sufficiently flexible to pursue different strategies and operate in different neighborhoods; it could be set up by churches, labor unions, Hispanic neighborhoods, white ethnics and, of course, African-Americans. In Chicago it funded Shel Trapp’s efforts as well as Gale Cincotta’s—both of which led anti-redlining programs intended to force banks to invest and instill appropriate real estate practices in changing neighborhoods. Within a decade of the Great Society, a national, state and local nonprofit community development network had sprung up—the foundation unit being a neighborhood-based community development corporation.
The first CDC’s were founded primarily by community activists … out of African-American social movements [or] ethnic organizing movements including Latino … many had religious roots … They tended to be large multifaceted organizations with a broad array of programs and large projects … Although many engaged in some form of housing development, they were more oriented to business and work force development than CDCs that began later. (Stoutland, 1999, pp. 196–7)
CD’s “comprehensiveness” concept embraces activities/programs from many policy areas as relevant to people-based community development. Schools and education, health and crime, recreation, policing and housing are just a few of the more common. Is a neighborhood housing entity a CDO? Is a CDC mental health clinic a CDO? Is a community nonprofit that operates a Head Start program, a sports league, lead-based paint removal program, a truancy program, a single mothers’ assistance program, a day care center, a furniture factory, a grocery store or an abortion counseling clinic a CDO? For most community developers, the answer to each question is likely yes—so long as it is community-controlled and located within a “distressed” neighborhood.
How is that measured? Chiefly by the number of board members who live in the neighborhood? Community participation has been a longstanding and exceedingly troublesome issue in community development, and a persistent concern in the CD literature. From its get-go with War on Poverty “maximum feasible participation,” it has not gone well. Governance often involves some tenuous imbalance among staff, city hall staff, funders, professionals in divergent disciplines and professions, community leaders, politicians, heads of key neighborhood institutions (often non-resident) and neighborhood residents. Good luck with community control if policy is made by this cattle stampede.
CDCs necessarily must possess one defining characteristic—they must serve a defined neighborhood or neighborhood-like geography (West Side). Their boards can be filled with domineering professionals and silent, even hostile residents; but if they provide people and/or physical or business-relevant services, they fit our bill. However, in this history when such an entity engages in political or social change or electoral– partisan action, they are defined as a “movement”—and move outside our definition of a CDC. Most community mobilization (organizing) organizations are not considered CDCs in this history.
COMMUNITY DEVELOPMENT IN THE SEVENTIES
Community development exploded during the seventies. This history makes a concerted effort to distinguish between wings/movements in that the purposes of each are noticeably different, even though they serve the same low-income/distressed neighborhoods. The first wing combines two “sub-movements”: ACORN (the example discussed below)—labeled as “Neo-Alinsky” to differentiate it from Alinsky-style community organizing also prominent in the seventies. The next wing (Settlement Houses to Neighborhood Services) follows a path initially bushwhacked by social reformer Jane Addams’s settlement house which, post-Great Society, developed into a “comprehensive community services center CDC” often found in racially/ethnically homogenous neighborhoods. The final wing (From Housing/Slum Removal to Neighborhood Revitalization)
might be described as CD-lite in that it follows CD principles, uses CD tools and operates out of a CDC; but it typically pursues pure neighborhood revitalization as perceived by its residents—shorn of any meaningful social change or class consciousness.
Community Organizing: ACORN and National People’s Action
Neo-Alinsky ACORN
Community organizing, as it evolved over the next half-century, is not just knocking on doors and mobilizing a neighborhood to respond to perceived or real threats (highways, redlining, urban renewal). The 1970s’-style Neo-Alinsky community mobilization/ organizing wing employs neighborhood-level citizen mobilization as a vehicle to leverage national social, political and economic change. This is not Alinsky-style community organizing. The Association of Community Organizations for Reform Now (ACORN), a neo-Alinsky movement, departs from Alinsky’s pure neighborhood mobilization for neighborhood-level goals in favor of larger, even national objectives. On the other hand, the seventies’ Alinsky iteration, the National People’s Movement (see below) seeks to mobilize neighborhoods for neighborhood change.
For Fischer, “Neo-Alinsky projects in the 1970s employed the ideology of the new populism—decentralization, participatory democracy, self-reliance, mistrust of government and corporate institutions, empowering low-income and moderate-income people … connecting [them] with the national political process” (Fischer, 1994, p. 146). Neo-Alinskyism broke away from its founder’s goals, borrowed from his popularity, but retained much of his style and techniques. Neo-Alinskyism was a social movement, a class-based social movement whose goal was “to develop mass political organizations rooted in neighborhoods, grounded in local concerns, and focused on winning concrete gains. The goal was to advance social and economic democracy, empower people, and challenge power relations within and beyond the neighborhood” (Fisher, 1994, p. 146).
Neo-Alinskyism followed a “majoritarian strategy” geared primarily to the needs of low–moderate-income people. It was not restricted to a single ethnic group, a particular neighborhood or a racial minority. Neo-Alinskyism used local organizing to fuse a national coalition for change at the municipal, state and, especially, national level. In such an overt political context, community organizing, using economic development and other concerns, is viewed as a political movement with a vital local ED/CD agenda, not an EDO. As an earlier example, we could have chosen the Community Services Organization, founded in 1947 to advocate for California Latino civil and economic rights. Future Congressman Edward Roybal, founder of Community Services Community Services Organization, received his training from the Alinsky-Industrial Areas Foundation. The Community Service Organization trained Cesar Chavez and Dolores Huerta.
Our poster child for Neo-Alinskyism was ACORN, founded in 1970 in Little Rock Arkansas by Wade Rathke. Rathke got his training from the National Welfare Rights Organization (NWRO). NWRO, founded in 1967, also deviated from Alinsky’s reliance on existing neighborhood institutions (especially churches and unions), emphasizing instead a house-to-house, knock on the door, sit at the kitchen table approach to identify issues (not necessarily neighborhood-level concerns) that could serve to mobilize targeted individuals in participating in a larger class-based movement (Thompson, 2016). “For ACORN the neighborhood was a ‘training ground’ or staging area from which to mount larger campaigns for democracy, equity and justice” (Fisher, 1994, p. 148). Coalitions among neighborhoods, and then cities and states, could be forged to advance issues at higher levels of government, or attacks on corporations. Alinsky opposed any sort of state or national organization as “potentially fascist.”
In 1970 Rathke organized six Little Rock low-income neighborhoods, found an issue (poor people’s access to furniture) and took it up the line to get Governor Winthrop Rockefeller to bring in a furniture warehouse. From that victory ACORN skyrocketed, moving onto school lunch programs, welfare rights, anti-blockbusting, public housing and even to a ‘Save the City’ campaign. In 1975 ACORN branched across the river to Texas, and by 1980 had 25,000+ dues-paying members in 19 states. Two years later, ACORN claimed 50,000 members in 26 states (Fisher, 1994, p. 152). By that time ACORN was involved in electoral politics.
No longer a neighborhood-based interest group, ACORN over the next 30 years became a vibrant national, state and local player in elections, using its voter registration and GOTV strengths. Other movement-based groups—for example the Massachusetts Fair Share, Public Research Interest Groups and Philadelphia’s Consumer’s Party— followed ACORN’s lead and much of its model.
If ACORN in my eyes is a political movement, not an EDO, one might wonder how it differs from chambers of commerce, or the Committee for Economic Development (CED). It would be hard, indeed, to argue that chambers do not represent class-based interests of the business community and CED the highest echelons of global capitalism. The nineteenth-century struggle against machines in our Big Cities also has to be thought of as class based, as was the chamber struggle against FDR’s New Deal. Our answer, probably unsatisfactory to many, is that chambers/CED created separate legal entities—such as civic reform clubs, PACs and industrial departments—and after the turn of the century endeavored to corral local partisanship through politically neutral staff professionalization. None of this was evident in ACORN.
Still, the line can be quite blurred, as evidenced in several western and southwestern postwar business “movements” (Abbott’s Neo-Progressives) that controlled city hall, pursuing a mostly ED agenda (Phoenix and San Antonio for example). Even in those instances, despite considerable overlap, chambers were legally and organizationally separate from the political movement organization. Neo-Alinsky community organizing, however, touches a rather raw nerve in that economic/community development not only extends into (local) politics, but also engages in activities/strategies that profoundly affect the operation and viability of the local policy system itself. While this history does not attempt to resolve this issue, others are welcome to try. That CD’s Neo-Alinsky movements add a new dimension to CD and maybe ED, however, is obvious.
Alinsky-style
Not all seventies’ community organizers were Neo-Alinsky. On Chicago’s west side, Alinsky-trained Shel Trapp and Gale Cincotta mobilized two neighborhoods by harassing real estate agents trying to create panic selling and confronting uncooperative public officials. Joining forces, they formed the West Side Coalition. Together Cincotta and Trapp established a national organization to support local neighborhood-based initiatives.
First they tapped a local network of financial backers, and then turned to Father Geno Baroni and his National Center for Urban Ethnic Affairs. Earlier, Baroni had persuaded the National Conference of Catholic Bishops to create a Campaign for Human Development to organize low-income ethnic and African-American communities. Baroni used his contacts (the National Urban Coalition and Center for Community Change) to assist Cincotta in obtaining funding for a conference to bring together community activists across the nation (Domhoff, 2014, pp. 9–10). That conference was held in 1972, and attracted 2000 attendees from 74 cities. The conference founded National People’s Action (NPA), a nationwide organization for neighborhoods. In short order, the NPA founded the National Information and Training Center (NTIC) to train organizers in Alinsky-style actions.
Cincotta’s (Trapp, Baroni) efforts prove that, as early as 1972, whatever the wing, strategy or tool, neighborhood community development was cobbling together resources and national supportive networks that provided money, access and expertise which in turn permitted local CDOs to develop organizational power and impact. The NPA (which continues to this day) is only one example of many that could be cited. Earlier, this history asserted that by the early 1970s community development had already “evolved” a national organizational infrastructure composed of everything from CD trade associations and financing-networks to entities that bordered on “movements.” That this CD complex formed so rapidly and naturally, almost instinctively, deserves comment. Its contrast to the inner-focused American Economic Development Council (AEDC), the pre-1968 mainstay of classic mainstream economic development, is quite revealing and suggestive.
