Capitalism and Community

For the most part capitalism has served America well.

Free enterprise, responding to market forces and the almost immutable laws of supply and demand, has been responsible for the creation of unimaginable wealth in this nation.

The economic system of the United States is in many respects the envy of the world. The possibilities provided by a free market economy motivate people to work hard, think creatively, invest aggressively and take risks for the sake of personal and corporate advancement.

Still, no economic system is flawless.

At times unchecked capitalism threatens the health and overall well-being of communities. Walter Rauschenbusch put it this way: "When fed with money, sin grows wings and claws."

I am thinking today of community and economic development in Dallas, Texas.

Why is it that, for the most part, new development flows to the outlying suburbs? Why does the north flourish while the south of the city continues to flounder?

The simple answer: north is where most of the money is.

But other factors need to be considered to understand the complete story here.

It is not just money that makes the suburbs both north and south and the north in general more attractive. It is the ease with which money changes hands in these hot development spots.

Suburban, northern county and regional development versus near-in city and southern sector development in Dallas is mostly about margins.

If, as a developer, I receive say 20% return on my investments out north, why would I want to settle for 9% down south? If my work is easier outside the city, why hassle inside the city for a lower return for my effort?

Unchecked or non-directed capitalism will follow the path of least resistance to the largest, most accessible pool of funds. No rocket science there.

Public sector (read government) leadership is a must for community and economic development in "lower margin" areas of a city and region like Dallas. If the reasonably expected profit margins are lower, the entire investment process must be incentivized in some attractive and creative manner to spur on development.

Cities have the capacity and, in my view, the responsibility to use their power to create such incentives. Tax abatements, infrastructure improvements, low-interest loans, bond funding initiatives, grants from higher up the public sector funding stream and innovative partnerships with non-profit and for-profit developers are all viable possibilities for city governments. In fact, cities use some, if not all, of these strategies when working with for-profit developers even in higher margin areas!

What we usually fail to see is that economic investment in "lower margin" areas benefits the entire community north and south in the form of increased tax revenues, decreasing crime, better code enforcement and stronger schools. Talk about long term return on investment!

Of course, the rate limiter for the redevelopment of the "harder" areas is usually easy to identify: courage, vision and leadership.

Unbridled capitalism seldom, if ever, serves the interests of the broader community.

Unregulated, greedy capitalism can damage community fabric severely and for generations.

If you ever doubt this fact, take a tour of south Dallas and then consider the health of the entire city.

Nehemiah 1-2