Global Challenge: How We Can Refit Cities for the Next Century

HOW WE CAN REFIT

CITIES FOR THE NEXT CENTURY

H.V. Savitch, 
School of Urban & Public Affairs 
University of Louisville
Louisville, KY 40208

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I would like to acknowledge and express my appreciation to two most extraordinary institutions--the Lady Davis Fellowship at the Hebrew University of Jerusalem (Public Policy & Administration) and the Woodrow Wilson International Center for Scholars, Washington, D.C. The time, resources, and intellectual opportunities at these institutions are remakable, and I owe much to them.

Abstract

            This paper explores the question of how locally based administration can be refitted for the next millennium.  It proceeds by sketching global trends and by outlining their impact upon localities.  We then employ these trends to formulate a new ecology.  The new ecology is based on open markets, increasing intensity of global interaction and highly decentralized activities.  That ecology produces both positive currents and negative counter currents which stem from their reciprocating dynamics.  These reciprocating dynamics lead to wealth through urbanization, but also to imbalances in investment and growth.  The dynamics emphasize the leading role of centrally located regions, but also beget greater social disruption and polarization.  Last, the dynamics enhance democracy through a global dissemination of information, but also produce heightened expectations, increased citizen demand and inordinate pressures upon local institutions.

            Command economies, tight governance or tall bureaucracies will not be able to manage these pressures, and local administration will have to be flexible and resilient.  Given these expectations, we offer an organizational strategy designed to enhance conventional government with intermediary organizations by building institutional capacity.  The idea of institutional capacity is premised upon an adaptive response to changing ecological pressures.  Horizontal, vertical and coalitional relationships connect private, public and non profit sectors through elaborated networks of interaction.  These networks maximize participation by citizens, small groups and mass associations.  Whether institutional capacity can be sustained or not, depends upon its ability to foster trust among major participants.

GLOBAL CHALLENGE

Rapid and Intense Change

            While it is by now a cliche that we are in an era of great change, the statement still warrants amplification.  The change is geometric and in many ways unparalleled.  The ancient world lasted for three thousand years, the medieval age for less than a thousand, and the industrial era for about a century.  Our "post industrial revolution" has occurred in just twenty-five years, and its pace is quickening.  In one great blow the new revolution has remade the industrial fabric of society, radically altered the behavior of capital, broken down national boundaries, and is remodeling government.

            Since 1970 most western nations have lost their manufacturing base, and either reformed themselves into citadels for white collar professions or radically shrunk.  Capital is no longer stationary, but moves quickly to set up plants across the globe and pull operations together in what has come to be known as "flexible production" and "just in time inventory" (Knight and Gappert, 1989; Porter, May-June 1995; Judd and Parkinson, 1990).  Transnational pacts have nurtured the transformation by facilitating the movement of currency, goods and people across boundaries.

            The most advanced of these pacts are coupled to common budgetary standards, regulation of interest rates and prospects of a common currency.  While the nation state is far from being lost, its character is changing, and with that shift local governments have taken on new roles.  Localities which were once considered to be mere administrative arms of their national government, are now achieving broader commercial discretion (trade delegations, transnational local agreements) and greater political autonomy (control over revenue collection, spending, investment and the redistribution of assets).

Positive Currents and Negative Counter Currents

            Throughout this global transformation localities have and will continue to experience gains and offsets.  We can plot the change to date by citing its most salient characteristics, and begin with the positives.  The point of departure is roughly 1970.

            --Partly through open competition prosperity is rising, it is contagious and it is associated with growing urbanization.  Most nations and most localities are better off today than they were thirty years ago.  As cities grow into great metropoli, so too does the economic well being of most inhabitants.  The relationship is not invariable.  As economies mature, prosperity appears to gradually plateau and eventually flatten.  Moreover, many parts of Sub Saharan Africa have experienced urbanization without development, and this part of the world remains an exception.  But the overall pattern between urbanization and economic well being is positive, and even nations in Sub Saharan Africa have begun to take off (Economist, 1997).

            Reaching back to 1970 up to the end of this decade, we know that increased urbanization is positively correlated with rises in Gross Domestic Product (GDP).  This is true for most developed as well as least developed regions of the world.  In the United States and Canada urban populations have risen by 20 percent and per capita income by a third.  West Europe shows a similar trend. In most of South America urbanization and economic gain are incremental and steady, growing by 20 per cent or more.  The most notable progress has been made in Argentina, Brazil and Chile.  Southeast Asia, East Asia and Oceana bear out similar lessons.  Despite recent downslides, younger industrial economies in South Korea, Indonesia and Thailand have just about doubled their urbanization and GDP (UNCHS, 1996, Ch 2).

            The causal relationships between increased urbanization and GDP are complex.  But the association is unmistakable and the underlying logic is strong.  Once agricultural, mining, or timber production reaches a certain level and surpluses can be brought to market, new opportunities arise for the new conversion of raw products into new goods.  The conversion takes place in urbanized areas, whose technological and trading capacity are fed back into rural economies, enabling still greater efficiencies and freeing more individuals for work elsewhere (Jacobs, 1984).  New technology and investment provide still more opportunities and a seamless synergy between all sectors of production.  This is why urbanized populations are far more prosperous than rural ones as well as why giant megalopoli continue to attract populations from the countryside.