The Cincotta, Trapp, Baroni story does not end in 1972. Trapp, hired in 1973 by Chicago’s Catholic charities to engage in neighborhood organizing, pulled together a coalition of 20 neighborhood groups, called the Metropolitan Area Housing Alliance. Redlining was its first targeted issue. Together with the NPA, Trapp convinced the Chicago city council to approve an ordinance requiring banks lending in Chicago to publicly disclose their mortgage loans and deposits by geographic area. The gap between deposits and where banks made mortgages was quickly exposed. The Illinois state legislature passed similar legislation; by 1975, after lobbying by a network of organizations, Congress approved the Home Mortgage Disclosure Act that made national mortgage lending disclosure by medium and large banks compulsory. Northern Technologies International Corporation (NTIC) did the analysis from the data that followed, and a flood of neighborhood-based groups and formal organizations took advantage of its analysis and applied it to their neighborhoods. The author of this history did this in Buffalo (New York) in 1977. The pressure that followed led to Congress passing the Community Reinvestment Act of 1977 (CRA) (Squires, 1992).
CRA proved to be both a strategy and a tool for all CD wings in the decades that followed. Foundations, such as Ford and Charles Stewart Mott, provided financial support to community groups—the latter making over 218 community grants previous to 2002. Much of its success occurred in the 1980s, but the CRA is a platform neighborhood strategy that leverages any number of specific initiatives beyond redlining and community disinvestment. The methodology, analysis and data-driven CRA should be considered a CD tool. The strategy can serve different goals, such as ending racial discrimination, ending disinvestment in a neighborhood, leveraging other bank neighborhood involvement, commercial investment or neighborhood branch formation.
A final point concerning seventies’ Alinsky-style community organizing was that it was not confined to northern Big Cities; nor was it the exclusive preserve of Progressive CDOs. Alinsky community organizing essentially boils down to community-based pressure group politics. It could be used by anyone, for any number of reasons. Fisher asserts that “traditional Alinskyism” was most effective in MexicanAmerican communities in the southwest and west. In these efforts, the Catholic Church (as it did in Alinsky’s Chicago) played a major role. Alinskyite organizations like Communities Organized for Public Service (COPS) in San Antonio, United Neighborhood Organizations in Los Angeles and the Metropolitan Organization in Houston played a vital role in a larger economic development agenda in their communities (Fisher, 1994, p. 147).
During the 1970s anti-abortion, anti-busing, and even those resisting neighborhood change, adopted community organizing and CDO structures. Restore our Alienated Rights (ROAR) in Boston may be one example of how white, middle-income neighborhoods embraced with some success Alinsky’s methods. While CDOs of this genre generate bitter reaction within Progressive-leaning community development, this does not temper the reality that Neo-Alinsky and Alinsky tools/structures are not exclusively Progressivist and that Privatist versions can exist as well.
From Settlement House to Neighborhood Services
Much of what had happened to political machines happened to settlement house/social worker neighborhood nexus after the Great Society. The New Deal, professionalization, and the Second Ghetto also took their toll (Trolander, 1987). Urban renewal, highways, and immigrant suburbanization were definitely unhelpful. By the 1950’s neighborhood settlement houses were seriously stressed.
Neighborhood-based services did not disappear completely. At least until the late 1950s most inner city neighborhoods managed to sustain a diverse set of recreational and cultural programs for children and youth, public health nurses … vestiges of street corner social work with gangs … and schools continued to make sporadic efforts. (Halpern, 1995, p. 150)
Gray Areas and MFY funded settlement houses to conduct their experiments in contemporary community development—and then the Great Society waltzed into the neighborhood.
Neighborhood racial and ethnic change and the Second Ghetto isolated older settlement houses and furthered the gap social work (and education) professionalism had created. In majority-black neighborhoods, community action’s maximum feasible participation and community control essentially finished the job. CAPs assumed neighborhood service responsibility and it was not long before Head Start became a cornerstone neighborhood services program. In neighborhoods without a CAP, government bureaucracies assumed a greater role in providing services to low-income and underclass—the traditional clientele of the settlement houses. Professionally, government social work paid better than settlement house, and clinical social work beat out traditional social work. With government taking over the most desperate, settlement houses restricted their clientele to those who could pay and to those they could help. By the early 1970s for all practical purposes, CD-related neighborhood services had been taken over by HUD/CDBG-funded CDCs.
The neighborhood center of today is very different from the settlement house of the early years. Then a white, female college graduate, without an M.S.W. headed the typical house. She [and staff] probably lived in the settlement house. The surrounding neighborhood was likely to consist of poor whites. Advocacy … [meant] settlement workers speaking on behalf of the poor. In 1986 a black male with an M.S.W. heads the typical settlement house, now called a neighborhood center. He may live out in the suburbs … The center’s clientele is mostly black, and the poor insist to a certain extent to speak for themselves. (Trolander, 1987, p. 235)
At this point the provision of former settlement neighborhood services in majority black neighborhoods intersects with both community control and ghetto as colony seeking liberation. In such neighborhoods, services became mostly subsumed under “community economic development.”
The poor were no longer underserved per se, but acquired services from a fragmented, hard to fathom, confusing to access “system” that appeared incoherent to the user: “There were more entry points, service sites, categorical programs, and specialized roles” than ever (Halpern, 1995, p. 184). Slipping through the cracks could be catastrophic. On top of inevitable difficulties of providing health, education, police and social services was the need to coordinate them, evaluate them as an aggregate and keep track of the unfortunates making their way through the maze. Old-style CD “comprehensiveness” had become redefined into a Gray Areas/MFY coordination nightmare.
Neighborhood service CDCs were related to or derivatives of OEO’s War on Poverty. As OEOs came under attack in LBJ’s later years, it funded an association of CDCs under OEO’s Title VII. That organization, the National Congress for Community Economic Development (NCCED), was helpful in securing support to extend OEO’s existence—but at a cost of restricting membership in NCCED to fewer than 40 Title VII CDCs. In 1977, NCCED opened up membership. While initially successful, larger more diverse membership generated internal conflicts and membership turnover. Western state Hispanic and Native American groups spun off their own organization. By 1980 NCCED members still lingered about 40 groups. The organization teetered on the edge. In that year, however, Robert Zdenek became president with a mission to expand membership and deal with a variety of CD issues. When Title VII was discontinued, NCCED was instrumental in creating the Office of Community Services Discretionary Fund—a fund which continues to provide financing critical to CDCs.
Over the following decade NCCED helped develop a network of supportive organizations (such as Friends of Rural Development, Coalition for Low-Income Community Development, the Council for Community-Based Development, National Community Reinvestment Coalition and Religious Congregations as Partners). Membership grew to 700–800 organizations. Today it struggles with its role as a “trade organization” or an advocacy group—linking local CDCs with the vast array of foundations and policy institutes that currently exist. A network of state chapters provides an additional layer of networking and resources. A survey, Against All Odds, published originally in 1989 and updated in 1991 and 1995, describes through case studies accomplishments of CDCs in neighborhood services and neighborhood-level community economic development.
From Housing/Slum Removal to Neighborhood Revitalization
Our last CD neighborhood-based wing emerged from the shadows of UR, interstate highways and sixties’ suburban-induced Big City neighborhood decline. To me this new neighborhood CDO provided a home for a new generation that in earlier periods might have been CD housers, thirties’ neighborhood and recreational planners like Perry, and “lovers of place” who valued their home stomping grounds and were determined to protect and preserve memories of their home. These CDOs are not the homeowner associations of Privatopia to be found in Chapter 19; nor are they trying to save the world through social change. They want to “revitalize” their neighborhood and preserve its identity for future generations.
These CDOs are “neighborhood organizations that limited their focus to community development in a single low and moderate-income neighborhood and looked skeptically on projects to build new institutions or amass power for external uses … social change or a new political movement” (Fisher, 1994, p. 157). What they feared most was physical deterioration and neighborhood economic base weakness, often caused by thoughtless actions of outsiders—institutional, government and corporate—against which an unorganized neighborhood could not protect itself. They often rejected alliances with neighboring CDOs, and glorified in a Springsteen kind of way their “glory days”—yearning to bring about their return. They defined their relevant sub-municipal competitive hierarchy and tried to increase their standing in it. Such CDOs combined different activities (housing, traditional ED and neighborhood services) and functions (interest group and social networking) that chambers of commerce performed for the business community.
As an example, the Southeast Baltimore Community Organization (SECO), incorporated in 1970, actually starts in 1966 when the Baltimore City Council approved plans to put in a six-lane highway (Interstate 83), demolishing hundreds of homes in southeast Baltimore neighborhoods. Close to downtown and waterfront, SE Baltimore housed 95,000 second-generation white ethnics. It was not a slum or predominantly low income—rather, working and middle class. Activists including future Senator Barbara Mikulski (godmother of SECO) formed a loose coalition—the Southeast Council against the Road (SCAR). Eventually, I-83 was stopped by qualifying one neighborhood for the Register of Historic Places.
In the course of highway opposition, coalition members shared a variety of issues and concerns, ranging from urban renewal to redlining, a threatened industrial rezoning, declining social services and lack of new schools. Task forces were formed, research done and individual projects selected for action—keep a library open or set up a recycling center, for example. In April 1971, with more than 1000 present, 90 neighborhood organizations joined together to create SECO, an umbrella CDO. From the beginning, it was a coalition of block clubs, churches, union locals and ethnic fraternal organizations. When appropriate, SECO used Alinsky tactics, but its hallmark was not to burn bridges with city hall. SECO focused on issues, not institutions, politicians or enemies. It would work with anyone to solve a problem.
Its first formal program in 1974 was a youth program, but during the seventies it won zoning changes, kept open a public nursing home, got a residentially friendly traffic pattern approved; secured better city services; housing inspection teams; a school program; a neighborhood health program; and an anti-juvenile delinquency program. Eventually it got a Neighborhood Housing Services (NHS) program and moved into housing development, building hundreds of units using a housing development subsidiary (SDI). SECO established a community-controlled arts and crafts company that sold goods made by elderly and disabled residents, and founded a primary health care facility that served 3000 patients a month. It also founded a neighborhood-based commercial revitalization CDO, the Highlandtown Revitalization Corporation. In 1971 SECO had one paid staff member; six years later 41 (Fisher, 1994, pp. 157–61). Probably each Big City (and many second tier) in the North and Midwest formed a CDO similar in style, organization and activities to SECO. By the seventies’ end there were hundreds.
