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New England
Journal of
Public Policy

A Journal of the

John W. McCormack Institute

ofPublicAffairs

Uni\ ersity of Massachusetts Boston

New England Journal of Public Policy

A Journal of the John W. McCormack Institute of Public Affairs
University of Massachusetts Boston

Padraig O'Malley, Editor

Sherry H. Penney, Chancellor
University of Massachusetts Boston

Robert L. Woodbury, Director

John W. McCormack Institute of Public Affairs

Geraldine C. Morse, Copy Editor

Ruth E. Finn, Design Coordinator

The John W. McCormack Institute of Public Affairs is named for the Speaker of the
United States House of Representatives from 1962 to 1971. John W. McCormack was
born in South Boston, less than a mile from the University of Massachusetts Boston
Harbor Campus. The McCormack Institute represents the university's commitment to
applied policy research — particularly on issues of concern to New England — and to
public affairs education and public service.

The New England Journal of Public Policy is published by the John W. McCormack
Institute of Public Affairs, University of Massachusetts Boston. Subscriptions are $40 per
year for libraries and institutions, $20 per year for individuals. Manuscripts and corre-
spondence should be sent to the New England Journal of Public Policy, John W.
McCormack Institute of Public Affairs, University of Massachusetts Boston, 100
Morrissey Boulevard, Boston, Massachusetts 02125-

3393 (telephone 617-287-5550; fax: 617-287-5544). See Guide for Contributors on inside
back cover. Articles published in the New England Journal of Public Policy are ab-
stracted and indexed in Sociological Abstracts (SA), Social Planning/Policy & Develop-
ment Abstracts (SOPODA), Sage Public Administration Abstracts (SPAA), Sage Urban
Studies Abstracts (SUSA), and Current Index of Journals in Education (CUE).

New England Rec&ffi^Wary

Journal of

Public Policy

Editor's Note

JAN i 9 1999
Univ. of Mass Boston

Padraig O'Malley

Industrial Policy:

Federal, State, and Local Response

Zenia Kotval, Ph.D., AICP

The Politics of Deindustrialization:
Three Case Studies

Eve Weinbaum, Ph.D.

Is Boston Becoming a Branch-Plant Town? ,-,

Lawrence G. Franko, Ph.D.

Institutional Design and Regulatory Performance:

Rethinking State Certificate of Need Programs <-t

Robert B. Hackey, Ph.D.
Peter F. Fuller, MLS, MPA

Predicting Success in JTPA:

Test of a Three-Component Model

Carolyn Ball, Ph.D.

The Professional Decline of Physicians
in the Era of Managed Care

Aimee E. Mar low

Cambodian Political Succession

in Lowell, Massachusetts ReCe'lVed Jfl LibfafV 103

Jeffrey Gerson, Ph.D. rrn c\ n -jonq

Univ. of Mass Boston

New England Journal of Public Policy

Governing Massachusetts Public Schools:

Assessing the 1993 Massachusetts Education Reform Act
John Portz

Citizen Participation and Strategic
Planning for an Urban Enterprise Zone

143

Michael L. Owens

Editor's Note

Padraig O'Malley

The first weekend in May brought revolutionary change to the global economy, a
revolution that, for all intents and purposes, occurred right under the public's nose,
unnoticed and evoking less comment than the public's, or at least the media's, unending
preoccupation with the travails of the likes of Monica Lewinsky or Kathleen Willey, or
the continuing unfolding of White House shenanigans.

Not that we should be surprised by this. The lurid and the lewd have a fascination
that allows us to wallow in our own sense of righteousness, beat our breasts with moral
gusto, and keep our minds properly focused on the minutiae of scandal in High Places.
Besides, wallowing is, at the best of times, a confessional experience, a cleansing exer-
cise: it decontaminates our own shortcomings, encouraging a slight feeling of superior-
ity that elevates our humble positions in the larger scheme of things.

And, of course, it is to this larger scheme of things to which the revolution I cite, the
birth of a currency — the euro — belongs, namely, the agreement among eleven Euro-
pean nations to phase out their individual species and replace them with a single Euro-
pean legal tender. The countries involved in the historic monetary union — Austria,
Belgium, Finland, France, Germany, Ireland, Italy, Luxembourg, the Netherlands, Por-
tugal, and Spain account for 19.4 per cent of the world's GDP compared with the
United States' 19.6 percent and Japan's 7.7 percent. It is responsible for 18.6 percent of
world trade, not counting internal trade, to this country's 16.6 percent and Japan's 8.2
percent. Which means that the euro will at once become the world's second currency
and may, in time, challenge the dollar for supremacy.

The euro is the culmination of an experiment that grew out of the ruins of post-
World War II Europe, out of the conviction that the devastation of the war must never
happen again. First, the Council of Europe, then the European Coal and Steel Commu-
nity, the European Common Market, the European Economic Community, and today's
European Community. Nor is it an experiment that is over. There is the continuing de-
bate over whether the EC should focus its direction on widening — the admission of
other European countries, especially those to the East, or on deepening — the pursuit of
stronger ties among existing members, with the implicit implication of some form of
political union at some unspecified time in the future.

For better or worse, the advent of the euro will change the way we do business,
trade, perhaps the balance of economic power, how we will align ourselves politically,
how we entertain new forms of governance, and not least, of course, how the process of
globalization advances. By any measure, it is a giant step in the direction of a more
cathartic globalism, but giant steps leave giant imprints in their wake, not all of which
bring tidings of good news.

Padraig O'Malley is a senior fellow at the John W. McCormack Institute of Public Affairs,
University of Massachusetts Boston.

New England Journal of Public Policy

Readers of this journal will have noticed an increasing emphasis on the impacts of
globalization in recent issues. Not only has it become the mantra of the last years of the
dying millennium, it is being presented as an elixir of unbounded possibilities, a pro-
cess that will, with the help of some undefined alchemy, make the twenty-first century
fulfill the promises and potential that somehow got lost or marginalized in the tumultu-
ous upheavals of the twentieth. Yet its implications are largely unknown, the pace and
speed of change are laboratory equations, and the unintended consequences of our
hubris in our capabilities to manage our planet are a matter of guesswork.

Thus, in "Industrial Policy: Federal, State, and Local Response," Zenia Kotval
quotes from Ann Markusen's study of industrial districts and how they succeed in an
increasingly competitive world ("sticky places in slippery space"). She characterizes the
problem as follows: "Sticky places are complex products of multiple forces of corporate
strategies, industrial structures, profit cycles, state priorities, local and national politics.
Their success cannot be studied by focusing only on local institutions and behaviors,
because their companies are embedded in external relationships." Yet, as Kotval points
out, "planners have been slow to analyze these impacts . . . and for the most part, indus-
trial planning as a topic of scholarly and professional inquiry can be described as a
black hole. A quick review of the recent programs of the annual conference of the
American Planning Association shows that the word industry scarcely appears in the
description of the sessions." "Have we been ignoring a critical, swiftly changing, and
complex issue that is likely to have major impacts on all our communities?" she asks.

Kotval 's analysis: "Influential to the current debate on industrial policy and global
competition are the conceptual frameworks put forth under the rubric of 'new growth
theory.' These frameworks, purposely constructed for use by policymakers, renounce the
current effectiveness of Keynesian macroeconomics and monetarist policies put in place
by the United States in the post-World War II years. This discourse is a response to the
new global competition and, more specifically, the interpenetration through trade of the
industrialized economies. The changing competition has been brought about by a level-
ing of the playing fields among industrial nations, continuous technological innova-
tions, and the globalization of industry in general."

While the debate between "new growth" theorists and their protagonists continues,
Kotval argues that one important variable, perhaps the most important — the increasing
interdependence of the world's large companies — is unaddressed. "These companies,"
she writes, "are virtually free of commitment to nations and exist increasingly as global
entities of their own. They are quickly responsive to the initiatives of Japan Inc.,
NAFTA, GATT, and the European Union in terms of the impact on the company rather
than on their workers or on their home nation. Given the mobility of capital, varying
labor costs, and the internationalization of markets, they have little choice." Kotval's
conclusion: "It is essential that industrial policy confront this issue and strive to create
approaches which create stability and worker security before any public investment
occurs." And: "As multinational corporations divide and multiply their operations
throughout the globe, engaging in joint ventures for research and production with other
corporations and governments, they create an increasingly complex web of relationships
that supersede the borders of the nation-state and stretches the balance of political-
economic theory and policy."

The recent $39 billion merger between Daimler-Benz and Chrysler is merely a har-
binger of deals to come. Chrysler, once a symbol of all things American and apple pie,
is no longer even American. Good-bye, America.

As a result of the way in which states and localities have experienced the effects of
economic restructuring — for some it has brought economic and social disaster, for
some mere disruption, and for some new opportunities for growth and expansion —
localities have developed increasingly sophisticated economic development programs to
replace lost jobs and lost programs. The retreat of the federal government from local
affairs in the 1980s has forced local regions to compete with one another for jobs
through their business recruitment policies. States and localities are rapidly acquiring
the expertise to understand regional and economic forces and develop sophisticated
tools to promote their own economic prosperity. But in the final analysis, the ultimate
success or failure of these efforts depends on the voracious appetites of global economic
forces. These are the issues we must recognize and address.

Hence the emphasis on Kotval's article. It provides the context for reading Eve
Weinbaum's "The Politics of Industrialization: Three Case Studies," Michael Leo
Owens's "Citizen Participation and Strategic Community Planning for an Urban Enter-
prise Community," Lawrence Franko's "Is Boston Becoming a Branch-Plant Town?"
and Carolyn Ball's "What Predicts Success in JTPA? Test of a Three-Component
Model."

Four other articles covering a potpourri of public policy questions round out this
issue: Aimee Marlow's "The Professional Decline of Physicians in the Era of Managed
Care" evaluates the history and ultimate failure of propositions 214 and 216 in Califor-
nia. John Portz's "Governing Massachusetts Public Schools: Assessing the 1993 Massa-
chusetts Education Reform Act" concludes that superintendents are most satisfied with
their role, especially their authority over principals and teachers, while school commit-
tee members are least satisfied with the changes, although they still provide general
support for the aims and goals of the act. Jeffrey Gerson's "Cambodian Political Suc-
cession in Lowell, Massachusetts" argues that five key factors appear to determine the
degree of Cambodian participation and representation in Lowell politics Three are inter-
nal — coming to terms with the legacy of the genocide perpetrated by the late Pol Pot's
murderous regime, the lack of a tradition of democratic participation in the home coun-
try, and general differences between those who regard themselves as Cambodians and
the American-born. Two factors are external — Lowell's two-tiered political system and
the response of the city's elected officials to the influx of Southeast Asians that began in
the early 1 980s. Finally, Robert Hackey and Peter Fuller, in "Institutional Design and
Regulatory Performance: Rethinking State Certificate of Need Programs," review the
capability of Rhode Island in this regard and conclude that the state's experience with
capital expenditure regulation in the 1980s and 1990s underscores the importance of
institutional design and policymaking capacity on regulatory effectiveness.

Robert Reich, the former secretary of labor, often referred to in these pages for his
recondite insights into how public policy works in this country, puts things in perspec-
tive in Locked in the Cabinet, his memoir of his years in the Clinton administration. He
recounts the following incident, which truly illustrates that government regulation im-
pinges on the lives of not only the poor and the downtrodden, but of those of us who
would assume ourselves to have rather important roles to play in the conduct of our
affairs. I quote.

[I enter} a small windowless room [in the Department of Labor]. ... A man in a
white jacket is cleaning a small vial. He turns to me "Oh, Mr. Reikk. " He has an
Eastern European accent and a full white beard. "I'm Doktor Svenkell. I'll be vit

New England Journal of Public Policy

you in just vun moment. Tis must be prepared carefully, of course." He turns back to
his cleaning. . . .

"Are you ready, Mister Reikk?"

"Yes," I say bravely.

Dr. Svenkell offers me the small glass container. "Perfectly clean. Now, if you'll
just step troo tat door-vay, you can do your business in private."

"Excuse me?"

I hold the container, but I still don't get it.

"Mister Reikk, you need somp time perhaps?"

"What do you want me to do?"

"Urine. . . . Pee. . . . Piss. Into container. Troo dat door is a batroom. Sometink
wrong? Nutting in your bladder right now?"

"But why?"

"Federal rek-u-la-tion. Drug test. Can't even be in te cabinet vit-out havink your
pee looked at. Quite a country we haf, isn't it?" He laughs, opening the door to the
bathroom before ushering me in. "Everyone's got to pee for te government, no
matter who. Dat's what I luf about tis country. Everyone's apisher" **

I apologize for omitting from the masthead of the special issue Workforce Development:
Health Care and Human Services the names of the guest editors, James Green and
Andres Torres.

Industrial Policy Federal, State, and

Local Response

Zenia Kotval, Ph.D., AICP

During the past twenty years, many economists and policymakers have strongly
advocated that the United States formulate a national industrial policy to improve
the competitiveness of American firms in the global marketplace. These proposals
call for both direct and indirect assistance to specific industrial sectors. Some
would contend that U.S. industrial policies are being challenged by newer growth
theories that shift the focus from the nation as the basic unit of industrial geogra-
phy to regions and municipalities. There is little argument about the need for in-
dustrial policies that tie national, state, and local initiatives together. However,
confusion and disagreement exist as to what defines industrial policy and what its
appropriate level should be. This article addresses the debate about national in-
dustrial policy and state and local responses to industrial policy and offers a sum-
mary of key themes in the current literature.

Over the past two decades, local planners have become increasingly aware of the
changing character of the industrial base in their communities. The end of the
cold war and concomitant closing of defense industries, the downsizing of industry as it
becomes less labor intensive, the increased mobility of capital and international trade
agreements are but a few of the factors that are influencing this change.1 Ann
Markusen's study of industrial districts and how they succeed in an increasingly com-
petitive world ("sticky places in slippery space") summarized the problem as follows:
"Sticky places, then, are complex products of multiple forces-corporate strategies,
industrial structures, profit cycles, state priorities, local and national politics. Their
success cannot be studied by focusing only on local institutions and behaviors, because
their companies . . . are embedded in external relationships.2 Yet planners have been
slow to analyze these impacts, among others, and to reflect on them in their proposals.
Indeed, for the most part, industrial planning as a topic of scholarly and professional
inquiry can be described as a black hole. A quick review of the recent programs of the
annual conference of the American Planning Association shows that the word industry
scarcely appears in the description of the sessions. Have we been ignoring a critical,
swiftly changing, and complex issue that is likely to have major impacts on all our
communities?

This article is designed to help overcome the lack of knowledge about industrial policy
and planning by presenting and analyzing key scholarly works on the topic. I hope that
academics and professional planners can gain increased understanding of the key issues
that frame the topic and, at least in the case of practitioners, begin to react to them in

Zenia Kotval, an assistant professor of urban and regional planning, Michigan State University,
researches the impacts of policy choices on local economic development and planning.

New England Journal of Public Policy

their professional plans and projects. The first of three sections addresses the debate
over national industrial policy and the second the state and local responses to industrial
policy, while the third section summarizes the key themes in current literature and the
missing elements of the debate.

The Industrial Policy Debate

Since the end of World War n, an explicit goal of U.S. economic policy has been to
establish and maintain conditions that permit the free market system to work with mini-
mal government intervention. Increasingly, however, advocates for industrial policy
seek to involve the federal government in the domestic economy to an unprecedented
extent, while opponents of industrial policy deplore the moves toward increased inter-
vention at home and protectionism abroad.3 The fact of the matter is that U.S. national
economic policies have evolved steadily since the Industrial Revolution. The changing
role of the federal government in the affairs of the private economy has dictated much
of what has occurred over the past two hundred years. This is a curious paradox given
the U.S. government's laissez-faire, anti-interventionist philosophy concerning private
enterprise.

Traditionally, the federal government became involved in the private economy only
when it was deemed necessary to correct free market imperfections such as monopolies
or negative externalities. Notable exceptions include U.S. intervention in the agricul-
tural sector to maintain stable farm prices; its defense procurement policies, which
directly affected the development of the shipbuilding, aerospace, telecommunication,
and electric industries; and its antipoverty programs.4 In the international realm, the
United States has focused its trade policy on lowering the barriers to free trade among
nations under the umbrella of the General Agreement on Tariffs and Trade (GATT) and
the North American Free Trade Agreement (NAFTA).

At the national level, the federal government has historically assumed a significant
economic role by routinely engaging in regulatory and budgetary matters. These forms
of interventions and macroeconomic controls were also put in place to ensure an effi-
cient and unfettered free market system.

Not until the Great Depression did the federal government become directly involved
with economic development matters at the state and local levels. The economic pro-
grams that were enacted as part of the New Deal legislation would profoundly influence
the public's expectations of the federal government's role in the economic affairs of the
nation.

Since the 1960s, regional and local economic development has assumed a more
activist role. Planning efforts at the substate level began to focus more on the debilitat-
ing effects of failed national monetarist policies and the mounting wave of deindus-
rialization. The domain of economic development planning activities was mainly two-
fold: (1) the administration of federal and state programs to deal with the economic and
social impacts of deindustrialization, and (2) the development of local and regional
reindustrialization strategies that were aimed at expanding the economic base of com-
munities.5 During this period, economic development efforts were extensively influ-
enced by federal legislation and federal funding. Many of the federal programs specifi-
cally attempted to address the growing problem of structural unemployment through a
myriad of programs aimed at creating jobs and expanding the economic base of cities
and towns. Structural unemployment also developed a geographic aspect during the

1970s as scores of industrial plants closed and relocated to other parts of the country
and throughout the world. Capital became much more mobile than populations and
workers in the emerging global economy.6

Ironically, the enactment of more recent federal economic and community develop-
ment programs and the infusion of funds to localities occurred in the absence of a na-
tional economic development policy. It has been argued that the federal initiatives were
tantamount to a de facto national policy that effectively removed the federal govern-
ment from economic and community development and instead passed the problems on
to individual states and localities. Still others have commented that this wave of federal
legislation and funding was but a piecemeal solution to the powerful forces that were
reshaping local and regional economies.7

Many states and substate regions with more than their share of declining industries
and job loss simply could not afford to wait for the national political climate to grow
more hospitable toward a national industrial policy. The continuous evaporation and
relocation of jobs in mature industrial sectors has prompted the need for state and local
industrial policies.8 It has been argued, in fact, that state and local industrial policies
may be more appropriate for state and substate regions that may want to target specific
industrial sectors.9 Industrial regions and localities also have varied power structures
among groups with stakes in the industrial policy and in their expectation in terms of
cost benefits.10 Thus, it can be argued that locally authored industrial policy is better
able than national policy to speak to the more defined political and economic interests
of a particular region or locale.11

National Industrial Policies

In its simplest form, national industrial policy can be defined as public initiatives that
influence and guide the development of targeted industrial sectors in society.12 This
definition closely fits industrial policy as it currently works in the United States, an
approach consisting of short-term programs and projects without an overall framework.
Robert Reich offers a more comprehensive definition:

Industrial policy focuses upon the most productive patterns of investment, and thus
it factors business segments that promise to be strong international competitors
while helping to develop the industrial infrastructure (highways, ports, sewers, and
skilled workforce) needed to support these elements. At the same time, by balanc-
ing regional growth and by assisting workers to retrain and relocate, it seeks to
reduce the resistance to economic change likely to come from those who would be
the hardest hit.13

Reich's definition includes almost all the elements of industrial policy that are being
discussed at the national level. These are public incentives, industrial targeting, political
involvement, international competition, infrastructure improvements, workforce devel-
opment, worker training, balanced growth, and help for the displaced worker. Although
there is no common agreement as to the scope of industrial policy, advocates generally
focus on the needs discussed in the following sections.

Prerequisites for Industrial Policy

Attempts to forge an industrial policy face a twofold challenge, namely, to ensure that
the policy is both analytically sound and democratically responsive. Liberals maintain
that current industrial policies are partially hidden or implicit, contradictory and ad hoc.

New England Journal of Public Policy

The federal government should "tailor and coordinate the broad range of government
programs in order to ensure that they facilitate growth in competitive productivity."14

In addition to program coherence, a rational industrial policy also requires adminis-
trative coherence. There is no single entity presently accountable for all the implicit
industrial policies of the United States; they are spread among dozens of competing
agencies. Ira Magaziner and Reich advocated in 1983 that the president and Congress
each establish an agency to evaluate the initial competitive consequences of all govern-
ment policies and programs.15

Second, industrial policies formulated by various agencies must be consistent with
one another and provide the same messages to all types of companies. There should be
one voice to tie together the operational procedures and directives of the bureaucracy.
Otherwise, efforts to create a workable industrial policy will be meaningless.16

Third, government regulations and the capacity of industries to adhere to them
should be cooperative. Any regulatory intrusion in the industrial marketplace should
allow companies time and funds to react. The regulatory process should also include a
commitment by the regulators to assist in finding solutions to critical problems.17

Fourth, there must be a commitment to long-term research and development activi-
ties. Current tax policies penalize companies that emphasize long-term research. Anti-
trust laws discourage competing industries from undertaking joint research projects.18

Last, industrial trade policies must be formulated in response to increased global
competition and the growing interpenetration through trade among industrialized
economies. The traditional economic development approach, which studies a region's
natural resources, industrial mix, and economic base, must be expanded to develop an
appreciation of the "international dynamics" of the industries involved.19

The Challenge for Industrial Policy Development

Irrespective of ideology, most industry analysts would agree that in order for an indus-
trial policy to be successful, it must clearly articulate competitive strategies aimed at
improving the efficiency and productivity of U.S. manufacturers. While specific strate-
gies differ according to ideological persuasion, each would need to focus on such fac-
tors as firm innovation, increased productivity, and market penetration.20

Influential to the current debate on industrial policy and global competition are the
conceptual frameworks put forth under the rubric of "new growth theory." These frame-
works, purposely constructed for use by policymakers, renounce the current effective-
ness of Keynesian macroeconomic and monetarist policies put in place by the United
States in the post-World War II years. This discourse is a response to the new global
competition and, more specifically, the interpenetration through trade of the industrial-
ized economies. The changing competition has been brought about by a leveling of the
playing field among industrial nations, continuous technological innovations, and the
globalization of industry in general.21

Growth theorists would argue that U.S. industrial policy has taken on a bad connota-
tion among economists and the public because it is normally associated with the federal
government's propensity for bailing out "sick firms in dying industries."22 Criticism has
also been leveled at the federal government for providing subsidies and tax breaks for
corporations. This so-called corporate welfare as a means of government intervention
has steered investment away from the training and development of the American
workforce.23 The subsidization of industry by the federal government also has a direct
bearing on state and local industrial policies. For instance, states have often used fed-

eral tax dollars to poach companies and jobs from other states.

The challenge for successful U.S. industrial policy, according to new growth theo-
rists, is not to subsidize inefficient corporations in declining industries or simply to help
stabilize the national economy. Rather, government policy must help to stimulate in-
vestment and innovation to match industry's evolving structure.24 Successful industrial
policy should also help serve the market and help create "organizational superiority" in
strategic industrial sectors.25

State and Local Responses to Industrial Restructuring

The impacts of economic restructuring are experienced not at some abstract national
level but at the state and local levels where people live and work.26 This section de-
scribes economic development programs used by state and local governments to help re-
place lost jobs and tax revenues and to take advantage of new economic opportunities. It
focuses on state and local practices rather than on ideologically based policy debates.27

Ideological values do, however, play a role in the choice and critique of state and
local economic development policies. Conservatives believe that a nation maximizes its
potential by organizing its economic development activity through market forces with
little or no government intervention. Liberals believe that market forces, though power-
ful and useful tools, need the government to channel and regulate the forces to ensure
an equitable society. Progressives view market forces as but one aspect of an entire
capitalist system that harms some to increase the wealth of others. The only way to
improve conditions is to democratize decision making. Progressives believe that incre-
mental reform can accomplish this goal while Marxists hold that only a full-scale revo-
lution can achieve lasting reform.28

According to this classification system, the state and local economic development
policies that have evolved since the Great Depression, and especially those of the
1980s, generally fall within or close to the liberal approach. States and localities inter-
vene in the market in numerous ways, through public financing as well as worker train-
ing. New Deal policies and programs of the 1930s represent what has been referred to
as the "First Wave" of economic development activity in the United States.29 The forma-
tion of the National Resources Planning Board during the New Deal era set the tone for
the federal government's interventionist activity by promoting state and local economic
development planning agencies. Although the National Resources Planning Board was
short-lived, vestiges of its industrial development programs had already become en-
trenched in most states. The conservatism of the federal government through the 1980s
was partially accountable for the increasing liberal interventionism of states and locali-
ties during that decade. By the early 1990s, virtually every state and large city had
adopted a form of industrial policy.30 Local government thus became more liberal in an
effort to compensate for conservative federal power.31

Features of State and Local Industrial Policy

It is also evident that the ideologies at the national level have a clear, direct link to the
states. The increased strength of conservatives in Congress has already had deep im-
pacts on how the states determine priorities. For example, debt reduction, one of
Congress's priorities, has resulted in fewer funds for transportation, infrastructure, and
community development assistance. Welfare reform, in turn, means that the states and
their localities must take action to either replace federal benefits or to turn their backs

New England Journal of Public Policy

on some of their citizens. Defense downsizing has already caused hundreds of military
bases to be closed and a major restructuring of our defense industries. What is most
interesting is that these federal initiatives are occurring as random acts. They are not
connected by any set of policies, for example, toward cities, toward competition, or
toward the poor. It is here that the states and their communities have had to focus their
actions. In the broadest sense, they deal with recruiting new businesses, retaining and
expanding the existing industrial base, and more recently, exporting local goods and
services to national and international markets.

Business Recruitment, Retention, Formation, and Expansion

Until recently, the practice of economic development was virtually synonymous with
business recruitment, or "smokestack chasing." This approach consisted mainly of mar-
keting a region's low taxes, low financing costs, and low wages. As competition in-
creased, states and localities added numerous incentives to outbid each other.32

These programs gained particular popularity in southern states where commerce
departments were created to perform a variety of economic development functions that
included industrial promotion and recruitment.33 These agencies were also empowered
to offer generous financial incentives to companies. The so-called First Wave policies,
which were originally conceived as planning tools to assist distressed areas in building
their capacity for value-added innovation, evolved into state strategies for capturing as
much industry as possible from other regions and localities.34 The model had a singular
focus, which was to recruit manufacturing plants from outside the state by offering
them "low-cost investment locations and public financial incentives."35

Some argue that state and local economic development, based on business recruit-
ment, often does not help the segments that need it most and that current state and local
development practices, especially business recruitment approaches, are undemocratic.
They claim that the process is elitist because public officials tend to identify with the
interests of the business and development community that they are courting. Elected
and appointed officials underplay the magnitude of the incentives they offer to firms
and exaggerate the benefits in jobs and future economic growth that will come from an
improved business climate.36

The industrial recruitment model has lost little of its political allure. A large
manufacturer's announcement of its intention to relocate to a community and bring a
specified number of jobs remains a highly visible and newsworthy event.37 Unfortu-
nately, in too many cases it was learned that the motivations of large multinational firms
were not necessarily compatible with the needs or interests of local communities.

What the recruitment strategies formulated by economic development agencies
failed to consider were the factors and conditions that contributed to the demise of
manufacturing jobs in the first place. For instance, there existed little understanding
concerning the magnitude to which the emerging global economy and the use of new
technologies had altered the geographical boundaries of industry. The increased mobil-
ity of capital greatly diminished the comparative advantage of individual cities and
regions of the country.

This economic reality eventually gave birth to the "Second Wave" of economic
policy in the United States. In the Second Wave, which unfolded during the 1980s,
economic development planners began to experiment with a host of new global strate-
gies to help foster local and regional economic growth. These tactics included the de-
velopment of entrepreneurial environments, university-industry linkages, manufacturing

modernization, and regional industrial clusters.38 Second Wave economic development
did not entirely abandon the business attraction or industrial recruitment model. Rather,
planners, realizing its limitations, changed their focus to "indigenous" economic devel-
opment activities that would help existing firms improve their productivity. Local ca-
pacity building was key to the new economic development consciousness. There existed
a newfound belief that the strongest magnet for economic growth is "an economic envi-
ronment rich with the human, technological, financial, and infrastructure resources that
support existing firms and entrepreneurship."39

The economic policies of the Second Wave were nurtured by a hospitable political
environment in the United States and abroad. The role and legitimacy of big govern-
ment was being questioned by a neoconservative movement that had gained political
power and strongly influenced public opinion. The conservative brand of Reaganomics
practiced in the United States espoused the virtues of decentralized free markets, de-
regulation, small business, and entrepreneurship.40 It could be argued, therefore, that
Second Wave strategies were formulated more in response to an ideological persuasion
than from a prescribed set of operational principles derived from a coherent national
economic policy. The recipe for successful economic development bestowed on regions
and communities was simply to build entrepreneurial environments in which business
and industry could flourish with minimal government regulation and interference.

It was soon determined that Second Wave economic development thinking had also
missed the mark. The major criticism was that Second Wave policies and strategies
misread the dynamics of the evolving global economy. The transition from the First to
Second Wave represented a policy change from industrial recruitment to internal or
indigenous economic development. However, the emerging "Third Wave" has repre-
sented a growing recognition that in order to create the total economic environment
envisioned by Second Wave proponents, new economic institutions and organizations
would have to be developed. Third Wave economic development principles have been
based on various state initiatives and experiments. They typically involve different
forms of manufacturing network programs. The key elements or set of operational prin-
ciples that have evolved from these state initiatives include (1) the application of gov-
ernment resources only to "demand driven" strategies, (2) a greater leveraging of public
and private resources, (3) the encouragement of competition among resource suppliers,
and (4) the creation of "automatic feedback loops" to determine program accountability
and effectiveness.41

Third Wave programs and initiatives continue to emphasize a limited role for govern-
mental involvement. The underlying motivation is to create a new flexible business
environment free of the existing maze of government regulation. The model manufac-
turing network would have a close spatial dimension and a knowledge-based production
system with mutually supportive business firm relationships. Economic development
planning in a knowledge-based manufacturing environment would also take on a more
entrepreneurial identity. Planners would be expected to assume the role of facilitator in
helping to create and nurture an environment that is conducive to economic growth and
competition. Planners would also routinely be expected to provide targeted economic
incentives, infrastructure improvements, and more flexible land use regulations.

