Introduction

What a pleasure to join you this morning.

Thank you, Charles, for the kind introduction and for highlighting the work we have done in partnership with the Casey Foundation. I had the enormous privilege twenty years ago of working with Casey President Doug Nelson and Vice President Ralph Smith to re-orient Casey’s work toward improving outcomes for kids and families marginalized socially, economically, and politically. I’ve had the pleasure of watching your extraordinary institution sharpen that focus in the subsequent years. It has defined for the field of philanthropy what it means to be a compassionate, accountable, principled, and impact-driven organization. Thank you for all you do.

And a special thanks to Alaina for developing a program that is so well thought-out and that has been so generative and rich with ideas and content. Thank you for the invitation to speak here.

You spent yesterday excavating the kind of practice the majority of practitioners working in community development find most intriguing: work at the hyperlocal level. And it is intriguing for good reason.

• It is at the hyperlocal level that the requisite density of skills, ideas, activities, and diverse micro-cultures circulate, ricochet, and recombine to dismantle tired and unproductive approaches in favor of the new or imaginatively recycled.
• It is at the local level that transactional alliances morph over time into enduring networks of trust and mutual support, thereby layering through successive generations an accretion of shared history, accomplishment, norms and aspirations that crystalize into civic culture.
• It is at the city scale that it is still possible to concoct a partial antidote to the increasingly ideological and ineffective uniformity of federal policy and regulatory regimes.
• And finally, it is at the local level that people can witness and feel the benefits of investing for the future, enabling them to forge a civic agenda that defines what the community is trying to achieve and how best to achieve it.

Today’s charge is to turn to issues that on the surface, may seem more removed: state and federal policy, and the role of business. But I submit to you that yesterday’s and today’s topics aren’t really that separate.  For three reasons.

First, it is primarily at the local level that government and business leaders can bridge across sectoral, political, and ideological lines to articulate the imperative of economic inclusion and to actually do something about it. Meaningful cross-walking across sectors and systems is just too hard at 30,000 feet. We need a ground-wire to the city and neighborhood levels if we’re to truly focus, target, and refine what an equity-focused agenda can look like.

Second, city economies are inherently local.  Local economies are a microcosm of larger economic systems. But, unlike aiming at macro- or mezzo-economic development policies, pursuing local economic development involves a direct embrace of consequence. It makes it your job to build opportunity structures for the people the economy has left behind, not to pursue regional or statewide growth and hope that the benefits will trickle down.

And third, we have to ensure that the work is connected to policy. There can be no question that our local efforts need the oxygen supplied by equitable, enlightened policy. But our work also needs to be a form of reverse osmosis. It’s not enough to identify sources of calcified disinvestment, inequality, and injustice. We have to send back up the chain policy responses capable of deconstructing them.

Three Roles Philanthropy Can Play in Promoting Economic Inclusion

The question is – given these realities – whether nonprofits, philanthropy, and other civic actors can contribute meaningfully to moving the needle of economic inclusion. We believe that the answer is yes. Let me offer three brief examples of the roles we can play to that end.

1. Uniting Across Sectors Behind a Resident-Informed Civic Agenda

The first role we’ve played is table-setting – trying to create a substantive and procedural framework that enables multiple sectors to engage on an issue that is too politically charged, complex, or otherwise fraught for the public sector to lead on.

Nonprofits and philanthropy can’t substitute for government. It’s not just a matter of inadequate financial resources; we simply cannot do without an able, committed public sector that forms equitable and reasoned public policy, that plans and manages competently, and that sets public priorities through informed public spending. But we can create neutral and safe space for the tough give-and-take required to agree on a resident-informed civic agenda.

Philanthropy can bridge into all the sectors – business, public, nonprofit, academic – to ensure appropriate breadth of perspective and degree of buy-in. Philanthropy can ensure there is a sophisticated, data-driven architecture of information and analysis undergirding the process. Philanthropy can provide the political cover for a city to muster the imagination and intellectual energy necessary to assail prevailing assumptions and embedded inertias.

But as Winston Churchill remarked, “However beautiful the strategy, you should occasionally look at the results.” So, let me describe how this played out in one city.

Responding to the business community’s concerns that the Twin Cities was becoming complacent about its ability to compete with other metropolitan regions, the McKnight Foundation brought together the CEOs of the region’s three dozen largest employers, together with the governor, the mayors of Minneapolis and St. Paul, and the president of the University of Minnesota to create the Itasca Project, an effort to forge a business-led civic regional agenda.

