ESSAYS

ESSAY 5

Reversing Corporate Flight

REUTERS

Blue-Dot cities are winning the global sweepstakes. But not everyone in those cities shares in the winnings.

 

Almost all these cities are cruelly divided between their global winners and losers. If the global divide cleaves these cities from the red-sea hinterlands around them, it also bisects the cities themselves.

 

Chicago may be the most dramatic example. Half of Chicago glitters while an inner city, mostly black, is economically destitute and, as a result, maimed by a violence that has made the city a byword for urban pathology.

 

The reason is no mystery. The black workers of Chicago and other post-industrial cities were abandoned forty years ago by their employers, who took their jobs to the suburbs before they took them to the Sun Belt and China. Neither the workers nor their neighborhoods ever recovered. It’s the grandchildren of that betrayal who are shooting at each other today.

 

In short, the private sector created the problem, and only the private sector can solve it.

People gather for a candlelight vigil against gun violence in the Englewood neighborhood in Chicago, Illinois, United States, July 3, 2015. REUTERS/Jim Young

"The success of the American capitalist models rests now on the impoverishment of millions of workers."

The solution is called jobs. This means investment by business to create jobs, to give young people – especially young men – an escape from the poverty and meaninglessness that drives them to the streets and a short, brutal life of crime.

 

This means a rethinking of the purposes of American capitalism. Corporations argue that they fled the inner city and its workers for solid bottom-line reasons. Racism undoubtedly played a role here, too, but let’s grant the corporations the economic argument. Investment aimed at creating urban jobs almost certainly will mean a hit to shareholder value, which remains the one and only criterion of business success in our society.

 

There are two things to be said about this.

 

First, the urban black population were the first class of Americans to be left destitute by this flight of their employers. The result was the black underclass. Now white workers in the old industrial cities are being deserted by their employers, mostly for the same economic reasons. The result is a new, and even larger, white underclass.

 

In other words, the success of the American capitalist models rests now on the impoverishment of millions of workers. The economy may be working as intended, to direct investment to places where it can earn the most profit. What’s good for the market, then, is bad for society.

 

This isn’t working in the short run. In the long run, it’s intolerable, even pre-revolutionary.

"Globalization has broken that link between the nation’s employers and their employees. Millions of the victims are part of the Trump backlash. But the first victims were black workers."

Second, none of this is written in stone, only in the economic textbooks and legal codes of a bygone industrial age, and is unique to the American form of capitalism. Corporate law in other capitalist countries recognizes the responsibility of business to a broader range of “stakeholders” – employees, suppliers, customers, communities. American law, almost uniquely, insists on business’ fiduciary responsibility only to shareholders.

 

Milton Friedman, the Nobel Prize-winning Chicago economist, proclaimed that the only social responsibility of a business is to increase its profits. This may have made some sense in 1962, when Friedman said it, an era when American companies used some of their profits to employ more American workers. This was the same era when “Engine Charlie” Wilson, the president of General Motors, could say that “what’s good for our country is good for GM, and vice versa,” and have some facts on his side.

 

Globalization has broken that link between the nation’s employers and their employees. Millions of the victims are part of the Trump backlash. But the first victims were black workers, and their descendants today are both gunman and targets in the shooting galleries that once were solid, if segregated, working-class neighborhoods.

 

We’re in a new economy now, with a social impact much different from the one in which our economic norms were written. It’s time to start debating new economic norms, in the hope that it’s not too late to save what’s left of the ghetto. 

Women prepare lunch orders at Homegirl Cafe in Los Angeles, April 23, 2010. Homegirl Cafe is staffed by 30 at risk and formerly gang involved young women, who are training to learn restaurant and catering work. REUTERS/Lucy Nicholson

"It is in the interest of corporate America to heal these divisions, if only to be able to hire the talent it needs to remain globally relevant."

I’d propose a new concept of corporate citizenship, the idea that business has a responsibility that goes beyond the bottom line to benefit the places it calls home. For starters, this means investment in its own communities, to undo the damage caused by its unseemly flight decades ago.

 

We’re talking investment here, not philanthropy. Many businesses already give generously in their home towns, but most of this money goes for social spending that does no more than put salve on the wounds. Nor are we thinking about small-scale entrepreneurship: some of that already exists and, while useful, doesn’t come close to solving the problem.

 

We’re also not talking social work. Businesses have a hard-headed reason to embrace this corporate citizenship. If they’re moved manufacturing overseas, they still keep their headquarters in Chicago and rely on the business services that a global city offers. They are global businesses now, so they need to attract the top-flight global talent, both for their headquarters and for their business services.

 

This talent encompasses the global citizens who can live anywhere. So why should they choose to live in a city that is seen by the world as a swale of racial violence? If the problem is worst in Chicago, it is shared by other global cities, all with their ugly and explosive racial and social divisions.

 

So it is in the interest of corporate America to heal these divisions, if only to be able to hire the talent it needs to remain globally relevant.

"Most of these young men say they would gladly abandon the streets for a job that paid $12 or $13 per hour."

In truth, it is not a huge challenge. The ghettoes, once teeming, have been emptying out over the years, as those who could leave did so. Each one of Chicago’s worst neighborhoods is almost exactly one-third as big as it once was. Englewood, one of the most lethal, had 90,000 people in 1970 and has fewer than 30,000 now.

 

Englewood’s official unemployment rate is 21 percent: unofficially, it’s probably over 50 percent. But if the goal is to end the violence by educating and employing its aimless and frustrated young men, the numbers are limited. Persons who work in the neighborhood say the most vicious gang members may be beyond help, but the rest can be reached. For its foot soldiers, the drug trade is not the lucrative job that outsiders suppose: most of these young men say they would gladly abandon the streets for a job that paid $12 or $13 per hour.

 

To have any real impact, any investment would need to be in the neighborhoods themselves. The city could provide free land and property tax breaks: most of these neighborhoods have large tracts of vacant land that long ago fell off the tax rolls. The city also could help with security, a major concern.

 

Any investment presumably would be in manufacturing – not the mass manufacturing of old but the smaller and specialized manufacturing that still exists in cities, mostly to serve local markets. Many of these jobs are technical and demand high skills. Some of this is taught in local community colleges and vocational skills, but the investors would have to commit to in-house training – common in places such as Germany but too rare among American employers.

 

None of this is easy. Little will lead to quick results. But this new corporate citizenship, creating real jobs that pay real money, is crucial if the city, as well as a damaged cohort of its young people, are to be saved.