            --Global, primate and regional cities have played a vital and disproportionate role in contributing to this prosperity.  Global cities (New York, London, Tokyo) have made free trade much easier to accomplish (Savitch, 1989; Sassen, 1992).  In other instances primate cities (Berlin, Mexico City, Karachi) have facilitated a new division of labor (Glickman, 1985; Sassen, 1994).  In still other cases regional cities (Miami, Marseille, Osaka) have served as critical gateways to smaller markets.

            Contrary to the impressions of central city decline, great cities have proven themselves to be efficient and enormously productive work stations for the post industrial era.  Whether one selects a handful of global cities, a larger number of primate cities or a sampling of regional cities, urban centers lead national productivity, and their total output in goods and services has accelerated during the last 25 years (Prud'homme, October, 1994; Savitch, 1996).  One study takes productivity a step further and argues that primate cities actually subsidize their respective nations.  Using data from across the geographic spectrum,  research points up that transfer payment from these cities amount to 5.3 percent of GDP in Cote D'Ivoire (Abidjan), 2.5 percent in Thailand Bangkok), 6.5 percent in Morocco (Casablanca) and 1.7 percent in France (Paris) (Davezies and Prud'homme, 1995).

            --We are beset by an explosion of information, and this not only promotes democracy, but encourages pluralism and greater accountability.  Overall advances contribute to the strength of the middle class and ultimately to institutional stability.  Ordinary people, citizens, residents are communicating in a new world of cyberspace.  At the dawn of the post industrial age, just 50,000 computers existed in the world.  That number has now rocketed to 140 million, giving common individuals access to each other across the globe.  More than one third of Americans and more than 20 percent of Western Europeans own computers. In East Asia, the figures are closer to 15 percent and growing every year (Economist, 1996b).

            While the internet cannot guarantee democracy, it can assure the dissemination of information; facilitate free exchange between groups; and, allow increasing communication between rulers and the ruled.  None of this takes into account the surge in world wide news dissemination (BBC, CNN), the proliferation of regular or cellular telephones (coupled to decreasing costs per call) and the spread of fibre optic cables (simultaneously transmitting 1.5 million conversations within the diameter of a human hair).  Under these conditions, it becomes increasingly difficult to monopolize information, control public opinion or ignore citizen demands.  While there may be setbacks and there will always be exceptions, the democratic future is promising.  Sooner or later and in most places, technology will stimulate pluralism, diversity and accountability.

            It is no sheer coincidence that prosperity, and free information have been accompanied by rising waves of democratization.  Since the early 1970s, democratic states have continually replaced authoritarian ones.  During this period, those states classified as "democratic" rose from thirty to fifty nine, while nations classified as "authoritarian systems" decreased from ninety-two to seventy-one.  In Western Europe, Spain and Portugal joined the other democratic states.  In Latin America, the transition to democracy was especially marked.  Brazil, Ecuador, Chile, Argentina, Guatemala and Bolivia have now joined the democratic ranks (UNCHS, 1996).  In East Europe, the collapse of communism brought a swarm of nations into the democratic fold.  In the Middle East only Israel can be counted within the world's democracies, though a handful of other nations (Jordan and smaller states on the Arabian Peninsula) have begun to loosen the reins of authoritarianism.  Again Africa constitutes a mixed and more complex picture, with only a minority of states classified as democratic while a majority are thought to be in various stages of transition (UNCHS, 1996).

Economic Gain Amidst Social Pain

            The positives also have their downside.  Exact connections are difficult to establish and the causes frequently overlap.  But the gains are logically and closely associated with serious negative effects.  Progress and decline can then go hand in hand, especially when economies are put under highly competitive pressures.  Here then are some salient negatives.

            --The force of transformation is connected to sharpened economic polarities, disparate geographical conditions and highly uneven investment.  These polarities are multi sided and can be seen between different areas of the world as well as within localities of many nations.  The paradox of contemporary economic development is that while most localities have become wealthier, they also contain rising numbers of the poor.  The explanation for this incongruity lies in differences of income generation and distribution of wealth within nations as well as between them.  Taking urbanized areas, 40 percent of the population in Sub Saharan Africa (Gambia, Mozambique) is below the poverty line.  In North Africa (Egypt, Morocco) the poor account for roughly 30 percent of the population.  While these numbers diminish in Asia and South America, the poor still make up between 25 and 30 percent of the urbanized population (Indonesia, Pakistan, Brazil, Venezuela) (UNCHS, 1996, p. 113).  The numbers descend as we reach the United States (21 percent in central cities and 9 percent in suburbs and West Europe (15 percent urban poor) (European Foundation, 1985; Baugher & Lamison-White, 1996). In the most advanced nations differences are accentuated between areas, and the most distressed can match those in less developed nations.  In the American Midwest and in the north of England the poor account for close to 40 percent of the population (Meegan, 1992; Parkinson, 1989; Nethercutt, 1987).

