November 2, 2006

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Discussion Framework: “Inclusionary Growth"

Robert Weissbourd, RW Ventures, LLC | November 2, 2006

INTO THE ECONOMIC MAINSTREAM

November 2, 2006

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“We’re at a point where left and right are converging … it’s great that you are doing this. I’ve been trying to do this, but I can’t bring together thinkers on these issues, as the conservatives complain and the liberals won’t talk to me.”

- Conservative Policy Leader

The Process

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How Divided are We?Closely and Deeply Divided

RepublicanDemocrat

Source: Morris Fiorina, “Culture War?”

Public Impressions:

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How Divided are We?Closely and Deeply Divided

RepublicanDemocrat

Closely but not Deeply Divided

RepublicanDemocrat

Source: Morris Fiorina, “Culture War?”

Public Impressions:

Likely Reality:

At least on political issues, the general public shares much more in common than current rhetoric would imply.

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Searching for Common Ground

Market BasedDevelopment

Free Markets

OwnershipSociety

AssetDevelopment

Empowerment

Inclusiveness

Community

Devolution

BusinessInvestment

Individual

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Common Goals: Inclusive Economic Growth

Productivity InclusivenessAsset

Development

“I N C L U S I O N A R Y G R O W T H”Constructive Government

Ownership Society

Asset-Based Development

Economics & Markets

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Elements of Inclusionary Economic Growth

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Elements of Inclusionary Economic Growth

Increasing Productivity• Long term economic growth occurs through enhancing productivity of

individuals, businesses and institutions (including government) • Invest in technology, R & D, human capital, knowledge factors that

lead to innovation

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Elements of Inclusionary Economic Growth

Expanding Inclusiveness

Increasing Productivity• Long term economic growth occurs through enhancing productivity of

individuals, businesses and institutions (including government) • Invest in technology, R & D, human capital, knowledge factors that

lead to innovation

• Reincorporating wasted “market-ready” assets – such as underdeveloped land, underemployed labor or underserved markets – into the economy can increase efficiency and productivity

• This growth is not just good, but good for business – no trade-off between equity and growth

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Elements of Inclusionary Economic Growth

Developing Assets

Expanding Inclusiveness

Increasing Productivity• Long term economic growth occurs through enhancing productivity of

individuals, businesses and institutions (including government) • Invest in technology, R & D, human capital, knowledge factors that

lead to innovation

• Reincorporating wasted “market-ready” assets – such as underdeveloped land, underemployed labor or underserved markets – into the economy can increase efficiency and productivity

• This growth is not just good, but good for business – no trade-off between equity and growth

• Getting assets market-ready also makes economic sense• Also necessary for strong society: healthy economy and democracy

linked

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Inclusionary EconomicGrowth is about Markets

We need to find market based solutions or policies that stimulate market corrections, such as creating competition for payday lenders.

– Moderate Policy Analyst

We need to create a market culture that is currently missing in some communities and constituencies …

– CDFI Leader

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Common Means: Markets

ExchangeExchange

ProductionProduction ConsumptionConsumption

Market Environment Internal Market Operations

• Markets are how wealth is created and economic growth occurs• Markets determine which assets are included

Other Exogenous Influences:Infrastructure

ResourcesTechnology

Tastes

Institutional Context:Enabling Laws

Prescriptive RegulationEntry Barriers

• Transaction Costs

• Finding Costs• Measurement

Costs

• Productivity• Costs

• Income• Taste

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Aligning Markets and Development

Low AlignmentLow Alignment

High AlignmentHigh Alignment

Market Market InterventionInterventionMarket solution Market solution possible if possible if market market operations and operations and environment environment changed changed through public through public policy and policy and advocacyadvocacy

Market Market RedefiningRedefiningMarket solution Market solution possible if possible if market market operations and operations and market market environment environment changed changed through private through private activitiesactivities

Market RefiningMarket RefiningMarket solution Market solution possible with possible with new information, new information, products or products or networksnetworks

Pure MarketPure MarketMarket solution Market solution possible; market possible; market already already generates generates development development outcomesoutcomesNon-MarketNon-Market

No market No market solution; market solution; market is not the is not the appropriate appropriate channelchannel

Adapted from Kahane-Weiser-Adapted from Kahane-Weiser-Weissbourd/Ford CIIWeissbourd/Ford CII

