Roanoke Times
                 Copyright (c) 1995, Landmark Communications, Inc.

DATE: SUNDAY, May 21, 1995                   TAG: 9505200017
SECTION: BUSINESS                    PAGE: F1   EDITION: METRO 
SOURCE: DORON LEVIN KNIGHT-RIDDER NEWSPAPERS
DATELINE:                                 LENGTH: Medium

CITIES, ARGUABLY, OVERLOOK THEIR ECONOMIC ADVANTAGES

Talk about a man-bites-dog story, this one is man-bites-Great White Shark.

Michael Porter, in the latest issue of Harvard Business Review, argues persuasively that cities have four distinct advantages:

Strategic proximity to high-rent, large population areas;

A large number of consumers, albeit less affluent ones;

Integration with industry clusters;

Plenty of workers - though they may lack skills or training - who need jobs.

He doesn't deny the disadvantages, such as crime.

Porter draws most of his examples of how inner-city business can thrive from Boston, where Harvard's business school is located. For instance: A catering business in Roxbury, a rundown section of that city, succeeds because it is located closer to downtown clients than suburban competitors. Businesses in south-central Los Angeles become suppliers to the entertainment industry, in Hollywood. In Detroit, an advantage accrues to entrepreneurs who find a niche supplying auto plants.

Waiting for a company such as Microsoft or Texas Instruments to plop a plant down in city cores just isn't realistic. Workers in these places aren't trained for that kind of work; the factories would be too far from their suppliers and their customers.

As you may have guessed, there's a big catch to Porter's theory, which he concedes: In order for his ``advantages'' to be economically useful, cities must be willing to break with time-honored notions about wealth, where wealth comes from and how it can be created. Money that once was spent by governments and cities directly on people - in other words, transferred from taxpayers to the poor - now should be spent helping business take root.

In other words, money for food stamps, income assistance, housing subsidies and day-care centers better belongs in training, loans and business-friendly infrastructure, such as new roads and industrial parks, according to Porter's theory.

He carries the reordering of economic relationships a step further. He suggests that money that big companies such as GM and Ford used to spend on set-aside programs or charity ought to be stopped. Instead, financially able companies should invest in inner-city businesses that are economically viable without artificial safety nets such as guaranteed contracts.

Whatever one's politics, it's fair to say the social welfare model for cities took a beating during the Reagan years and will probably be buried by the new Republican majority.

Democrats now are calling Republicans ``heartless'' for gutting welfare and cutting taxes. Interestingly, one doesn't hear Democrats or any one else able to defend what social welfare programs did for cities' economic infrastructure.

It remains to be seen whether federal empowerment zones become a case of government providing services or government improving the environment for enterprise to flourish. To the extent that it's the latter, Porter would argue, there can be great opportunities for slick new businesses.