Economic nitrogen fixing: Part 1, import and recycle nutrients

April 21, 2011 | Cities, Economic development, Economics, Eminent domain, ICCD, Markets, Slums, Theory, US News

By: David A. Smith  


What makes a neighborhood poor? 


Slum in Manila


 In a great multi-part post , Jim Capraro  of the  Institute for Comprehensive Community Development  offers a flash-of-genius answer:


Slum in Cairo (Garbage City ) 


A long time ago, a colleague and I were working in a very poor neighborhood in Chicago.

At one point, he turned to me and said, “There aren’t many problems here that wouldn’t be helped greatly if folks had more money.”


American south (Birmingham, Alabama?), 1940s


And thereby hangs an economic definition of slums, one worth exploring in depth. 


To begin with, cities are complex, and slums are similarly complex, a social cryptobiotica that turns wasteland into a small-scale, delicate, and living economic ecosystem.


In the scores of neighborhoods I have worked with across the country, the ingredients are all the same array of program/issue areas which include work around housing, education, safety, job readiness, health, financial literacy, and many, many more. 


Storefront, Mukuru Sinai, Nairobi, Kenya, 2009


In farming, the difference between good and bad land lies in its soil’s ability to retain nutrients in the ground, where plant roots can get at them and form complex organic compounds.  Key is nitrogen, which though it comprises 78% of the atmosphere is useless in a gaseous state because the plants cannot break it down – just like electronic money is useless to slum dwellers if they cannot access it for their communities.  Nitrogen fixation is when gaseous nitrogen (N2) is broken apart and converted into ammonia (NH3) which is a chemical building block whose hydrogens can be knocked off and attached to carbons to create longer organic-compound molecular chains.  Some nitrogen fixation is biological, some is abiotic, but either way, if nutrients don’t get fixed in the soil, the soil cannot grow anything.


Any vector works, as long as it puts nutrients into the ground


The same thing happens in informal and economically deprived urban areas.  As I posted in A slum is a wealth-extraction machine, in a slum, money flows out but not in:


Imagine that money glows green and people are merely shades and phantasms, as if we are all seeing with X-ray eyes. 


No money visible here


Each of us is thus a faintly gray form with a bright rectangle on our hips (wallets) or by our ribs (handbags).  Follow us from above on fast-forward throughout our days and weeks, hovering over a slum, and what do you see:


·         Every morning, small dim dots stream out of the slum, dispersing throughout the city, seeking work.

·         Day time, the dots settle, and as the day passes, their financial cores brighten as they earn money.  Some brighten faster than others; some brighten irregularly.  All generally end the day a bit more lustrous than before.

·         Evening, the dots stream home, and the slum into which they trickle glows more brightly.  The dots swirl about as slum-dwellers transact one with another.



Look!  Money on his hip!


Over the week, the slum grows ever brighter.  Then comes rent day.  Out goes a torrent of wealth, a concentrated beam going to the slumlords, almost none of whom ever live in the slums they exploit. 

The result is that just as you can’t fill a sieve, you can’t make a slum more wealthy unless the money in it recirculates, and for that you need jobs.


DVD repair shop hole-in-the-way, Dharavi, Mumbai, India


Capraro’s experience and post expands on this idea.  Good urban development or redevelopment is economic nitrogen fixing: turning money that is floating in the metropolitan area and attaching some of it to community assets such as people, families, places, businesses, and jobs that are resident in the community.  As Capraro puts it:


I think there is one program area that that is more strategic – and more important – because when done well it can enable everything else. 


I am speaking of economic development.


In most places – like that very poor neighborhood in Chicago – the critical question to answer is:  How can folks get more money?


The question is impressively simple.  In the answer lies an enormous complexity.


“Why do you always answer a question with a question, master?”

“What makes you think I do that?”


Capraro then presents a good illustrative example:


The things we usually call “economic development” projects many times don’t really help to “develop the economy.”


Many years ago, as a CDC director I worked long and hard to develop a supermarket grocery store which we located in a very blighted commercial district.


Was this economic development?


Despite development difficulties, the store has been operating since 1985 selling groceries and fresh meat, fish and produce in a former food desert.  Also, since our CDC owned 1/3 of the real estate, we received about $30,000 or more a year from the net rent.


A new grocery store certainly sounds like a classic example of economic development, but then ask yourself, how is the money flowing?  Capraro frames this as a Socratic dialog:


Don’t I look philosophical?  Capraro


Capraro:  To develop (grow) an economy you have to export something (like goods, services, labor, entertainment) in exchange for money.  A grocery store does just the opposite: it imports product in exchange for local money.  Think of it this way, our community suffered from a “trade deficit” which we enhanced by building the supermarket.


