This economic restructuring might be palatable if fortunes were rising or the pain was shared along the entire spectrum of the income distribution, but the sharp rise in inequality in the U.S. – higher now than at any time since the Gilded Age – has given rise to populist movements on the left and right that cast blame on elites and a “rigged” system. In many ways, the combination of sluggish job growth and growing inequality – exacerbated by rapid technological change and intensifying globalization – has created a slow-moving but increasingly urgent crisis. Today’s political climate is a symptom.
Addressing these challenges would be easier if all actors were able to agree on a basic set of facts and so devise evidence-based solutions to the problems we face. Unfortunately, just as our crises have hit fever-pitch, we have also hit a new zenith in the fragmentation of knowledge: while Americans in the 1960s tended to glean their information from “broadcast news,” we are now fully in a “narrow-cast” world in which cable television channels appeal to certain audiences (and disdain others) even as many of us rely on our curated Facebook or Twitter echo chamber to deliver analysis with which we already largely agree. Unchallenged by opposing perspectives, we are increasingly drifting apart at exactly the moment in which we need to know and grow together.
Local and metropolitan chambers of commerce did not invent these issues – demographic change, economic restructuring, growing inequality and knowledge fragmentation – but it is the new context in which they must operate. Business as usual – having chambers push for a tax break here or a streamlined regulation there – is no longer enough. With a commitment to place and often a high level of community trust, chambers can and should play a broader civic role at helping Americans make their way through these dramatic shifts. After all, business leaders can see the opportunity change brings and they increasingly recognize that there is a strong economic case for embracing not rejecting our growing diversity by race, sexual orientation and so much more. Indeed, emerging evidence suggests that when we all adjust more gracefully to the shifts in both who we are becoming and how the economy now works, we are able to help our metropolitan regions prosper.
Income disparity and economic inclusion may seem like unusual topics for chamber leadership; shouldn’t chambers just focus on getting the business climate right and let the public and nonprofit sectors correct any distributional damage that might occur along the way? Again, that may have been sufficient in an earlier era in which markets and public systems both worked better but that is no longer the case. Part of the imperative to act: Since the early 1990s, a growing body of research has been documenting that the current high levels of inequality, as well as racial inclusion and spatial segregation by race, income or jurisdiction, can have deleterious effects on economic growth.
In short, what has been traditionally seen as a sort of moral issue – inclusion – has become a central concern for economists seeking to promote prosperity. This does not mean that suppressing any sort of income differentials is the right approach – incentives do matter – nor does it mean that all interventions to reduce inequity and promoting inclusion will have positive spillover impacts on economic growth. But in light of the emerging evidence as well as the changing demography and growing political pressures, chambers can no longer afford to think of inclusion as an afterthought. They should instead recognize that regions that are more equal and more integrated – across income, race, gender and place – have better economic performance, on average, than those regions that are more unequal and more divided. And they should argue to their members and their allies that doing good and doing well can go hand in hand.
Some places are leading the way, offering lessons for others to follow. In San Antonio, Texas, decades of discord between business and community have been replaced by striking instances of collaboration, particularly around supporting pre-K for less advantaged kids – with the business case being that this is part of preparing the workforce for the mid-century. In Jacksonville, Florida, a long-established Community Council has been bringing together actors across sectors to devise solutions to the region’s pressing problems; younger business leaders have consistently been part, building bridges across the region that allow for quick and effective responses. In metros as conservative as Salt Lake City, as liberal as Seattle, and as straight down the middle as Raleigh, we find a commitment to planning processes that bring multiple actors together to embrace their shared fate and find real solutions to problems as vexing as homelessness, poverty, immigration and the environment; in all these cases, business leadership has played a key role.
We suggest that this range of efforts illustrate the creation of what we have termed “diverse and dynamic epistemic communities.” Leave it to us academics to offer a complicated albeit precise term: with apologies for any misdirection, it’s basically what you know, who you know it with, whether those partners hail from differing sectors and whether the overall partnership is able to deal with shocks and change.
Epistemic communities, those with a shared knowledge base on key issues, provide exactly the norms, standards and (place) identity that are the micro-foundations for linking equity, inclusion and growth. Because there is genuine care for the other, partly because of the communicative processes inherent in such communities, economic and social actors look for “win-win” opportunities rather than Darwinian competitive destruction. They also break down barriers so that the positive possibilities raised by our growing diversity get realized rather than dashed.
This might sound a bit daunting (particularly the choice of words) but think about it: well-functioning networks, organizations that are rooted in place, strategies to share ideas and strategies across economic sectors, all with an eye to ensuring regional resilience and prosperity. Doesn’t that sound a lot like contemporary chamber work?
The new twist in that role in the 21st century is that chambers are increasingly likely to find themselves leading beyond the business community and even beyond their own direct interests. In an earlier age, the glue to hold things together would have come from a broader social infrastructure: faith-based institutions that would provide some sense of common ground, a news media that enjoyed high confidence and could ground the conversation in facts, business elites who could marshal resources for civic purposes, labor unions that could insure that wage hikes and immigrant mobility were a reality and not just an aspiration, and a government that could provide its own set of supports, with broad social agreement on many of the basics like Social Security, Medicare, transportation infrastructure, environmental protection, and the like. In that context, business could more or less pursue its own particular concerns and assume an appropriate overall social balance would be struck.
But much of that institutional infrastructure has been eroded by changing market forces, demographic differentiation and political fragmentation. Local and metro chambers are finding themselves stepping in to fill leaderships gaps because they have strong roots, are practiced at developing relationships over time and can either generate or work with others to generate the data that leads to a more reasonable conversation about their region’s future. For the most part, they are also often more clearly convinced than many other actors, including those displaced and made anxious by a changing economy, that diversity is a strength. They understand the need to develop and support a multi-cultural (heck, multi-everything) workforce, to seek new markets wherever they may exist and to bring together the competing ideas and opinions that can make for the best possible product.
