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Ghetto Economics: dynamics, reproduction and development policy

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https://www.eduzhai.net/ FACULTAD DE CIENCIAS ECONÓMICAS Y EMPRESARIALES GRADO EN ECONOMÍA ECONOMICS OF THE GHETTO: DYNAMICS, REPRODUCTION AND DEVELOPMENT POLICIES Autor: Daniel Jacobo Orea Tutor : Rafael Fernández Sánchez Curso Académico 2012/2013 27/05/2013 ABSTRACT The paper explores the universe of the ghetto from an economic insight, integrating on this task support from political, sociological and historical perspectives. Along itself, different factors of ghetto emergence will be deployed so that main features of it will consequently arise. These features are going to knit a more-than-it-would-seem complex and unique network of economic relationships, both inside the neighborhood and with other more affluent districts of the city; an intrinsic network of ghetto resources exploitation by outsiders, which is ensured through external mechanisms of reproduction that contributes to create a self-reproduction mechanism inside the ghetto core, which at the extent will suppose a overwhelming barrier towards local economic thrive. The essay finally concludes with a discussion about which are the mainstream policies applied on slum development and which is the suggested effective intervention paths, which are based on a clear removal of current shrinking and exploitative economic relationships. 1 CONTENTS 1. Introduction…………………………………………………………….3 2. Entering the Ghetto: Framework and roots………………..………4 2.1 Description of the area…………………….……………..……..4 2.2 Main factors of emergence……………………………………..5 3. Economic Dynamics of the Ghetto……………………………….10 3.1 Employment……………………………………………...……..10 3.2 Entrepreneurial matrix and investment……………………….12 3.3 The role of crime………………………………………………..14 3.4 Ghetto economic circuit………………………………………..15 4. Mechanisms of Self-Reproduction………………………………..17 4.1 Internal mechanisms…………………………………………….17 4.2 External mechanisms…………………………………………...20 5. Economic Development: Alternatives for the Ghetto…………...21 5.1 Mainstream policies and criticism on them…………………..21 5.2 Alternative policies……………………………………………….25 5.3 Leadership role of minority communities, creative industries, and the Bedford-Stuyvesant example of success…………..26 6. Conclusions and Potential Paths to Follow on this Study………29 Bibliography 2 INTRODUCTION Large metropolises are presented as the most visible face of the international economic framework. They seem to gather all the requirements to provide wealth creation to their home country and unlimited economic and professional opportunities to their same citizens. They are the dynamic centers of global and local economies and cultural activities. This nature makes them to experience opposite forces: economic animosity leads to resources depletion, intensive activities also can lead to degradation, and cultural diversity leads to segregation. Therefore, major cities presents this two opposite faces of the coin. Thus, the principal motivation of this work is the study of the hidden face, the less friendly face of these metropolises characterized by segregation, racial discrimination and the final outcome of social expulsion to those city districts known as “ghetto”; fact that might appear ironic if we have a look on its semantic root, from venetian dialect, “getar”, which literally means “to throw away”, and was applied for the sixteenth century Venetian Jewish district, where iron foundries were located and their residues were “thrown away” on this same place. However, I would like to remark that my interest lies on which can be considered modern ghettos, that is, those which arose from the late XIXth century onwards and are still present on our days; rejecting all that has to be with medieval Jewish and Arab quarters or European racial ghettos violently imposed by authoritarian regimes during the XXth century. The aim of the article is to carry out a quick overview on the main literature about the process of “ghettoization”, to sort out some personal concerns and solutions on the topic, finishing with the formulation of potential paths of study to be followed. Thus, the structure of this work will follow an intuitive scheme, starting in the first section with a general description of what a ghetto is and its main factors of emergence, following with a second section where a more economic approach will be done, trying to sort out its main economic insights and dynamics presented in the literature. After this theoretical approach, and based on it, I will try to develop in the third section some internal and external mechanisms that support the replication of these districts on major cities. The fourth one is a miscellaneous and interdisciplinary section, where policies of development, minorities leadership role on the issue and most suitable and hopeful industrial activities to invest on, as cultural ones, are presented. Finally, a last section is reserved to summarize all results emerging all along the paper and possible ways of study on future work on the field. 