Third Wave case study examples include the "high performance" manufacturing
zones popularized in the Midwest42 and new manufacturing network initiatives in
Michigan, Indiana, and Ohio.43 Battle Creek, Michigan, is viewed as a prototypical
high-performance manufacturing zone because the city and the region were severely

New England Journal of Public Policy

impacted by a wave of deindustrialization during the 1970s and have since been revital-
ized through a proliferation of Japanese transplants. A number of other traditional
manufacturing locations in the upper Midwest have also been targeted by Japanese
foreign investors. In each case, the new economic development strategies focused on
organizational restructuring, new delivery systems, innovative management practices,
and more formalized worker training and vocational education programs. States and
communities are increasingly focusing on business formation or growth from within.
Regardless of its total accuracy, David Birch's point on the majority of new jobs being
created by firms that are less than ten years old, employ fewer than twenty people, and
manufacture a product is taken seriously in most states, especially in New England.44
Many states and localities are paying equal attention to business retention and expan-
sion strategies and realizing that they are more cost-effective than business recruit-
ment.45

Even if one accepts business retention approaches on ideological grounds, it does
have several limitations as a development strategy. First, from the political standpoint, it
is riskier and less glamorous than business recruitment, since politicians have nothing
new to show for their efforts. Instead of being able to unveil a brand-new building or
corporation, a politician is given the unenviable task of selling something familiar back
to the constituents.46 Is it any wonder that politicians are reluctant to endorse such a
strategy? Second, retention efforts work only in communities that already have a fairly
healthy economic climate. If there are local shortages of labor, problems with work-
force skills, land use problems, and high operational costs, all the retention efforts in
the world will not work. Again, it could be argued that the very communities most in
need are those which are too poor to afford this type of aid. Last, retention efforts are
not immune to the state wars and interstate bidding games.47

What Does the Literature Tell Us? A Summary of Key Themes

Virtually all the books and articles reviewed point out that if the United States is to be
competitive, it must compete globally. This is probably no surprise to the reader. How-
ever, what is striking is the difference of opinions on how best to improve our competi-
tive posture. The debates over NAFTA and GATT illustrate the difficulty in coming to
agreement.48 What is most interesting, however, is the fact that business at the local
level has, in many ways, ignored the debate and undertaken efforts on its own to be-
come internationally competitive.

In second place is the need to stimulate research and development (R&D) and to
move it away from its military orientation.49 While opinions differ concerning how best
to accomplish this, there are indications of some movement in this direction. The shift
from Defense Advanced Research Projects Agency to Advanced Research Projects
Agency, while partially a simple change in name, reflects the government's understand-
ing of the need for this change. Also, the role of the National Institute of Standards and
Technology in creating regional innovation centers is another positive step.

The third is the interest in industrial clustering.50 The idea that regions have existing
and emerging groupings of industry with linkages among labor, finance, and R&D is
quite popular. While few argue for government to target clusters, most scholars see
great merit in stimulating local strengths and opportunities.

As part of the industrial clustering, most industrial policy advocates see, as the
fourth factor, the need to change corporate culture. More specifically, they are aware of

the necessity to develop industrial networks that share ideas and approaches. The age of
totally isolated individual firms developing products totally from within has passed.
They also argue for government to help stimulate business commitments for the long
term. The quick return-on-investment strategies of many companies creates a climate of
insecurity and instability at the local level.

The fifth focuses on education and training. The nation must effect an extensive shift
in the way we educate and train our workforce.51 It is clear that lifelong education is a
requirement for a healthy economy.

The sixth is the need to improve our infrastructure.52 This is not simply a matter of
roads and bridges but ensuring that our telecommunications systems are state of the art
and meet the requirements of all regions of the nation. It means that our water must be
pure and deliverable to regions that lack it. And it means that our sanitation needs must
be environmentally appropriate and that our people are protected.

Finally, regulatory reforms have to be addressed.53 These include, as examples, anti-
trust laws at the national level, unemployment and workers' compensation laws at the
state level, and zoning laws at the local level. Putting all these together is no easy task!

Missing Elements

What is the debate lacking? The first element is the link between industry and the envi-
ronment. Yes, we see an increased concern over protecting the environment. Yes, we see
higher and higher standards that govern environmental hazards. And yes, we have noted
increased environmental awareness at the local level. But beyond this, we see little
attention being paid at the federal level to industrial site recovery. It is ironic that the
Environmental Protection Agency is responsible for the "brownfields" initiative. EPAs
mandate is not to attract industry to brownfields, it is to stimulate the cleanup of the
polluted industrial landscape. This action is "stove piping" at its worst. EPA should not
own this problem at the federal level but should share it with the departments of Hous-
ing and Urban Development and Commerce. Few industrial policy advocates or ana-
lysts, except George Lodge, have picked up on this issue. It clearly needs to be ad-
dressed.

Second, industrial policy advocates have steered away from place-specific programs.
Little current literature calls for the creation of an Appalachian-type commission in
some region of the country. This represents a fundamental shift in the position of advo-
cates in the 1970s and early 1980s. Perhaps the current advocates no longer see the
need for such agencies, perhaps the inherent policy of the nation to redistribute wealth
across the country is working, or perhaps there are newer, less bureaucratic methods to
undertake regionally assisted development. The fact remains that the literature under-
plays the desirability of regionally directed approaches.

Third, relatively little attention is being placed on cities. Beyond Michael Porter's
call to make cities more competitive, Robert Beauregard's perspective that the negative
sides of urban life have been exaggerated, and Ann Markusen's call to use some of the
mythical peace dividend for urban restructuring, mighty few advocates are looking at
linking industrial policies and urban revitalization. It is as if our cities are to sink or
swim on their own merits.

Finally, the increasing independence of the world's large companies is under-
addressed. These companies are virtually free of commitment to nations and exist in-
creasingly as global entities of their own. They are quickly responsive to the initiatives
of Japan Inc., NAFTA, GATT, and the European Union in terms of the impact on the

New England Journal of Public Policy

company rather than on their workers or on their home nation. Given the mobility of
capital, varying labor costs, and the internationalization of markets, they have little
choice. In light of this phenomenon, it is essential that industrial policy confront this
issue and strive to create approaches which create increased stability and worker secu-
rity before any public investment occurs. Otherwise our communities will be involved
in risky business.

A Final Word

Even as we debate and adopt, reject, or compromise on various visions of national
industrial policy, the global economy itself continues to change rapidly. As multina-
tional corporations divide and multiply their operations throughout the globe, engag-
ing in joint ventures for research and production with other corporations and govern-
ments, they create an increasingly complex web of relationships that supersedes the
borders of the nation-state and stretches the balance of political-economic theory and
policy.54

It is tempting to assume that these developments will continue unchecked, gradu-
ally pushing protectionism aside until the world becomes one big market. We must,
however, avoid such simple assumptions. National nontariff barriers are increasing in
significance, as are regional trading blocs. Indeed, the division of the world economy
into a yen bloc in the Pacific, a dollar bloc in the Americas, and a mark-dominated
bloc in Europe has, to some extent, already occurred. It is therefore important that we
make conscious choices among the industry and trade policy options before us, mind-
ful of their consequences not only for the world output and income, but for each
nation's worker, consumer, and community income and well-being.

Furthermore, states and localities have experienced the effects of economic restruc-
turing in different ways, some as economic and social disasters, others as mere disrup-
tions, yet others as opportunities for new growth and expansion. In response, localities
have established increasingly sophisticated economic development programs to re-
place lost jobs and tax revenue. Owing in part to the retreat of the federal government
from their affairs through the 1980s, local regions have focused their energies on com-
peting with one another for jobs through their business recruitment policies. They are
also using more deliberate analysis and planning procedures to establish appropriate
development goals and strategies.55

With or without a change in federal priorities, several trends seem irreversible.
States and localities are rapidly acquiring the expertise to understand regional and
economic forces and developing increasingly sophisticated tools to promote their own
economic prosperity. Yet the ultimate success or failure of the state and local eco-
nomic development efforts also depend on the development of global economic forces
as well as that of other national governments. The task ahead for states and localities,
and for the federal government, is to generate mutually cooperative policies that pro-
mote equity and human welfare. **

Notes

Helzi Nopponen, Julie Graham, and Ann R. Markusen, Trading Industries, Trading
Regions (New York: Guilford Press, 1993).

2. Ann R. Markusen, "Sticky Places and Slippery Space: The Political Economy of Post
War Fast-Growth Regions," Working Paper #79 (New Brunswick, N.J.: Center for
Urban Policy Research, 1994).

3. Kevin P. Phillips, "U.S. Industrial Policy: Inevitable and Ineffective," Harvard Business
Review 70, no. 4 (1992), 104-112.

4. John J. Accordino, The United States in the Global Economy: Challenges and Policy
Choices (Chicago: American Library Association, 1992).

5. Barry Bluestone and Bennett Harrison, The Deindustrialization of America: Plant
Closings, Community Abandonment, and the Dismantling of Basic Industry {New York:
Basic Books, 1982).

6. John E. Ullman, The Anatomy of Industrial Decline: Productivity, Investment, and
Location in U.S. Manufacturing (New York: Quorum, 1988).

7. Bennett Harrison, Lean and Mean: The Changing Landscape of Corporate Power in the
Age of Flexibility (New York: Basic Books, 1994).

8. Margaret E. Dewar, "The Industrial Policy Dilemma," Economic Development Quarterly
6, no. 2 (1992): 211-219.

9. Michael Porter, in collaboration with Monitor Company, Inc., The Competitive Advan-
tage of Massachusetts (Cambridge: Monitor Company, 1991).

1 0. Harvey A. Goldstein, ed., The State and Local Industrial Policy Question (Chicago:
American Planning Association, 1987).

1 1 . David Osborne, Laboratories of Democracy: A New Breed of Governor Creates Models
for National Growth (Boston: Harvard Business School Press, 1990).

12. Sar A. Levitan and Chalmers Johnson, "The Contradictions of Industrial Policy,"
Journal of the Institute of Socioeconomic Studies 7, no. 4 (1983-1984): 48-63.

13. Robert Reich, "Why the United States Needs an Industrial Policy," Harvard Business
Review 60, no. 1 (1982): 74-81.

14. Ira Magazmer and Robert Reich, Minding America's Business: The Decline and Rise of
the American Economy {New York: Harcourt Brace Jovanovich, 1983).

1 5. Robert Kuttner, "Facing Up to Industrial Policy," New York Times Magazine, April 19,
1992, and Phillips, "U.S. Industrial Policy."

16. George Lodge and William Glass, "U.S. Trade Policy Needs One Voice," Harvard
Business Review 61], no. 3 (1983): 75-83, and Michael M. Weinstein, "A Stealth
Industrial Policy," New York Times, February 24, 1993, A14.

17. Harvey Goldstein and Edward Bergman, "Institutional Arrangement for State and Local
Industrial Policy," Journal of the American Planning Association 52, no. 3 (1986):
265-276; Virginia D. McConnell and Robert M. Schwab, "The Impact of Environmen-
tal Regulation on Industrial Location Decisions: The Motor Vehicle Industry," Land
Economics 66, no. 1 (February 1990): 67-81; and Keith Schneider, "Rules Easing for
Urban Toxic Cleanups," New York Times, September 20, 1993, A12.

18. Edward J. Malecki, Technology and Economic Development. (Essex, England:
Longman Scientific & Technical; New York: Wiley, 1991).

19. Porter, The Competitive Advantage of Massachusetts, and Robert B. Reich,
"Clintonomics 101: And Why It Beats Bush-Reagan," New Republic 207, no. 10
(August 31, 1992): 23-24.

20. Porter, The Competitive Advantage of Massachusetts, Michael Best, The New
Competition: Institutions of Industrial Restructuring (Cambridge: Harvard University
Press, 1990), and Reich, "Clintonomics 101."

2 1 . Porter, The Competitive Advantage of Massachusetts.

22. Best, The New Competition.

23. Reich, "Clintonomics 101."

24. Porter, The Competitive Advantage of Massachusetts.

25. Best, The New Competition.

26. Nancey Green Leigh, Stemming Middle-Class Decline: The Challenges to Economic
Development Planning (New Brunswick, N.J.: Center for Urban Policy Research, 1994).

27. Osborne, Laboratories of Democracy, and Brian J. Berry, Long Wave Rhythms in
Economic Development and Policy Behaw'or (Baltimore and London: Johns Hopkins
University Press, 1991).

New England Journal of Public Policy

28. Accordino, The United States in the Global Economy, and Phillips, "U.S. Industrial
Policy."

29. Doug Ross and Robert E. Friedman, "The Emerging Third Wave: New Economic Develop-
ment Strategies," in Local Economic Development: Strategies for a Changing Economy,
ed. Scott R. Fosler (Washington, D.C.: International City Management Association,
1991), 125-138.

30. Goldstein, The State and Local Industrial Policy Question.

31. Richard D. Bingham and Robert Mier, eds.. Theories of Economic Development (Newbury
Park, Calif.: Sage, 1993), and Robert A. Beauregard, Voices of Decline: The Post War
Fate of U.S. Cities (Cambridge, England: Basil Blackwell, 1993).

32. David Friedman and Joel Kotkin, "Begging as an Economic Development Strategy: Let
Other States Do It," Los Angeles Times, April 18, 1993, M6.

33. Stuart A. Rosenfeld, Competitive Manufacturing: New Strategies for Regional Develop-
ment {New Brunswick, N.J.: Center for Urban Policy Research, 1992).

34. Fosler, Introduction to Local Economic Development, xiii-xxix.

35. Ross and Friedman, "The Emerging Third Wave."

36. Timothy J. Bartik, Who Benefits from State and Local Economic Development Policies?
(Kalamazoo: W. E. Upjohn Institute for Employment Research, 1991).

37. Fosler, Introduction.

38. Richard Florida and Timothy McNulty, "High Performance Economic Development,"
Economic Development Commentary 19, no. 1 (1995).

39. Jeanne Armstrong and John R. Mullin, "National Industrial Policy and the Local Plan-
ners," Journal of Planning Literature 2 (Spring 1987): 119-135, and Ross and Friedman,
"The Emerging Third Wave."

40. Harrison, Lean and Mean.

41 . Ross and Friedman, "The Emerging Third Wave," and AnnaLee Saxenian, Regional
Advantage: Culture and Competition in Silicon Valley and Route 128 (Cambridge:
Harvard University Press, 1996).

42. Florida and McNulty, "High Performance Economic Development."

43. Walter H. Plosila, "Technology Development: Perspectives on the Third Wave," in Local

Economic Development, 48-55, and Ross and Friedman, "The Emerging Third Wave."

44. David Birch, The Job Generation Process (Cam bridge: MIT Program on Neighborhood and
Regional Change, 1979).

45. Friedman and Kotkin, "Begging as an Economic Development Strategy."

46. John M. Levy, Economic Development Programs for Cities, Counties, and Towns, 2d ed.
(New York: Praeger, 1990).

47. Osborne, Laboratories of Democracy, Accordino, The United States in the Global
Economy, and Peter S. Fisher, "The National Consequence of Decentralized Industrial
Policy in the United States," paper presented at the Association of Collegiate Schools of
Planning Annual Conference, Austin, Texas, October 1990.

48. Max Holland, When the Machine Stopped: A Cautionary Tale from Industrial America
(Boston: Harvard Business School Press, 1989).

49. Alex Mintz, ed.. The Political Economy of Military Spending in the United States (New
York: Routledge, 1992), and Ann Markusen and Joel Yudkin, Dismantling the Cold War
Economy (New York: Basic Books, 1992).

50. Manuel Castells and Peter Hall, Technopoles of the World (London: Routledge, 1994).

51. William J.Wilson, When Work Disappears: The World of the New Urban Poor (New
York: Knopf, 1996).

52. James W. Harrington and Barney Warf, Industrial Location: Principles, Practice, and
Policy (London: Routledge, 1995).

53. Michael L. Dertouzos, Richard K. Lester, and Robert M. Solow, Made In America:

Regaining the Competitive Edge (Cambridge: MIT Press, 1989).

54. Accordino, The United States in the Global Economy.

55. Bingham and Mier, Theories of Economic Development.

The Politics of Three Case Studies

Industrialization

Eve S. Weinbaum, Ph.D.

This article analyzes the grassroots efforts of the working and unemployed poor of
three Appalachian communities to improve their towns ' devastated economy in an
era of rapid economic change and globalization. While all three were beset by
plant closings, their forms of political mobilization, both before and after the shut-
down, differed. Each group of workers mounted a communitywide campaign de-
signed to convince the company to stay, to induce local government action, to re-
ceive pay and benefits due, and to influence state legislation and economic devel-
opment policy. Mobilization in the wake of a plant closing is rather extraordinary,
especially in isolated, low-income rural areas. Why did it occur in these communi-
ties, and what were its consequences for the participants and for the state? First,
each group's ultimate failure to influence an economic outcome and policy reveals
the grim prospects for meaningful local democratic politics in a global economy.
But second, the mobilization in two of the three cases succeeded in transforming
the participants and the local community.

There is something new and disturbing about current economic afflictions," says
The New York Times.1 In the 1990s, journalists and social scientists of all politi-
cal persuasions are observing troubling trends and widespread anxiety regarding eco-
nomic issues, especially among the unemployed and the poor, but increasingly through-
out the American middle class. The changes that accompany downsizing and
deindustrialization are affecting a broad group of workers — from blue-collar produc-
tion workers to high-level managers — in nearly every region of the country.

The changes of the late 1980s and early 1990s in New England have been particu-
larly severe. Partly because of decreases in defense-related spending, the Northeast has
seen what one economist has called "dramatic employment reductions ... the most
severe recession the region has faced since the Great Depression."2 A disproportionate
share of these reductions has been caused by business failures or plant closings in a
variety of economic sectors. Closings in New England, as elsewhere in the nation, have
had serious, undesirable implications for the regional economy. Firms that cease to exist
cannot rehire workers in periods of economic recovery, banks whose business customers
default become less likely to finance new ventures, and communities are decimated as
laid-off workers disperse. Accordingly, economists argue that high rates of plant clos-
ings tend to have lasting repercussions and to slow eventual economic recovery.3 The
"global economy" has had an obvious and well-documented impact on Americans'

Eve S. Weinbaum, a political scientist, is education and political director for the southern
region of the Union of Needletrades, Industrial, and Textile Employees (UNITE).

New England Journal of Public Policy

standard of living and economic expectations, but it also has affected our politics.

I analyze the political changes that accompany deindustrialization in cities and rural
areas all across the United States by closely examining three plant closings in Appala-
chian Tennessee. Although local conditions and regional differences are important,
these communities provide a useful microcosm for the study of political mobilization
around economic change in any region. Many of the firms that once left New England
and the Midwest for the low wages and less stringent regulations of southern regions
like Tennessee are now moving on. Some are going overseas in a continuing quest to
reduce production costs, others are moving between states and counties to benefit from
economic development policies and incentives. Whatever the reason, capital mobility is
becoming more prevalent than ever, leading to serious consequences for every region of
the United States.

All three subject communities analyzed experienced plant closings between 1988
and 1993. The workers in each plant, deciding to protest the shutdown in some way,
undertook an effort to improve their community's devastated economy in an era of rapid
economic change and globalization. Different forms of political mobilization took place
either before the closing (with the hope of preventing it) or afterward, or both. Each
community mounted a communitywide campaign to prevent the plant from closing, to
induce local government action, to acquire the pay and benefits due them, or to lobby
for state or federal legislation. Such mobilization in the wake of a plant closing is rather
extraordinary, and I examine the reasons for its occurrence and its results in all three
cases.

I discuss the mobilization in several stages, the first covering the circumstances of
the shutdowns. It is striking that, although the workers in these plants had more or less
notification and time to prepare, this made little difference; all the closings came as a
shock and a hardship. The three factories are in small towns in rural areas, and the
workers knew that once laid off, finding work, except at fast-food restaurants, cleaning
houses, or through temporary agencies, would not be easy.

The second stage is the mobilization campaign. The nature of the effort varies tre-
mendously between cases. Is the problem framed as a single plant's failure or as a chal-
lenge to the structure of the American economy? Besides the breadth of the issue, there
is the question of the nature of the target of the activity: the plant manager, the corpora-
tion, the local, state, or federal government. I show that these are not given parameters
but the choices of the leaders in the early stages of a campaign.

The third stage involves the nature of the coalition that forms around the issue as it is
framed. To be successful, organizers must recruit others who can provide resources and
examples. Their ability to do this depends on many factors, including the current degree
of organization in the workplace and in the community and between the two, as well as
the leadership and organizing skills of those involved in the drive.

Finally, I argue that the success or failure of each mobilizing effort must not be
judged by economic outcomes alone. When small, rural, economically and politically
marginalized groups confront national and international institutions on the direction of
the global economy, positive material outcomes are a rarity. At least as important are
the changes in the individual participants and in their communities brought about by the
experience of political mobilization. Through this process, participants come to under-
stand many factors in an entirely different light: their own power and the power of col-
lective action; power relations in their communities; their relationship to authority and
the ability to stand up for what is right; the "economy"; national debate of public policy

issues; politics and the role of elected officials; and their commonality with working
people across the country and the world. I based the description and analysis of the
striking differences in their perceptions of their experiences, and of politics more gener-
ally, on my sixty in-depth interviews, conducted October 1993 through February 1994,
with employees in all three communities. These transformations demonstrate the poten-
tial of grassroots organizing to generate political change.

These cases show that organized and sustained struggle requires many factors, in-
cluding various types of resources, preexisting community networks, and perhaps most
important, leadership. I show that the differences in the types of issues defined, the
campaigns waged, the coalitions formed, and the changes in both understandings and
material conditions are directly related to the type of political organizing that character-
ized each effort.

Case 1: Greenbrier Industries

The more than five hundred Greenbrier Industries employees who returned from their
Fourth of July vacation in the summer of 1993 found a rude surprise awaiting them. The
Clinton, Tennessee, workers were greeted by a telephone message instructing them not
to report to work the following day. Some disregarded the message or, certain it could
not be true, went to the factory to find out more about what was happening. There they
found supervisors and plant managers who were equally confused. The workers were
told only that they would receive word in a week as to when they should come back to
work. When they checked in the following week, they received the same response. No
one knew what to expect, but there was no work. Little by little, the employees discov-
ered the truth: Greenbrier would not reopen. Even worse, it appeared that the company
had for months been secretly siphoning off funds. Most workers' final paychecks had
bounced. Many payroll taxes had not been paid, suppliers had stopped deliveries when
months-old bills were left unpaid, and the company was behind on its obligations. On
July 28, 1993, Greenbrier Industries quietly filed for Chapter 7 bankruptcy at its New
Jersey headquarters.

Hiring as many as 650 people, Greenbrier Industries had been the second largest
employer in Clinton, a town of only 8,000. An apparel plant owned by Northerners, it
was a rather typical rural southern factory employing mainly women to sit in front of
assorted sewing machines for long days. The pay was low; in 1994, most new workers
were paid $4.50 an hour. More experienced workers hoped to be placed in piece-rate
jobs in which they could be rewarded for extraordinary speed. But when a worker or a
group became too efficient at a particular task — when their earnings neared $7.00 or
even $8.00 an hour — engineers appeared to conduct new time studies and reevaluate
the piece rate downward. Sewing machine operators did not get rich at Greenbrier, yet
workers maintain that they liked working there. Treated well, they considered them-
selves part of the Greenbrier "family."

The large old brick factory building by the river, just two blocks from City Hall and
in clear view of the Anderson County courthouse, could not have been a more centrally
located landmark. It drew workers from very poor rural Campbell, Union, and Roane
counties, but most of the employees lived nearby, and nearly everyone in Clinton seems
to have had at least one relative, friend, or neighbor who worked at Greenbrier. The
twenty-two-year-old company had a rather checkered past. Plagued by investigations
and allegations of corruption, Greenbrier had been shifted among various interrelated

New England Journal of Public Policy

owners for many years, yet had continued to grow and thrive. Greenbrier's main
customer — for years it had been the only one — was the U.S. government. The plant,
which was awarded Department of Defense contracts, had started by making body bags,
eventually branching out into parkas, bulletproof vests, camouflage suits, tents, wind-
breakers, and dress coats. The workload had been extremely heavy during Operation
Desert Storm, and managers not only hired many more workers, but everyone put in
overtime hours, sometimes as long as sixteen-hour shifts several days in a row. But
business had slowed so that workers were being shifted around and sometimes laid off.
Everyone seemed to know that business was bad, but management had continued to
assure workers that everything was all right. The sudden bankruptcy was a shock to the
entire Clinton community.

For many workers, the devastation of suddenly being faced with no work and no
income was intensified when they learned the details of the bankruptcy. Many were
burdened by the most serious problem of owing huge hospitalization bills. While they
were employed, the workers had continued to contribute weekly payments — approxi-
mately $30 a week from a gross salary of less than $200 — for health insurance. But
without informing anyone, the company had stopped paying their bills six months pre-
viously. Greenbrier, a self-insured business, had not paid medical bills for half a year.
Some workers owed up to $40,000 in hospital bills, despite the assurance of the com-
pany, to both the workers and the doctors, that it would cover all services, including
major surgery. By the fall, the workers were being hounded by collection agencies on
behalf of hospitals, and some began to receive notices that their wages, if they had any,
would be garnisheed to pay Greenbrier's outstanding bills.

Many workers had also contributed to a 401 (k) pension plan, some up to 15 or 20
percent of their monthly wages, on the promise that their personal contributions were
being matched by those of their employer. After the company declared bankruptcy,
these employees found that not only had there been no matching payments, but their
own contributions had been seized by the bank. Workers watched helplessly as their
livelihood and their entire savings disappeared.

The Greenbrier Workers Committee

When it was clear that the plant was permanently closed, the Greenbrier workers called
a meeting at which almost three hundred people appeared. Comparing notes, they dis-
covered common ground: everyone had been promised that they would return to work
after the summer vacation; nobody's hospital and doctor bills had been paid for at least
six months; no one knew what had become of their 401 (k) savings. One by one, out-
raged workers stood up to tell their stories. The group, becoming increasingly angry,
discussed possible courses of action. Because the company had declared bankruptcy, no
one was optimistic about the plant's reopening. Someone pointed out that although the
workers' bills had not been paid and many of their final paychecks had bounced, the
managers and office staff were still working. So the group decided to begin picketing
twice a week. They demanded that the company dedicate whatever money remained not
to office staff in an empty factory but to repayment of its debts to the workers. The
activists also decided to continue meeting in the county courthouse every Thursday
evening to share information and to make further plans.

Although the decision to picket was spontaneous, it was taken seriously by the at-
tendees. More than one hundred workers, armed with angry picket signs, arrived the
following Saturday morning and led a lively parade in front of the factory. The local

press showed up, and even the Knoxville newspaper and television stations took notice,
for picket lines are an unusual sight in the quiet Cumberland plateau. Energized by this
attention to their plight, the workers told their stories and attempted to garner even
more notice. They called their senators and representatives and contacted county and
city executives, asking that an official investigation be undertaken. The federal officials'
only response was to refer them to the nearest job training and employment offices, and
the local officials claimed that they had no power to intervene.

When a report of the Greenbrier workers' initial meeting and picket line appeared in
the Knoxville press, the Tennessee Industrial Renewal Network (TIRN) became inter-
ested. A coalition of labor, community, church, and environmental groups dedicated to
organizing around such economic issues as plant closings, TIRN had been involved in
helping workers in similar situations. TIRN sent a staff organizer, Tom Turner, to speak
with the Greenbrier workers to determine whether they would be receptive to his assist-
ing them in planning strategies and educating people about their rights and opportuni-
ties. Turner attended an early meeting, bringing with him two women who had lost their
jobs when their sewing factories closed. They described to the group the hardship of
surviving a plant closing and provided information regarding the various government
programs and what could be expected of each. Following this gathering, Turner contin-
ued to attend Greenbrier meetings and picket lines and began to work more closely with
a group of key leaders. They decided to call themselves the Greenbrier Workers Com-
mittee (GWC), elected officers, and formally joined TIRN.

The picket lines and meetings continued, but as weeks passed the ex-workers became
demoralized. They had succeeded in getting the office staff out of the empty plant, but
were given no answers concerning the money due them. The media ceased to be inter-
ested in the stale plant-closing news, and politicians no longer returned phone calls.
Some of the workers found new jobs, most requiring significant commutes and paying
less than their previous amounts, and most had no time to continue protesting. Others
decided that the situation was hopeless and gave up. By early December, fewer than ten
people attended a Thursday meeting, and it seemed unlikely that the GWC would con-
tinue to exist. The leaders decided to hold one more meeting, in mid-January, to see if
progress had been made in tracking down their 401 (k) and other funds, and to disband
after that.

