The Federal Government
Chapter 18 Carter Reagan
Chapter 19 Reagan EITC to Clinton New Markets/CD
Chapter 16 Final JFK
Chapter 15 Truman and Eisenhower
Chapter 13 West
Chapter 10 New Deal
Western Infrastructure Chap 8
Early Republic Chap 3
The Federal Government
Sticking the Federal Nose into Sub-state Policy-Making
By Washington’s second administration (1794) the so-called Hamilton Plan (strong executive-led federal government, a pro-manufacturing finance system, a National Bank) assumed center stage. By 1796, however, the Washington “unity” administration splintered into a Jefferson-led, legislative-focused, agrarian, and state-rights Democrat-Republican Party (D-R’s) that directly challenged Hamilton/Washington Federalists. The Federalists struggled under Adams and lost control of the federal government (forever) to Jefferson in 1800–leaving the federal government in the hands of Tidewater/Deep South-based Jeffersonian D-R’s. Perhaps, Jefferson’s most important economic development action was the Louisiana Purchase from which fifteen states emerged[i].
After the War of 1812, and a weak attempt at New England succession from the federal Union (Hartford Convention), the dominant Federalist Party collapsed and merged into a unstable two-wing Democratic-Republican Party. The two-wing D-R Party presided over a short-lived “era of good feelings (1816-1828). And then Andrew Jackson was elected President (1828)—and no one had good feelings after that. Jackson, a complex character, a Deep South slave-owner/planter with Greater Appalachian values, a strong believer in state’s rights, cheap money, anti-bank but an equally strong proponent of the Constitution and the Republic, Jackson was his own paradigm and enigma. His effect on contemporary economic development, however, was profound—his concept of urban governance, the weak mayor system limited governmental capacity and policy effectiveness for nearly a hundred years. The reaction to his economic failings created a wave of state legislation that continues to affect economic development to this very day.
Most of the infrastructure-related events described below occurred after the War of 1812 and were generated by D-R factions led by Henry Clay. Federal involvement in local ED largely ceased with the Jackson Administration (1828-36), and the Panic (Depression) of 1837. Not until Lincoln did the feds resume an activist role in state/sub-state ED. In the interim states assumed a greater role, producing a decidedly mixed bag of policy outputs. The Whig Party formed after 1840 as an alternative to the dominant Jacksonian Democrats. The history briefly describes these federal infrastructure initiatives. The nature of these initiatives and the reaction to them reveals a lack of consensus regarding the role of the federal government in matters of sub-state economic development during the pre-Civil War years. Importantly, post 1861 federal ED-related initiatives bridged that now infamous ED public/private chasm by using, instead of the corporate charter, the modern private business corporation as its primary EDO.
Early Republic Federal Government and “Internal Improvements”
A predominately agricultural economic base, ensured that most of America remained rural hinterland, pockmarked by (today’s standards) remarkably small urban centers. In 1790 only five per cent of Americans lived in urban areas (defined as 2,500)[ii]. By 1860, however, the urban share of the population increased to a whopping twenty percent. Despite an emerging industrialization, America in this Era is best thought of as a developing nation, without a land-based transportation infrastructure, dependent on water-borne commercial trade. We lacked a meaningful financial/investment system and consequently, we were deeply reliant on foreign direct investment. Each of these factors affected sub-state economic development activities, and also generated a federal attempt to overcome the isolation of rural America by making it more accessible for trade and population mobility. The man most associated with these initiatives was Henry Clay.
Henry Clay (D-R) was arguably the most prominent national “economic developer” in the pre-Civil War period if only because of his longevity on the national political scene. A transplanted Virginia slave-owning planter, Clay moved to Kentucky and was elected to the House of Representatives at 34 (1811). On the first day of his first term on the Hill (1812), he was elected Speaker. Reelected to the Speaker for the next four terms, he remained in either House or Senate until 1852; he ran unsuccessfully for President six times. Relevant to us was Clay’s “American System” federal policy platform.
The American System was a three-pronged federal economic development program: (1) a protective tariff intended to nurture the emerging manufacturing sector startups, and shield them from British dumping and low cost imports; (2) a (second) national bank that would inhibit inflation, establish a strong national currency, provide lending to firms, and foster interstate commerce; and (3) provide federal subsidies to roads, canals and “other internal improvements” to strengthen access to rural cities/ towns which dotted the American landscape”. The American System was controversial, and while in office, Jackson sparred and fussed with Clay over much of it—refusing to charter the National Bank and denying funds to the National Road. The Bank’s death contributed mightily to the Panic of 1837.
The tariff, however, equaled slavery in is divisive political effects on the body politic. Tariff debate exposed stresses among competing industry sectors and the contrasting North/South economic bases. The Southern export-based agricultural economy required as close to free trade as could be wrung from the North, which wanted a tariff to protect its fragile new manufacturing sectors. Free trade or tariff protectionism considerably impacted industry sectors/life cycles and have consistently created the potential for zero-sum decision-making among the nation’s regions and states/cities. The various tariffs associated with Clay’s American System were not the first, and would not be the last, example of polarizing regional economic development conflict triggered by tariffs. On balance, BTW, the North came out the better.
The National Road anticipated the Eisenhower interstate highway system by more than150 years. The National Road (Route 40) commenced in Washington D.C. By 1818 it reached Wheeling (West) Virginia and eventually got as far as Vandalia, Illinois. The Feds provided subsidies, off and on, through 1835 when states took over. “So many towns sprang up along it that it became known as the Main Street of America”. (Reynolds, 2008, p. 12) The National Road opened up the central Mid-West as the railroad did for the American West some forty to sixty years later.
Western Infrastructure
Why mince words. Most of the West was literally owned and managed by federal bureaucracies, i.e. the federal government. Whatever history and tradition characterized economic development east of the Mississippi, it was likely to be a quite different story in the West for that reason alone. The federal role started during the nineteenth century. The 1891 Forest Reserve Act/Land Revision Act authorized the President (Benjamin Harrison) to set aside and reserve land and forest areas from the public domain. Added to by both the Cleveland and McKinley administrations, the land/forest aggregation was turned over to the newly created (1905) Forest Service—the creation of Pinochet and Theodore Roosevelt. By the 1990’s over 740 million acres—one third of the nation—was still directly administered by the federal government. The Feds were many western state’s largest landowner; and the “feds” controlled economic recreational/tourist activities conducted on these lands.
In 1919 the National Park Organic Service Act established a nation-wide set of national parks, and, intentionally or not, put Uncle Sam into the local/regional tourism business. Federal ownership of so much land and the involvement of the federal government in regulating/conducting what, in other states, would be local/state economic development activities/business climate has created, a complexity, if not a constant source of tension in western state economic development. This tension did not take long to manifest itself. In 1922, after leasing federal petroleum reserves to a private firm, a massive scandal, the Teapot Dome scandal erupted. The tension persists and will be discussed in Chapter 19, Suffice it to say, the federal government will be an EDO as far as western tourism goes.
As a starting point in regards to the federal role in western economic development, I make three observations: (1) the West as described by its famous explorer, John Wesley Powell is “an arid region”; (2) anyone who has survived a car trip across the West will know—it is BIG. Getting from place to place and providing services over such a dispersed, loosely populated area is a different matter; and (3) the Pacific Ocean required the federal government to construct a defense/military presence in the Pacific coastal states; These observations require certain infrastructures that will be discussed in this section: water, energy, and highways. First and foremost, the federal government had to deliver infrastructure if the West was ever to develop. Several of these infrastructures will be discussed, albeit briefly, in Chapter 13. This brief entry into the world of federal infrastructure in western states mostly provides a time line for critical infrastructure developed in these years by the federal government. Frank Wiggins could not have grown oranges and Mulholland, stole his water without earlier federal intervention.
Agriculture, the gray area of economic development, prompted early western state action to advance wide-scale household farming, then Frank Wiggin’s infamous orange groves, and in fairly short order large-scale commercial agriculture. By the time John Steinbeck’s heroes were making their way from the Dust Bowl to employment in southern California farm worker jobs, a second book, Carey McWilliams’s Factories in the Field (McWilliams, 1939) provided vivid testimony of the existence and weaknesses of California’s highly developed commercial agriculture complex. Donald Worster (Worster, 1992) argues that over forty years, California and other western states developed into a hydraulic economy, similar to that of the ancient Egyptians and Mesopotamians—an economy based on farming made possible through irrigation accomplished through concerted, large-scale government public works.
The government-irrigation nexus grew out of an 1871 private firm, the San Joaquin and King’s River Canal and Irrigation Company headquartered in San Francisco. This corporation opened up the San Joaquin Valley and within two years irrigated over 16000 acres. Rich and poor, big and little farmers flooded into California and by the 1880’s new migrants had consumed nearly every drop of water in sight. The1895 formation of the Fruit Growers Exchange prompted yet more marketing cooperatives that fed the grocery stores of the nation—and drained more water. Deeper wells were required. In order to accommodate further growth, eventually large-scale irrigation was required.
In 1887, the Wright Act (California) authorized farmers to organize a quasi-government entity that could own land, build irrigation complexes, and tax the landowners: the agricultural district was born. “By 1920 there were 71 irrigation districts in the state, most of them put together in the boom years of 1915 to 1920. The largest, covering over a half million acres, was in the Imperial Valley” (Worster, 1992, p. 60). It was only a question of time, and in the late thirties the New Deal federal government commenced the Central Valley Project. The quest for water for a thirsty population and growing economy had drawn the federal government into the provision of infrastructure necessary for western states economic expansion. It didn’t come willingly (Hundley, 2009).
In 1917 seven states formed the League of the Southwest to promote development (irrigation) from the Colorado River. Congress in 1921 authorized the states to enter into an agreement to allocate the flow and resources of the Colorado. So in 1922 the Colorado River Compact[iii], a controversial agreement, was signed and water rights of the Colorado were allocated to each member state. The federal government played a major role in the politics and negotiation of the Compact—indeed Worster asserts much pressure for the first federally constructed dam program came from the Bureau of Land Reclamation, as well as the City of Los Angeles[iv]. Worster’s take was that without the Frank Wiggin’s-Los Angeles Chamber entrepreneurial drive to encourage migration and commercial agriculture, there would have been little reason to construct the dam system. He cities William Mulholland who had earlier declared (1907) “If we don’t get the water, we won’t need it. We have to get the water or quit growing” (Worster, 1992, p. 69). In any case, the Colorado River Compact made dam construction and electrification of the inland West possible.
A confirmed Privatist, Calvin Coolidge, signed the Boulder Canyon Act in 1928 and set in motion federal dam construction. President Hoover in 1930 dedicated the dam and started construction (that’s why they call it the Hoover Dam, stupid). In any case, the Hoover Dam was completed and generating power by 1937. At that time, however, Harold Ickes, FDR’s Secretary of Interior, changed the name to the Boulder Dam.
Hoover Dam was followed in 1938 by Parker Dam, located 150 miles downstream and furnishing water for the California Aqueduct which supplied the City of Los Angeles. Then came the building of the Imperial Dam and the All-American Canal to supply the agri-business interests farther south on the Mexican border. Than Davis Dam began to go up in 1946, and soon after the Morelos Dam in Mexico … the names proliferated endlessly.… Blocked, trapped, stilled and siphoned off, the Colorado finally ceased in normal seasons to reach the sea. (Worster, 1992, pp. 70-1)
Somebody somewhere has might be thinking about highways, so let’s switch from dams and water to a happier note– Route 66. The Will Rogers Highway began construction in 1926 and crossed over 2400 miles from Chicago to Santa Monica[v]. Although not completely paved until 1938, Route 66 served the function performed by the National Road (opening up the Southwest)—without the controversy the latter engendered. In short order, the Route became part of the American fabric and legend—the highway traveled by Grapes of Wrath Dust Bowlers, the Route of wartime industrial decentralization and population migration, and an early 1960’s television series my wife loved. Federal aid to highways increased from $216 million (1932) to $805 million by 1936. Much of these federal highway monies, however, were spent in urban areas (Triborough Bridge in NYC and the Arroyo Seco Freeway in Los Angeles) (Altshuler & Luberoff, 2003, p. 78).
Accordingly by the New Deal, the federal government had four decades of deep involvement in western infrastructure. FDR, however, faced other more complex issues than infrastructure in confronting the Great Depression: rural poverty, marginal farmers/livestock, a Dust Bowl, and a large rural population in a nation that in 1920 had in aggregate just achieved a bare majority of urban residents. That is a story for Chapter 13.
From Rural to Urban
What is sometimes so obvious, it is seldom mentioned, just automatically incorporated into one’s approach is the change, a radical change, occurred during these years in the character of sub-state economic development. Up to this period, the Big Cities were driving economic development policy and practice. States and certainly the federal government were secondary actors, except in rare instances, like gift and loans clauses, or transportation infrastructure financing. Federal tariff policy was deeply affected by municipal-level pressures. With the Depression, that municipal-driven character changed, probably forever. To be sure, municipal-level policy actors will continue to play a leading role in American economic policy through the Transition Era (1961). That will be very evident after Chapter 11. It will not be until the 1960’s, the Great Society that the federal (and state) governments will put municipalities “in their place” as “creatures” of higher-level governments.
The Depression is when this radical change begins in earnest. During the Twenties, the federal government had become marginally more involved in state/sub-state ED-related matters such as western infrastructure, highways, and harbors. Republican Presidents, especially Hoover, took the lead encouraging cities to adopt planning ordinances—and was simpatico with city efficient movement. The Depression hit during Hoover’s first year in office, crushing local governments—creating massive service demands, lowering tax revenues, and destroying the fiscal capacity of state/sub-state governments. The federal government seemed the only government able to respond. There was, however, little in the history of American government, prevailing economic theory, or the tenets of 1920’s business conservatism/dual federalism that offered any roadmap for the Feds. Stories of Hoover’s well-meaning, but hopelessly inadequate reactions are well known. As time went on, conditions worsened and, as the 1932 election drew nearer, the Republican Congress and President tried harder to address the pain.
The result was a surprising set of ED-related initiatives. One initiative is a total shock: the Davis-Bacon Act of 1931. Davis-Bacon required “prevailing wages” on federally financed projects. Crafted by New York Republican Congressman Robert Bacon in 1927 (reacting to a VA project that hired low-wage Alabaman Afro-Americans) the legislation had failed thirteen times by 1931. Hoover, under pressure from unions and the Republican Congress embraced the legislation. The Secretary of Labor set prevailing wage rates/fringe benefits. The legislation’s scope, expanded over the following decades, increasingly overlapping with union-based prevailing wages.
Another initiative, the 1930 President’s Research Committee on Social Trends, called attention to “the sprawl of great cities”, resulting in the formation of another special committee to investigate the “metropolitan community” (Gelfand, 1975, p. 80). That committee hired University of Michigan sociologist Roderick McKenzie, a former student of Robert Park, to prepare a report. McKenzie produced “The Metropolitan Community”:
… the disturbing’ introduction of the automobile that had exerted the ‘most potent force’ since 1900 in causing the redistribution of America’s population and the social disorganization of America’s cities. The centrifugal drift of people away from the central city areas … had given rise to a whole host of problems: blight, overloaded public facilities. Insufficient tax resources, haphazard suburban building, to name but a few. (Gelfand, 1975, p. 81)
Hoover’s Presidential commission asserted decentralization was the nation’s chief urban problem, and enumerated its many causes and consequences.
The New Deal Ain’t What You Think It Was
Big Cities found dealing with FDR in his first term a bit of a slog. FDR faced intense opposition from southern Democrats as well as from Republicans (Katznelson, 2014). FDR himself was a mixed bag of Progressive and Privatist tendencies, surprisingly sensitive to the South and West, but not Big City governments, business or chambers. FDR’s first term New Deal was not an urban, nor a Big City enterprise—Roosevelt himself was ambivalent to Big Cities and not especially supportive of Big City economic development. His home and second White House was not located in New York City, but rural Dutchess County; his second home was Warm Springs Georgia. He was more the Dutch patroon, rooted in an agricultural heritage living in an America which only recently had become majority urban. These internal contradictions and the oftentimes-quarrelsome politics of the Democratic Party limited the New Deal’s impact on Big City ED. FDR’s first term New Deal initiatives disproportionately addressed the Depression’s damage to people, the poor, aged and unemployed, agriculture and rural America—not manufacturing and not to not cities (Gelfand, 1975).
Rather Roosevelt was an old-style, 1920ish Progressive, a believer in home rule and in a federalism where the state, not municipal governments, was the logical partner to federal programs. He wanted as little as possible to do with big city politics and municipal affairs such as budgets and finances. If anyone was to attempt that fool’s errand of bailing out cities, it should be the states. His was a “marble cake” federalism in which each level of government was fiscally responsible for its delegated powers/policy areas. FDR’s marble cake federalism sent federal dollars to states who then distributed monies to cities and towns through formulas. Moreover, most New Deal initiatives went to individuals in need, not governments). Accordingly, FDR’s New Deal Programs were …
urban only in the sense [they]) assisted people who lived in cities; guarantees of collective bargaining for the organized; work relief for the jobless; public housing for the slum resident; judgeships for the immigrant blocs. None of these programs represented a deliberate attempt to remake the cities as the Rural Electrification Administration, the Resettlement Administration, and the Tennessee Valley Authority changed the face of the countryside…. Roosevelt … was interested in the city dweller, not the city. (Gelfand, 1975, p. 68)
Roosevelt believed cities, teetering on the edge of bankruptcy, unable to assist the desperate and volatile unemployed constituted the greatest threat to the Republic. Accordingly, FDR’s first administration emphasized emergency measures designed to help individuals deal with the collapse of the private economy. Wagner-Peyser, an economic development initiative to be sure, was to him an emergency measure meant to get people back to work—fast. While believing the “Big Cities” represented “progress”, he also advocated a rural-industrial strategy that promised to exchange “speculative living in the city for one of stabilized living in a real home in the country”. Roosevelt’s first “urban” New Deal initiative was the Resettlement Program.
[Since] technological advances now made it possible to enjoy all the attractions of urban life in a bucolic setting, Roosevelt suggested that the government foster the development of rural-industrial communities, uniting subsistence farming with part-time factory employment. He was advocating nothing less than an officially sponsored exodus from the cities…. Convinced that the ‘pendulum has swung too far in the direction of the cities and that a readjustment must take place to restore the economic and sociological balance’ he urged a national program of population redistribution to relieve ‘the overbalance of population in our industrial centers’’. (Gelfand, 1975, p. 25)
To this end, Roosevelt inserted $25 million subsistence homesteads program in his 1933 $3.3 billion public works bill. That bill, the National Industrial Recovery Act, was the major exception to in Roosevelt’s first-term preference for agriculture and rural areas. NIRA is FDR’s first initiative that commenced the slum clearance, public housing and eventually urban renewal (Lowe, 1967, pp. 22-4). That story discussed in Chapter 11.
In another example, municipalities needed an off-budget fiscal mechanism, such as municipal (revenue) bonds to finance an augmented public works program. With federal support for municipal revenue bonds, FDR could have forged a direct federal-local relationship to combat the Depression. Harry Hopkins uncovered research by University of Chicago finance professor, Simeon Leland that demonstrated local budget austerity inherent in state constitutional balanced budget requirements operated at counter purposes with federal-level Keynesian deficit spending. Accordingly in 1934 he developed a legislative proposal calling for a “National Municipal Bank” (reminiscent of an Infrastructure Bank), capable of loans to municipalities for public/private civic improvement projects.
The Conference of Mayors lobbied aggressively for the Bank, but pushback from Secretary of Treasury Morgenthau and Congress was intense. FDR abandoned the issue. In its place, FDR amazingly sent to Congress a Hoover-style classic liberal, anti-Keynesian proposal to end tax-exempt status of state and municipal bonding. This, of course, would have sounded the death knell for state and local counter-cyclical infrastructure investment through IRB’s[vi]. The measure mercifully failed. In the end, nothing came of the National Municipal Bank and the tax-exempt status of state and local bonds was preserved.
By 1936, however, a beleaguered Roosevelt, believing he needed votes of big city residents to win a second term, changed his tune toward urban legislation. “Only deeds…would permit the gentleman farmer from Dutchess County to maintain his urban following…. (R) elief monies poured into the cities, accompanied by important patronage posts. (Gelfand, 1975, p. 67) Big Cities first aligned with the Presidential wing of the Democratic Party during the 1936 election. Federal funds that followed in subsequent FDR administrations were motivated more by elections than a Progressive spirit.
FDR’s New Deal was motivated less from a Progressive community development perspective then an ad hoc mixture of desperation, and experimentation, and later a politically expedient alliance with urban residents for votes. As far as the cities went, the New Deal resisted using federal powers and resources at the city level, opposed direct federal-municipal relationships, and did not see the federal government as a Progressive instrument for municipal-level change.
“Our Cities”
Roosevelt, a long-standing advocate for planning, created (July1933) the National Resources Planning Board (NRB) with his uncle, a lifelong leader in the planning movement (Frederic Delano), as its chair. Before it fell off the national stage in 1943 (enjoying three name changes during the decade), NRB became the “bully pulpit” for urban and planning advocates, and the personal platform for political scientist Charles E. Merriam[vii]. Merriam was quite the dynamo. He advocated abolition of states, making cities co-sovereign with the federal government and a force in the Conference of Mayors and American Municipal Association. By late 1934, Merriam had convinced NRB to establish a special committee on urbanism. The committee would (1) inventory urban physical, social and economic conditions; (2) discover emerging trends in urbanization; (3) outline the urban future; (4) develop proposals for remedying deficiencies; and (5) formulate a national urban policy (Gelfand, 1975, pp. 86-7). On the seventh day, it would rest!