To make a long story short, Itasca gained initial traction by focusing on six priorities that business leaders had identified over the course of a year’s worth of interviews. The work was driven by three dynamics structured by McKnight:

• First, McKnight convened quarterly meetings, providing a safe, neutral environment and supporting the discussions with sophisticated empirical background materials;
• Second, a CEO led each of the six initiatives, but McKnight arranged for the region’s top nonprofit leadership to provide the staffing for the working groups, giving rise to a new-found trust and respect between the private and nonprofit sectors; and
• Third, McKnight underwrote the costs – studies from Brookings, consultant costs, loaned executive time from the nonprofits, and others.

The impact has been dramatic. Right out of the box Itasca created, and ensured enactment of, a multiyear, multimillion-dollar commitment to improve the state’s transportation system. It launched a campaign to address the growing health disparities between the region’s majority white population and its communities of color. It created a privately-funded statewide effort to advance early childhood development. And, perhaps most importantly, it put influential members of the business community unambiguously on record in support of a regional business plan tied directly to a broad-based civic dialogue among all the sectors.

This is not a model unique to the Twin Cities. Many of you are working in this way already. A remarkable example is the way the Arlington Community Foundation has created a table where local Fortune 500 Companies can interface with nonprofit and public sector actors who are more deeply tuned into community needs. Jennifer Owens will talk about this later today.

2. Promoting Diversification of Local Economies 

A second role that philanthropy and the nonprofit community can play is to contribute to the diversification of local economies.

Much of our collective work is focused on places and circumstances in which the market has failed low-income people. And yet, the job of creating, attracting, and growing businesses has not traditionally fallen within philanthropy’s wheelhouse. But as market malfunction and neglect have become increasingly egregious and destructive, that has had to change. Philanthropy has had to evolve a more complete and nuanced toolkit capable of creating the preconditions for equitable long-term economic planning and implementation.

Just two quick examples of how that has taken form in Detroit.

The first way is contributing to the creation of an entrepreneurial ecology.

For the better part of a century, Detroit has been an economic monoculture – with a command-and-control automobile industry telegraphing precisely stipulated production requirements into every nook and cranny of its vast supply chain. Innovation and creativity were everywhere, but entrepreneurship was in scant supply – or, at least since Henry Ford rolled his first Model T off the assembly line a century ago.

A decade ago, the Kresge, Ford and Kellogg foundations took the lead in creating a $130 million fund called the New Economy Initiative, designed to put in place the kind of infrastructure that entrepreneurs and small businesses need in order to get started and grow: back-office supports, mentoring and networking opportunities, early stage capital, affordable space, and many others.

It took us awhile to realize that the fund would be most impactful if targeted directly at the city of Detroit.  Initially, we envisioned a regional initiative.  But it became clear Detroit’s economy was not the same as the regional economy, and if we wanted to get serious, we’d have to take aim at the specific challenges within our city limits.

The re-imagined, city-focused initiative promoted the diversification of the city’s economy by supporting small businesses, increasingly in our neighborhoods. This effort has contributed to a new vibrancy that is breathtaking – restaurants, tech firms, service businesses, and arts activity are reweaving the fabric of the city.

The second way philanthropy has helped diversify Detroit’s economy is by economically de-risking projects.

Until just recently, the most elementary cost-return calculus didn’t pencil out in Detroit residential and commercial projects – although it costs about the same to build a project in the city as it does anywhere else, the returns were insufficient to defray those costs.

We accordingly turned to philanthropic social investment capital to peel away the top layer of risk for market-rate investors. We needed to make it safe for them to underwrite projects that could serve as proof points that the city was investible. And we needed enough of those proof points to begin bending the financial viability curve.

It has worked. More and more mixed-use, mixed-income projects are coming on-line, demonstrating to investors that they can obtain a return on their investment independent of philanthropic capital.

The trick is, of course, to ensure that this engagement with private markets – whether small businesses or mixed-use residential and commercial projects – inure to the benefits of Detroit residents. Trickle-down is not an equity strategy. We’re working hard to put bumper rails in place to guarantee that these moves are genuinely inclusive.

3. Influencing the Public Sector

Of course, none of this work happens in a vacuum. We operate within a context shaped by the policies, practices, and norms of the public and private sectors. It would accordingly be tantamount to philanthropic malpractice to ignore the possibility of engaging with, and seeking to influence the policies of, our private and public sector partners. That is the third way that philanthropic and civic players can help move the need toward economic inclusion.

Let me offer an example from Kresge’s experience with the Obama Administration during Detroit’s bankruptcy ordeal.