3 2 ENTERING THE GHETTO: FRAMEWORK AND ROOTS 2.1 DESCRIPTION OF THE AREA A formal description of these targeted metropolitan areas is deserved to be done in order to have a first and accurate delimitation on the study field. I consider on this task a modern ghetto as a urban district, characteristic in relatively large cities, that works as an enclave, voluntary or involuntary, but not definitive, for disadvantaged economic and racial underclass social groups; which has been arose by cultural, economic, political and historical factors, creating an informal selection process since the end of the XIXth century, and where a network of internal and external mechanisms contributes to its self reproduction and persistence till our days. I will devote the following chapters to thoroughly explain its main characteristics, factors of emergence and mechanisms of reproduction. It is also worthy of being remarked that these districts have developed a relevant evolution through the whole century to our days, along which they mutated, diversified, expanded, changed their inhabitants, or even disappeared. In addition, Fusfeld and Bates (1984) points out that the ghetto can be unfolded in two alternative concepts of itself: the racial ghetto and the poverty ghetto, corresponding to the two most clear characteristics of a ghetto. However, they don’t seem to geographically fully coincide. Instead, the poverty ghetto is overlapped by the racial ghetto, since population from advantaged ethnic groups might be present within its poverty boundaries, and, in the other way, ethnic groups subjected to racial discrimination might inhabit in middle-and upper-income areas of the city. There is not a clear geographic pattern where ghettos are commonly set. It seems that North American black and Hispano ghettos tend to be established in the downtown and inner city areas, due to a process of “white flight” of wealthiest white citizens to affluent suburbs in order to look for self segregation and escape from what they considered deteriorating areas. Thus, a clear pattern of geography of income levels arises. However, this pattern is much more ambiguous in European cities´ urban distribution, where typical affluent neighborhoods and deteriorating ones might get melted across their streets due to a new rise of inner city recovery by citizens, among who a trendy feeling to recover them arose. Finally, these areas, mainly due to poverty and marginalization, are strongly characterized by the presence of crime, drug addiction, organized gangs, anger and, at the end, violence. 4 2.2 MAIN FACTORS OF EMERGENCE The task of sorting out the main factors of emergence of ghettos might appear easier than it eventually comes out to be. I tried to design three classification groups on which fit the main factors of ghettoization and segregation remarked by the used literature on it. Thus, historical, economic and cultural factors might seem to be the most accurate distribution to address the task. Although this straight-forward classification, it is a constant pattern that most of these factors are transversally influenced by one or two of the other delimited groups of factors. A) Historical factors -The rural exodus As a first attempt on discovering the roots of segregation, it is important to stand out that ghettos are not a recent urban phenomenon, but they have been accompaning the history of cities since long time ago. And one of the most relevant factors that undoubtedly trigger this process is the massive waves of immigration from rural areas to cities during the beginning of the XIXth, known as “the rural exodus”, due to evolutions on agricultural processes, which saved on labor force, and even more on manufacturing and industrial processes, focused on these major cities, where a greater accumulation of capital is done due to a great concentration of demand and consumption, technological advances and investment. Manufacturing industries, thirsty of low-skilled and cheap labor force, more than welcomed all these inflows of people looking for better living standards that the city may seem to provide better than impoverished rural areas. A good example to visualize this fact is the black migration from southern agricultural cities to North manufacturing metropolis, as New York or Detroit, at the end of the XIXth century. Cities from the “snowbelt” provide more warrantees for freedom than the south where, despite the fact that abolition of slavery has already taken place several years before, its patterns still stank on social and economic black-white relationships, legally based on the so called Jim Crows laws, which promoted the segregation between whites and blacks and other marginalized races on housing, schooling, public spaces and transportation. However, it is going to be seen that this initial segregation by race supported by a legal and historical stratus will derived in a mixture between self-segregation of undermined classes as a measure of protection and indirect discrimination coming from affluent classes, entering in the domain of the cultural emerging factors of the ghetto. 