Merriam appointed Louis Brownlow (of Brownlow Commission fame), the President of the American Municipal League, a couple of city planners from Harvard (Charles Eliot and Arthur Comey), and University of Chicago urbanist Louis Wirth (whose committee research was summarized in “Urbanism as a Way of Life”). The impossible job description took two years to complete; on September 20, 1937 the final report, Our Cities: Their Role in the National Economy” was released.
Our Cities outlined how the United States had turned the page from a rural agricultural nation—to a “nation of cities”. “As long as the United States was principally a rural and agricultural country… it was to be expected that our outlook and policies should have been largely rural. But since the city has come to play such a predominant role in the national existence, it becomes imperative that it acquire a central position in the formulation of national policy” (Gelfand, 1975, pp. 91-2). In essence, it concluded the nation’s agenda was now an urban one. Roosevelt’s ambivalence, if not pushback, to this report suggested, however, in his Preface to Our Cities:
For the first time in our history, the attention of the United States Government has been officially directed to the role of the city in our national economy…. It may be questioned whether the National Government has given the same careful attention to some of the specific and common problems of urban dwellers, as it has to the problems of farmers ….and it is the purpose of this report to indicate some of the emerging city problems in which … the National Government may be helpful… [However] it is not the business of the United States Government to assume responsibility for the solution of purely local problems. Nevertheless, [the Federal Government] cannot remain indifferent to the common life of American citizens simply because they happen to be found in what we call ‘cities’. (Gelfand, 1975, pp. 90-1)
A week after Our Cities publication, Roosevelt in his speech dedicating the Bonneville Dam, asserted “Today many people are beginning to realize that there is inherent weakness in cities which become too large for their times and inherent strength in a wider geographical distribution of population”. The statement, it would seem, is a stunning endorsement of suburban decentralization and a hint that city pathologies are a major reason for population dispersal from cities (Gelfand, 1975, p. 96). If correct, from day one, Roosevelt was not on board with Our Cities. No specific federal initiatives followed from the report.
Our Cities was not on the New York Times bestseller list. The report received lukewarm support from urban-related national associations, scarcely noticed by mayors and business elites, ignored in the practitioner world, and never mentioned in the Congressional Record. Our Cities, however, deeply influenced urban-minded academia. According to Gelfand, Our Cities was “directly responsible for the establishment of a Bureau of Urban Research at Princeton University in the summer of 1941” and “the Princeton unit would serve as a model for later urban study centers” (Gelfand, 1975, p. 93).
Federal Government Assumes Workforce ED Leadership
It is a good bet most contemporary economic developers do not think of the U.S. DOL employment services and unemployment relief program as “economic development”. When most, I suspect, think of workforce, they instinctively think of CETA, JTPA, WIA, and vocational and community college programs. The federal programs that are the focus of this section’s focus have been in place so long, they are not often included in state/sub-state ED. One of the lessons that emerges from this history, however, is the federal government has a demonstrated long-standing involvement in certain aspects of our state/sub-state workforce strategies. Their involvement obscured a bit because these programs typically run through state bureaucracies. They are people-focused—not place-based (reflecting as they should a national perspective). Nevertheless, they can be found in most every jurisdiction and are the primary resource for unemployed job seekers throughout the nation. Starting around World War I, but most obviously during the New Deal Depression years, the feds displaced state and municipal public
Employment exchanges, and carved out a major role in public retraining programs for disabled and unemployed. As one of the very first New Deal Acts, the 1933 Wagner-Peyser Act carved out public employment exchanges as the preserve of the federal government. These programs are the first of a core of federal programs that through their distinctive intergovernmental nexus provided semi-direct federally funded services to a jurisdiction’s unemployed, and those seeking employment.
Ohio, the first public employment exchange, started in 1890; Seattle in 1894 set up the first known municipal level public employment exchange, followed by New York State in 1897 and Illinois in 1899. By 1900 there were 15 public employment offices (all levels)–by 1912, 64. After the 1913-14 “depression, 109 offices existed, 79 managed by states and 30 by municipalities (1915). During World War I, an Employment Service Department was set up within the federal DOL—at the peak of its war-time operations 850 offices were set up—but at war’s end it shut down (Douglas & Director, 1934, pp. 317-42). To the surprise of us all, then, public employment exchanges were a little noticed state/ municipal ED initiative that testifies to the early importance of state/sub-state governments in workforce programs, and the clear and consistent need by government to offer employment assistance to its residents. During the Roaring Twenties, however, the U.S. Employment Service and state employment exchanges were mostly dormant (Becker, 1965, p. 15). That changed, of course, by 1933 when 13 million were unemployed.
The 1933 New Deal Wagner-Peyser Act did not set up a federally operated public exchange system, choosing instead to provide grants to States to set up and operate, congruent with federal requirements, their state-system of exchanges. The predominant federal requirement was the states must make the service available to all workers, and assist all companies in their efforts to find employees. As such, the U.S. Employment Service could piggyback on those States operating a public employment exchange (in 1933 twenty-three states, 120 offices (Adams, 1965, p. 194)), as well as encourage the other States to establish their own. A national public employment system would result. The intention was to leave as much autonomy as feasible to States so to meet local needs. By 1935, thirty-four states had set up a public employment exchange. The 1935 Social Security Act included an unemployment insurance program that operated from the State employment exchanges. In 1939, the U.S. State Employment Service transferred from DOL to Social Security. In 1944, the Serviceman’s Readjustment Act expanded services to veterans, established a veteran’s preference in referrals, and set up a Veterans division within the now-named Bureau of Employment Security.
Public training programs have a longer, albeit sporadic history. Trade education began in Boston’s schools after 1820. The 1917 Smith-Hughes Act established a federal role in vocational training for agriculture, industry and home economics. The U.S. Office for Vocation Rehabilitation started retraining disabled for employment in the 1920’s. The New Deal 1937 Fitzgerald Act set up the federal Bureau of Apprenticeship and Training and during the War a “Training-Within-Industry section was set up in the (War) office of Production Management (Somers, 1965, pp. 228-30). Retraining was not the hot button then it is today, but the federal government early on displayed an interest and carved out a niche.
States were less active. Wisconsin started an apprentice program in 1915 operated by its State Industrial Commission. The Industrial Commission “movement”, was a Progressive era worker health and safety reform. Alice Hamilton[viii], a doctor volunteering in Jane Adams’ Hull House, was a primary advocate and employee for the first such Commission in Illinois[ix]. The Depression prompted a number of State/local retraining initiatives, involving relief recipients, which were temporary, small and poorly funded. (The first known State unemployment-retraining program established by Pennsylvania only in 1957).
Roosevelt’s Rural Western Revolution
New Deal programs poured a great deal of money into western states. Between 1933 and 1939 an estimated $7.6 billion (1940 dollars) of federal non-military funds were invested/transferred to the West (Nash, 1985, p. 5). The New Deal continued previous Republican infrastructure projects, extending dam-building initiatives to the Columbia and Missouri Rivers (1944/Pick-Sloan Plan). Benefits included hydroelectric service, new recreation areas (tourism), and irrigation. There was also loss of Indian villages and other archeological sites. Roosevelt and Ickes (Dept. of Interior, Public Works Program) take exclusive credit for the Columbia River system infrastructure, the Bonneville Dam (Washington), Grand Coulee dam on the Colorado, and the multi-state Missouri River basin development. The New Deal literally “poured” the foundation for future trans-Mississippi urbanization, thru irrigation, energy production, and water access that permitted increased population and industry. The expertise garnered in dam, highway and bridge construction by western construction firms would later serve America (and the West) well; these firms would construct the shipyards, factories, housing projects, and new logistical system that propelled the “arsenal of democracy (Bechtel-McCone, Bendix, Kaiser, MacDonald and Kahn, Knudsen (Herman, 2012, pp. 50-7)
An example of the link between this infrastructure and municipal economic development programs is found in Phoenix. With completion of the Roosevelt dam in 1911 its population grow (tripled) to 29,000 over the following decade. Arizona statehood with Phoenix as its state capital (1912) didn’t hurt its growth either. The lure of further growth captured Phoenix’s economic development business and policy leaders’ attention and during the twenties, the City and Chamber conducted extensive promotion campaigns to recruit residents into their new-found “Valley of the Sun”. Phoenix was the place “where winter never comes”. Phoenix grew during the Depression, attracting a 1940 population of over 65,000.
The Rural Electrification Act (1935) established cooperative electric power companies in rural areas across the nation; literally teams of electricians went from house to house in targeted areas and installed a 60 amp circuit, a 20 amp kitchen circuit, and a ceiling light fixture and switch in each room of the house (and barn). Transmission and distribution lines crisscrossed what were previously thought of as remote areas. Much time has passed, but the reader of today should appreciate the almost revolutionary change these simple measures had for much of our geography and many of our people. This is basic infrastructure of the modern age and the New Deal federal government brought it to where the private markets could not serve.
The Civilian Conservation Corp and the Work Progress Administration (WPA, 1935) were the New Deal workforce/unemployment programs. Harry Hopkins and the WPA employed the unemployed (men) to carry out public works projects (roads, parks, bridges and public facilities-city/county halls, sewer systems, hospitals, and libraries). Much of the National Park system (central to western tourism) benefited from the CCC. Between 1933 and 1943 the CCC built cabins and bathhouses in fourteen parks, installed 1850 miles of telephone wires, and carved out 5700 acres of campgrounds and picnic areas (Pitcaithley, 2001, p. 306). New Dealers initiated a serious reform of American Indian Reservation system.
Roosevelt’s first New Deal launched an American agricultural revolution—a twentieth century American version of the eighteen century English enclosure movement. New Deal federal land management (Taylor Land Grazing Act) and federal farm programs (AAA) fostered increased concentration in both farming and livestock-raising sectors. Passed in 1934 The Taylor Act effectively ended the long-standing open, loosely monitored, private grazing of cattle and sheep (and water rights) on federally-owned land and inaugurated a new, aggressive regulation of private use of federal lands. The net effect, aside from benefiting larger commercial entities better able to secure limited federal usage permits, was to move smaller and marginal homesteaders and ranchers from rural areas to regional urban centers during the late thirties and the war years. Des Moines grew nearly 13% from 1930 to 1940, Denver 12%, Bismarck North Dakota 40%, Fargo 14%, and Pierre South Dakota 18%.These farm refugees eventually found employment as war production workers.
The Truman-Eisenhower Years
Truman Years
Truman inherited a presidency in the War’s final days. Without an instruction manual and governing with a hostile Congress, Truman reconstructed international political and financial systems, helped rebuild Europe, and defended South Korea in an Asian land war. Amazingly, Truman found time for domestic policy. In 1946 Republicans won majorities in both houses of Congress (the first time since 1928); they won a majority of governorships as well. Republicans were determined to roll back the more controversial New Deal programs.
Truman pressed hard for the Employment Act of 1946. As originally submitted to Congress, the Act would have set up a workable “Keynesian” economic system. A strong federal role in the business cycle would have far-reaching implications for sub-state economic developers. Full employment and fiscal tools such as tax cuts and deficit spending, implied conscious federal involvement in local economies. These grandiose hopes, however, did not materialize.
The 1946 Employment Act triggered a die-hard fear against national planning. The legislation, while approved, was gutted, merely establishing a Council of Economic Advisors who produced a State of the Economy Report and little else. No commitment to full employment was made and no stimulative deficit spending approved. The Employment Act, the highlight of Truman’s first years in office, demonstrated the critical role the 1946 Congressional elections played in a New Deal Thermidor. Republicans wanted to break the power of unions on federal legislation, and, this must come as a surprise, Republicans voted several rounds of tax cuts and passed meaningful budget cuts–which Truman vetoed. The most critical ED-relevant legislation approved in the 1946 Congress, still around today, was the Taft-Hartley Act.
Taft-Hartley had lasting effects on state/sub-state economic development. The Act overturned the 1935 Wagner Act, permitting states to restrict a “closed shop” requiring compulsory union membership as a condition for a job. Truman vetoed Taft-Hartley; the veto was overturned. Taft-Hartley prompted a burst of state “right to work” laws, setting in motion a regional business climate competition. Other bills modified FDR’s southern economic development strategy. The Hays-Bailey bill (1945) proposed by southern legislators, committed the federal government to an area-wide jobs to people or place-based approach. That legislation foreshadowed Kennedy’s ARC, and Johnson’s creation of the Economic Development Administration (EDA). The bill was not approved, however. Truman, however, created the Bureau of Employment Security and the Area Development Division, expanding the Federal Employment Act[x].
Truman unexpectedly won the 1948 election. His 1949 “Fair Deal” increased minimum wage and social security benefits, but he was unable to increase aid to farmers, pass civil rights legislation, provide aid to education, or a create national health program. An important Truman victory, heavily compromised, was the 1949 Housing Act discussed earlier. Approved in 1948, Puerto Rico’s “Operation Bootstrap” resulted in Puerto Rico’s first Industrial Tax Exemption Act—a program similar in its core concept to, believe it or not, BAWI. The Act, designed to attract industrial firms to Puerto Rico, was the first in a string of programs that continues to the present time (Benjamin, 1980, p. 678ff).
The Korean War commenced in June 1950, and industrial decentralization moved to the front-burner.
Eisenhower Years
Eisenhower’s moderate Republicanism consolidated the New Deal. Mixing budget cuts, tax reductions and a Privatist rationale into Eisenhower-era programs gravitated toward traditional chamber-style ED: infrastructure and assistance to firms. It was, after all, a time characterized by Charles Wilson’s (General Motors’ President/Secretary of Defense) quote “What was good for our country was good for General Motors, and vice versa“. Eisenhower’s federalism worked through states where possible, following four major principles: federal assistance should (1) help communities help themselves; (2) create permanent jobs [not temporary work programs]; (3) be implemented by governments close to the troubled community; and (4) not be extended “if the proposed project create[s] unemployment in some other area”[xi].
Congress was also active in sub-state economic development. It conducted hearings and commissions on the IDB, military industrial decentralization and purchasing polices, as well as discussion on how to deal with chronically depressed areas or troubled sectors such as textiles and coal. Eisenhower years were punctuated by three recessions, and despite budget cuts, federal deficits increased. Democrats regained control of Congress in 1954, but the federal government could no longer be described as activist. Still they were years of considerable change and flux. The Civil Rights Movement began and Brown vs. the Topeka Board of Education was issued. The South reacted to both, and Eisenhower cautiously applied the law, essentially on an event by event basis–without trying to polarize the South.
Agriculture and Rural Economic Development
After years of studies and bureaucratic resistance (principally from Agriculture Extension Agents), the DOA submitted rural economic development legislation to Congress in 1955—which were approved. Inspired, prodded would be a better word, by Deputy Undersecretary of Agriculture True D. Morse the federal government had entered into ED for deeply challenged heartland rural communities/counties. In many rural communities, farmers were no longer able to supplement income by working temporarily in mining and lumber; decline of these industries had reduced farm incomes. Prompted by the “Department of Agriculture’s Human Resources: A Report on Problems of Low Income Farmers” DOA urged federal programs to foster non-farm employment opportunities in targeted rural areas (over 1,000 counties). The Report outlined fourteen initiatives including: lending programs to start farms, encourage defense industries to develop employment opportunities in rural areas, educational and vocational training, and stressed need for greater federal involvement in rural loan and technical assistance.
Morse had seized upon the DOA Report, appeared before House Agricultural committees, and in 1955 secured approval of a program (an amendment to the Smith-Lever Act) authorizing the Extension Service to “give assistance and counseling to local groups in appraising resources for … improvements in agriculture or introduction of industry designed to supplement farm income … and furnishing all possible information as to existing employment opportunities” (Rasmussen, 1989, p. 193). One hundred and twenty new extension agents were hired to implement the program. To minimize Congressional opposition to federal involvement in non-agricultural economic development (Chair Jaime Whitten was at best a mild supporter), Morse’s Rural Development Program was treated as a “pilot” program, initially available to fifty-seven counties and expanded gradually to two hundred counties by 1960 (Roth et al, 2002).
Further research, press and media commentaries followed. In 1958 a conference in Memphis evaluated Morse’s program, considered the impact of tourism in rural areas likely to be opened up by the 1956 Highway Act, and assessed ways to make rural areas more attractive to industries seeking to relocate. Eisenhower himself followed up by establishing a Committee for Rural Development Programs (1959). The National Planning Association issued a report in support, praising Morse and his tireless efforts. In October 1960 at a University of Nebraska conference on Regional Rural Development, Morse’s Rural Development Program was again reviewed. The report that followed indicated the seriousness of the rural crisis and the need for further federal involvement. Surprisingly, in 1961, the new Kennedy administration picked up the Report (having read “The Other America” by Harrington) and the Rural Development Program was retained and expanded—supplemented by a new federal approach to area-wide rural development.
True D Morse had pioneered federal rural initiatives that would endure. Now entitled Rural Intermediary Relending Program, they still function today. The program capitalizes revolving loan programs operated by intermediate lending entities. RLFs eligible purposes include: development of business facilities, starting new business, expanding existing business, developing new employment, rural job retention, and CD projects in communities of 25,000 or less.
Besides Morse and rural ED, the Eisenhower administration, pulling back from FDR’s more aggressive federal-led marble cake federalism, made several decisions that impacted state and sub-state ED. The Park’s Service Mission 66 initiative built necessary infrastructure for significant increase in Park tourism after 1966. The Submerged Lands Act of 1953, legislation that stirs the hearts of Americans today, granted states full rights over coastal submerged lands up to the three-mile US limit. The most obvious effect was oil-drilling responsibilities and proceeds accrued to the states—greatly affecting both California and Alaska in particular. Eisenhower was also more inclined to acknowledge and incorporate local pressures in power development, mineral and logging, and energy uses of federal-owned land. National Park expansion in late 1940’s and 50’s (Jackson Hole and Grand Teton) was tempered by compromise with state and local officials who wanted to more opportunities for economic development—opposing the Park Service that was more inclined to seal off areas to preserve and protect natural beauty and the wilderness environment. Power development on the Snake River was left to the state utilities rather than federal government. One of the more complex decisions (regarding dam construction) on federal land ownership, the Dinosaur National Monument initiative, pitted the Bureau of Reclamation against the Park Service, several states, environmentalists, preservationists and local cattle growers and industry sectors (Nash, 1999, pp. 66-72). The compromise was controversial and later related decision (Glen Canyon) was even more controversial served as a warning that in future years federal land, western state’s rights, and appropriate usage of federal lands by locals and industry would be escalated into its own political/economic development movement.
Small Business Administration
In 1953 a new federal independent agency entered into the lexicon of sub-state economic development: the Small Business Administration (SBA). SBA, while new, did not appear deus-ex-machina; its origins lay within Hoover’s Depression-era Reconstruction Finance Corporation, his “bank” for corporations of all sizes during his last year in office. FDR retained the RFC, making it an important instrument of his New Deal-Depression business support system. WWII war production was mostly a big-business affair and that raised concerns small business would be unable to compete with industry behemoths. So, in 1942, Congress created the Smaller War Plants Corporation (SWPC) to make loans to smaller manufacturers, and encourage banks to extend financing to such firms. SWPC advocated for small business in defense contracts as well. Terminated at war’s end, a successor agency, the Small Defense Plants Administration was re-created upon entry into the Korean War. When finally terminated, SWPC’s functions (limited management counseling and education) were transferred to the Department of Commerce’s Office of Small Business.
The newly-elected Eisenhower and Republican Congress wanted to close the RFC, believing it unnecessary government interference in business-economy (RFC had been implicated in influence peddling during the Truman administration). Also, the 1949 Hoover Commission on government reorganization urged an end to federal government direct lending because it “invites political and private pressure or even corruption” (Bean, 2001, p. 8). Congressional politics and wide spread popular support for small business, however, led to Eisenhower to substitute a new small-business version of the RFC for the old and discredited one. So in 1953 Congress ended the RFC, but created SBA. SBA was given a mere four year authorization. Neither Eisenhower nor Congress envisioned a long-term federal small business financing commitment.
At inception, SBA was authorized to “aid, counsel, assist and protect … the interests of small business concerns” and specifically tasked with including small business in government contracts. By 1954, SBA was already making direct loans and guaranteeing loans to small business. SBA further expanded to loans for natural disasters and picked up counseling and education functions formerly entrusted to the Department of Commerce. “Between 1954 and 1960, SBA financial assistance quadrupled, and agency personnel expanded from 550 employees to 2200 employees” (Bean, 2001, p. 19). SBA’s services are sometimes referred to as the “three C’s: capital, contracting and counseling”. In 1957 SBA was reapproved as a permanent independent agency. By 1999 the SBA had issued nearly $14 billion from its direct lending program. In 2010, SBA was granted Cabinet status by President Obama.
Despite its programmatic success, SBA has always been controversial: (1) should the federal government be a direct lender to business at all; (2) if yes, should it favor a subset of firms–small business over medium and large firms; and (3) its vulnerability to political favoritism and outright corruption. Reflecting these concerns, Main Street business interest groups have not consistently supported SBA over its sixty plus year history. The U.S. Chamber of Commerce did not support SBA’s creation and periodically has advocated its termination. The National Federation of Independent Business (NIFB), while supportive of SBA’s creation, has not been a consistent ally either, and usually is reserved to SBA’s programs. The SBA enjoys fragile support from the small business community where one still encounters hesitancy to use SBA programs.
The Republican Party has sometimes called for SBA’s elimination. Eisenhower cut SBA’s funding, and the Reagan Administration, the 1996 Contract for America, and George W Bush administration advocated SBA termination. Democrats on the other hand have mostly supported and used the SBA when in office. Yet, SBA survives and prospers-even when Republicans are in charge; banks have increasingly turned to the SBA for financing. This ambivalence suggest something deeper is “going on” than partisanship and business conservative ideology. I suggest small business and SBA straddles the two cultural streams, and has been a perennial “fault line” between Privatism and Progressivism.
