Monday, April 30, 2007

Market Tools, Constructive Competition, and Communities of Opportunity

by Denis R. Rhoden, Jr., Research Associate at the Kirwan Institute

Much of the attention paid to the liberalizing of international markets and economies has focused, rightly, on dramatic changes in the distribution of resources between the ‘rich’ and ‘poor’. There is a plethora of statistical evidence supporting the decade-long trend of increasing disparity and wealth concentration.

Nevertheless, increasingly relevant is the wide-reaching significance of how access and proximity intersect, relative to disparate conditions to impact households, neighborhoods, and regions. At Kirwan this topic is explored in-depth based on the bundle of assets we call ‘opportunity’. Outside Kirwan, from academics to practitioners, research on the subject of opportunity, particularly for the disadvantaged, is vast both in terms of its empirical depth and curiosity in shaping the challenges associated with an existence devoid of opportunity. Largely, these explorations focus on household conditions in terms of ultra haves and haves-not – a dichotomy of proverbial proportions. Hernando de Soto’s The Mystery of Capital underscores that capitalism, with all its promise and failures, is the dominant system going forward. We are charged with exploring how to expand the notion of capitalism from its distributive present to a potentially more integrative and expansive future. Late president Gerald Ford once urged America to do more to encourage constructive competition. Although vaguely defined, for our purposes, constructive capitalism reflects an attempt to make room for social equity and market efficiency as succinct, equal, and measurable goals. Recent efforts at Kirwan have tried to catalogue such practices at the state and regional level around the United States, which is by no means an admission that constructive capitalism rests at these levels alone.

Two examples from these findings are:

- The development of business accelerators (e.g., Minority Business and Rural Business) modeled after the Cincinnati-based Minority Business Accelerator, which along with corporate partners, this legislation in part creates value by engaging emerging-industry firms in Ohio to consider establishing participation targets and accountability systems to inform the operation of Business Accelerators.
- California and major institutional pension funds like TIAA-CREF provide investment managers with the latitude to direct asset allocation based on broader return measures that include social impact filters.

These are just a few of the types of interventions, institutions, and policies being offered today. Much more research needs to be done to uncover the realities of undercapitalized neighborhoods. In addition, more research investment needs to be directed towards illustrating the conditions, organizational linkages, implementation, and measurement strategies of constructive competition policies and practices.

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