The Failure of the GWC

At an early meeting the laid-off workers had discussed possible strategies. Understand-
ably, their immediate goal was to secure the money they feared was lost: their final
paychecks, health insurance, and pension savings. Toward this end, Turner suggested
that they contact a lawyer, bringing Rick DeLone, a Knoxville attorney experienced in
bankruptcies to their next meeting. The attorney had spoken with the bankruptcy trustee
in New Jersey to ascertain the status of the Greenbrier estate. After listening to the
workers' concerns and needs, DeLone presented the bad news. If he were in their shoes,
he told them honestly, he would not spend the time and money either suing Greenbrier
or following up on their claims. It would be prohibitively expensive for the workers to
hire him, DeLone said, because it would require repeated trips to the northern New
Jersey company headquarters where all its records and the bankruptcy papers were
filed. And it would be unlikely to pay off, since the bankruptcy was complete, and
Greenbrier's individual owners, who reportedly had fled to South America, were protected
by American incorporation laws.

New England Journal of Public Policy

Some workers at the meeting resisted DeLone's conclusion. Some wanted to think of
ways of raising money. They were eager to offer proof of management's wrongdoing
and to prosecute the offenders. One woman verbalized the certainty of many concerning
the firm's mismanagement. "They knew, probably two, three, four years ago, that they
were running into financial difficulties. There's no doubt in my mind that in this time
frame, they started taking money and putting it into other companies, changing names,
putting it in their own pockets. They really did. And if I had the time, if I had the
money, I could prove this with Greenbrier. But I just don't have the money." She also
explained that their goal in hiring an attorney would not be to win a large settlement but
simply to see justice done. "It wasn't the money that we wanted. I think we would have
been satisfied with an apology. But we never heard from them. It's just horrendous."4

Another woman described her sense of violation and powerlessness. "When they
claimed bankruptcy, it made me so mad I wanted to die. I said it's like standing on the
courthouse steps being raped, and the police driving by and just waving. You know, they
took our money. And apparently they'd been taking it a long time."5 A man wondered at
the imbalance of justice he suddenly saw: "It's like, you've let them steal everything
you've got, and there's nothing you can do about it. But now if we — if you or I — go
out here and steal something, they'll put us in jail. It's just not . . . it's just not fair."6

Yet this tremendous sense of injustice and anger had no outlet. The workers, unable
to dispute DeLone's conclusions, deferred to his expertise. Certain individuals contin-
ued to look for ways to fight rather than to accept their fate passively. Ann Ritter went
to the Anderson County courthouse to see if she could take out a warrant for the plant
manager's or the owner's arrest, because, as she said, "He's took money out of our
checks and used it for his own." But, as she was told, "He's protected by the bankruptcy
court."7 She persisted, calling news stations and being interviewed repeatedly about the
Greenbrier situation. She called Senator Jim Sasser's office and sent reams of informa-
tion to his aides, but ultimately received no response. Eventually Ritter, who had to take
on three jobs to replace her Greenbrier work, had no more time for protest.

Months later a group of workers reconvened and decided that they should continue to
try to raise awareness about their plight. They were still saddled with huge hospital bills
— one was trying to pay off a $38,000 debt at $5.00 a month, which was all he could
afford. They had received no word about their savings money. They were still outraged
and energetic, but after brainstorming awhile, they could think of no real channels by
which they could hope to effect positive changes. They decided to stage a one-day
picket at the county courthouse, to try one last time to move local officials to take up
their case and at least investigate, or preferably to advocate on behalf of the displaced
workers. By then, only about ten workers showed up on the picket line. There was a
palpable sense that their cause had been lost, and that further actions were unlikely and
probably futile.

The Greenbrier workers were desolate and bitter. Although their work was tedious,
dangerous (injury rates, including carpal tunnel syndrome, nerve damage, severed
fingers, and back injuries, were astronomical) and low-paying, they had been surpris-
ingly content. One worker said, "I thoroughly enjoyed my job. I enjoyed learning. And I
just learned so many things, I just loved it."8 Nearly all talked about how terribly they
would miss their coworkers, about the close relationships they had formed at work.

To many, the most devastating aspect of being laid off was the extreme disrespect
demonstrated in Greenbrier's actions. As one worker explained, "We knew they was in
trouble. We were not surprised they were going to close. We were just surprised at how

they treated us. That it was done so dirty."9 Another elaborated:

"I think it wouldn't have bothered any of us near as bad if they had said, 'Hey,
we don't have a job for you anymore, we don't have your 401fkj, we don't have
this . . .' But they didn't say anything. And that's what bothers you so bad. It is
terrible. And it takes a long time to get over that. Because you have the devastation
of being without employment, you know, just the financial aspects of it, you have
no health insurance, but then you have to deal with being treated that way. And that,
for me, has been the hardest part. I'm not over that yet. Because I feel like some-
body that they had no respect for whatsoever. And that has been very difficult for
me."10

Prior to the closing, most workers had felt extremely loyal to Greenbrier. Bob
Walker, who worked on maintenance and security for eighteen years, described his deep
loyalty to the plant manager.

"He was like a father to me. ... I would have done anything for him, really. I was
always a company person ... I cared about the place and wanted to see it grow. I
had opportunities on top of opportunities to take kickbacks on things and I didn't."

He described being injured several years ago, and his decision not to file a workers'
compensation claim or to ask for sick pay.

"No pay, no workmen's comp, or anything. I wanted to be ... I felt at the time that
it would just hurt the company. Then I had a car wreck with one of their vehicles,
reinjured my back. But I didn't sue or apply for workmen's comp or anything. The
company had enough of that on 'em, so I didn't."11

Like many other workers, Walker was astonished to learn that the managers did not
have the same respect for him.

When asked to explain why the plant closed, the Greenbrier ex-workers were unani-
mous in their judgment: bad management. Some blamed the plant and personnel man-
agers; other placed the fault on upper management and owners in New Jersey. Some
believed their bosses to have been devious and manipulative; others guessed that they
were merely incompetent and lost money by planning and running the factory poorly.
Every worker believed that the plant was entirely profitable, efficient, and productive,
and that it therefore closed unnecessarily. Most workers personalized their blame, and
expressed their sense of extreme betrayal by the plant managers who had been like
parents to them.

Although Greenbrier Industries survived entirely on government contracts with gov-
ernment inspectors always overseeing every aspect of its production, the workers did
not blame the government for what happened. All they would ask the government to do
differently is to punish the "thieves" — the corporate officials who took their savings
and health premiums without providing the promised benefits. None of those inter-
viewed had ever been involved in political campaigns or issues, and many had never
even voted. For them, the plant closure and their elected officials' inefficacy only rein-
forced their sense of powerlessness and their belief that the political system is ulti-
mately corrupt.

The fired Greenbrier workers were more likely to look within the plant itself for an

New England Journal of Public Policy

explanation. Many blamed their fellow workers. One supervisor described the high
turnover rates, which compromised both efficiency and product quality. While she
noted that machine operators whose $8.00 or $9.00 an hour rate for piecework had been
decreased to $4.50 an hour, she did not connect this fact to the high turnover. Instead,
she blamed the workers: "People don't take any more pride in their work. They're really
not that ambitious, you know . . . especially young people. I guess they're spoiled, prob-
ably. I think a lot of them are satisfied with welfare and that kind of help." She also
blamed workers for submitting excessive workers' compensation claims, although ac-
knowledging that work-related injuries were rampant, and she had no examples of
fraud.12 Even after the extreme hardship foisted on them by the company, the workers
often blamed one another for hurting Greenbrier. Even after being forced to apply for
welfare and food stamps, the workers put down people who drew welfare or relied on
any type of government subsidy, seeing themselves as fundamentally "different." Al-
though they were down on their luck, the Greenbrier workers believed that unlike other
recipients of aid, they were more than willing to work.

Case 2: Acme Boot Company

Once upon a time, the Acme Boot Company owned and operated five large boot-mak-
ing plants in Tennessee. It employed thousands of workers in sorting, cutting, stamping,
stitching, piping, and shipping and receiving. Making high-quality casual, dress, and
cowboy boots for such famous labels as Dingo, Dan Post, and Luchessi, Acme was the
largest boot manufacturer in the world. Unlike most factories in rural Tennessee, Acme
Boot was unionized, and employees were well treated and relatively well paid. Workers
describe leaving farms or coal mines to work at Acme, then encouraging their families
and friends to join them. Many attest to the closeness they felt with their fellow workers
and to their pride in the unsurpassed quality of the product they turned out every day.
The company had been in Tennessee for nearly seventy years, and at corporate head-
quarters in Clarksville, Acme was proud to be the county's largest and best-known em-
ployer. People in Clarksville still remember how, during the Great Depression, the com-
pany had sent its workers out to cut the grass every day rather than lay them off.

Beginning in the early 1980s, Acme Boot plants began to shrink or close, as the work
was moved elsewhere. Acme had opened nonunion, lower-wage plants in Texas,
Mexico, and South America, and much of the production was done there, with boots
returning to Tennessee for finishing, repairs, and shipping. By 1990, the Clarksville
plant was the only one remaining, and many laid-off workers had relocated there to
keep their boot-making jobs. In November 1992, the final bomb fell. Acme announced
plans to close the Clarksville manufacturing plant. About six hundred people would be
laid off, most within two months, and production work would shift south, especially to
a new plant in Puerto Rico. The company president announced that some management
and supervisory personnel would move to Puerto Rico immediately to begin operations
there. He reassured the community that although no manufacturing operations would
remain in Clarksville, almost a hundred managerial employees would remain in corpo-
rate headquarters there. "Acme will continue to be in Clarksville . . . Clarksville is
home," he said.13 The workers saw it differently.

The events leading to this closing had begun several years earlier. In 1985 the com-
pany had been bought out by Farley Industries, a Chicago-based, privately held firm led
by industrialist and high-profile takeover specialist William F. Farley. A diversified
company with interests in automotive components, railroad parts, apparel, and foot-

wear, Farley Industries is best known for its Fruit of the Loom label. Farley viewed
Acme's reported annual sales of more than $3 billion as a profitable addition to its foot-
wear holdings. The decision to close the Clarksville plant, made in Farley's offices in
Chicago's Sears Tower, was part of a long-term restructuring toward outsourcing, ac-
cording to corporate spokespeople. Acme would move out of manufacturing and into
marketing, buying low-cost boots from makers in Latin America and elsewhere and
selling them under the Acme labels.

For the immediate future, however, production was booming in El Paso — much of
the actual work was done, for much lower wages, across the border in Mexico, where
the two Acme plants had doubled their employee base and tripled production in the
previous year.14 The Clarksville boot-making operations were being moved to Puerto
Rico. Asked to explain this decision, Acme president Mike Vogel said, "It's better for us
to do it there. It's less costly . . . There are some tax code advantages to doing work in
Puerto Rico." He also cited lower wage and benefit costs and potential employee train-
ing incentives for Acme. He did not say that the Clarksville plant was closing because it
was doing badly. Indeed, 1992 was Acme Boot's second best profit-making year of all
time.15

The decision to move the plant to Puerto Rico was directly encouraged by both the
Puerto Rican and the U.S. governments. After discussions, Puerto Rican officials gave
Acme Boot a building in Toa Alta owned by the Puerto Rico Industrial Development
Company, a government entity. The building and its surrounding roads and utilities had
been built with federal government money, and had previously been occupied by a phar-
maceutical division of Baxter International Inc. Acme, in return, had promised to invest
$1 million in production equipment and machinery and to hire six hundred workers. The
newspaper Caribbean Business reported, "The establishment of Acme Boot operations
in Puerto Rico is a major boost to the island's footwear and leather goods industry, espe-
cially in light of the North American Free Trade Agreement, which is seen as influenc-
ing labor-intensive industries such as apparel and leather goods to set up plants in
Mexico."16

This great boon for economic developers in Puerto Rico was an equally great tragedy
for the Clarksville workers. The Acme jobs were not extremely well paid, and the work
was certainly not easy. The highest pay bracket for unionized workers, $7.95 an hour,
was only for those who had been on the job more than thirty years. When the plant
closed, the average employee was forty-eight years old and the average length of senior-
ity was twenty-five years. Most workers had believed their jobs were absolutely secure.
Having worked at Acme for their entire adult lives, they had no experience or training in
anything else. Moreover, Clarksville was in the middle of a serious recession — accord-
ing to most workers a true depression — and they knew other jobs would be scarce and
pay well below Acme's rates. Jobs above minimum wage were nearly impossible to
find.

The Union Fights Back

For about ten years previous to Acme Boot's closing, management had been telling the
union — United Rubber Workers Local 330 (URW) — that times were tough and de-
manded cuts in wage scales and concessions on benefits. Alan Buckner, Local 330's
chief steward at the time, remembers one particularly harsh round of negotiations in the
early 1980s. "We went through negotiations to give concessions to keep the plants open.
I tried at that time to get [the union president] not to do it. I said, 'They're going to

New England Journal of Public Policy

close the plants anyways.' But cuts and concessions came. I went from piecework to
hourly work. I went from $13.22 an hour to $5.35."17 With every contract, more pay
cuts were handed down and more hard-won benefits were lost. Managers brought in
cost figures from El Paso and elsewhere and told the employees that to retain the work
in Clarksville they had to be "competitive" and cut their own costs. The workers voted
to go along with the concessions in the hope of saving the factory and their jobs.

When the company announced that the Clarksville plant would close, the union
leadership was surprised and furious. They had seen Acme's other Tennessee plants
close, and had been reassured that the Clarksville factory — Acme Boot's first and
flagship plant — was doing better than ever. Suddenly they were told that within two
months from the announcement, half the employees would be laid off. Even worse,
managers were already being relocated to Puerto Rico to hire 250 workers for the
brand-new Acme Footwear, Inc.

The union immediately challenged the legality of the shutdown, claiming that Acme
Boot officials had violated the federal Worker Adjustment and Retraining Notification
Act by not telling the employees who would be laid off when. Federal law requires
companies to give employees sixty days' advance notice of potential layoffs or plant
closings. The Tennessee Department of Labor was given a list of those who were to be
separated in the coming two weeks, but the workers were never advised.

The union then began a publicity campaign, notifying the local press and local offi-
cials of Acme Boot's plans. The union held a very well-attended rally, claiming that
closing the Clarksville plant was possibly illegal and certainly immoral. Individual
workers told their stories and wondered what they would do after losing one of the best
jobs in Clarksville. Forced to respond, company officials assured the public that they
intended to be a "good corporate citizen" of Clarksville, providing more assistance and
notification on the closing than required by law. Focusing on the hundred remaining
employees, Vogel claimed, "The last five or six years have been very tough. What we
are trying to do is make this company well so we have jobs for the remaining employ-
ees."18 The workers, who had received their highest production bonuses ever, knew
differently. The Clarksville plant's profits were higher than they'd ever been.

Union leadership, who began to research Acme's proposed move to Puerto Rico,
found that the company was taking advantage of the Possessions Tax Credit, also known
as Section 936 of the U.S. Internal Revenue Code, which allows Puerto Rico subsidiar-
ies to repatriate their profits back to their American corporate parents without federal
taxation. Federal corporate income taxes are waived on profits earned in U.S. territories,
including Puerto Rico, Guam, and the Virgin Islands, giving multinational corporations
a legal 100 percent tax break. Also, under the Puerto Rico Tax Incentive Act, an Ameri-
can company is not required to pay the high Puerto Rico income taxes. The company
acknowledged that it was looking forward to the tax breaks.

With the help of the Oil, Chemical, and Atomic Workers International Union
(OCAW), which had just been through a similar fight against the Elkhart, Indiana,
Whitehall Pharmaceuticals, the URW learned more about Section 936 and decided to
fight Acme's plans. The strategy was to block the company from taking advantage of
Puerto Rico's tax breaks, relying on a 1987 commonwealth law which said that local
officials can refuse to waive the local corporate taxes if they find that a company's
move caused economic hardships on the mainland. A question on the tax break applica-
tions asks if the jobs in Puerto Rico would cost jobs in the United States. If the answer
is yes, the company is ineligible for tax benefits. Acme's answer, no, was a lie, which

constitutes tax fraud.

In January the union held a second rally, focusing on Acme's move to Puerto Rico.
Calling Acme a runaway shop, the URW directly blamed Section 936 for Clarksville's
expected loss of 480 jobs in one year. The United Rubber Workers vowed to save Acme
Boot by convincing either the U.S. or the Puerto Rican government to review and deny
the company's claims, an action that had never been taken. The union amassed proof
that equipment was shipped directly from Clarksville to Puerto Rico and that the work
planned for Puerto Rico duplicated part of the Clarksville operation. The union found
support from other organizations, such as the Midwest Center for Labor Research
(MCLR), which identified thirty-five communities from which more than 15,000 jobs
were transferred from mainland plants to Puerto Rico tax-sheltered factories — these
represented only a fraction of the 100,000 people known to be employed in Puerto
Rican factories owned by American corporations. A researcher with the MCLR called
this "a case of tax-loophole-driven job destruction" and agreed with the URW's position
against Acme's petition.

Union leaders traveled to Washington to try to convince the American government to
block Acme Boot's 936 request. There they found themselves up against the Puerto
Rico-USA Foundation, a lobbying group made up of seventy major Fortune 500 corpo-
rations fighting to uphold Section 936 and other incentives. Initiatives by members of
Congress to amend 936, or to require corifirmation that job transfers do not harm main-
land workers, have repeatedly failed. The congressmen cannot compete with aggressive
lobbyists for companies like Pfizer Pharmaceuticals, which saves $156,400 in taxes for
every employee in Puerto Rico, whose earnings average only $26,471. The U.S. Trea-
sury Department estimates that it annually loses about $3 billion in taxes to Section 936
— profits that accrue directly to transnational corporations.19

Union leaders also initiated contacts with Puerto Rican officials, urging that they
enforce their law prohibiting tax benefits to manufacturing companies whose relocation
on the island is directly responsible for job losses in the States. They found that Acme
had already been received with open arms by local politicians desperate for new jobs at
almost any price. URW president Mitch Tucker wrote to Puerto Rico governor Pedro
Rossello to ask that he deny tax benefits to Acme Boot. He said that the plant scheduled
to open in Toa Alta, Puerto Rico, would be carrying out essentially the same manufac-
turing procedures being performed in Clarksville. "We state to you unequivocally that
this is a runaway shop ... If an exemption has already been granted, you must revoke it
... If an application is now pending, it should be denied." Tucker added that Acme
"plans to perform Clarksville production processes on Clarksville brand name boots
with equipment shipped from Clarksville . . . Any attempt by Acme Footwear, Inc., to
represent the facts otherwise, especially on its application under the Puerto Rico Tax
Incentive Act, would be fraudulent."20 Tucker also sent letters to resident commissioner
Carlos Romero Barcelo and to vice president-elect Albert Gore, neither of whom re-
plied.

Thwarted in its efforts within regular political channels, the URW launched a public
campaign. Its goal was to increase public pressure to persuade the company to continue
manufacturing operations in Clarksville and to abandon its plans to open a boot finish-
ing plant in Puerto Rico. At a rally in Clarksville, Mitch Tucker vowed, "We want to
send William Farley a message. We intend to fight this illegal shutdown." Turner called
on Farley to fulfill his promise, made at the time of purchase, that Acme Boot would
maintain manufacturing in Clarksville.21 The rally featured Connie Malloy of the

New England Journal of Public Policy

OCAW, who had helped fight Section 936 in Elkhart, and Ricky Mullins, a dislocated
Decaturville Sportswear worker. The URW repeatedly drew on the parallels between the
Clarksville and Decaturville stories, as the Decaturville plant closing had been a major
campaign issue in 1992 when the company moved from Tennessee to Central America
with the support of the Agency for International Development. Vice President Gore had
visited Decaturville and denounced the pattern it represented, and Ricky Mullins had
been invited to the Faces of Hope luncheon at the Clinton inaugural. Yet when the URW
pointed out the similarity and asked for the Clinton administration's support, it received
no reply.

The union urged all area unions as well as community groups and churches to attend
its rallies, demonstrations, and events and to participate in its campaign. The media,
and some public officials, began to take notice. The San Juan Star quoted Puerto Rico's
new chief of economic development, Clifford Myatt: "If it is a clear case (of a run-
away), then we will be obliged to make a decision in accordance with the facts." But
Myatt also cautioned that while his agency would take a close look at the Acme appli-
cation, there is "a very thin fine" between runaways and normal plant closings. "We
will have to see the reasons for the closing, whether the company thinks it makes busi-
ness sense, and if it does not relocate in Puerto Rico, if it intends to relocate somewhere
else." And a spokeswoman for vice president-elect Al Gore said Acme's proposed move
was "an unfortunate use of the existing tax law, which was intended to create jobs."22

With other groups from Clarksville and elsewhere in Tennessee and the nation, the
Acme workers planned event after event. They held demonstrations, press conferences,
and marches. Supported by the Clarksville community, they held a three-hundred-car
motorcade through the small downtown. Every weekend, workers stood in front of
K-Mart and Winn-Dixie, distributing flyers that explained Section 936 and their plight
and encouraging community members to contact all relevant decision makers. In April
the union sponsored a mass public boot-burning, at which hundreds of Clarksville resi-
dents burned their Acme-made boots. This dramatic gesture inaugurated a national
boycott of Acme, Dingo, and Dan Post boots. A boycott flier, "The Anatomy of an
Acme Boot," designed by award-winning labor cartoonist Mike Konopaki, was distrib-
uted by labor unions nationwide.

On May 29, 1993, the Walter Cronkite Report covered the shutdown of the
Clarksville plant. Invited by the URW, the Report staff attended the boot-burning and
other events, including the last day of work at Acme Boot on May 21. The Cronkite
Report aired extensive footage of interviews with dislocated employees and showed the
devastating impact of job loss on workers in the already depressed Clarksville economy.
It emphasized job flight, the lure of Section 936, and the connection between tax policy
and job loss. Following the Cronkite Report, other national and local news media
picked up the Acme Boot story. Members of Local 330, who received mail and support
from individuals and groups around the country, were tremendously encouraged by the
outpouring of public support for their cause.

At the end of May, Acme suddenly announced that it would not seek federal income
tax exemptions on profits from the Puerto Rico plant. The company withdrew its appli-
cation for Section 936 benefits. Acme president MikeVogel explained that although the
company was distancing itself from the 936 issue, it would still receive local incentives
and was still moving. He claimed that the Clarksville plant closing and the establish-
ment of a new plant in Puerto Rico were "nonrelated, coincidental issues."23 A high-
ranking Puerto Rican official cited "corporate exhaustion" as the reason for Acme's

withdrawal of its tax exemption application. And Clifford Myatt said, "I think the union
has been so vociferous and unfair in its attack on them that [Acme doesn't] want any
more bad P.R. Also, they've been inundated with so much paperwork and expenses that
they decided to forget it."24

This was a major victory for the workers' campaign against Acme. Yet they had not
succeeded in saving their jobs or their community. The Clarksville plant closed on
schedule, and the company, without benefit of tax breaks, moved its operations to
Puerto Rico. After months of mobilization, coalition building, public education, media
attention, political lobbying, and protest, the Clarksville community lost Acme Boot.

Lessons from the United Rubber Workers Fight

The most obvious and significant difference between the situations at Greenbrier and
Acme Boot was the presence of a strong union. First, because the URW was regularly
negotiating contracts with the company, it had access to financial reports and other
information and could see the coming changes before anything drastic happened. Sec-
ond, because the union had an organizing structure in place, workers could be informed
almost immediately as events unfolded. They were therefore less likely to blame one
another and were kept up to date on the situation. Third, the union had connections to
larger organizations, especially to the URW International Union, other labor unions,
coalitions like Tennessee Industrial Renewal Network, and research and advocacy insti-
tutes like the MCLR. All these provided crucial support at various stages of the work-
ers' mobilization and lobbying. Fourth, the union knew how to launch a public cam-
paign. It, and other unions, unlike the Greenbrier workers, had held marches, parades,
rallies, boycotts, and other events previously and knew how to organize actions success-
fully. They had dealt with the press regularly. Union leaders and members had been
active in political campaigns, so they knew which officials to call first. Finally, the
URW had access to resources from outside the Clarksville community. They could pay
people to fly in for rallies; send representatives to Washington to lobby; create leaflets,
posters, and banners; and buy advertising space in local newspapers. By contrast, the
Greenbrier workers could not even communicate with the bankruptcy trustee because
they could not afford a long-distance phone call to New Jersey.

Interestingly, despite all these benefits Acme's workers were not more pro-union
than Greenbrier's. A few blamed the union for giving away too much or for not doing
more to prevent the closure, but most were absolutely indifferent on the subject of
unions. Although they were not ideologically committed to unions, they appreciated the
benefits and work environment created by a union. Sally Kellam was typical; referring
to her search for a new job, she said, "I don't care one way or the other; it don't matter
to me if it's union or non-union." On the other hand, she noticed real differences be-
tween the two types of plants, and she did have a preference. "I just don't like the way
that things are just different [at nonunion plants]." Her most serious complaints at her
new job involved layoffs, which were random or involved favoritism, mandatory over-
time, and unequal treatment of workers.25 With the union at Acme Boot, workers had
come to expect fair treatment, open and agreed-upon procedures, and reliable avenues
for redress of grievances. This general expectation of fair treatment seems to have fu-
eled the campaign against Section 936 as well.

Although the Acme Boot campaign failed in its immediate goal, it had a striking
impact on both participants and other members of the community. Ironically, while
unions are usually charged with creating antagonism between workers and management,

New England Journal of Public Policy

just the opposite can be demonstrated here. Unlike the Greenbrier workers, no Acme
Boot employees blamed their supervisors or managers. Instead, they blamed the federal
government for maintaining the Section 936 tax loophole and helping major corpora-
tions rather than workers of either country. The workforce was effectively educated to
understand the national and international political decisions that led to the plant clos-
ing. They understood Acme's move as a strategic decision encouraged by a series of
governmental decisions made under pressure from large transnational corporations.
When other economic issues arose, such as the North American Free Trade Agreement,
they could understand them in this same context. While most of the Greenbrier workers
who had opinions said they believed NAFTA would probably be "a good thing," all the
Acme Boot workers interviewed could speak quite knowledgeably about the agreement
and its effects on both American and Mexican workers.

The Acme personnel were better educated about American politics as well. They had
participated in letter-writing campaigns, met with politicians, and learned a great deal
about the political process. They were not, however, necessarily more sanguine about
the political system. Sally Kellam expressed a common sentiment: "We [the URW
workers] went out here and worked for [President Clinton] to get him in office. Now we
feel like we've been let down. So, I don't think I'm gonna vote again. What's the point?
. . . Now, maybe I'll change when the time comes again."

But whether or not she participates in electoral politics, Kellam was changed by the
Acme Boot campaign: "I've gotten more involved in a lot of things since this plant
closing . . . I've gotten more involved. I have never in my life wrote letters to congress-
men and the White House; I never was like this . . . But I feel like we need to stand up
because that's important. They need to know how the people feel. It could make a
change. It could make a difference."26

Case 3: General Electric

In Morristown, a midsize town in the mountainous, rural Appalachian region, a job at
General Electric had been considered one of the best positions a person could hold.
Morristown has a low rate of unionization and, like all of upper East Tennessee,
Hamblen County has been hard hit by plant closings and layoffs. In 1988, GE was con-
sidered a progressive employer and an invaluable asset to the community, with wage
scales higher than those of most local industrial facilities. Most workers earned between
$9.00 and $12.00 an hour, had been there for many years, and considered that they had
secure, permanent jobs. Yet a new management team had begun to institute changes that
seemed to alter the character of the plant and labor-management relations for the worse.
The workers felt increasingly harassed and powerless.

In June of that year, the International Brotherhood of Electrical Workers (IBEW)
launched a union organizing campaign at GE's Morristown plant. There was great ini-
tial support among workers, but the company spared no expense to counter the union
campaign. Management treated employees to parties and gifts. Workers were shown
films describing how the union would hurt them and the plant. The company produced
its own videocassette devoted to "the GE family," complete with shots of nearly every
worker, some with families and friends, and the beautiful surrounding area. For the
video, the company commissioned an original country music song dedicated to the
people and countryside of Morristown. It promised that GE would protect its workers
and their community more than any "outside" union could.

By September of 1988, by instilling a mixture of fear and complacency, the company
had won the struggle, and the union was voted down by a 3-to- 1 margin. One observer
noted that "the employees beamed with pride because they thought this would demon-
strate to the company how they believed in General Electric."27

One week after the vote, GE laid off more than one hundred of those same workers.
They were told that they would be recalled to work in the spring of 1989. But the next
week they learned from radio, television, and newspapers that their jobs were perma-
nently lost. The distribution center warehouse was moving thirty miles away, literally
down the road, to the town of Mascot in adjacent Knox County. GE had received eco-
nomic development incentives from Knox County to encourage the move, as well as
state funding to train new workers. At the new site, GE announced, all work would be
subcontracted through USCO, an independent company, and all jobs would be rede-
fined as "temporary," even though the work was no different than it had been. The pay
would be about $6.00 an hour, with no benefits, a far cry from the union wages the
workers had once anticipated. Knox County executive Dwight Kessell commended the
county's director of economic development for "the extraordinary work she did in se-
curing this new industry and these new jobs for Knox County."28

After hearing about the new plans, the laid-off workers attempted to contact manag-
ers to see if there was any alternative. They met as a group to discuss possible courses
of action. Their offers to freeze or cut their own wages in order to keep their jobs, ben-
efits, and seniority were refused. Attempting to initiate negotiations to retain their jobs,
they were again refused. The company stated that, in order to remain competitive in the
global market, tough measures were necessary. After giving up on changing manage-
ment's mind, some workers simply traveled to the USCO plant, asking to be hired there

— to do their own jobs, for half the pay and no benefits. They were never called back.
By the end of 1989, the hundred permanently laid-off workers were looking for new

jobs. The official listings at the Tennessee Department of Employment Security Job
Service comprised very few openings, and hardly any above minimum wage. Officials
referred worker after worker to temporary service and contract-labor agencies. Unlike
traditional employers, these agencies were continually hiring. Morristown-area facto-
ries were increasingly choosing to contract out for "temporary" employees rather than
hire their own permanent workers.