These neighborhood CDOs got their start as a “defensive mobilization” against an outside intruder that threatened negative impacts. Once the initial confrontation was over, these informal coalitions followed a number of paths. Many closed up shop; others like SECO started small and built themselves into a neighborhood CD conglomerate, combining activism, services and neighborhood-level mainstream physical, economic and community development. Our assessment is that the seventies were the high point for mainstream, business-assistance/ED tools and strategies. Commercial revitalization and asset-based community development (starting factories, stores, businesses as subsidiaries) were hallmarks of this period—less prevalent in future decades.
By the 1980s more CDOs fixed upon some form of housing development as their core competency. Housing had always been a CD priority, and by this point a considerable body of knowledge, expertise and tools had been assembled. Housing was visible, and with reasonably sophisticated management, investment was easier. Housing was less risky, more predictable and attracted more and more CDOs into its orbit. The prototype neighborhood housing CDC was the NHS. During the decade several critical and highly important tools and programs developed from individual initiatives in several cities. Each of these tools or programs started from a single initiative and over time evolved, in two cases with profound federal involvement, into a national system able to be tapped into by CDOs, neighborhoods.
NHS
The first started from Pittsburgh’s Central Northside block club led by Dorothy Mae Richardson. Its campaign to obtain housing loans for low-income neighbors attracted local bank and foundation support. A first ever program was founded to provide home loans to non-bankable applicants and provide counseling and technical assistance to sustain homeownership and maintain a quality home. The new program was called Neighborhood Housing Services (NHS). The NHS innovation was picked up on by the Federal Home Loan Bank (FHLB), and in 1973 the FHLB joined with HUD to create a task force whose hope was to take the Pittsburgh experiment nationwide. The task force added a key element, a secondary market, where these low-income mortgages could be sold to investors as a way of creating a revolving mortgage fund for new mortgages. They launched the program and by 1978, 60 NHS programs had been established. Congressional legislation transformed the task force into the National Reinvestment Corporation (subsequently renamed NeighborWorks America) that branched out into rural communities (its first being in West Rutland VT). Over the next four decades, NHS expanded to 240 communities.
Community Land Trust
In a similar vein, learning and copying from a diverse variety of international projects/experiments,1 Ralph Borsodi, Robert Swann and Charles Sherrod founded the first American “community land trust” (CLT), New Communities Inc., in 1969 near Albany Georgia. The goal of New Communities was to secure good land for future African-American farmers. New Communities purchased a 5000-acre farm and platted it for lease (ground leasing) to homesteads and cooperatives. New Communities operated for about 20 years; in the 1970s about a dozen rural CLTs started.
A CLT is a nonprofit 501© (3) that acquires land in a target area with the intention of retaining control over the land forever. Any asset on the land, for example a building, can be sold, but the land is only leased to users so long as acceptable to the purposes for which the CLT was incorporated. The CLT retains extensive rights and can preserve quality of structures and enforce compatible uses. In the event of lease default, the CLT can reacquire control. The CLT board of directors is composed of leaseholders, neighborhood residents and institutional representatives from entities responsible for the founding and subsequent operation of the CLT. The model was extended into urban areas/neighborhoods as a solution to such problems as affordable housing, gentrification and displacement. The first urban CLT, the Community Land Cooperative of Cincinnati (1981), dealt with displacement of low-income blacks. Perhaps the best known CLT, founded in the mid-1980s, was an element of Boston’s Dudley Neighborhood Initiative.
South Shore Bank
The last example of a seventies CD program/tool is Chicago’s South Shore Bank. South Shore Bank is valuable as an example of seventies’ CD, but also for its business model that challenged a CD core principle. As frequently noted, much of post-Great Society CD is uncomfortable with “capitalism” (for lack of a better word). An important CD explanation for distressed neighborhood decline is disinvestment—by various profitseeking entities. Bank lending and anti-redlining, as already discussed, were early on and core post-Great Society CD strategies. South Shore Bank demonstrated how capitalism can be used, albeit reshaped a bit, into “community capitalism” (Taub, 1988) to promote neighborhood revitalization.
The reader might be aware South Shore Bank commenced operations in 1972—and went into receivership in 2010. A consortium of private and public investors supported a takeover by Urban Partnership Bank, and the Federal Deposit Insurance Corporation (FDIC) picked up 80 percent of its losses ($347 million). The bank has reopened and the multi-city network of “Shore Banks” has been spun off and continues independently. The default was caused in part by the 2008 financial collapse; a post-2000 weakness in lending standards; a sustained decline that seems related to post-2000 job losses and declines in household income; and a bit of being “too big for its britches” taking management’s eyes off the ball. The bank operated successfully for the better part of three decades; its business model still, in my eyes, constitutes a useful model for future generations.
Community organizing anti-redlining applies pressure through CRAs to encourage/ require existing bank investment within city neighborhoods. South Shore Bank used a different model: it created “a self-sustaining [bank with an] independent capital base, and the discipline of the profit motive … a bank that could be tough-minded about loans … satisfy bank examiners, make a profit, and still transform an inner-city neighborhood without [gentrification] (Grzywinski, 1991, p. 88). Three knowledgeable, concerned professionals blocked the bank’s move to the suburbs in 1972. Shortly after, they acquired the bank. The old South Shore had seriously disinvested in its service area in response to neighborhood and racial transition. The goal of the new owners was to reverse disinvestment so residents could invest in their neighborhood.
Acknowledging that neighborhoods compete for everything—resources, businesses, people, skills (a sort of neighborhood competitive hierarchy)—they wanted to ensure South Shore could compete. To compete, neighborhood deterioration could not be pervasive and extensive—recognizing that distressed neighborhoods are not identical and that a minimum level of viability was required if neighborhood revitalization was to be achieved. South Shore recognized its most viable asset was its housing stock. Accordingly, it turned to housing rehabilitation, encouraging and financing a series of rehabilitation entrepreneurs to restore neighborhood housing.
Using their bank holding company, they set up subsidiaries, including a CDC that bought apartment buildings in targeted areas and rehabbed them, while funding entrepreneurs to rehab neighboring buildings. The CDO initially rehabbed three buildings and Shore Bank-financed housing rehabbers finished up 17 more. Attracting large foundation investment to finance new acquisitions to rehab, more buildings were tackled. Alongside this strategy, a variety of patient, risk-insensitive deposits, which for the most part paid competitive interest rates, ensured the bank had sufficient capital to both lend and for reserves to satisfy bank examiners. They also recognized that small deposits were too costly, and took steps to ensure their deposits made them profits. They reached outside the neighborhood for socially conscious investors attracted to their purposes—but they paid competitive interest rates. Their strategy was to reverse disinvestment, but also to restore neighborhood competitiveness. Over the following decades, their model expanded to Cleveland and Detroit. The eventual bank failure, however, suggests a South Shore Bank model alone cannot revitalize a neighborhood, and strongly points to neighborhood’s economic base, its jobs, occupations and income generation as critical elements of a sustained revitalization.
CDFI
The bank’s mission was amplified in the summer of 1992 when a guy named Clinton visited on his way to the White House. He pledged, if elected, to fund 100 South Shore Banks (and 1000 microenterprise centers). A coalition of CD loan funds, banks and credit unions, microenterprise lenders, community venture funds and CDCs thought this was an idea worth living up to, so they formed the Community Development Financial Institutions (CDFI) Coalition in the same year.2 In July 1993 Clinton submitted to Congress legislation that, among other features, established an agency, the CDFI Fund. The bill passed in 1994; the agency was located in the Department of the Treasury. The CDFI Fund is a federal market-based approach to support financial institutions in economically disadvantaged communities. Its goal is to inject capital into neighborhoods lacking sustained access to (residential/commercial) investment capital.3
WON’T YOU PLAY IN MY SANDBOX?
The rise of community development coincided with the implosion of hegemonic Big Cities and the early onslaught of a new immigration wave—affecting the rising Sunbelt the most. In this section the history focuses on the collapse of the northern Big Cities. Whether housing/slum clearance, highways or urban renewal ever stood a change of combating suburbanization is unlikely at best. By the mid-1960s the question was moot. The sixties crises extinguished whatever hope that urban renewal would eliminate slums and blight and “stanch the flow of white, middle-class families to the suburbs” (Beauregard, 1993, p. 165). A sustained Great Migration, a massive suburban exodus and multi-year riots brought existing Big City policy systems to their knees. The Brown decision and bussing were frosting on a “cake left out in the rain.” The media, being the media, trumpeted the extremes, and the Big City Policy World went into a deep and bitter funk—railing against suburbs and the South. The seventies proved to be the nadir of Big City central city ED. Big City policy systems had a “hard landing”—as much “psychological” as demographic, economic and fiscal. Big Cities lost faith in themselves.
The Facts: So Help Me God
Simply put, Big Cities stopped growing between 1960 and 1990.4 Between 1950 and 1970 St. Louis lost 27 percent of its central city population; Pittsburgh, Boston and Buffalo lost 20 percent; Detroit and Cleveland 18 percent. Only Indianapolis (+74 percent), Columbus (+44 percent) and Kansas City (+11 percent had grown—through annexing suburbs. In the latter three cities manufacturing employment grew 20 percent, 67 percent and 51 percent respectively. Big City suburbs, however, exploded. Washington metro led the pack with 93 percent suburban growth; Minneapolis and Columbus (80 percent); Kansas City (54 percent), Milwaukee (51 percent) and Detroit (49 percent) followed. Boston and Pittsburgh’s suburban growth were more muted (21 and 19 percent). Pittsburgh, however, (–23 percent) and Buffalo (–18 percent) lost manufacturing employment—the earliest non-textile victims of the yet unnamed manufacturing decline. NYC (–9 percent), Philadelphia, Boston, Detroit and Cleveland (–2 percent) also lost manufacturing jobs. Overall, surprisingly in these years the 17 hegemonic Big Cities grew manufacturing employment by 18 percent.
