Spring, 1998, Vol. 4, No. 2

First Place: Colver-Rosenberg Award
The Nature of the Beast:
Forays into Defining Community and Economic Development

By Peter Huffaker, Student in the joint SSA-Graduate School of Business program.

The community economic development (CED) field is very broad and contains many contradictions. In some ways it is like the metaphor of the elephant being described by three blind men. Each, touching a different part of the elephant, describes it in a completely different way. However, unlike this metaphorical elephant, it is not clear that the different parts of the CED field make up a consistent whole. Nevertheless, I will try to define CED along its different dimensions with the intention of creating a useful framework for analysis.

There are a handful of characteristics that seem to be universal to CED institutions-they have a social mission, they act as intermediate economic institutions and they employ similar strategies. Other dimensions of CED are important across the field, but different organizations define their work in quite different ways. These dimensions include the organization's level of community participation, growth vs. developmental goals, relationship to the mainstream economy, perspective on the individual and the market in which it is engaged. Evaluating all of these factors together should provide a useful framework for defining and understanding any CED program.

CED's Social Mission

Recognizing that a social mission is inherent to any CED program differentiates it from other economic development efforts. The CED field has a strong foundation of values that underlies its work. The field's modern history dates back to the social activism of the 1960s and 1970s. Social advocates, tired of demanding action from others, began to create their own institutions. The inadequacy of financial institutions led to the formation of numerous community development credit unions. Low-income housing was insufficient so people began to build their own. Jobs were in short supply so people tried to create new economic opportunities.

Economic Intermediary Institutions

How do individuals navigate, survive and thrive in a world of globalism, technological change and a constant shifting of resources between sectors of the economy? In part, individuals navigate this world by relying on formal institutions and informal social networks. Banks provide financing, businesses offer jobs, unions engage in advocacy and employment programs supply linkages and training. These formal institutions are what I refer to as economic intermediaries. CED organizations also serve as economic intermediaries. They are differentiated from other for-profit institutions by intent. Banks and businesses do not serve as intermediaries in the interest of the individuals and communities they serve. In this way CED organizations are similar to unions and employment programs that have the intent of serving in the best interest of the groups they represent. However, CED organizations can be further differentiated from unions and employment programs by the strategies they employ. I believe this intermediary role to be a key component of the CED field.

CED Strategies

Overwhelmingly, CED organizations use collaborative approaches as opposed to the adversarial tactics of traditional community organizing. CED institutions can take either for-profit or not-for-profit forms, but they tend to use the tools of both sectors. I like to think that the CED field uses businesses as instruments of social intervention. A bank becomes a tool for reinvestment, a manufacturing firm is transformed into a training institute, and a T-shirt shop becomes a youth development program.

A good example of the latter is Studio Air, a program of the Shorebank Neighborhood Institute. At Studio Air, teens learn both artistic and business skills. They assume responsibility for design, production and sales, and are given the support and training required for success. The youth are engaged in positive activity, learn useful skills and have the opportunity to make money. In this way the CED field takes the tools of the business world and uses them for a social mission.

Level of Community Participation

The word 'intent' used in the above discussion on economic intermediaries brings to light the issues of agency and community participation. Applied here, agency means that a CED organization may not always act in the interest of those they purport to serve. Community participation is one safeguard against this possibility. The belief is that if communities have a high level of involvement in a CED organization, it is more likely to act in their interests.1 Examples from the field vary tremendously in the degree of community control-from none at all to a fully grassroots democratic process of control.

Economic Development vs. Economic Growth

While wealth creation and its role in poverty alleviation is often forgotten, understanding this relationship is a central tenet to CED. But more wealth does not necessarily translate into greater social well-being. For this reason some draw a distinction between economic development and economic growth. To understand the contrast between these two, imagine there are two kinds of wealth, financial and social.2 Economic growth focuses on short-term financial wealth, while economic development maximizes long-term financial and social well-being. While one might assume that CED rests squarely on the economic development end of this dichotomy, there are situations in which economic growth, unfettered by the concerns of overall social well-being, may be an appropriate goal. Different CED practitioners use both growth and development goals.