5 -International waves of migration In a broader way, metropolises, both American and European, have been also an important recipient for incoming flows of foreign migration. Specifically, this migration flows have a clear direction pattern from developing countries to the main capital cities of developed countries, since they accumulated the greatest part of the country´s wealth, institutions and labor opportunities, easily attracting these migration flows, and serving them as a first introductory step into the country. Major cities of developed countries hoard the greatest share of global economic power, as industrial manufacturing cities did on the national framework. Immigrants coming from developing countries might find the same motivations to move as peasants and rural population had during the agrarian exodus, enabling us to find a pattern of similarity between these two migrating trends. In addition, international trends of migration have an important cultural and historical perspective that rural exodus cannot present due to its inner nature of migration. Geographical factors, as proximity to home country, cultural factors, as shared language or life-styles, and historical factors, like still present friendly relationship between a metropolis and its prior colonies, may influence the history of international migrations across the XXth century. -World Wars externalities Every war creates a very special economic framework, based on an industry committed to satisfy the demand for products which can support all belligerent activities that are taking part. This “positive externality” has the capacity to boost the economy since an increase in manufacturing demand of all kinds (clothing, weapons, transportation, and other supplies) pumps up employment and, therefore, domestic consumption. For example, in the case of American slums, warfare times require from the “war-force” of the country´s population, calling up for duty to a massive portion of adult males, which are also part of the national labor force. This destruction and shortages on labor force are incompatible with the new labor demanding situation of manufacturing industries. Therefore, these previously explained waves of immigrants coming eiter from the agricultural exodus or international flows, commonly low-skilled, supposed a cheap source which can replace any vacant left by men called to the army. This fact may influence to the concentration of low-wage and racial underclass in slums created around manufacturing factories. In this case, it is observable how a historical factor in the beginning is transversely derived and influenced by a purely economic factor. Although these historical factors provide us consistent reasons to explain the accumulation of migration in cities, which increases the probability cultural clash 6 and racial diversity present in the city; they are not sufficient enough in explaining the reasons of segregation and ghettoization of some districts of the city. B) Economic factors -Job competition and racism Free competition of labor markets, one of the archetypes of capitalist system, sets on together industrial employers, the holders of capitals, willing to set the possible lowest wage level, craving for larger profits; and the labor force, suppliers of their time and effort, which are willing to provide it for a wage no lower from their considered reservation wage to cover its basic surviving living standards. These massive waves of migration previously cited, either coming from rural area or from abroad, pushed by unpleasant economic and social factors at home, are more prone to accept lower reservation wages than those groups already established in the city, and industrial capitalists perfectly knew this fact. In Fusfeld Bates (1984) this job competition between different racial groups all belonging to the working-class, giving the example of North American cities since the end of the XIXth century, is graphically described. Blacks coming from southern agrarian villages were explicitly employed as strikebreaking measures to weaken Trade Unions bargaining power on wage settlements. One can think why did not, as it may seem obvious, black collective support white-working class strikes, and the reason lies on the initial hate of the former group to the prior due to their cooperation with patrons, excluding them from white-controlled Trade Unions. In addition, they fear of losing their jobs if they support unions, and get expelled jobless in the edge of poverty. Thus, this fact encouraged more black workers to break strikes, considering patrons the allies and white workers as the competition. This created a vicious circle of racial antagonism. Therefore, and according to (Fusfled and Bates, 1984: 18) “one of the important origins of twentieth-century racism is the historic use of blacks for strikebreaking”. Finally, corporations, as always, get benefited from this antagonism, and far from avoid it, “they did their best to exacerbate it for selfish corporate purposes” (Fusfeld and Bates, 1984: 24). Therefore, free job competition is a source of racism, one of the main components on process of segregation for the racial ghetto. -Industrial leadership Manufacturing industries have been important agents on the change and evolution of every metropolis, since their economic and population boom were 7 caused in great part by the industrialization fuss that experienced between the late XIXth century and the first half of the XXth century. These industries were originally placed on the city center, either since the city has evolved around the industrial area, or to save in transportation costs. Massive migration looking for jobs on manufacturing industries started to establish around industrial complexes. As the means of