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New Localism in the Age of Pandemics

Below is the Nowak Metro Finance Lab Newsletter shared biweekly by Bruce Katz

 

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Photo of Fishtown Social in Philadelphia

I am participating next week in a UK conference on Creating Communities: Places beyond the Pandemic. The conference is designed to wrestle with the central question: How can place-based policy and regeneration enhance communities and prosperity?

To prepare for the conference, the organizers (a new think tank called Onward) asked me to reflect on what New Localism means in an Age of Pandemics. This is an expanded version of what I contributed.

As many of you know, Jeremy Nowak and I published The New Localism: How Cities Can Thrive in the Age of Populism in 2018. Our thesis was straightforward. Over the past several decades, cities have emerged as the vanguard of addressing many of the world’s toughest challenges: climate change, inter-generational poverty, relentless technological change and economic restructuring, housing un-affordability, to name just a few.

The rise of the city state as problem solvers has coincided with the declining impact of many national governments for several reasons. National governments are exclusively governments, subject to hyper partisan politics and polarization. Cities are networks of public, private and civic leaders, who tend to embrace pragmatism rather than ideological rigidity and reward action rather than obstruction.

National governments operate via vertical, 20th century silos, bureaucracies separated by language, culture and specialized expertise. Cities, by contrast, nimbly match complex challenges with interdisciplinary, multi-sectoral solutions that are customized to local priorities, rather than compartmentalized, one-size-fits-all responses.

In my view, the COVID-19 crisis has simultaneously heightened the need for the national and revealed the power of the local. Given the nature and sequencing of this crisis (i.e., public health lockdown, partial economic shutdown, reverberating implications for affected sectors), national governments have been forced to intervene on multiple fronts, with varying degrees of focus, functionality and consistency. But the role of local leaders has been critical on multiple fronts, validating and refining our message in The New Localism.

In the United States, for example, city stakeholders mobilized quickly to set up relief funds to stabilize local small businesses (see http://drexel.edu/nowak-lab/publications/reports/Covid-Emergency-Fund-Typologies). These relief funds used a broad array of distribution channels for capital (including local governments, philanthropies, business chambers and community development lenders), enabling them to provide rapid, flexible financing to meet the particular needs of very small businesses on the financial brink.

When the federal government did act, cities ensured maximum impact through community intermediaries that enabled, for example, under-banked small businesses to understand the terms and conditions of federal loan products and access them in real time. This reinforces one of the central themes of the new problem-solving era. The “horizontal” nature of local leadership networks enables different stakeholders within cities to play critical matchmaking roles, often linking, for example, very small businesses (particularly Black- and Brown-owned businesses) that do not get adequately served by large financial institutions to a broader array of capital providers. In a complex economy, where large institutions increasingly dominate, these ecosystems of public, private and civic institutions are critical to match small businesses with the capital, customers and services they need to succeed (using the sharp phrasing of my friends at Next Street).

And now, with the federal government mired in pre-election malpractice, cities like Chicago and San Jose have already started to design ambitious recovery plans that seek to ensure that the post COVID economy is more sustainable and inclusive that the economy that preceded the pandemic. This is absolutely essential in the aftermath of the multiple crises of public health, economic contraction and police brutality that have revealed, once again, deep racial disparities on income, health and wealth and the persistence of structural racism throughout our society.

Where do we go from here?

On the surface, the pandemics have shown the need for national governments to organize markets (e.g., the supply of needed health responses) as well as provide a safety net for families and communities rocked by unemployment and the shuttering of small businesses. As we move from crisis to recovery, national governments will also be responsible for countercyclical investments in innovation, infrastructure and human capital; an era of austerity politics will simply wreak havoc on vulnerable populations and disadvantaged communities.

At the same time, national governments must take actions to guard against large firms and financial institutions further dominating the economy. As Jane Jacobs eloquently wrote many times, the essence of prosperous economies and vibrant communities is their embrace of small, locally-owned businesses that generate rather than extract wealth and grow incomes for broad segments of the population. The national government must do more than level the playing field between the large and the small. They must tilt the playing field towards the small and under-served.

But the pandemics have also revealed the special roles played by local governments, networks and ecosystems. This argues that the post crisis period should combine needed national investment with more devolved power and programmatic flexibility, to ensure that localities — cities, suburbs and rural areas — can align national funds to vastly different local priorities and needs. This also argues that localities must pay more attention than ever on building tightly connected ecosystems that can link underserved constituencies and communities to market opportunities and quality capital.

Make no mistake. Communities are going to wake up from this global pandemic with fewer small businesses and hollowed out Main Streets and commercial corridors. No suite of federal programs or loan products, by themselves, are going to bring back what we have lost (which was inadequate in many communities to begin with). What will drive inclusive recovery over time (particularly when the federal government moves beyond crisis mode) will be strong networks of the full panoply of institutions that link supply and demand, place and capital, people and opportunity. Local stakeholders — city governments, large, place-bound anchor institutions, small mediating entities — must work harder for their communities, because no one else will. To make these ecosystems hum and work as an integrated whole, community intermediaries in particular will need to be imbued with more capacity and dedicated capital to ensure that underserved neighborhoods and places are no longer at the periphery.

To repeat, the pandemics have simultaneously heightened the need for the national and revealed the power of the local. But New Localism, like national government action, is not something that just happens. It has to be designed, built, supported and stewarded over time. It needs to be ever evolving, adapting from new models and the innovations of other places, large and small. The local has its own, distinct potential and agency, the full power of which has yet to be understood or deployed. That’s a big part of what comes next.