Economic Development and Higher Education

A tale of two economic engines

GVSU revisits 70-year-old study that compares GR and Flint’s civic well-being.

April 15, 2016
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Grand Rapids
A view of Monroe Avenue and Division Street in downtown Grand Rapids nearly 70 years ago. Some of the stores included Goebel and Brown, Peck’s Drug Store and Herpolsheimers, all of which were examples of the city’s dependence on small business. Courtesy Grand Rapids Public Library

(As seen on WZZM TV 13) Size does matter when it comes to business environment and the relationship it has with civic well-being and social capital.

The recently published article “Social Capital, Economic Diversity, and Civic Well-Being in Flint and Grand Rapids” in the 2016 Seidman Business Review edition has revisited a nearly 70-year-old conclusion by sociologist C. Wright Mills and economist Melville J. Ulmer that small-business economic environments tend to raise the level of civic welfare.

The original 29-page study was submitted to the Senate Small Business Committee in 1946 and was intended to explore the “effects of economic concentration on civic welfare” in six U.S. cities based on their contrasting business environments: small- to medium-sized businesses versus a dominant big business.

Although the six cities were not named at the time, it was revealed in the 1990s that Flint and Grand Rapids were evaluated as paired Midwestern cities.

The three broad conclusions highlighted in the 1946 study suggested small-business cities provided a considerably more balanced economic life for residents; a considerably higher level of general welfare; and the differences in city life was due largely to the prevalence of small business in contrast to the dominance of big business.

Nearly seven decades later, the in-depth look at how big-business cities and small-business cities impacted civic welfare has been revisited by Michael DeWilde, director of the Koeze Business Ethics Initiative for Grand Valley State University’s Seidman College of Business, and Gerald Davis, professor at the University of Michigan’s Ross School of Business.

DeWilde said the original study looked at factors contributing to civic well-being and concluded one or two big-industry towns were more susceptible to a range of factors that could negatively impact the quality of living.

“In contrast, the kind of economic diversity and pluralism and small- to medium-sized businesses that you find in a place like Grand Rapids they thought correlated to higher levels of civic well-being as measured by education, housing, parks, arts, and then something that in the 1970s was being called ‘social capital,’” said DeWilde.

The 1946 study found cities with small- to-medium-sized, privately held firms tended to help develop an independent middle class, which not only was more mobile due to the transferrable skill sets and work experiences, but also more likely to be civically engaged and have a social capital network to help people in difficult times.

“As compared to a place like Flint where … the vertical integration of the small and private businesses that made up the GM structure made it very difficult for people to move or bank on any kind of network, social or working, once GM started leaving Flint,” said DeWilde.

“There was just nowhere to go and very few ways to make up the lack there, whereas in Grand Rapids you had a lot of horizontal economic development that allowed for people to move. Even if one industry was down, there was another place to go. (There) was a much stronger sustained entrepreneurial spirit here than there was there,” added DeWilde.

Overall, the civic spirit of a city was found to be “stunted or distorted” in big-business cities since there was not truly an independent middle class, and the potential leaders of civic enterprise were “either powerless to act or were motivated by interests outside the city,” according to the 1946 study. In small- to medium-sized diversified cities, Mills found the environment was “favorable to the development and growth of civic spirit.”

Some factors DeWilde and Davis highlighted as criteria for civic well-being included: high degree of social capital, or networks of social connectedness; good schools and a high educational attainment; access to a thriving arts and culture life; affordable housing; safe neighborhoods; jobs skills matching employment opportunities; and low ratios of income disparity.

“Certainly one of them that we mention is public-private partnership that Grand Rapids is now widely known for and praised for and that is largely private, but also a number of large public businesses now work in concert with both one another and with government and other large institutions,” said DeWilde. “I think in Grand Rapids — and it is true for a lot of other regions, too — the growth of a place like Grand Valley and other universities is critical to that.”

Both the 70-year-old study and recent interviews revealed the necessity of having people who are committed to the region.

“People could live anywhere in the world and they choose to live in Grand Rapids for a number of reasons — family commitments, quality of life, friends, share the same values. But one of the things that came up that was a bit more practical was that Grand Rapids is of a size they thought where their ideas, their resources, could make a significant impact on the quality of life,” said DeWilde.

One of the concerns raised during the interview process was that shared values, both civic and philanthropic, were in danger of declining since “it wasn’t always clear that the third, fourth and even fifth generation” would have the same mindset, according to DeWilde.

“We haven’t done a lot on this yet, but a lot of what we heard just anecdotally is that philanthropy is changing, there is more the ROI mindset about it,” said DeWilde. “Second, third, fourth generations are giving differently than their forefathers did or foremothers, and so how does that play out in terms of what is ahead?”

DeWilde said part of the advocacy by some philanthropic community members at this point is to ensure the entrepreneurial spirit continues to be cultivated to make sure there are enough resources and individuals allowing businesses to flourish over time.

“Let the small business grow and cultivate,” said DeWilde. “This is not Silicon Valley. We don’t want you to grow these businesses and then sell them; we want you to grow these businesses and pass them on generationally. That is what we do here in Grand Rapids; that is who we are.”

Other potential challenges for Grand Rapids are the number of industrial firms in the region being replaced by service-oriented firms; maintaining the high degree of civic and philanthropic engagement prevalent today; and retaining and attracting talent in the region.

“A lot of people mentioned this: Grand Rapids is a great place if you are more or less like the folks that are already here. There is a sense of are we going to be able to attract folks who are diverse and are we going to be able to build an educational attainment and opportunity within the African-American community?” said DeWilde.

“We need homegrown talent, on one hand, and we need to do a better job of cultivating that. And then we need to really think about how open and welcoming we are to folks who haven’t grown up here and making them feel part of the community,” added DeWilde.

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