            These polarities ramify into patterns of investment, so that potential for economic growth or recovery is profoundly affected. Wealthier areas gain an increased capacity to reinforce their market position, and this can be seen through disparities in infrastructure investment.  Taking thirty four metropolitan centers around the world, we find those with the greatest wealth (Tokyo, Vienna and Paris, Amsterdam) received over 700 times more per capita expenditures in infrastructure than did those in less developed economies (Dar es Salaam, Delhi, Cairo, and Quito) (UNCHS, 1996).  This pattern has continued over the past decade.  Should it persist, we can expect to see wealthy areas enhancing their economic capacity, while those already marginalized within the global system will become even less attractive for investment.

            --Economic transformation and polarization have contributed to higher social disorder.  The last 25 years have seen greater migration, more severe family dislocation, sharper social segregation and ruptures in the social fabric.  Migration is not new to the world, but it was never as pervasive nor so closely associated with family separation and temporary living status.  The shift has not just occurred in the West, but in less developed nations that host millions of migrants.  In most cases migrants flock to inner cities, and today a quarter of the populations in New York, London and Toronto are foreign born.  Even homogeneous Tokyo holds 250,000 foreign residents and a large number of ethnic Koreans (The Urban Age, Spring 1994; Sassen, 1994; Economist, 1996a, p. 41).

            What distinguishes post industrial migration from preceding movements is its truncated and temporary patterns of settlement.   Commonly, single men live abroad for lengthy periods while sending remittances to the homeland.  When whole families do migrate, they are treated as long term aliens, rarely assimilating or acquiring citizenship.  The situation is particularly acute in Germany which today hosts 6.5 million foreigners or 10 percent of the population. More than 70 percent of Germany's "guest workers" have lived in the country for more than ten years.  Germany is not alone.  Mexico and Thailand received hundreds of thousands of migrants in the last five years.  Today, Sao Paulo hosts nearly a million foreign residents, while Bangkok holds 500,000 (Population Action International, 1994; The Urban Age, 1994, p. 20).

            --The cumulative impacts of these changes have washed onto the steps of government and are creating inordinate pressures.  At both policy and administrative levels, localities are faced with heightened expectations and a surfeit of demands.  We need only review the most salient events to appreciate how they redound upon local, state or provincial government.  Nowadays, job creation and growth is not only a matter of national policy, but the duty of every governor, mayor, county or town executive.  Local officials have become a sales force for economic development and job creation.  An increasing number of accounts from Europe report that Belgian and Italian mayors are becoming job recruiters for the unemployed  (Kantor, Savitch, Vicari, 1997; Ackaert, 1997).  Great Britain's "enterprise zones" and "city challenge grants" and America's "empowerment zones" and "enterprise communities" emphasize local responsibility for economic growth (Hambleton, 1993; Rockefeller Institute of Government, 1996).  Even France's powerful central state has given heed to local initiative in its effort to create "zones franches" and "zones des priorites" (Pacull, March 29, 1996: Desportes, January, 19, 1996).

            Meanwhile citizens are expecting and asking for more.  The rise of cable television, narrow casting, and the internet has created an aware citizenry who demand that problems be resolved and services be provided.  This is especially true for affluent and sophisticated "yuppie" populations.  These constituencies expect that streets be safe and clean; that open spaces be preserved and that fairness ordinances be adopted and implemented.  Ironically, as citizens expect and often receive more, favorable attitudes toward government at all levels have declined.  In the United States confidence in national institutions peaked during the 1970s and plummeted by the 1990s.  In 1995 only 9 percent of the population had confidence in the executive branch.  Confidence ratings for state and local government are higher, but they too have fallen (Gallup Organization, 1996).

            It is not by sheer coincidence that so many of us are interested in "reinventing government" and promoting "privatization", "public-private partnerships" or "matrix organizations" (Savas, 1982; Osborne and Gaebler, 1992; Kiel, 1994; Bozeman and Stausman, 1990).  Public officials, journalists and researchers spend enormous amounts of time searching for new ways of doing old things (National Performance Review, 1993, 1995).  Innovation in government has become the watchword, buttressed by calls for greater accountability.  All this can only be a response to cumulative pressures and popular awareness that government can do more with less.

The New Ecology of an Accelerating Future

            These six currents and counter currents are different sides of comparable phenomena.  Though producing both positive and negative effects they are inextricably linked, have a reciprocating influence and are bound to a common future.  We can expect that efforts to enhance GDP will stimulate investment, but also create greater disparities within and between localities.  Struggles over regional primacy will lead to greater affluence, but also beget family disruption, social polarization and a more pervasive informal economy.  The explosive tendencies of information will increase and widen consumption, but also heighten public expectation, increase demands upon government and place inordinate pressures upon local institutions.

            The conjunction of these currents and counter currents make up an ecology in which local democratic institutions and administrative systems will have to accommodate pressures for reform (greater responsibility, efficiency and accountability).  Still early in their life cycle, these currents are bound to accelerate (Downs, 1967; Kaufman, 1985).  Mounting and accumulating pressures have already begun to fashion a new ecology defined by certain norms, de facto rules, or processes.