At least part of the reason this all seemed so confusing at the time was that regional change was not yet understood, deindustrialization still unnamed, and even Big City growth and decline seemed somewhat uneven. Suburban decentralization of manufacturing made the waters even murkier. It was hindsight that produced today’s experts.5
It didn’t get much better between 1970 and 1990. St. Louis lost another 37 percent, Detroit and Cleveland 32 percent, Buffalo 29 percent population. Only Columbus, of the 17 hegemonic Big Cities, increased (17 percent). Overall, in these two decades, hegemonic Big Cities lost over 17 percent of their central city population. For most, even metro (suburban) growth was muted compared to national averages. Big City metro growth was an anemic 5.6 percent. Leaving aside DC (32 percent), Minneapolis-St. Paul was highest (25 percent) and Columbus, KC, Baltimore and Indianapolis followed in line. But, Buffalo (–12 percent), Pittsburgh (–11 percent) and Cleveland (–9 percent) metro areas lost population. Even NYC’s metro area lost more than 3 percent. While many academics were wailing about the power of central city business/real estate growth machines, the Big City central city was in a vicious population decline that lasted for 40 years.
All this was bad enough, but simply put, hegemonic Big City central cities lost much of their middle class. Home ownership rates plummeted in central cities and skyrocketed in the suburbs,6 and median family income did not keep pace with national averages—in some cities (1970 to 1990) it actually, and amazingly, declined for the metro area: Buffalo (–6 percent), Cleveland (–3 percent) and Detroit (–1.5 percent). Pittsburgh grew only 2 percent for the 20-year period. The Great Lakes chronic city syndrome had arrived on the ED scene.
Myrdal’s Vicious Circle: Race and Functions
McDonald described the 1970–89 central city urban crisis as “the vicious circle in urban America.” His vicious circle asserted that:
once a central city or part of a central city starts downhill, the negative social and economic features of that downhill slide reinforce each other. The start of the downhill slide can be caused by a variety of external forces, including industrialization, building an expressway leading to suburbanization of both jobs and people … These forces act on the central city [as a whole], but typically the worst outcomes are confined to particular portions of the central city. (McDonald, 2008, p. 222)
Long-term decline, perhaps surprisingly to current readers, became most apparent after the 1980 census—prompting many to think of the eighties as “bottom.” Collapse, however, was clearly revealed in the 1970 census. Detroit, Cleveland, Buffalo, Milwaukee, Chicago, Minneapolis and St. Louis (in descending order) declined most (McDonald, 2008, pp. 224–5, 243, Tables 13.1 and 2).
Whatever the problem identified during this period, it possessed a racial dimension. A Fortune editorial wrote in 1968: “the Negro Problem represents a crisis within a crisis, a specific and acute syndrome in a body already ill from more general disorders” (Ways, 1968, p. 133). Race was the bottom line, and race redefined slum into ghetto—making mainstream chamber/UR economic development less relevant than place-based community development. Hidden from sight is the total rejection of the previous age of UR physical paradigm. The paradigm gave way to social action/ concerns and other policy areas: welfare, crime, education and racial discrimination. The ghetto “served as the symbolic reference [to urban decline and] to the many social ills … associated with social disorganization” (Beauregard, 1993, pp. 172–3). If ghetto separatism/anti-colonialism infused community development, it also prompted a shift of political power to blacks. In short, the postwar Big City municipal policy system came tumbling down.
“New guys,” white mavericks or obscurities, often replaced them (Rizzo or Beame for example). A few mayors stand out (White in Boston), but Big City instability decapitated the old political establishment. Big City economic developers were on their own, making do as best they could with weaker mayors (Lipsky, 1980). City councils became more diverse and black mayors were elected. The first black mayor, Carl Stokes of Cleveland (1967), was followed by Gary Indiana’s Richard Hatcher, Detroit’s Coleman Young (1973), Tom Bradley (Los Angeles, 1973) and Walter Washington (Washington DC, 1975). In the next decade Atlanta’s Maynard Jackson (1981), Chicago’s Harold Washington (1983), Clarence Byrnes in Baltimore (1987) and NYC’s David Dinkins (1990) were elected. Significant central city policy system change resulted in the aftermath of the Great Society, urban riots and the rise in consciousness of the “urban crisis.”
In this atmosphere yet another issue appeared in Policy World publications: the issue of central city “purpose”—so-called “functions” traditionally associated with Big City metropolitan hegemony that were now lost. It started with Norton Long’s article “The City as Reservation”—with central city inmates and keepers “economically dependent on intergovernmental transfer payments”. For Long, the only function retained by the “new” central city was to serve as a sort of Indian reservation “for the poor, the deviant, the unwanted, and for those who make a business or career managing them” (Long, 1971, p. 32).
Long was followed by scholar George Sternlieb, who pinpointed the problem:
the crisis of the city is not a crisis of race. Rather, the crisis of the city is a crisis of function. The major problem … of our cities is simply their lack of economic value … what is left to the city that it does better than someplace else. (Sternlieb, 1971, pp. 15–16)
The only function left, he observed, was housing Long’s unfortunates. The central city had become a “sandbox” for them to play in and leave the rest of us alone (Sternlieb, 1971). True to course, these articles were found in urban textbooks for decades to follow. In 1976 central cities were likened to a “cemetery” (urban death) (Baer, 1976, pp. 18–19). Accordingly, planners, economic developers, academics and think tanks adopted “planned shrinkage,” “mothballing” or abandoning parts of cities until attractive to business investment. These strategies entailed a deliberate cutting back of public services in the most deteriorated city areas and encouragement of the population to leave.
At a Brookings Institution 1977 Round Table, Sternlieb (head of Rutgers Center for Urban Policy Research) suggested founding a federal urban development bank:
[We should view] the city very much the way we viewed the development of a bomb shelter or fallout shelter program … The question then, of public policy, is what is the least cost approach that is politically feasible to preserve an infrastructure so that if, and when there is a public recognition, desire, and necessity to reutilize them, there is something left to reutilize.7
In this 1970s’ environment: “land parcels cleared in renewal areas [will] remain vacant for long periods of time. Society can be viewed as ‘banking this land for potential future use whenever changed local conditions stimulate increased demand there.’” Downs suggested a “modified form of triage … This strategy means there would be no large expenditures for upgrading efforts in most parts of much deteriorated areas … Eventually after the much deteriorated areas are almost totally vacant, they may be redeveloped with wholly different uses” (Downs, 1976, pp. 18–21).
The importance of “functions” to contemporary economic development should not be understated. The concept of “Functions” started economic development down the long trail that when combined with deindustrialization, led to job creation as the primary criterion, if not “goal,” of mainstream economic development. CUED, holding an optimistic perspective, advocated government assumption of chamber business assistance programs, including generalized strategies of retention and attraction, relying on public lending, tax-exempt financing, tax abatement and industrial parks—coupled with “reformed” physical redevelopment targeting waterfronts, “eds and meds” and “mixed-used” downtown redevelopment. One can see in CETA and JTPA a workforce approach that stressed continued and enhanced shared decision-making with business leadership in training and skills upgrading—along with youth training that corresponded more closely to community development objectives. Also in the period, one can see movement toward place- based, i.e. destination, tourism gathering steam (Faneuil Hall). To future community developers, on the other hand, lay the task of revitalizing the ghetto, facilitating control by residents over their fate.
The issue of functions, however important, is an elusive topic. Where the list of functions originated is unknown—this author never got a copy. Apparently known only to the urban intelligentsia, there is such a list, and the Big City had served many key (and lesser) functions that upheld the “correct” metropolitan order (monocentric). To this day, these functions remain fundamental to the “legacy city” paradigm. In any case, in these years the question was what should be done with central city functions? Were they lost forever? Could they be recaptured? Could new functions be found? These questions were/are important. Turned inside out they can, and will, serve as strategy goals for future central city economic developers.
The Fiscal Crisis
Central cities were broke fiscally as well as psychologically. The causes of fiscal stress are rather obvious: declining/stagnant tax base, residential abandonment, CBD retail/ commercial decline (sales tax), and higher expenditures to house the nation’s poor. Revenues were flat or falling. The national economy suffered from record-breaking inflation and increasing energy costs. CPI in 1970 was 3 percent, rising to 11 percent annually. Central city payrolls increased for a variety of good and not so good reasons. Police departments expanded to cope with rising crime, gang activity and murder rates. Unions, especially militant during the decade, increased wages and personnel. Productivity dipped. Only three central cities (Buffalo, Cleveland and Pittsburgh) reduced payrolls during this period (Teaford, 1990, pp. 221–3). Taxes went up—to the delight of all. Budgets were cut where possible. Sale of municipal assets was common, regionalization of expenditures through authorities/service districts (sewage, libraries, parks, transportation, zoos, museums and power plants) commonplace. Annual deficits were masked with one-time revenues—and short-term debt. And still that wasn’t enough. St. Louis ran an illegal deficit for three of four years (1971–74). Philadelphia (1975) ran a half-billion dollar deficit. Penn Central Railroad went bankrupt, gutting Buffalo’s property base.
Short-term debt was the real problem. Two- or three-year notes must be refinanced. In an inflationary period, each refinancing with higher interest rates cost more. New York was left in deep fiscal distress by Lindsey; in 1970 short term debt was 20 percent of total revenue—when he left office in 1974 it was 25 percent. NYC accounted for about one-quarter of the nation’s outstanding short-term state/local indebtedness. Boston, Cleveland, Baltimore, St. Louis and Philadelphia were deeply in hock also. State legislatures reluctantly crawled into this out-of-control spending machine. By 1976 two-thirds of Baltimore’s budget originated from intergovernmental (state and federal) transfer payments—so did Buffalo’s. New York City got 50 percent of its revenue from intergovernmental transfers; Cincinnati, Pittsburgh, Boston, Detroit and Minneapolis 40 percent or higher.
The fiscal crisis made the central cities wards of state and federal governments. Buffalo’s Mayor Stanley Makowski bemoaned: “We are creatures of the state—its children, if you will. If we cannot turn to our parent, where can we turn? (Teaford, 1990, pp. 224–6). The delicate balance of power between Big Cities and state legislatures seemed upset—arguably permanently altered. Running a reservation and sandbox is expensive. Fiscal capacity, the lack of it to be precise, redefined Big City economic development into central city “fiscal” development. On top of recapturing lost “functions,” central city ED was entrusted with the task of “paying the central city’s bills.” The scramble to pay bills yielded at least one interesting innovation.
Tax-sharing may be a partial answer to metropolitan tax incentive competition, and the Twin Cities in 1971 approved a path-breaking commercial/industrial tax-based sharing legislation—the Metropolitan Redistribution (Fiscal Disparities) Act. An important element of the so-called “Minnesota Miracle,” the act became effective in 1975 after being upheld by the courts. The Act required all communities in a seven-county area to share 40 percent of the incremental growth of industrial/ commercial taxes, the proceeds determined and allocated by formula (based on fiscal capacity) to social services. The Act developed out of a 1969 report by the Citizens League and was, in part, prompted by a bitter annexation battle between Bloomington and another suburb to annex a high-tax yielding power plant (Orfield and Wallace, 2007). Since passage, it has worked well and has been periodically updated to reflect new issues and concerns.