Small business taps into the mindset and ideological fabric of many Americans. Concern for the underdog and the average Joe’s seemingly endless desire to escape meddling bosses by becoming one’s own boss is enduring. The small farmer and now businessman remains the yeoman of American politics. The franchise McDonald’s owner may have substituted for the yeoman farmer, but that also seems to fall into the “fault line”. Still many believe starting a small business is the best way to achieve upward personal, economic and social mobility and a persistent fear of big business and concentration of industry have from time to time united business Privatists-Progressives. This ad hoc mixture of political cultures and intermittent political and economic congruence has arguably created a residue of support, and, at times, patience, for small business upon which the SBA has tapped.
Expansion of SBA functions/programs was not long in coming. In 1958, legislation introduced by Wright Patman (Texas, Chair of Housing Banking and Commerce) and Lyndon Johnson (Texas, Senate Majority Leader and Presidential candidate) created a new program, extending the its financing scope rather dramatically. Under provisions of the 1958 Small Business Investment Act, SBA could license a new type of lending corporation, the Small Business Investment Corporation (SBIC), which then could finance startup firms through long-term loans or purchase of their convertible debt, which was used as a match for private investment in the SBIC. SBIC, ultimately using SBA dollars, could then make “loans” to small firms–a “loan” very close in function and subordination to equity or venture capital. The 1958 legislation was controversial; business interest groups opposed SBIC as “direct equity ownership of business by government”.
The need for this “near equity” financing arose because of the inherent structure of small business itself. Small business is composed of (1) firms which through scale, maturity and size generated sufficient sales and cash flow to reasonably be expected to pay down a loan, and (2) other firms young, very small and startup with few sales that could not satisfy conventional bank due diligence. Until 1958, SBA could lend only to the first, “bankable” small business. SBIC was designed to fill that gap. As such SBICs constitute a major innovation in public financing of new, young startup firms. In 2013 more than 300 SBICs were in operation, guarantying nearly $18 billion in obligations. So extensive is the SBIC network that it has been referred to as the “fourth banking system” after commercial, investment and mortgage banking. If so, it is a little noticed element of “shadow banking”. SBIC may be the first meaningful entry by economic developers into startup venture capital financing.
SBIC would be used by states as their model for state-entry into small business/startup financing. Since the early sixties, there has been a small explosion in SBIC-structured EDOs (not all SBIC-licensed) at state and regional levels. These agencies are prime candidates for “siloization” in that they are based on specialized expertise, possess a unique funding stream, and service a limited clientele.
Interstate Highway Act
The 1956 Intestate Highway Act authorized $25 billion to construct 41,000 miles of interstate (and intra-city) highways and established the Highway Trust Fund to operate/finance the system. The legacy left by highway construction, however, may have been as important to economic development as the change caused by construction itself. The 1956 Interstate Highway Act has profoundly affected the history of our profession in that it has been incorporated into our continuing urban renewal saga. Interstate highway construction overlapped with Big City urban renewal to such an extent that the two became almost inseparable in our memory. This overlap requires the Act to be placed within the context of the larger urban renewal discussion. In the next chapter which describes urban renewal at the city-level, the interstate highway act is considered an “epoch”, one of six, that constitutes our Age of Urban Renewal. This chapter, however, concentrates on the Act and its impact on sub-state ED.
Postwar Big Cities and Highways
Since the 1920’s suburban decentralization had acquired increased prominence in Big City economic development strategy. Burnham’s 1909 Chicago Plan envisioned an extensive highway network from the CBD to the furthest periphery as the best strategy to maintain CBD dominance. Highways figured prominently in facilitating decentralization and as solution to congestion, traffic, and insufficient parking that allegedly drove residents to the suburbs. States were primary policy actor regarding non-Big city highways. Cities, of course, were primary in regards to streets and intra-city expressways/freeways.
The nation’s first limited access highway (grade separation, ramps, no curb cuts) was New York City’s Bronx River Parkway (1923). It spawned parkways and a suburban boom in highway construction. By the end of the 1920’s, Big Cities across the nation were developing freeway/limited access systems. New York remained the pacesetter with the Henry Hudson Parkway and the West Side Highway (1931), followed by Chicago’s Lake Shore Drive (1933). The New Deal used highway construction as a job stimulus, increasing funding from $216 million in 1932 to over $800 million by 1936. New York City, for example, used federal aid for bridge and tunnel construction, and, Los Angeles began planning for a regional freeway and bypass system starting in 1937 with the Arroyo Seco Freeway. In 1937, FDR asked the federal Bureau of Public Roads to design a national system of toll roads. War shifted priorities, but in 1944 Congress authorized construction of a 40,000 mile toll-free national highway (including 4,000 miles of Big City highways), but “forgot” to include money to start construction (Altshuler & Luberoff, 2003, pp. 76-9). The Bureau of Public Roads, working with states (not cities) had by 1954 prepared maps indicating where the interstate would go.
After the war Big Cities developed plans and engineering to build city highways, and by 1956 there were 480 miles (completed or under construction) in the twenty-five largest cities—more than half in NYC, Chicago and Los Angeles (Altshuler & Luberoff, 2003, p. 79). Virtually no federal funds were involved, and all required eminent domain and removal of existing uses along the route. Cities were already building freeways on their own dime and initiative, bushwhacking paths through neighborhoods long before interstate highways. In 1955, the American Municipal Association, representing America’s big city mayors wholeheartedly endorsed an Eisenhower-Clay Commission Report estimate that 15% of the interstate highway system went through Big Cities and would carry half the total traffic—and account for more than half ($27 billion) of total construction costs (Altshuler & Luberoff, 2003, pp. 79-81). Postwar car registration, truck logistics and horrendous traffic made highway construction, by all levels of government, a first order priority. In 1955 only 10% of highway spending was borne by the federal government—by 1961 that increased to 31% (Altshuler & Luberoff, 2003, pp. 82, Table 4-1).
Interstate Highway Approval
It is not our purpose to reconstruct either the politics behind passage or the history that lead to the Highway Act (Rose & Mohl, 1990) Routes and plans had been kicking around for a generation, and were updated by the 1954 Clay Commission. Legislation, however, was another matter; proponents could not agree for the better part of a decade what the bill should say, who should benefit, and who would pay. Road contractors sparred with truckers, state highway engineers fussed with private auto clubs and local public works departments and rural states had different ideas than urban states. A national advocacy group, Project Adequate Roads, assembled a coalition of road users, contractors, and engineers behind a planned, toll-free highway system—but once it moved into detail, the coalition members fragmented. House-Senate committees also failed to put it all together.
Final agreement was reached in 1956 when its chief Congressional proponents (Hale Boggs of Louisiana, George Fallon of Maryland, and Virginia Senator Byrd) gave something to everyone—no special tax on truckers, funds to farm areas, urban, and trunk roads that provided enough to each, and additional sums for the Big City systems (urban roads 90% federal reimbursement), and increased future year appropriations. At that point, New York Senator Wagner introduced legislation to compensate those relocated by construction; it was voted down. On June 25th, the Senate voted 89-1, the House (by voice vote) on the 26th and the President signed it on June 30, 1956.
A Shared Belief: Slums Must Be Removed
Rural and farm states viewed interstates through their own prism, pursuing different objectives than Big City states. The latter perceived highways as a strategy for CDB-focused anti-decentralization, a strategy that also included removal of blighted neighborhoods. Rural states saw the interstate as access to communities, regions and agricultural/mining logistics; engineers, who planned the routes and managed construction budgets, wanted a direct, cheap, easily constructed road that moved traffic fast, with minimum congestion, and got users where they wanted to go. In short, everybody fervently wanted to build a highway for their own reasons and terms—but beyond that “forget about it”.
Federal and State highway engineers and truckers, in particular, were totally unconcerned with the urban renewal/slum clearance /decentralization agenda that motivated urban policy actors and city planners. “The federal Bureau of Public Roads and the state highway departments believed that their business was to finance and build highways and that any social consequences of highway construction were the responsibility of other agencies” (Rose & Mohl, 1990, pp. 65, 96). They administered construction contracts to meet budget and time schedules, with minimum adornments (such as route changes to avoid controversy, go underground to preserve what was above, or install sound barriers) were not in their calculus. In a 1947 speech to a U.S. Chamber conference on Urban Problems, the federal director of the Bureau of Public Roads (Thomas A. MacDonald) “dismissed the inevitable housing destruction”, observing instead that ‘It is a happy circumstance that living conditions for the family can be re-established [through slum removal] and permit the social as well as economic decay at the heart of the cities to be converted to a public asset’” (Rose & Mohl, 1990, p. 99).
There was nothing in the federal legislation or in the funding distribution formulas that directed state highways to provide relocation assistance for displaced families, businesses, churches or schools. When state highway departments signed contracts with the firms to prepare sites and build the roads, such contracts lacked procedures or funds for relocation. If someone else didn’t do it, relocation assistance did not happen. ”Highway builders were clearly conscious of social consequences of Interstate route location. It was quite obvious that neighborhoods and communities would be destroyed and people uprooted, but this was thought to be an acceptable cost of creating new transportation routes and facilitating economic development” (Rose & Mohl, 1990, p. 97). After routes were approved local governments were left out of decision-making and construction. State highway departments managed the projects, received and disbursed funds, wrote contracts, and bid/managed contractors. The go-to place to resolve issues was the state legislature, which in many states Big City interests were not well-served. Intra-urban highway construction across Big City neighborhoods was a state affair, with municipal bureaucrats, politicians and residents on the outside looking in. This was state-directed highway construction—not locally-determined urban renewal.
While literally correct, however, that last sentence is complicated. While they may not have been able to meaningfully impact intra-urban highway construction, local officials did have a say in the routes—and they could have provided relocation assistance or developed alternative housing. Sometimes that happened; for the most part localities let state highway construction run through their city with minimal oversight. In a few instances, Boston being one, the Mayor took on the state and tried to protect his neighborhoods—unsuccessfully. A goodly number of horror stories included in today’s textbooks and urban renewal literature cite neighborhoods destroyed by New Deal and postwar Housing Act slum removal/public housing or federal/state interstate highway construction as examples. Why did city after city allow their neighborhoods to be torn up? They were trying to bet the suburbs at their own game and “tame the automobile”. For that we can thank Victor Gruen, the father of suburban malls.
Highways, Planning, Refunctioning the CBD: Victor Gruen and Jane Jacobs
Pound for pound, highways did the most damage to neighborhoods Low-income minority neighborhoods and residents were devastated; but highways cut through all kinds of neighborhoods—or followed along water providing a wonderful “wall” that precluded access/use of the waterfront. Nothing generated more intense vitriolic opposition than highway construction. Politicians “felt the Burn” and stopping highway construction became a Sixties pastime, a source for community organizing and a catalyst to form neighborhood CDOs. “Public officials in most of the older metropolises [BUT] “Short of wholesale demolition of the entire building stock and street system there was no way to make central city thoroughfares as suitable for automobile traffic as suburban highways” (Teaford, 1990, p. 165). The car, similar to the rifle, was the instrument by which individual preferences and decisions wreaked horrible consequences on the urban physical/social landscape. The car made suburbanization likely and possible and without some accommodation, the car was likely to destroy the CBD. Enter Victor Gruen.
An Austrian, a planner, and a confirmed socialist, known today as the “father of shopping malls“, Victor Gruen loved cities and downtowns. His problem was simple–he could not convince Big central Cities to embrace the car, the shopper, and, believe it or not, walking. If the central city could not adapt to the car it was doomed. That is what the suburbs did–they accommodated the car. More than anything Gruen wanted to rebuild the CBD to compete with the suburb’s access to the auto and walking. He tried to make the CBD the king of metropolitan retail/commercial.
A decade and a half off the boat, he designed an outdoor shopping center, “Northland”(1956)–outside of Detroit– around its hometown department store, Hudson. One hundred and sixty-three acres and ten thousand parking spaces, “Northland” was allegedly the nation’s first outdoor regional shopping mall. He quickly followed up with Southdale in Edina Minnesota, an unknown suburb of Minneapolis. Southdale revolutionized suburban shopping centers–spreading across the nation. Over the next two decades he designed over fifty malls himself. The sprawl of malls was not in Gruen’s plan–and he wasn’t happy or proud. In 1978, despairing of what malls had become, he claimed developers had “bastardized his ideas” and he refused “to pay alimony for those bastard developments” (Gladwell, 2004). The father of malls had disinherited his children. Ironically, Southdale is about fifteen minutes from the Mall of America (largest mall in the nation with over 500 stores and twelve thousand parking spaces).
Kennedy Years
When voters woke up on November 9th, 1960 Democrats had won control of the Presidency, Senate and House-a sort of hat trick for politics. Kennedy garnered 49.7% of the vote to Nixon’s 49.6%. However it went, the election passed the baton to the World War II “greatest” generation. The priorities and values that slipped into federal policy during JFK’s Administration built onto FDR’s New Deal a hard-fought Cold War prosperity and an American economy and society transitioning into unknown territory. JFK’s theme, “the New Frontier”, talked about space, science, geographic-focused poverty (West Virginia). He assembled a cabinet and network of advisors since described as the “best and the brightest”; it was an administration dominated by Ivy League academic experts. With glamour, grace, sophistication, and a young family; he presided over an administration portrayed as “Camelot”.
As a public policy issue, poverty ranked high by the early 1960’s. Oscar Lewis (Lewis, 1959), Five Families, and Michael Harrington’s, the Other America (Harrington, 1962) blazed new ground. Lewis’s Five Families described a “culture of poverty”, asserting the poor were not kept poor solely by institutions and discrimination, but by a culture that socialized members into a value system that led to “wrong” decisions. Socialization in a poor family carried within it the risk of being inculcated into a value system that perpetuated poverty. This poverty cycle had to be broken, the value system changed, if poverty was to be cured. Harrington picked up on Lewis; his book discovered an “invisible land of the poor” isolated in rural areas and in urban slums. Kennedy read Harrington’s book and appointed him to his Administration.
The poor are invisible … people who lack education and skill, who have bad health, poor housing, low levels of aspiration and high levels of mental distress… And if one problem is solved, and the others are left constant, there is little gain. [Needed to reverse poverty] was a broad program of] remedial action–a comprehensive assault on poverty. (Isserman, 2009)
Kennedy’s most significant economic development legislation (1961 Area Development, 1962 Manpower Development Acts) proved important ED innovations. Workforce had been a federally-led ED strategy, but Kennedy’s Manpower Development Act departed from former federal manpower/labor programs, shifting from concern with national defense and unemployment to structural poverty, job creation and economic revitalization in geographically depressed areas. Kennedy’s first major sub-state ED initiative was not manpower, however, but area-wide or regional economic development. Kennedy started down a path that shifted away from FDR’s TVA to federally-financed ED tools (revolving loans) infrastructure, public facilities, urban renewal, and, yes, manpower training.
1961 Area Development Act
The New Deal linked infrastructure and public works to job creation. War production federal assistance included attempts to include small business and counter “worker shortage and surplus” areas, but post-WWII industrial decentralization (industry relocation and preferred war contracts) presented new opportunities and problems for linking federal defense spending to jobs. The first conscious postwar example was the Defense Manpower Policy Number Four (DMP No 4). DMP No 4’s intent was to “channel all government spending into the areas hardest hit by economic troubles” (Lotchin, 1993, p. 58). DMP No. 4, unexpectedly, got sandbagged by auto and textile industry unemployment and Secretary of Defense Charles Wilson’s channeled DMP No. 4 to Detroit, Massachusetts and Connecticut (the latter two alone received five and one and a half times respectively more defense contracts than the five southern states charged with piracy (Lotchin, 1993, pp. 60-1)). Accordingly, DMP No. 4 got caught up in the, earlier described politics of industrial decentralization.
After 1956 (Miernyk, 1965, pp. 165-72), concern for distressed geographies with high levels of unemployment shifted to the Senate Committee on Labor and Public Welfare. Led by Illinois Senator Paul Douglas, hearings/Joint Report on low income families revealed ow income, depressed regions were scattered throughout the nation. This triggered five bills calling for an independent “Depressed Areas Administration” (a cheerful, charming name). The bills empowered feds to make loans to business expanding or relocating to “labor surplus areas”. Also included were funds for individual retraining (vocational schools). Senate/House support was hard to come by, however. Douglas dogged the issue, submitting bills each year through 1961.
Kennedy was deeply affected by West Virginia’s pervasive rural poverty. Having committed to depressed areas revitalization, Kennedy embraced Douglas’s Senate bill. –leading to passage of the 1961 Area Redevelopment Act (ARA). ARA broke with previous federal public works programs shifting away from past goals, and broadening federal redevelopment initiatives into manpower, direct job-creating loans to private corporations, utilizing public facilities-based renewal projects to provide infrastructure and jobs, and, in general, injecting the Department of Commerce into rural economic development. The approach was bi-modal: it continued Privatist strategies such as infrastructure and business assistance/attraction with CD people-focused workforce programs. “In the rural areas, as in the urban slums … community development … require[s] a coordinated multifunctional approach—the preparation and adoption of comprehensive plans for attacking simultaneously a wide variety of community shortcomings; the mobilization of the resources of many agencies … new leadership and more extensive citizen participation;” (Sundquist, 1969, p. 131)
ARA certainly reflected New Deal programs such as TVA. It was the first postwar federal geographically-targeted ED program, located in the Department of Commerce (a subject of considerable controversy). Opposition, largely from Northern politicians and labor unions, especially the Textile Workers of America, was substantial and never abated during the program’s existence[xii]. The U.S. Chamber of Commerce opposed the program and a widespread perception in the South that ARA facilitated the civil rights movement limited its support and effectiveness. Many communities were uncomfortable being characterized as “distressed”. The USDA, uncooperative at first, eventually assisted in facilitating “rural development committees”.
Although ARA included both urban and rural counties, the program was the first non-USDA rural extra-infrastructure job-creating initiative. In that ARA included a small retraining DOL program, it extended a federal toe into the manpower-workforce policy area. Providing hints of a future “creative federalism”, ARA authorized grants direct to localities for infrastructure (public facilities), including water, street and sewer improvements, as well as business loans (one-third of ARA appropriation–reflecting a belief that depressed areas lack of capital[xiii] was a primary barrier to economic growth). Urban renewal projects qualified for infrastructure assistance. ARA financed 316 projects that claimed creating 40,000 jobs. (Roth et al, 2002, p. 2) The Secretary designed 300 rural counties in addition to 230 rural counties in the USDA Rural Development Program. By 1964 designated counties doubled to nearly 1000[xiv]. Appropriations, however, remained unchanged; in 1963 funding terminated completely. Many, maybe most, of the designated counties did not meet legislative criteria. The program sunset in 1965.
One can trace the evolution of EDA’s infamous OEDP, Overall Economic Development Plan, from the Area Redevelopment Act. Cobb asserted[xv] ARA prompted formation of many southern local industrial development corporations. ARA loans required a local match and the LIDC offered a convenient structural vehicle with which to participate in ARA programs. Even in those states that provided match at the state level, LIDCs were a useful local monitor and responsible entity. Given nearly 1000 counties submitted applications, ARA’s incentive to form LDCs was likely not confined to the South. It is a guess only, but ARA may have stimulated county level EDOs in local economic development.
ARA firmly embedded a notion characteristic of future federal loan programs: that federal aid should not shift jobs and firms—redistribute pepperoni on pizza slices so to speak. Any employment created from the Act’s funding or projects could not “transfer jobs from one area of the United States to another”. From the depressed regions’ perspective creating jobs in an area of such demonstrated need is necessary and desirable—even if they derive from shifted jobs and relocated firms. For others, however, usually those in the Policy World or the losing jurisdiction, legitimate job creation require a net new job.
Interestingly, shifting workers through “voluntary” relocation from a labor surplus area is not. Worker mobility has always been legitimate and arguably a primary workforce strategy—even with public funds.
Typically, labor surplus areas are victims of structural change and areas and their residents that are hurt by structural change are frequently unable as well as unwilling to relocate. “Some workers … do not respond to the pull of market forces. This is not always because workers are unwilling to move, but also because they recognize that age and lack of education or training (and occupational experience) limit their chances of finding employment elsewhere …. Home ownership, attachment to friends … family … and community are often the cause” (Miernyk, 1965, p. 170). These concerns are timeless and support place-based economic development efforts such as ARA.
Public Works Acceleration Act (1962)
This little-known legislation, approved May 1962, after hard negotiation with Congress, connects New Deal programs linking workforce housing to public work construction as a sub-state unemployment strategy. The Kennedy initiative, based on the 1946 Employment Act, hoped to achieve Keynesian full employment. The Act granted authority to allocate construction funds for federal facilities, and direct grants to state/local governments (50-75% match) for public facilities in (ARA) “redevelopment area” or a community with high unemployment. Eligible construction projects had to be “substantially completed” within a year (shovel-ready meant something in the good old days). Water, sewer plants, streets public buildings and recreation facilities were the chief beneficiaries.
Kennedy intended the Act to be countercyclical: to “revitalize the economy by a general expansion of public construction” and the Act could be thought of as a pilot program for federal (physical) counter-cyclical involvement in sub-state jurisdictional economic bases. The $400 million approved in 1962 ($500 million in 1963) was a pittance, however, doing little to relieve local unemployment, address local public facility needs, or achieve “full employment”. Still, the 1962 Act exposed issues associated with achieving full employment through a public works strategy. The Act also had its “darker” side in that one could also see it as an initiative, visible to city voters, that the federal government was doing its part to alleviate the 1962 recession.
