What if we can’t “fix” poverty?

A cross the country, we are dealing with the consequences of the growing disparity in income between the rich and poor. How can we use new thinking about networks to address these challenges? A promising pilot project has been underway for some years in Shreveport, Louisiana. Community Renewal International takes a decidedly different approach to the challenges of poverty and the complex trap that impoverished neighborhoods create for people.

In the past, we’ve chosen to see these challenges in isolation. So, for example, the Department of Housing and Urban Development focused on providing affordable housing. The Department of Health and Human Services provides a range of social service programs to these neighborhoods. The Labor Department runs programs to train workers. The list goes on.

On top of these long-standing federal government initiatives, both national and community foundations have designed programs to address specific challenges presented by poverty. A general pattern has emerged over the years. These government and philanthropic programs are largely designed to fix isolated problems within these impoverished neighborhoods.

Could it be that this approach of “fixing the problems” of poverty doesn’t work?

The evidence is piling up.  Despite billions of federal dollars invested in trying to fix impoverished neighborhoods, pathways out of poverty are more difficult to find. Most recently, a research team of leading regional economists looked at upward mobility across the U.S. and found that isolated low income areas are very difficult to escape.

What if, instead of thinking of poverty is a complex set of problems to be fixed, we thought of poverty as presenting challenges that could be overcome with renewed relationships?

Think about this question from your own perspective. Recall a time when you faced a particularly difficult challenge in your life: a divorce, the death of a loved one, a failure in school or work. Most of us, if we’ve lived any length of time, have confronted a deep personal challenge.

Now think of how you confronted it. Chances are you did not do overcome your adversity on your own. You had help. You had friendships and connections on which you relied to regain your balance and begin moving forward once again.

What if we thought of our impoverished neighborhoods as places where we could intentionally build these supportive relationships? What if we focus these relationships on the core dimensions of what makes a healthy community: a safe environment, adequate housing, quality education, meaningful work?  What if we committed to ourselves to rebuilding the relational foundation of our communities, person by person, block by block?

Community Renewal International has been taking this approach in rebuilding the impoverished neighborhood of Allendale in Shreveport, Louisiana.  After decades of neglect, a new neighborhood is forming, based on intentional, healthy relationships.

Across the broader community new networks have formed to support these relationships within the neighborhood. Reflecting on our own personal experiences, the results are predictable:  lower rates of crime, better housing, fewer teenage pregnancies, a stronger commitment to education, a more promising neighborhood economy, and, perhaps most important, healthier and happier residents.

The Community Renewal model challenges the way we have thought about urban poverty since at least the Great Depression.  When we intentionally rebuild the relational foundation of our communities, new solutions appear. We dramatically increase the creative capacity of residents to fashion their own solutions with trusted partners. We “link and leverage” our assets in new and creative ways.  Most important, residents start this process with the assets they control, the assets within their own networks. Chief among them: their trusted relationships.

This new approach poses its own set of challenges for the federal government. Within multiple agencies, we are faced with redesigning three generations of anti-poverty programs that have largely failed. Over 60 years, the federal government has funded an endless series of pilot projects that are not easily replicable, not easily scalable, and not sustainable over the long term.  Highly prescriptive and deeply burdened with intricate regulatory rules, these federal programs have absorbed billions of dollars with not much impact.

The answer is not, as some have suggested, simply sweeping away these programs with nothing new to replace them. Rather, it’s a time for policy innovation. It’s a time to re-imagine the federal role — not as prescriptive problem solver — but as a civic shareholder in these neighborhoods.

The Community Renewal model demonstrates that the federal government can make intelligent investments in impoverished neighborhoods and generate positive returns from lower rates of crime, lower rates of teenage pregnancy, higher educational attainment, and healthier neighborhood economies. Most important, Community Renewal offers the promise of sustainability, a factor that has been sorely missing from federal policy.

To understand why the Community Renewal model can offer a sustainable approach to rebuilding neighborhoods, we need to examine the dynamics of money flows within the neighborhood.

At its core, a neighborhood economy emerges from three flows of money. “Good Money” flows into the neighborhood from businesses that trade outside the neighborhood boundaries. So, for example, a restaurant that attracts patrons from across the region pumps Good Money into a neighborhood.  When an entrepreneur sells products on the Internet, she also pumps Good money into the economy.

“Neutral Money” flows through the neighborhood when residents of a neighborhood buy and sell from one another. When a resident buys from a locally owned business, she is accelerating the flow of Neutral Money. This flow creates more employment in the neighborhood, what the economists call the “multiplier effect”.

Finally, “Bad Money” flows out of the neighborhood when residents make purchases outside the neighborhood that they could make inside. (This pattern gives rise to the controversy over the Big Box stores.)   Bad Money also flows out of the neighborhood when people move away and population declines. Perhaps the largest flow of Bad Money, however, comes when young people drop out of school and fall into a life of crime and dependence.  The neighborhood – not to mention the broader economy — loses the potential income stream that comes from a potentially productive member of the community.