Whose Default Was It? Drop Dead Big Cities!
The 1975 NYC financial collapse elevated central city debt into a national crisis. With deficits of $1.5 billion, and $5.3 billion in refinanced short-term notes, the city was on the brink of default. Previously stop-gap remedies and one-time fixes kept the city afloat, but by June banks flat out refused to refinance the short-term debt. NYC, in technical default, was shut out of the credit markets. The state legislature responded by creating the Municipal Assistance Corporation (Big Mac), which hired Felix Rohatyn to restructure city debt and impose operating efficiencies. The Emergency Financial Control Board, controlled by state appointees, assumed more direct control over City Hall administration. Substantial layoffs, increased public transportation fares, wage freezes and an end to City University free tuition were recommended (Teaford, 1990, p. 227). In November the city secured congressional approval for up to $2.3 billion in short-term loans. President Ford said No! The headline read: “Ford to New York City: Drop Dead.” The evolving federal position regarding “municipal bailouts” couldn’t be clearer! For the next four years New York City remained closed out of the money markets and was a ward of the state.
Cleveland was next up. With the indubitable Dennis Kucinich newly elected and pledging no new taxes, Cleveland did its version of the short-term debt polka, suspension of bond ratings, trying to sell its Municipal Light Commission—and then refusing to do so. Finally, Cleveland defaulted outright in December 1977: “the first major municipality to do so since the Great Depression.” Fiscal instability “spread like an epidemic through the nation’s central cities.” In this environment, what is a good central city economic developer to do?
The first thing was to stop building expressways, highways and freeways. Public spending, union negotiations and tax increases resulted in brutal political contests with citizens, small business, unions and residents—and the city/mayor lost most of them. CBD and commercial/manufacturing/office redevelopment projects, the meat and potatoes of redevelopment, came under attack for nearly a decade. Worse, it was at this point the full attack on UR hit its highest level; it was painfully obvious many projects were not working. Many urban renewal agencies changed their name to community development (Teaford, 1990, pp. 230–36). The real purpose of economic development in these years was helping to “pay the bills”—the rest was just rhetoric.
THE SECOND WAR BETWEEN THE STATES: THE SHIPS COLLIDE
In the midst of this fiscal turmoil, Business Week devoted a special issue entitled “The Second War between the States” (May 1976).8 The article rang out like a fire bell in the night. The first impulse was to place blame on who started the fire. Southern competition surfaced to the top of America’s 1976 policy agenda. Thoughtful observers, with a few years of hindsight, knew the problem was more complex than the so-called “southern branch recruitment strategy”—which by then was 40 years long in the tooth. In the best of traditions, we shot first and thought later. The problem for our history, however, is the first irrational shots became engrained in our professional and Policy World legacy. In the process, Big City fiscal collapse, suburban growth, and Big City policy system change all became “smushed,” along with allegations of southern piracy (with federal help) into ED’s institutional memory.
How Economic Development Became Ground Zero
It probably began with a Times article by Kevin Phillips that popularized a Nixonian “southern strategy” (Phillips, 1969).9 Phillips asserted that Nixon’s victory resulted from his “southern strategy” (somewhat dubious in that Nixon lost the majority of the South’s 1968 electoral votes to George Wallace). The southern strategy rested on the increase of conservative Republican Sunbelt voters. Impetus behind the southern strategy was a repudiation of the Great Society (and the Civil Rights Movement) (Boyd, 1970). On its face, economic development was not a central player. Nevertheless, the 1972 landslide results (70 percent of the Deep South vote for Nixon, victory in every state but Massachusetts) proved Phillips more right than wrong—although the Democrats retained control of Congress. The political rise of the South was a punch to northern faces.
If regional change meant the rise of the West, that was one thing. If it meant the rise of the South, that was quite another. Regional change was perceived, albeit incorrectly, as mostly southern aggression: a new Civil War fought not with bullets but with tax abatements, IRBs, right to work laws and state and local incentive deals that lured highly visible automotive firms from the North and Midwest to the South. Arguably the opening salvo in this new North–South war was 1976 New Stanton PA Volkswagen Plant bidding war—probably the first public/media “bidding for firms with tax abatements.”
Pennsylvania competed for site location with two sites in neighboring Ohio. Pennsylvania “won.” The state bidding war culminated in the largest incentive package America had ever seen: $71 million (1970 dollars) in tax abatement, highways, rail improvements and assorted (some say sordid) business incentives. Volkswagen invested nearly $250 million to produce the Volkswagen Rabbit C, but simultaneously it also purchased an American Motors plant in South Charleston West Virginia and an auto air-conditioning plant in Fort Worth Texas—each with state incentives. The southern plants captured the media attention and notoriety. The South somehow had won the bidding war. Ironically, by 1984 all three plants were either sold or closed. In 2016 the New Stanton plant sits closed and empty.
Only a scant year later Honda, in 1977, commenced a successful negotiation for a massive incentive deal to build a motorcycle plant in Marysville Ohio. That was the opening salvo in what would later be called the post-1980 “Auto Alley,” stretching from Great Lakes to the Gulf of Mexico (Kilner and Rubenstein, 2010). In any case, in both instances the incentive war was initiated by foreign companies and states competing for foreign direct investment (FDI). The blame for bidding wars was placed on the doorstep of the rising and aggressive South by northern politicians (Moynihan, 1977), the Policy World and the media. Highly publicized works by Kirkpatrick Sale’s popular 1975 book Power Shift timed perfectly with the politically tumultuous post-Watergate years. A Policy World flurry of books proclaimed the existence of regional change and regional competition (Goodman, 1979).
Who’s to Blame?
The widely quoted, somewhat sensational Last Entrepreneurs in particular cemented the image of anti-union southern states peddling tax abatements and just about every other ED subsidy to foot-loose greedy capitalist firms. Goodman (1979, pp. 33–4) argued that southern states “are selling not merely climate or regional culture, but an ever-expanding package of tax breaks, subsidized job training, public financing, and an anti-labor, anti-environmental control climate.” In this war for manufacturing, southern states were labeled “the last entrepreneurs”—a euphemism for pirates. With the exception of the last two incentives, however, the same could be said for northern and midwestern states as well. The reality was an arms race had started long before the actual fight began.
In these pre-deindustrialization years southern states were perceived as the cause of the “increasingly virulent plague of plant closings in the industrial Northeast and Midwest” (Goodman, 1979, backcover). While not without its ideological and pro-labor baggage, The Last Entrepreneurs conveyed a dynamic that had developed after the Second War: state/local governments, regardless of the region, were engaged in a deadly serious competition for migrating business—each for their own reasons. But something had changed. Economic development was always attacked for its “dealmaking,” incentives, bidding wars and inter-jurisdictional competition. It had always been so, of course, but these nefarious activities were no longer confined to the municipal level. The states were now involved—in a very big way. And the competition captured heavy-duty media and Policy World attention.
The numbers were numbing, and the alleged implications so dear to the future—and to the fate of political officials and career economic developers. When confined to municipalities, deal-making and incentives were tied to the urban competitive hierarchy; much less so when deal-making shifted to states. Within the profession, the importance—and the status—of deal-makers changed the character, priority and tone of economic development policy. If in the past retention as a strategy held a slightly greater priority, in these years it began its all-too-rapid descent into a sideshow. Capturing big foreign companies was a matter of public prestige—and any loss public shame wrapped with the ribbon of irresponsible bidding wars.
To make matters even more complicated (and persuasive) the federal government, controlled by Sunbelt Presidents (Johnson, Nixon) and southern congressional committee chairs, had fed federal funds into huge amounts to game-changing new industries such as space travel and national defense (ACIR, 1977). A raft of serious policy and analytic literature documented the seriousness and impact of federal funds in the rise of the Sunbelt (Perry and Watkins, 1977). These works described a political/economic/ social zero sum game in which a negligent North was upstaged by the cagey southern country bumpkin (Editorial, 1976). The task, from the northern and midwestern perspective, was to cut off the spigot of federal spending to the South and reroute it to the North and Midwest, to the central cities.
Federal tax and spending policies are causing a massive flow of wealth from the Northeast and Midwest to the fast-growing Southern and Western regions of the nation … The states at the receiving end of high federal outlays also tend to be those that tax their own citizens least for state and local government services. On the other hand the balance of payment situation generally is adverse in the Northeast and Midwest, where population is stagnant or declining, where unemployment is the most severe, where relative personal income is falling and where the heaviest state and local tax burdens imposed. (Editorial, 1976)
The region-building war-production initiatives and the heritage of military installations and defense spending that followed after the war were critical to the South: Cape Canaveral and the space industry. Federal grants in aid formulas overall were transformative. Make no mistake, federal spending had played a major role in the southern economic transformation. But it also might be noted that no one has counted the benefits set by hegemonic, eastern, Big City corporations, their Pittsburgh Plus pricing et al. and its effects on the more “colonial” regions of the nation. There are two sides to every coin.
Economic development had now become politicized, openly politicized, and the politicians assumed leadership in the initial phases of the second war. The solution to the problem of federal spending was, not surprisingly, federal spending. While economic development was the alleged cause of the Second War, the real underlying tension was the North/Midwest fear that irreversible regional economic change was in process and had to be curtailed or reversed. This demanded resources they did not have. The South (and West) sought the same to protect their new-found growth machine. So the battleground of the second war would not only be the deal-making for mobile industry, but would also be the policy and funding found only in the Oval Office, halls and chambers of Washington.
Hitherto the North had been in undisputed economic ascendency. By 1976, with its central cities “hitting the bottom,” it was likely the North/Midwest’s hegemony was threatened. The time had come to fight back. Viewed from the other side of the Mason–Dixon fence, the “worm had turned.” The two-century pattern of northern economic and oft-times political dominance was visibly changing in the South’s favor. That regional change also included a sort of “coming out” of the West as well, however; but the rise of the South was truly galling—and unforgiveable—demanding special treatment. One may wonder if there was something else going on as well as simple regional change.
Was the Second War between the States a war between the two ships of economic development?