            As decentralization and free trade proceed, more localities are fragmenting and behaving as solitary, proactive, competitors in a global marketplace.  The melting away of older restraints gives rise to a new international division of labor, and a search by localities for their own, distinct, competitive advantage.  A gradual but inexorable process of self-examination obliges local decision makers to ask, how can we find our niche in the world, national or regional national market? what can we do best? and, where can we garner capital investment?

            One way to establish a competitive advantage is to offer goods and services more cheaply, and sometimes to establish supply lines for contraband items.  High growth regions create an increased demand for inexpensive household labor, customized services and hard to find goods.  Some of this demand has been transformed into an informal economy, heavily staffed by migrants.  The army of prosperous white collar commuters who pack financial districts each weekday is passed by another army of blue collar "reverse commuters" who work "off the books" as housekeepers, gardeners or day laborers.  Other participants in the informal economy work in tiny garment factories or as unlicensed street vendors and artisans.  A smaller number may be involved in gambling or illicit activities.

            Another way of dealing with competitive advantage is to lower the costs of doing business.  Any number of methods can be employed, but the most popular fall into "supply side" techniques.  These include lowering taxes, supplying cheap labor, training labor forces, building new infrastructure, relaxing or abolishing environmental regulations, and forming government-business partnerships which reduce investment risks (Eisinger, 1988).  Once localities try to lower taxes or attract business through supply side incentives, they may find themselves on the road to fiscal stress and austerity (Clark and Ferguson, 1983; Clark, 1994a; Clark, 1994b; Clarke, 1989).

            Fiscal stress difficulties become a long term issue on the local agenda.  Chronic economic distress is not new for national and sub national governments in less developed economies.  It is however, a more recent occurrence in advanced economies that is both long term and transnational (Clark, 1994a).  Over the years fiscal stress has created a climate where localities take risks to stay afloat.  When those risks do not turn out well, the results can reverberate well beyond local boundaries.  New York's default of 1975, Liverpool's receivership of 1984, Orange County's bankruptcy of 1995 forced major changes in how government operates. More recently, fiscal austerity in South Korea, Malaysia, and Indonesia have led to major financial and organizational restructuring.

            There are too socio-cultural elements in the new ecology, which are integral to the information explosion and middle class growth.  Post industrial societies are thought to possess modern life styles which emphasize environmental protection, consumer interests, and identity politics (feminism, gay rights).  Some scholars have found evidence of a new political culture based on individual motivation (rather than class consciousness), a respect for markets (instead of hierarchy) and greater attention to local government (in contrast to national authority) (Clark and Inglehart, 1990; Clark, 1996).  Other scholars see post industrial societies as the hothouse for a post materialist society with its emphasis on citizen activism and social issues (Miranda, Rosdil and Yeh, 1992).  The more likely scenario is that new cultures will develop and either overlay, mix with or function alongside more traditional attitudes.

            Figure 1 summarizes and sharpens the previous discussion by portraying the leading elements of the new ecology along with their consequences. These consequences stem from both positive and negative currents and their confluence. The ultimate effect is a bundle of norms, de facto rules, and processes.

     This schematic representation is best viewed as an array of conditions, a virtual agenda of behaviors, that localities will face.  Public administrators may also infer a mismatch between this agenda and government institutions.  While global markets, technology and society are in a period of rapid transformation, governmental institutions have lagged.  The intensely decentralized composition and flexibility of global forces stand in marked contrast to hierarchical and fixed behavior of government institutions.  Particularly acute are the contrasting modes of operation between markets and governmental institutions.  Markets are flexible, prolific and immensely responsive to mass demands, while government institutions are steeped in formalism and routine.       The next century will have to bring the new ecology and governmental institutions in alignment.  Government, particularly local institutions, will have to generate new ideas in order to keep or gain a competitive advantage.  Government will have to exact greater efficiencies in order to attract investment, work with consummate skill in order to mitigate disparities and avoid social unrest.  Not the least, localities will have to be more accountable if they are to satisfy citizens, maintain popular legitimacy and cope with daily pressures.  The key question, what kinds of institutional structures are best suited to these challenges?

INSTITUTIONAL CAPACITY

An Ecological Approach

            Some scholars have used Darwinian theories of natural selection within a given environment to analyze organizational or institutional change (Kaufman, 1985; Morgan, 1986).  Several premises undergird the ecological approach taken here.  First, institutions are treated as open systems, interacting with, responding to, and evolving within a particular environment or set of external dynamics.  In the long run the ability of institutions to respond to these dynamics will determine their viability.  This is not to say that organizations cannot remain obsolete for a period of time.  Institutions may lag well beyond their time, and this is why the pace of adjustment is erratic.  Change occurs in cycles, often in fits and starts, and sometimes in shocks.  Institutions shift from one organizational format to another, others disappear and others are freshly created--often with unintended consequences (Kaufman, 1969; March and Olson, 1989; Savitch 1994).