Kennedy was concerned whether full employment could fully ameliorate the all-too-evident reality of structural unemployment and area-wide depression. “We could have a great boom and still have [high structural] unemployment” (Freeman, 1965, p. 175). Addressing structural or chronic problem areas had subtly entered into ED policy. Economists of the period were dismissive of public works as a full employment strategy. Their principal criticism of public works was that it was “too slow in starting and too late in ending” (Freeman, 1965, p. 175). The public works classic of the era, McKean and Taylor’s, “Public Works and Employment from the Local Government Point of View”, concluded that “Even allowing for the full effect of the multiplier and pump priming, … a program to stabilize state and local public works would influence the economy to an insignificant degree” (McKean & Taylor, 1955, p. v). Public works, however, was the preferred strategy of the local politician; the voter could see and touch public works and was proof their community was getting its share. As a presidential election strategy, public works directly connected the President to the local community resolving its problems.
The key issue whether public work was a timely solution to local unemployment focused about whether anything like “shovel-ready” (the term was not used in the 1960’s) was realistic and desirable. Shovel-ready seemingly required advanced planning, it was believed, that went miles beyond blueprints, site engineering, and cost minimization, into controversial questions that included evaluation of alternatives, whether the facility should be built at all, who would benefit (or not). Plans touched off competing ideologies and partisanship, and the result of a plan was often the need for more plans. Long-before NIMBY became our profession’s mascot, it was questioned whether “shovel-ready” was a realistic concept.
To make matters more difficult public works as a strategy to create local employment raised issues of whether public works could hire unskilled workers in volume, or rather by nature required skilled workers to construct facilities in a timely and quality-acceptable manner. Construction, by its nature, is less wage and salary driven than site acquisition, equipment and materials-driven. Most of a construction budget was consumed by non-wage expenses, and the required adoption of Davis-Bacon (1931) meant that skilled labor costs would be sufficiently high to preclude lower skill employment in volume. It was these factors, indeed, that had severely punished NIRA’s 1933 housing and slum removal program. Thus it was evident, even by the time of JFK, that if one wanted to get income into the hands of the unemployed, the faster and more direct method was “work relief”, i.e. welfare or unemployment assistance (Freeman, 1965, pp. 179-92).
Public works as a federal sub-state economic development strategy to achieve full employment, or to relieve high unemployment was by the early 1960’s regarded as at best uncertain, and likely to be unsuccessful in addressing unemployment. As a “political” ED strategy, federal public works had some merit—but its practical effects on unemployment, skills training, or addressing local public facility need was unremarkable. There is one huge qualification to this observation: if the goal of public works shifts away from unemployment mitigation or skills training, to, say, simple facilitation of a desired public work (a sewer plant, community center, safe bridge) than a federal public works program may indeed have merit.
1962 Manpower Development and Training Act (MDTA)
MDTA marked the formal debut of contemporary federal manpower/workforce policy. ARA had touched on training for the unemployed—pioneering federal payment of a subsidy to the unemployed worker in a training program. This was important because at the time, most states did not allow the unemployed to receive unemployment benefits in a training program (21 states did—Massachusetts (and D.C.) were pioneers (Murray, 1965, p. 75)). Government-assisted worker training need not be linked only to the unemployed. General “industrial” education can be traced to 1820 Boston when trade instruction was introduced into high schools. In 1880, St Louis Manual Training School (connected to Washington University) became the model for high school manual training. The National Society for Promotion of Industrial Education was formed in 1906.
The federal government has a long tradition of providing training-related programs. The 1862 Morrill Land Grant Act (teachers colleges) may have been the first entry but the Smith-Hughes Act (1917) facilitated vocational education in agriculture, industry, and home economics, the 1933 Wagner-Peyser Act and a long string of subsequent federal programs demonstrates with certainty a federal commitment to manpower. The U.S. Office of Vocational Rehabilitation has been involved with training handicapped workers for jobs since the 1920’s. As late as 1958, the National Defense Education Act authorized training for skilled technicians. In 1961 over 3.85 million were enrolled in vocational education (Somers, 1965, p. 228). Wisconsin may have been the first state to embrace apprenticeship training (1915 State Industrial Commission), but the federal Bureau of Apprenticeship and Training (1937) worked with unions, vocational schools, and private employers. During the Second World War, the Training within Industry section of the Office of Production Management disseminated “best practice” materials, with a focus on supervisors.
State (and local) involvement in training beyond vocational education “have been crash programs for specific groups of displaced workers or for specific jobs in individual establishments; … relatively small … hampered by inadequate appropriations”—or specifically linked to receiving welfare of unemployment benefits (Chicago and Milwaukee). By 1961 twenty-one states allowed unemployment benefits to be paid while receiving training. The first “full-fledged”, reasonably funded state program for training the unemployed was in 1957 Pennsylvania. The law required high schools to offer courses for the unemployed; by 1960 nearly 2,000 unemployed were enrolled. In 1961, West Virginia followed Pennsylvania’s example as did Ohio (Somers, 1965, pp. 229-30).
The Ford Foundation founded its National Manpower Council in 1951. Over the decade, the Council asserted there was no shortage of manpower, but rather a greater need to improve upon the quality of that manpower. To that end, the Council published a significant report in 1955, “Improving the Work Skills of the Nation“. The report advocated changes in the educational system, curricula, two year college training, and that business and government ought to prioritize involvement into this new policy area. The best level from which to confront these issues was the community. The fear was skill-driven unemployment would result in structural unemployment–with an increasingly large percentage of the American workforce permanently unemployed or underemployed. “(I)n an increasingly technical age, the expanding employment occupations were those that placed a premium upon well-educated and highly skilled applicants; simultaneously, job opportunities for those without these qualifications were disappearing rapidly … The remedies … were remedial education and specialized job training” (Briggs Jr., 2016).
The Department of Labor in 1954 created by administrative order the “Office of Manpower Administration and revamped its renamed Bureau of Apprenticeship and Training. BLS produced datasets on the readjustment of industries and communities affected by automation. It also published an “Occupational Outlook Handbook” and a special study on “Manpower Needs of the Sixties“. In the last years of the Eisenhower administration, our old friends Senator Paul Douglas and Senator Joseph Clark developed proposals that led to the Vocational Retraining Act of 1961—still primarily focused on educational institutions and adjusting unemployment compensation to allow for training and retraining. Eligibility for retraining problems was limited.
Arthur Goldberg, Kennedy’s Secretary of Labor introduced DOL to the issue. His goal was to move beyond vocational education. In April 1961, Goldberg created the DOL Office of Automation and Manpower. The Bureau of the Budget was not only supportive of a new program, but a key staff member Michael March assumed leadership. Working with Clark and a network of state/local/school organizations, a new proposal was formalized into the bill that became MDTA (1961). With divided union reaction, the bill faced a number of cross-currents, but was approved in February 1962.
MDTA authorized a three year program for workers displaced by technology and a training allowance for unemployed workers. Local public and private agencies were eligible to receive funds to identify and provide training to upgrade the skills of displaced workers. No formal link was made to actual job creation. Up to fifty-two weeks of training was authorized. MDTA created new pools of funds that motivated states to develop workforce EDOs eligible for DOL programs. Demonstration projects, research, and on the job (OJT) training solutions over the next few years expanded the program. The federal government had entered into skills training, separate from educational and vocational training, and had thus pioneered an economic development approach to workforce training. The Department of Labor housed the program and assumed leadership over manpower-workforce policy.
By the early 1960’s the civil rights movement revealed long-standing discriminatory employment practices that limited Blacks to the lowest paid and skilled employment. Manpower and training programs were tasked to reduce poverty, and confront Great Migration Big City disruption. A string of subsequent federal legislation played a desperate game of catch up with what was called a “manpower programmatic revolution”. In 1963 the Vocational Education Act was amended yet again, and was followed by the Great Society’s revolutionary Economic Opportunity Act of 1964, and then by the 1967 Social Security Act. By the end of the 1960’s there were at least thirty separate federal training programs—an entirely new manpower/workforce system was in operation.
Innovation in Community Development
“Men may find God in Nature, but when they look at cities, they are viewing themselves”
Paul Ylvisaker, Life Magazine
While JFK, Senator Douglas, and Arthur Goldberg were trail-blazing a federal path in the direction of Keynesian-economics and people-focused CD, the Ford Foundation and “urban guerillas” innovated disruptive new programs that consciously intended to create an alternate community development path—a paradigm as potentially revolutionary as anything done previously. A “nexus of change” formed between the Policy World and Kennedy political appointees/bureaucrats. By November 1963 that group developed the nucleus/DNA of key concepts that later were encapsulated into the 1964 War on Poverty—the opening economic development salvo of the Great Society. That internal “policy nexus” begins with the Ford Foundation programmatic initiatives which we describe below
Disruption would be guaranteed by convincing the powerful federal government to not only fund the new programs, but apply its political muscle to lure/compel sub-state actors to follow them into this brave new world. Left behind would be the CD housers and neighborhood physical developers who were then engaged in slum clearance, and neighborhood redevelopment around housing. A new dawn in the Age of Community Development was on its “threshold of a dream”.
Community Development’s core concept is that it is people, not business-focused. The new set of Ford Foundation/federal government CD initiatives proved to be extremely disruptive to old-style housing/neighborhood CD, but even more so to the Privatist, state and local oriented mainstream ED. Crossing over several “fault lines” they fostered heavy-duty politicization within our policy area–more than northern hegemony and southern “piracy” were doing. The new CD’s linkage with the federal government was the key to its dramatic entry into our policy area—and the chief ingredient that led to inevitable politicization. The involvement of the federal government in a state and sub-state policy spheres, without the legitimizing threat/reality of war or depression, into a policy area heretofore locally dominant was guaranteed to stir someone’s juices. That it was done with good intentions will only compound the schism.
People-based community development is intended meaningful economic opportunity for all who live within its jurisdictional boundaries. But not all need help equally and CD’s focus has always been on those who most need help the most. In these years (1950’s and 1960’s) despite the overwhelming exuberance of the American economy, culture, military and political power, difficult economic realities—race, unemployment, automation, and poverty will be perceived as structural barriers that inhibit or preclude the disadvantage from seizing economic, political and social opportunity. Breaking through these structural barriers was a role for the federal government—and that has remained a mainstay relationship for a redefined community development.
Woodlawn, Gray Areas, and Mobilization for Youth (MFY)
From the mid-1950’s the Ford Foundation started a series of experimental programs in urban areas across the nation. One of these was the Gray Areas Program, designed and advocated by 33 year old (1955) Paul Ylvisaker. Much has been written about the Ford Foundation’s Gray Areas[xvi]. Gray Areas (and Mobilization for Youth) is directly linked to the War on Poverty and much of the Great Society— “Community Action” evolved from both.
Ylvisaker, a Harvard Ph.D., advisor to Philadelphia Mayor Joseph Clark, turned Ivy League faculty, was recruited to the Foundation in 1955 and subsequently developed experimental programs centered about physical urban reforms, such as housing and urban renewal as counters to the metropolitan crisis of the era. By 1960, Ylvisaker, perceiving disruption caused by physical urban redevelopment/housing/slum clearance, had “drifted” into “people problems”, away from brick and mortar and urban governance. Integration of human services and a concern with racial change and race relations were central programmatic concepts (O’Connor, 1966, pp. 600-6).
Shortly before Gray Areas, and completely independent of it, was a shadow movement in the Woodlawn neighborhood of Chicago. Woodlawn was a reaction against the soon-to-be-old style housing/slum removal neighborhood CD. Using tactics and a community organizing CD strategy developed by Saul Alinsky it would serve as model for other neighborhoods and social activists, and a metaphor for us. Drawing from its own roots, no small part of which was resistance to slum removal to create public housing, another CD alternative path was becoming cohesive. That path would insert itself into the political and administrative chaos/vacuum created by the intrusion of the Great Society into local and Big City policy systems. Woodlawn-style community organizing was not an intended feature of Great Society community action, but the two became fused (or confused) for a period of time—and that was all it took. But let’s not get too far ahead of ourselves. First the basics.
Woodlawn
Up until 1948, Chicago’s Woodlawn neighborhood was white, middle-class, ethnic, originally populated by workers from the 1993 Chicago Exposition. Home for many University of Chicago professors, the neighborhood of nearly 73,000 residents underwent dramatic racial change during the 1950’s. The play “Raisin in the Sun” tells the story of the neighborhood’s first black family. Fearing blight’s impact from nearby Hyde Park neighborhood (Hirsch’s Second Ghetto then in the process of slum removal and neighborhood transition), the University of Chicago urged preemptive housing/slum removal in Woodlawn that triggered its own intense racial transition and widespread arson. An alliance of Black pastors (Arthur Brazier) operating within Alinsky’s umbrella Industrial Areas Foundation (led by his successor (Nicolas von Hoffman—Alexander, cited in this history, is his son) formed their own group (TWO) to resist urban renewal and integrate African-Americans into the Woodlawn neighborhood. In 1960, adopting Alinsky’s community organizing principles TWO worked with von Hoffman in developing a semi-political/economic development strategy that fell clearly into the community mobilization wing of Community Development.
TWO organized actions against local businesses that gouged consumers, attacked overcrowding in neighborhood schools, organized rent strikes—and aggressively fought the University of Chicago’s urban renewal plan—TWO insisted low-income housing be first built on vacant land before any active units were torn down. TWO eventually gained a seat on the Planning Board and stopped further slum removal. While it may have aggressively contested the development of the Second Ghetto, TWO was unable to stop racial transition. Counter-intuitively perhaps, during the 1960’s, Woodlawn lost over one-third its resident population (this is a characteristic of the Second Ghetto). Older neighborhood institutions moved, many to the suburbs. The neighborhood became solidly Black.
Gray Areas
Borrowing from Raymond Vernon’s “gray belt” which Ylvisaker defined as potential slums pressured by structural shifts in the economy and residential markets—areas that Ylvisaker believed concentrated the disruption induced by physical redevelopment and racial change. Gray areas were neighborhoods where programs should be introduced to “citify our in-migrant populations”. Recognizing pathologies of what Hirsch later called the Second Ghetto, Ylvisaker asserted 1960 gray area neighborhoods could no longer perform the socializing function they had for previous generations of immigrants. For him gray areas were “a wretched form that has lost the saving grace of a noble function [assimilation] … their escape into better jobs and neighborhoods is slowed by the depressed conditions they live in or by the color they were born with … The challenge to the cities was to revitalize the gray areas and ‘perfect the process’ of assimilating and making ‘first class citizens’ of the in-migrants … in one generation” (O’Connor, 1966, p. 606).
Developing several programs, first in housing and then a “Great Cities School Improvement Program” Ford Foundation made grants to several Big Cities to establish “citifying” pilot programs focused on culturally-deprived/disadvantaged in-migrants. These programs attempted to positively impact families, home life, and to coordinate social services these individuals might require. Each grant was constantly evaluated, training workshops were provided, and distinguished experts brought in to assess findings and effectiveness of the grant. After a year or so, Ylvisaker came to the conclusion that if these people-changing programs were to have any effect, social services, schools, and government agencies had to be linked in a common effort that overcame their “guild-ism” (siloization).
Ylvisaker injected this new theme into Gray Areas–not to one policy area, say juvenile delinquency, but to simultaneously involve a slew of policy areas that collectively prevented individual mobility/change—not to “target one institution, but the whole tangled network of agencies responsible for housing, social services, and employment for the poor”. Thus enlarged Gray Areas offered a diversified, but managed, package of services sufficient to the task of personal, family and social change. That is what community developers call “comprehensiveness.” It has evolved into a defining characteristic of the foundation approach to community development.
To receive follow-up grants cities, their mayors, and bureaucracies, had, not only to provide a match, but plan a coordinating process that could innovate as well as implement focused programming. Five cities (Boston—headed by Ed Logue a former Ylvisaker staff member, Oakland, New Haven, Philadelphia and D.C.). Each of these cities devised their own programmatic approach to Gray Areas targets. In each demonstration project, Gray Areas established a community organization to coordinate the programs and link community’s institutions. In that Gray Areas Programs contemplated a systematic “revamping of neighborhood–a reshaping of the entire social and human system”, it is not surprising many agencies and institutions resisted. The “quality and effectiveness of local leadership was also a limitation” (Mossberger, 2010, pp. 63-5). In any case, through coordination of neighborhood bureaucratic initiatives, the cycle of poverty could be broken.
At this point (1963), Gray Areas/Ford Foundation became more complicated and complex. Municipal grantees intermingled Gray Areas’ implementation with grants from U.S. DOL’s Office of Manpower and Training. The overlap was most pronounced with juvenile delinquency grants, one of which being New York City’s Mobilization for Youth (MFY). That offered an opportunity to Ylvisaker and Ford to join efforts with the Kennedy Administration—in this case with the Administration’s evolving, embryonic anti-poverty community action approach being forged in task forces within DOL. There was, however, a shift in approach that Ylvisaker was uncertain of—Gray Areas focused on urban bureaucracies and DOL’s approach focused on people rehabilitation. In DOL’s approach, urban service bureaucracies were to be “coordinated”, not by Ylvisaker’s coordinating agency, but through something called “community action”. Accordingly, it is now helpful to switch to the Mobilization for Youth program so to ground the reader in that approach.
Mobilization for Youth (MFY)
Unlike Gray Areas, MFY was a bottoms-up policy process. It resulted from a grant application developed within the NYC’s Henry Street Settlement House (Helen Hall, its Director), the coordinator for six other neighborhood settlement houses, submitted to the National Institute on Mental Health. The proposal advocated a program to counter juvenile delinquency in these neighborhoods, and was returned to Henry Street for further study and refinement. Two Columbia University professors (Lloyd Ohlin and Richard Cloward) developed a revised application based on their newly-articulated model of the causes of juvenile delinquency (Cloward & Ohlin, 1960).
They asserted a “lack of conventional opportunity alienated inner-city youth from societal norms and pushed them to adopt the norms [often illegal, sometimes violent] of the street and the gang”– “frustrations caused by unequal opportunity structures [found] in poor communities“. At root was gang member’s exclusion from legitimate upward assimilative paths such as education, part-time jobs, and school extra-curricular activities. Henry Street’s original proposal was recast into the model, resubmitted, and eventually approved. The $12 million dollar program commenced in 1961 (Halpern, 1995, pp. 101-2). Most of MFY’s funds and programs went into conventional services, pre/after school programs, youth employment, and some training.
More sophisticated than Ylvisaker’s formulations, MFY was compatible with the Gray Area human service framework, but it ventured into new ground. Instead of coordinating various social and government bureaucracies through a “neighborhood coordinating entity” as did Gray Areas, MFY adopted a more bottoms-up approach that meaningfully involved residents and clients in problem identification and resolution. Adults and parents, for example, were part of the process to address issues with schools. These adults in turn were expected to be more involved with their children, potential candidates for juvenile delinquency (Brager & Purcell, 1967). Bureaucracies, being bureaucracies filled with experts, often had a hard time with this involvement, as did the residents. During program implementation, relationships went “south”, MFY staff got caught in the middle, and tended to support residents (Halpern, 1995, pp. 102-4). Obliquely, the clash of bureaucratic and resident cultures meshed poorly with the Gray Areas approach—even though by this point the Ford Foundation was involved with MFY.
It is at this point (1963) that MFY and Gray Areas “hooked up”—but the arena was not the Ford Foundation, but rather the President’s Commission on Juvenile Delinquency, the Department of Labor, the Bureau of the Budget and a Presidential task force. What had happened is that from separate departments, two key Ford Foundation program directors lobbied federal officials to carry their ideas, and the programs further. The review and decision was one function of the Task Force. This is the critical juncture that took these pioneering, yet rudimentary initiatives, and recast them into “community action” and eventually, the War on Poverty. This policy formulation approach, vastly different from that followed by a more open, legislatively-focused, and decentralized public housing, slum clearance, and urban renewal policy process, hints that foundation-led community development may have alternative policy formulation processes that set it apart from both mainstream economic development, and other wings of community development. That it did in 1963, is evident in the next section.
Looking Backward Through the Looking Glass: Experts and Bureaucratic Bowels
The Task Force deliberations overlapped with a changing ED policy environment reacting against municipal-led urban renewal, public housing, Interstate highway construction, and slum removal/housing demolition, from multiple projects. Felt disproportionately in neighborhoods and ghettos, resulting in destruction of local business, loss of housing units, accelerated neighborhood transition and succession, protests, sit-ins, rent strikes, conflict, even violence, often within schools, were normal events after the early 1950’s. Crime and juvenile delinquency were high visibility policy areas. Active resistance at public meetings against specific urban renewal-highway projects, while not especially impactful, was also commonplace. Jane Jacobs had published in 1961. The so-called melting pot was boiling over and the Second Ghetto in steroidal development while the below policy initiatives were being formulated.
Early 1961, Ford Foundation officials, including Ylvisaker and MFY’s director, David Hunter, approached the new Kennedy administration. David Hackett, an RFK boyhood friend, campaign official and newly-assigned special assistant to the Attorney General[xvii], After being briefed, principally it seems on Gray Areas approach, the President in May 1961 established the President’s Committee on Juvenile Delinquency and Youth Crime (PCJD), chaired by the Attorney General, and composed of secretaries of HEW, Labor, and indirectly Budget Bureau’s Kermit Gordon. Hackett was the staff and he recruited Lloyd Ohlin, Sanford Kravitz (a prominent social worker and soon to be Chief of Research and Program Development of OEO’s Community Action Program), and Richard Boone from the Ford Foundation. The staff, referring to themselves as urban guerillas (Vietnam was in vogue), formulated programs, cobbled together funds, and working with Ford (and others) set up programs in selected communities to test further the ideas developing in Gray Areas and MFY (Moynihan, 1969, pp. 63-7).