Washington Regional Economic Development Advocacy Policy
Early in 1973 the New England Congressional Caucus formed. As described by Rep. Silvio Conte (R. Conn), the reason for its formation was that “the region has been repeatedly unfairly treated on key economic interests like oil imports, rail freight rates, and defense contracts”; Rep. James Burke (D. Mass) wanted the focus to be “the ailing textile, shoe and electronics industry (Route 128).” Banks and fuel oil firms funded a research organization, the New England Economic Research Office.10 At that point, middle Atlantic/midwestern states were not yet organizationally joined together. The 1976 battles of New Stanton and Business Week, however, tipped the scale. In June 1976 seven governors (New York, New Jersey, Pennsylvania, Connecticut, Rhode Island, Massachusetts and Vermont) formed the Coalition of Northeastern Governors. The spirit of the coalition was expressed by Pennsylvania’s Governor Sharp: “It was largely tax dollars from our urban states that built the Tennessee Valley Authority. Now we find the lower cost of TVA power used against us to attract our industries.”11
In the same year, 1976, the Northeast–Midwest Congressional Coalition began life as a caucus in the House of Representatives (18 states). In the following year the Northeast-Midwest Institute was formed. Cobb reports that:
by February 1979 twelve coalitions had launched efforts to redirect federal monies to the Northeast and Midwest. Their first visible success was adjustment of the CDBG formulas to “direct more monies into northern cities and created the Urban Development Action Grant Program (UDAGs) to aid the nation’s most severely distressed urban areas. (Cobb, 1993a, pp. 198–200)
“It was the proliferation of regional interest coalitions in the North that led southern political and economic leaders to decide it was they who needed to be organized,” argued Cobb.
Not so quick. The South it seems had actually united before the Northeast Governor’s Coalition. As early as December 1971 (two years before the New England Congressional Congress) nine southern governors signed into agreement the Southern Growth Policies Board (SGPB, presently 13 states); in 1973 its staff and research functions were located in the Research Triangle. To be fair, SGPB initiatives and tone were defensive, policy analytical and internally focused. Yet southern congressional leadership through careful attention to detail reshaped Great Society and federal ED programs to increase funds to southern geographies. Over the seventies and subsequent decades the SGPB developed a southern “set of facts,” research and policy—as the Northeast-Midwest Institute did for the North and Midwest. Regional political and economic conflict was now very real and settled in to stay. In 1978 Jimmy Carter tried to moderate the regional division with a White House conference on “Balanced National Growth and Economic Development.” At that conference a panel on “Sunbelt– Frostbelt” included two important contenders, Daniel Patrick Moynihan and Governor George Busbee (Georgia), chair of the SGPB. Each pleaded their respective cases.
Below the Fold: The Perfect Storm Crashes into States and Municipalities?
All this “fussing ‘n’ feuding,” herds and quivers—and the threat of decline—brings out the economic developer in us. There is no single “cause” clearly associated with the raft of EDOs that were formed or reformed during the seventies. It varies to be sure, especially in the timing; but multiple dynamics seem to be in play. Hierarchical competition, both urban and metro, and now regional change and competition are obvious stimulants, but so is the decline in manufacturing and the rise of technology gazelles (see below). The arrival of foreign investors (FDI), notably absent in the fifties and even sixties, stirred up juices within each jurisdictional economic base. The collapse of Big Cities and their policy systems on top of continued suburbanization, neighborhood change and the onslaught of the baby boomers, and the shift away from UR to other ED strategies/tools/programs, all entered into the nexus to form or to rejigger EDO and ED policy/strategy.
Research/survey by Humphrey et al. (1989a, b) found that some 60 percent of Local Industrial Development Groups (LIDGs)—not equivalent to our EDO, which is considerably broader, including chambers, authorities or CDCs for example—were established in the 1975-85 period, and that two-thirds were located in “northern industrial states” such as New York, Pennsylvania, Michigan and Ohio do confirm significant formation of local EDOs in our hegemonic Big City states, and assert factors such as the 1973 oil embargo, global competition and “accelerated industrial restructuring of the 1970s and 1980s were responsible. A survey of their CEOs found that the reasons for LIDG incorporation were: (1) coping with unemployment; (2) competing effectively with other places; (3) and taking advantage of state and federal ED programs (Humphrey and Erickson, 1993, pp. 111–12). A literature concerning formation of EDOs developed in the middle–late 1980s after Bluestone and Harrison’s (1982) crucial work on deindustrialization suggests Big City states formed EDOs mostly in response to changes in their jurisdictional economic bases. We saw evidence of this, however.
But wide-spread creation and restructuring of EDOs characterized the seventies. Three distinct patterns emerged. States rejiggered their EDOs and added more arrows to their quivers. Attraction, incentives and deal-making captured the headlines, but TIF usage increased and IDBs and retention programs proliferated. At the local level counties entered slowly into ED, particularly in the West and South. More prominent was the turn to municipal government from chambers. Municipal EDOs, which, like state governments, were reformed and reorganized, empowered with new tools and programs. Attraction and retention remained pillars of local ED policy/strategy, but experimentation and an appreciation for the rise of technology was also apparent. Business retention, in particular, required states and locals to develop similar tools and techniques to counter alleged advantages and incentives offered by the recruiting/ attracting jurisdiction.
For example, Pennsylvania leaped ahead of New York by five years by approving in 1967 its Economic Development Financing Law empowering municipalities, counties and townships to establish economic development authorities. These authorities “construct, improve and maintain industrial, specialized, or commercial development projects for the elimination or prevention of blight … borrow money and issue bonds … exempting the property and securities of such authorities from taxation [tax abatement].”12 Pennsylvania’s Mid-Atlantic pioneering entrance into the arms race prompted New York, five years later, to reform its state programs and EDOs. In nearly every state, Big City or small city EDOs are being formed or reorganized. The ED landscape, both structural and policy, was clearly in flux.
EDOs developed similar incentive and business climate packages. We do not lack for examples. Consider a case: the Millers Falls Company in Greenfield (rural western) Massachusetts, as relayed to us by Robert Goodman (1979, pp. 62–4). Since 1868 Millers Falls made hand tools in the small town of Greenfield Massachusetts. In the fifties it employed 1300 workers, one of the largest manufacturers in western Massachusetts. Bought by Ingersoll Rand in 1962, 1976 employment declined by nearly 50 percent and the company announced it was looking at sites in North Carolina and nearby Connecticut. Governor Dukakis got in his limo and dropped into town. The company president decried Massachusetts’ high taxes/wages, so Dukakis jaw-boned the union, which after three months’ negotiation accepted lower wages/benefits. The local union organizer summarized the deal as: “We feel we submitted to extortion … The company says you submit or we throw you out and turn this town into a ghost town.” The state offered $285,000 in state money to secure another $775,000 from EDA to prepare a new building site.
Meanwhile Deerfield, an adjacent town, offered the company 30 acres, ten more than the company was asking for. Deerfield also agreed to use its tax-exempt status (IDB) to help Millers Falls raise $1 million at low interest to pay for part of a new $3.7 million plant: “We decided to give the Sunbelt a run for its money,” said the chairman of Deerfield’s industrial development commission (Goodman, 1979, p. 64). So the company moved from the city of Greenfield to the town of Deerfield with a pretty robust incentive package in hand. The company, however, relocated to New Jersey in 1982 as part of a leveraged buyout. The original Greenfield site is now a “Museum of Industrial Heritage.” To our best knowledge, there was never a proposal from a southern state or jurisdiction to the firm. Yet, in the minds of the participants, they were competing with the South.
Cobb presents data suggesting that by the middle 1970s:
if the southern states had once provided more financial support for such [industrial development promotion] programs than did states elsewhere, their competitors had all but caught up by the early 1970s. In fact, Pennsylvania’s per capita investment in development was more than 6.5 times the southern and national average. The southern states maintained only a slight edge in the percentage of the total state budget devoted to industrial promotion. (Cobb, 1993a, pp. 199–200)
SHIFTING SECTORS
The flurry of southern and suburban migration of businesses masqueraded plant closing during the 1970s. The tendency of mature profit cycle companies sectors to disperse to lower-cost geographies, however, was again “discovered” during the seventies, mostly by Policy World economists. Loss of jobs, plant closedowns were quickly linked with several not-so-new emerging agglomerations that made their appearance in the Policy World debate that raged during the seventies. Called the Great Reindustrialization Debate, it mostly included the (business and social science) Policy World, unions, and corporate management. Political leaders also kept a watchful eye.
The seeds for many of the paradigmatic strategies that characterize twenty-firstcentury contemporary economic development were being sowed in these years. We will discuss the Great Reindustrialization Debate in more detail in Chapter 19. In this section the history isolates two sectors as deserving special attention. These sectors served as the backdrop to much of the Great Reindustrialization debate. First, a “new” southern/Midwestern auto alley incrementally developed; second, a “technology” industry, distinct from manufacturing, appeared almost out of nowhere.
The Auto Alley was fueled by Japanese and European foreign direct investment (FDI). The emergence of the Auto Alley disrupted the already troubled traditional American auto industry, and it injected foreign competition into American domestic auto production—a competition that badly hurt American industry. New auto agglomerations in the South soon became a significant element of regional change and added to the perception the South was “stealing” much-needed manufacturing from Big City states. The shift of auto-related production to the southern alley, combined with the weakness of American auto manufacturers, was, of course, a major factor in the catastrophic decline of Great Lakes and Michigan’s jurisdictional economic bases— creating the infamous “Rust Bowl” (Klier and Rubenstein, 2013).
The southern Auto Alley also became linked to Big Three (American) downsizing due to lost sales to foreign competition. Detroit simply could not produce competitive high-quality vehicles attractive to consumers. That corporate weakness triggered new discussion within auto manufacturing that permeated university business management departments—spreading its application across many other sectors as well. Productivity, corporate management strategy, and worker management joined entered into the Great Reindustrialization Debate as well.
Auto Alley and Regional Change
Sunbelt auto alley expansion was driven by investment decisions made by foreign automakers.13 Internal auto industry dynamics, microeconomic costs and production efficiencies—and corporate strategy—were incorporated into foreign automakers’ location decisions. Consequently, there were many factors that entered into a location decision—not just the ED deal-jockeying described below. Foreign manufacturers arrived at America’s shores not because of recruitment or ED attraction, but for their own reasons. Japanese auto manufacturers and parts suppliers had embraced new techniques such as just-in-time (JIT), new process technologies (statistical process controls-batch processing) and logistical/distribution innovations—which seriously affected their search for American locational assets.