The Birth of CATS

Having lost good jobs at General Electric, the workers were shocked to hear that tempo-
rary service was their only option. Many had to support families and could not rely on
jobs with absolutely no security or stability, at such low pay and — most important for
some — with no health insurance or pension benefits. They were shocked, too, to find
that they were not alone; permanent, decent-paying jobs in Morristown were systemati-
cally being replaced by temporary jobs, either through agencies or through in-house
temporary labor pools at large companies. The outraged workers, mostly women, began
to meet regularly. At one meeting, someone — no one can now remember exactly who

— suggested they call their group Citizens Against Temporary Services, or CATS, and
the name stuck.

One of their plans was to hire an attorney who would file a lawsuit against GE.
Charging age discrimination, since older workers had been disproportionately singled
out for layoffs, and fraudulent use of government funds, they compiled evidence for a
case against GE. Although they believed their case was strong, the initial hearings

New England Journal of Public Policy

dragged on, and it became apparent that, if they could win at all, the legal route would
not further their goals in a timely fashion. Eventually, under pressure from GE manage-
ment, their lawyer withdrew from the case and they were forced to drop the suit without
winning anything.

Initially optimistic that aid would be forthcoming once the facts of their case were
public, they began to contact politicians and community leaders to see if anything could
be done. When they met with only apathy or outright hostility from officials, CATS
decided to plan community meetings to put pressure on GE but also to expose their
larger concerns about the increasing use and abuse of temporary and contingent workers
by large companies. CATS set out to generate support and to exert pressure to get their
jobs back, but also to look for ways to address issues of injustice in the workplace that
were affecting workers in Hamblen County.

With a little research, CATS leaders quickly discovered that the loss of permanent
jobs to the instability and inequities of temporary jobs was a national trend. In fact, the
growth of part-time, seasonal, and other forms of contingent work represents a sea
change in the American workplace. In 1989 the National Planning Association esti-
mated that nearly one third of the entire workforce was composed of contingent work-
ers, and that the percentage was growing. Perhaps unsurprisingly, women and minorities
are disproportionately represented in the temporary workforce — nearly double their
percentages in the total workforce.29 Between 1983 and 1993, the number of temporary
workers increased by more than 300 percent.30 The payroll of temporary employment
services — one part of the contingent work boom — increased by almost 3000 percent
between 1970 and 1992.31 By 1994, Manpower, Inc. — a temporary help supply service
— was the largest employer in the United States, with nearly one million employees.

As CATS began to seek help elsewhere and to devise plans, they found many local
groups and individuals who had similar concerns. They talked with unionized and unor-
ganized workers, and with community groups, politicians, and unemployed people.
Workers from all industries were aware of the problem and troubled by the trend toward
contingent work. On the one hand there was a broad concern and support for reform; on
the other hand, there was very little precedent for positive change. CATS found that
because temporary service agencies in Tennessee were completely unregulated, there
was no official route through which to address abuses. At a legislative meeting in late
1989, the administrator of Tennessee's Personnel Recruiting Service Board, which li-
censes permanent employment placement agencies, said she receives about ten com-
plaints per year about permanent employment agencies, but she gets three complaints
per week about temporary agencies, over which she has no jurisdiction.

After organizing in the fall of 1989, CATS proved extremely persistent and deter-
mined. Wearing their self-made, bright red T-shirts emblazoned CITIZENS AGAINST
TEMPORARY SERVICES across the back, they were highly visible around town. One
of their initial events was a community meeting in Morristown to publicize their plight
and the issue of temporary jobs. Nearly four hundred people attended — a record for
the small town. Shortly thereafter, CATS marched down the streets of Morristown call-
ing for fair labor laws in Tennessee. Hundreds of people attended the parade, which was
spirited yet serious in its demands for attention and reform.

These events, and the remarkable turnout they generated, were all the more impres-
sive because the only Morristown newspaper refused to carry any stories about CATS.
The city and county governments, the Chamber of Commerce, the local business com-
munity, and the local media either actively opposed CATS — as antagonistic to corpo-

rate interests and therefore harmful to Hamblen County's "business climate" — or dis-
missed it as irrelevant. After being blacked out by the town's one paper, CATS had to
find other strategies to publicize its message and events. One way involved organizing
members and their families to distribute leaflets advertising events at supermarkets and
other public places. Another was to buy space in the Smoky Mountain Trader, a small,
free advertising weekly that was available all over town. In it, CATS publicized its
meetings and other activities, even publishing short articles. This proved most effective,
as the Trader's wide circulation made it a useful conduit of information.

If CATS's public events did not draw mainstream media, they did serve another cru-
cial function: attracting the attention of important potential allies. One of the marchers
at the April parade was Bill Troy, a staff member of the Committee on Religion in Ap-
palachia (CORA), a coalition of church groups working on issues of economic justice.
Troy was in the process of founding a new organization, the Tennessee Industrial Re-
newal Network (TIRN), a coalition of labor, community, and environmental groups to
work on economic issues statewide. Having learned about the CATS march through
friends at the Highlander Center for Research and Education, another Appalachian
institution interested in economic justice, Troy was inspired by CATS members. He
immediately got in touch with the group and remained involved for the next five years.
He invited CATS representatives to a June 1990 Chattanooga conference he was orga-
nizing for June 1990, "Responding to Plant Closings in Tennessee." CATS members
attended the conference, speaking movingly about their experiences with the GE ware-
house closing and its aftermath. This was the beginning of a close alliance with TIRN,
which set up an ongoing committee to assist CATS efforts with staff support and other
resources.

Through their contacts with Highlander Center staff, CATS became aware of an
Appalachian citizens group, Save Our Cumberland Mountains (SOCM). It had worked
primarily on environmental and land use problems for many years, but had recently
become more involved with economic and job issues as well. In 1990, CATS voted to
become the Morristown chapter of SOCM, thereby taking advantage of the group's
extensive experience in organizing, strategizing, and lobbying skills and resources. This
alliance was a further means of institutionalizing CATS and ensuring a strong base from
which it could continue its work.

With the help of SOCM staff, CATS began to design a strategy to push for govern-
ment action. Ferreting out the facts of the government's complicity in GE's move
proved difficult. CATS leaders made hundreds of frustrating phone calls to Nashville
and Washington, to every imaginable relevant office. A few traveled to Nashville sev-
eral times to ask questions in person. After nine months of research, they finally discov-
ered that tax dollars had indeed been allocated to GE to support its move to Mascot.
They tracked down the contract showing that GE had been promised $200,000 in Job
Training Partnership Act (JTRA) funds to train new workers for the exact jobs from
which they had been fired. CATS argued that this was illegal, because JTPA funds can-
not be used for jobs from which fully capable workers had been laid off. GE argued that
it was legal because the new factory was operated by USCO, the labor contractor, rather
than by GE. After putting pressure on Knox County officials and state and federal labor
department officials, CATS won. It was able to prove that GE was directly responsible
for the warehouse and that the fully capable Morristown workers had not been offered
the new jobs although many would have been willing to take them. CATS finally
persuaded the Department of Labor to declare the GE/USCO warehouse in Mascot

New England Journal of Public Policy

ineligible for JTPA funding and withdraw the $200,000.

Toward the end of 1989, CATS began to push their state legislators to set up a study
committee to look at the issue of temporary services. They also lobbied for a study
committee on fair labor laws in Tennessee. Both committees were set up, and CATS
then demanded that they hold hearings in Morristown. Finally a joint hearing was
scheduled for October at Walter State Community College. CATS once again distrib-
uted leaflets, wrote articles for the Trader, activated their telephone tree, and contacted
labor unions, community groups, churches, and anyone else they could think of. Their
efforts paid off, as an unexpected seven hundred people showed up to overwhelm the
legislators. Many testified movingly about the experiences they had undergone and their
worries for the future of their families and children with all the changes in the work-
place. CATS members were surprised and heartened by the outpouring of support for
them and their issues from all over East Tennessee. They heard horrible stories similar
to theirs from friends and allies they never knew they had. Everyone seemed to agree
that the situation for factory workers was dire and becoming worse, and that it was the
government's responsibility to take action. The committee listened dutifully, but, as
usual with study committees, no results materialized.

CATS finally decided that if Tennessee were to have any type of fair labor laws, the
members themselves would have to create them. In 1990 they wrote legislation that
would define temporary employees as temporary, regulate temporary agencies, and
forbid the replacement of permanent workers with temporary ones. This was precedent-
setting legislation, since at that time no state or local legislation dealt with the abuse of
temporary services. With help from TIRN and SOCM, CATS members pressed for their
bill to be introduced in the 1990 legislative session. As the date for the vote approached,
they organized a delegation of about fifty citizens to drive four hours to Nashville to
lobby for themselves. Although CATS had done extensive lobbying ahead of time, when
they arrived in Nashville for the vote, they found themselves outnumbered and over-
powered by opponents. Federal Express, Eastman Kodak, and other major Tennessee
employers were pushing hard against the CATS bill. The National Association of Tem-
porary Services and its Tennessee affiliate were also lobbying against it. Although
CATS had received promises of support from a majority of committee members, several
decided not to vote at all, and the bill never made it out of committee. The following
year CATS presented a more streamlined, less ambitious bill, for which they again
lobbied extensively. They believed they had a good chance of winning, but they were
outmaneuvered by more politically powerful opponents. After two years of legislative
work, their only tangible result was a bill requiring temporary service agencies to regis-
ter with the state, a minimal requirement that contained no provisions for regulation or
enforcement.

CATS's Ongoing Legacy

CATS failed to accomplish any of its original goals. It did not succeed in keeping the
GE jobs in Morristown; it did not get even one worker rehired. After investing consider-
able sums in attorneys' fees, CATS members lost their lawsuit against General Electric.
The time and energy spent lobbying elected representatives did not generate even a
minimal bill to protect temporary workers. The temporary service industry is subject to
no more regulation than previously, and temporary jobs are still multiplying in
Morristown as permanent ones disappear. Yet despite these failures, CATS is an excel-
lent example of a successful organizing effort. Members of CATS were involved in a

sustained effort at social change around economic issues. Both the individual partici-
pants and the larger Morristown community — arguably even the entire state of Tennes-
see — were transformed by the struggles begun by a small group of women laid off
from GE.

CATS scored several points that cause it to stand out among community mobiliza-
tions around economic issues. One is symbolized by the name of the group. Unlike the
two companies described above, the Morristown laid-off workers did not organize sim-
ply around the events at GE. They did not call themselves the GE Workers Committee,
or Morristown Citizens Against GE. From the outset they were Citizens Against Tempo-
rary Services, representing a conscious decision to focus on the cause of their problem
rather than its symptom. Moreover, because of its close alliance with larger organiza-
tions in East Tennessee, and because of the region's rich history of community organiz-
ing struggles, CATS was immediately encouraged to foster an understanding of its
members' experiences within a wider context. This association with similar yet diverse
groups had many consequences.

First and probably most important was the contribution of organizing expertise. Bill
Troy of CORA and Susan Williams of the Highlander Center worked closely with the
CATS group, helping them strategize, build a local coalition, plan events, and carry out
an entire campaign. The CATS activists credit Troy and Williams with inspiring them,
helping them think through their ideas, planning next steps after disappointments, and
keeping them going when they felt like giving up. The chairperson of CATS calls them
a lifeline, saying that she would not have survived without their aid.

Second, other organizations provided people to participate in CATS events and to
publicize their issues and struggles. CATS members spoke to a national audience at the
TIRN founding conference in Chattanooga and to statewide audiences at rallies in
Knoxville and Memphis. They joined TIRN leaders to speak with other displaced work-
ers about practical issues like JTPA and other programs, but also about the changes that
are required to better serve the needs of working people. Some even attended a confer-
ence in Washington, D.C., about women in the changing workplace.

Third, other organizations provided essential training in leadership skills. CATS
members participated in workshops at the Highlander Center with community activists
and organizers from all over the South and Appalachia, learning how similar struggles
were handled in similar communities. They were encouraged to speak publicly, to per-
suade others to get involved, to confront decision makers, all entirely new experiences
for the women involved.

Fourth, CATS members were exposed to communities extremely different from their
own. The most dramatic example was a trip to the maquiladora (free trade) zone in
Mexico, sponsored by TIRN. Two CATS leaders participated in the trip, along with
eight other women workers from East Tennessee. They visited a General Electric plant,
among others, and were horrified by the living and working conditions provided by
American corporations. They learned to make connections between their own experi-
ences and those of Mexican women working in the maquiladoras for very low wages,
with no job security or organizing rights. Simply by traveling around Tennessee and
meeting with other groups in the context of their fight for fair labor laws, CATS mem-
bers were educated about changes in the economy and their effects on all kinds of
groups.

Finally, even more intensely than the Acme Boot workers, the CATS participants
underwent a political education and transformation. Until 1988 they had been very

New England Journal of Public Policy

lucky, holding some of the best, most secure, and highest-paying jobs in Hamblen
County. Through a sudden management decision they became not just laid-off factory
workers but, even worse, workers qualified only for the most unstable, poorest-paying
temporary service positions. This changed their view not only of themselves but of
others as well. Kathy Muller, a CATS leader, described the changes she saw in herself:

I must have been a shallow person. Because, see, I was in my own world. I got up
every day, and I went to work, and I made good money, and . . . when I went to the
grocery store and I saw somebody that had food stamps, I always thought, "Oh, that
little kind of people, they ought to get a job and go to work . . ." Now I'm grateful
that I'm able to look and see and have compassion for people, because they're
having a hard time. I wrote Al Gore a letter and told him that I fully believe that 98
percent of our society would work, if they could make a decent wage to where they
can survive ... I really think if you give people the incentive that they'll work.32

In addition to their attitudes, their political behavior changed as they organized
CATS. Not one member had ever been to the state capitol in Nashville, and very few
had ever so much as written a letter to a public official. As Muller said, "When I
worked at GE I would've never asked my government a question. I would've never
challenged them on anything. Now I challenge them on everything. I mean, I wouldn't
take their word for nothing ... I can see beyond what they say." This was a major
change for Muller. "I had all these ideas that there was justice in the Labor Department.
Even when I lost my job, I thought, Well, not to worry, I'll go out and find another job,
and then when reality started setting in I thought, Well, our government won't let GE do
this. And when you realize they will let 'em do it, they're doing it every day, then I
began to ask questions."33

The process of beginning to ask questions and doubting long-held beliefs about au-
thority was extremely difficult for many. Joe Perkinson, a veteran of the Korean and
Vietnam wars, who was fifty years old when he was laid off, seriously contemplated
suicide and other types of violence. He threatened to bring in a gun to force GE manag-
ers to give him his job back, at whatever wage. Others in the group convinced him to
use more peaceful means. He now has a minimum-wage, temporary job as a security
guard at the Morristown mall. He says he understands why the crime rate is so high in
areas where there are no good jobs.34 Kathy Muller points out that none of the CATS
members had ever fought for something like this before. "I was the type of person, I
guess that if [GE] had told me to go out in a lake and jump in, I would've went in, be-
cause I thought they knew what was best for me ... I had been brought up to think that
if you got a job you did the very best you could, you worked as hard as you could, you
did what they said, because they were boss, and you'd be okay! When I realized that
didn't work, it was hard, it was really hard."35

These hard-learned lessons stuck. More than anyone in Greenbrier or Acme Boot, the
members of CATS continued to participate in political activities. CATS became the
Hamblen County chapter of SOCM, and Muller became a leader in a new campaign to
get city drinking water for people living in a neighborhood near a polluted landfill.
Other members, including several who were previously virulently antiunion, led and
worked in union campaigns. All the members interviewed were extremely knowledge-
able about NAFTA, welfare reform, labor law reform, and other national economic
issues. They continued to write letters and meet with legislators at every opportunity.
Most important, they have learned to stand up for themselves, both individually and

collectively. Each one can tell stories of confronting authorities, at work and elsewhere,
when injustice was being done. These small demonstrations of resistance, taken to-
gether, have had an impact on many lives.

CATS also transformed Morristown. Anyone in that town who has a problem in the
workplace knows to contact a CATS leader. A small group of them now serve as infor-
mal job counselors for nearly the entire city's population. Moreover, although it has
become SOCM and has quieted down during the past four years, public officials in
Morristown remember CATS. The county executive and Chamber of Commerce offi-
cials refer to it as having instituted the strongest protest about jobs and the economy
Hamblen County has ever seen. Although CATS may have lost the immediate battle, its
legacy can be detected in the ongoing decisions made by local officials who have
known the group's organized power and will always, even unconsciously, anticipate

their reactions.

* * *

The most striking conclusion to be drawn from the three cases of mobilization
in East Tennessee is the exceptional potential of ordinary working people to take on a
complicated issue, educate themselves, fight for what they deserve, and join with others
in a common struggle. The crucial corollary is that in order for this process to take
place, enormous resources are necessary. This is true not in the sense of a traditional
"resource mobilization"36 framework, but in terms of indigenous resources from within
a community: an institutionalized base with which groups can affiliate and learn orga-
nizing skills, sources of publicity and information, and leadership.

These three examples show that abundant crises in every community can serve as
sources of mobilization and protest, but their consequences are more difficult to predict.
In all three companies, the consequence the participants sought — to keep their jobs —
eluded them. The global economy brings a widening gap in power that has proved to be
too severe for impoverished local groups to overcome. Only few such campaigns will
ever produce concrete improvements in economic circumstances, by keeping a plant
from moving on or by pressuring local governmental entities to strengthen their eco-
nomic development bids. Yet even if material benefits never appear, these organizing
efforts are not failures. Where grassroots mobilization has occurred, people have a
much stronger comprehension of fundamental political issues and, as important, a trans-
formed understanding of themselves in relation to those issues. Organizing is likely to
increase political participation and thus strengthen local democracy, educate citizens on
local and national issues, nourish leadership, and foster solidarity and collective respon-
sibility. Different types of mobilization lead to different sets of experiences, understand-
ings, and resulting political behaviors among participants.

Studying political mobilization among low-income rural people reveals the incen-
tives and barriers to true local democracy in an increasingly global economy. This study
has focused on the concern most central to poor people's lives: their jobs and, more
generally, the condition of the local economy. It shows, first, that the most devastating
economic changes result not from an invisible hand within an optimizing free market,
but from sets of national, state, and local institutions and political decisions. It then
shows that local people can have an impact on these issues, although they must contend
with formidable structures and opponents. Although local organizing cannot compete
with the forces shaping national and global economic policy, it can transform local
politics and is an essential beginning. It is important to note that these local battles are
indeed only a beginning.38

The histories presented here prove that in no way should this type of organizing be

New England Journal of Public Policy

seen as limited to local groups and traditional neighborhood issues. In every case,
people were more than capable of seeing their struggles in a national and international
context and learning to analyze their own towns' economies in this framework. The
transformation from the personal and local to the global remains the test of successful
organizing. Small, disadvantaged communities always encounter difficulty in mobiliz-
ing around economic issues, but if they neglect to act, they are excluded from the deci-
sions that most affect their lives. Examining systems that enable excluded groups to
achieve a voice in such judgments is central to debates about democracy and power in
contemporary American politics and public policy. In an era of downsizing, deindus-
trialization, and economic globalization, these questions are more important than ever. $*

Notes

1. "Downsizing and Its Discontents" (masthead editorial). New York Times, March 10,
1996, E14.

2. Yolanda K. Kodrzycki, "The Costs of Defense- related Layoffs in New England," New
England Economic Review, March/April 1995, 3.

3. James W. Meehan, Jr., Joe Peek, and Eric S. Rosengren, "Business Failures in New
England," New England Economic Review, November/December 1993, 33.

4. Interview with Joanne James, December 7, 1993, Clinton, Tennessee.

5. Interview with Ann Ritter, LaFollette, Tennessee, December 10, 1993.

6. Interview with Bob Walker, Clinton, Tennessee, December 6, 1993.

7. Ritter interview.

8. Ibid.

9. Interview with Bobbie Bishop, Clinton, Tennessee, December 6, 1993.

10. James interview.

11. Walker interview.

12. Bishop interview.

13. Douglas Ray, "Acme Plans Boot Plant in Puerto Rico," Clarksville (Tennessee) Leaf-
Chronicle, December 27, 1992.

14. The El Paso plants employed more than seven hundred employees, a number similarto
that of those fired from the three other closed Tennessee plants. The company would
not reveal the wages of workers in El Paso or Mexico. See Stephen Franklin, "Union
Wants Puerto Rico to Boot Acme," Chicago Tribune, February 1, 1993, 1.

1 5. Ray, "Acme Plans Boot Plant," 1 .

16. Pablo J. Trinidad, "Acme Bootto Produce Footwear in Toa Alta," Caribbean Business,
December 10, 1992, 1.

17. Interview with Alan Buckner, Clarksville, Tennessee, December 14, 1993.

18. Franklin, "Union Wants Puerto Rico to Boot Acme," 1.

19. Harry Turner, "Congress Urged to Eliminate 936," San Juan (Puerto Rico) Star, May 15,
1992), 1.

20. Robert Friedman, "Rossello Urged to Deny Factory Tax Benefits," San Juan Star, January
12,1993, 1.

21. Terry Batey, "Acme Boot Workers, Union Vow to Fight Closing to Bitter End," Nashville

Tennessean, January 15, 1993.

22. Robert Friedman, "Acme Boot Company: A Runaway Plant?" San Juan Star, January 10,
1993,20.

23. Jimmy Settle, "Will Newest Stitch Come in Time for Acme Workers?" Clarksville Leaf-

Chronicle, May 18, 1993, A1.

24. San Juan Star, May 7, 1993.

25. Interview with Sally Kellam, Clarksville, Tennessee, December 15, 1993.

26. Ibid.

27. Linda Yount and Susan Williams, "Temporary in Tennessee: CATS for Stable Jobs,"
Labor Research Review, no. 15: 74.

28. Ibid., 75.

29. Richard Belous, The Contingent Economy: The Growth of the Temporary, Part-Time, and
Subcontracted Workforce (Washington, D.C.: National Planning Association, 1989).

30. Nine to Five, "National Profile of Working Women" (Washington, D.C.: Nine to Five,
1995), 1.

31 . By 1994, Manpower, Inc., a temporary help service, was the largest employer in the
United States, with nearly one million employees. See Robert E. Parker, Flesh Peddlers
and Warm Bodies: The Temporary Help Industry and Its Workers (New Brunswick, N.J.:
Rutgers University Press, 1994), 27.

32. Interview with Kathy Muller, Morristown, Tennessee, December 10, 1993.

33. Ibid.

34. Interview with Joe Perkinson, Morristown, Tennessee, December 8, 1993.

35. Muller interview.

36. See, for example, John McCarthy and Mayer Zald, "Resource Mobilization and Social
Movements: A Partial Theory," American Journal of Sociology 82, no. 6 (May 1977);
Anthony Oberschall, Social Conflict and Social Movements (Englewood Cliffs, N.J.:
Prentice-Hall, 1973); Charles Tilly, From Mobilization to Revolution (Reading, Mass.:
Addison-Wesley, 1978); and William Gamson, The Strategy of Social Protest
(Homewood, III.: Dorsey Press, 1975).

37. Here I amend the arguments of Harry Boyte, Doug McAdam, and others. See, for
example, Harry C. Boyte, The Backyard Revolution: Understanding the New Citizen
Movement (Philadelphia: Temple University Press, 1980); Harry C. Boyte and Sara M.
Evans, Free Spaces: The Sources of Democratic Change in America (New York: Harper &
Row, 1986); Doug McAdam, Political Process and the Development of Black Insurgency,
1930-1970 (Chicago: University of Chicago Press, 1982).

Is Boston Becoming a
Branch-Plant Town?

Lawrence G. Franko, Ph.D.

A decade ago, Boston appeared to be emerging as a headquarters city for a large
number of world-class enterprises. Notwithstanding the recovery from the early-
1990s recession, and a thriving entrepreneurial economy of business acorns, Bos-
ton today seems on its way to becoming largely a branch-plant town. None of the
1980s Massachusetts Miracle saplings or the more recent acorns have grown into
mighty corporate oaks headquartered here. This article discusses the risks of hav-
ing our current prosperity increasingly based on branch plants acquired or estab-
lished by firms centered elsewhere. Its concern is based on the proposition that
having big-business corporate headquarters here does matter, not only for long-
term economic success and stability, but also for the vitality and funding of our
cultural, art, philanthropic, and community service activities.

When I moved back to the Boston area in the early 1980s, part of the excitement
for a then-still-youngish professor of international business and finance returning
to the hub of the universe after a dozen years in Europe was being close to the head-
quarters action of the seemingly world-class firms then emerging — DEC, Wang, Data
General, Apollo, Prime, Lotus, Foxboro, Fidelity, State Street, BayBanks — not to
mention those institutions already "emerged" — Raytheon, Polaroid, Gillette, Stride-
Rite, Dennison, Sheraton, the First National Bank of Boston, and the Bank of New
England. There was also a myriad of small or already medium-size high-tech and other
firms in the farm team, like ChipCom, BBN, Powersoft, Wellfleet Communications,
GCA, Thinking Machines, Kendall Square, and Au Bon Pain, just waiting to burst upon
the world scene. Acorns aplenty, whether or not nurtured by Arthur D. Little's epony-
mous park, just waiting to grow into mighty oaks.

Not only did Massachusetts have its own headquarters team, but the Boston region
was attracting some non-U. S. multinationals as a site for their Stateside or North Ameri-
can regional headquarters. NEC, Bull, and Scitex looked to be the leading edge of a
coming wave.

Some of these firms are still going strong; quite a few others clearly are not. Some
are no longer around, or they survive, usually only partially, as divisions of the larger
firms that have absorbed them. In the event, a forest of mighty, world-class, locally
headquartered oaks is not what has emerged in the Massachusetts economy. Only two
Massachusetts companies (Raytheon and Digital Equipment Corporation [DEC]) were
on the 1995 Fortune Global 500 list, which includes both manufacturing and service
companies. Switzerland, the country from which I returned, which coincidentally has

Lawrence Franko, a professor of finance and strategic management, College of Manage-
ment, University of Massachusetts Boston, teaches the MBA course Massachusetts in the
Global Economy.

New England Journal of Public Policy

roughly the same population as Massachusetts, has sixteen on that list. Only two Massa-
chusetts companies, Gillette and Fleet Financial, are on the 1996 Wall Street Journal
100 Biggest U.S. Companies by Market Value list.1 Of the eighteen Massachusetts com-
panies in the 1989 Fortune U.S. 500 Industrials, no fewer than seven have subsequently
disappeared by merger, takeover, or bankruptcy. And industrials were not the only dis-
appearing companies once headquartered here: "Jordan Marsh is now Macy's. Mergers
eliminated other familiar names like Shawmut and BayBank. The Boston Company is
owned by Pittsburgh-based Mellon Bank Co. There's no more New England Telephone,
only Nynex, soon to become [and now is ] part of Bell Atlantic. The Boston Globe is
now owned by the New York Times Co."2

Moreover, in spite of the near-euphoric mood currently setting in about the state of
the Massachusetts economy, the survival prospects for still others of "our" larger, lo-
cally headquartered firms are perhaps even more questionable than in past. After earn-
ing the dubious distinction of being on the Wall Street Journal's list of 10 Worst Per-
forming Stocks for the past one, five, and ten years, DEC may yet be sliced and diced.
(On January 26, 1998, the sale of DEC to Compaq of Houston was announced.) Fleet
Financial, once the great consolidator of regional banking, itself has become the subject
of takeover rumors after recent financial underperformance. Even presumably impreg-
nable State Street appears to be a tempting target for the Bank of New York.

Indeed, banking and financial services constitutes the next cluster of the Massachu-
setts economy on the list of most likely takeovers, consolidations, and mergers — and
possible headquarters removal. The political dams preventing absorption of Massachu-
setts banks by more-global, more-nimble, more-efficient, and lower-cost (read bigger

— banking has become a scale game) competitors will soon break down with the arrival
of full interstate banking. Insurance is also an activity that hardly seems immune to the
threat of consolidation, and a shakeout in a mutual fund industry in which there are
more funds competing than there are stocks listed on the New York Stock Exchange is
but a matter of time and stock market fortune. Even without a stock market correction,
Boston's concentration of high-overhead, star-system active management funds makes it
vulnerable to the competition of no-load, index-fund competitors based elsewhere.

After considerable uncertainty, Raytheon appears to have emerged as a survivor/
acquirer as the musical chairs stop in the defense restructuring game, although share-
holder suits and antitrust queries concerning its recent spate of acquisitions could still
cast doubt on that outcome. Although Gillette is currently the one unqualified Massa-
chusetts global-large-enterprise success story, it is worth recalling that even Gillette had
a near-death experience in the not-too-distant past.

The propensity of locally headquartered institutions to underachieve, fail, or be taken
over is also no longer confined to firms. The controversy over the (possibly temporary

— or aborted) "rescue" of nonprofit Tufts-New England Medical Center from the
clutches of Columbia/HCA, a giant for-profit hospital management firm headquartered
in Nashville (Nashville?), Tennessee, has highlighted the existence of a high-cost Mas-
sachusetts health care system ripe for rationalization at the hands of outsiders. Cigna,
headquartered in Philadelphia, has acquired Healthsource of New Hampshire, a move
that will bring its HMO membership to nearly 6.5 million, and the number of its total
HMO-plus-indemnity customer base to over 12 million in twenty-nine states.3 Whether,
and how, Massachusetts not-for-profit HMOs can hold out against the scale and access
to capital markets of such rivals remains to be seen. The U.S. health care management
system revolution is increasingly being led — or pushed — by employers, governments,

and organizations that see insurance, care, and hospital management as economic ac-
tivities rather than as callings, and the leaders in this cost revolution are not headquar-
tered in Boston.