The delinquency programme operated, then through an unstable alliance of Robert Kennedy’s personal authority with internal department rivalries, and the mutual understanding of a small group of idealistic innovators within the bureaucracy … [it] stressed a new coalition of community leadership … intellectual coherence … a proven theory of social rehabilitation. (Marris & Rein, 1967, p. 135)
If Moynihan (a participant) is correct, PCJD proved to be the “blast furnace” that forged community action and the War on Poverty. Over the next two years, PCJD experimented with pilot programs, joined in closely with Ford Foundation MFY and Gray Areas, and eventually came to several conclusions: (1) the federal government with local governments and private foundations should start programs to attack the problems of youth; (2) bureaucratic siloization and uncoordinated services required new methods and structures if these problems were to be successfully countered and a critical mass of initiatives assembled sufficient to provide individual and neighborhood change; (3) the root cause of these problems was “poverty”, and success required “concentrated resources on attacks on poverty” on a wide variety of policy areas”.
Municipalities, schools, and local nonprofit bureaucracies required having their feet held to the fire of consistent, client-centered program administration—and that was best accomplished by embracing citizens and residents themselves in the process of change. “They wished the poor to be involved in the program, but in the interests of therapy as much as anything else … they wanted those who had the power to do something about the suffering and the poverty”. It was as simple and decent as that” (Moynihan, 1969, p. 70). This was called “community action”. Gray Areas “comprehensiveness” was incorporated into this approach as necessary to provide the scale and power to break the cycle of poverty. Poverty being the root cause, any attack on its symptoms ought to also attack poverty itself.
At this critical juncture, the Civil Rights Movement “turned north”. The August 1963 March on Washington (“I have a dream”) for Jobs and Freedom; economic demands were prominent elements in its agenda. Later active in Chicago and other northern cities, organizations such as the NAACP, CORE, and National Urban League intensified pressure on northern integration efforts and urged hiring of minorities by private companies. The Civil Rights Movement expanded into economic development. In this environment, the policy approach drafted within PCJD appeared in a Council of Economic Advisors staff report, “Program for a Concerted Assault on Poverty” on October 29th, 1963. The next day CEA’s Chair, Walter Heller wrote the cabinet to submit their proposals so they “might be woven into a basic attack on poverty and waste of human resources as part of the 1964 legislative program” (Moynihan, 1969, p. 79).
A month later Hackett’s PCJD proposal was accepted by the Bureau of the Budget—but by then President John Kennedy had assassinated in Dallas.
The Great Society
Upon entering office, LBJ crafted his domestic program. Calling it the Great Society, it was launched in his January 1964 state of the union address. Civil rights were his first priority. In July 1964 Congress approved the Civil Rights Act. In July, LBJ signed the Urban Mass Transportation Act. LBJ’s second priority was his ‘war on poverty” also alluded to in the State of the Union address. In August, 1964 he signed the Equal Opportunity Act into law—“Today for the first time in history of the human race a great nation is able and willing to make a commitment to eradicating poverty among its people”. Less than eight months had elapsed since Kennedy’s death.
War on Poverty
LBJ’s War on Poverty smashed through municipal policy systems like a steamroller. The Equal Opportunity Act was only the first legislation in the War on Poverty. In short order, the 1964 Food Stamp Act, the 1965 Social Security Act (creating Medicare and Medicaid) and the Elementary and Secondary Education Act In no time, it engaging low-income residents in policy change through “community action” implemented and financed by the War’s new CDO, the community action agency (CAA). Within eighteen months nearly 1,000 were established in each decent-sized municipality in the nation. The CAA led the charge for neighborhood-driven policy implementation. Empowered with a host of human, community service and education programs CAA’s potential program arsenal affected nearly every significant neighborhood and city-level institution or agency. CAA itself did not implement these programs; it funded other CDOs and agencies with pass-through federal monies.
Mostly, CAA coordinated local Head Start, VISTA, Upward Bound, community health centers, family planning, and legal aid. The Job Corps and Neighborhood Youth programs were run out DOL and Title I of the Elementary and Secondary Education Act out of HEW. In many ways, the CAA story was less these programs and their implementation, than their role in the “community action” empowerment objective. The Office of Economic Opportunity (OEO, headed by Sargent Shriver) required CAA’s to create boards of directors (and staff) with the” maximum feasible participation” of neighborhood residents. While the origins of the phrase “maximum feasible participation” (MFP) are still unclear, they wound up in the War on Poverty legislation. The remaking of the community-neighborhood-culture of poverty was not to be engineered from above by bureaucratic rule-making, but from below, by the people in the community. MFP meant action by the community, not for the community. The problems of the community could best be resolved by those within the community who would be empowered to control the institutions of the neighborhood–and the programs financed by the War on Poverty.
MFP meant CAAs “would provide a structure for poor communities to mobilize their own resources on behalf of their residents, and a platform for giving poor people more of a voice in the bureaucratic institutions that shaped their lives” (Halpern, 1995, p. 108)
Whatever else it was supposed to do, MFP unleashed a three year civil war within most CAA’s. Incessant power struggles followed, over who was, or was not, to be on the board, between City Hall and the Board, between the CAA/Board and its constituent institutions (school principals, for example). Some suggested it was better to watch sausage being made than to sit in a board meeting. Schools and City Hall bureaucracies fared the worst. “It became clear that a personal history of hardship and exploitation did not incline a person to be community-minded … Community residents on the board did not necessarily represent the most disenfranchised segments … but rather a narrow set of interests, notably that of families, friends and allies” (Halpern, 1995, p. 110). Moynihan compares CAA internal policy-making to the old machines—concerned with nepotism, services and patronage (Moynihan, 1969). Towards the end of 1966, Congress, prodded by mayors, wanted to rein in CAP, establish order and a measure of accountability. LBJ, after two years of complaints backtracked.
In hindsight OEO set up a direct funding/program link from the federal government to cities and community organizations–bypassing states and city halls. It was the prototype of Johnson’s creative federalism. Creative federalism was a radical departure from FDR’s cooperative federalism. Cooperative federalism, described as “marble cake” federalism, shared federal powers and program implementation with states; there was no direct federal-local grants. Social Security, employment/unemployment assistance, secondary education were excellent examples of cooperative federalism. Johnson’s Creative Federalism, however, ran through categorical grants that bypassed state government and went to selected municipal or community-based recipients (often as not political opponents of mayors and governors). During Johnson’s five years more than 200 new categorical grants were created (Bowman & Kearney, 1999, p. 42). This was the famous “picket fence” (silos) that permitted the federal government to directly fund an eligible recipient, requiring the eligible recipient to follow federal regulations and policy priorities. These grants, often very specific in scope, weakened state and local government and empowered their recipient. Creative federalism lasted until Nixon’s 1974 block grants, which flowed through states, returned to business as usual.
War on Poverty and SBA
The War on Poverty left a lasting impression on SBA. Title IV of the Equal Opportunity Act directed SBA to both “advance the Negro in the business world” and to expand its programs (Bean, 2001, p. 47). Title IV funds, linked to community action programs, and provided resources for lending (Equal Opportunity Loans) to minority business. Title IV also mandated establishing Small Business Development Centers (SBDCs) to recruit EOL applicants and provide management assistance. The funds, however, were largely diverted to natural disasters loans (Alaskan earthquake) and satisfy high demand for traditional SBA loans. Only $10 million was spent on EOL. SBA’s “banker culture” allegedly inhibited SBA involvement in OEO and community action. Still, by the end of 1965, SBA had established a SBDC in each of the thirty-five community action-designed cities (Bean, 2001, p. 49).
The 1965 Watts riots intensified SBA’s involvement in the War on Poverty. SBA Director Eugene Foley became the first head of the newly formed EDA (see below). He attempted to merge SBA and EDA, but Congressional opposition ended that idea. Foley (in 1964) recruited volunteer retired business executives and formed them into experimental “chapters” in New England. These chapters offered counseling, mentoring and expertise to small business. The innovation was successful, and he expanded it nation-wide so by 1967 there were 3500 SCORE volunteer and institutionalized within SBA. In 2013, there were 348 SCORE chapters and 13,000 counselors.
After Foley’s departure and an interregnum, the new SBA Director Bernard Boutin conducted a serious reorganized/revitalized SBA’s processes. In particular, he revamped SBIC which had imploded in the 1962 stock market crash. An internal investigation uncovered several scandals, including an organized crime money-laundering scheme. Boutin also secured Congressional legislation permitting SBICs to expand capacity and size—and, to acquire independent expertise for its program implementation. He increased the program’s definition of “small” to include AMC with 30,000 employees. SBIC was “saved”, but its position was precarious and it suffered a roller coaster-like ride for the next decade. SBIC stagnated as private venture firms competed with SBICs.
Following Boutin another short-lived Director, Howard Samuels (1968), launched the Section 8(a) program for minority contractors. SBA had always been authorized to act as an intermediary (prime contracts) between federal departments and small business, but in 1967, a Defense Department innovator urged SBA to use that authority to “set aside” contracts for minority small business. In 1968 SBA accepted the idea and issued 8 prime contracts. The program has subsequently generated its fair share of controversy, but that has not stopped its long-term growth. By 1980 $1 billion in contracts had been issued, and by 1999, nearly $7 billion (Bean, 2001, pp. 143, Appendix B).
Housing Act of 1964
Greatly underappreciated War on Poverty legislation included the Housing Act of 1964, an act intended to “reform”, but preserve and expand urban renewal. By this time, Martin Anderson’s, the Federal Bulldozer had hit the bookshelves, describing in great detail deficiencies in the federal urban renewal program. Resident reaction, Jane Jacobs, Herbert Gans, and anti-Moses sentiment was also pushing back on urban renewal projects. The bloom was indeed off the urban renewal rose. Still, the Housing Act provided $750 million (as opposed to $375 million included in the 1964 Urban Mass Transit Act) for urban renewal. It did, however, shift the program away from large-scale blighted neighborhood slum removal to housing rehabilitation, and preservation, where feasible, of existing units. The act directed municipal planners to pay more attention to resident dislocation.
In its place a modified Baltimore Plan, centered on enforcement of health, sanitary and occupancy codes, was included in eligible costs. By 1967, cities would lose UR eligibility if comprehensive plans did not take into account social costs, and make available loans for resident rehabilitation. Yet, although all conceded that urban renewal disruption was made worse unless alternate public housing were first built, the Act reduced funding for public housing to 37,500 units (from 50,000). Interestingly, LBJ included a “new towns” initiative “with all public services … [and] industry … needed to provide jobs … housing … recreation facilities for moderate and low-income families”. This was intended to provide suburban alternatives to the central city ghetto. The section was noticed by Congressmen from suburban districts—and it was not approved.
The War on Poverty/CAP, however, had a serious effect on social service and planning municipal bureaucracies (Lipsky, 1980). Aside from making life generally miserable for public servants, community action and the rising tide of citizen activism challenged the prevailing physical economic development/planning paradigm. As early as Spring, 1965, Harvey Perloff in a milestone presentation “Common Goals and Linking of Physical and Social Planning” alerted professions to the new world, a world that included social and personal costs associated with programs and plans. There was a need to bring together social and physical planners in a new planning paradigm—the juncture of the two could result in new opportunities that anticipated much of the 1966 Model Cities legislation (Scott, 1969, pp. 606-10). From this point on, planners in particular, debated—and struggled—to reconcile its centrality in urban renewal, highways and suburban subdivision development. Over the following decades, a community development form of planning would evolve—and arguably evolve to become planning’s dominant paradigm (incorporating environmentalism and sustainability).
Whatever else it accomplished, the 1964 War on Poverty elevated the federal government into the dominant actor in Big City sub-state urban and economic development policy-making. Not exactly puppets, Big City mayors (and policy systems) in these years were dancing to music not of their own making. In protest many yanked on Washington’s policy strings and demanded to be heard. Also, the War on Poverty had Kennedy fingerprints (RFK’s) all over it, and LBJ, no later than the 1964 election, was moving in his own direction, with his own people. Post-War on Poverty legislative acts arguably constitute the second phase of the Great Society.
LBJ’s “other” Great Society Legislation
There were five major post-War on Poverty ED-related legislation: the Housing and Urban Development Act of 1965 (creating HUD), the 1965 Appalachian Regional Development Act, the Public Works and Economic Development Act of 1965 (creating EDA), the Demonstration Cities and Metropolitan Development Act of 1966 (Model Cities), and The Housing Act of 1968. Taken in aggregate, these acts radically altered the sub-state economic development landscape, legitimized the fledgling Community Development redefinition, and was a critically important element in the next decade’s reshaping of Big City policy systems. They also exerted considerable impact on economic development professionalization through EDA’s sponsorship of a new professional association: the Council of Urban Economic Development.
These legislative acts (1) moderate (almost repudiated MFP, for example), but integrate War on Poverty with older mainstream federal economic development; (2) establish a federal home base for future federal Community Development leadership, (3) and (eventually) did the same for mainstream physical/ infrastructure/urban renewal and business assistance economic development. The last provided funding for a new set of public departments and agencies that over the next decade increasingly displaced chambers of commerce from their exalted position as lead agency in municipal economic development.
Housing and Urban Development (HUD)
In August 1965 LBJ signed the Housing and Urban Development Act of 1965 which he described as the “single most important breakthrough in housing policy since the 1920’s”. Four weeks later, separate legislation created a new cabinet department of Housing and Urban Development into which were placed most of the housing agencies mentioned in this history. The legislation greatly expanded financing for most housing programs, and added new rent subsidy for elderly and disabled, provided housing rehabilitation grants to impoverished homeowners, veteran homeowner subsidies, initiated “Section 8”[xviii] housing, provided matching grants to localities to construct water/sewer facilities, community centers, and urban beautification programs in distressed neighborhoods.
Sections calling for more metropolitan planning, especially for water/sewer projects, and further encouragement for formation of metro-wide planning entities, such as Council of Governments, was also included. But even this early, suburban Congressional resistance to low-income housing (and the ill-fated LBJ “New Towns”) led to strong statutes and program innovation—but inadequate funding. Two years of additional funding for urban renewal (at $750 million annually) was also provided. A housing and research entity was also approved—leading in 1968 to the Urban Institute as a private nonprofit.
Appalachian Regional Development Act: the South and Great Society
The 1965 Tennessee Valley Authority Development District Act, the Appalachian Development Act (creating Appalachian Regional Commission and sub-state development districts) and OMB-Cir-A-80 (Aelred & Johnson, 2005, pp. 66-7) continued the Kennedy area-wide strategy. HUD and EDA were also included into this twelve state regional planning and development initiative. For some southerners, the aggregation of these Great Society initiatives represented a first-class economic development assault (Schulman, 1994, p. 186). Reality was more complicated.
The South brought this “assault” upon themselves. A 1960 Conference of Appalachian Governors demanded federal action to address the region’s woes and the Kennedy administration was sympathetic to the issue. Approved in 1962, ARA undertook a review of the region’s problems. By 1963, ARA assembled a joint federal-state commission, composed of representatives of the Appalachian states and federal agencies chaired by Franklin Roosevelt Jr. The Commission’s purpose identified four problem areas: (1) lack of access to, and within, the region; (2) technological inability to efficiently utilize the region’s plentiful natural resources; (3) lack of facilities to control/exploit the abundance of rainfall and channel it for low-cost energy generation; and (4) an inadequately educated and trained workforce. Their called for a coordinated federal-state-local program to address these needs. On April 29th, 1964 LBJ submitted to Congress the Appalachian Redevelopment Act.
The Act provided public works, various ED programs, and above all planning and implementation of a multi-faced area-wide redevelopment program. ARA’s programs were viewed by many Northern/ Midwestern Congressmen/Senators as little more than a redistribution of their money to the South—a South that was stealing their jobs, tax base and manufacturing firms. LBJ’s legislation triggered such opposition that the Great Society steamroller, then in full gear, was not equal to the task. ARA failed.to be approved in 1964. Resubmitted in 1965 the LBJ juggernaut was victorious, authorizing $1.1 billion. In tandem with ARA, Congress also approved the Public Works and Economic Development Act which was also intended to play a significant role in Appalachian development. The twelve states welcomed the legislation as an opportunity.
There are several reasons for this southern openness to federal involvement. ARC was from the get-go effectively controlled by its member states. Each state had a voting member on the Commission and the federal government was restricted to the two votes of Commission co-chairs. Given that ARC’s job activity was to distribute federal largesse, those its activities were acceptable, and log-rolling and back scratching ensured each state’s anticipated its proposed projects received a speedy approval. Secondly, unlike EDA which distributed its dollars on the basis of need, low income and high unemployment, ARC dispersed funds on “growth potential”–as defined by the affected states. Growth areas often were, the state’s more affluent areas. Thirdly, ARC’s programs were compatible with traditional southern priorities: infrastructure (highways, dams) workforce training and enhanced technology capacity. ARC “never interposed federal administrators between southern governments and their citizens, never built a constituency for direct federal intervention as the TVA and [welfare] programs had“. (Schulman, 1994, pp. 186-7).
By funding regional economic development districts throughout the East South Central and South Atlantic census divisions, the federal government created a network of planning, housing, human service, transportation, and economic development regional organizations that were a remarkable, arguably a page-turning departure from past ED state history. Many persist to this day. Over the next fifteen years, ARC program expenditures primarily went to highway construction (estimated 60% of total expenditures). Highways opened up isolated areas of the region and when combined with land stabilization and water drainage programs garnered the bulk of ARC’s funds. ARC was an exception to the CD thrust of Great Society programs. EDA, however, with its stress on formula-defined distressed communities, meshed poorly with ARC’s focus on affluent growth areas; the two clashed. EDA was perceived as a federal intruder and its attempts to establish coordination districts ran into considerable difficulty, especially in Kentucky, Tennessee and Georgia where ARC district-led coordination was preferred (Schulman, 1994, p. 188). Confrontation with OEO’s community action programs, however, triggered a lot more controversy and “heat” than EDA.
The 1965 Tennessee Development District Act authorized “creation of development districts to provide ‘the various counties and cities … general and comprehensive planning and development activities’ (and make) the maximum use of federal, state and local programs designed to stimulate economic development[xix]. These ED districts, managed by sub-state EDOs spread throughout the states. In Alabama, a network of regional Planning and Development Councils were initially authorized in 1963 and further empowered by Governor George Wallace in 1969 and 1971. The network continues to play an important role in Alabama’s ED system. Mississippi in 1967, first established the Southern Mississippi Planning and Development District. Subsequent federal prodding to extend the District’s authorizing legislation state-wide bogged down–until the passage of federal 1968 Intergovernmental Cooperation Act’s Circular-A-95. Governor John Bell Williams finally issued Executive Order 81 (July, 1971) designating and renaming the existing ten non-profit corporations as official sub-state regions. Mississippi was one of several states to utilize nonprofit corporations through executive order. To this day Mississippi has neither passed enabling legislation, nor appropriated funding for planning and development district operations[xx]. Instead, Mississippi approved its own, ED legislation, the Mississippi Code of 1972, to implement the ARC’s programs, The 1972 Mississippi Code set up the structural outline of Mississippi’s current state ED system.
Economic Development Administration (EDA)
The 1965 Public Works and Economic Development Act was intended to replace Kennedy’s Area Redevelopment Administration and supplement ARC and TVA. EDA, housed in the Department of Commerce, was the legislation’s engine. EDA ironically evolved into the de facto “home base” for Big (and Small) City EDOs, the go-to agency for local mainstream ED professionals interested in infrastructure, physical/central city redevelopment and business assistance to firms (RLFs). It didn’t start out that way, however. .EDA’s original legislative goals and eligibility criteria, centering on jurisdictional job loss and population decline, focused (Titles III and IV) EDA on rural area-wide economic development.
The EDA mandate was similar to that of the ARA … conceived as a depressed area agency with a rural focus, have a supply-side orientation, contain minor countercyclical provisions, and increase [federal] government’s role in supplying infrastructure to lagging areas[xxi].
Johnson intended EDA to counter the flow of rural population to the central cities–by stimulating the depressed areas through enhanced infrastructure and business development, urban migration could be slowed: “if we ignore people in distressed rural areas we make certain that thousands upon thousands of families will be compelled to move away and go into the great cities. And when they get there, they are going to be concentrated in slums; they are going to live on the edge of poverty[xxii].
EDA grants (50% match required) could be obtained by state or local governments after development of a comprehensive economic development strategy-plan. Eligibility was limited to areas with persistently high unemployment and disproportionate low income population or economic adjustment resulting from “severe changes in economic conditions”. As LBJ wrote “There is little hope of establishing new industry in an area which does not have the public works and development facilities to support industrial growth”. There was no legislative mention of cities and “urban” areas. The muscle in the Act (Titles III and IV) were oriented toward the formation of area-wide economic development districts, with a primary focus in Appalachia.
EDA, as described above, had a rough go in Appalachia. Internally, the agency leadership pursued a strategy to redirect itself away from ARC and rural areas to an urban mission. Between 1967 and 1978, EDA empowered its regional offices and developed close ties with economic developers in each region. Earlier, behind the scenes EDA officials met with urban economic development officials to encourage them to involve themselves with EDA and to support legislatively EDA’s redirection. In fairly short order, Big City economic developers formed a professional association (CUED—see below) and sustained itself with EDA support and financial assistance. With CUED’s close involvement, EDA developed legislative support and a track record in urban economic development. EDA’s central place in urban affairs would take a few years to evolve. A permanent redirection was only achieved by adding Title IX in 1974.