Japanese manufacturers, long protected by high tariffs that shielded them from foreign competition, were confronted with the 1973 expiration of the Bretton Woods trade agreements (upon which postwar global trade revolved). From that point on “floating” currency rates became the key single factor driving global trade and comparative advantage as import/export ceased its reliance on the gold standard. Japanese auto manufacturers could no longer compete behind high tariffs, so they “innovated” and developed a new business model based on low costs, cutting-edge processes, composites materials, production efficiencies and decentralized management/team-decision-making. Floating currency rates drove their decision to establish production facilities in high-demand markets such as the USA, but they required a low-cost business climate to accommodate their business model (Howes, 1993, pp. 61–2). Low-cost American locations had a compelling advantage in attracting these facilities.
Our tale of auto alley expansion starts with Honda’s 1977 first USA investment in Marysville Ohio—not usually thought of as a Sunbelt state. The Marysville plant was initially intended to assemble 60,000 motorcycles; but in 1980 Honda purchased adjacent land, and by 1982 an automobile assembly plant was in production also. By 1990 Honda sold 800,000 Accords in the USA—half were from Marysville. The 1982 assembly plant was followed by a series of additional Honda investments in Ohio (all with tax and other incentives), so that by 1990 Honda had invested over $2 billion and hired over 8000 worker-associates in Ohio automotive-related facilities (Marvel and Shkurti, 1993, pp. 52–3).
The traditional Great Lakes auto alley evolved during the 1920s from a highly agglomerated, oligopolistic automotive complex (Markusen, 1985, pp. 163–75) around Detroit, its northern suburban counties, across the bridge to Windsor Canada to Toronto and following Interstate Route 90 through Cleveland, Buffalo and all the way to Syracuse and Schenectady NY. The Big Three subsequently decentralized automotive assembly/parts production to regional hubs in key market areas: San Francisco, Los Angeles, Dallas, Atlanta, St. Louis, Kansas City, New York/New Jersey/Baltimore and Springfield Massachusetts (Markusen, 1985, p. 170). The core “traditional auto alley” was less OEM assembly plants than a huge automobile parts and automobile-related plant nexus that remained heavily concentrated within the Great Lakes auto complex. The Marysville investment was (just) outside the “traditional” auto alley (Rubenstein, 1992). The Marysville Honda facility marked the abrupt and remarkably rapid inauguration of a second auto alley.
Prompted not only by internal industry transformation but also by threats of American protectionism and unfavorable currency imbalances, Japanese automakers (including one Subaru facility) quickly poured new investment into the south central states. The new auto alley concentrated along Route I-65 (Indiana through Alabama) and I-75 (Michigan to Georgia) with an East–West dimension: a series or “rungs” along I-20, I-40, I-64, I-70 and I-80. By 1979, the US had 55 assembly plants, 34 in the (new) auto alley.
The seven southern states of Alabama, Georgia, Kentucky, Mississippi, North Carolina, South Carolina and Tennessee together had 7 percent of transportation sector employment in 1972. Thirty years later the region’s share had grown to 16 percent … The number of assembly plants in the South increased from 5 to 13 between 1979 and 2008. In addition, 67 percent of all parts plants in the South were opened between 1980 and 2006, compared with only 40 percent in the rest of the United States. (Klier and Rubenstein, 2008, p. 3)
By 2008, the number of assembly plants in the new auto alley had increased to 43; elsewhere their number declined to seven. During the 1950s, three-quarters of all parts were made in, or near, Michigan, whereas in 2008 the state retained only one-quarter. The new auto alley even after a three-decade run shows no sign of abating (Platzer and Harrison, 2009, p. 5, Table 2).
The 1980s’ Auto Alley expansion was viewed by many as one more example of the “usual” southern piracy through incentives, promotion, a cheap nonunion workforce, community college business assistance programs and business climate advantages (right to work, low taxes, pro-business). Attraction to the Auto Alley by foreign investors certainly was affected by these factors, especially right to work. The aggressive role of southern governors in promotion also frequently created an edge. Governor Lamar Alexander’s Tennessee was a prime example of a state attraction effort that successfully landed in 1986 a General Motors-Saturn plant facility at Spring Hill. That decision, however generated intense competition between states: New York allegedly put a $1.2 billion package into play; 18 states competed. That Asian automakers/parts plants intended to be nonunion from the get-go provided a prohibitive advantage to right to work states.
Lest we appear as an apologist for southern behavior, I argue, as does Stuart Rosenfeld, that foreign automakers were only one of many industry sectors investing in the South at this time (Rosenfeld, 1992, p. 70, Tables 6–8). FDI was a cornerstone of the post-1960 southern manufacturing renaissance. Great Britain (not a competitor in Auto Alley), for example, in 1989 owned most southern foreign-owned facilities; the Federal Republic of Germany was second. Canada and France combined owned more southern manufacturing facilities than third place Japan—the chief Auto Alley foreign investor. During the 1980s Japanese-owned plants in Southern Growth Policies Board States increased from 63 to 359, an annual compound growth rate of 21 percent.
LONG LIVE TECHNOLOGY
Technology firm location was grossly uneven (in fact political economists often referred to “uneven development” in their commentary). Almost all were concentrated in a few jurisdictional agglomerations. On the other hand, the shedding of mature manufacturing firms was widespread and seemingly on the rise. New technology agglomerations created Route 128 and Silicon Valley (and smaller agglomerations in Texas, Los Angeles and Minnesota) that figured prominently in the next half-century. Technology’s rise was strongly tied to federal government war production that had evolved over many years but now caught the attention of the media and policy-makers. Agglomerations and uneven development also entered into the Great Reindustrialization Debate, that two decades later would emerge as clusters and the knowledge-based-innovation paradigm.
Early on the “technology revolution” diffused to three principal geographies: Route 128, Silicon Valley and Dallas. A second wave based on new technologies brought it to several other locations such as Seattle/Redmond. By the mid-1980s high technology had become the “economic Holy Grail … hailed as the antidote to the decline in the smokestack industries” (Markusen et al., 1986, p. 1). The original home of this incredible gazelle sector was Boston/Cambridge, nearly a half-century earlier. The rise of the technology in Boston/Cambridge was no whim or accident.
There are plenty of excellent works that detail the technology revolution.14 Our task is to understand the timing of Route 128 and Silicon Valley growth—and why. Technology has a longer history than many realize, and that should be understood to better appreciate the process underlying innovation and clusters. Our version of technology’s rise emphasizes the role played by the federal government, driven by threat of or actual war (World War II, Korea followed by the Cold War). Sectors and industries can emerge without federal government involvement, of course, but the rise of the technology that appeared in the seventies is closely tied to Defense Department/ Space Program demand and investment. Also, the period’s technology agglomeration was strongly affected by idiosyncratic roles of entrepreneurs and differing business cultures/practices of each agglomeration. These are likely to be essential ingredients for new emerging sectors cluster or agglomeration (cluster and agglomeration are not identical, by the way).
Route 128
Route 128, more correctly pre-Route 128 Harvard-MIT, was technology’s birthplace. Boston-Harvard-MIT grasped an initial advantage over other regions by dint of its well-established university relationships with the Defense Department and Washington DC. These relationships developed over two centuries and they crystallized around technology’s rise immediately previous to WWII. WWII holds the key to our understanding of pre-Route 128 new emerging sectors.
Harvard was the nation’s prime intellectual leader and “generator” of governmental/ corporate elites. By the twentieth century Harvard was Washington DC on the Charles River. War/defense policy-makers had more links to Harvard, it seems, than to West Point or Annapolis. The Harvard Business School played a similar role for America’s top corporate leadership. Harvard trained the leadership that sent government contracts to the Boston area and founded new industry. Harvard had been doing this for a long time; Edwin Land, for example, had spun off Polaroid (1937) from Harvard. Harvard’s other key sector-building contribution was to create the nation’s first venture capital firm (1946). With capital from the local insurance industry and the university, Georges Doriot and former MIT president Harvey Compton formed the American Research and Development Corporation, New England’s (and probably the nation’s) first formal venture capital firm.
MIT had unique advantages also. Founded in 1861 to pursue “its uniquely practical focus … the orientation toward the needs and interest of the industrial community” (Lampe, 1988, p. 3) rendered MIT a university whose mission dovetailed with private innovation and applied commercial R&D. MIT also had a longstanding history of spinning off companies—as early as 1889 (Arthur D. Little) and Edison’s Bell Telephone (1877). MIT proved to be the single most important launching pad for Route 128 firms, claiming that during the 1950s and 1960s it spun off over 100 startups from its research labs. Lincoln Labs, for example, spun off Data General, Raytheon and Digital Equipment. By 1986 MIT’s accelerators had spun off 400 firms since 1950, with sales in excess of $29 billion and employment of 175,000 (Lampe, 1988, p. 12).
Interestingly, neither Harvard nor MIT wanted research on the campus itself. Each set up separate off-campus research laboratories. Nor did the universities directly finance or invest in research. MIT (1955) concluded that “investing in start-up companies was too risky and not consistent with how ‘men of prudence, discretion, and intelligence manage their own affairs’ … [So] In spite of the university’s commitment to commercially relevant research, it kept firms at arm’s length” (Lampe, 1988, p. 4). Accordingly, MIT spun off-campus Lincoln Laboratory for Air Force-related research, followed by MITRE Corp. and Draper Laboratories—university accelerators in today’s parlance. Given that Route 128’s first span opened only in 1951, the separation of the university physically from the spin-off laboratory accelerators was a defining characteristic of Route 128 experience.
Central to this spinoff phenomenon is a “platform” company.” University research labs produced first-generation platform companies that spun off second-generation companies using the motherships’ technologies and processes. Platform companies spin off firms like a popcorn-maker pops corn. A platform product can potentially be used in a number of industries/sectors, not all of which actually exist when the product is first introduced. The organizational model that developed from Route 128’s platform firms’ business culture retained control over second-generation spin offs, keeping them within its corporate structure as a subsidiary or “department.” This transformed the firstgeneration company into a vertically integrated “holding corporation”—a technology conglomerate (Saxenian, 1996). Those second-generation firms outside the conglomerate found it difficult to acquire scale-up financing other than from their corporate parent—which imposed its products and technology as a condition of financing on the second-generation firm. Entrepreneurs within technology behemoths may have had little recourse than to leave the area to start a firm outside the conglomerate structure. Silicon Valley platform firms followed a different model with starkly different results—including “birthing” new sectors adjacent to the platform company.
