In this issue, news on impact investing by foundations, the low-down on urban vs rural, matchmaking for small business legacies, and the debate over disability benefits.
As you may recall, Heron met its goal of getting to 100 percent mission-aligned in late 2016. So be sure to check out Clara Miller's 2017 letter reflecting on a five years of change. Also of interest is this podcast looking at the future of the field and what it has to do with Heron's poverty goals.
Meanwhile, the Ford Foundation recently announced that it was moving $1 billion of its assets into impact funds over the next ten years. In the Stanford Social Innovation Review, Ford's Darren Walker had this to say:
This work represents a new frontier for us and will require new people with new skills. So we will build a special team of dedicated, veteran investment professionals to manage our MRIs. Unlike our excellent, existing investment team, this group of financial analysts and advisers focused on MRIs will report to our program leadership, and be held accountable for social and financial returns that contribute to our mission and, over time, to our annual programmatic payout.
As for the objective of our MRIs, our early efforts will target areas that have long been central to our mission of disrupting inequality in all its forms. In the United States, we’ll start by examining investments that make housing more affordable and inclusive. And in developing countries, we’ll look at how MRIs could expand access to vital financial services, particularly for low-income and other underserved communities.
LISC also announced a new $100 million market-rate CDFI bond to bring more investments into U.S. communities, reports Impact Alpha's Oscar Perry Abello:
The bond markets represent serious capital. At the end of last year, the U.S. bond market stood at $39.3 trillion, including $3.8 trillion in municipal bonds. By comparison, HUD’s Community Development Block Grants in 2016 totaled just $3.2 billion.
But for places like Puerto Rico, or for the school systems of Chicago or California, bonds have represented a temptation to pile up excess debt, as well as a minefield of deceptive practices. [LISC CEO MAurice]Jones believes LISC can avoid the problems, in part by attracting like-minded investors. “We are seeking investors who are interested in us both as a business investment and a business that can serve the communities and people that we are serving,” Jones says.
This new report from Upstart Co-lab report looks at how to improve the investment future of creative spacemaking. And private investors are creating their own transmission lines to increase connect green power projects in rural areas to cities such as Los Angeles, reports the Wall Street Journal's Russ Gold:
Near Rawlins, in rural Wyoming, crews are prepping land near the state line with Colorado so they can build a 3,000-megawatt wind farm, which could be the largest ever constructed in the U.S.
Crucial for moving all that renewable power to market: Mr. Anschutz’s proposed 730-mile transmission line—a giant extension cord of sorts that will deliver the electricity to a point near Las Vegas. From there, the power can easily flow into Southern California’s grid. Mr. Anschutz isn’t the only wealthy investor pumping money into power-line projects in an effort to bring green energy to big cities. The Ziff family, whose fortune harks back to the glory days of magazine publishing, also is partly funding a green-power project between Oklahoma and Tennessee.
Altogether, these and other merchant-transmission projects could cost upward of $17 billion, plus at least a further $20 billion in wind, solar and hydro projects to fill these lines. There are no federal subsidies available for building transmission lines, though wind farm developers are eligible to tap a U.S. tax credit for building new production.
In the Week, Jeff Spross argues that defenders of cities--who believe the death of rural areas are inevitable--have it wrong because the economic rural/urban divide is the outcome deliberate and harmful policy:
This new reality is the result of deliberate choices by the architects of America's national economic policy.
Decades ago, antitrust enforcement was ferocious, breaking up companies for reaching a mere 7 percent of market share. Tax rates were far higher on income, capital gains, and corporate profits. These practices prevented corporate behemoths from siphoning off the wealth created by their workers to a few far-flung locals. Instead, that wealth was plowed back into local communities in the form of investment and high wages for workers.
Government subsidies and regulations ensured that railroads, airlines, and shipping companies couldn't decline to service a more rural area just because it wasn't profitable. That kept less dense areas of the country plugged into the rest of the economy. Meanwhile, the New Deal and World War II shoved monetary and fiscal policy in a more Keynesian direction, promoting robust public investment by government. That kept the supply of jobs plentiful, wages high, unions strong, and labor markets tight.All of that went away beginning in 1980, with the general rightward turn in U.S. policymaking. American society became far more unequal, centralized, and extractive.
Is the remedy of the urban/rural divide more local control? In Yes! Magazine, David Korten offers this:
Local control is a foundational conservative principle. Many progressives embrace that principle as well, with a call to seek solutions in local economies grounded in local ownership. This area of agreement provides a potential foundation for an effective rural-urban political alliance to establish control of jobs, resources, markets, and finance in the hands of people who have a stake in the long-term economic, environmental, and social health of the communities in which they live. A corporation that exhausts the soils, fisheries, or forests of one place simply moves to another, leaving the people to bear the consequences. This is an essential difference between people and corporations. People have a natural interest in prioritizing long-term health and well-being over short-term profits.
It is no coincidence that many of the worst pockets of poverty are located next to profitable, polluting, highly mechanized and automated resource extraction and processing sites—think fracking, mountaintop removal, tar sands, oil refineries, and chemical plants that destroy essential life-supporting resources, including clean water, fertile soils, healthy forests, and fisheries on which both rural and urban people ultimately depend. The profits go to corporations. Local communities live with the loss. Other pockets of poverty are located next to the world’s remaining fertile lands and productive forests and fisheries—from which local people are excluded by the distant corporations that control and profit from them.
