February 12, 2009
Unlocking the Cash Economy
It turns out that there is more money in the inner city than we thought:
In its 2004 report on the city of Cleveland, Social Compact detected a residential population that was 24 percent higher than 2000 Census figures indicated. In studying the new immigrant hub of Santa Ana, Calif., for a 2006 report on that city’s disadvantaged communities, Social Compact found an average household income 40 percent larger than that captured in the 2000 Census — a discrepancy Social Compact says can be partially explained by a thriving informal economy many traditional economic models don’t capture.
In an interview with Miller-McCune.com, Social Compact CEO John Talmage attributed the difference in the numbers to his organization’s mining of data from a variety of sources — including tax rolls, utility accounts and credit companies — rather than relying on computer models based on incomplete or unreliable data. The approach tends to emphasize the economic opportunity — rather than the poverty and deficiency — to be found in low-income neighborhoods.
America’s inner cities, according to ICIC’s Web site, represent $122 billion worth of retail purchasing power.
The whole article, by Amy Ramos at Miller-McCune, synthesizes a bunch of other research on economic development in urban neighborhoods. Some of the findings:
- The problem isn’t a lack of money, but of investment in infrastructure and education;
- A heavily cash-based economy means that you get a lot of cash-based businesses, from “coffee shops and cake makers to tax counselors and home-improvement outfits… ‘family-owned, small, very often cash-based and not financially sophisticated.’”
- Also, lots of fast food. Why not big grocery stores, sit-down restaurants, or furniture shops? You usually don’t shop there with cash!
- It is really hard to get a large grocery store in a city neighborhood. Not only do you have to buy (and usually demolish) property, you have to fight regulators, politicians looking for handouts, neighborhood groups… Smaller shops (better yet, carts) have a much easier time flying under the radar.
- Urban planning is a mess.
- You can take this too far, but it’s almost as if the “vice” purchases that pepper city neighborhoods — liquor stores, lottery tickets, fast food, drugs — are a reaction to the excess of cash in these neighborhoods and the absence of “wholesome” outlets for that money. It’s all cash, no capital.
- It’s like Deadwood! Lots of money chasing too few services, an absence of law, nothing to spend it on but gambling and prostitution and drugs. When the city gets a bank and a school and trash and fire services and telegraph lines that connect it to the rest of the world (legitimate commerce and infrastructure), the whole town changes.