Could even the very bastion of Massachusetts's identity and success, its universities,
someday come under competitive and takeover threat? Could the ever escalating costs
and ever rising tuition fees someday call forth real competition? Could the revolution in
technology promote such an unthinkable revolution? Could "our" students ever become
so crass as to succumb to the blandishments of upstarts like the University of Phoenix
and its Wall Street Journal advertisements for an "online MBA," or to those of the other
971 "cyberschools" in the 1997 Distance Learning guide?4

Even without such seemingly remote risks, there are worries enough at hand.

Route 128 versus Silicon Valley and Beyond

The most obvious and current problem is on Route 128. It is also one of the most wor-
rying, since high technology is one of the key base industries by which Massachusetts
earns its keep in the world via exports to other regions and countries and on which a
whole service-economy edifice of real estate, legal services, construction, medical ser-
vices, and state and local government rests.

Whether or not Silicon Valley has won the high-tech race can be debated. The pessi-
mistic view of Route 128 presented by AnnaLee Saxenian in her 1994 Regional Advan-
tage: Culture and Competition in Silicon Valley and Route 128 may or may not be too
stark.5 The purported openness of Silicon Valley's commercial, market-oriented culture
versus Route 128's more closed, vertically integrated, Pentagon-dependent firms has —
thankfully — not led to the disappearance of Massachusetts high tech. Indeed, Boston
high-tech boosters can and do point to the flourishing existence of some 2,000 software
firms in Massachusetts, although most are very small and very new, to a considerable
amount of venture activity, and to some continuing successes in computing and commu-
nications hardware. What is, however, incontrovertible is the fact that Route 128 is not
the equal of its former self. Many of the great hopes of the 1980s have fizzled or failed,
not just in the realm of minicomputers and not just because of the end of the cold war.
One looks with some nostalgia at the listing of "up and comers" in the Porter-Monitor
report on the competitive advantage of Massachusetts.6 Names such as Thinking Ma-
chines, Kendall Square, and Symbolics resound like those of ancient cities, long disap-
peared.

Moreover, when Silicon Valley, or Seattle, has not simply defeated Massachusetts
high-tech firms, it has taken them over. Sometimes these are called mergers, but it is
curious how frequently such "mergers" are followed by the rise to top management
positions of people based in places like San Jose. Apollo has become part of Hewlett
Packard, ChipCom was acquired by 3Com, Cisco (under the direction of a Wang alum-
nus) has acquired a series of Route 128 high-tech hopes, and Wellfleet, Powersoft, and
now Cascade have been "merged."

Even within firms' divisions, somewhat hidden from public view, a tectonic shift
toward California and the West has sometimes been discernible. Japan's NEC used to
view Boxborough as its center of U.S. personal computer operations; now a "merger" of
these into California's Packard Bell has displaced much of its activity — and personnel
— westward.

New England Journal of Public Policy

Why Worry? Does It Matter?

Of course, one possible response to this litany of the inability of Massachusetts to
spawn big businesses with large stock market values is: Who needs large firms any-
way? Small is beautiful. Emerging entrepreneurship is the wave of the future. True, the
early nineties recession was scary, but we now have a very low unemployment rate,
total nonagricultural employment has finally recovered to its previous 1988 peak,7 real
estate values and rentals are rising, and confidence is high. True, venture capitalists
pour more money into California, but Massachusetts is still the number two recipient of
venture dollars in the nation. Moreover, we have the mother of all creators of enterprise,
MIT — celebrated as godparent to the creation over the past half century of 4,000 cur-
rently active enterprises, 1,065 of which have headquarters in Massachusetts.8 If com-
monwealth firms are conspicuous by their (near) absence from the lists of the largest,
Massachusetts companies are well represented in the small and medium-size enterprise
scoreboards of Forbes, Inc. Magazine, and Business Week, albeit with one notable weak
spot that is perhaps the consumer-marketing obverse of the state's strength in MIT-
spawned producer technology. In Entrepreneur's list of 100 Fastest Growing Franchises,
only one Massachusetts firm is to be found: Dunkin' Donuts, now British owned.

To the question "Who needs large firms anyway?" can be appended another, to wit:
"Who needs headquarters?" Boston's own former labor secretary, Robert Reich, stirred
this controversy a number of years ago in the context of the (then) feared disappearance
of corporate headquarters in the United States as a result of the (then) feared conquest
of U.S. industry by foreign firms, especially the (then) invincible Japanese. In his much
commented upon article, "Who Is Us?" in the Harvard Business Review of January-
February 1990, Reich asserted that Americans should not worry about whether or not
American firms were headquartered in the United States, since what was really impor-
tant was whether jobs and technological know-how were located in — or transferred to
— America. Whether companies were identified as American or Japanese or Swiss or
whatever was irrelevant because footloose, anational multinational corporations run by
supranational cosmopolitans would locate activities around the world wherever those
activities were most productive or efficient, regardless of nationality of ownership,
management, or headquarters location. Thus, while one might reasonably worry about
the quality of the American labor force, or worker education, or economic infra-
structure, neither sleep nor sympathy (nor public policy, aka subsidies or tax breaks)
should be lost on American companies or their headquarters personnel or headquarters
locations.

Of course, people do worry about whether "their" firms have a large or small volume
of sales, or a large or small total value in the marketplace, or whether a Gillette, DEC,
Bank of New England, Shawmut ("They were more concerned with local customer
service"), Blue Cross, or Tufts-New England Medical Center is taken out of town, or
out of existence. They worry so much that Raytheon and Fidelity can obtain special tax
breaks in return for not leaving town, and they worry so much that they try to use the
political process to subvert the notion that the United States is a single economy and to
obtain special government protection for competitively threatened banks, nonprofits,
electric and telephone utilities, and whatever else seems more "us" than "them."

Headquarters location, in the real world, still defines an essential part of who is us
versus who is them. On a national level, the Reichian vision of the unimportance of
headquarters in a world of footloose multinationals quickly gave way to the promotion

of U.S. businesses by Ron Brown and Laura Tyson. Somehow, Texas Instruments,
Boeing, General Motors, Ford, Chrysler, and Caterpillar did look more like America
than did Nippon Electric, Airbus, Toyota, and Komatsu. Locally, whether State Street
will report to New York or Tufts-New England to Nashville is treated as news, precisely
because something seems to threaten us — namely, them. And the Wang of the time of
The Doctor is still missed. Somehow neither the people of Lowell nor the aficionados
of the arts in Boston can feign indifference to that firm's demise.

Still, while simple fear of change, or of foreigners, or of New Yorkers, or of non-New
Englanders, or of for-profits or of multinationals may be lampoonable offenses, both
self-serving and intellectually challenged, there is significance lurking behind the pas-
sion. There is, in fact, good reason for citizens of a city or region that has high aspira-
tions to care about whether there are large firms and organizations headquartered there.
The core of the reason has to do with wealth creation. Headquarters is where the money
tends to be. And, although the Puritan tradition would have Boston not be too blatant
about it, being the Athens of America, let alone the hub of the universe, takes money.

One lesson of many centuries of history is that great art, great architecture, great
public works, and great institutions are built on great fortunes. In today's world, great
fortunes are built on great business institutions, which in turn are built on scale and
scope, according to the title of the seminal work on the roots of long-term enterprise
success and failure by Harvard Business School's Alfred Chandler.9 It is no accident
that Seattle's opera is flourishing while Boston's has become next to nonexistent. There
are many Microsoft and Boeing millionaires to finance it. A whale is a whale, and an
assemblage of minnows does not a whale make.

As products and services inevitably mature and spread to mass markets, and to glo-
bal markets, scale, or size, is necessary to achieve the lowest-cost competitive positions
that are the enduring barriers to competitive entry. These in turn permit high profit
margins, high wages and salaries, high stock prices — and wealth. Invention, entrepre-
neurship, and flourishing small companies are a wonderful start, but if there are no, or
exceedingly few, second acts, prosperity based on such a potentially evanescent base is
fragile and unstable. As Chandler and others have shown, U.S., German, and Japanese
firms led the world in achieving corporate scale and scope, first within national bound-
aries, then globally. This rise and development of large enterprise enabled these nations
to become the wealthiest economies of the world. In contrast, much of the decline in
Britain's industrial position came from an inability or unwillingness of small and me-
dium-size enterprises to make the capital, management, and psychological commit-
ments to become truly world class and world scale.

Moreover, in the modern world, initial success in building big business arguably
begets more success later. The underdog-beats-big-baddie myth — David upsets
Goliath, tiny mammals replace big dinosaurs, Apple vanquishes IBM, and so on — is so
deeply entrenched in our culture and consciousness that we hardly notice that, more
often than not, it is the Apples, not the IBMs, that become the endangered species.
Established firms, at least those with alert management, have learning, cost, distribu-
tion, and brand-name advantages with which they can "preempt the market by dispers-
ing their models along quality space," to cite Joanna Stavins in her study "Firm Strate-
gies in the Personal Computer Market: Are Established Brands Better Off?"10 Chandler
found that in recent history, it is Goliath that has usually bested David in pharmaceuti-
cals, chemicals, and computers, and noted that "the ability of large established firms to
use learned routines and integrated capabilities to enter related product markets helps to

New England Journal of Public Policy

explain a significant change in the ways in which major new industries are coming to be
created. Established firms in recent years have played a greater role in the creation of
new industries than entrepreneurial start-ups because the time and cost of commercial-
izing technologically complex new products and processes is not in invention or re-
search. It is in development — in the long and complex course required to produce
goods in large enough quantity and with high enough quality to be purchased by a sub-
stantial number of customers in national and global markets."11 Such words may ring in
our ears as more local Lotuses, and biotech startups, and hospitals, and HMOs, and
financial service boutiques disappear into, or on account of, big business competitors
headquartered elsewhere.

Furthermore, to become world-scale in the global market, it is a distinct advantage
for firms to have already become large at home: it is large firms, dominant and com-
petitive in home markets, that can afford the often sizable overheads and investments
involved in seeking out foreign markets, conducting lengthy negotiations with prospec-
tive partners and agents, overcoming distance, language, and cultural barriers, and
adapting to unfamiliar mores. Boston small business may be doing well locally, but it
has almost totally missed some key international opportunities. A case in point: be-
tween 1991 and 1995, the Philippines moved from turtle to tiger in Asia. The turn-
around in that country's economy presented a major international opportunity. Some
firms seized it: exports of California companies to Manila trebled. However, exports
from Massachusetts, already tiny, declined.12 Another: following the fall of the Berlin
Wall, hopes were high that Massachusetts environmental firms would clean up, and
clean up in, East Germany, Poland, Russia, and elsewhere in the ecological wasteland
left by communist misrule. Alas, they have been bypassed by those countries and their
new governments, which have sought out large American and European environmental
services and waste management firms (not headquartered in Massachusetts) with broad
systems, and financial and management capabilities.13 Moreover, as is often the case
with small and medium-size firms in many industries, it was not every Massachusetts
environmental firm that even wanted to be bothered with the cultural and currency com-
plexities of doing business outside the United States.

Hosting Big Business Is Good, Housing Its Headquarters Better

Many states and localities implicitly acknowledge the wealth-creation effects of big
businesses through their assiduous efforts to court large enterprises to locate factories,
distribution centers, R&D laboratories, and the like in "their" region. Indeed, the rise of
the new South and the Sun Belt is intimately bound up with a redrawing of the U.S. big
business map. The success of Charlotte, North Carolina-based Nucor in many southern
locations, the Research Triangle's attraction of major facilities from Canada's Nortel
and Britain's Glaxo-Wellcome, BMW's location of its gleaming plant in South Caro-
lina, Motorola's branch-plants in Phoenix, Intel in New Mexico, and Mercedes's new
factory in Alabama, are but a few of many examples.

Whole countries have sometimes adopted basing their prosperity on welcoming
"others'" firms. The post-World War II prosperity of Belgium is in large measure a
testimonial to the benefits of hosting the branch-plant activities of companies headquar-
tered elsewhere. The demonstrations and protests triggered by the sudden closing of a
plant by France's Renault suggest, however, the potential instability of such an eco-
nomic development strategy. When the going gets tough for firms, the periphery some-

how seems to be downsized before the headquarters center. (Does anyone remember
GM Framingham?)

If plants, distribution centers, and the occasional lab can bring jobs and tax revenues
to a region, having companies locate their headquarters there is even better, especially
if, as for Boston and Massachusetts, high costs of energy, transport, housing, and labor
limit or preclude any major success in the industrial hospitality business. Moreover, it is
at headquarters where the highest-skill, highest-income, and highest-tax-base jobs are
and will remain.

Headquarters business and organizational functions are extremely resistant to decen-
tralization and geographic dispersion. Like it or not, research and development, infor-
mation gathering and information technology, financing and financial management,
accounting and control systems, logistics and purchasing, not to mention corporate
legal, governmental affairs, and human resources functions, and more, all have central
roles to play in the hub connecting the spokes of any sizable organization. In spite of
much talk of decentralization and internationalization in the business literature, R&D,
for example, remains largely a headquarters activity. One study of the world's largest
industrial enterprises found that 44 percent of parent companies reported that they had
no overseas R&D expenditure, and another 13 percent reported that overseas R&D
accounted for less than 5 percent of their total R&D expenditure.14

All these functions are subject to the need for an agglomeration of critical mass and
for rapid face-to-face communication among people. All the marvels of modern tele-
communications, fax machines, aviation, inter- and intranets have not and will not
change the fact that many more jobs in such activities are found at places that are rec-
ognizable as headquarters than in branches, subsidiaries, factories, and service centers.

A disproportionate number of headquarters hub jobs require high skills, which mean
high pay, high taxes paid by the people who work in headquarters hubs, and, not least,
high contributions to the community. It is not an accident that the Bank of Boston has
been particularly involved in inner-city education and community development. It's not
just that it hires here, but its managers have to live and walk on the streets here or
nearby. When Wang and DEC were successful, they could embark on inner-city initia-
tives that were later unsustainable. Before "power shifted ... to out-of-towners," Bos-
ton had the Vault, the coordinating committee consisting largely of CEOs of firms head-
quartered here, which took on missions of business social responsibility and even politi-
cal compromise in order to "make the city work."15

Headquarters cities also tend to be where firms' owners are concentrated; owners are
not just founders, but include their families and descendants, and managers and em-
ployees who earn or take equity in their firm. And owners are the sources of fortunes
needed to endow and invigorate a region's cultural life. Boston got a Wang Center just
in the nick of time. Could it not use a few more such endowments?

What Should Be Done?

First and foremost, managers of firms and other economic organizations who care about
Boston and Massachusetts — and there are many who would rather live here than in
Silicon Valley or New York — should bestir themselves even, and perhaps especially, if
they are managing successful enterprises. Managers, consultants, business scholars, and
gurus alike might ponder the phenomenon of the tendency of smaller, successful Massa-
chusetts firms hardly ever to make it into the league of world scale, scope, and global

New England Journal of Public Policy

headquarters. (Indeed, it is one of the ironies of our situation that few states are as well
populated by business management experts, much of whose expertise is supposed to
help acorns grow into oaks, as the commonwealth.)

Of course, one cause of aborted business trajectories is hardly new. Not long ago I
had the occasion to ask Ken Olsen an undiplomatic question following a talk he gave at
the Colonial Inn in Concord: "What is your diagnosis of what caused DEC to stumble?"
His answer rings all too true: "Too much past success." The ancient Greeks called it
hubris. Despite the chastening of the recession, and especially because of the recovery,
a little too much of it still hovers around Boston. The attitude seems to be "Since we
have been at it so long, 'our way' of doing medicine, or banking, or mutual funds
(which we invented, after all), or high-tech, or indeed education, must be the right way
to do it." When I hear such sentiments, I am too often reminded of the maps of the
world that used to be sold in Harvard Square when I was an undergraduate in the 1960s:
the parody Mercator projection with Cambridge, Boston, the Cape and Islands, Maine,
New York, and sometimes the Grand Tour parts of Europe, portrayed very large, and the
rest of the United States of America, and the world, pictured very small.

Managing and making it in Massachusetts in the next century will require more than
a federally financed tunnel to the twenty-first century. It will require a transcontinental
(California is our main competitor, and not just in high-tech) and transnational vision.

A Public Policy Response?

One thing the Massachusetts economy does not need, but is in the process of acquiring,
is a public policy and a political climate of institutional protectionism whose aim is to
keep out New York bankers, Tennessee hospital managers, Canadian electricity provid-
ers, and whoever. Alas, the lesson of investment protectionism the world over is that, at
best, it provides a short-term defense of the status quo and, at worst, leads manage-
ments to compound past inertia with yet new inefficiencies made possible by the new
administrative and regulatory barriers to competition. Creating barriers behind which
local institutions can continue current or create new inefficiencies increases the prob-
ability that their demise will only be more painful in the future than it would be today.

Not only do governmental barriers to competition breed inefficiencies, but Massa-
chusetts protectionism also stores up the prospect of future retaliation. New York can
surely be as creative at finding reasons why BankBoston or Fleet or State Street itself
could someday be denied an acquisition target there as the commonwealth is in protect-
ing State Street from "foreign" predations. Worse, building a wall around one's garden
shuts one in, just as, or more effectively than, it shuts others out. Indeed, the demise of
the Bank of New England was almost certainly partially the result of earlier attempts to
"ring fence" the home team. Protecting New England banking from outsiders encour-
aged New England banks to put all their eggs in one regional basket, with the disastrous
results that are only too well known.

What public policy can do is to keep us from becoming Taxachusetts again, to make
the commonwealth hospitable to enterprises of all sizes and from all origins, to get rid
of the kind of regulation that keeps our electric costs at four times the kilowatt-hour rate
of electricity delivered at the Canadian border, and to make, and then keep, our commu-
nications and transport infrastructure world class.

Public officials also need to communicate and to persuade the public that such steps
are useful and necessary. They must also establish more open processes to ensure that

they do not end up in the kind of unproductive political stalemates in which our region
seems to specialize. To take but one example: headquarters managers must fly a great
deal, and getting to Logan Airport is less than a joy for many. Hanscom use and expan-
sion would be part of a solution to the problem, but community mistrust of Massport is
at such a level that this bottleneck to world-business expansion appears destined to
become far worse before it gets better.

An all-out effort to improve education, and to link it to the modem, technological
business world would be in order. Too much of the Massachusetts education establish-
ment seems wedded to 'sixties dogma about the desirability of "Resisting the Corporate
Agenda in Higher Education" (the title of a recent teachers union conference) rather
than to recognizing the real problem, which is that Massachusetts has too few truly
giant corporations and too few students prepared to make their way in a capitalist
world.

In addition, public officials might exercise leadership by attempting to inspire the
Massachusetts polity with a desire for true economic excellence. This might take politi-
cal courage. In Communist China, leaders can actually go around saying things like 'To
get rich is glorious." Here, such a statement would likely be the butt of media ridicule
and qualify its maker to be disinvited from speaking engagements at noted universities.
Can one imagine politicians actually saying kind words about big business and wanting
their headquarters here, and not only about entrepreneurial start-ups? This could end up
going well against the grain of the commonwealth's already abundant antibusiness,
populist attitudes, attitudes which political leaders reinforce not only directly by their
attacks on "profits" (as if the state did not get a slice of those evil profits, with which it
then pays politicians' and bureaucrats' and teachers' and professors' salaries), but indi-
rectly by their stoking popular cynicism toward "capitalism" via expedient, but ulti-
mately market-perverting, corporate-welfare tax breaks and protections from takeovers
for specific firms and institutions. Promoting Boston as a headquarters city, and Massa-
chusetts as a headquarters state, is not the same thing as reflexive favoritism toward
whatever wheel squeaks loudest.

Indeed, there is little that is more embarrassing to those who wish a flourishing of
business and wealth creation in the commonwealth than the spectacle of what
Theodore Forstmann has called the "statist businessman" lobbying government for
subsidies for his own firm and for penalties and regulations for competitors.16 Such
sowing of the political process to "game" the market will reap the whirlwind of a more-
than-understandable future backlash against "greedy, self-interested business," even
when the main victims of corporate welfare may be other competing businesses. Per-
haps a modest proposal is in order: a most favored nation, or company or organization
(for nonprofits can play this game as well) clause which, every time a tax break or a
subsidy is handed out to a company out of fear that it, too, might disappear from Massa-
chusetts, would ensure that equivalent benefits were made available to all other busi-
nesses and institutions in the state.

The most important task of the managers of commonwealth businesses and other
economic organizations is not to go hat in hand to government for protection from out-
siders but to demonstrate the dynamism and success of their enterprises. To modify
slightly a famous statement by a former governor of the commonwealth, the business of
business ought to be business. Ultimately, whether Boston becomes a branch-plant town
depends on the vision and action of Massachusetts managers. **

New England Journal of Public Policy

Excerpts from this article appeared in Focus, The Boston Globe, April 13, 1997.

Notes

1. "Shareholder Scoreboard," Wall Street Journal, February 27, 1997.

2. Joan Vennochi, "Locking Up the Vault," Boston Globe, April 2, 1997, C1.

3. Ted Hampton, "Cigna Buys Healthsource of N.H.," Boston Globe, March 1, 1997, A7.

4. Lisa Gubernickand Ashlea Ebeling, "I Got My Degree through E-Mail," Forbes, June 16,
1997, 84-93.

5. AnnaLee Saxenian, Regional Advantage: Culture and Competition in Silicon Valley and
Route 128 (Cambridge: Harvard University Press, 1994).

6. Michael E. Porter in collaboration with Monitor Company, Inc., The Competitive
Advantage of Massachusetts (Cambridge: Monitor Company, 1991).

7. Massachusetts Division of Employment and Training, "Employment Statistics" (CES-
790), at www.magnet.state.MA.US/det/1MinFo.htm, December 1997.

8. Economics Department, BankBoston, MIT: Impact of Innovation (Boston: BankBoston,
1997), http://web.mit.edu/newsoffice/founders/introduction.html.

9. Alfred Chandler, Scale and Scope: The Dynamics of Industrial Capitalism (Cambridge:
Harvard University Press, Belknap Press, 1990).

1 0 . Joanna Stavins, "Firm Strategies in the Personal Computer Market: Are Established
Brands Better Off?" New England Economic Review, November/December 1995, 13-
24.

1 1 . Alfred Chandler, "Organizational Capabilities and the Economic History of the Industrial
Enterprise," Journal of Economic Perspectives 6, no. 3 (Summer 1992): 97.

12. Statistics from the Accelerated Export Enhancement System (AXES) of the Massachu-
setts Institute for Social and Economic Research, MISER Foreign Trade Database,
University of Massachusetts Amherst (as cited in Jennifer Sioson, "Massachusetts
versus California Trade to the Philippines," paper for the course Massachusetts in the
Global Economy, December 11, 1996.

13. Vincent Rocco, "The Massachusetts Enviro-tech and Enviromental Services Industry in
Eastern Europe," presentation in Massachusetts in the Global Economy, November
1996.

14. R. Pearce and S. Singh, Globalizing Research and Development (London: Macmillan,
1992).

15. Vennochi, "Locking Up the Vault."

16. Theodore J. Forstmann, "The Paradox of the Statist Businessman," Cafo Policy Report,
March/April 1995.

Institutional Design Rethinking State
and Regulatory Certificate of

Performance Need Programs

Robert B. Hackey, Ph.D.
Peter F. Fuller, MLS, MPA

The success of state efforts to control rising health care costs depends on the incen-
tives contained in the legislative design of regulatory policies and in the adminis-
trative capacity and autonomy of state agencies. States have regulated the con-
struction and expansion of health care facilities and services for more than two
decades through "certificate of need" (CON) programs designed to limit the diffu-
sion of expensive new medical technologies and to avoid the duplication of health
care facilities. Although the cost-control record of state certificate of need pro-
grams has been widely criticized, Rhode Island's experience with a reformed CON
process from 1985 to 1995 suggests that properly designed capital expenditure
controls can impose order on the rapid diffusion of new medical technologies.
Staunch political opposition from health providers, however, raises serious ques-
tions about the ability of state officials to implement such reforms. In the end,
Rhode Island's experience with capital expenditure regulation in thel980s and
1990s underscores the importance of institutional design and policymaking capac-
ity on regulatory performance.

The 1974 passage of the Health Planning and Resource Development Act, Public
Law 93-641, marked the federal government's first comprehensive effort to regu-
late the behavior of health providers. While earlier federal planning efforts in the 1960s
lacked teeth, PL. 93-641 required hospitals to obtain a certificate of need (CON) from
state health planning agencies before undertaking significant capital projects. State
CON programs required applicants to demonstrate both the need for their projects and
their consistency with goals of an overall health system plan. Through the CON pro-
cess, state planners sought to impose orderly development on the health care industry,
expand access for the poor and in geographically underserved regions, reduce duplicate
and underutilized services, and above all, control health care costs. In the eyes of their
critics, however, CON programs have stifled competition, failed to control costs, and
had little effect on access to health care.1 Opposition from health providers, coupled
with recurring doubts about the cost-control record of state and local planning agencies,
led to the termination of federal support for health planning in 1986.2 The end of federal
support for health planning produced a range of responses at the state level. Although
some states replaced federal dollars with state funds, and a few states increased their

Robert Hackey, assistant professor of political science, University of Massachusetts
Dartmouth, is a senior research associate at the university's Center for Policy Analysis.
Peter Fuller, former program manager, Trauma Care Systems Development Project, Rhode
Island Department of Health, is associate director for operations, Seekonk Public Library.

New England Journal of Public Policy

regulatory efforts by strengthening existing CON statutes, thirteen states abandoned
health planning and certificate of need activities altogether after 1986. The prevailing
view of state capital-expenditure controls is summarized by Randall Bovbjerg, who
concludes that "the evidence that CON in practice has accomplished any useful social
objectives is very weak."3

On closer inspection, however, certificate of need programs offer several lessons for
policymakers. The design of regulatory institutions structures the incentives and oppor-
tunities for state officials, industry groups, and other interested parties in the regulatory
process. In most instances, the creation of CON programs represented a departure for
the states from their traditional role of licensing health providers to a more active regu-
latory mode. The development of state CON programs required legislatures and health
bureaucracies to rethink the limits of public authority and to develop new state capaci-
ties. As such, state efforts to control health care costs through capital-expenditure con-
trols afford an opportunity to examine the impact of institutional design on policy de-
velopment and implementation.

Beginning in 1984, Rhode Island established an aggregate ceiling on capital costs
subject to certificate of need review, known as the CONCAP, in an effort to control
hospital capital expenditures and rationalize the diffusion of new medical technologies.
Despite a documented record of cost containment, a proposal to eliminate the state's
capital budget cap passed the General Assembly with broad-based support from the
executive branch, the hospital industry, and third-party insurers a decade after its intro-
duction. We explore the political evolution and programmatic success of CON in Rhode
Island through the use of data from a series of semistructured, open-ended interviews
with public and private officials conducted during the summer and fall of 1992.

All the participants in the state's CON process, including representatives of Blue
Cross, Ocean State Physicians' Health Plan, the Hospital Association of Rhode Island,
the state Health Services Council, and the state Department of Health agreed to be
interviewed for this project. To assure their expression of their candid opinions, respon-
dents were guaranteed anonymity. Data on the performance of state CON programs
over the past decade and state and national data on the fiscal health of the hospital in-
dustry are also included to place Rhode Island's cost-control record in both a regional
and a national context. In retrospect, the rise and demise of Rhode Island's innovative
controls on capital expenditures for health care providers illustrate the constraints fac-
ing state regulatory agencies in an uncertain political and fiscal environment.

A Framework for Analyzing State Cost-Containment Programs

In recent years, the rediscovery of institutions within mainstream political science has
underscored the significance of program design in structuring policy outcomes.4 The
design of the regulatory process and the scope of state enabling legislation shape both
the politics and the performance of state CON programs. As Lawrence Brown notes, "In
general CON labors under heavy burdens as a cost constraining technique, but . . . un-
der specific and favorable conditions it may rise above its liabilities."5 Several condi-
tions, in particular, influence the effectiveness of state controls on capital expenditures.
First, the presence, and level, of threshold requirements for reviewing capital projects,
for example, exempting projects costing less than $1 million from CON review, affects
the ability of state regulators to control capital-related costs by limiting the number of
projects subject to regulatory approval. Where review thresholds are high, only major

renovations or construction require state review. Conversely, if the review threshold is
set too low, state regulators are vulnerable to charges of micromanaging institutions, as
even minor repairs or service enhancements, such as upgrading existing telephone sys-
tems, are subject to regulatory oversight. In 1992, review thresholds for hospital capital
projects in New England ranged from $300,000 in Vermont to $8.5 million in Massa-
chusetts.6 While several states required that all new equipment purchases undergo a
CON review, others exempted purchases of less than SI million.