            Second, the new ecology suggests that in years to come, institutions will increasingly face a different social, business, and technological climate.  We face a future where change will occur faster than we can anticipate, much less predict or plan.  Citizens, consumer groups, business, labor unions, private and non profit organizations will acquire information and adapt behavior faster than any public body can act.  Heightened consumer demand will spawn business innovation and a stream of specialized goods intended for narrow clienteles.

            Under these conditions, smaller and more numerous organizations may be better than larger, monopolistic ones.  Research shows that numerous voluntary organizations are more effective at supporting social needs and ensuring commitment than large organizations (Coleman, 1988; Putnam, 1993).  This observation is also true for business development.  At the beginning of the post industrial era two thirds of all new jobs were firms with fewer than 25 employees, and the trend has become more marked through the current decade (Birch, 1987).  Now, as we are thirty years into that period, we find that 80 to 90 percent of that growth comes from medium and small business (Hesselbein, Goldmith and Beckhard, 1997).

            Command economies, tight governance and tall bureaucracies will not work in this kind of environment.  The future belongs to a plurality of relatively flat organizations that are capable of developing new productive capacity.  The necessity to do more, to be more accountable, to innovate and be more efficient are derived from these pressures.  We can better understand drives to reinvent government as an expression of the new ecology.  "Privatization", "public-private partnerships" and "matrix organization" are efforts to increase the scope of public responsibility by enlisting commitments from all sectors of society.  Privatization is connected to drives for efficiency from producers and accountability to consumers.  Public-private partnerships and matrix organizations are attempts to remove organizational limitations.  The recent popularity of “performance based contracts”, and private/public contract bidding are ways to replicate market flexibility and focus on outcomes rather than process.

            Third, institutions are not neutral nor are they mere administrative tools.  Institutions define the framework create the rules, and transmit values through which action takes place. To borrow from March and Olsen (1989) institutions are rooted in history and experience which define rules, norms, identities and beliefs.

            We can also say, that collective behavior not only affects institutions, but is affected by them, and this turns out to be important for the achievement of social ends.  How institutions do things and what they prescribe strongly influences political culture.  Canada and the United States resemble each other in extraordinary ways.  Yet their political institutions are quite different from each other, and these shape public attitudes and mass behavior.  Canadians remain more deferential to authority, are more rule abiding and less prone to protest (Lipset, 1986).  The colonial legacies of Britain and France produced very different societies in Sub Saharan Africa.  French direct rule made populations more dependent upon centralized institutions.  Francophone Africa is still given to collective behavior and the colonial presence remains strong.  Britain's indirect rule produced greater pluralism, and institutional independence (particularly in judicial and legal systems). Anglophone Africa is politically more diverse and the colonial presence disappeared more rapidly (Almond and Coleman, 1970).

            These lessons can be translated into future expectation for change in more advanced political economies.  How institutions lead economic development can stimulate or dampen popular participation.  The kinds of strategies institutions pursue can shape anticipations and the way in which people are likely to respond.  Government may not be able to command, but it can facilitate the process of production.  Localities can encourage private and non-profit organizations to take on both market driven and public activities.  Competitive bidding, franchises, and prudent loosening of controls can stimulate the development of pluralistic, community based, autonomous organizations.  All this contributes to the building of institutional capacity.

Thickening Institutions

            Institutional capacity means the increasing ability of organizations to absorb responsibilities, operate more efficiently, and enhance accountability.  The reasons for this are tied to the kinds of ecological pressure placed upon both public and private sectors.  To meet these pressures institutions will have to "thicken" the components, activities and energy which make them up (Kaufman, 1985; Amin and Thrift, 1994).  Thickening calls for an enrichment of institutional diversity, pluralism and autonomy.  It avoids institutional monoliths and discourages large, monopolistic organizations in favor of socially rooted diversity.

            The idea is to rely upon both the actual and potential resources of the social order to spawn institutions.  This requires that we cut a large swath through the social structure in order to 1) incorporate private firms (finance, manufacture, retail, media) 2) attract mass organizations (labor unions, civic groups, professional associations); and 3) embrace non profit and government bodies (charities, hospitals, universities, development authorities, local governments).

            What counts is not the mere existence of institutions, but the richness of their interaction.  Vertical, horizontal, or coalitional relationships make interaction possible and ultimately produce outcomes.  Institutional thickness is made possible by mutual awareness and a sense of interdependence.  Conventions, unwritten rules or the ascriptive ties of ethnicity, religion or gender make institutional thickness possible, while action around common objectives keeps it viable.

            The notion of "trust" underlies and sustains institutions. Trust is a voluntary relationship, built through common patterns of socialization and an acceptance of institutions--their rules, norms, identities and beliefs.  On a social level, trust manifests itself in a basic disposition toward one's neighbors and goes to the essence of community relationships.  It is an expectation of "regular, honest and cooperative behavior, based on commonly shared norms" and a community's values (Fukuyama, 1995).  Put another way, trust entails the recognition of a common future, a willingness to engage in reciprocal endeavors and invest in one another's enterprise--psychologically and materially (Coleman, 1988; Putnam, 1993; Fukuyama, 1995).

