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By: Charlie Jones

August 2022

The economic distress of America’s inner-city neighborhoods is one of the nation’s most pressing issues. The lack of jobs and businesses in the disadvantaged inner-city neighborhoods fuels a continuous cycle of poverty and thriving social problems like drug abuse and crime. These problems make the inner-city neighborhoods deteriorate, and the debate on how to help them restructure has been an ongoing discussion for years.

The fact of the matter is that efforts have been made in the past decades to try to revitalize the inner cities’ neighborhoods. These efforts have not fully succeeded to prove a sustainable economic base. There have been efforts to create employment opportunities and improved infrastructure. However, these still eludes the inner-city neighborhoods despite the government investing substantial resources in these cities.

The help given to the inner-city neighborhoods has also included relief programs such as housing subsidies, income aid, and food stamps. These programs only address highly visible and special needs but do not address long-term help for the inner-city neighborhoods. Additionally, programs that were aimed at development have been fragmented and ineffective.

It is time to recognize that revitalizing the inner-city neighborhoods will require a radically different approach. Without downplaying the role of social programs in continually meeting human needs and improving education, we must support and not undermine a coherent economic strategy. The real question is how businesses in the inner-city neighborhoods and the nearby employment opportunities for the inner-city neighborhood residents can increase and grow. Here is how we can improve the inner-city neighborhoods economically.

  1. Creation of a Stainable Economic Base

There must be the creation of a sustainable economic base in the inner-city neighborhoods but not an economic base that is created through artificial inducements, government mandates or charity. We cannot cure the problems of inner-city neighborhoods by increasing social investments and believing that economic activities will follow. The economic model created for inner-city neighborhoods should begin with the premise that inner-city neighborhood businesses should be profitable and positioned to be competitive on a regional, national and even international level. The inner-city neighborhood businesses should be able to serve the local communities and have goods and services that they can export to the surrounding economies. Such an economic model can only be found by finding and exploiting the competitive advantage of inner-city neighborhoods, which will translate into a truly profitable business economy.

Economic activities in such neighborhoods can only take root if the neighborhood enjoys competitive advantages and are in a niche that cannot be replicated elsewhere. For example, a small but steadily growing high-tech company may be interested in contributing to the inner-city neighborhoods through the provision of its services. The competitive advantage of the inner-city neighborhoods is that they may not have a high-tech company, and the neighborhood enjoys low-cost real estate and labor. To improve such a neighborhood and stabilize the distressed individuals in this neighborhood, the city council can subsidize the operations of the high-tech company. In exchange, the company should supply jobs to the residents of the inner-city neighborhood. The inner-city neighborhood management can reciprocate to the company by offering incentives to lower costs and boost profits.

  1. Establishing business relationships with inner-city neighborhood companies

Outside companies can enter joint ventures with inner-city neighborhood companies. These joint ventures will encourage the inner-city neighborhoods to engage in export and become competitive. Both parties stand a chance to benefit. For example, Dorchester-based metal fabricator company AB&W partnered with General Motors. This gave AB&W the ability to become a high-performing and dependable supplier. This symbiotic relationship is not based on charity but is mutually beneficial and very sustainable. Every major company should develop such relationships with inner-city neighborhood companies to help the economies grow.

  1. Adopting the right model for equity capital investment

Venture capitalists must also consider investing in inner-city neighborhoods. The inner-city neighborhood success model may not look like the venture capital model usually created for technology companies. Instead, the success model of inner-city neighborhoods will resemble an equity fund that works in emerging economies such as Russia and Hungary, where investments are mundane but profitable. Ultimately, the inner-city neighborhood businesses that run on the principles of competitive advantage will generate adequate returns to investors. This will best be realized if they are aided with incentives such as tax exclusions for capital gain and dividends for being inner-city neighborhood businesses.

  1. Government intervention through the provision of direct resources to areas of greatest economic need

The crisis of inner-city neighborhoods demands that they should be first in line for government aid. Though this statement may be a cliché, the fact still is that programs in infrastructure, land development, crime prevention, and environmental cleanup, are funded politically. Therefore, investments that will boost the economic potential of inner-city neighborhoods must be considered a priority. For example, infrastructure should first make inner-city neighborhoods more attractive business locations. These government interventions will ease critical social problems and reduce social service spending.

  1. The government should increase the economic value of inner-city neighborhoods as business locations.

Stimulation of economic development requires the government recognize that it is part of the problem. The priorities of the government can run counter to business needs. The government must rethink policies and programs in different areas to achieve this. For example, growing cities like Chicago, Minneapolis, Indianapolis and Kansas have come up with successful brownfield urban areas by making flexible environmental cleanup standards depending on land use. These cities have indemnified landowners against added costs if the land is found contaminated after cleaning up. These cities use tax increment financing to aid cleanup and re-development costs.

Final Take Away

Improving the inner-city neighborhoods is a collective responsibility of the government and non-governmental business community. The government should ensure that resources are directed to the inner-city neighborhoods and have incentives for businesses to work there. In a flourishing business environment, the community and business will experience a solution where everyone benefits. This could be the answer to the challenges in the inner-city neighborhoods.

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