Building Social Capital Through Economic Development

1
Building Social Capital Through Economic
Development

• Mildred Warner,
• Department of City and Regional Planning
• Cornell University
• mew15_at_cornell.edu
• CaRDI-USDA Rural Community Development Training
  Institute
• July 17, 2002

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Discussion Outline

• Trends in governance
• Decentralization
• Privatization
• Social Capital
• Implications for Rural Economic Development
• Traditional Strategies
• New Strategies
• Community Economic Development
• Challenges and Opportunities
• Child Care as Economic Development

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Three trends in governance

• Decentralization
• Make decisions closer to the client
• Privatization
• Capitalize on the strength of the private sector
• Social Capital
• Strengthen local networks and challenge local
  power relations
• What do these trends mean for promoting rural
  economic development?

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Decentralization

• Make decisions closer to the client
• Local voice
• Local control
• Local mobilization
• Cautions -
• Excuse to reduce federal and state support
• Promotes competition
• Local elites may capture more control

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Privatization

• Take advantage of private sector skills
• New resources
• New ideas
• New political clout
• Cautions -
• Partnerships hard to build and maintain
• Governance - blurred accountability,
  democratic deficit
• Do market/consumer notions reflect full
  citizenship and development goals?

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Social Capital

• Strengthen local networks and challenge local
  power relations
• Change norms - encourage collective action
  for the collective good
• Strengthen networks within community and
  beyond
• Promote investment and empowerment
• Cautions
• Justification for local bootstrapping
• Is local focus enough to encourage policy change?

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What is Social Capital?

• Those features of social organization - networks,
  norms of reciprocity and trust - that facilitate
  cooperation for mutual benefit (Robert Putnam)
• Norms
• Networks (linkage and autonomy)
• Resource mobilization

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Why is Building Social Capital So Difficult?

• Hard to get beyond history
• Hierarchical patron - client relations
  (Appalachia)
• Horizontal more egalitarian and democratic
  relations (Midwest)
• Hard to build at the community level
• - Family, partnership, community, region
• Hard to Change Norms
• Trust, Diversity,Reciprocity

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Key Factors in Building Social Capital to
Support Public-Private Partnerships

• Autonomy
• Reciprocity Returns on Investment
• Linkage

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Autonomy

• The power to effectively express an opinion,
  carry out a program, or challenge other actors
• - Some groups have more autonomy than
  others
• How can you design programs to build autonomy
  where it is weak?
• How can you balance autonomy of stronger and
  weaker partners?

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Reciprocity Returns on Investment

• Who Invests? Who benefits?
• Specific gains vs. general benefits.
• Specific reciprocity - tit for tat
• Generalized reciprocity - what goes around comes
  around
• Need for partnerships to succeed
• How can you strengthen community norms in support
  of collective benefits?

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Linkage/Networks

• Networks Wide or Narrow?
• Wide networks promote information exchange
• Networks Horizontal or Vertical?
• Horizontal ties promote lateral learning
• Vertical ties promote policy change
• Strong and Weak Ties
• Strong Ties - direct benefits
• Weak Bridging Ties - general benefits, links
  outside community
• Can we design programs to help build networks?

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What do these trends mean for promoting rural
economic development?

• Challenges
• Need a community or region-wide vision
• Must build partnerships
• Strengthen participation across public and
  private sectors, and across class and race
• Promote local change
• Affect broader state and national policies

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State of Current Economic Development Practice

• Traditional Approaches Industrial Recruitment
• New Approaches Business Retention and Expansion
• Community Economic Development Microenterprise,
  CDCs
• Survey of 1000 local governments across the
  U.S., International City/County Management
  Assoc., 1999

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I. Traditional Approaches

• I. Business Incentives/Business Attraction
• Most governments do it - political reality
• ICMA survey shows 69 offer business incentives.
  Of those that do
• 74 offer infrastructure improvements
• 72 offer zoning assistance
• 54 offer tax abatements

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Is Attraction Effective?

• Research shows limited effects
• Most effective at promoting inter-local
  competition - beggar thy neighbor
• - 80 recognize neighboring local governments
  are their primary competitors
• More governments are planning and trying to be
  strategic about it.
• Need a plan which can be evaluated
• Only 32 have a written business attraction plan

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Governments which are strategic

• Focus on export base not retail
• Try to make firms sticky
• Support clusters
• Important for technology sharing and worker
  attraction
• Use incentives to achieve other goals e.g.
  high density retail downtown, brownfield
  redevelopment

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II. New Approaches Business Retention and
Expansion

• Recognize local firms more likely to stay
• 82 of governments support at least one business
  retention activity
• What do they do?
• Surveys and visits to firms (60-70)
• Business roundtables (40)
• Ombudsman programs (22)
• Problem - doesnt garner headlines like
  successful attraction

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II. New Approaches Small Business Development

• More community development focused - not export
  base focused.
• Recognizes opportunity to nurture local business.
  