Formation of Council of Urban Economic Development
EDA’s top leadership, assigned its chief of urban projects, Andy Bennett, to develop an urban constituency and a non-rural role for EDA. To this end, EDA through the late 1960’s played the role of godfather for what became the Council of Urban Economic Development (CUED). CUED’s midwife was, Ed de Luca[xxiii], head of Baltimore’s Development Corporation, who in 1966, informally encouraged by Bennett, sent a letter to twenty Big City mayors and their development chiefs (February 10th, 1966) inviting them to Baltimore to brainstorm. The letter’s opening lines, “A few weeks ago you expressed interest in the formation of the ‘HUB CLUB (Kysiak, 1992, p. 4) which we proposed as a concerted effort by cities to combat the loss of industry to suburbs”, exposed the motivation behind this initiative (deindustrialization/suburbanization), and those behind it (big city mayors and their young ED czars).
In 1966, in the midst of what would be five years of central city riots, few had any doubts the exodus of business from central city to suburbs was going to accelerate even more dramatically. Something had to be done. In response to the February 1966 letter, Big City economic developers[xxiv] from fifteen cities arrived in Baltimore all paid for and coordinated by de Luca. There followed a series of meetings (Washington, Pittsburgh and Chicago) over the next year. In April 1967 the “Helping Urban Business Council” (HUB) was officially incorporated in Milwaukee. By that time, additional cities, such as Toledo had joined the group.
Like AEDC in its formative years, HUB restricted its membership to cities over 250,000; in fairly short order the population requirement was reduced to 100,000. By 1967 fifteen cities had joined. HUB’s central mission was to address the “industrial and commercial problems of the central cities, with a major emphasis on industrial development” (Kysiak, 1992, p. 5). In its earliest years the “cult of manufacturing” was an integral strand of HUB’s DNA. The initial laundry list of programmatic priorities included tax incentives, downtown-CBD redevelopment, preserve industrial land, incubators, manpower and ‘negro entrepreneurship’. In 1968, EDA funded a two year grant to HUB (the first of a series of grants through the 1970’s–the first HUD grant came late in the 1970’s) and an Executive Director was hired. By 1969 twenty-one cities joined HUB and its first annual conference was held in Philadelphia. In 1970, executive offices were moved to Philadelphia.
The move to Philly, however, was short-lived as HUB (1) became convinced a strong presence in Washington DC was needed to acquire the Nixon administration’s support for urban, central city involvement; (2) the organization’s name was changed to Council of Urban Economic Development (CUED); and (3) the headquarters with a new Executive Director, founding member Ken Fry from Milwaukee, was moved to DC where it remains to this day. By 1972 CUED had about 150 members, and a second EDA grant. Early CUED priorities were technical assistance to its members (including on site), networking, and above all “making its presence known to Congress” (Kysiak, 1992, p. 6). CUED during the Nixon Administration, however could not access or consistently affect its decision-making while maintaining support of a Democratic Congress.
AEDC during this period also was active–but in a substantially different fashion. In 1964, with headquarters in Boston, the first class of the Industrial Development Institute graduated nineteen economic developers. In 1966 the first issue of its journal, the “AIDC” was published and membership exceeded 1000. In 1967 the first accredited “Basic Industrial Development” course was held at Texas A&M and in 1968 three such courses (intended for American Indians) were held at Arizona State University. In that year, the first survey of member activities and salaries was released (The Industrial Development Practitioner; Profile and Study). AIDC’s crowning achievement in this period, however, was its 1971 establishment of the profession’s first certification program, its first certified developer exam from which 58 developers were certified. In 1973, the headquarters moved to Kansas City (Seal Shelton. & Birkhead, 2001, pp. 28-9).
By 1970 economic development has developed two separate professional organizations. AIDC and CUED were not only separate, they were quite different in their membership, functions and priorities, and in their core mission as a professional association. AEDC continued its inward focus on networking and developing the skills of its members in the practice of their profession, its more open enrollment made it eight times larger than CUED. Its publication tied its membership to economic development and its development of a curriculum for a basic introductory course in economic development, followed by a professional certification program meant that it had developed a body of knowledge reflective of its approach to economic development.
CUED’s priority was to maintain a focus by an activist federal government on economic development. Its technical assistance programs, for the most part, were intended to assist members in developing programs whose purpose was to retain central city manufacturing–firms that were targets of industrial recruitment by AIDC members. Tension between the two was constant. The irony in all this was that both organizations so different in their conception of economic development, and whose inception forty years apart, had developed from leadership provided by the city of Baltimore. The difference in their godfather organizations was quite telling: AIDC (U.S. Chamber of Commerce), CUED (Economic Development Administration).
HUD and Model Cities
It started in the spring of 1964 when LBJ selected Dr. Robert C. Wood (Chapter 14’s conflicted suburbanite) to head a series of task forces intended to generate ideas and programs for federal involvement in urban affairs. Their recommendations produced much of the legislation discussed in the remainder of the Chapter. The influence of these task force members is further enhanced by the subsequent appointment of several, including Wood, to HUD leadership.
By 1966, with riots increasing, Vietnam War polarizing the nation, Civil Rights picking up steam, and obvious disruption triggered by the War on Poverty, LBJ was reluctant to jump headlong into some bold, expensive, hard to digest initiative. Rather, LBJ was inclined toward the Task Force on Urban Problems’ suggestion HUD test a number of ideas, experiment with lots of approaches, by funding each in a “demonstration city”. Given the large number of “demonstrations” evident in most urban areas, the legislation that followed this suggestion was renamed “Model Cities”. Unique to Great Society legislation was the “core strategy concept. (Olken, 1971) Each city by plan had to identify its specific problems, set goals/objectives, and develop its own strategy to achieve these goals. As described, its eligible objectives, following Gray City comprehensiveness, were sufficiently broad to encompass a wide variety of policy areas could be included within a local economic development strategy. Model Cities defined the low-income neighborhood as the level of its investment, so a municipal-wide strategy was not eligible.
The “Demonstration Cities and Metropolitan Redevelopment Act of 1966”, was, from our perspective both a consolidation of War on Poverty innovations moderated by the widespread criticism and outright opposition it had engendered. It authorized for five years, but weakened, OEO’s low-income, community action approach; instead there was a decided movement toward “bricks and mortar”. Perloff’s earlier idea, to combine social and physical, best described its approach. Model Cities required its own organizational form, the City Demonstration Agency (CDA) composed of elected officials, representatives of major agencies, and business leaders; CDA actions could be nullified by mayor or city council. Model Cities thus tempered OEO’s MFP community action nexus—and strengthen oversight and mayoral “direction” over program initiatives. CAAs had to make their peace with local government. Many disappeared, others adjusted.
Model Cities cemented “Gray Areas” comprehensiveness into Great Society/HUD-style community development. Title I outlined “an adequate program for a model neighborhood should … expand housing, increase job and income opportunities, reduce dependence on welfare, improve educational facilities and programs, combat disease and ill health, reduce the incidence of crime and delinquency, enhance recreational and cultural opportunities, establish better access between home and jobs, and in general improve living conditions” (Scott, 1969, p. 622). Not surprisingly, critics complained that it “gilded the ghetto”—encouraged separateness, and discouraged assimilation and integration. HUD’s first Cabinet Secretary, Robert C. Weaver argued to the contrary, that through Model City programs ghettos will be the stepping stone to assimilation. “Physical, social and economic planning will be combined to fit the residents of blighted districts to participate more effectively in urban life, and someday to live wherever they can afford the housing costs” (Scott, 1969, pp. 632-3) That was not the last word on that subject.
The second policy thrust of Model Cities was something called “metropolitan development”. In a simple way, metropolitan development brings us back to ultimate causes of nearly all the slum/blight clearance public housing, CBD-urban renewal, Big City economic development, and the Great Society programs—how to counter suburbanization. HUD’s answer in Model Cities was “area-wide planning” redefined into now-required metropolitan plans (Section 204) complete with input from a metropolitan entity (council of government, metropolitan planning group, or area-wide government). If cities (now meaning metro area) didn’t create these entities, no federal money. It worked while it worked—but when Model Cities went away so did many of these entities.
The legislation authorized for cities of all sizes grants to plan and implement comprehensive city demonstration programs to rebuilding or restoring entire sections or neighborhoods of slum and blighted areas by the concentrated and coordinated use of all available federal aids together with local, private and governmental resources. The number of demonstration cities was increased from 75 to 150 (without any increase in funding), testifying again to the almost inevitable “spreading” in economic development; 193 cities submitted applications. Almost immediately urban riots intensified, 71 cities had major riots that year. Responding to pressure, HUD in November awarded its first round of grants to 63 cities and towns (a Big City bias in funding was evident). The identical phenomena occurred in 1968, lots more riots, followed by a second round of funding (Goldfield (Ed), 2007, p. 485).
By this point Congress had approved the Housing Act of 1968, which, if one reads its provisions, ought to have been the capstone of the Great Society. That honor, however, probably goes to Model Cities. In a horrendously polarized election year, Congress overwhelmingly approved it—and then refused to fund much of it.
National Historic Preservation Act of 1966
The Historic Sites, Buildings and Antiquities Act of 1935 marked the formal entry of the federal government in historic preservation. Administered by the Park Service it funneled New Deal funds to combat the Depression through work projects and construction. The effort abated during the War but in 1947 private citizens through the National Council for Historic Sites and Buildings pressed for a more permanent federal role. Its success resulted in Congress in 1949 chartering the National Trust for Historic Preservation (a nonprofit that linked government, the Park Service, and private citizens). The 1966 Historic Preservation Act, however, institutionalized historic preservation by creating the National Registry of Historic Places.
The Act precluded use of tax incentives to demolish historic structures, buildings, and even neighborhoods which could be classified as a historic district (the Fells Point Neighborhood in Baltimore qualified as a historic preservation neighborhood and in 1969 stopped I-83 from going through its neighborhood). Tax incentives for rehabilitation were also authorized. One of the more famous uses of this legislation occurred in 1979 with qualification of Miami Beach Architectural District—the first district entirely composed of 20th century buildings—based on its distinctive Art Deco South Beach architecture. Historic Preservation was further expanded by the 1974 CDBG Act (Goldfield (Ed), 2007, pp. 331-3).
Riots
The riots began in 1964 triggered by any number of specific events and acts that captured the cumulative inequalities and day-to-day frustrations of living in predominately black, Great Migration central city ghettos. Harlem, Rochester, Jersey City, Elizabeth, and Philadelphia erupted in 1964. Watts rioted with serious loss of life in 1965, becoming the poster child (later shared with Detroit). In 1966 Chicago, Cleveland, Atlanta, San Francisco experienced significant destruction with the inevitable media exploitation. Tampa, Buffalo, Newark, Detroit blew up in 1967 in what was now an expected and increasingly destructive annual expectation. In 1968 the nation exploded. Fueled by Martin Luther King’s April assassination, and Robert Kennedy’s assassination in June, an estimated 120 cities disintegrated into a cascade of urban violence, destruction, and death. Riots were especially brutal, long-lasting and heart-breaking in Detroit; Baltimore and Washington DC. Residents still remember them with great emotion. To cap it all off, as the Democratic National Convention deliberated, Chicago imploded, and America watched day and night on TV.
Using sociologist Seymour Spilerman definition of race riot, between 1964 and 1971 752 riots occurred with 228 deaths, 12741 injured, 69099 arrested, and 16000 arsons. The peak year was 1968 (289 riots). Forty-four percent of the deaths occurred in just three riots (Detroit, Watts, and Newark) (McDonald, 2008, p. 149). The 1967 federal Kerner Commission reported in March 1968 “Our Nation is moving toward two societies, one black, one white—separate and unequal”. They blamed riots specifically on racial discrimination in employment, education, welfare, housing—and policing–and concluded the riots were anomic, unplanned, rapidly escalating disruptions that hurt overwhelmingly African-Americans. Almost totally, the looting, arson, and disruption was in Black neighborhoods[xxv]. Subsequent research revealed these neighborhoods between 1960 and 1980 lost one-third of their population—Cleveland’s declined by 65%, but Los Angeles (Watts) lost only 1% (McDonald, 2008, p. 153).
The question of how these riots affected the practice and policy of economic development in the following years is an important background element in the chapters that follow. Neighborhoods needed repair; some demolition/rebuilding did follow. In many cities, however, reconstruction was painfully slow—visible reminders of these years persisted for decades. The effect on people, obviously, was often profound and long-lasting. Suburbanization increased dramatically after the riots—and urban investment plummeted. The shock that hit Big City policy systems was transformative; policy agendas shifted dramatically, as did politics and political leadership.
A final, more subtle, legacy of the riots was their effect on subsequent policy-making political culture. Economic development policy-making can be deeply affected by “stories” (Stone, 2002, pp. 133-4) each policy actor brings into the policy process. The riots, dramatic and destructive as they were, became essential elements of many stories held by policy actors—not to mention the stories prevalent among residents, voters, and tax payers. Almost certainly these stories continue to affect contemporary sub-state economic development policy.
Nixonian Thermidor
Nixon won in 1968–an election in which one candidate (RFK) and Martin Luther King were assassinated. Vietnam War protests and summer riots continued, Chicago’s Democratic convention/riot left the nation stunned, and fearful. Both houses of Congress remained Democrat. Nixon won by a plurality (43.5%), with 301 electoral votes, (Humphrey 43%, 191 electoral), George Wallace’s won five Deep South states with 13.5% of total vote/45 electoral. .Wallace unhinged the southern Democratic Party, triggering a southern state Republican realignment. Republicans won 62% of governorships. Nixon’s 1972 presidential election was a landslide, exceeding Lyndon Johnson’s 1964 landslide
New Federalism
Nixon could have attempted to repudiate the Great Society. He didn’t. With Congress Democratic, Nixon choose to consolidate programs, but, counter-intuitively also extended the federal government into environmental policy, creating EPA (NEPA), OSHA, and 1972 Clean Water Act. As controversial as President Nixon proved to be, this history views his non-Watergate domestic activities as reshaping, even extending, certainly not repudiating, the Great Society. Nixon pressed for a “New Federalism” (Conlan, 1998) restoring the traditional balance between federal and State uprooted by Great Society’s Creative Federalism (Nathan, 2013). New Federalism meant creating ten regional federal councils to coordinate national programs and simplify regulations. Cornerstones of the New Federalism were revenue-sharing and block grants. Nixon’s New Federalism produced a mixed reaction, and a mixed bag of legislation—complicated by a Watergate-troubled presidency in his last two years in office. He resigned, of course in 1974 and Vice-President Ford became President through 1976.
Nixon’s reshaping of federalism directly affected economic development. Creative Federalism rested upon categorical grants bypassing state government to go directly to municipal/community-based recipients. Nixon’s New Federalism (1) combined many categorical grants into one “block” grant which (2) ran through the states and which (3) allowed the states meaningful discretion in its distribution (despite the existence of a formula) and administration (Finegold, 2004). There were three major block grants in the Nixon-Ford years and economic development was caught up in two of them (Housing and Community Development Act and Comprehensive Employment and Training Act).
The 1972 State and Local Fiscal Assistance Act established the core revenue-sharing program, in many ways the heart of Nixon’s New Federalism (Reagan ended it). Revenue-sharing was not important as a funding source for ED; in its first two years, ED received a whopping 2.2% allocation from eligible jurisdictions (Judd, 1984, pp. 344, Table 11-5). The significance of revenue sharing was empowerment of states/localities and a step back by the federal government.
Comprehensive Employment and Training Act
CETA was then and WIA remains today the nation’s cornerstone manpower-skills training-trade adjustment-one stop-youth-workforce program. It funds, at least partially, over five hundred specialized workforce EDOs throughout the nation. CETA interfaced with educational systems, and offered productivity/training for business. Building on the “unemployment-oriented” “Employment Act of 1946), “education-oriented” “G.I. Bill (1958), and Kennedy’s MDTA “structural” unemployment, skills deficiencies and occupational/trade displacement, CETA responded to a structural employment crisis induced by global technological changes, by retraining “dislocated” workers transitioning from one sector to another. CETA evolved into the nation’s answer to deindustrialization (Comprehensive Employment and Training Act A-58, 1977).
Workforce programs such as these are a departure from the traditional, “Go West Young Man” manpower program long practiced in the United States (Clague & Kramer, 1976). Restated that cute expression translates into “get a job somewhere else”. People mobility has been America’s default structural unemployment program, as the Southern Diaspora testifies. All sorts of specific programs existed previous to CETA. Kennedy’s MDTA was contemporary workforce’s pioneer legislation that targeted four objectives: counter labor shortages in key industry sectors, provide opportunities for the unemployed, upgrade labor force skills to render them more competitive, and provide an avenue out of poverty (Levitan & Mangum, 2003). Also, on-the-Job, institutional classroom-based instruction, remedial instruction, curricula design, and some placement were handled through DOL and contracts with local vendors, community agencies and institutions. By 1970 estimates were DOL managed over 10000 such contracts. Between 1962 and 1964, about 100000 workers participated annually.
The 1964 War on Poverty launched the Jobs Corps, the Neighborhood Youth Corps, Operation Mainstream, Adult Basic Education, the Work Experience Program, Public Service and New Careers Program, and through Senator Kennedy’s Special Impact (1966) legislation, the Concentrated Employment Program (CEP). About 65% of those served in these programs were low-income. Another Great Society Program, Opportunities Industrialization Centers (OIC), started in 1964 but operated by special funding to nonprofit corporations accessible to low-income unemployed African-Americans. The WIN (or Work Incentive Program) operated out of Social Security Administration, providing supportive services such as day care, social and medical assistance, and some skills and job training to those on public assistance. By 1967, an estimated seventeen categorical programs existed in these workforce programs. Among other programs it funded, CEP issued contracts to CAAs to coordinate this mélange of initiatives within their target areas—82 CAAs received these CEP contracts (Comprehensive Employment and Training Act A-58, 1977, pp. 3-5).
DOL fragmentation and coordination were serious concerns; several administrative solutions were attempted, notably CAMPS, the Cooperative Area Manpower Planning System. CAMPS funded states (governors specifically) to set up area-wide planning/advisory committees; in 1970, mayors were funded to do the same. By 1973, over 400 area-wide or local CAMPS committees were in place, each state had a “manpower planning council” and more than 1200 full and part-time positions were funded with CAMPS dollars. In 1972, their composition was mandated and enlarged to include local elected officials, business and labor leaders, and institutions. They “supposedly” were entrusted with making recommendations to chief elected officials on manpower funding and programmatic matters. Mayors and governors became in the process the chief coordinators of this manpower/workforce nexus. Whether any of this worked as was intended is unknown, but one might be skeptical. CAMPS served as the foundation for CETA.
Nixon’s Workforce Initiatives: Nixon’s 1969 Manpower Training Act proposed consolidating categorical programs into a “New Federalism” block grant. Winners and losers battled it out in Congress, along with Big Cities that feared they would not fare well competing with suburbs and second tier cities. The legislation was defeated in 1971. A new bill was filed with manpower one of “six special revenue-sharing proposals” in an omnibus multi-policy area bill (Manpower Revenue Sharing Act). Congress, it was said, reacted with hostility and apathy—which seems hard to combine—and so in 1973, the Nixon Administrative carved out a third special manpower bill, based upon existing Presidential authority to oversee on-going programs, and which offered locals a carrot by decentralizing manpower decision-making to the CAMPS planning councils. So we backed into the CETA framework.
Through a formula, about 70% of the appropriation went to the chief elected officials (CLEOs) and governors where CAMPS did not exist for allocation to manpower programs. Nixon’s bold action finally got Congress motivated and compromise produced a final bill that passed in 1973. What emerged was a hybrid block, revenue-sharing, categorical grant omnibus, fairly decentralized, federally-financed workforce system. Most first-level decision-making and allocation of funds (compliant with federal guidelines and objectives du jour) was made by local/state “Prime Sponsors”. Accordingly, would approve Prime Sponsors (the legislation was silent) became the next battleground. Governors wanted in, so did mayors; debate and compromise followed (Davidson, 1974). Congress approved the bill on December 20, 1973; eight days later Nixon signed “the Comprehensive Employment and Training Act of 1973 (barely).
So what had tumbled out of this washer/dryer policy-making? Title I (consolidated seventeen categorical grants) created a block grant to “Prime Sponsors” (either state or local government CLEOs) for a variety of manpower tools/programs (training programs, employment services, testing, counseling, placement and supportive services—the whole shebang). There was no required matching. Cities and counties (or consortiums) greater than 100,000 could become Prime Sponsors. The CAMPS planning council was used by CLEOs to operate/administer funds. To receive funds a comprehensive plan had to be approved. The Prime Sponsor determines the mix and allocation to the various eligible alternatives. Funds were allocated among Prime Sponsors through a formula based on (1) previous funding level, (2) number unemployed, and (3) number of low-income (with various set asides at the state level for vocational education and state-level manpower services). The Job Corps survived. With nips and tucks, ebbs and flows, this structural framework endures to the present—through JTPA, WIA and now OWIA.
1974 Housing and Community Development Act
The 1970 Housing and Urban Development Act, a creature of Congress, continued most 1968 Housing Act and Model Cities programs. Model Cities, rent supplements, rental housing (Sections 235/236) and public housing funding increased. One interesting innovation was the Urban Growth and New Communities Act picked up LBJ’s earlier “dream” to build new (suburban) towns, dispersing African-Americans throughout the metro area deconcentrating ghettos. Consensus within black ghettos, however, had moved away from assimilation to separate neighborhoods controlled by residents. The Act created a Community Development Corporation with $500 million to guarantee debt by public and private developers (Smookler, 1975).