transportation developed, the city started to get expanded and industrial tycoons found cheaper to move out from the city core their plants, since in this locations property taxes and land were cheaper, and the evolution of transportation solved the problem of expensive transactions from the industry to the consumers. There are two outcomes of this industrial decentralization. One immediate situation on which working class districts developed around former inner city industrial complexes seen as financial resources and economic wealth flies from the area, fact that leaded towards deterioration and contributed to the creation of poverty ghettos. Another long term situation, on which a creation of new ghettos outside the city as a result of this chasing phenomena promoted by the demand for low-wage labor of manufacturing industries. -Economic apartheid The previous factor serves as a link with this last and definitive factor on understanding the design of cities and the appearance of segregated ghettos. Fusfeld and Bates (1894) presents a pattern of city geography divided in three kinds of districts based on the income level of its inhabitants. Thus, metropolitan areas are classified into poor communities or poverty ghettos, middle-income districts and affluent quarters. This fact is explained by disparities in housing prices. The econometric study carried on in Borjas (1997), gives empirical support to this fact, proving that high incomes tend to segregate together on the same neighborhoods. As this groups has the greatest economic sources, housing prices will tend to pump up, as a purely supply-demand force, creating an economic barrier to lower income social classes. In addition, highly skilled persons, originally belonging to ethnical or economic disadvantaged group, as an impulse to thrive, also present a tendency towards less ethnical segregation and accommodation into higher income districts, pursuing potential positive spillovers which may be present on these districts. And this fact is no more than a clear pattern of life style choices. Choosing to establish in one part of the city or other embodies choosing with who households are living next to, with who are spending its leisure, with who their kids are sharing school and friends, with who they are going to grew up… Therefore, it is not about random territory distribution of the city, but about each social class destiny, on which their offspring would eventually replicate the income achievement of their parent´s life. And, indeed, it seems that there is an intergenerational persistence on this, since, as Borja (1997) states, “children who moved out from parental 8 neighborhood tend to choose a new one similar in ethnic and economic composition”. What it is being creating is a société de l´entre soi, rooted in patterns of income distribution, where again marginalized economic and racial groups are thrown away in a separated-to-mainstream-way-of-life ghetto C) Cultural and socio-political factors -Theory of “port of entry” Ghettos are, from my point of view, the most genuine part of cities due to their condition of multicultural sponges. According to the theory of “port of entry”, developed by Cutler, Glaeser and Vigdor (1997), ghettos may be used by new incoming immigrants as an initial stage in their integration into the city. The presence of ethnic groups of their own country of origin may be seen as a comfortable social atmosphere where one can find the reproduction of some cultural patterns, as language, food, religion, or just by the presence of friends that has been already established on it. It is very common to observe how, within the same territory ghetto, streets are thoroughly shared out by different ethnic groups. In addition, minorities may find on segregation the most efficient path of self-protection and mutual help, developing their own institutions which eventually could have some degree of weight in the city´s government. “Tastes for living among members of one´s ethnic group are strong for recent migrants” (Cutler, Glaeser and Vigdor, 1997: 18) In addition, this theory implies that some ethnic groups are even ready to pay relative higher housing rents than if they decided to established in other districts. However, this friendly approach of a springboard towards city integration may suppose a non-exit alleyway for others, which systematically will became the society´s dropouts. -Collective action racism Ruling ethnic and economic social classes have been driving direct exclusive practices to ensure their own segregation from minorities. They can take different forms, as “specific policy instruments such as racial zoning or restrictive covenants…. or organized activities such as threatened lynching or firebombing” (Cutler, Glaeser and Vigdor, 1997: 19). Although the greatest part of these mentioned activities are generally not legal, since they straightly violate human rights, they were often practiced and even supported by governmental institutions at some stage of the city past, collaborating in the birth and growth of ghettos. In addition, as larger and more populated the city is, the more likely cross-racial clashes are, worsening the problem. Nowadays, this “collective action racism” has been smoothed and sophisticated towards a more 9

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