Relationship to the Mainstream Economy

There are three common perspectives which define the relationship of CED organizations to the mainstream economy. First, mainstream capitalism is fundamentally flawed. It acts to increase alienation and destroy social bonds. In response, CED should strive to create an alternative set of economic institutions that create wealth in a fundamentally different way. The basic argument here is that the separation of the economic and social systems is artificial and has negative consequences for overall well-being. CED organizations which adopt this position attempt to integrate these two spheres more appropriately within alternative economic institutions. Second, mainstream capitalism is not fundamentally flawed. However, various social and economic barriers have prevented the creation of market institutions in some areas. The goal of CED then is to create mainstream institutions in previously neglected areas.

Finally, mainstream capitalism separates communities from the wealth creation process. In this scenario, the role of CED organizations is to better link marginalized groups to the mainstream economy, not to create economic institutions that replicate or replace mainstream institutions. The important concept here is not wealth creation or development, but economic opportunity. Economic opportunity allows access to all of the goods and services generated in the economy.

All three approaches to the mainstream economy create economic opportunity. The difference in this third approach is that the opportunity comes from linkages to the mainstream rather than through alternatives to the mainstream.

Perspective on the Individual

CED organizations vary tremendously in the way that individuals are incorporated into their work. Some have a structuralist orientation where the focus is on how the environment impacts the individual. Individuals are viewed as capable, and the problem is predominately a lack of economic opportunity. Other CED organizations have a more individualistic approach. Opportunity is accessible, but individuals do not have the skills to take advantage of it. A third type of CED organization maintains an ecological perspective, which recognizes the needs and limitations of individuals within their environment. The Chicago Christian Industrial League (CCIL) is an example of an ecological perspective.

As a part of its mission to serve the homeless, CCIL runs a landscaping business. Shelter residents are employed and receive on the job training in addition to more traditional provisions (food, counseling, case management). CCIL's approach is structuralist in that it provides direct opportunity or jobs to individuals. It is also individualistic in that participants are engaged in counseling and case management.

Markets of CED

CED programs can also be distinguished by the domain in which they intervene. Broadly, these are the capital, housing, labor and "goods markets".3 These markets are deeply intertwined. For example, institutions that intervene in the capital markets provide investments to housing developers, investment in businesses (usually small or micro), consumer credit, investments in commercial or industrial real-estate development or provide financial services. Obviously, financial institutions that provide investments in housing are also in the housing market.

As another example, the Shorebank Neighborhood Institute (SNI) has an investment fund that provides capital to small manufacturing firms on the west side of Chicago. In addition, SNI runs an employment program that places local residents in the manufacturing sector. Firms that hire through the employment program get interest rate discounts on their debt. This program is indicative of the creative linkages between the labor and capital markets taking place in the CED field.

Reviewing all of the characteristics and dimensions of CED, the metaphor of three blind men groping to define an elephant becomes all the more compelling. My efforts to capture the essence of this enormous beast have led to the following definition: Community economic development is the process of creating economic opportunity at an intermediary level between individuals of a community (group) and the macro economy for the purpose of establishing a more just or better society.4 Within this definition lies the extreme variability of the CED field. Analyzing any CED program along the various dimensions outlined in this article will help to illuminate its core characteristics. And within this framework the whole of the community economic development field can be better understood. As economic intermediaries, CED programs are not in a position to influence macroeconomic trends, but they can mitigate the effects of those trends on communities and individuals. It is this trait that most unifies the diverse components of the field and holds its tremendous potential for permanent social change.

ENDNOTES

1. It is not my intention to comment on the complexities, strengths, and weaknesses of high levels of community participation.
2. One might think about different kinds of wealth for every dimension of well-being-social, spiritual, environmental. I dichotomize between financial and social wealth or well-being for illustrative purposes only.
3. The goods market refers to the availability of goods and services within a particular neighborhood. The importance of this area should not be down played. If transportation is unavailable, the distance to the nearest grocery store becomes a very serious quality of life issue. Also, individuals who climb the economic ladder will quickly leave neighborhoods with a poorly developed goods market.
4. This last bit about "a more just or better society" is quite important. It points out that the field is based on values, on implicit or explicit definitions of what is good, better, or just and refers back the field's underlying social mission.

Peter is a student in the joint SSA-Graduate School of Business Program. His field placement is at The Community Economic Development Corporation of Dearborn Homes.

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