Between 1970 and 1973, HUD was hit with a series of major scandals—chiefly involving Section 235 (homeownership)/236 (rental housing). In 1973, an even worse scandal reached into FHA, and several other HUD programs. The poor were sold sub-standard, excessively-priced, over-appraised homes by real estate speculators. Granting FHA insurance to Section 235/236 bordered on fraud, and HUD’s administrative competence was seriously questioned. Nixon announced a moratorium on HUD spending until studies, audits and analysis could be conducted (Sullivan, 1979, pp. 389-91). By 1974, with Nixon leaving office, the stage was set for a fundamental repivot of HUD and the nation’s housing programs. The result was the 1974 CDBG Act, signed by President Ford, taking effect in 1975.
The 1974 Act, built around Nixonian block grant, revenue-sharing and administrative decentralization established the present-day Community Development Block grant, funding it at $7.9 billion. Combining seven categorical grants distributed by formula to eligible grantees (including states, municipalities), the HUD block grant included economic development programs such as historic preservation, revolving loan funds, fair housing, and urban renewal. The key control was the Housing Assistance Plan required of recipients. Decentralization of decision-making and local administrative flexibility were key objectives—as was limiting the role of the federal government in public housing.
The Act pivoted the federal government away from public housing projects and landlord role for the nation’s poor into Section 8 housing. Section 8 provided direct rent subsidy to low-income recipients that covered gaps between rent able to be paid by the recipient and the privately-owned rental unit rate. This pivot from public housing marked the end in CD’s long-standing and controversial CD public houser housing movement. The Age of Urban Renewal and Public Housing was over! Section 8 offered a new tool for Community Development Corporations, who now worked with private developers to construct low-income housing in depressed, low-income neighborhoods—while at the same time permitting, indeed, later requiring, middle-class neighborhoods and suburban communities to house low-income families and individuals. Section 8, with its strengths and weaknesses, continues to this day as the cornerstone housing policy of the nation. CDBG authorized staff/administrative cost reimbursement fostering growth in sub-state CDCs/EDOs.
Historic Preservation Act of 1976
The Act[xxvi] partnered IRS with the National Park Service to create a historic preservation tax incentive program appropriate to private restoration of historic properties, often in partnership with State Historic Preservation Offices (SHPPOs). The legislation provides public subsidy to properties that are income-producing so long as they are listed on the National Register, and rehabilitated according to Dept. of Interior standards. Since 1976, the Act has levered more than $33 billion private sector investment in over 32000 historic properties, creating about 185000 housing units, of which 75000 are low-moderate (2015) (Ryberg-Webster, 2014).
EDA Changes its Stripes
EDA couldn’t sit still during the Seventies—six legislative acts were approved in the decade. Congress added three new “Titles that established EDA as a home for mainstream urban physical redevelopment and business assistance ED to counter-balance HUD as the home base for Community Development. CUED was no small part of that. Lost to history was an agency formerly dedicated to rural ED. No consensus existed in Congress as to what role the federal government should play in sub-state mainstream business assistance and physical redevelopment. That was really nothing new—with periodic exceptions, the policy area has been conflict-ridden since the National Highway and canal-building days. Many believed the feds could accomplish very little outside of infrastructure (and macro-economic policy), except distort the marketplace. Since FDR, however, Congress (and JFK) had argued for a comprehensive program to combat distress in severely-distressed and depressed areas. The Great Society in 1965 created Economic Development Administration to support, through physical development and infrastructure, the Appalachian Regional Commission’s efforts to reduce rural area-wide poverty and economic distress.
The six legislative acts between 1965 and 1975 refocused EDA away from that function, and moved it into the federal vehicle used to “provide direct assistance to urban areas … address issues confronting communities experiencing sudden and abrupt economic dislocation caused by factory shutdowns, foreign competition, base closures, and disasters … [provide] anti-recessionary [funding]… for public works projects as a means of creating jobs and priming the economic pump” (Boyd, 2011). In hindsight, the “toe-in-the-door” refocusing legislative act was a 1971 EDA amendment, vetoed by Nixon that somehow got included into another legislative bill to extend EDA through 1973. That legislation was approved and signed. Nixon never supported EDA. He usually included some statement with his signing, asserting EDA or its programs did not create jobs for the poor, overlapped with other federal programs, and should spend more effort on rural areas.
The 1971 two-year extension also included a previously vetoed bill creating “special impact areas” as eligible for Title I programs. In fact 25% of EDA’s Title I funding was tied to these areas, defined as areas with large concentration of low-income households, high or abrupt increases in unemployment, such as the closure of a factory—all of which applied to urban, as well as rural areas. The legislation encouraged short-term job-creating projects, as well as EDA’s original goal to produce long-term ED benefit for distressed areas. These additions were included in new legislation extending EDA for two years (until 1976), signed by Nixon because his bill, the Rural and Urban Community Development Revenue Sharing Act, had gotten nowhere. In 1974, Nixon proposed that EDA address needs of local areas affected by natural disasters. Congress agreed and approved the Disaster Relief Act of 1974 that added a new title. The disaster relief initiatives included authorization to capitalizing RLFs to help businesses access capital. This turned out to be one of EDA’s most helpful and utilized programs.
Overriding a Ford veto, Congress in 1976 approved the Public Works Employment Act that enlarged EDA involvement in public works as job-creating projects. In the same year, Congress also passed amendments to EDA’s basic legislation, extending it through 1979, making explicit its ability to operate in urban as well as rural areas. The 1976 amendments liberalized several EDA programs, reducing local match, making eligible private sector costs like interest on loan guarantees, interest-free loans to redevelopment areas (urban renewal) to facilitate land acquisition and redevelopment. They also required newly elected President Carter to convene a White House Conference of Balanced National Growth and Economic Development (held from January 29, 1978 to February 2). The report from that conference called for no new federal programs, rather for more effective government and a “real” partnership among levels of government and the private sector.
Carter was also unable to secure permanent funding for EDA in 1979—he did secure legislation extending it through 1982—but no permanent reauthorization of Congress occurred until 1998. EDA survived on periodic legislation that extended its funding for a few more years. Said and done, it took EDA thirty-three years to achieve permanent status as a federal agency.
SBA
During Nixon years, SBA started its successful Small Business Institute program (SBI-1970) by reaching agreements with four professional organizations to provide counseling to small business. This was quickly extended by 1975 to include over 400 colleges and universities, 20000 students and 8000 firms (Bean, 2001, p. 83). SBI offered education-based expertise from business students and advisors to small companies. In 1996 SBI became independent of SBA, continuing to this day self-funded complete with a Journal and annual conference. Conversely, a Nixonian initiative to transfer the successful SCORE program to ACTION generated a four year struggle with the volunteer-based program, culminating with SCORE’s establishment of its own non-profit in 1975. SCORE would be independent, but coordinated through SBA. Given SBA’s alleged long-standing indifference to SCORE in the long run this may have been a positive.
Great Society
The Great Society, including its Nixonian Thermidor, was a game-changer for sub-state ED—and a revolution for community development. It left a “permanent” legacy in the form of a substantial nexus of federally-funded local CDOs/EDOs operating in most communities/regions in the nation. Literally thousands of workforce (CETA)-related Prime Sponsors, a greatly expanded SBA, and Nixon’s EPA and Clean Water initiatives. Great Society programs fostered emerging government departments/offices through HUD and EDA funding, created networks of regional planning/economic development entities, mostly in the South, but also A-95 and metropolitan clearing houses that fostered regional planning—and, of course the controversial CAP and its successor neighborhood level CDOs. Left behind was Industrial Decentralization.
The physical landscape of American sub-state economic development has never been so dramatically enlarged in so short a time. During these years the federal government injected a programmatic and financial pipeline directly into most American jurisdictions. Buried under this avalanche was classic chamber-based ED. Most ED/CD eyes and grant applications were fixed on Washington. Through block grants the federals had roused (and fed) the State beast and it too took more notice of sub-state ED.
The nearly four decade-old slum clearance, public housing/urban renewal CD/ED strategy-juggernaut intended to preserve Big City metro hegemony was, for all practical purposes, redirected to “softer”, more people-focused neighborhood-based empowerment—and CBD-related revitalization. Public housing was effectively abandoned in favor of neighborhood-based CDO and private housing redevelopment—and individual Section 8 vouchers for privately-owned housing. In its wake, the Great Society had not simply rejuvenated American community development, it actually forged an updated community development that accommodated the Second (and Third) Ghetto. The explosion of CD strategies and tools has added a robustness to the profession it formerly lacked. A Policy World network and an enhanced CD-foundation complex had formed as well.
Of course, the Great Society did not single-handedly “create” Contemporary Economic Development. Rather it was a shotgun whose programmatic discharges flew in any number of directions—from southern sub-state ED policy systems, to Big City inner neighborhoods, periphery suburbs, to the formation of intended and unintended wings of a new contemporary community development. Its short, profound and widely-dispersed disruption—accompanied by the fury, confusion, and dynamic reaction it unleashed revealed to us all the “page of history” was turning. By 1974, American economic development looked very different from what it did a decade earlier.
As for the riots. The Great Society did not “cause” the riots. Big City upheavals had been brewing for some time awaiting a critical mass and a crack in the system. The Great Society knocked down the Big City’s municipal policy system’s house of cards. It cracked open local policy systems and into the gap poured the activism and resentment inspired by unsettling population movements and generational cohort change. It coincided with the loudest civil rights crescendo and the soon-to-be evident implosion of the northern/Midwest hegemony. Timing is everything they say.
The Feds Regroup
Carter Years
The Carter economic backdrop included inflation (stagflation), leading to a 1980 21.5% prime rate triggered by 1973 and 1979 oil/energy crises. The Second War between the States moved “off-Broadway” by then and “deindustrialization” was called reindustrialization. FIRE sectors and technology were the new gazelles. Before Carter was elected, a Democratic Congress overturned Ford’s CETA veto, extending the Nixonian workforce block grant, embracing the spirit of Nixonian Thermidor.
Democrats held super-majorities in both branches after 1976–with fewer Southerners in committee chairs, and (1977) Boston’s Tip O’Neil Speaker. Carter’s election meant Democrats controlled three branches of the federal government; they would not do so again until 1993.Carter, however, did not overturn Nixon’s Thermidor; no new block grants, but the old ones were constantly tweaked, formulas readjusted, sections added. Between 1975 and 1980, 92 new categorical programs were created, bringing the total to a record 534 (Conlan, 1998, p. 94).
CDBG: In 1977, the Departments of Education and Energy were approved. Extension of the CDBG (1977) tilted block grant formulas from the Sunbelt to Northeastern/Midwestern central cities. New sections attacked red-lining, and CRA Title 9 provided some muscle to activists interested in reversing disinvestment in central city neighborhoods. In 1978 Carter proposed neighborhood level initiatives, including an Urban Volunteer Corps, a Community Development Credit Union, several crime prevention programs and a HUD Neighborhood Self-Development Program. They were not approved.
UDAG: On the whole, UDAG was more Congress’s doing, than Carter’s; it gave new life and direction to central city redevelopment (Nathan, 1980). Administered by HUD, it either conflicted with, or supplemented, EDA’s Title IX and was considered a public/private partnership to revitalize “distressed cities”. UDAG provided critical funds to besieged mayors coping with central city decline. Only twenty-eight per cent of pre-1980 UDAGs (there were 241 by then) went to the Sunbelt. $1.4 billion went to industrial projects, a little less went to office, $300 million went to hotels and less than $300 million to residential projects–in large central cities (Mollenkopf, 1983, p. 279). UDAG ended in 1986.
The Earmark: Pork has a long tradition in Congress; but the “earmark” is a special kind of pork that became so commonplace today earmark and pork are synonymous. Earmark is a specific allocation for a specific project of some description which, by itself, would almost certainly not be approved, but when placed innocently in an unrelated larger bill, along with other earmarks, creates a critical mass for which any number of legislators will vote. The earmark is so designed that lobby firms secure annual retainers for delivery of additional earmarks. (Kaiser, 2009, pp. 69-81) The first legislative earmarks for Georgetown and Tufts Universities was approved in 1976-1977. Over the next several decades will be used more each year, by any number of jurisdictions to achieve all manner of projects, many legitimate economic development initiatives.
White House Conference and SBDCs: In 1978 Carter attempted a major reorganization of ED federal agencies/programs. His legislation would have combined EDA, HUD, SBA with a National Development Bank and other programs in Commerce and Agriculture. It passed both houses but died in conference–testimony to choppy politics. Carter himself repudiated many of its recommendations during the reelection campaign. The National Development Bank, a proposal from Carter’s Urban and Regional Policy Group, intended to make/guarantee loans/grants to depressed urban/rural areas for ED was not well-defined, and less well-received by Congress. See Mohl Urban Policy pp22-23******
Carter’s National Agenda for the Eighties got lost in his reelection campaign. The Agenda attempted to reconcile tensions caused by Sunbelt-Snowbelt conflicts. The Agenda recognized the now-chronic manufacturing plant closings, downsizings and job losses that had prompted the “reindustrialization” debate of the Seventies. Recommendations included relocation of unemployed to areas where jobs were more plentiful. More successful was Carter’s 1980 White House Conference on Small Business which prompted Congress to establish a nation-wide system of Small Business Development Centers as clearinghouses for one-on-one small/startup counseling and business plan formulation. Usually linked with a university or college, these SBDCs steadily grew in number/capacity in the following decades. Also Bayh-Dole reform of patents was approved in 1980.
Foreign Trade Zone: A number of important changes were made to the FTZ. FTZ first established in 1934 (anti Smoot-Hawley tariffs) was administered by the Bureau of Customs. FTZ was a demarcated-area zone (creating a tax-free “island”) that facilitated import-export activities by foreign and domestic firms. In early practice, FTZ amounted to a-little-used tax-free storage of imported goods. In 1970 there were only eight FTZ and 3 sub-zones in operation. The key obstacle to increased usage was the 1934 Act which discouraged manufacturing within the zone (inverted tariffs). Under pressure from its user-trade association (NAFTZ), the FTZ Board in 1980 permitted value-added manufacturing within the zone/sub-zone to be tax free and effectively dismantled the island zone concept. In 1980 approximately 50 zones were in operation; by 1986 there were 150; by 1990 177, and in 2007 approximately 260 zones and 400 sub-zones in operation.
CERCLA-Superfund-Brownfields: In 1980, CERCLA-Superfund legislation was approved by Congress. CERCLA included the Superfund remediation program, but also authorized funds, regulatory procedures and clean up/liability standards appropriate to private and local brownfield remediation as well. Each state enacted its own “voluntary clean-up program” (VCP). The design of the EPA brownfield initiative (as opposed to superfund) was based on cooperation, consensus, and self-interest determined by voluntary agreements funded by grants and tax credits and the explicit acknowledgment of the leading role of state/local officials in cleanup efforts (Hula, 1999). By the end of the 1990’s most states had enacted such programs. State variation in brownfields programs was huge.
Variations included: eligibility, whether project was voluntary or compulsory, extent and form of liability release, process for approvals, who issued approvals, third party liability relief, support available to participants, degree of flexibility in clean-up standards, and reopener clauses. Participants who had actually created the site (PRPs) could be treated quite differently from state to state. Some states were so strict, the intent seemed more to punish polluters than remediate sites. Other states provided support and incentives to PRPs. Michigan, for instance, empowered-authorized localities to create a “Brownfields Redevelopment Agency” (a Quasi EDO) with key powers, liability relief and access to relevant state programs and support. Others states dragged PRPs to court. The issue was the inherent complexity underlying brownfields remediation: its legal nature, its required compliance with established chemical formulas, and the inability to provide any involved party, including banks and other potential funders, long term security (“reopeners”)–all rendered brownfields remediation an immensely complicated, fragile, and time consuming affair.
Reagan Devolution
In a three way race (John Anderson and Jimmy Carter) Reagan-Bush won a landslide (winning 44 states). The 1984 election was even worse from the Democratic perspective–49 states went for Reagan-Bush. Not even Massachusetts voted for Mondale-only his home state Minnesota. Dukakis-Bentsen did better in 1988, winning 10 states, but Bush-Quayle squeaked by with the other 40. All in all, 1981-1993 was the longest period since 1920 when Privatist Presidents governed. Yet Reagan-Bush years were an era of divided government. They were, however, years of increasing disunity within the Democratic Party. The formerly solid Democratic South shifted Republican. Democrats retained control of the House, but the Senate went Republican for the first time since 1953. This pattern repeated itself in 1984 and 1986, but Democrats regained control of both Houses in 1988.
Reagan’s administration never formed a formal urban or sub-state ED approach. Reagan intended, and to a certain extent succeeded, in pulling the federal government from sub-state policy areas and ending Great Society direct city-federal relationships. Sub-state jurisdictions were the states’ responsibility, forcing States, willing or not, to assume a greater role. Its key concept was “devolution” whose spirit was expressed in his first inaugural address:
It is time to check and reverse the growth of government which shows signs of having grown beyond the consent of the governed. It is my intention to curb the size and influence of the Federal establishment and to demand recognition of the distinction between the powers granted to the Federal government and those reserved to the states or to the people[xxvii].
To accomplish this promise, Reagan set forth a sweeping agenda of budget reductions, tax cuts, personnel freezes, block grants and deregulation initiatives. Remarkably successful in his first two years, he found the going got tougher after:
Federal income tax rates were cut 25 percent and business taxes were reduced an additional $50 billion; federal spending for domestic programs was reduced by $35.2 billion with savings over subsequent years totaling over $130 billion; nine new block grants were established, consolidating seventy-seven programs and sixty-two additional programs were terminated (Conlan, 1998, p. 96)
Reagan’s devolution disrupted urban ED greatly. Gone was revenue sharing ($1.8 billion), job training and public service jobs were cut by 69%, CDBG halved (54%), urban mass transit reduced by 25%, and UDAG by 41%. In 1980 federal dollars constituted 22% of Big City (over 300,000) budgets—by 1989 it was 6%. State governments didn’t pick up the slack; their percentage was 16% in 1980 and the same in 1989. (Dreier, 2002, pp. 126-7) The residue of OEO (War on Poverty) was converted to the community services block grant and transferred to the Department of Health and Human Services (1981)—by 1985 its funding had been reduced by $1 billion. Between 1981 and 1992 federal aid to cities was cut by 60% (Domhoff, 2013, p. 246). Public housing programs and Section 8 were cut, at one point, by 80%. Two private sector-dominated task forces (President’s Commission on Housing and National Urban Policy Report) issued reports in 1982 clearly detailing the Reagan approach to sub-state ED/CD—wherever possible it should be left to the “free and deregulated” private sector.
EDZ: Although Robert Kennedy in 1968 initiated legislation roughly similar to the 1981-Kemp-Garcia enterprise zone, the idea originated from the United Kingdom. Ironically, this most Privatist of ED programs was initially proposed by social democrat Peter Hall in a 1977 Royal Town Planning Institute conference. Hall called a Hong Kong-style Freeport (sort of an American FTZ) for distressed British urban areas`. Picked up by Sir Geoffrey Howe, a highly placed Conservative MP, given the label “enterprise zone”, Howe retained tax abatements, reduced planning approvals and included wage/price exemptions. The concept was to reduce taxes and regulation in clearly-defined distressed geographic areas hopefully resulting in a private investment surge and, yes, innovation. Enterprise zones assume micro-economic cost reductions will triumph over geographic and demographic constraints.
Embraced by the Heritage Foundation’s Stuart Butler[xxviii], Butler reshaped the zone to address housing reform and neighborhood revitalization rather than British-style job creation through startups. This change attracted Congressman Jack Kemp and Bronx Democrat Robert Garcia. In June 1980 (Carter years) Kemp and Garcia introduced Kemp-Garcia Urban Jobs and Enterprise Zone Act (Benjamin, 1980). The Act blended business job creation with people-based housing/neighborhood redevelopment; the federal role included significant federal tax abatement and depreciation allowances. Reagan did not back the 1981 Kemp-Garcia. Instead, in 1982, Reagan supply-siders returned the concept to its original job creation economic development Privatist roots. For Reagan:
The urban enterprise zones concept was pure supply-side economics… identify and remove government barriers to entrepreneurs who can create jobs and economic growth. It will spark the latent talents and abilities already in existence in our most depressed areas. Both public subsidies and the easing of environmental and zoning restrictions were important components of the enterprise zones proposal… few zones were proposed (75) (Judd, 1984, p. 361)
The bill’s reliance on startups and hiring low-income zone residents was inspired by David Birch’s, the Job Generation Process (Birch, 1979). Perhaps surprisingly, the EDZ bill generated bipartisan support, particularly from the Black Caucus and a number of ED professional associations (NASDA and, to a lesser degree, CUED). Reagan’s bill, however, was regarded by Progressives as ineffective, resting as it did on tax abatements to firms (Butler, 1982). Abatements were believed unlikely to motivate a firm’s location decision. The bill would simply reshuffle firms from one site to another. Other concerns were the EDZ’s reliance on tax credits (useful only for profitable firms). Quality of jobs was questioned, as was whether jobs would flow to zone residents or outsiders. Committee chair, Dan Rostenkowski bottled up the bill; he did not uncork the legislation until 1993. EDZ was never approved in the 1980’s.
IDB: IDBs were easy targets for Reagan reform legislation. The 1968 Revenue and Expenditure Control Act had sharply limited IDB issuances and eligibility by establishing two IDB “types”: exempt and small issues. Small issue IDBs declined dramatically during the seventies. “Reforms” were approved in 1982 (TEFRA) and 1984 Deficit Reduction Act (DEFRA) climaxing with the 1986 Tax Reform Act. Each Act regulated (and limited) IDB issuance—and restricted eligibility to small manufacturers and nonprofits. IDB restrictions were primarily intended to enhance revenues. “Tax exempt bonds were under constant attack throughout the 1980’s as an inefficient subsidy and unacceptably large drain on federal revenues. The revenue loss totaled $20.4 billion in 1983”. (Conlan, 1998, pp. 137-8)
JTPA: The 1982 Job Training Partnership Act (JTPA) replaced the Nixonian CETA block grant. JTPA was a bipartisan effort reform intended to fix an unloved CETA.