Another growth opportunity for local chambers: among the fastest growing businesses are minority-owned enterprises. Immigrants in particular tend to have high rates of entrepreneurship, but they are often busy with launching and sustaining firms and perceive that they have little time for the civic work that occupies much chamber activity. Nonetheless, some chambers have recognized the importance of attracting and incorporating immigrant business owners, partly to help revitalize older urban areas that have been battered by industrial decline. Other chambers have developed a series of programs that are helping to promote overall business diversity, including efforts to support Black-, Hispanic- and women-owned firms.
While the common impression might be that these are matters most appropriate to chambers in large urban areas where there already exists a significant presence of people of color, large gay communities and other forces driving the acceptance of diversity, there is growing interest in these efforts in smaller and medium-size markets as well. Those areas that have already absorbed demographic change have often shed their fear of the “other”; the real challenge is in those places just beginning to experience demographic shifts.
Another set of concerns are in those metropolitan areas where there is a long history of separation and inequality. There, we have seen chambers and other groups take on the task, as in Jacksonville and San Antonio, of bringing people together across historical divides. This can lead to difficult but necessary conversations – and we highlight innovative efforts that are targeted at helping a broad spectrum of leaders unlearn the racism, sexism and homophobia that sometimes causes all of us to miss potential in, well, all of us.
Indeed, this report uncovers those positive efforts, including in places like Grand Rapids, Michigan; Greenville, North Carolina; Eden Prairie, Minnesota; Reading, Pennsylvania; and Cincinnati, Ohio. The areas we highlight and the programs we review offer a set of action steps that chambers can take. But it’s important to see them as steps on a much longer journey to new roles for business as a civic actor. After all, the dramatic and unpredictable technological, demographic and economic changes we have experienced in recent decades are likely to be the norm, rather than the exception, in the foreseeable future. Businesses and communities throughout America will continue to face uncertainty and change.
That’s a potential recipe for conflict but it’s also an opportunity for leadership. Business thrives when it can navigate change, understanding a shifting terrain, taking advantage of all available talent and collaborating with other actors to achieve sustainable markets and public policies. Business thrives when community and connection are part of a region’s DNA – when no skill goes untapped, no dream goes unrealized and no resilience goes undeveloped. And business thrives when chambers take on their responsibility as civic and not just economic actors.
So the task for chambers is to provide the data and dialogue, reason and relationships, that can help guide our cities, metros and states to the sort of shared prosperity that has always been at the heart of the American Dream.
This work is not for the faint-of-heart: a bumpy process is to be expected as making changes to accommodate our inevitable demographic and economic shifts is not easy and can involve substantial conflict. However, those chambers who don’t embrace the growing diversity of American society are likely to see themselves increasingly marginalized economically and socially, while those that embrace it are not only likely to be more successful, but can play a critical role in helping smooth our path to a more prosperous and interconnected America.
The country is becoming increasingly diverse, and these diverse communities represent a key part of our economic future:
Between 2010 and 2050 the non-Hispanic white population is projected to decline by 6 percent, while the African-American population is projected to grow by 37 percent, the Asian population by 102 percent, and the Latino population by 121 percent. The country will be majority-minority by 2042, and the workforce will be majority-minority a decade earlier.
Demographic change is driven by natural growth, not immigration:
Migration to the U.S. is stabilizing, net migration from Mexico is negative, and economists and demographers are worried about the negative impact of immigration decline on the size of the workforce. With growth coming from the U.S.-born, marshaling the investments to ensure the next generation’s productivity is critical for us all.
The number of non-Hispanic white owned businesses is declining, while the number of businesses owned by people of color are growing:
Between 2007 and 2012, the number of African American-owned businesses grew 46.3 percent, Latino-owned business grew by 34.5 percent, Asian-owned businesses grew by 23.8 percent, while non-Hispanic white owned businesses declined by 8 percent.
The number of businesses owned by immigrants is also growing:
A quarter of all new businesses in the country are started by immigrants. Immigrants now represent 18.4 percent of the self-employed population. In adetailed study of businesses in 11 states, immigrant entrepreneurship rose from a 17 percent share to a 27 percent share, while immigrant-owned businesses represented 30 percent of all businesses receiving venture capital funding, and businesses started by immigrant entrepreneurs had higher levels of employment growth than native-founded businesses.
Cities and regions that embrace diversity do better economically:
Income inequality, geographic concentrations of the poor, city-suburb disparities and racial segregation are all associated with slower growth over the last three decade. Economists at the Cleveland Federal Reserve have found that high levels of racial inclusion and progress on income equality also correlate with strong economic growth. Regions with higher levels of income inequality and racial segregation are less resilient to economic downturns.
Diversity is not just about bridging traditional divides.
It is not just race and income inclusion—as important as they are—that must be tackled. The presence of a large gay population has been found to be a better predictor of high-tech location than many other indicators of social and cultural diversity. Helping communities develop the new openness that is key to a creative economy is essential.
Diverse and dynamic epistemic communities are key to regions adapting to new economic and demographic realities:
Essentially, what you know, who you know it with, how diverse those partners are, and how well the partnership is able to weather change has a big impact on regional competitiveness and effective problem-solving. Business leaders have a critical and important role to play in creating such dynamic learning communities.
View the full report, titled Embracing the Challenge: The Diversity, Equity and Inclusion Imperative for Chambers of Commerce, by visiting www.ACCE.org.
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