            New York's Lower East Side and San Francisco's North Beach are places where Chinese and Italian communities have built a rich array of institutions based in and sustained by trust.  Small businesses rooted within respective communities, hire neighbors as laborers and managers, contract with kinsfolk as suppliers and secure loans from local credit associations or savings banks.  In New York's diamond center, Hasidic Jews conclude transactions with a simple handshake.  Contracts and elaborate conventions are rare, and so too are law suits.  Relationships are cemented by the intangibles of shared norms.

            We might see how institutions and trust can build upon one another.  By definition, institutional thickness is inclusive and provides vehicles for both elite and mass participation. It provides opportunities for participation and for building relationships within defined structures.  The problems before us are, how can we put this into operation?  The focus is on advanced societies, and addresses questions of how can we create these social assets where they are relatively scant? how might we stimulate institutional growth where there is a modicum of it? and, how are we able to strengthen institutions where communities have already cultivated these assets?

Promoting Institutions and Trust Through Participation

            Promoting institutions requires more flexible government.  We can begin to achieve this by conceiving of government in its broadest sense--not as just government but as different forms of governance.  The most familiar formal institutions consist of legislatures, executives, courts, bureaucracies and political parties.  But we also know that complex society is informally and increasingly run by public authorities, community based organizations (CBOs), public private partnerships, the privatization of public services and interlocal agreements.

            Scholars have shown that governance consists of networks of ad hoc, incremental arrangements that in one way or another contribute to the management and viability of the social order (Parks and Oakerson, 1989; Ostrom and Ostrom, 1993).  Public authorities direct airports and bridges for commuters; community based organizations take on housing construction for moderate income families; public-private partnerships rebuild downtowns for business; privatized services clean city streets for local government; and interlocal agreements furnish the basis for tax sharing and economic development between municipalities.

            Organizations of governance can serve as useful channels for the devolution of power down through and across the social structure.  We can build institutional capacity by furnishing opportunities for "spontaneous sociability"--for citizens to cohere at the grass roots (Fukuyama, 1995).  One way to do this is to open up streams of participation that converge at various junctures of governance.

            We can think of participation on a graduated scale with the most basic consisting of ancillary support, reaching higher to interactive consultation, up through an actual delegation of partial powers and ultimately attaining self governing autogestion.  Starting with the most modest participation, the levels are  explained as:

            a) support for grassroots institutions through training,           technical assistance, and financial aid

            b) consultation with grassroots organizations by seeking       advice, taking that advice into full account, and using it whenever possible

            c) delegation of limited, renewable authority to grassroots    institutions by authorizing them to carry out public or quasi public functions and,

            d) grants of autogestion which permit institutions to govern             themselves on a functional and/or territorial basis.

            Devolution can magnify institutional capacity, increase its ability to handle the myriad demands that are placed upon the public sector, and allow it to reach out to the citizenry in more creative ways.  Participation is forged by interests that have a stake in the activity and are closest to it.  Once the institutions are in place, greater accountability can be introduced by surveying the public or by allowing citizens to chose through market type alternatives.  

            Figure 2 shows how forms of governance can be used to build institutional thickness.  Note, the figure is illustrative of the range of pluralistic groups found in advanced societies, as well as how those groups can recruit and stimulate popular participation. Some of the groups are familiar such as labor unions, chambers of commerce and civic associations.  Others are less known in the United States such as the “mixed corporation” which is an organization that combines public and private resources in order to carry out development in a pre designated site.  Mixed corporations have been used successfully in France, and recruit up to 49 percent of their capital from the private sector to build housing or create local enterprise.  They hold a distinct advantage in being able to combine public resources with private initiative, and induce the participation and interest of investors.

      Most of the organizations listed above are led by an

elite and have a mass base.  Labor unions, professional organizations, neighborhood groups and business associations are steered by the actions of leaders and professionals.  This elite often carries the mass with it, and can plow resources as well as human energy and talent into governance.  The strategy is to design incentives that will meld the interests of both mass and elite into respective forms of governance (public authorities, community based organizations, public-private partnerships, privatizated industry and transnational or interlocal agreements).  Specific incentives are discussed below, and we recognize the response to incentives are neither automatic nor invariable.  Actors will respond differently, and some will be motivated by tangible, divisible incentives, while others will be driven by ideological, diffuse benefits (Wilson, 1973).  Some organizations will be induced by economic rewards (labor unions, business and professional associations), while others may be driven by civic virtue (historic preservation societies, environmental organizations).  Still others will be motivated by prospects of better service (neighborhood organizations, tenant organizations), and a large number will have mixed motives (universities, non-profit organizations).  Whatever the case, participation can be tied to incentives, and the overall strategy is to provide opportunities to coalesce around common goals.

            The strategy also rests on the permeating effects of institutions on behavior.  Put more directly, opportunities to participate will affect both the manner and substance of participation. The chance to work together and recruit additional participants can thicken institutions and enhance the overall capacity and quality of governance.

