|Richard Rothstein, author of The Color of Law, speaks at the Tools Toward Market Restoration conference in Detroit, May 1, 2018. Source: twitter.com|
Chronic market failure.
I’m sure I’ve heard that term before, somewhere, but I certainly heard it again in advance of the Tools Toward Market Restoration Conference I attended last month in Detroit, presented by the Federal Reserve Bank of Chicago. It’s clearly an economist’s term — it’s a concise, value-neutral term that aptly describes what’s been happening in cities in the middle of America, large and small, for about three generations now.
Warm climates, made more attractive by investments in water infrastructure, the spread of air conditioning and a business-friendly environment has propelled the growth of Sun Belt cities since World War II. Access to highly educated talent, a necessity in today’s tech/finance/professional services economy, and unparalleled urban amenities that draw a sharp contrast with the homogeneous suburbia that many people grew up with, fueled the incredible rebound of today’s coastal “superstar” global cities.
But cities with economies built on steel, rubber, glass, auto production, agriculture and food processing, lumber and all the goods needed for a growing nation, with the transportation network to distribute it? Now suffering from worldwide competition?
Chronic market failure.
That’s certainly one way to characterize what’s happened in the Midwest and Rust Belt, but it’s deeper than that. If anything, the conference reaffirmed with me that “chronic policy failure” and “chronic social failure” probably contribute as much, if not more, to the condition of Midwest and Rust Belt cities than simple market failure alone.
The conference was bookended with two presentations that drove those points home. The conference’s opening speaker was Richard Rothstein, Distinguished Fellow with the Economic Policy Institute and author of The Color of Law: A Forgotten History of How Our Government Segregated America. He made clear that the presence and persistence of today’s urban ghettos — a term he used because he believes it more accurately describes their development and use — was the outcome of federal policy established as part of the New Deal’s Home Owner’s Loan Corporation (HOLC). Through the development of its Residential Security Maps for cities nationwide, designed to categorize neighborhoods by their mortgage worthiness, “redlined” communities (almost always African American communities) were starved of the financial resources necessary to keep them as viable communities over time. Redlining policy effectively codified, at the federal level, biases that already existed and were expressed through other means at the time (exclusionary zoning, restrictive covenants, among others), and led to the development of other tools that would further destabilize African American communities (public housing construction, urban renewal, interstate highway development) in the name of removing urban blight. This also became the justification for the lack of investment by cities in these neighborhoods for the services we take for granted in other areas — in schools, parks, infrastructure, even basic services like trash collection. That’s the chronic policy failure.
The conference concluded with a presentation by Marisa Novara, vice president with Chicago’s Metropolitan Planning Council and the non-profit agency’s lead on an intriguing study, The Cost of Segregation. Recognizing that Chicago is one of the most intractably segregated metro areas in the nation, particularly when it comes to black-white segregation, and one that employed all the tools (and more) listed above, MPC asked a fascinating question: what does it cost Chicago to be as segregated as it is? And can it be quantified?
MPC started by comparing Chicago to the 100 largest metro areas nationwide. They found that, overall, metro Chicago had the fifth-highest level of combined racial (black and Latino vs. white) and economic segregation. They found that if metro Chicago had a level of segregation equal to the median of the 100 largest metros, its impact would be:
- An additional $4.4 billion in income in the region, amounting to nearly $3,000 per person, across the board;
- An additional 83,000 people in the region with bachelor’s degrees, fueling the increase in income;
- A regional homicide rate that would be 30 percent lower; and
- Residential real estate values that would be $6 billion more.