Second, state CON programs can also foster discipline by establishing a budget con-
straint for decision makers; in an open-ended system, regulators have few incentives to
challenge the prerogatives of providers backed by supportive community groups.7 A
ceiling on capital costs forces decision makers to prioritize projects and approve only
those that offer the highest relative benefits. Unlike an open-ended CON process, the
regulatory process under a capital cap becomes a zero-sum game for providers in which
the approval of an additional proposal automatically reduces the pool of funds available
to other institutions. As David Young argues, "the failure of CON programs to control
costs is largely because of lack of competition for a limited pool of resources."8

Third, the success or failure of hospital regulatory efforts in controlling systemwide
costs also depends on the number of payers or providers subject to regulatory review. If
only acute-care hospitals are required to participaate in certificate of need review,
nonhospital providers, such as freestanding surgical centers, dialysis centers, diagnostic
imaging facilities, and similar ventures, may gain a competitive advantage that under-
mines support for the system. Furthermore, unless CON controls apply to nonhospital
providers, states find it impossible to control systemwide health care costs, for physi-
cians and hospitals have an incentive to shift care to unregulated nonhospital settings.
Since the scope of state regulatory powers is defined by statute, the ability of policy-
makers to contain costs through certificate of need review is ultimately a political ques-
tion.

Fourth, the external environment in which regulatory programs operate affects both
their performance and their long-term prospects for survival.9 The continuation of
health planning and certificate of need programs in more than thirty-five states after the
expiration of federal support for health planning in 1987 is a puzzle, for both state and
federal policymakers have increasingly favored market-oriented solutions rather than
regulatory ones over the past decade. State CON programs must balance the competing
and often contradictory expectations of service consumers with the needs of resource
providers who sustain their activities.10 This dependence on external resources leaves
public officials at the mercy of potentially hostile groups whose long-term interests
conflict with the state's desire to control costs.11 The recurring fiscal woes of many state
governments in the late 1980s and early 1990s produced an annual ritual in which agen-
cies scrambled to cope with threatened (or actual) cuts by squeezing out inefficiencies
or identifying new revenue sources.12 Although the statutory recognition granted to
government agencies, coupled with their established relationships with legislators and
support from clientele groups interested in controlling health care costs, for example,
third-party insurers, favor organizational survival, CON programs remain extremely
vulnerable.13 As regulatory programs that must wrestle with complex issues, state CON
controls are typically low in salience for the public at large.14 Furthermore, since capital
expenditure regulation impinges on the managerial autonomy of health providers, CON
programs often find themselves with few supporters and many critics.

Finally, the administrative capacity of state regulatory programs has a powerful

New England Journal of Public Policy

impact on policy outcomes.15 Specialized knowledge and expertise have become
prerequisites for the development of effective regulatory policies in the health care
industry. The complexities of the contemporary hospital reimbursement process,
coupled with the inherent difficulty in objectively evaluating the "need" for new health
care facilities and sophisticated new medical technologies, foster a technocratic deci-
sion-making process that relies on data, forecasts, and evidence of clinical outcomes.16
Many observers, however, remain openly skeptical about the ability of state govern-
ments to compete effectively with well-financed interest groups and policy think tanks
in developing and modeling the impact of various policy choices.17 Skeptics suggest
that the limited administrative capacity of American political institutions, particularly
those at the subnational level, represents a formidable obstacle to effective policy mak-
ing. State legislatures and bureaucracies were regarded for decades as backwaters of
cronyism and patronage politics. While times have changed, and state governments are
increasingly sophisticated in their ability to draft, implement, and evaluate policy
choices, the development of state administrative capacities remains uneven. In some
states, policy development lies in the hands of quasi-academic think tanks or working
groups in which well-educated, highly trained professional policy analysts apply the
tools of their trade to developing and assessing various policy options. In other states,
acquiring professionally staffed agencies remains a goal, not a reality, as key appoint-
ments are made without regard to policy expertise or prior experience in the field.

The professionalism and expertise of state agencies, however, depend on the re-
sources available for hiring and retaining talented staff.18 In particular, the adequacy of
state compensation and the level of staff support emerge as critical issues for building
institutional capacity over time. Unless they can compete for talent with the private
sector by paying comparable salaries, regulatory agencies find it difficult, if not impos-
sible, to hire skilled employees with professional training in law, public policy, and
health economics. Once hired, professionally trained staff must have sufficient re-
sources like space and administrative and computing support to compete with private-
sector lobbying groups and think tanks. In the absence of these essential resources, state
regulatory agencies are likely to serve as stepping-stones to the private sector, which
offers the most capable employees a chance to hone their skills before moving up to
more lucrative opportunities outside state government.19

Widespread departures from its top management positions can leave a regulatory
agency without a clear sense of direction, hardly a situation predisposed to the develop-
ment and implementation of innovative public policies. Sapolsky, Aisenberg, and
Morone's case study of hospital rate setting in New Jersey concluded that "it is less
difficult to bring together a talented group for designing a new program than to hold
one together for the arduous task of program implementation and refinement. The re-
ward for even a brief association with an interesting project is often a much better posi-
tion elsewhere."20 When a state's resources are overwhelmed by the private sector, the
stage is set for interest groups to dominate the regulatory process. Leadership stability
is also vital for the ongoing success of state regulation. Effective leaders can energize
an organization by clearly defining a unifying sense of purpose and mission and by
mobilizing support for their goals among significant external constituencies.21 Leader-
ship can take many forms, from charismatic public salesmanship to behind-the-scenes
efforts at coalition building. In either case, however, frequent changes in leadership can
create uncertainty among client groups concerning the agency's direction and policy
priorities. Under such circumstances, legislative leaders and interest group representa-

tives are reluctant to make long-term commitments to support the agency's agenda, for
new leaders or an interim administration may pursue a quite different agenda.22 As a
result, short-term administrators face a credibility gap — if others do not expect them to
remain in their positions long enough to carry out their stated goals, they find it diffi-
cult, if not impossible, to back new regulatory initiatives.

The specialization of state policymaking expertise includes both the degree of insti-
tutionalization in a state legislature and the division of labor among distinct working
groups or units in state government. State legislatures vary considerably in their degree
of institutionalization. While legislative service is a full-time job with possibilities for
career advancement in some states, in other states legislators serve only part time for
little pay and few perks. In addition, while some state legislatures have developed
highly differentiated committee systems that foster specialization among their mem-
bers, others have not.23 The extent of staff support for both committees and individual
members also influences the ability of legislators to serve as proactive players in policy
development.24 Part-time legislatures with limited staff support and few specialized
committees find it more difficult to develop and oversee specialized regulatory pro-
grams than full-time legislatures with narrowly defined committee jurisdictions and a
cadre of personal and committee staff.

The Political Evolution of Certificate of Need in Rhode Island

Although many groups have supported health facilities planning in Rhode Island over
the past three decades, each had its own vision of how the process should work. As a
small state with a population of just over one million persons, Rhode Island is home to
eleven acute-care hospitals, four of which are located in the capital city of Providence.
The Rhode Island Department of Employment Training and Security estimates that one
of every nine workers in the state is employed in the health care industry. Rhode
Island's hospitals are a major force in the state's economy. Data provided by the Hospi-
tal Association of Rhode Island (HARI) indicated that the state's hospitals employed
more than 23,000 people in 1994; Rhode Island Hospital (a founding member of the
Lifespan hospital network) is the state's largest private employer. Over the past two
decades, the hospital industry has emerged as one of the state's most influential lob-
bying groups whose paid lobbyists develop and track legislation affecting its member-
ship, testify at hearings, and coordinate grassroots lobbying campaigns with the
association's member hospitals. During the 1980s, hospitals grew displeased with the
CON process and chafed under the state's strict capital expenditure controls. HARI's
political advantages were compounded by the fact that until 1994 the 150 members of
Rhode Island's legislature served only part time and received only $5.00 a day for their
efforts; with little professional staff support available to individual members and com-
mittees, legislators are forced to rely heavily on testimony and information provided by
interested parties in formulating legislation.25

During the past decade, Rhode Island hospitals, like their counterparts in other
states, made a difficult adjustment from a system of retrospective, cost-based reim-
bursement to one in which providers are paid prospectively or at a steep discount from
quoted charges. By the end of the 1980s, however, Rhode Island hospitals were in a
precarious fiscal position. For example, they were found to have relatively low levels of
financial liquidity when they were compared with similar U.S. institutions.26 They
ranked forty-sixth in the nation in days of cash on hand and forty-seventh in their

New England Journal of Public Policy

overall operating margin.27 Capital spending particularly fell far behind both national
and regional averages, although Rhode Island's teaching hospitals had the eighth high-
est number of medical residents per thousand members of the population in the United
States in the late 1980s.28

Prior to the mid-1980s, Rhode Island's hospital industry had not witnessed the in-
tense competition that accompanied the expansion of for-profit hospital chains, man-
aged care, and alternative delivery systems. Until that time, the private health insurance
market was dominated by Blue Cross and Blue Shield of Rhode Island, which insured
more than 85 percent of the population not covered by government-sponsored programs
like Medicare and Medicaid despite modest inroads by two fledgling HMOs.29 Blue
Cross, in turn, was a key player in the state's prospective rate-setting program, which
determined both individual hospital budgets and an overall ceiling on hospital expendi-
tures each year. No preferred provider organizations operated in the state during the
1970s and 1980s. While four ambulatory surgical centers were licensed during the
1980s, two were limited to providing abortion services and gynecological surgery. Fur-
thermore, no for-profit hospitals or national hospital chains currently operate hospitals
in Rhode Island, although both Columbia/HCA and Tenet proposed to acquire nonprofit
institutions in 1996 and 1997. While Columbia/HCA's controversial bid to purchase
Roger Williams Medical Center failed, Tenet's proposed merger with Landmark Medi-
cal Center still awaits regulatory approval.

Rhode Island health planning has a long history dating back to the mid-1960s; pri-
vate planning efforts predated the passage of federal and state certificate of need legis-
lation. In general, hospitals have favored private planning initiatives that do not threaten
their autonomy and opposed planning functions lodged within the Department of Health
as unnecessary intrusions on medical practice. In 1968, Rhode Island became the sec-
ond state in the nation to regulate hospital capital projects. The legislature's decision to
regulate capital construction won the endorsement of the hospital industry and a special
legislative commission appointed to study the rapid increase in hospital charges during
the 1960s. At the time, hospitals viewed CON as a less onerous alternative to state rate
setting despite the inherent risks involved in ceding regulatory authority to the state.
Hospitals also favored CON as a means to limit competition in the state's health care
system, for "providers have seen some merit in entry barriers as a means of turf protec-
tion and therefore have generally given CON at least their tacit support."30 Blue Cross
and Blue Shield of Rhode Island, for its part, enthusiastically supported facilities plan-
ning as a means to control its costs in the past two decades. As the state's dominant
third-party health insurer, Blue Cross continued to hold more than 70 percent of the
nongovernment health insurance market in the early 1990s despite recent inroads by the
state's two largest health maintenance organizations, United Health Care (formerly
Ocean State Physicians' Health Plan) and Harvard Community Health Plan of New
England, formerly the Rhode Island Group Health Association. Unlike neighboring
states like Massachusetts, however, few business groups and other third-party payers
played a major role in health care policy debates during the 1980s and 1990s.31

In the early 1970s, Rhode Island's fledgling health planning programs received a
significant boost as a result of the federal government's decision to embrace health
planning and certificate of need as its principal cost-control strategy. Under an amend-
ment sponsored by Senator Claiborne Pell, the state was exempt from requirements
mandating local citizen planning boards to assess the need for proposed projects in the
context of statewide health plans. As a result, funds that were channeled to local health

systems agencies in other states were allocated to the Rhode Island Department of
Health (DOH), generating a windfall to support its nascent planning activities. The
department's early initiatives reflected a strong commitment to rational planning but
showed little sensitivity to the political ramifications of its policy prescriptions. This
political naivete was reflected in the development of the state's first comprehensive
health plan, which proposed a radical restructuring of health care delivery. The draft
health plan that was released to the public in 1980 immediately agitated providers,
which drummed up support in their local communities to meet the perceived threat. The
plan proposed, for example, to eliminate "excess capacity" in the state's hospital bed
supply and to restrict the number of surgeons who could practice in the state.32 Employ-
ees and patients of hospitals targeted for closure or service reductions jammed public
hearings across the state to plead their case.33

The public forums about the draft health plan were raucous affairs that drew hun-
dreds of local residents; at one meeting in southern Rhode Island, local police were
called to escort the planners out of town after a tumultuous hearing during which angry
residents charged that the state's proposal to close "surplus" hospitals would result in
layoffs for hundreds of local residents. As one DOH senior planner recalled, "In the
early years we didn't know what we were doing; we didn't look at the political obsta-
cles, just our rational models." After a dose of political reality, subsequent plans of the
department backed away from some of its more controversial proposals. Rather than
decertifying beds, the DOH elected to promote competition among health providers to
transform the state's hospital industry during the 1980s. In the decade after the publica-
tion of the state's first draft health plan, a combination of mergers, closures, and service
conversions reduced the number of licensed Rhode Island hospital beds by nearly 13
percent, from 3,461 in 1980 to 3,015 in 1993.34

Imposing Competition from Above

By the early 1980s, a growing body of evidence suggested that "CON laws and health
planning [had] made little difference in costs, quality, or access to health care."35 Al-
though the state's CON process provided for a case by case review of proposed capital
projects on the basis of need, in the absence of limitations on the number of new capital
projects, CON controls had a limited impact on systemwide costs. The limitations of
Rhode Island's existing CON legislation were readily apparent during the debate over
an application from Women & Infants' Hospital in Providence to replace its aging facil-
ity in the early 1980s. As one senior hospital administrator recalled, "No one had ever
envisioned the replacement of a hospital, but dropping out of the sky was a $50 million
project." In response, officials at the Department of Health called for efforts to
strengthen the CON process by imposing a statewide capital budget cap on all new
construction projects.36 The department's proposal to strengthen the CON process won
the endorsement of a special legislative commission, chaired by state representative
Anthony Carceri, to study health care capital expenditures. In its 1982 report to the
General Assembly, the commission argued that the "health care system, like individu-
als, must be held more closely to the discipline of a budget." In 1984, both chambers
endorsed a statewide capital expenditure limit with unanimous support for the Health
Care System Affordability Act (84-H-7103) despite opposition from HARI.

Two factors played a significant role in the legislature's decision to expand the scope
of certificate of need in Rhode Island. The DOH enjoyed unusual influence and prestige

New England Journal of Public Policy

within the state bureaucracy as an agency that provided unbiased and sophisticated
analyses. Federal planning funds, which exceeded $1 million per year in the late 1970s
and early 1980s, enabled the DOH to hire a cadre of planners and policy analysts to
develop a number of innovative databases on health care costs, utilization, and out-
comes. In addition, the department enjoyed strong support during the 1980s from sev-
eral prominent legislators and from the executive branch, which added legitimacy to its
policy recommendations. As one senior DOH official noted, these relationships "helped
a great deal in terms of support for our budgets and proposed legislation."

The Health Care System Affordability Act established a statewide ceiling on hospital
capital expenditure projects. Under the CONCAP, each certificate of need application
approved by the state's Health Services Council (HSC) reduced the amount available
for other projects; the cost of interest and depreciation for all projects under review was
not allowed to exceed the CONCAP amount negotiated annually by the hospital associ-
ation, Blue Cross, and the state Medicaid program. After 1984, all CON applications
subject to CONCAP review were evaluated in a single batch each year to foster a
comparison of each proposal. In addition to establishing a ceiling on total capital ex-
penditures in 1984, the enabling legislation required the HSC to review proposals for
(1) new facilities in excess of $600,000, (2) increases of ten or more acute-care beds or
10 percent of existing capacity, (3) the addition of services that increase operating ex-
penses by $250,000 or more, and (4) the acquisition of health care equipment requiring
an expenditure of more than $400,000.37 Finally, the 1984 legislation directed the state's
HSC to first review applications on the basis of need and then rank order each on the
basis of its relative merit. After this priority ranking was completed, each project would
be approved in order until the annual CONCAP budget was exhausted. The Health Ser-
vices Council, however, was not required to fully deplete the CONCAP negotiated by
the participants in the state's prospective reimbursement program — Blue Cross, the
state's hospital association, and Medicaid. Each certificate of need approval reduced the
amount available for other projects, thus creating a zero-sum game among applicants.
The actual dollar limit of the CONCAP reflects the estimated cost of the annual capital-
related operating expenditures, interest, depreciation, and leasehold expenses negotiated
during the state's prospective rate-setting process.

Rhode Island's amended CON process was designed to determine both the public
need and the affordability for each proposal. The initial review of a project is usually
conducted by one of the Office of Health System Development's two project review
committees, which make written recommendations to the full Health Services Council.
The HSC has the option of approving, rejecting, or modifying a proposal. The HSC
recommendation is then forwarded to the director of HSC for a final determination.
Although the director is free to accept or reject the recommendation, few of the
council's decisions have been overturned.

Two other types of review are designed to make the CON process more flexible and
responsive to both routine and unusual needs. Applicants may apply for expeditious
review of projects that are designed to meet emergencies and other urgent public health
needs. The CON statute also provides for an accelerated review of projects that present
a prima facie demonstration of need and affordability, for example, in the case of
projects proposing a one-for-one replacement of equipment. Projects approved under an
accelerated review are not subject to the CONCAP priority listing procedure, and they
are allowed to draw first from the amount budgeted by CONCAP. Both forms of priority
review have been criticized by providers for offering an unfair advantage to some appli-

cants, for institutions able to demonstrate that their projects fit the criteria for either
expeditious or accelerated consideration leapfrog over other projects on the HSC's pri-
ority ranking scale.

The Success of CON in Rhode Island

Current perceptions of CON's failure as a cost-control strategy are largely based on
assessments of program performance during the 1970s. Previous efforts to measure
CON program performance have been criticized for their inability to show that the
imposition of capital controls made a difference in either a state's level of capital ex-
penditures or the fiscal condition of its hospitals.38 Most studies confined their discus-
sion to the percentage of projects that were approved, denied, modified, or withdrawn.39
Rhode Island's CON process became more stringent after the adoption of the CONCAP;
the overall approval rate for CON applications fell from 84 percent in the five years
preceding 1984 to less than 70 percent from 1985 to 1990.40 Between 1990 and 1992,
the state Health Services Council approved twenty of the twenty-fix CON applications
it received from hospitals, but denied petitions to construct a bone-marrow transplant
facility and additional cardiac catheterization laboratories. Savings from hospital
projects that were either modified, denied, or withdrawn exceeded $68 million in capi-
tal costs and $25 million in annual operating costs from 1971 to 1986.41

While Rhode Island compares favorably with other states in this regard (see Table 1),
measurements of process say little about a program's effectiveness. Other indicators,
including equity financing ratios, occupancy rates, and capital-expense ratios, offer
better measures of the impact of CON on hospitals' capital-related operating costs.
Projects approved by the Health Services Council from 1984 to 1994 reduced hospitals'
interest expenses by increasing institutions' equity participation, or "down payment," on
new projects to nearly 40 percent of total approved capital expenditures.42 A higher
percentage of equity funding, in turn, constrains costs by reducing the expenses associ-
ated with servicing capital debts.

Various indicators of hospitals' fiscal health can be used to gauge the impact of
Rhode Island capital-expenditure controls, for CON programs can affect hospital invest-
ment patterns in several ways. First, CON review may deny institutions' applications to

Table 1

CON Application Review Outcomes, Selected States

Withdrawn,

Denied, or

State (years)

Approved (%)

Modified (%)

Maine (1982-1992)

295 (81.0)

69 (19.0)

364

New Hampshire (1982-1991)

69 (77.5)

20 (22.5)

Rhode Island (1 979-1 983)*

47 (83.9)

9 (16.1)

Rhode Island (1984-1992)

47 (72.3)

18 (27.7)

Vermont (1984-1993)

117 (88.6)

15 (11.4)

132

Sources: Maine Department of Human Services; New Hampshire Health Services;
Rhode Island Office of Health Systems Development; Rhode Island Department of
Health; and Vermont Health Care Authority.

New England Journal of Public Policy

build new facilities, add equipment, or expand services, resulting in a savings of both
capital costs and ongoing operating costs associated with the proposed project. Second,
CON approval may be conditional, in that hospitals may be required to modify their
initial proposal by lowering costs, meeting well-defined national standards, guarantee-
ing access to underserved populations and the uninsured, and fulfilling other goals de-
fined by the review panel. Furthermore, "the very existence of certificate of need acts as
a deterrent to frivolous or obviously misdirected projects. Few institutions are likely to
expend the time, energy, and money to traverse the complex certificate of need process
for a project which cannot withstand the test of public scrutiny."43

A comparison of various indicators of capital-related costs for New England hospi-
tals is shown in Table 2. Capital-related costs for Rhode Island's eleven acute-care hos-
pitals fell well below national and regional averages in the decade following the
enactment of the CONCAP. The capital-expense ratio describes the cost of interest and
depreciation relative to an institution's total operating expenses, since higher values for
the ratio indicate a higher level of indebtedness and lower values are indicative of both
fiscal health and fewer long-term obligations. The median capital expense ratio for state
hospitals (0.05) was the lowest in the region and the second lowest in the United States
in 1992, indicating that the state's hospitals had an unusually low level of debt relative
to their counterparts in other states.44 The second column in Table 2 presents the median
values of hospitals' debt- service-coverage ratio, which measures institutions' ability to
repay the costs of both interest charges and principal payments. Higher values indicate
a greater ability to meet their financing commitments; the debt-service ratio is also the
single most important indicator of debt capacity used by bond- rating agencies.45 While
the median debt-service-coverage ratio for Rhode Island hospitals exceeded the national
median, the state ranked fourth among its New England neighbors. The state's relatively
poor performance on this indicator, however, is not owing to high levels of capital
investment but to the fact that Rhode Island hospitals have a low net income relative to
institutions in other states as a result of the high proportion of Medicare and Medicaid
patients served by the state's nonprofit institutions.

The utilization rate of health care facilities also provides insight into the effective-
ness of Rhode Island's strengthened capital-expenditure review process. Since CON
programs subject proposed capital investments and service changes to a comprehensive

Table 2

Hospital Capital Expenditures in New England, 1992

Equity

Financing

Ratio

0.720
0.503
0.316
0.492
0.507
0.589

0.535

Source: W. Cleverly, 1993 Almanac of Hospital Financial and Operating Indicators
(Columbus, Ohio: Center for Healthcare Industry Performance Studies, 1993).

Capital

Debt

Expense

Service

State

Ratio

Coverage

Connecticut

0.057

5.57

Maine

0.071

2.96

Massachusetts

0.084

2.54

New Hampshire

0.088

4.40

Rhode Island

0.050

3.23

Vermont

0.074

4.36

U.S. Median

0.079

3.16

review process, states with effective CON programs would be expected to have, on
average, a more efficient use of existing facilities. Despite growing competition in
Rhode Island's health insurance marketplace and a national trend toward lower utiliza-
tion of inpatient services, the median occupancy rate for Rhode Island's acute-care
hospitals exceeded both the regional and national medians. The state's median occu-
pancy rate of 68.9 percent was the fifth highest in the nation in 1992. The high utiliza-
tion of existing health care facilities reflects the fact that Rhode Island did not experi-
ence a surge in the construction of ambulatory surgical centers, freestanding imaging
centers, and new hospital facilities following the termination of federal planning pro-
grams in 1987.

In addition, because projects must pass more stringent tests before institutions can
break ground or add new services, hospitals in states with aggressive CON programs
should be older than their counterparts in other states. Again, evidence indicates that
CON controls in Rhode Island have had a demonstrable effect. The median age of the
state's acute-care hospitals, 9.51 years, is considerably higher than the national median
and the median of all other states in the region except Connecticut. In 1992, the average
age of Rhode Island's hospitals' fixed assets was the third oldest in the nation.46

The effectiveness of Rhode Island's certificate of need process can be traced to a
steady expansion of the scope of projects subject to regulatory review. In 1978 the law
was amended to include most other health providers, including freestanding ambulatory
and surgical centers. Debates over the construction of the latter particularly proved to
be highly controversial in recent years, as the director has rejected proposals to build
additional for-profit centers in the state because of concerns about an existing overca-
pacity of outpatient surgical facilities and the potential impact of "cream skimming" by
the centers on the financial stability of existing institutions.

Change and Continuity in Rhode Island's CON Program

Rhode Island's success in controlling capital outlays would be expected to strengthen
the opposition of providers to the capital-review process and increase its vulnerability in
an uncertain fiscal climate. Although hospitals initially supported CON as a less oner-
ous alternative to rate-setting controls, by the mid-1980s the process significantly cir-
cumscribed institutions' managerial autonomy. Hospitals strongly objected to the
CONCAP process on the grounds that it unnecessarily limited their freedom to react to
a changing market for health services. CONCAP survived for nearly a decade without
major revisions through strong support from both the legislature and the senior manage-
ment of the Department of Health. From 1987 to 1992, the General Assembly made
several largely technical changes in the CON law. Health care providers gained an im-
portant concession in 1991 when the length of the review process was capped at 120
days (91-H-6712). The legislature also limited the scope of the CON program by raising
the financial thresholds for projects subject to review (91-H-6652) and by exempting
certain nursing and home health care providers from the process. In 1993, the legisla-
ture also exempted new state health care facilities from CON review (93-S-499). The
legislature, however, refused to approve wholesale exemptions for cancer treatment
facilities (91-S-1073) and for repeal of fees for CON reviews for equipment (91-H-
5599).

New England Journal of Public Policy

One critical challenge facing organizations lies in managing the transition from pro-
gram start-up to successful implementation.47 State government bureaucracies are par-
ticularly vulnerable to problems of program implementation, because budget cuts, inter-
est group opposition, and lucrative opportunities in the private sector often lead to a
revolving door through which employees use state employment as a training ground for
better-paying private- sector jobs. Innovative state programs are often victims of their
own success, for "the presentation of new ideas often brings the designers widespread
attention and career opportunities to serve in a larger jurisdiction . . . The reward for
creativity draws talent away from state government at the point when ideas are being
implemented and refined."48 The Department of Health's tendency to promote from
within was a critical element in preserving its commitment to CON, for it promoted the
development of an institutional memory rooted in health planning. During the 1980s
and 1990s, the DOH managed to attract and retain talented administrators and analysts
to oversee and refine the CON process. Senior department officials drew upon the cadre
of health planners that developed the state's health plans in the 1970s to assume leader-
ship roles. By the early 1990s, several officials in the senior management team, includ-
ing the deputy director, the associate director for health services regulation, whose
office oversees the CON program, and the chief of the Office of Health Systems Devel-
opment had fifteen or more years' experience with health planning and facilities regula-
tion.

Political support for CON, however, eroded in the early 1990s. As Rhode Island's
economy stumbled into a recession, state agencies were forced to cope with successive
rounds of budget cuts, personnel layoffs, and furloughs.49 The Hospital Association of
Rhode Island, for its part, had sought to modify the CONCAP law since its passage,
arguing that the statewide expenditure ceiling "could constrain the retooling process
necessary for hospitals to adjust to the new [competitive] environment." HARI's 1988
Environmental Assessment for the Hospitals of Rhode Island noted "growing disillu-
sionment with many aspects of certificate of need and particularly with the CONCAP
program" among its members.50

The ongoing opposition of the health care industry was amplified by a growing anti-
regulatory sentiment in the state's business community. Business leaders had been ex-
pressing a concern over the antibusiness reputation of the state, which, it was widely
believed, adversely affected the state's ability to attract new industry and investment.
The Rhode Island Public Expenditure Council, a watchdog group supported by several
of the state's largest employers, repeatedly cited unwarranted government regulation as
detrimental to the state economy. In addition, critics charged that the CON process was
increasingly driven by political rather than policy considerations.51 In 1992 and 1993,
local hospitals viewed proposals to build freestanding surgical centers in three cities as
a direct threat to their survival. Several hospital mergers and compacts contributed to a
climate of uncertainty in the hospital industry and brought the Health Services Council
into the public limelight.

The HSC had always been a politically sensitive body. Fifteen of its twenty-two
members are appointed by either the governor or the leaders of the General Assembly.
Although members are not appointed for set terms and can be replaced any time, the
council was seldom subject to overt political pressure. One hospital vice president com-
mented in 1992 that "the process was always political, but it was discrete. Now it seems
that anything goes." In 1993, a total of nine HSC members — 41 percent of its total
membership — were replaced. The timing of the appointments also raised questions. In

June 1993, two members were abruptly replaced amid a heated discussion over a pro-
posal to build a rehabilitation hospital in Warwick. Less than six months later, three
members were replaced during an acrimonious debate over a proposed outpatient surgi-
cal center in the town of Johnston. The HSC itself may have added to the perception of
undue political influence by issuing decisions based on what appeared to be incompat-
ible objectives. In approving one proposed surgical center in Providence, the HSC
sought to promote consumer choice and competition. Several month later, the council
rejected a proposed surgical center in Johnston, citing concerns about the effects of
competition on St. Joseph Hospital. This struggle was played out before an increasingly
cynical public that had recently witnessed several major scandals involving highly
placed officials, including the former governor, the chief justice, and the chief court
administrator.

In 1994 Governor Bruce Sundlun asked the director of DOH to prepare legislation to
modify the CON process. According to Peter Dennehy, the governor's principal health
policy adviser, the Sundlun administration was increasingly concerned about the state's
slow rate of economic growth. In this climate, the governor viewed CON as a burden
for one of the few growth industries in the state. After a series of meetings between the
DOH staff and the governor's office, the Sundlun administration drafted legislation that
significantly revised the CON process by eliminating the CONCAP. The bill, 94-S-
2841, was introduced as part of the governor's legislative package and passed the Sen-
ate by a 45 to 0 margin and the House by 75 to 0 in June, ending Rhode Island's experi-
ment with global budgeting for hospital capital expenditures ten years after it began.
Although the types of projects subject to review by the Health Services Council remains
essentially unchanged, the number of projects eligible for approval under the revised
statute is unlimited. In the words of a former DOH official, the General Assembly's
action, at the governor's request, had "pulled the teeth of the CON program."