Shortly after President Obama took office in 2009, his administration reached out to our city with heart, expertise and imagination. In the wake of the Great Recession, the automotive bankruptcies, the foreclosure crisis, and the imprisonment of the Detroit mayor and dozens of his associates, I received a call from our very own Derek Douglas, who was serving as the President’s Special Advisor on Urban Affairs. Derek told me that he had just left a cabinet meeting in which the President had said that he would not permit Detroit to become the Katrina on his watch. He asked our advice about how the federal government might best structure its support.

Over the next three years, the Administration was true to Derek’s – and the President’s – intention. They provided indispensable support for our efforts to create a light rail line to jump-start the creation of a regional transit system. They loosened restrictions on federal housing dollars to enable us to attack blight. They dispatched Don Graves, a high-level Treasury official, to spend a year on the ground as a liaison. They launched the “Strong Cities, Strong Communities” program in Detroit, embedding federal talent in key city agencies.

Those efforts helped create a scaffolding that supported Detroit even as it fell into the largest municipal bankruptcy in U.S. history. Shortly after the bankruptcy was declared in 2013, I received another call from the White House. This time it was from Gene Sperling, director of the National Economic Council. He – like Derek before him – asked how the Administration could be of the greatest help. He observed that although the administration couldn’t forgive the city’s mounting debt or pass emergency legislation for the benefit of a single city, it wanted our advice about other ways it could help keep Detroit afloat. I asked if he could give us two weeks to assemble some ideas. He agreed.

Kresge took the lead in scoping out federal programs that might be helpful in five areas – housing, transit, safety, municipal capacity, and technology – and sent it along to Gene. He called back immediately and asked if we could bring a representative delegation to meet with him at the White House. So, a week later, a dozen Detroiters went to pay a visit.

We weren’t prepared for the scene we walked into in the Roosevelt Room. Sitting around the table were not just Gene and Valery Jarret, but cabinet secretaries and assistant secretaries, the Attorney General, the White House Technology Director – and probably another dozen top-level administration officials. We spent the next three hours working through the proposed strategies contained in our white paper. In the process, we the Assistant Secretary for Transportation lifted a critical regulatory obstacle to the light rail project . . . HUD Secretary Donovan agreed to free additional blight money . . . Attorney General Holder suggested re-directing police surplus public safety equipment . . . and the White House technology guy offered to bring the chief information officers of Google, Apple, Yahoo, and other tech firms to Detroit for a two-day immersion into Detroit’s technology challenges.

And Gene wasn’t done. After we left, he formed inter-agency work groups to further refine the ideas emerging from the conversation. Within a few months, the administration assembled a $300 million aid package – including contributions from Detroit philanthropy. It isn’t possible to overstate the power of that package – in giving the city a psychic and operational boost that would prove invaluable as we excited the bankruptcy.

I probably can’t convince you that this was anything except a once-in-a-generation example of principled, visionary, catalytic partnership between the public and philanthropic sectors. But I actually do think it is suggestive of something that is, in fact, replicable – illuminating the alchemy that can result from civic society engaging in full partnership with compassionate, enlightened, and responsive public leadership. The camaraderie exhibited during that time was rooted in something deeper than politics, or even pragmatism. It was instead centered in the realization that any federal administration must be the proud and powerful steward of all this nation’s cities – large and small, vibrant and struggling. That is how change happens.

Conclusion

So that’s the case for how local actors can work with business and government to champion local economic and community development. Sounds simple enough. Civic leaders acting strategically to help establish common grounds, to promote diversity in local economies and to work with local, state, and federal policymakers and private actors at all scales to create a collaborative vision of inclusive economies.

The problem is, of course, that this is demanding work, and few of us rarely muster the energy to do it consistently, with force.

There is, regrettably, a cynical rationalization for inaction – at least in the philanthropic realm. After all, we foundations are thin on legitimacy – unlike government, we can’t command a public solidarity for the actions we espouse. We can be insular and overly-narrowly focused. And we’re loath to give up our mantle of neutrality, preferring to maintain a kind of objective distance that avoids stirring up controversies that might force us to spend whatever political capital we possess.

But, at the end of the day, there is no excuse for inaction is there? What good is philanthropy if we don’t bend every tool at our disposal to take direct aim at structural impediments to inequality and injustice? . . . What good are we if we don’t use the privilege of our position to grab those third-rail issues that the public and private sectors refuse to touch? . . . What good are we if we don’t help build the capacity of our civic partners to articulate and execute community vision?

So, we have no real choice but to act. And more and more, we are acting.

But we certainly can’t act alone. It is my hope that today’s conversations generate imaginative ways for each of you and your organizations to play a broader role in informing economic development, business, and policy. The road is there to be taken. If enough of us take it, it might actually make a difference.

It has been a pleasure. Thank you for listening. And best wishes for a productive day.