Tour members:  But what about the jobs in the supermarket?  Aren’t they bringing money into the community?


More slum importing: aluminum pots for sale, Kibera slum, Nairobi



For the community to work, it has to export value-added good and services, so that it can import capital, which can be used to develop infrastructure and livelihoods.  Importing goods and exporting people’s cash keeps the community poor. 


Capraro:  If the folks who work at the supermarket live in the community, they will be taking home paychecks.  However, the source of the money used to make the payroll is from the revenue generated by the grocery sales, money which came from our community to begin with.


Because people are mobile, they can move into and out of a slum – and indeed, throughout history, slums have been landing pads for immigrants, who oriented themselves to the city as cheaply as possible, and then moved out when their circumstances improved.  That’s an entirely viable model for population development, but leaves the place lagging.


Through local employment, we are recycling local money back into the local economy.  But that is not as powerful a contributor to economic growth (economic development) as bringing new money into the local economy.


Recycling capital within a community is intrinsically a good thing – it magnifies the impact of that newly imported capital, and it returns the economic nitrogen back to the economic soil, rather than running off and depleting the ecosystem.  As I previously posted, Cairo’s Garbage City embodies this principle – it is the poor (Coptic Christian) quarter of town where the ragpickers turn trash into cash, as my friend Melanie Walker says. 


Economists call this “import substitution.”  Import substitution helps to stop the bleeding of wealth out of a community as residents go elsewhere to shop. But, again, it does little to contribute to economic growth.


Slum value adding: flour and sugar turn into baked goods, Kibera slum, Nairobi


Tour members:  So why did you go through all of the trouble to create this supermarket?


Capraro:  We didn’t build the grocery store to bring money into people’s homes.  It won’t produce a large volume of mortgage-paying, family-raising income, and we’re not counting on it to increase home ownership potential much.  We built it for two reasons:


1.  People really need groceries.  (Even if this were the only reason, it would be worth doing.)


2. This commercial corridor was terrible, populated with vacant and abandoned structures, some of which were fire-gutted.  The grocery store development served as commercial revitalization anchor.


We cannot overlook the importance of an attractive streetscape.  People like living in visually attractive surroundings, and because you are what you live in, a neighborhood full of trash and graffiti signals disinvestment.  Conversely, new property development is an economic green shoot, encouraging belief … and belief encourages investment.


More where that came from?


After we developed it, all of these other smaller surrounding retail companies wanted to locate their shops as close to the anchor as possible.


Slum importing: fruit stand, Kibera slum, Nairobi


I still haven’t answered the key question: How do we work so that folks can get more money?


To do that, we need activity that brings outsider’s money into our community, where we capture it.  In other words, the community has to export value and import cash.


Slum exporting: furniture shop, Kibera slum, Nairobi


Biological nitrogen fixing happens in many ways, chief of which is in plant roots that form nodules to convert atmospheric nitrogen into ammonia; the roots act as the first link in a plant supply change culminating in shoots, branches, and leaves.


Every nodule a little biological enterprise: pea roots


Economic nitrogen fixing happens via the emergence of an indigenous business which produces a distinctive or valuable product, such as Capraro’s local Chicago example:


In 1979 Chicago magazine held a secret pizza contest [for] the Best Pizza in Chicago.


That wasn’t the only secret contest they ran


I was amazed when I spotted on the cover the name “Giordano’s” [the little pizzeria Efren and Joseph (Giuseppe) Boglio had opened in our neighborhood].  [Suddenly] Giordano’s became a powerful culinary destination. 


For the first six months, each evening, hundreds of patrons would travel to our community for an ethnic eating adventure.  There were evenings when the restaurant turned away up to one hundred people because there was no room. 


Overnight, their base of customers from outside of the community grew to a level that dwarfed the volume of local consumers.


Recognition had not only boosted the business many-fold, it had turned Giordano’s into a neighborhood exporter, as people brought full wallets and empty bellies and left with full bellies and empty wallets.


Balance of trade (in this case, China): imports, exports, and net trade balances


Further, once the economic-nitrogen-fixing vector was established, its circulation expanded, because food is not the only thing one can buy in an emerging neighborhood:


During the year that followed Giordano’s discovery, a new consumer pattern developed.  After dining at Giordano’s customers would travel to another local retailer, a short distance from Giordano’s, on the way to the expressway, to partake of desert. 


So the first ecosystemic component in fixing economic nitrogen into an informal neighborhood is creating economic exporters, businesses that can flourish within the neighborhood and sell products and services outside it.


Come to our neighborhood!  Spend money!


There’s another critical piece as well.


[Continued tomorrow in Part 2.]