The rise and demise of Rhode Island's reformed CON process offers several useful
lessons for other states. First and perhaps foremost, Rhode Island's CON program dem-
onstrates the effectiveness, if not the necessity, of a budget cap for controlling health
care providers' capital expenditures. In particular, opportunities to "outmaneuver" the
Rhode Island's CON process were sharply curtailed after the introduction of the
CONCAP in 1984. A ceiling on capital costs forces decision makers to prioritize pro-
grams and choose the most cost-effective projects. Since the merits of each application
are judged relative to others, capital caps place much greater emphasis on the opportu-
nity costs of forgone projects. Unlike an open-ended CON process in which an unlimit-
ed number of projects could be approved if they demonstrated need, the CONCAP em-
phasis on statewide affordability created a zero-sum game for providers. Under these
circumstances, the approval of an additional proposal automatically reduced the funds
available for other institutions' projects.

Second, although the effectiveness of CON programs can improve with age as per-
sonnel gain experience and sharpen their skills, the ability of any regulatory initiative to
succeed in the face of opposition from the regulated industry depends on the institu-
tional capacity of the implementing agency.52 In the long run, the effectiveness of state
CON programs depends on their ability to recruit and retain key personnel. Building the
institutional capacity of state CON programs, however, requires a commitment from
policymakers inside and outside the implementing agency.53 The fiscal crisis that beset

New England Journal of Public Policy

the Rhode Island state government in the early 1990s buffeted the DOH even though the
program had a stable source of funding from providers' application fees. Furloughs,
wage and hiring freezes, and restrictions on the purchase of new equipment contributed
to sagging morale among program personnel. In addition, turnover had a significant
impact on the Office of Health Systems Development after the end of federal support
for health planning. Although Rhode Island had assembled an impressive health plan-
ning and regulatory infrastructure during the 1970s and 1980s, the state did not replace
federal health planning funds after the repeal of RL. 93-641. Without continued fund-
ing, several experienced planners and regulators left for jobs in the private sector; others
stayed with the department and received promotions to senior management positions.
The CON program managed to retain a core group of experienced analysts but was
unable to replace those who departed. Simultaneously, new productivity demands
emerged after legislative changes in 1991 shortened the review period from 210 to 120
days.

Providers, for their part, used their considerable resources to outlast the Department
of Health via an incremental approach to the review process. Several institutions reap-
plied successfully for CON approval after addressing the comments and critiques raised
by the Health Services Council and program staff during the review of the initial appli-
cation. Rhode Island DOH staffers do not dispute the fact that those who reapply often
win approval, but they nevertheless defend the process. As one senior policymaker
noted, "Sometimes tenacity pays off. It's not necessarily because the CON process has
been worn down, but because we're disseminating technology in a planned way." A
singular focus on the rate of project denials may be counterproductive, for the delibera-
tions that accompany the CON review process often lead to concessions by providers
that expand access to services or lower program operating costs. Modifications, not
merely rejections or withdrawals, must be seen as significant successes for CON pro-
grams, particularly if they increase hospitals' equity participation in proposed projects
or lead to reductions in staffing and operational costs.

In other cases, however, state officials were handicapped by the program guidelines
that had been established through collaborative planning arrangements. In 1993, for
example, the DOH was forced to approve two competing proposals to establish cardiac
catheterization laboratories at two Providence hospitals. The approvals came despite
concerns about the duplication of facilities and the clinical appropriateness of existing
procedures because both applicants had met the formal criteria established by the state's
Cardiac Care Advisory Committee (CCAC) in the mid-1980s. Under the criteria estab-
lished by the CCAC, a hospital could demonstrate that a proposed catheterization lab
was "needed" if the applicant's existing labs were operating at more than 90 percent of
their designed capacity and the utilization rate for all facilities in the system exceeded
80 percent. The CCAC, which was heavily dominated by cardiac surgeons who were
sympathetic to calls for expanded capacity, made it impossible for the Health Services
Council to reject projects on the basis of need, although several design and financing
issues led both institutions to reapply after the HSC rejected their initial proposals in
1992.

The legislature and executive branch consistently supported CON in Rhode Island
until the mid-1990s despite growing opposition from health providers. Although
changes in party control often lead to policy shifts, the 1984 election of Rhode Island's
first Republican governor in more than a decade had a negligible impact on DOH's
activities. Instead, department funding was nonideological and nonpartisan. In addition,

the active participation of such respected former legislators as Representative Anthony
Carceri on the state Health Services Council provided CON with greater legitimacy.
The retirement of several prominent legislative supporters of health planning, coupled
with a high rate of turnover among experienced members of the HSC in the early 1990s,
made the CON program increasingly vulnerable to attacks from its critics. The depar-
ture of the program's legislative patrons was particularly significant, for apart from
prominent party and committee leaders, individual legislators had no personal staff at
their disposal. In the context of a highly partisan legislature in which power was con-
centrated in the hands of the House and Senate leadership, members actively sought
advice from lobbyists and colleagues with acknowledged policy expertise on compli-
cated issues.54 With the retirement of several prominent CON supporters from the legis-
lature and the replacement of experienced members of the Health Services Council in
the early 1990s, the influence of the hospital industry grew steadily.

Third, CON also fell victim to what Martha Derthick and Paul Quirk have described
as "the politics of ideas."55 During the 1980s, both industry groups and senior state
officials within the Department of Health embraced market-oriented, competitive solu-
tions as the most effective means of controlling health care costs. Enrollment in man-
aged care plans rose steadily after 1980; by 1994, Rhode Island, with 27.6 percent, had
the ninth highest rate of HMO penetration in the nation. Entry regulation, by contrast,
was seen as a costly administrative burden on health providers and as an anticompeti-
tive device that hospitals could use to establish entry barriers for alternative delivery
systems.56 In contrast to other states, projects proposed by noninstitutional providers
were also subject to CON review in Rhode Island; elsewhere, hospitals sought to cir-
cumvent the process by acquiring equipment in stages, collaborating with private physi-
cians, and establishing parent corporations.57

CON programs, however, need not play a reactive role that stifles innovation. The
Rhode Island Department of Health initiated a request for proposals (RFP) process to
evaluate new submissions in identified areas of need in the late 1980s to assist institu-
tions in long-range planning. RFPs for magnetic resonance imaging (MRI), cardiac
catheterization units, rehabilitation services, and home health care were issued during
the 1980s to make the state's CON process more proactive in its orientation. The use of
RFPs balanced the demand for new technologies with the state's continuing emphasis
on cost containment. In the case of MRI facilities, a nonprofit network emerged as a
cost-effective solution to the desire of community hospitals to obtain advanced imaging
capabilities in the mid-1980s. A consortium of ten hospitals joined to share MRI tech-
nology through a mobile network that provided portable MRI units for each hospital at
least two days per week. Participating hospitals were spared the full cost of building a
permanent facility and hiring specialized staff, since radiologists employed by the net-
work performed and analyzed MRIs at each hospital. The result was a compromise
acceptable to all parties, as the state's tertiary care centers were allowed to construct
permanent MRI facilities, and institutions in outlying communities were afforded ac-
cess to the latest technology. The CON process simultaneously facilitated the diffusion
of new technology, minimized hospitals' financial obligations, and avoided unnecessary
duplication of equipment and health care personnel.

While a preset ceiling on moneys available for capital projects such as the CONCAP
can increase the effectiveness of capital-expenditure review, CON alone cannot bring
hospital costs under control, as capital projects account for only a small portion of insti-
tutions' total costs. Furthermore, as Arnold Relman noted nearly a decade ago, "The

New England Journal of Public Policy

chief cause of the cost crisis [in American medicine] is not so much the price as the
ever increasing volume and intensity of medical services being provided in outpatient
settings and hospitals."58 Physicians exercise considerable control over the volume of
services performed by hospitals; economic analyses of physician and hospital behavior
over the past two decades by Joseph Newhouse, Mark Pauly, and others suggest that in
the absence of well-defined and commonly accepted protocols for treatment, doctors
can essentially "create demand" for profitable diagnostic and surgical procedures to
maximize their incomes. In fact, the president of the American College of Cardiology
confirmed this suspicion when he noted that "important economic incentives are at
work in some of these increases in rate of procedure utilization."59

In recognition of the continued need for some regulation of health care capital ex-
penditures, both certificate of need programs and local health planning regained popu-
larity in the early 1990s after their more than a decade under siege. While some states
repealed their CON legislation in the late 1980s, Delaware, Florida, and Georgia all
expanded the scope of their CON programs between 1989 and 1991.60 While most ob-
servers share Sapolsky's view that "physicians, and more relevantly, hospital adminis-
trators, quickly discovered that the planning system could be outmaneuvered [and that]
... the system was not much of an obstacle once the consultants were called in to ad-
vise," the cost-containment record of capital expenditure regulation in Rhode Island
suggests that the prevailing wisdom about certificate of need has to be reexamined.61
The principal historical shortcoming of state CON programs was the placing of too
much hope on a program with multiple objectives to control health care costs.

The proliferation of new technologies, from magnetic resonance imaging facilities to
cardiac catheterization labs, provides a constant reminder that new, often expensive
procedures that offer institutions lucrative opportunities to increase patient volume are
constantly being created. A number of states imposed moratoria on new hospital con-
struction after the end of federal health planning subsidies in 1986. Such actions, how-
ever, are blunt tools for controlling the diffusion of new technologies because they did
not discriminate between projects with proven clinical benefits and demonstrated need
and less essential proposals. In contrast, CON imposes rationality on the diffusion of
new technologies and the introduction of new services by providing an institutional
mechanism to evaluate the demand for new capital. In the absence of CON, hospitals'
desire to increase their market penetration and reputation through the acquisition of
promising new technologies and renovations of maternity and outpatient surgical facili-
ties has the potential to devolve into a technological arms race between competing
institutions.

Using recent studies as a benchmark, state regulators are beginning to apply the
guidelines developed by outcome researchers in evaluating CON applications based on
the appropriate utilization of existing services. Recent studies of the appropriate utiliza-
tion of cardiac catheterization, coronary angioplasty, and other specialized diagnostic
and therapeutic procedures in recent years have been driven, at least partially, by reim-
bursement. In particular, payer status — private insurance, Medicaid, self-pay — is
strongly associated with patients' utilization of health services. Studies of cardiac cath-
eterization, carotid endarterectomy, and coronary angiography found that many surgical
procedures were either "inappropriate" or of "uncertain" clinical value.62 In the absence
of evidence that proposed services have a significant impact on patient outcomes, the
state may use the CON process to identify potentially unnecessary and costly facilities
and discourage the overutilization of specialized and expensive procedures.

Capital-expenditure review is likely to play a significant role in controlling costs
over the next decade, for after the demise of the Clinton administration's health care
reform package, the focus of attention has again shifted to the states. Rhode Island's
experience with CON provides evidence that a comprehensive approach to capital -
expenditure review, including an ongoing facilities planning process, "batch" review of
applications, and a cap on capital-related operating expenditures, offers policymakers
an effective institutional mechanism to control costs. In the wake of mounting evidence
that the adoption of new technologies has fueled health care inflation over the past
decade, capital-expenditure review still offers policymakers one of the few institutional
levers to shape the organization and delivery of health care services. **

We thank Bruce Cryan, John Donahue, Mark Peterson, Bill Waters, and Don Williams for
their helpful comments. We are indebted to John Dickens of the Maine Department of
Human Services, Edmond Duchesne of New Hampshire 's Health Services Planning and
Review Board, and Stan Lane of the Vermont Health Care Authority for providing much of
the comparative data on state CON program performance.

Notes

1 . F. A. Sloan, "Containing Health Expenditures: Lessons Learned from Certificate of Need
Programs," in Cost, Quality, and Access in Health Care, edited by F. Sloan, J.
Blumstein, and J. Perrin (San Francisco: Jossey-Bass, 1988), 44-70; D. Burda,
"CONspiracies to Crush Competition," Modern Healthcare, July 8, 1991, 28-29; M. E.
Kaplan, "An Economic Analysis of Florida's Hospital Certificate of Need Program and
Recommendations for Change," Florida State University Law Review 19 (1991 ): 475-
98; R. M. Roos, "Certificate of Need for Health Care Facilities: A Time or Re-exami-
nation," Pace Law Review 7 (1987): 491-530.

2. K. J. Mueller, "Federal Programs to Expire: The Case of Health Planning," Public Ad-
ministration Review 48 (1988): 719-725.

3. R. R. Bovbjerg, "New Directions for Health Planning," in Cosf, Quality, and Access in
Health Care, 206.

4. J. G. March and J. P. Olsen, "The New Institutionalism: Organizational Factors in
Political Life," American Political Science Review 78 (1984): 734-749.

5. L. D. Brown, "Common Sense Meets Implementation: Certificate of Need Regulation in
the States," Journal of Health Politics, Policy and Law 8 (1982): 482.

6. American Health Planning Association, Directory of Health Planning and Policy Agencies
(Oklahoma City, Okla.: AHPA, 1992).

7. D. W. Young, "Planning and Controlling Health Capital: Attaining an Appropriate
Balance between Regulation and Competition," Medical Care Review 48 (1991): 261-
293.

8. Ibid., 272.

9. H. Aldrich, "Environments of Organizations," Annual Review of Sociology 2 (1976):
79-105; J. Brudney and F. T. Hebert, "State Agencies and Their Environment:
Examining the Influence of Important External Actors," Journal of Politics 49 (1987):
186-206; C. Perrow, Complex Organizations, 2d ed. (Glenview, III.: Scott, Foresman,
1979).

10. W. R. Rosengren, "A Nutcracker Theory of Modern Organizations: A Conflict View,"
Sociological Focus 8 (1975): 271-282; J. D. Thompson, Organizations in Action (New
York: McGraw-Hill, 1967).

1 1 . Perrow, Complex Organizations.

12. S. D. Gold, The Fiscal Crisis of the States (Washington, D.C.: Georgetown University
Press, 1994); F. Leazes and R. Sieczkiewicz, "Budget Policy and Fiscal Crisis: A
Political Matrix," New England Journal of Public Policy 10 (1994): 71-82.

New England Journal of Public Policy

13. See R. D. Arnold, The Logic of Congressional Action (New Haven: Yale University Press,
1 991 ), for a discussion of these factors at the federal level.

14. See K. Meier, Regulation: Politics, Bureaucracy, and Economics (New York: St.
Martin's Press, 1985), for a discussion of the role of complexity in regulatory
policymaking.

15. R. B. Hackey, "Trapped between State and Market: The Politics of Hospital Reim-
bursement in the Northeastern States," Medical Care Review 49 (1992): 427-455.

1 6. L. D. Brown, "Technocratic Corporatism and Administrative Reform in Medicare,"
Journal of Health Politics, Policy and Law 10 (1985): 579-600.

17. H. M. Sapolsky, "Prospective Payment in Perspective," in L. D. Brown, ed., Health
Policy in Transition (Durham, N.C.: Duke University Press, 1987), 65-78; D. Stone,
"Why States Can't Solve the Health Care Crisis," American Prospect 9 (1992): 51-60;
and F. J. Thompson, "New Federalism and Health Care Policy: States and the Old
Questions," in Brown, Health Policy in Transition, 79-101.

18. H. M. Sapolsky, J. Aisenberg, and J. A. Morone, "The Call to Rome and Other Ob-
stacles to State-Level Innovation," Public Administration Review 47 (1987): 135-142.

19. Hackey, "Trapped between State and Market."

20. Sapolsky et al., "The Call to Rome," 135.

21 . J. W. Doig and E. C. Hargrove, Leadership and Innovation (Baltimore: Johns Hopkins
University Press, 1987).

22. E. B. Herzik and B. W. Brown, Gubernatorial Leadership and State Policy (New York:
Greenwood Press, 1991).

23. L. Fowler and R. McClure, Political Ambition (New Haven: Yale University Press,
1989); P. Brace, State Government and Economic Performance (Baltimore: Johns
Hopkins University Press, 1994); and W. K. Muir, Legislature: California's School for
Politics (Chicago: University of Chicago Press, 1982).

24. S. C. Patterson, "State Legislators and the Legislatures," in Politics in the American
States, 5th ed., edited by V. Gray, H. Jacob, and R. Albritton (Glenview, III.: Scott,
Foresman, 1990), 161-200.

25. M. Hyde, "Rhode Island: The Politics of Intimacy," in Interest Group Politics in the
Northeastern States, edited by R. J. Hrebnar and C. S. Thomas (University Park, Pa.:
Pennsylvania State University Press, 1993), 301-321.

26. B. Cryan, The Health of Rhode Island's Hospitals: A Financial Analysis FY1982 to

FY1988 (Providence, R.I.: Rhode Island Department of Health, Office of Health
Systems Development, 1989).

27. W. O. Cleverly, The 7993 Almanac of Hospital Financial and Operating Indicators
(Columbus, Ohio: Center for Healthcare Industry Performance Studies, 1993).

28. Hospital Association of Rhode Island, Environmental Assessment for the Hospitals of
Rhode Island (Providence: HARI, 1988).

29. L. G. Goldberg and W. Greenberg, "The Response of the Dominant Firm to Competi-
tion: The Ocean State Case," Health Care Management Review 20 (1995): 65-74.

30. Sloan, "Containing Health Expenditures," 69.

31 . L. A. Bergthold, "Purchasing Power: Business and Health Policy Change in Massachu-
setts," Journal of Health Politics, Policy and Law 13 (1987): 425-451; Hackey,
"Trapped between State and Market."

32. D. A. Rochefort and P. J. Pezza, "Public Opinion and Health Care Policy," in Health
Politics and Policy, 2d ed., edited by T. J. Litman and L. Robins (Albany, N.Y.: Delmar
Publishers, 1992), 247-270.

33. Ibid.

34. Three hospitals merged or consolidated during the 1980s with approval from the State
Health Services Council. Woonsocket Hospital and Fogarty Hospital merged to form
Landmark Hospital Corporation, resulting in the conversion of a significant number of
beds from acute care to long-term care. In Central Falls, Notre Dame Hospital, acquired
by Memorial Hospital of Rhode Island, was converted to an outpatient clinic. Finally,
acute-care services at the Providence unit of St. Joseph's Hospital were closed;
existing medical/surgical beds were converted to long-term-care and rehabilitation
services, and the hospital's emergency department was recast as an outpatient clinic.
Overall, the reduction in Rhode Island beds exceeded the national average over the

period by approximately one percent.

35. Bovbjerg, "New Directions for Health Planning," 206.

36. J. T. Tierney, W. J. Waters, and W. H. Rosenberg, "Certificate of Need — No
Panacea but Not Without Merit," Journal of Public Health Policy 3 (1982): 178-181.

37. The Health Care Affordability Act increased the threshold for CON review from
$150,000 for capital projects and $75,000 for increases in operating costs. The CON
statute (Rhode Island General Laws, § 23-15) currently requires the Department of
Health to review a wide range of capital expenditures for health care. These include
(1) health care projects with total capital costs exceeding $800,000; (2) equipment
with total capital costs exceeding $600,000; (3) new services with annual operating
expenses exceeding $250,000; (4) any new licensed facility or service regardless of
capital or operating costs; (5) certain tertiary or specialty care, e.g., organ transplant,
regardless of capital or operating costs; (6) any increases in licensed bed capacity; and
(7) any reallocation of more than ten beds or 1 0 percent of the licensed beds among
discrete services or facilities. These seven categories allow the Health Services Council
to review every major capital expenditure for health care.

38. H. M. Sapolsky, "The Democratic Wish: A Symposium," Journal of Health Politics,
Policy and Law 16 (1991): 821-822.

39. Bovbjerg, "New Directionsfor Health Planning."

40. J. X. Donahue, D. C. Williams, W. J. Waters, and B. A. DeBuono, "Affordability
Considerations in Certificate of Need Hospital Capital Expenditure Review Determi-
nations," Rhode Island Medicine 75 (1992): 347-350.

41. H. D. Scott, J. T. Tierney, W. J. Waters, D. C. Williams, and J. X. Donahue, "Certifi-
cate of Need: A State Perspective," Rhode Island Medical Journal 70 (1987): 341-345.

42. Donahue et al., "Affordability Considerations."

43. Tierney et al., "Certificate of Need."

44. Cleverly, The 1993 Almanac of Hospital Financial and Operating Indicators, 93.

45. B. Cryan, Hospital Capital Investment in Rhode Island (Providence, R.I.: Department
of Health, Office of Health Systems Development, 1993).

46. Cleverly, The 1993 Almanac of Hospital Financial and Operating Indicators.

47. F. J. Thompson, Health Policy and the Bureaucracy (Cambridge: MIT Press, 1981).

48. Sapolsky et al., "The Call to Rome," 135.

49. R. B. Hackey and D. C. Williams, "Hard Choices in Health Care Regulation: Monitoring
the Quality of Hospital Laboratory Services," in Ethical Dilemmas in Public Administrat-
ion, edited by L. Pasquerella, A. Killilea, and M. Vocino (Westport, Conn.: Praeger,
1996).

50. Hospital Association of Rhode Island, Environmental Assessment, 4.

51 . F. J. Freyer, "Politics Seen Affecting Health Council," Providence Journal-Bulletin,
October 26, 1993, A5.

52. See Brown, "Common Sense Meets Implementation," for a discussion of the adminis-
trative learning curves for CON programs, and Hackey, "Trapped between State and
Market," for a more thorough treatment of how institutional capacity shapes policy-
making.

53. D. Cohodes, "Interstate Variation in Certificate of Need Programs: A Review and
Prospectus," in Health Planning in the United States: Selected Policy Issues, edited by
the Institute of Medicine, Committee on Health Planning Goals and Standards (Washing-
ton, D.C.: National Academy Press, 1981).

54. Hyde, "Rhode Island: The Politics of Intimacy."

55. M. Derthick and P. Quirk, The Politics of Deregulation (Washington, D.C.: Brookings
Institution, 1985).

56. Burda, "CONspiracies to Crush Competition."

57. Roos, "Certificate of Need for Health Care Facilities."

58. A. S. Relman, "Assessment and Accountability: The Third Revolution in Medical Care,
New England Journal of Medicine 319 (1988): 1220-1222.

59. R. L. Frye, "Does It Really Make a Difference?" Journal of the American College of
Cardiology 19 (1992): 468-470.

60. C. Thomas, "Certificate of Need: Taking a New Look at an Old Program," Sfafe Health
Notes, no. 114 (1991): 1-6.

New England Journal of Public Policy

61 . Sapolsky, "The Democratic Wish: A Symposium," 822.

62. M. R. Chassin et al., "Does Inappropriate Use Explain Geographic Variations in the Use
of Health Care Services? A Study of Three Procedures," Journal of the Am erica n
Medical Association 258 (1987): 2533-2537; T. B. Graboys et al., "Results of a
Second Opinion Trial among Patients Recommended for Coronary Angiography,"
Journal of the American Medical Association 268 (1992): 2537-2540.

What Predicts Test of a Three-

Success in JTPA? Component Mode

Carolyn Ball, Ph.D.

The Job Training Partnership Act (JTPA), an education and training program to
assist the economically disadvantaged, is one of sixty or more programs Congress
is considering consolidating. This program had great success in the late 1980s
and early 1990s, but its value and support have been declining. This author exam-
ines whether JTPA should continue through a test of three employment theories:
discrimination, signaling, and human investment using data from Maine's JTPA
program. Findings indicate that while the program can reduce discriminatory bar-
riers and negative signals such as welfare status, it does not consistently succeed
as a training investment. Enrollment in an educational training program has a
negative effect on an individual's ability to obtain a job, a particularly important
finding, given the changes in welfare law. If it is to continue in some form, JTPA
must be revised to better serve clients who need education.

In 1982, senators Daniel Quayle and Edward Kennedy crafted the Job Training
Partnership Act (JTPA) (PL 97-300), which states administer by contracting with
service providers to train and place economically disadvantaged individuals. Ten years
later, Congress endorsed JTPA's continuation, increasing the emphasis on literacy and
remedial education.

To continue to receive contracts, providers must meet the program's wage and place-
ment performance standards. Based on its internal evaluation, JTPA has had a success-
ful track record in New England and elsewhere (see Table 1 in Appendix A). Measured
in program years that run from July 1 to June 30, it has consistently achieved about a 70
percent placement rate nationwide from Program Year (PY) '86 to PY '89, dipping
downward with the recession in PY '90. This success has led the National Commission
for Employment Policy to view performance standards as driving JTPA to success.1
Additionally, many scholars view performance standards as the best measure of pro-
grams.2

Yet even with this strong record, JTPA may encounter difficulty as Congress consid-
ers merging more than sixty education and training programs into block grants.3 With
the advent of the new welfare law, Temporary Aid to Needy Families (TANF), JTPA is
again under scrutiny. Congress will undoubtedly expect JTPA to provide greater
assistance to welfare clients, a group it has always served. Since TANF requires able-
bodied individuals to work while receiving welfare, JTPA will have less flexibility in
assisting individuals, about half of whom are welfare recipients. Quick placement will

Carolyn Ball, assistant professor of public administration, University of Maine, Orono,
teaches and conducts research in labor and personnel issues.

New England Journal of Public Policy

be a primary goal with education and training a secondary goal. Given these new pres-
sures, should JTPA continue in its present form or be revised? To answer this question, I
measure JTPA's success through the lens of three common theories of employment:
discrimination, signaling, and human investment theory.

The Job Training Partnership Act is most closely associated with human capital in-
vestment theory. According to legislative intent, training is an investment in individuals
and in the nation's economy, not a government expense.4 Signaling theory, on the other
hand, predicts that employers choose employees based on such signals as education
level, which identify an employee's potential productivity. And, of course, discrimina-
tion theory suggests that employers judge individuals on overt unalterable characteris-
tics, not on ability. Each theory provides a different perspective on the JTPA's ability to
assist participants.

To test these theories, I build exploratory regression models to measure success
based on JTPA performance standards methodology. Success is measured by the out-
comes measures of placements, post-training wages, and education (for those lacking a
seventh-grade reading level or a general equivalency diploma) combined with place-
ment. The data set for the models is from Maine's Title II- A adult program for PYs ' 89
to '91.

JTPA Performance Standards Methodology

What predicts success for the Job Training Partnership Act? The Department of Labor
(DOL) measures it by two general categories of outcomes: placements and post- training
wages. The specific outcomes vary, reflecting changes in the goals of JTPA, refinements
in evaluation, and new data. For example, in PY '93 a new standard, placement com-
bined with education, was added to reflect a legislative mandate to increase the literacy
level of trainees.

After determining outcome measures, DOL creates ordinary least squares regression
models. Unlike textbook models, which provide explanations, these models of regres-
sion are meant to be management tools which do not include all the factors that might
affect outcomes. Models "hold constant those factors over which the service deliverer
has little or no control."5 Therefore, JTPA models control for participant characteristics
and area economic differences. JTPA models control for the difficulty of serving
women, minorities, welfare recipients, and those who lack a high school education,
groups that DOL has labeled "hard to serve."6 Success, then, occurs when service pro-
viders meet or exceed standards, a numerical range of acceptable performance.

Theory

Discrimination Theory

Employment discrimination research tells us that there are major differences in wages
between men and women, minorities and whites, and black and white women.7 We also
know that income and job stability increase with age although economists argue aboute
discrimination through civil rights laws. On the other hand, these same people also
receive higher wages.

Some studies emphasize discrimination as an explanation for wage disparities. For
example, in his 1991 study, Clifford Adelman traced high school graduates in the years
1972 to 1984 to examine the achievements of men and women in the marketplace.9

Though women had higher aspirations, continued their education at the same rate as
men, and had higher grade point averages in college, their pay was less than that of
men. This held true even when men and women with no family responsibilities were
compared.

In another study, a controlled experiment examined labor-force disparities.10 Black
and white males were coached on interviewing, matched to control for characteristics
such as age and physical appearance, and given fictitious indistinguishable resumes.
The results indicated that blacks received fewer interviews and job offers than whites.

Studies of Job Training Partnership Act clients in Indiana, Ohio, and Tennessee also
confirm the effect of gender and race on the placement and wages of participants.11 But
according to Kathryn Anderson, younger clients are more difficult to place than older
clients, countering expectations of discrimination theory.12

JTPA performance standards models include indicators of protected status age, race,
and gender, making data readily available to put the theory in operation. Based on this
brief review, we expect that JTPA clients would feel the impact of discrimination, af-
fecting the success of JTPA to place individuals.

Signaling Theory

Signals of life choice events are also theorized to affect a participant's chances of em-
ployment.13 Employers who cannot directly assess productivity consult a person's
record of education or work experience to reduce uncertainty in the hiring decision.
Race, gender, and age, which are unalterable, are distinguished from signals. For ex-
ample, an individual can choose to invest in an education but cannot choose her race.

Obviously, research demonstrates that education is important in determining jobs and
wages, and a few support the applicability of signaling.14 In one study, John Bishop
found that signals, provided they were conspicuous, did have an effect.15 High school
graduates with high-level skills did not receive wages any higher than those with low-
level skills. The diploma rather than skill served as the signal of productivity.

Work experience or its lack because of welfare status can serve as a signal as well.16
Those who report their welfare status are less likely to be hired. Employers prefer to
hire those who are not welfare recipients even when government provides incentives for
hiring those who are.

JTPA studies confirm a statistically significant effect of welfare status and educa-
tion.17 In fact, Anderson found that welfare status and education had a greater effect on
placement than gender or age.18 Not surprisingly, then, we hypothesize greater success
for high school graduates and those who do not receive welfare than for those who have
no diploma and receive welfare. JTPA models always include education and welfare
status as control variables.