The critical fuel behind Route 128, the Silicon Valley and Texas Instruments growth was federal research contracts and a world war. Federal contracts over decades paid for applied research to develop and construct specific prototype models (radar systems, for instance)—not basic research. Basic research had been developed decades previous (in some cases four decades previous). Like a fine wine, basic research must be carefully aged until a specific product is needed for which someone is willing to pay. Federal spending for basic research will likely employ your grandchildren. Researchers, previous to 1940, had already developed important breakthroughs and concepts, some equipment and specialized skills/processes and knowledge-mentoring relationships. In the 1920s, for instance, MIT researchers started work on the minicomputer, and in 1953 constructed Whirlwind, the world’s first reliable real-time electronic digital computer. It was waiting to be used when a market developed.
Design was one thing, production was another. Commercialization and scale-up production required yet another infrastructure to be readily available. The 65 colleges and universities in the Boston area “provided a critical source of professional labor, including physicians, managers, and lawyers as well as engineers and scientists—the labor force and middle management needed to grow production from the innovation. The Boston area could provide both. The results of all this were pretty dramatic stuff: “By the late 1960s high technology has taken firm root in Massachusetts, accounting for nearly 10 percent of total employment” (Lampe, 1988, pp. 5–6).
Route 128 itself is a limited-access, circumferential highway that opened in 1951, allegedly the nation’s first. As early as 1955, Business Week referred to the highway in an article, “New England Highway Upsets Old Way of Life,” and called it the “Magic Semicircle.” By 1958, 99 firms and 17,000 workers had located along Route 128; by 1961 there were 169 firms employing 24,000 directly on the highway, and as many very close by. In 1965 MIT researchers counted 574 companies, and the number more than doubled in eight years. In 1972 there were 1212 firms (Lampe, 1988, p. 16). By the 1970s the “Massachusetts miracle” had created the nation’s leading center of electronics innovation. The reader might remember this happened while New England’s textile industry was collapsing.
Sustained Innovation: A Second Wind?
Military contracts to the region, however, fell precipitously between 1967 and 1972— about 40 percent decline in real terms. The state lost 112,000 manufacturing jobs, 15 percent from high-tech firms. Close to 30,000 defense-related jobs were lost between 1970 and 1972 (Lampe, 1988, p. 17). Route 128 firms forced to wean themselves away from federal contracts shifted into production/sales to commercial consumer markets. The key to 128’s transition was the minicomputer. A second Massachusetts miracle began in the 1970s as advances in engineering design, discovered during the sixties, reduced computer size and cost while expanding capabilities Advances opened up new markets and innovated commercial applications, creating demand for products Route 128 firms could supply. DEC, Wang, Raytheon and Honeywell scrambled to take advantage.
DEC (a 1957 spin off from Lincoln Lab) was the platform company. Its entrepreneur, Kenneth Olsen, had developed a microcomputer Spun off in 1957 from Lincoln Lab, Olsen located DEC in an abandoned textile mill (not on Route 128). First on the market, DEC’s sales exploded. Fortune magazine (1986) declared Olsen America’s most successful entrepreneur. DEC could have spun off lots of entrepreneurs and small firms, and to a certain extent it did. Data General spun off, becoming a DEC competitor. So did Silicon Valley’s Hewlett-Packard. But for the most part, DEC retained innovations within its corporate structure, became more rigid and, for various reasons, less responsive to consumer demand. DEC tried to shape, if not compel, consumer demand to suit its research designs and products. That didn’t work— consumers wanted what consumers wanted. Data General, using DEC technology, was the first to fail and was sold to EMC in 1998. The writing was on the wall. In 1998 DEC also was acquired by Compaq (a Texas Instruments spin off whose chief competitor in the PC market was another Texas firm, Dell). In 2002 Compaq was acquired by Hewlett-Packard. The minicomputer had lost the battle to the PC. Technology had moved too fast for DEC. Massachusetts had lost its firms to Texas and California.
Silicon Valley
As late as the 1940s Silicon Valley was an agricultural region. During WWII military bases triggered in-migration and provided federal contracts to Santa Clara Valley firms. Silicon Valley developed from spin offs generated by Stanford University. But its real founder was Professor Frederick Terman (1924 MIT electrical engineering). Terman, whose father was a Stanford professor, returned home after graduating from MIT in 1925. By 1940 Terman was a national leader in electronic/radio engineering (vacuum tubes). An energetic business developer, he did whatever was needed to encourage startups, including a small tech firm pioneered by two of his students—a Mr. Hewlett and a Mr. Packard. Terman personally lent H&P their startup financing, secured a bank loan for them and found them a shop.
Other Terman-inspired spinoffs located around the Stanford area, creating a budding cluster of prewar technology firms. One was Litton Engineering Laboratory, found in 1932 to produce glass vacuum tubes. By war’s end Litton was the nation’s leading producer of glass-making machinery. Another was Varian Associates (lent $100 by Stanford and given free use of Stanford labs in exchange for 50 percent interest in any resulting patents). During World War II Terman relocated to Harvard’s Radio Research Laboratory to work on radar-jamming/anti-aircraft defense technologies. Returning to Stanford in 1946 he was committed to developing a strong West Coast technology industry capable of competing with the East. To accomplish this goal Terman recruited top-notch technical scholars, in effect making Stanford the West Coast’s MIT. By 1950 Stanford awarded as many doctorates in electrical engineering as MIT. Terman used his East Coast contacts and experience to leverage Korean War defense contracts, founding the Stanford Research Institute in 1950 (defense-related research) and establishing the Honors Cooperative Program (engineers took graduate courses at their workplace)—by 1961, 400 engineers were enrolled (Saxenian, 1996, p. 22).
Terman became Dean of the Electrical Engineering School in 1951 and, true to form, developed it into one of the nation’s best. Terman’s Stanford Industrial Park (1951)—a short walk from Stanford classrooms—recruited its first tenant, Varian’s R&D unit. A slew of corporations followed. Another classic Terman deal was Lockheed. Terman convinced Lockheed to locate its new missile and space division in nearby Sunnyvale (1957). Stanford agreed to provide faculty members to advise and train employees, while Lockheed in turn was instrumental in rebuilding Stanford’s aeronautical engineering department (Saxenian, 1996, p. 24). In 1955 the park encompassed 220 acres; in 1961 652 acres (25 companies and 11,000 employees) (Saxenian, 1996, p. 22).
East Coast firms, including Raytheon, established branches in Silicon Valley; so did the forerunner of NASA. Diversity created a critical mass of firms, engineering talent, suppliers and startups in areas such as lasers, microwaves and medical instrumentation. By the late 1960s, Santa Clara County was recognized as a center of aerospace and electronics activity. In comparison, Route 128 was more specialized. SV attracted several platform technologies spread across a number of sectors and industries—tied mostly to consumer-driven products, never totally dependent on the Defense Department.
Silicon Valley’s most explosive growth was driven by an innovation that did not exist until 1951: the semiconductor, whose chief element gave the place its name in the early 1970s. By 1970 semiconductor manufacture was the largest and most dynamic sector of Santa Clara County, and the nation’s leading center of semiconductor innovation. The industry started in 1955 in Palo Alto with Shockley Transistor, SV’s equivalent of Ken Olsen. William Shockley, an MIT grad and inventor of the transistor, worked for decades at Bell Labs in NYC and New Jersey. In 1951 he was elected to the National Academy of Sciences. Having failed in a startup transistor firm with Raytheon (1956), he returned to Palo Alto (to care for his ailing mother) and started Shockley Transistor—the first firm to develop a silicon chip.
Shockley hired the best engineering talent; but, similar to the Caine Mutiny’s Captain Queeg, Shockley inspired a mutiny and most of his staff, the “traitorous eight,” left to form a competing venture, Fairchild Semiconductor. While still in a garage, Fairchild Semiconductor got an order for 100 mesa silicon transistors, followed by Air Force and NASA contracts. By 1963 sales were $130 million. Fairchild spawned ten spin-offs in its first eight years, one of which was the Intel Corporation (1961). Thirty-one semiconductor firms started in SV during the 1960s, the majority tracing their lineage to Fairchild. Only five of the 45 independent semiconductor firms started in the US between 1959 and 1976 were located outside of SV (Saxenian, 1996, pp. 25–7).
From its inception, Silicon Valley was diversified, financed less by government contracts than venture capital (by 1974 more than 150 venture capitalists operated there) and aggressively competed in consumer-driven markets. By 1975 Silicon Valley surpassed Route 128’s employment level. Interestingly, the period in which Route 128 and Silicon Valley took off was the fifties and sixties; but it is in the seventies—when both underwent transition—that they finally entered into our ED history.
NOTES
- Including the UK’s Garden City, Gramdan villages in India and Moshav land owned by Israel’s Jewish National Fund.
- cdfifund.gov/Pages/default.aspx.
- cdfi.org/about-cdfi-coalition/history/.
- Statistics are census, Statistical Abstract and HUD State of the Cities as reported in McDonald (2008, Chaps 4 and 10).
- A notable exception was Simon Kuznets, “Economic Growth and Income Inequality,” American Economic Review, vol. 45, no. 1 (1955) and his Toward a Theory of Economic Growth (New York: Norton, 1968).
- See McDonald (2008, p. 86, Table 6.1).
- Brookings Institution, Round Table Discussion on Urban Development Banking, March 21, 1977, transcript, Washington, DC.
- Business Week, May 17, 1976, no. 2432, pp. 92–114.
- Warren Weaver Jr., “The Emerging Republican Majority,” New York Times, September 21, 1969.
- Nashua Telegraph, February 23, 1973, p. 5.
- New York Times, January 9, 1977, p. 41.
- Pennsylvania Economic Development Financing Law of 1967.
- “Collaborative Regionalism and Foreign Direct Investment: The Case of the Southeast Automotive Core and the ‘New Domestics,’” Economic Development Quarterly, vol. 26 (2012), pp. 199–219.
- For starters see Saxenian (1994); Markusen et al. (1986); Michael Luger and Harvey Goldstein, Technology in the Garden (Chapel Hill: University of North Carolina Press, 1991); and Lampe (1988).
Ron W. Coan 