            Accountability to different publics is an important aspect of devolution.  A number of mechanisms allow citizens, residents and consumers to evaluate and then "vote" on the calibre of services.  Surveys, charrettes, referenda, and community elections for governing boards are ways to elicit citizen opinion and make decisions on institutional performance.  These are relatively soft techniques for making hard choices about whether to continue funding, renew or expand institutional authority.  Market choices that enable citizens to chose one service provider over another is a harder type of accountability that entails profits and losses, and whose popularity is growing.

            Institutional thickness also means organizational proliferation and a willingness to accept free floating activities.  While this may seem like pluralistic chaos, it is best tracked through incentives that are built into the system and by self regulating behavior.

Taking Stock

            As with any new venture there are questions attached to building institutional capacity and using it to create a symbiosis with popular participation.  The most serious problems concern the relationship between institutional change and behavioral modification, the difficulty of mobilizing and sustaining interest among the poor, the incentives for collective action, and the risks posed to conventional government.  We begin with the first question.

            • Can institutional change really engender behavioral change or is this merely putting old wine in a new bottle?  There is a good deal of empirical research on this issue.  Most scholars have established the mutual influence of institutions and behavior (March and Olsen, 1989; Savitch, 1994).  As discussed earlier, the findings are that institutions shape behavior as much as behavior shapes institutions.  The reasons for this are clear and quite logical.  Not only are institutions bearers of rules, norms, identities and beliefs, but they are able to give resonance to those factors by their executive and administrative functions.  From a practical point of view institutions allocate functions, distribute power, define relationships, and in doing so, influence behavior.  More often than not, institutional arrangements entail rewards, deprivations and have the force of law.

            These can be fairly compelling sanctions.  While institutions may not completely change behavior, they do send messages which condition individual and collective response.  Results may even be distorted, but over the long run organizational rules have a substantial impact (Savitch, 1994).  Institutions may not be able to create immediate "trust" between groups or create,  but this puts too stark an edge on the issue (Putnam, 1993).  Institutions can optimize what already exists, they can nourish incipient values, they can carve out boundaries of participation, and they can furnish incentives for using common resources (Ostrom, 1990).

            We should not doubt that progress will be uneven and there will be setbacks.  Nonetheless, over time institutions do have a powerful effect.  Germany's experience with democracy is a case in point.  The Weimar Republic collapsed because a democratic constitution was imposed upon a culture not habituated to free, pluralistic, open institutions.  Yet the second time around, democratic constitutionalism succeeded.  Cultures do, after all, adapt and the key to success lies in the simultaneous introduction of institutional incentives, training and re-education.

            • Are not the very preconditions of institutional capacity (middle class values) missing among the poorest citizens?  Why should we expect an underclass to participate, much less build institutional capacity?  True, political apathy will be a drain on efforts to build institutional capacity.  Ironically, those communities that enjoy a rich array of institutions are well off and need them least.  Put another way institutional capacity may be an effect and not a cause of prosperity.

            This issue poses a chicken and egg quandary which cannot easily be answered, but can be addressed by viewing institution building as an interactive process.  Institutions can also contribute to the reformation of values as much as they can be a refraction of it.  Value change can be advanced through education and citizen workshops.  This kind of training can take place as part of the "support" functions for community based organizations (CBOs) and public-private partnerships.  Participation can also be stimulated through community newsletters, religious institutions, consumer groups (tenant or squatter organizations) schools and the work place.  Also, some residents are bound to hold jobs within a public authority, a CBO, or a public private partnership.  Private firms doing public business can also be required to hire residents.  Community involvement can be made part of a job, and employees could serve as a cadre for enlisting their neighbors.

            In sum, building institutional capacity occurs simultaneously with value change.  At the same time, institutions do offer the means (education, training) the incentives (jobs, improvement) and the opportunity (resources, community mobilization) for success.

            --Collective action is difficult to bring about.  In the absence of individual, tangible incentives, why should populations and institutions move into unchartered terrain?  Personal and tangible incentives can complement collective benefits and should be applied at national and state (provincial) levels.  Advanced economies can use existing capital and tax benefits to promote popular participation and enrich forms of governance.  One way to do this is for community based organizations and public private partnerships to offer constituencies an opportunity to purchase stocks or bonds. Purchase of the stock or bond could entail tax credits, tax deductions or tax free income. 

            This would be especially feasible in income producing ventures such as community development banks, “mixed corporations” or economic development organizations. Returns on those investments could be tax free.  Municipal corporations have long since issued tax free high denominational bonds, and this has proven to be a highly successful venture. There is no reason why neighborhood based organizations could not issue lower denominational stocks or bonds, and forge mutually sustaining relationships with local citizens.  Personal monetary investment within a neighborhood development organization would stimulate political interest and have a positive participatory effect. Organizations (neighborhood groups, environmental organizations) which produce no profit are more problematic, but here too monetary incentives could be applied.  Corporate friends and citizens should be induced to enlist their support through enhanced tax credits and by actual benefits produced by these groups (clearance of brownfields, neighborhood watch programs, recreational facilities for youth and the elderly). 

