After founding and running the Metroplex Civic & Business Association (MCBA) for the past three years, I agree with this Wall Street Journal Opinion (WSJ) piece that America’s businesses have been noticeably absent from local government. While this article paints an accurate picture of what has been taking place in federal, state, and local governments over the past several decades, it sparked my curiosity. How did we get here?
American businesses played a major role in building, developing, and setting up local governments in the largest cities during and after the Industrial Revolution. In the early 1900’s, the business leaders were directly involved in municipal governments, often times holding elected office as populations expanded. Even during the Great Depression, business leaders played a key role in holding communities together, despite the economic challenges.
After World War II the United States had built the most powerful and expansive Navy in the world, effectively making the waterways safe for international business. This was the period when American businesses started slowly taking their eye off local politics and municipal governments. Many companies left city hall and shifted focus to D.C. and to other countries. In the half century that followed, companies expanded globally and left our local governments to fend for themselves.
The local governments slowly but surely shifted away from having business minded elected officials, which resulted in fewer officials understanding finance, the time value of money, or even how to read a P&L (Profit and Loss Statement). One benefit of having successful business leaders involved in government is their approach to solving problems. As my close friend often described his strategy while problem solving for one of the top management consulting firms in the world, McKinsey & Company, “you want an analysis that is Mutually Exclusive and Collectively Exhaustive (MECE)”. Meaning that all factors in a decision are analyzed distinctly without overlap, and the sum of all the factors cover all possible options or outcomes. Making a decision from this type of analysis seldom results in unintended consequences.
Without a thorough analysis process and with little to no finance or economic background, our local governments have slowly been filled with ideological driven individuals. These individuals seem to look at a problem and attempt to rapidly “do something” to solve it despite negative consequential impacts. An example would be a District Attorney trying to solve the problem of having an overcrowded jail, by publicly stating they will not prosecute any theft below $750. While the jail receives less people, theft skyrockets. Short-sighted decisions like these, have caused the problems we are seeing in most of our major cities today.
From our observations, it doesn’t seem to matter where citizens fall on the social end of the political spectrum, in determining if a city will grow and thrive. What matters most for a thriving city is whether businesses and individuals can be successful.
The MCBA is a non-partisan non-profit organization and we have come to realize that 90+% of people want predominately the same things. We postulate that a city must get all the following items generally right to grow and thrive.
Core Pillars a City Must Provide:
- An environment where businesses and individuals can be successful
- An environment with low crime & low homelessness
- An environment with great schools so kids can be successful
- An environment with low regulation & low taxes
In the WSJ article, the problems the Author described can be distilled down to one of the above pillars being out-of-whack. You will hear a similar story from most of the individuals and business owners that have left California over the last couple years. “Crime is too high.” “Taxes are too high.” “They are passing some crazy laws.” “I couldn’t run a successful business there anymore.” It’s a shame that once great cities like San Francisco and Los Angeles are losing people and companies as fast as they are. As companies leave California, their tax base continues to fall, which is throwing their economy into a downward spiral. These leaders, thinking short-term, tax the remaining citizens and companies “More” to cover their budget deficits, only accelerating the exodus.
While there are many other benefits, cities were created and exist to trade goods. Put another way, a cities primary purpose is to conduct business. It’s time that American businesses turn their absentee slips in and get our cities back on track. Because if they don’t, free enterprise as we know it will all but disappear.