Understanding these three flows of money helps to explain why the Community Renewal model offers such promise. By rebuilding the relational foundation of a neighborhood, Community Renewal creates new opportunities to increase the flow of Good Money into a neighborhood, increase the velocity of Neutral Money within the neighborhood, and reduce the flow of Bad Money flowing out from the neighborhood. By giving residents the opportunity to shape these three flows of money for themselves, the Community Renewal offers the promise of sustainability.

From a broader perspective, the federal government – the nation’s taxpayers – is investing billions of dollars in “social overhead” to support these impoverished neighborhoods. So, for example, the cost of housing one prisoner ranges north of $30,000 a year. Failing to teach a young child to read and comprehend well by the third grade results in a loss of hundreds of thousands of dollars in potential income over that child’s lifetime. Failing to provide ready sources of healthy food increases chronic illness like obesity and diabetes. In the end, we all pay the costs of deteriorated, dysfunctional neighborhoods.

Moving federal policy in a new direction will not be easy. The federal government is not set up to capture the long-term gains of network-based neighborhood policies. Electoral politics pushes policy to short-term thinking and simplistic formulas.  Employees within the federal government will need new skills. While they are very adept at managing the intricacies of existing federal programs, they are not very skilled at participating on equal terms with neighborhood residents as investors seeking long-term returns. Shifting mindsets will take training and time.

Equally important, new, simpler design principles will need to guide a new generation of federal legislation. Outdated and unproductive enabling legislation needs replacement with legislation that is more flexible and responsive. This shift will require Congress to undertake major reforms in authorizing legislation, a task that seems nearly impossible with the current Congressional gridlock.

Fortunately, we have some new Congressional dynamics emerging. No Labels represents a bi-partisan caucus of Congressional members committed to setting aside ideological differences and working on real reforms. With this caucus as a start, we might see some shifts taking place in Congressional political dynamics over the coming election cycles.

Equally important, we some successful policy models on which to draw the next generation of federal legislation for our cities and regions. The Small Business Innovation Research grant program places the federal government in the role of investor in small promising enterprises. Under this approach, the federal government’s investment is carefully staged to guide the business toward sustainability. Using the same design, the federal government could make investments in neighborhoods as a partner in rebuilding the relational foundation – the networks – that will sustain a neighborhood over the long term.

Neighborhoods are complex, a set of networks embedded in other networks. The Community Renewal model demonstrates that impoverished neighborhoods can be rebuilt by intentionally investing in new sets of healthy relationships.  Rather than trying to micromanage problem-solving at the neighborhood level, the federal government can become a productive investor in the relational foundation of healthy neighborhoods.

The Small Business Innovation Research program can be replicated as the Community Renewal Investment program, in which the federal government creates neighborhood Opportunity Funds to invest in promising collaborations.

A simple set of criteria can guide the program toward collaborations that are truly transformative: investments that are scalable, replicable and sustainable.  Can this network-based approach work? We have good evidence it can.

Some years ago, Purdue pioneered a new approach to workforce innovation. As one of thirteen regions selected nationally, Purdue received $15 million to create new collaborations in workforce development. Using network-based models, we established an Opportunity Fund to invest in promising collaborations that held the potential of being transformative. We defined the term “transformative” precisely. We looked for collaborations that were replicable, scalable and sustainable.

Using these simple rules, we launched over 60 initiatives with over 200 metrics in four strategic focus areas. At the end of four years, 80% of our initiatives continued past the initial funding; they were sustained by collaborations the created new value for the participants. All totaled, although we received 8% of the money awarded nationally, we generated over 40% of the outcomes. In other words, we changed the game.

Our results underscore some valuable insights about network-based approaches to policy: they offer the opportunity to be faster, more agile and far more productive with our federal dollars. They offer step-change improvement in the productivity of federal programs.

Community Renewal is pointing the federal government to another promising approach that transcends past patterns, another opportunity to change the game.

All that’s needed now is a willingness to innovate.

Ed Morrison is Director of the Purdue Agile Strategy Lab. He is also an adjunct professor at the University of the Sunshine Coast in Queensland, Australia. For the past five or six years, he has been developing new, agile approaches to strategy in open, loosely joined networks, a discipline he calls Strategic Doing. Prior to starting his economic development work, Ed worked for Telesis, a corporate strategy consulting firm. In this position, he served on consulting teams for clients such as Ford Motor Company, Volvo, and General Electric. He conducted manufacturing cost studies in the U.S., Japan, Mexico, Canada, Italy, Sweden, and France. Ed started his professional career in Washington, D.C., where he has served as a legislative assistant to an Ohio Congressman, staff attorney in the Federal Trade Commission, and staff counsel in the US Senate. He holds a BA degree cum laude with honors from Yale University and MBA and JD degrees from the University of Virginia.

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