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Commentary: The New Urban Crisis and inclusive technology-based economic development

April 27, 2017
By: Jonathan Dworin

Among this year’s most talked about books on economic development is Richard Florida’s The New Urban Crisis. This commentary provides a brief overview of Florida’s book, a response to his conclusions, and insight into what the crisis may mean for economic development practitioners more broadly. 

Florida, well known for his theories on the creative class, has long advocated that the competitiveness of cities depends on their ability to embrace innovation and attract the knowledge workers essential to the 21st century economy. To do so, the author has recommended that cities and regions focus on three things: technology, talent, and tolerance.

In his new book, Florida suggests that the impact of these recommendations has had both positive and negative effects. While the clustering of talent and innovation is now the basic engine of economic growth, it has led to deep divides within our society, Florida notes. These divides are at the root of The New Urban Crisis, which the author outlines with five dimensions:

  • Superstar cities: A growing economic gap between a select group of “superstar” regions (e.g., Bay Area, New York, Boston) and the country’s remaining metropolitan areas;
  • Crises of success: Related to this superstar status, cities are facing challenges such as unaffordable housing, inaccessible transportation, and the eradication of the middle-class;
  • Patchwork metropoles: In nearly every metropolitan area, there are growing levels of economic inequality and segregation, culminating in a “patchwork” effect where small areas of privilege and large areas of distress and poverty are scattered throughout cities and suburbs;
  • Declining suburbs: Suburbs are facing challenges once thought of as explicitly urban, such as growing poverty, crime, and income insecurity.  This has contributed to worsening economic and racial segregation; and,   
  • Global urbanization: In cities across the developing world, many regions are rapidly urbanizing – yet their poor populations are seeing little improvement in living standards.

Florida’s book concludes by noting the influence that the surprising 2016 presidential election results had on the recommendations that he ultimately makes. He voices frustration that his original recommendations calling for a federal urban policy that appointed a council of cities to deploy federal resources would be unlikely to come into fruition.

Instead, Florida’s updated recommendations call for mayors and local officials to take the lead on pressing urban issues such as poverty, transportation, and affordable housing. He suggests these leaders focus on local items like zoning reform, transit infrastructure, and raising the wage floor to help combat the crises. To address persistent concentrated poverty, Florida recommends improving urban educational outcomes, as well as implementing policies like a guaranteed basic income, a negative income tax, and an expanded social safety net. The actions to help ameliorate the negative effects of this new urban crisis are what Florida refers to as “urbanism for all” – his new focus moving forward.

Overall, Richard Florida’s newest book draws necessary attention to the stark divides facing society and their relevance to regional economic development. Three items are important to consider, however, when evaluating The New Urban Crisis. First, there is a need for increased emphasis on the small- and mid-sized regions where the impacts of “urbanism for all” are most likely to be felt. Second, in pursuit of a technology-based economy, there is a need to ensure that supportive activities are increasing opportunity among underrepresented populations. Third, recommendations that remedy the new urban crisis are not limited to local or federal politics – state legislatures and policymakers can and should play a critical role.  

To begin, many of the solutions proposed by Florida target those superstar cities where innovation and economic growth – and the crises that ensue – are at their most extreme (e.g., San Francisco or New York City in the U.S., or London, Toronto, or Tokyo abroad). While there is no denying the importance of addressing the glaring urban problems facing those cities, one can make the case that they make for lousy laboratories in the pursuit of inclusivity. 

More attention should be paid, then, to how smaller and midsized regions can drive “urbanism for all,” as well as what types of tangible activities can help those regions achieve such a goal. Success is likely to look very different for these smaller and midsized regions. Although they have less by way of innovation infrastructure (e.g., basic research, venture capital investment, entrepreneurial support), the problems they are facing related to the new urban crisis may be more approachable.  

Writing in Wired, Florida acknowledges that the challenges facing aspiring technology hubs are less divisive than those in the aforementioned superstar cities. These regions “need to be strategic about how they grow” and should focus on “building up their tech industries and startup ecosystems.” Florida is correct that support for technology-based economies remains paramount to economic development in the 21st century. Modifications are required, however, if these technology-based strategies are to help support inclusivity and not make geographic socioeconomic divides deeper.

The flexibility of research-oriented anchor institutions and technology-based economic development organizations means there are numerous possibilities to develop and implement strategies toward inclusive innovation. As seen in regions like Pittsburgh, Baton Rouge, Detroit, and Portland, some technology-based economic development organizations are increasing their focus on efforts to broaden participation among underrepresented populations through targeted activities and entrepreneurial support. Innovative initiatives in places like Indianapolis, New Orleans, St. Louis, and metro-areas around Lake Erie are using the principles behind technology-based economic development to create opportunity and help their regions address problems related to society, health, and the environment.

In addition to the potential benefits of increasing investment in “innovation infrastructure,” these large-scale projects have the potential to connect individuals in neighboring, disenfranchised neighborhoods with the broader innovation economy. Investments in innovation infrastructure lead to construction and skilled-trade employment, and these facilities can employ individuals in opportunity occupations. There is growing evidence that research projects at universities stimulate local economies, as sponsored research projects frequently purchase goods from local firms. Research-intensive anchor institutions in regions such as Baltimore and Cleveland have also explored strategies to improve economic opportunities through coordinated workforce, community, and economic development activities as a means of building community wealth. Citing examples of programs in places like Detroit and Washington, D.C., an analysis by ICIC recommends the proliferation of programs that tap into the buying power of anchors and established industries to help increase contracting opportunities for small businesses.

Research from the Economic Innovation Group shows that declining dynamism and entrepreneurship has had far-rippling negative effects on the American economy. Structurally, more can be done to support entrepreneurship through training and the removal of barriers and roadblocks to starting a business, as recommended by Harvard economist Ed Glaeser as ways to help solve the new urban crisis. Connecting populations that are underrepresented in the innovation economy with entrepreneurship opportunities is critically important to economic development that leads to “urbanism for all.”

Finally, while an increased reliance on local leadership (or regional leadership, as Brookings’ Amy Liu recommends) may help implement some of Florida’s recommendations, a shortcoming of both his and Liu’s arguments is a failure to recognize the importance of state legislatures and policymakers in driving change at the metropolitan level. Just as cities and metros are the lifeblood of the national economy, they are also critical forces behind state economies. As a result, state legislatures should have a stake in not only enhancing the economic productivity of cities through innovation, but also addressing issues related to the new urban crisis. Whether or not they do is up for debate.

State legislatures are among the most important funders of education and infrastructure, policy areas that are key to addressing the new urban crisis. Through their housing and finance agencies, states play a critical role in allocating funds and tax credits for affordable housing. States also provide support to the types of organizations with the power to make economic development more inclusive. While investments in human capital, around areas such as Pre-K, STEM education, and skills development can indeed occur at the local level, larger scale support can come from the states. Public elementary and secondary schools are equally reliant on state and local funds for revenue, according to the Department of Education’s National Center for Education Statistics.

Although the book can be lauded for its efforts to frame inequality as the pressing issue facing economic development, several of Florida’s conclusions are worthy of additional examination. In particular, Florida’s argument would benefit from a smaller focus on superstar cities, a larger emphasis on economic development in practice, and more regard for the importance of state-level policymaking.

For economic development practitioners, the findings of Florida’s book present an introspective opportunity to analyze the activities that have – and have not – worked well for inclusive economic growth. This is particularly true for the technology-based economic development community, where challenges related to unequal growth have been ruminating for years. Fortunately, many of the institutions needed to address the problems set forth in this book are already in place at the state and local levels. What they now require is the dedication, coordination, and resolve to act. 


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