Market InterestsMarket Interests

Development Development GoalsGoals

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Aligning Markets and Development

Low AlignmentLow Alignment

High AlignmentHigh Alignment

Market Market InterventionInterventionMarket solution Market solution possible if possible if market market operations and operations and environment environment changed changed through public through public policy and policy and advocacyadvocacy

Market Market RedefiningRedefiningMarket solution Market solution possible if possible if market market operations and operations and market market environment environment changed changed through private through private activitiesactivities

Market RefiningMarket RefiningMarket solution Market solution possible with possible with new information, new information, products or products or networksnetworks

Pure MarketPure MarketMarket solution Market solution possible; market possible; market already already generates ED generates ED outcomesoutcomes

Non-MarketNon-MarketNo market No market solution; market solution; market is not the is not the appropriate appropriate channelchannel

Market InterestsMarket Interests

ED GoalsED Goals

Adapted from Kahane-Weiser-Adapted from Kahane-Weiser-Weissbourd/Ford CIIWeissbourd/Ford CII

Make Market Make Market WorkWork

(Addressing (Addressing Internal Internal Imperfections)Imperfections)Change Market Change Market

ParametersParameters

(Using Market (Using Market Mechanisms)Mechanisms)

Change Market Change Market ParametersParameters

(Using Non-(Using Non-market market Mechanisms)Mechanisms)

Vital Work –Vital Work –

but not market but not market based!based!

Market Works:Market Works:

Company profits Company profits while providing while providing Development Development impact.impact.

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If we care about markets, what’s the role of government?

The government’s role is to reduce or eliminate market imperfections, and shine a light on areas of need.

– Republican Policy Leader

Structure incentives to bring people back into the labor market, to motivate people to join the mainstream, such as by lowering the payroll tax or expanding EITC.

– Conservative Think Tank

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Implications for Government Roles

Enabling

Create optimal infrastructure for

market to perform; increase

productivityRole

Public goods; market

preconditionsMarket

Rationales

Property rights;law enforcement;

transportation infrastructure

Examples

What is the proper role and best means for government to enhance market operations towards inclusionary economic growth?

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Implications for Government Roles

Improving

Fixing markets

Externalities, information

imperfections, entry barriers

Regulating pollution; education

Enabling

Create optimal infrastructure for

market to perform; increase

productivityRole

Public goods; market

preconditionsMarket

Rationales

Property rights;law enforcement;

transportation infrastructure

Examples

What is the proper role and best means for government to enhance market operations towards inclusionary economic growth?

November 2, 2006

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Implications for Government Roles

Using

Moving markets on their margins

Positive externalities; more efficient approach

to non-market goals (equity, public welfare)Empowerment

Zones;New Markets Tax Credit (NMTC); CRA (in part)

Improving

Fixing markets

Externalities, information

imperfections, entry barriers

Regulating pollution; education

Enabling

Create optimal infrastructure for

market to perform; increase

productivityRole

Public goods; market

preconditionsMarket

Rationales

Property rights;law enforcement;

transportation infrastructure

Examples

What is the proper role and best means for government to enhance market operations towards inclusionary economic growth?

November 2, 2006

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Implications for Government Roles

Degree to which market and asset development goals are already aligned

Getting Assets Market ReadyMoving assets to

market (developing assets in ways

which yield growth)

Non-market objectives (but

market awareness)

IDAs; Brownfield Remediation;Education and

training

Using

Moving markets on their margins

Positive externalities; more efficient approach

to non-market goals (equity, public welfare)Empowerment

Zones;New Markets Tax Credit (NMTC); CRA (in part)

Improving

Fixing markets

Externalities, information

imperfections, entry barriers

Regulating pollution; education

Enabling

Create optimal infrastructure for

market to perform; increase

productivityRole

Public goods; market

preconditionsMarket

Rationales

Property rights;law enforcement;

transportation infrastructure

Examples

What is the proper role and best means for government to enhance market operations towards inclusionary economic growth?

November 2, 2006

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Implications and Issues

Aligning Inclusion with Growth

Customizing to Particular Markets

Expanding Individual Choice: Vouchers + ?

Directly Investing in Productivity

“Development as Freedom” Capacity and Responsibility

Discussion

Robert Weissbourd, RW Ventures, LLC | November 2, 2006