There are many communities proving their resilience such as Twin Falls, Idaho home to factories for newer brands like Chobani and Cliff Bar, reports Kirk Johnson in the New York Times. But competition for jobs remains:
New manufacturing jobs and population growth have bolstered southern Idaho, bucking the pattern, and the perception, of rural struggle. But the surge only underscores the deeply uneven world of what economists call non-metro America, where the recession never ended in some places and is barely remembered in others.
Of nearly 2,000 rural counties in the United States, about 60 percent added jobs last year, while 40 percent contracted, according to federal figures. In such a brutal calculus, economists and local politicians said, little things add up fast: like being close enough to a big city, but not so close as to be crushed by the competition; having good access by air and highway for passengers and freight; and then having enough trained workers if and when new companies knock on the door.
In Kansas, they have a matchmaking program to transfer the companies of retiring owners of small businesses to keep them in rural communities:
RedTire has nothing to do with tires; instead, the name is short for the phrase “Redefine Your Retirement.” The staff do everything from appraising the business to vetting the buyer, and even offer counsel after the deal is done. While traditional business brokers work to maximize the advantage of the party that hired them, RedTire focuses on making the fairest deal possible for both sides. As of December, it has brokered the sale of 27 businesses, which together employ more than 200 people, in sales that total $22.6 million. The program has grown steadily in the five years since it launched, and now gets more work requests than it has the capacity to take on.
Some of the businesses RedTire transitions would probably have disappeared if the service wasn’t there. Steve Kelly, the vice president of economic development at the Chamber of Commerce in Lawrence, Kansas, says that he’s seen many small businesses close when the owner couldn’t find a new person to take over.
Finally over at the Guardian, Kate Raworth says the economists of the 21st Century should think of the economy as complex system in need of regenerating.
The White House budget director has called disability benefits a wasteful program. In the Washington Post, Terrance McCoy looks at the use of disability benefits in rural America where "the jobs have dried up":
Across large swaths of the country, disability has become a force that has reshaped scores of mostly white, almost exclusively rural communities, where as many as one-third of working-age adults live on monthly disability checks, according to a Washington Post analysis of Social Security Administration statistics...Most people aren’t employed when they apply for disability — one reason applicant rates skyrocketed during the recession. Full-time employment would, in fact, disqualify most applicants. And once on it, few ever get off, their ranks uncounted in the national unemployment rate, which doesn’t include people on disability.
The decision to apply, in many cases, is a decision to effectively abandon working altogether. For the severely disabled, this choice is, in essence, made for them. But for others, it’s murkier. Aches accumulate. Years pile up. Job prospects diminish.
Over at TalkPoverty, Rebecca Vallas said that "rather than digging into what’s driving widespread unemployment and poor health in struggling rural counties, the [Post] article cherry-picks one of the counties with the highest rates of disability benefit receipt, to create a dystopian portrait." She adds:
The Post sidesteps the eligibility requirements for SSDI, and focuses on the recent increase in the number of people receiving benefits. But as the agency’s chief actuary has explained—and in fact predicted decades ago—the growth is mostly due to baby boomers aging into their high-disability years, women entering the workforce in greater numbers in the 1970s and 1980s (so now we are insured under Social Security in case of disability at nearly the same rates as men), and population growth. In fact, these three factors alone explain more than 90 percent of the increase in beneficiaries between 1970 and 2008.
Also in the Post, Tianna Gaines-Turner expresses frustration that, even after testifying in 2014 before Congress about her experiences, Paul Ryan's policies on poverty seem out of touch:
Back then, I wanted Ryan and his colleagues on the House Budget Committee to understand that poverty isn’t about laziness or a lack of intelligence. Poverty is not a situation anyone wants. I don’t know a single person who looks forward to standing in line at the food bank, using an EBT card at the grocery store or explaining to their kids why the electricity was shut off. These are not choices anyone would make.
I also wanted the panel to understand that most people who live in poverty work hard, often at multiple jobs...I wish I could ask Ryan if he feels that way today. I wish I could say: Speaker Ryan, you claim to care about poverty. You sat and listened to my story. You looked me in the eye. You gave me a hug. Did my testimony matter at all to you? Do you really believe that my life, and the lives of my children, are worth less than a tax break for the wealthy?
Politico interviews researcher Anne Case on why so many white people are dying between the ages of 45-54:
[A high school] degree seems to be a marker for a lot of dysfunction that we’re seeing. But this new paper shows that the body count is only the tip of the iceberg. People with less than a college degree are reporting a lot more pain, much poorer health, poorer mental health. They’re less likely to be married, they’re less likely to be attached to the labor market, their wages don’t increase with age as quickly as they had in previous generations...
When we talk about ‘deaths of despair,’ there’s now not a part of the country that’s not been touched by it. It’s true that there was a lot of attention paid to urban versus rural, but if you actually plot out these deaths of despair—suicide, alcohol, drugs—in every classification of urbanization—so the large central MSAs [Metropolitan Statistical Areas], or small MSAs, or metropolitan areas—in every one of them, those had an increase in deaths of despair, year after year, and they’re pretty much going up in parallel. A small relative increase for people in rural areas, but it’s really not the case that it’s a rural phenomenon. I think for some reporters, it became something like, Oh, let’s go to Appalachia and talk to people in West Virginia. And yes, it’s happening in West Virginia, but it’s also happening in rural Maine and Baltimore City, it’s happening in Florida, it’s happening in Utah.