Capital Stability and Local Democracy


This article is from the November/December 2002 issue of Dollars and Sense: The Magazine of Economic Justice available at

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This article is from the November/December 2002 issue of Dollars & Sense magazine.

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What's the worst-kept dirty secret about local politics in the United States? That in most American cities, business groups and private land interests have vastly disproportionate influence over the political process.

Why is this the case? Competition among localities for scarce jobs and investment. Local politicians need to show that they have done their part to bring "growth" and jobs to an area. This usually means making alliances with business groups and rolling out the red carpet and fine wine—and tax breaks—for any business that expresses an interest in relocating to the area. It also means avoiding regulations, taxes, and redistributive policies which scare businesses away.

In this environment, civic and political organizations representing working people, neighborhood interests, and social and environmental concerns face a continual uphill battle to defend, let alone advance, their interests. For instance, activist groups in Chicago, one of America's best-organized cities, would likely count it a substantial political triumph if they succeeded in securing $60 million in additional city and state assistance for low-income housing development in the city. (The $60 million would augment Chicago's current spending on affordable housing by about 20%.) A victory of that scale would probably require a concerted campaign lasting months or even years and thousands of hours of citizen effort.

If you're a big corporation, however, a few phone calls and visits with local officials can do the trick. In 2001, Chicago and Illinois officials offered Boeing a reported $63 million in inducements to persuade the aircraft giant to move its headquarters to town. Time after time, even liberal mayors elected with wide support from minorities and working-class people have found themselves making similar decisions.

Neoliberal, pro-market scholars accept this reality as just a fact of life; other scholars, including some on the left, think that deplorable as it is, little can be done to alter this fundamental structural feature of American politics.

We disagree with both positions. In our view, the functioning of larger-order democracy depends critically on what goes on at local-level units—and in particular, the lessons local politics teaches (or does not teach) about people's power to affect public policy and exercise collective self-governance. Theorists of democracy such as Alexis de Tocqueville, John Stuart Mill, and John Dewey have long stressed the importance of local-level democratic practice, and we think their concerns are as relevant today as ever. Right now, unfortunately, the lesson most commonly taught at the local level is that business interests call the shots.

The stirring vision of citizens shaping their own local communities will continue to fade unless local politics becomes less dependent on business interests. We think this is quite possible even in the era of globalization: here's why (and how).

A Few Lucky Towns

Not all American cities lack vibrant progressive activism or large-scale citizen influence over local politics—think of places like Cambridge, Mass., or Madison, Wis. Such places have strong progressive cultures which have reproduced themselves over the decades. Less commonly noted is that both communities are largely exempt from the threat of economic decline due to corporate disinvestment and capital flight.

The presence of large, immobile universities in Cambridge and Madison underpin the cities' local economies. To be sure, business interests in these cities have a voice in local politics, but they do not have a credible threat to leave en masse if the community were to adopt policies which prioritize public well-being over the desires of private firms.

What if every community in America had the same advantages these favored places enjoy—namely, a stable job base more or less permanently anchored by immobile capital? Such a situation is necessary (though not sufficient) for a serious revitalization of local democracy—and the good news is, there are literally dozens of ways to begin moving toward that goal.

One way to stabilize a community's economy is through direct public investment, as in the case of towns anchored by state capitals or state universities. To take another example, many of the 3,000-plus community development corporations doing work in urban and rural communities have started their own businesses, taken equity stakes in other businesses, and/or acted as incubators for new, locally-rooted firms. Yet another possibility is local and state-level public enterprise, whereby the public undertakes business activities usually left to private firms. For instance, the small rural community of Glasgow, Kentucky owns its own cable television and telecommunications network, creating jobs and saving millions of dollars which used to go to the inefficient private cable company.

There are also ways to make economic activities now regarded as "private" more closely wedded to specific places. For instance, worker-owned firms are much more likely than conventional firms to be rooted in particular communities: workers in firms where most stock is owned by an Employee Stock Ownership Plan (ESOP) can block the sale of a company, and ESOP firms in general are less likely to go bankrupt than conventional firms.

Public-employee pension funds, which have often been perfectly willing to make risky investments overseas or in fancy derivatives, could also play a role by targeting their investments to local businesses or to firms in depressed areas. Dozens of states and several major cities already have some form of "economically targeted investment program," ranging from New York City's re-investment policy, which has led to thousands of low and medium-income housing units being built in the city, to politically-conservative Alabama's state-employee pension fund, which has aggressively sought to create jobs within the state.

These are just a few of the possible ways to anchor capital more securely in local communities. Already, in fact, the federal government operates dozens of programs, some well-known, some obscure, which honor the principle that local communities should not be permitted to wither and die when economic disinvestment occurs. Such programs, ranging from the Johnson-era Economic Development Administration and Appalachian Regional Commission to the Clinton-created Community Development Financial Institutions Fund, are generally woefully underfunded. But most have a long track record of on-the-ground activities and a wealth of experience upon which a more aggressive, adequately funded program might draw.

A Case for Action

A serious program to re-root capital in communities and thereby alter the structural equations governing local politics in America would require sustained public commitment and substantial funding over a period of many years. But the costs of such an initiative must be weighed against the costs of our current "economic development" policies, under which states and localities compete with one another to subsidize mobile corporations, and in effect pay for jobs that private firms would have created anyway. The costs of a new initiative must also be weighed against the sheer economic irrationality of allowing cities such as Detroit or Buffalo, with vast built-up infrastructure, to wither away at the same time that other places are booming (and building new sewers, roads, and power lines to accommodate America's internal migrants).

Most of all, the costs of a bold new agenda to secure the economic basis of American communities in an era of sprawl, job-chasing and globalization must be weighed against the costs of doing nothing—and continuing to let the processes of local democracy in America decay into nothing more than window dressing for business dominance over local politics.

This primer is based on ideas detailed in the authors' new book, Making a Place for Community: Local Democracy in a Global Era (Routledge, 2002).

Thad Williamson is a doctoral student in political theory at Harvard and a Dollars & Sense collective member. David Imbroscio is Associate Professor of Political Science at the University of Louisville. Gar Alperovitz is Lionel Bauman Professor of Political Economy at the University of Maryland and President of the National Center for Economic and Security Alternatives.