            Another source of support can be drawn from private, for profit banks.  The Community Reinvestment Act (CRA) is a federal law which specifies that private banks must invest in distressed neighborhoods, and failure to do so can entail penalties.  These sanctions have been effective in checking the practice of “redlining”, and there is no reason why CRA strictures cannot be applied to transitional and middle class communities (U.S. Department of Housing and Urban Development, 1996).  Such a measure would induce private investments in neighborhood development, and could also be used to fund specified ventures by civic groups, labor unions and the like.

            States (provinces) and metropolitan areas can also be enlisted to sustain self help organizations and reduce local regional disparities.  A portion of collected taxes can be pooled on a metropolitan wide basis, and used to build infrastructure in distressed areas, clear brownfield hazards, support economic development or assist self help agencies.  Some states and metropolitan areas have already employed this technique.  Metropolitan councils in Minneapolis-St. Paul and in Portland have used region wide channel growth and redress disparities between local governments.  While these are scattered efforts, evidence shows they are reasonably successful (Nelson and Duncan, 1995; Savitch and Vogel, 1996).

            • What about the risks of hyperpluralism, institutional chaos, and an absence of control?  Allowing a large number of small institutions to flow more freely, and granting them a degree of authority always entails a risk.  These risks are integral to the nature of the new ecology, and we would expect some ventures to succeed while others fail.  Having said this, the risks are calculated ones, balanced by offsetting advantages and ultimately subject to controls by larger, formal institutions.

            We know that smaller institutions are more accountable to constituents and better able to generate commitment.  Smaller governments are viewed by citizens more favorably than larger ones (Gallup Organization, 1996).  Smaller organizations are also better able to overcome "free rider" problems through peer pressure and more effective oversight (Olson, 1965).

            We also know that hyperpluralism is a manifestation of a classic paradox of organization (Lawrence and Lorsch 1969).  A more sophisticated and advanced ecology will generate greater organizational specialization in order to manage a multiplicity of needs.  Yet the more we develop organizational specialization, the greater the fragmentation, and the more difficult it is to integrate new organizations. What is suggested here is not a cessation of conventional government in favor or informal governance, but strengthened limited government along with capacity building for intermediate associations.  We would expect both conventional government to be relieved of day to day functions by intermediate association.  This would allow governments to shift the emphasis to integration.

            Moreover, depending upon place and circumstance, conventional government should have ultimate power to verify or, when necessary, suspend less conventional governance.  It is common for state, provincial, regional or municipal authorities to hold final responsibility, and this venture is not different.  Forms of governance that accommodate institutions are normally subject to higher level oversight, which permits expansion, shrinkage or adjustment.  Public authorities function under indirect controls and are subject to audits.  CBOs have been cut off from funding for good cause.  Public-private partnerships, privatized services and interlocal agreements follow contractual rules which contain remedies in case of infraction or abuse.

            Finally, mechanisms of accountability can be used to provide information, evaluate performance and furnish periodic reports on the process.  Quantitative and qualitative baselines can be used to facilitate more elaborate techniques of benchmarking.  This data can be used regularly to measure performance, monitor institutions, and modify procedures.  Few ventures of this sort are sure, but adapting government for the next century is well worth the effort.

Conclusions

            There are critical ties between ecological change and institutional development.  The New Ecology is based on open markets, global interaction and highly decentralized activities.  Among other forces, it is propelled by technology and an information explosion whose impact is cumulative.  While we might like to control these activities for the common good, comprehensive oversight is not possible.  Government can be more effective by adapting to new conditions by building institutional capacity.

            Formal government can shed part of its responsibilities, undertake fewer functions, and limit itself to what it can best accomplish.  A suggested strategy for bringing this about is through a simultaneous devolution of power into less formal institutions and thickening institutions.  Greater autonomy, self regulation, pluralism and citizen accountability are the marks of institutional capacity.

Notes

1.  The most long standing of these pacts is the European Union which holds fifteen members (Austria, Belgium, Denmark, Germany, Greece, Finland, France, Ireland, Italy, Luxembourg, Netherlands, Portugal, Spain, Sweden, and the United Kingdom).  Others have now taken root though North America's NAFTA (Canada, Mexico and the United States) as well as South America's Mancusor (Argentina, Brazil, Paraguay, and Uruguay) and Southeast Asia's ASEAN (Brunei, Indonesia, Malaysia, Philippines, Singapore, Thailand, and Viet Nam).

2.  Global cities are giant entities which are at the command points of the world economy and serve as international informational and financial centers.   Primate cities are also giant entities, at least twice as large as the next largest city, and not infrequently hold 20 percent or more of a nation's population.  While primate cities are not at the nexus of the global economy, they are  central to a national economy and generate a substantial portion of its GDP.  Regional cities are major cities, with sizable though not an overwhelming population (usually second cities.  They often serve as a gateway to large regions around it.

3.  There have been some recent interchanges between scholars on the decline of hierarchy.  To date the reasons for decline have been attributed to cultural factors such as the rise of a new political culture and to political drives for greater individualism and equality.  An ecological approach would differ however, and suggest that monolithic and tall bureaucracy is simply inappropriate to global trade, to highly decentralized production, to technological advance and to the rapid dissemination of information.  Institutions either must adapt to these changes or fade (FAUI Communication on New Social Movements, July 16, 1997).

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