• 60 of governments support at least one small
  business activity
• Analyze business needs and be responsive with
  public infrastructure
• Technical assistance (50), marketing (30),
  business incubator (25), management (18),
• Financing (loan funds 60, matching
  improvement grants 32)

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III. Community Economic Development

• Focused on low income people and neighborhoods
• Traditional tools applied in a new context have
  the widest use
• Economic development zones (66)
• Job training (63)
• Community Loan Funds (55)
• Community Development Corporations (53)
• Welfare to Work (49)
• Micro-enterprise (27)

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Challenges/Opportunities

• How to involve the private sector
• Show the profit potential of community
  investment
• 55 of governments report the private sector as a
  partner in traditional economic development
• Only 5 of governments list the for-profit sector
  as a partner in community economic development

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Challenges/Opportunities

• Need more social entrepreneurs.
• Need community visioning.
• Need to articulate a broader range of
  development values.
• Justify social programs in economic
  terms.

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What is Economic Development?

• More than jobs and income
• Human Development
• Sustainability
• Choice and freedom
• Economy is society
• What do we want our society to be?
• Need community strategic planning
• Articulate local values, vision
• Involve a broad range of partners

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Be Creative Encourage Innovative Thinking

• Traditional IDA Tools can be used in a new way
• Bonding non-profits (health care, elderly
  housing, childrens services)
• Tax abatements for non-profits
• Address lack of leadership talent
• Promote Business Entrepreneurship
• Promote Social Entrepreneurship

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• Promote Community Development Banking
• Small business and affordable housing loans
• Do local banks utilize government subsidies?
• Help banks see new markets
• Personal Finance Services
• Credit Path transactor? saver ? borrower ? owner
  
• Attack predatory lending

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• Build the Social Infrastructure for Economic
  Development
• Dont be afraid to define social programs in
  economic development terms.
• Child care is a critical part of the social
  infrastructure for economic development
• It enables parents to work
• It helps attract and retain other local
  businesses
• It improves the quality of life in our
  communities
• It promotes brain development of children

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Power of Public-Private Partnerships

• Early Education Partnership, Tompkins Co NY
• Led by Chamber of Commerce
• Includes Child Care Council, banks, employers,
  foundations, government
• New voice for child care, new solutions
• Goal Community Fund for Child Care
• Universal access to affordable quality care for
  all families

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Child Care is a Vital Part of the Local Economy
280 early care and education establishments serve
3,500 children in Tompkins County
Parent Impact 3,500 jobs and 112.3 Million in
wages
Average Wage in Tompkins County 31,575
3,500 working parents
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Universal Subsidy Fund
Quality Child Care Affordable to All
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• Our largest employer, Cornell University,
  introduced a new child care benefit for its
  employees - 600,000
• Employers see child care as their issue
• Quality child care reduces employee turnover and
  absenteeism
• Nationally 65-85 of workers with child care
  subsidies work in services and retail
• Child care subsidies are employer subsidies -
  reduce the cost of labor
• FL Child Care Partnership Act
• Grew from 2 million in 1996 to 10 million in
  1999, public/private match

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From Welfare to Economic Development

• Tompkins County used economic impact analysis to
  look at child care subsidies.
• Showed a positive return on subsidies as an
  economic development investment - more than 3.00
  for each 1.00 of subsidy.
• Is asking businesses to assist with an outreach
  campaign to parents, and to encourage government
  to expand subsidy coverage.

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Build Business Support for Subsidies

• In Tompkins County only 1 in 8 eligible children
  receive child care subsidies.
• The Partnership determined if government funded
  all eligible children in Tompkins County it would
  return
• 9 million in federal and state taxes to the
  local economy
• stimulate 5 million in local economic impact.
• The Chamber of Commerce is sponsoring an employer
  outreach campaign to Fill the Gap!

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Implications for USDA

• How can current economic development programs be
  designed to support social capital and social
  infrastructure development?
• How can you capitalize on the potential benefits
  of decentralization and privatization?
• How can innovative local programs encourage
  development of more innovative state and national
  policy?

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Resources Social Capital

• Putnam, Robert D. 2000. Bowling Alone The
  Collapse and Revival of American Community. New
  York Simon Schuster.
• Potapchuck, William, Jarle Crocker, William
  Schechter and Dina Boogaard. 1997. Building
  Community Exploring the Role of Social Capital
  and Local Government. Washington, DC Program
  for Community Problem Solving.
• Warner, M.E. 1999. Building Social Capital The
  Role of the Local State, Rural Sociology 64 (3)
  373-393.

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Resources Economic Development

• Association for Enterprise Opportunity,
  http//www.microenterpriseworks.org
• National Association of Development
  Organizations, Washington, DC.
  http//www.nado.org
• National Community Capital Association,
  Philadelphia, PA http//www.communitycapital.org
• National Congress for Community Economic
  Development, Washington D.C. http//www.ncced.org
• Professor Warners Restructuring Local Government
  Web Site and the Early Education Partnership
  http//www.cce.cornell.edu/restructuring/