Although CETA provided jobs for more than a million unemployed persons and work experience for thousands more, by 1978 the program had become for many a ‘dirty four letter word’. Stories of corruption and mismanagement–directed mainly at CETA’s public employee titles–undermined support for the entire legislation. Moreover careful evaluations of CETA training programs often failed to detect substantial improvements in the future earnings of trainees (Conlan, 1998, p. 166).
Congress had attempted reform since 1978; several Democratic/Republican reform bills were under review in 1981-82. A 1982 compromise bill, sponsored by Senators Quayle and Kennedy, formed the nucleus for JTPA.
The bill reduced trainee benefits and subsidies, expanded state/local roles, intensified participation of business, and capped state administrative/support expenses by requiring 78% of the state appropriation be transferred to the locals. The CETA system of local “prime sponsors” was terminated and units of local government with populations greater than 200,000 were designated as “service delivery areas” (SDA), each administered by a “private industry council” (PIC) responsible for a locally approved plan and fund allocation–subject to approval by its chief local elected official (CLEO). JTPA decentralization and augmented private sector input did change the process. The role of the states remained meaningful. The delivery system, while different from CETA, was not a radical departure and the inclusion of the CLEO augmented political and partisan dynamics into local administration of the federal workforce program[xxix]. Cynically, JTPA was a work in progress in many respects, but remained the cornerstone of the nation’s job training and youth employment approach.
SBA: In 1981, SBA launched its now well-respected, “504 Certified Development Program”. The 504 Program, closely mirroring the earlier SBIC organizational structure, was “fixed asset” financing (real estate, machinery, inventories). Like SBIC, the 504 Program was administered through a SBA licensed, nation-wide network of private, usually nonprofit entities that packaged, issued and serviced the SBA loan/lien. The loan structure was, similar to SBIC, involved multiple participants (owner-10%, bank lender (at least 50%), and proceeds from the SBA-issued debenture (up to 40%). Thus the 504 program was designed to partner with banking institutions to offer conventional-like financing to businesses unable to meet bank standards. Retail, companies experiencing recent growth, or counter-business cycle pressures found the 504 to be especially useful. Rural areas also benefited from financing made available by regional, multicounty certified development corporations. By the first decade of the 21st century, the 504 Program had licensed nearly 300 Certified Development Companies; 70,000+ loans, totaling more than $28 billion had been closed, and a small, but vibrant, secondary market had evolved. A professional association, NADCO, founded in 1981, represents nearly all the licensed CDCs and provides lobby support for the program and technical expertise.
Ignoring conservative screams, Reagan in 1982 signed the Small Business Innovation Research Act (SBIR)[xxx]. SBIR facilitates small business startups and commercialization of new technologies, processes and innovation. SBA serves as the coordinator, overseer, reporting agency, and contract point for several federal agencies[xxxi]. Annually a (presently) 2.5% set aside from federal R&D appropriations funds SBIR grants to eligible firms that compete in annual application cycles. Each department technically oversees approved grants/projects. SBIR is a three phase program: Phase I (based on technical merit, feasibility and commercial potential); Phase II (up to two year development of Phase I projects); Phase III leads to commercialization, and is funded by individual Departments. Through FY 2009, SBIR funded 112500 awards dispersing nearly $27 billion, assisting 15,000 companies, 50000 patents, and involved approximately 400000 scientists and engineers (Rosenbloom, 2007).
CDBG Small Cities: Reagan consolidated 54 categorical grants modifying or creating nine block grants including CDBG and the Community Services Block Grant. CDBG was modified to create a “small cities” (under 50,000) program to third/fourth tier cities. The small cities program was decentralized to states who set priorities, application process and approved allocation. Small cities probably fared well, better than larger “entitlement cities’ whose share declined, about 5%.
PTAP: The1985 Procurement Technical Assistance Program (PTAP) administered by the Defense Logistics Agency assists companies to obtain contracts with federal, state and even local governments. Funded in a cooperative agreement with the Department of Defense, a nation-wide, state-based, network of Centers for free or low cost, provide information, support and training to companies desiring to bid, register and secure governmental contracts. The centers are usually nonprofit, EDOs, Tribal, university-based or governmental–depending on the state.
UDAG: Reagan had consistently opposed or defunded UDAG—he also annually defunded EDA—but Congress put it back in, at lesser amounts. To attract more support for UDAG, Congress prodded HUD to broaden eligibility to include more localities. Some states (New York and its UDC subsidiary for example) copied the UDAG program. Congress did not fund UDAG in 1988 (Reed, 1993) and it went gentle into the cold, dark night. Direct federal financial involvement in urban renewal ended.
Manufacturing Extension Partnership:
Throughout the 1980’s it seemed American manufacturing was having its lunch eaten by the Japanese and Europeans. American industry was losing its competitiveness—even in its gazelle-like technology (electronic) sectors. American goods were perceived as inferior quality, and management closed and stagnant, resistant to new processes and innovations. How we made goods, “managed workers” and innovation seemed in need of rethinking. In this atmosphere, the Hollings (from its sponsor Senator Hollings, South Carolina) Manufacturing Extension Program (MEP)—committed to providing customized, shared cost services in partnership with small/medium-sized manufacturing firms and enhancing technological competitiveness was launched. An obscure section of the 1988 Omnibus Trade and Competitiveness Act authorized the founding of manufacturing extension centers and services, (eventually in 1994) run out of National Institute of Standards and Technology (NIST).
Initially, MEP focused on technology-transfer of technologies developed in federal laboratories. A substantial refocus of services to meet client needs and demands over the first decade followed (Sargent Jr., 1915) Quality control, productivity innovations, integrating Japanese-proven techniques (Sigma 6, lean manufacturing) and process innovations (ISO 9000 started in 1987) were its chief foci. In later years it expanded into technology and startup initiatives (Masterman, 2009). In these first years, centers were initially set up in South Carolina, Ohio and New York; by 1994 44 centers existed—today MEP is found in all fifty states.
Impact of Reagan/federal government on Sub-state ED/CD
Two sets of comments need to be made: those concerning the Reagan Years and those concerning the role of the federal government in state/sub-state ED/CD. Said and done, Reaganism pulled the federal government back, not out, of sub-state economic development. Ideology and philosophy aside, the impact was primarily fiscal. Federal cash flow to cities/ED/CD was severely cut. Cutbacks stressed economic development to help “pay the bills” and intensified ED politicization. CD had a bit of the rug pulled away—the price of dependency on the feds. Mostly, states and cities did not replace federal funding with own-source revenues. That is particularly true of CETA public service employment programs—which were zeroed out. Some commentators (Kleinberg, 1995) asserted the more hidden impact was to preference Sunbelt growth cities—perhaps–but it is not at all evident what the proper role of the federal government should be regarding regions and regional change. If national ED/CD preferences are also a public policy, than elections and policy-making determine who gets what.
The more interesting observation is how much was left intact of federal involvement in state/sub-state. Certainly the vehicle (block grants) differed from the categorical direct linkage of the Great Society, but federal involvement in the strategy/program persisted. Categorical grants, however, continued in surprisingly high numbers—mostly due to a Democrat Congress expressing itself programmatically. A variety of new ED-related initiatives started during these years (CERCLA, Manufacturing Extension Program, Bayh-Dole legislation, FTZ, block grant formula changes and more). A little noticed example of a Public Works bill, passed by Congress in 1987, subsequently vetoed by Reagan, overturned by Congress, provided federal support for likely the largest local infrastructure/highway project in the nation’s history: Boston’s Big Dig. This seriously challenges the prevailing wisdom Reagan Years were years of an unremitting “No”. Whatever Reagan intended, the federal government emerged from these years as an active player in state and local ED/CD—maintaining a strong and durable presence in key strategies such as workforce, employment assistance, export, small business and CD. An aggressive federal government involved in sub-sate ED/CD continues as a fault line between our Two Ships.
Federal Government Carves out a Role: People v. Place
Community mobilization and CDC neighborhood community economic development strategies blurred if Alinsky’s IAF was any indication. Neighborhood-level CD could not escape its place-based approach to empower, mobilize and revitalize deteriorated geographies populated by low-income and minorities in an era of Deindustrialization. That meant assimilation requiring movement to other geographies, potentially at cross-purposes with its place-based focus. People-based and comprehensiveness remained cornerstones, but were linked with revitalization of deteriorated, mostly central city neighborhoods. It was difficult enough to change people, but to change neighborhoods physically and economically at the same time was no small feat, with or without Reagan. More and more the likelihood a Third Ghetto may have developed—a ghetto that no longer had believable hope that a job was achievable.
The national atmosphere that sustained aggressive community organizing began to lose steam previous to Reagan’s election—or more precisely Privatist anti-tax referenda (and organizing) captured the media and public’s attention. Reagan deemphasized and defunded HUD-style housing and CD programs. That, of course, set back local CDCs. Reagan and Bush moved in a different direction providing assistance directly to people. Reaganism had stolen CD’s thunder. Two programs in particular, earned income tax (EIC) & low-income housing tax credit (LIHTC) (expanded by the 1986 Tax Reform Act) dramatically reshaped federal anti-poverty and low-income housing approaches. Reagan initiatives were not limited to distressed neighborhoods; those eligible got benefits wherever the low-income person resided.
LIHTC provided incentives to private investment in low-income affordable housing. Today it is estimated more than 90% of low-income affordable rental housing utilizes LIHTC. LIHTC is not linked to distressed central city neighborhoods. EIC (which actually started in 1975) provides tax credits to qualifying low-income families with children. At least 26 states have added their own EIC tax credits as well (2012) (as have some sub-state jurisdiction: Montgomery County, MD, NYC and San Francisco). Both programs have incrementally expanded several times since their creation. To think these federal “direct to people” programs as Privatist CD would be controversial; both fall in a cultural limbo (or gray area). Still, as early as 1990, a major study of CDC financing reported 94% of CDCs that responded received more than $50000 annually from LIHTC[xxxii]for program support.
The same could be said for Hope VI, a page-turning public housing redirection that is usually credited to the Clinton administration, but actually grew out of the 1989 Congressional National Commission on Distressed Public Housing. The Commission’s recommendations/action plan called for a radical redirection of federally-supported public housing. Congress and the new Clinton Administration concurred, approving legislation that among other reforms provided substantial funds for demolition of severely distressed public (high-rise) housing. Remembering that public housing was an Age of UR outputs, HOPE VI represents real page-turning legislation. Snuck into the legislation as one of its three goals was “to provide [replacement] housing that will avoid or decrease the concentration of very low-income families”Invalid source specified.. This countered CD’s place-based distressed neighborhood focus.
Clinton continued Reagan-era federal direct-to- people anti-poverty/welfare programs. EIC was expanded, and minimum wage increased. Clinton’s main focus was welfare/AFDC reform (TANF). With a reenergized EIC, the emphasis was to “make work pay”. Families and households got a meaningful lift from EIC, mitigating some of the dour effects of TANF. TANF was the newest block grant on the block and its passage was treated with some skepticism by community developers. “TANF significantly reduced the number of people on welfare rolls, although those concentrated in high-poverty inner-city neighborhoods were least successful in leaving welfare. It is not clear, whether the lot of former recipients has improved. Many simply went from the ranks of the ‘welfare poor’ to the ‘working poor’ with no betterments of their living standards.” (Dreier 129-30) By this point it was clear this form of intergovernmental transfer was preferred to Great Society categorical grants.
One could see in Clinton’s signature 1993 Empowerment Zone legislation the need to break up concentrations of poverty by connecting people to opportunities, not only in suburbs, but across the nation. Clinton’s Empowerment Zone (EZ) (1994) designated 11 zones, each eligible for $100 million in grants and tax credits for investment and hiring of low-income residents; also 95 “enterprise communities” eligible for more limited grants and credits, and 4 “enhanced enterprise communities” were also created. The EZ initiative satisfied Clinton’s electoral covenant with cities, but its reliance on private sector market incentives was not well-received by many community developers. In linking low-income to opportunities wherever such opportunities might be, EZ pursued a bottoms-up, locally-driven comprehensive set of programs in distressed inner city neighborhoods—“community-building partnerships for change”—but it challenged physical/economic neighborhood revitalization. EZ, however, included the usual “comprehensive” array of social programs (housing, education, job training, and human service programs) and was coordinated by a “community service board”, with residential membership as well as governmental and agency leadership.Invalid source specified.
The ambiguity between place-based people community development and deconcentrating poverty made some community developers wonder if Clinton and they were on the same page. [EZ asserted that it] seeks to invest in people and places, recognizing the old dichotomy as false”. Many community developers were not sure it was false. In 1995 this tendency toward dispersion, rather than “gilding” the ghetto, was made more explicit in Clinton’s 1995 HUD 1995 Urban Policy Report. Asserting that
America’s cities have been in trouble. Poor families and poor inner city neighborhoods have become disconnected from the opportunities and prosperity of their metropolitan regions, the nation, and the emerging global economy. A vicious cycle of poverty concentration, social despair, continued outmigration and fiscal distress in central cities undermines the ability of metropolitan regions to compete … Moreover, the polarization of urban communities—isolating the poor from the well-off, the unemployed from those who work, and minorities from whites, frays the fabric of our nation’s civic culture.
A later pilot program, “Moving to Opportunity” provided Section 8 vouchers to 7500 residents from six inner-city neighborhoods “to escape ghettos and move to better neighborhoods”. Another pilot program, “Bridge to Work” provided enhanced transportation access for poor inner-city residents to jobs in the suburbs (Dreier pp.129-30).
New Markets
In his second term Clinton struggled with a resurgent Republican Party, Contract for America, and attempted impeachment. If anything were to be accomplished, it would be bipartisan, and likely involve corporate America and more Privatist forms of ED (physical redevelopment and financing). Foundations and philanthropies provided a convenient meeting ground and a forum for incubating new ideas for public/private central city low-income neighborhood reinvestment. The New Markets Tax Credit (Community Renewal Tax Relief Act of 2000), Clinton’s last major urban initiative, developed out of this nexus.
The American Assembly a bipartisan business-led think tank, issued a report after its 1997 annual meeting. During that meeting debate, triggered by Michael Porter’s research on the potential of inner city redevelopment, urged business to invest in inner cities to foster something called “community capitalism”. Community capitalism was a fancy name for business investment, and job creation in distressed communities, with government and the neighborhood community playing a supportive role. Access to capital and provision of technical assistance to investors by knowledgeable intermediaries were essential requirements. The American Assembly sent out its report to the White House where it caught the attention of Al Gore—who was contemplating a run for the Presidency. New Markets Tax Credit in the Community Renewal Tax Relief Act of 2000 was the reaction.
New Markets was a vehicle to provide investment (equity or near equity) to distressed low income communities (and presumably neighborhoods)—both urban and rural. An annual “allocation” of tax credits is made by Congress and its administration handled by Dept. of Treasury’s CDFI Fund. CDFI awards tax credits to Community Development Entities (CDEs) who award them to specific qualified businesses making a fixed asset investment in defined low-income geographies. Advantages include lower interest rates and less strident terms and conditions—without New Markets such projects would likely not have sufficient financing available. Thru 2014, New Markets dispersed over $38 billion to leverage $75 billion in new investment to troubled geographies. The program formally expired in 2014, but lingers on in several bills at time of writing. New Markets certain targeted geographies of concern to community developers. It is hard to envision, however, it being described as a community development program—again exposing Clinton’s awkward dance with community development.
Perhaps, the sub-state-related federal initiative that consistently and deeply affected sub-state economic development in the pre-Civil War period was foreign trade, boycotts and federal tariff policy. This history treats these policy areas gingerly—not because they are not relevant, but because the topic is its own book. Foreign policy and national trade policy are primary to the evolution of a jurisdictional economic base—and war’s impact on just about everything speaks for itself. For better or worse, we will not focus on pre-Civil War trade and tariff policy. These two policies provided a foundation for both the South’s and North’s strategy to develop its economic base. They also triggered inter-regional conflict that through most of this period exceeded that generated by abolition and slavery.
[ii] In 1820 12 cities were greater than10000–more than two-thirds of the nation’s urban population (New York and Philadelphia constituted one-third). In 1860, 101 cities were greater than 10000, and 8 more than 100,000.
[iii] The states are Colorado, New Mexico, Utah, Wyoming, Arizona, California, and Nevada.
Chinatown (1974) produced by Roman Polanski, starring Jack Nicholson and Faye Dunaway, tells Los Angeles side of the tale. The Library of Congress cited this film as “culturally, historically … significant” so it must be true.[iv]
[v] The inspiration and political pressure for the highway is credited to two businessmen, Cyrus Avery of Tulsa and John Woodruff of Springfield MO, working within the American Association of State Highway and Transportation. Route 66 was intended to replace three existing highways. Taking advantage of 1916 federal legislation that authorized a federal role in highway construction, its original purpose was to simply connect the numerous small towns along the route to the national transportation system/economy.
[vi] Port authority reaction, in particularly the bell-weather New York-New Jersey Port Authority, was intense. Jameson W. Doig, Empire on the Hudson (Columbia University Press, 200) Chapter 10.
[vii] Merriam was a founder of public administration, an early pioneer in scientific management, and a founder in what would later become the behaviorist movement in political science. Merriam also served as a Chicago City Council member, ran twice for mayor and later founded the Social Science Research Council.
[viii] Sister of Edith Hamilton, author of the famous tome on Greek mythology.
[ix] https://www.dol.gov/dol/aboutdol/history/mono-regsafepart06.htm
[x] Tracey L. Farrigan and Amy K, Glasmeier, “Economic Development Administration: A Legislative History”, http://www.povertyinamerica.mit.edu/products/publications/eda_legislative_history
[xi] Tracey L. Farrigan and Amy K, Glasmeier, “Economic Development Administration: A Legislative History”.
[xii] EDA (www.eda.gov) Legislative History, p. 7. For a comprehensive list of ARA concerns, see pp. 9-10.
[xiii] Compromise with northern legislators permitted business loans to be used for “venture capital” which in 1961 meant relocated firms (no doubt from the North). In late 1962, as a response to a recession, the Administration tried to expand ARA with public works programs to relieve unemployment; it was blocked because it “gave unfair competitive advantages to certain enterprises and regions” and would prompt “area relocations”.
[xiv] The “spreading” effect, characteristic of many targeted ED programs was a significant failing, criticized by Northerners who stressed ARA’s susceptibility as a campaign tool.
[xv] Cobb, Selling of the South op. cit. p. 53. He cites Jeanne Patterson, the Local Industrial Development Corporation, Indiana University, Bureau of Business Research, Graduate School of Business.
[xvi] Alice O’Connor, “Community Action, Urban Reform, and the Fight Against Poverty: the Ford Foundation’s Gray Areas Program”, Journal of Urban History, Vol. 22, No. 5, July 1996, pp. 586-625; Robert Halpern, Rebuilding the Inner City, op. cit., pp. 89-101; William Domhoff, the Ford Foundation in the Inner City: Forging an Alliance with Neighborhood Activists”, hrrp://whorulesamerica.net/local/ford_foundation.html (retrieved December 5, 2014).
[xvii] Hunter would be a pall bearer for RFK seven years later.
[xviii] Section 8 of the Community Development Block Grant Act of 1974 renamed the program established in 1965 (Section 236, Leased Housing Program) and greatly expanded it.
[xix] State of Tennessee, Office of Attorney General, Opinion No. 09-126.
[xx] Report #372 to the Mississippi Legislation, January 5, 1998
[xxi] EDA Legislative History, pp. 13-14. file:///C:/Users//Downloads/eda_legislative_history.pdf
[xxii] Quoting LBJ in EDA Legislative History, op. cit. p. 14.
[xxiii] Kysiak a friend of the Curmudgeon, was employed by de Luca and was a valued participant during these early years. We rely on his publication, as well as informal email and conversations. De Luca subsidized the early HUB Club from departmental funds
[xxiv] Drawn from Baltimore, Milwaukee, Jersey City, Chicago and Cleveland–all public sector development officials–accompanied by a representative (Andy Bennett) from EDA.
[xxv] National Advisory Commission on Civil Disorders (1968)
[xxvi] http://www.achp.gov/docs/BRAC/Federal_Historic_Preservation_Tax_Incentives_Program-June_06.pdf
[xxvii] Ronald Reagan, “First Inaugural Address” in Congressional Quarterly Almanac, 1981 (Washington DC, Congressional Quarterly 1982) pp. 11-e–12-e
[xxviii] Butler, from Britain, was executive director of London’s Adam Smith Institute in London. He embraced the EZ in 1979, and, after visiting the South Bronx, linked the enterprise zone to housing reform. His book, The Enterprise Zone: Greenlining the Inner Cities (1981) caught Kemp’s attention.
[xxix] For an early review of 1983-1990 JTPA “An Assessment of the JTPA Role in State and Local Coordination Activities“, U.S. Department of Labor, Research and Evaluation Report Series 91-D, 1991.
[xxx] A similar program had been started by NSF in 1977
[xxxi] Departments of Agriculture, Commerce (NIST and National Oceanic and Atmospheric Administration), Defense, Education, Energy, Health and Human Services, Homeland Security, Transportation, EPA, NASA, and NSF,
[xxxii] Christopher Walker, “Nonprofit Housing Development”, Housing Policy Debate 4 (3): pp. 369-414.
Ron W. Coan 