Human Investment Theory

The mission of the Job Training Partnership Act is based on human investment theory
more than on discrimination or signaling theory.19 Human investment theory assumes
that public subsidies for training create higher incomes, higher associated taxes, and
social spillovers (reduced health care costs, reduced crime) that assist both society and
the individual. Government subsidizes training because employer and individual deci-
sions lead to insufficient education and training.20 Employers fail to provide general
training because it is visible to other employers and may lead to turnover. Individuals
often do not seek training on their own because they lack funds or perceive few rewards

New England Journal of Public Policy

for doing so. Thus, government- sponsored training programs such as JTPA close that
gap by providing training.

JTPA research indicates that the type of training provided is critical to success (see
Glossary for definitions). For example, research has found that on-the-job training con-
sistently yields high placement rates, but by and large has less impact on earnings than
other forms of training.21 Nationwide, however, more JTPA participants are enrolled in
job search instruction, the least effective type of training.22

It is fair, then, to conjecture that training has an impact on success but varies with
the type of training. DOL performance models adjust for factors outside the control of
service providers, so training activities are normally excluded. However, data on enroll-
ment in the most common forms — on-the-job training, occupational training, educa-
tional training, and job search assistance — are collected and available.

Test of a Three-Component Model

To test the ability of the three theories to explain the success of the Job Training Part-
nership Act, I retain its methodology and measure success as placement, wages, and
placement combined with educational training. Rather than assuming that one theory is
more important than another, I view the theories as three components affecting success.
The probability of success is estimated as a linear function of (unalterable characteris-
tics) + (signals) + (training investments) + e, where e is a random error term. For clarity
and simplicity, I use only the most common factors and outcome measures found in
Department of Labor models and employment theories. The variables are gender and
age to measure discrimination, education and welfare status to measure signaling, and
the four types of training to measure investment. I exclude race in the exploratory mod-
els since there are very few nonwhites in Maine's population or client base. I use logit
regression23 for the two placement models and ordinary least squares regression for the
wage model.

To determine the success of the Job Training Partnership Act, turn first to the place-
ment models in Table 2, Appendix A. Interpreting logit regression is straightforward.
The chi-square improvement indicates that each component of the model is statistically
significant, improving the model's explanatory power as one moves from entering unal-
terable characteristics to training investments.24 One can also examine the cases cor-
rectly predicted. For both the placement and education/placement models, adding the
third component dramatically affects the explanatory power of the models. This is par-
ticularly true in the education/placement model, in which the cases correctly predicted
increase by 8 percent.

The logit regressions, however, show that JTPA's success depends on which theory or
component is viewed. First, as predicted by discrimination theory, JTPA has more diffi-
culty placing older participants. Placements increase as participants become older, ta-
pering off for the oldest participants. But gender is significant only in the education/
placement model. The probability of being placed and having received educational
training, all other factors held constant, is 61 percent for females and 73 percent for
males.25

JTPA has unexpected success overcoming signal barriers. Welfare recipients have a
greater probability of being placed than non-welfare recipients. Being a dropout has
significance only in the education/placement model, which one might expect. Even here

the difference is relatively small; the probability of dropouts being placed amounts to
only 3 percent less than that of high school graduates. Signals that normally make it
difficult to find a job have limited effect on Maine trainees.

As expected, the success of JTPA depends on the training. Since the act is based on
human investment theory, this result is more troublesome for its future success as a
stand-alone program. The placement model indicates that only on-the-job training is a
positive investment. But for those who receive educational training, investment in any
additional training, whether job search assistance or occupational training, is a positive
benefit. This seems to indicate that there are two groups of trainees served, those who
can use on-the-job training and those who need a greater investment for their future.

How do the three components affect success measured by post-training wages? The
regression model in Table 3, Appendix A, shows that with each component, the R-
square increases by about 2 percent, and all components work in the direction theo-
rized. The investment component's impact, again, is highly dependent on the type of
training provided. Only occupational training increases wages. On-the-job training has
a negative impact while educational training is not significant. What appears to be hap-
pening is that service providers can, for the most part, overcome discrimination and
negative signals when placing individuals, but wages are affected by all three compo-
nents.

Strength of Theories

The reduced models in Table 4, Appendix A, with nonsignificant variables eliminated,
give a clearer picture. If one views the Job Training Partnership Act as a means to over-
come discrimination or signaling life events, the program has been successful. For ex-
ample, signals have no significance in the education/placement model;26 wages, how-
ever, are more difficult to equalize. When all other factors are removed or partialed,
indicated in the last column of Table 4, female wages decrease by about .19 and drop-
out wages by about .12.

If one views JTPA through the lens of an investment strategy, the reduced models
reveal greater problems. The probability of placement for those who receive educational
training decreases by about .20 when all other variables are removed. This is a dramatic
effect: receiving educational training is the most important variable in explaining the
lack of success of JTPA as an investment. Only occupational training has an effect on
increasing post- training wages and serves as an investment strategy..

The Relation of Theory and Practice

How do these theoretical results relate to practice? Before answering that question, one
has to resolve a technical issue. Have the theories actually been tested? The R-square
and the comparable chi-square indicate that critical factors were left out of the three-
component models, biasing the results. The Center for Governmental Studies at North-
ern Illinois University, however, has found that performance standards models routinely
explain 5 to 7 percent of the variance regardless of the demographic or economic data
included.27 Therefore, given similar modeling results, the three-component models show
that service providers have been successful at overcoming discrimination and negative
signals in their placement policies. In fact, Maine welfare recipients have a greater
likelihood than non-welfare recipients of being placed.

New England Journal of Public Policy

To improve the success rate, however, JTPA sendee providers must be aware of cre-
ating a human investment strategy, particularly for their welfare clients. With the Work
First philosophy DOL is embracing to support TANF legislation, greater emphasis has
to be given to on-the-job training.28 In the past, DOL frowned on such training, viewing
it as a subsidy to employers who would teach individuals anyway. JTPA needs to in-
crease its contacts with the business community to make on-the-job training possible for
more than a small group of people. Job search assistance alone is not likely to benefit
people even though it is the most common form of training nationwide.

The Job Training Partnership Act currently balances emphasis on placements with
wage performance standards. Performance standards are expected to continue, but states
will be receiving bonuses for welfare placements. This will make it more difficult for
JTPA to improve educational opportunities and, hence, recipients' future wages. In
Maine, virtually no welfare recipients have received both on-the-job training and educa-
tional training. Those entering JTPA in need of remedial education have been difficult
to place, which is not likely to change. But if clients receive an additional investment in
other forms of training, they will be placed and their wages may be comparable.

Finally, JTPA has to build upon its success in overcoming signal barriers for welfare
clients by active involvement in helping individuals make decisions about their training
and by obtaining resources for clients once they complete the program. Nationally,
welfare recipient wages have risen steadily but only to an average of S7.05 per hour for
a thirty-six-hour week. On-the-job training can meet their short-term needs, but occupa-
tional training has greater success in increasing participant wages. Considering the
Work First emphasis, however, fewer JTPA clients may see occupational training as a
viable option. Welfare recipients, with some exceptions, must work. States that value
higher wages for JTPA clients will have to request exemptions, since the act provides
funding for only two years of schooling when many careers demand at least four years ?*

Glossary

Educational training: conducted in an institutional setting, training designed to enhance
participants' employability by upgrading basic skills, for example, remedial education,
basic/GED education, literacy, and English as a second language. Educational training
does not provide the technical skills and knowledge required to perform a specific job
or group of jobs nor does it provide job search assistance such as resume writing, inter-
viewing skills, and so forth.

Job search assistance: activities designed to facilitate movement into the labor market
including job-seeking skills, resume writing, interviewing techniques and job referrals,
labor-market information placement assistance, job clubs, counseling, and help in es-
tablishing and achieving employment goals.

Occupational training: conducted in an institutional setting, training designed to pro-
vide the technical skills and knowledge required to perform a specific job or group of
jobs. Classroom vocational training is included in this category.

On-the-job training: provides the knowledge and skills necessary for full performance
of a job while participants are engaged in productive work. Employers that provide on-
the-job training may be reimbursed for their services.

Placement: includes only the formerly employed who are placed in an unsubsidized
job, enter the armed forces, become self-employed, or enter a registered apprenticeship
program.

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Table 2

Logistic Regressions of Success

Placed Placed with Educational Training

Unalterable

Characteristics

Gender

0.259°

0.124

0.089

0.51 1a

0.326

0.562"

Age

0.092"

0.095s

0.082s

0.1 1 3a

0.1178

0.140"

Agesq

-0.001a

-0.001s

-0.011s

-0.001"

-0.002"

Signals

Welfare

0.507b

0.390b

—

0.766b

0.441s

Dropout

-0.153

-0.018

-0.333

-0.128"

Investments

On-the-job

training

—

1.748a

—

Educational

-1.634s

—

Occupational

—

-0.382s

—

0.033c

Job Search

—

0.905c

Explained

76.4%

77.9%

65.3%

64.7%

72.9%

Correctly

- 2LL

2539

2516

2377

644

629

570

Chi-square

17. 0b

22. 9C

139. 0b

9.9a

15. 9b

58. 1c

improvement

N = 2369 for the placement model.

N = 504 for the placement with educational training model.

Source: Data files of the Maine Department of Labor, Augusta, for PY '89 to PY 91'

Notes:

Placed =

Gender =

Age

Dropout

Welfare

Training

1 = Placed; 0 = Not placed.

1 = Male; 0 = Female.

22 through 70.

1 = No GED; 0 = GED/high school diploma.

1 = Welfare; 0 = Not on welfare.

1 = Received training; 0 = Did not receive training.

"Significant at .05 level.
bSignificant at .001 level.
Significant at .0001 level.

New England Journal of Public Policy

Table 3

Ordinary Least Squares Regressions of Success

Unalterable

Characteristics

Gender

Age

Agesq

Signals
Welfare
Dropout

Wage
B

0.6556a

0.83153

0.9431a

0.1391b

0.1257b

0.1224b

-0.0017b

-0.0015b

-0.0015°

-0.2612d

-0.2758d

—

-0.8324d

Investments
OJT

Educational
Occupational

F
R-square

R-squareCh

—

-0.2861d

—

0.0724

—

0.4820a

15.6700a

16.2620a

14.2200a

0.0282

0.04788

0.06584

0.0282

0.01966

0.01796

N = 1623

Source: Data files of the Maine Department of Labor, Augusta, PY '86 to PY '91.

"Significant at .0001 level.
bSignificant at .001 level.
Significant at .01 level.
Significant at .05 level.

Table 4

Final Models

Placement

with Education

Wages

Rao

Partial

Observed

Characteristics

Gender

—

0.640a

0.092

0.942b

0.189

Age

0.083a

0.045

—

0.122b

0.083

Agesq

-o.oor

-0.052

—

-0.002b

-0.078

Life Events

Welfare

0.414b

0.070

—

-0.269'

-0.056

Dropout

—

-0.275b

-0.118

Training

On-the-job

1.755b

0.070

—

-0.298c

-0.051

Educational

-1.635b

-0.200

—

Occupational

-0.388a

-0.044

0.970d

0.133

0.479b

0.105

Job Search

—

1.037b

0.182

—

Explained

Correctly

77.7%

73.05%

—

-2LL

2377

580.59

—

16.210

Chi-square

178.41

—

73.718

—

R-sq

0.066

Chi-square

7.04

—

7.837

R-sq Ch

0.020

improvement

N = 2369 for the placement model.

N = 501 for the placement with educational training model.

N = 1623 for the wage model

Note: In the placement with education model, job search rather than on-the-job training.
Only four individuals were enrolled in the latter and received educational training.

Significant at .01 level.
"Significant at .0001 level.
'Significant at .05 level.
Significant at .001 level.

New England Journal of Public Policy

Notes

1. National Commission for Employment Policy, Evaluation of the Effects of JTP 'A Perfor-
mance Standards on Clients, Services, and Costs, NCEP Research Report 88-16
(Washington, D.C.: NCEP, 1988).

2. Joseph Wholey and Harry Hatry, "The Case for Performance Monitoring," Public
Administration Review 52 (1992): 604-610.

3. Johnny Ray Youngblood, "Jobs for Nobody," New York Times, June 30, 1995, A19.

4. For a history, see Richard Fenno, The Making of a Senator (Washington, D.C.: CQ
Press, 1989).

5. For details, see U.S. Department of Labor, Employment and Training Administration,
Guide for Setting Title ll-A and Title III EDWAA Performance Standards for Program
Year (PY) 1990 (Washington, D.C.: DOL, November 1990). DOL obtains aggregate
data for service deliverers. At the state level the models are replicated with a series of
dummy variables.

6. Burt Barnow, "Government Training as a Means of Reducing Employment," in Rethink-
ing Employment Policy, edited by D. Lee Bawden and F. Skidmore (Lanham, Md.: Urban
Institute, 1 989), discusses JTPA performance standards methodology.

7. For a discussion of wage differentials between men and women, see Elaine Sorenson,
"Exploring the Reasons behind the Narrowing Gender Gap Earnings," Urban Institute
Report 91-2 (Washington, D.C.: Urban Institute, 1991), and Clifford Adelman, Women
at Thirtysomething: Paradoxes of Attainment (Washington, D.C.: U.S. Department of
Education, June 1991). For minorities, see Jewelle Taylor Gibbs, Young, Black, and
Male in America (Dover, Mass.: Auburn House, 1988); Norton Grubb and Robert
Wilson, "Sources of Inequality in Earnings," Monthly Labor Review 112 (1989): 3-13;
Margery Turner et al.. Opportunities Denied, Opportunities Diminished: Racial Discrimi-
nation in Hiring (Washington, D.C.: Urban Institute, 1991); and James Smith and Finis-
Welch, Closing the Gap: Forty Years of Economic Progress for Blacks (Santa Monica:
Rand Corporation, 1986). For black and white women, see James Cunningham and
Nadja Zalokar, "The Economic Progress of Black Women," Industrial and Labor Rela-
tions Review 45 (1992): 540-555.

8. Kevin Murphy and Finis Welch, "Empirical Age-Earnings Profiles," Journal of Labor
Economics 8 (1990): 202-229.

9. Adelman, Women at Thirtysomething, vi, 7, 23.

10. Turner et al.. Opportunities Denied, 42-55.

1 1 . Carolyn Ball, "The Maine JTPA Program in the Workforce," paper prepared for the
Maine Department of Labor, 1993; Carolyn Ball, "Wage and Gender Disparities in
JTPA: A Response to GAO," paper presented at the Partnership for Careers in Employ-
ment and Training Conference, New Orleans, April 10-15, 1992; Dennis Benson and
Jackie Rhoads, "Disparities in JTPA Services: Responding to Different Needs," paper
presented at the Conference of the Partnership for Training and Employment Careers;
Kathryn Anderson, "The Effect of Creaming on Placement Rates under the Job Training
Partnership Act," Industrial and Labor Relations Review 46 (1993): 619, did not find
race disparities in placements in Tennessee.

12. Anderson, "The Effect of Creaming," 619.

13. Michael Spence, "Job Market Signaling," Quarterly Journal of Economics87 (1973):
355-374; Eugene Kroch and Kriss Sjoblom, "Schooling as Human Capital or a Signal,"
Journal of Human Resources 29 (1993): 156-175; John Bishop and Shani Carter, "The
Worsening Shortage of College-Graduate Workers," Educational Evaluation and Policy
Analysis 13 (1991): 221-246; John Bishop, "Underinvestment in EmployerTraining: A
Mandate to Spend?" Human Resource Development Quarterly 4 (1993): 223-246.

14. Bishop and Carter, "The Worsening Shortage of College-Graduate Workers," 222.
Adelman, Women at Thirtysomething, calls this the screening hypothesis. Education
can screen individuals both into and out of jobs.

15. John Bishop, "Work Force Preparedness," in Research Frontiers in Industrial Relations
and Human Resources, edited by D. Lewin, O. Mitchell, and P. Sherer (Madison, Wise:
Industrial Relations Research Association, 1992): 447-488.

16. John Bishop, "Toward More Valid Evaluation of Training Programs," Journal of Policy
Analysis and Management 8 (1989): 209-228.

17. For welfare status, see Benson and Rhoads, "Disparities in JTPA Services," and
Anderson, "The Effect of Creaming," 61 9. For education, see Ball, "Wage and Gender
Disparities."

18. Anderson, "The Effect of Creaming," 619.

19. Gary Becker, Human Capital, 3d ed. (Chicago: University of Chicago Press, 1993).
According to David Hornbeckand Lester Solomon, Human Capital and America's
Future: An Economic Strategy for the '90s (Baltimore, Md.: Johns Hopkins Press,
1991 ), human capital refers to the acquired skills, knowledge, and abilities of individu-
als.

20. Bishop, "Underinvestment in Employer Training," 220.

21 . Ball, "The Maine JTPA program"; Ball, "Wage and Gender Disparities"; Benson and
Rhoads, "Disparities in JTPA Services"; Stephen Bell and Larry Orr, "Is Subsidized
Employment Cost Effective for Welfare Recipients?" Journal of Human Resources 29
(1994): 42-61; U.S. General Accounting Office (hereafter GAO), Job Training Partner-
ship Act Racial and Gender Disparities in Services, HRD-91-148 (Washington, D.C.:
GAO, 1991), 4; Howard Bloom et al., The National JTPA Study (Bethesda, Md.: Abt
Associates, 1993).

22. GAO, Job Training Partnership Act Racial and Gender Disparities, 22.

23. The probability of placement =

1
z=

1+ez
where:

z = is a linear combination

z = B0 + e,X, + B2X2 + 63X3 + e

24. The probability of the observed results is measured mathematically as -2 times the log
of likelihood, -2LL. If the model fit the data perfectly, -2LL would be zero. The chi-
square improvement is the difference between -2LL as components are added.

25. This is the probability when the average age is thirty-four, the individual also received
job search assistance, and the individual is not a high school dropout. For an explana-
tion of logit modeling, see John Aldrich and Forrest Nelson, Linear Probability, Logit,
and Probit Models, Sage University Paper Series on Quantitative Applications in the
Social Sciences, 07-001 (Beverly Hills: Sage Publications, 1984).

26. Rao (R) serves a similar function as the partial correlation in ordinary least squares.
Small values indicate a small contribution to the model. Like a partial, Rao is affected
by the other variables in the model.

27. Correspondence with John Baj, research associate, 1988 to 1995, Center for Govern-
mental Studies, Normal, Illinois. See also John Baj et al., A Feasibility Study of the Use
of Unemployment Insurance Wage-Record Data as an Evaluation Tool for JTPA
(Washington, D.C.: National Commission for Employment Policy , 1991).

28. U.S. Department of Labor, Implementation of Welfare-to-Work Grants (Washington,
D.C.: DOL, October 1997).

The Professional
Decline of Physicians
in the Era of
Managed Care

Aimee E. Marlow

Physicians have long enjoyed prestige, power, and autonomy, but the rise of man-
aged care organizations has drastically changed their status. Many doctors are in
thrall to the financial well-being of the corporations that employ them, their
knowledge and expertise controlled and manipulated in the interest of profit maxi-
mization. This article investigates the professional decline of physicians, citing the
use of gag clauses, incentives to withhold care, and the breakdown of their author-
ity. In an effort to regain some measure of control, physicians have taken their
concerns to the public, supporting state and federal legislation that attempts to
curb questionable managed care practices, but this new alliance is unreliable. The
author evaluates the history and ultimate failure of California 's propositions 214
and 216, both created to protect patients and physicians. The results clearly sug-
gest that physician influence alone can no longer sway public opinion.

Physicians, facing deprofessionalization in the new corporate structure of medicine,
are losing a tremendous amount of power. Some no longer control the simplest
medical decisions, for example, what they may tell patients and what tests they may or
may not administer.1 The few who downplay the importance of such restrictions fail to
recognize that "the fate of patients is tied to the fate of doctors."2 In other words, the
attenuation of medical practice is an issue not only for physicians, but for all who con-
sult them. This article examines several of the myriad details regarding the state of U.S.
medicine.

What Is a Profession?

Sociologists have long studied the rise of U.S. professionalization, a product of the late
nineteenth and early twentieth centuries, which increased dramatically during and after
the Industrial Revolution, leading to growth of large bureaucracies.3 As society devel-
oped more complex structures, institutions flourished, and the need for experts and
leaders quickly became evident.4 Technical training and leadership capabilities sepa-
rated the professional from the lay person.5 The literature of sociology acknowledges
that in aspiring to professionalization, an occupation generally "strives to attain" the
following characteristics and goals:

Aimee E. Marlow, a doctoral candidate, Department of Sociology, Boston College, concen-
trates on health and medicine, public policy, work, and gender issues.

.VfH England Journal of Public Policy

1. Altruistic service to clients and society:

2. A basic liberal education followed by professional and technical training;

3. Licensure by the state . . . The criteria for licensure and practice . . .
should be drawn up [in]. . . consultation [with] practitioners representing
the profession.

4. The competence of professionals is judged by other professionals;

5. Professional practices continually directed by the body of theory and re-
search relevant to the field; and

6. A code of professional ethics . . . continually developed, corrected, and
enforced by the profession itself.6

The link between integrity, service, and appreciation for knowledge, evident in all
six points, places a large responsibility on members of an occupation to uphold its pro-
fessional status. Their reward for achieving success is great, for the professional gains
the right "[of] freedom, not only to do his work according to his own best judgment . . .
but also to choose his own style of work and economy of effort."" This model reflects
medicine as it should be and what most Americans expect it to be: an altruistic profes-
sion embodying integrity, autonomy, and ethical accountability.

Professional knowledge and theory are particularly important. Physicians, who tradi-
tionally rely on their interpretive wisdom to separate them from other professions, se-
cure a coveted niche in society as healers. Basic medical knowledge, a touchstone offer-
ing them a sense of the role they should play, serves to separate patient from physician.
We trust physicians with one of our most valued possessions, our health; their role en-
compasses strong "moral and social functions."8 Everett Hughes notes that, in general,
professions "also claim a broad legal, moral, and intellectual mandate."9 He adds, "Not
only do the practitioners, by virtue of gaining admission to the charmed circle of the
profession, individually exercise a license to do things that others do, but collectively
they presume to tell society what is good and right for it in a broad and crucial aspect of
life."10 Medicine fits this mold exactly. Physicians and patients have a give-and-take
relationship: patients give their trust to doctors, whose moral and intellectual obliga-
tions, they are confident, will safeguard them from harm.

In rising to dominance, physicians met all the criteria noted above, benefiting first
from structural changes in society and later from their collective power. Prior to gaining
authority in the late nineteenth and early twentieth centuries, doctors encountered a host
of obstacles. :: Without a scientifically sound body of knowledge and a lack of "unity
. . . and collective authority," physicians required grounding.12 The traditional view of
illness that dominated society aggravated the issue. Paul Starr writes, "Many Americans
who already had a rationalist, activist orientation to disease refused to accept physicians
as authoritative. They believed that common sense and native intelligence could deal as
effectively with most problems of health and illness:"13

The late nineteenth century, a time of great cultural, scientific, and social change,
greatly influenced the state of all professions. The United States embarked on a "cul-
tural revolution," when "Americans became willing to acknowledge and institutionalize
their dependence on professions."1" In addition, the Industrial Revolution brought about
the urbanization of life in America and a new reliance on complex organizations with
hierarchical structures, which became comfortable and accepted. The term "profes-
sional" represented power, wealth, and advanced education, all qualities revered in
societv.

Concurrently, physicians acquired the knowledge that granted them access to and
control over grounded scientific "evidence/* Advances in "'diagnostic technology . . .
strengthened [their] powers ... in physical examination of the patient." Science also
developed tests for "specific . . . disease," and in the 1880s, the organisms "responsible
in tuberculosis, cholera, typhoid, and diphtheria were isolated"; by the 1890s, "labora-
tory tests had been introduced to detect [them]."15 Thanks to science and to society,
physicians started gaining power.

But other hindrances remained; structural changes came from within the profession
and physicians at first lacked a strong collective society that could represent them.
More troublesome was the profession's lack of a "fixed track" for education; "whether
or not a physician went to medical school and if he did. for how long and with what
general education, were all variable."16 Such ambiguities left plenty of room for alterna-
tive forms of treatment like homeopathy and eclectic medicine to enter the market.
Even as late as 1900, "the ports of entry into medicine were still wide open and the
unwelcome passed through in great numbers."17

The formation of the American Medical Association fAMA) in 1847 was an attempt
to give physicians an organizational foundation, but more important, the AMA sought
to standardize medical education with a view toward eliminating alternative medicine.18
Initially, the organization suffered from internal conflict and lack of structure but re-
mained dedicated -ito [addressing] the problem that originally motivated its formation,
control of medical education."19 In 1904 the AMA formed the Council on Medical Edu-
cation, which set standards for medical schools, including increasing the preparation
time necessary to become a doctor of medicine and mandating that all physicians pass
state licensing examinations before being allowed to practice.

The 1906 Flexner committee, in a report that investigated the country's 160 medical
schools, concluded that only 82 achieved adequate standards for medical education.20
The best were encouraged to remain open, while the weaker would be closed or merge
with stronger institutions. This tremendous overhaul of the educational system "greatly
increased the homogeneity and cohesiveness of the profession [and] instilled common
values and beliefs among doctors . . . and . . . discouraged sectarian divisions."21

Standardization of medical education provided other benefits as well, enabling doc-
tors to truly define the role of physician. The lines of distinction drawn between doctors
and other health care professionals were changed in the twentieth century. Hughes ex-
trapolates: "The elaboration of the organization of hospitals, clinics, and public-health
agencies combined with great technological change in medicine and an immense in-
crease in the demand for medical services has led to a great reshuffling in the whole
medical system."- The reshuffling led to more power and autonomy for physicians. The
profession simply passed along certain duties, such as taking blood pressure or filing
forms, to other workers.23 This served to set physicians even further apart, for menial,
time-consuming tasks were no longer their responsibility.

By pushing forward and successfully taking advantage of the structural changes
occurring on the national level, physicians ascended to the professional ranks, continu-
ing through the post-World War II era. The new advances in scientific technology that
appeared, "making [medicine] more effective in treating illness." were coupled with
federal money for new hospitals and "the explosion of private health insurance.*'2" Phy-
sicians attained an unimaginable level of resources and wealth.

The boom in the medical industry presented people with previously unirnagined

New England Journal of Public Policy

prospects for making money; many physicians took advantage of the potential bonanza,
adding the role of businessman to their persona.25 Investment opportunities took many
forms, but none was as lucrative as those offered by pharmaceuticals, an industry which
by the mid-1950s was worth $4.5 billion.26 It seemed reasonable for physicians to in-
vest in these companies, for as Howard Wolinsky and Tom Brune noted, "doctors knew
something about the drugs they prescribed."27

But the public did not buy this explanation. For the first time, people were forced to
realize that "doctors' clinical judgment [could be] influenced by their business inter-
ests."28 Overwhelmingly, they rejected the physician as businessman. People were
clearly uncomfortable and threatened by the thought that doctors could be persuaded to
prescribe the products of drug companies in which they had a financial interest rather
than more appropriate medications.29 Recognizing the loss of public trust, the AMA
denounced doctors' involvement with these organizations. In a further effort to polish
the tarnished image of physicians, AMA delegate Dr. Edwin B. Dunphy declared in
June 1952, "The medical profession is not a luxury business but a profession dedicated
to rendering service to humanity. Reward or financial gain is a subordinate consider-
ation. Physicians should never lose sight of this principle. If they do, the medical pro-
fession will certainly be government regulated eventually and [emphasis added] with
public approval."30 One might assume that such bad publicity and public disapproval
would have deterred physicians from involving themselves in business ventures, but as
history tells us, it didn't. For the most part, corporate medicine found physicians to be
willing participants.

Evolution of For-Proflt HMOs

Dunphy had no inkling of the future of medicine and its business alliances. Today, re-
flecting on his words, one questions how far medicine has come and if the lessons of
the past taught anything. The success of physicians in their pursuit of professionalism
involved luck. Being positioned more than once in history to take advantage of societal
changes is remarkable for any profession; the specific events noted above comprise a
few such fortuitous examples in the chronicles of physicians. But what is also evident
from Dunphy is that more than forty years ago, doctors, even when they held the upper
hand, feared a corporate threat to their integrity.

Modern for-profit HMOs and corporate medicine do not offer physicians the power
to reject or dispute the corporations. The managed care concept first gained popularity
in the early 1980s.31 Most HMOs maintained a nonprofit status until 1987, their main
theoretical purpose for existence based upon utilitarianism and rationalization, namely,
to provide for as many people as possible quality health care at the least expense. As
Wendy Mariner stated, "The goals of managed care came to be seen as the efficient use
of health care resources ... to provide quality care."32 By 1987, "there were 650 HMOs
with about 29 million members."33

Early nonprofit HMOs, seemingly adhering to the original purpose, "encouraged
coordinate care, [including] preventive services, in long-term personal relationships
between patients and primary care providers."34 Moving managed care into the competi-
tive market and making it a for-profit industry apparently offered improved quality and
efficiency overall since "increased competition could achieve the goals [of] providing
good quality care."35 The success of profit-making HMOs depended largely on physi-
cians' ability to keep a "foot in both the medical and the business camps" and its suc-
cess in performing "both medical and business functions, taking actions to provide or

withhold care that touches the traditional sphere of medicine, and, at the same time,
acting like ordinary business enterprises with no moral obligation or, at least, obliga-
tions that have little to do with traditional medical ethics."36

In the model under discussion, medical ethics and business concerns are accorded
equal priority. Although this was the intent of for-profit HMOs, it was not borne out in
reality. When faced with conflicts between providing "quality medical care and . . .
obligations to preserve their assets," profit-making HMOs favored the needs of the cor-
poration, not the profession.37 Business concerns that "put profits before patients" are
now "the palpable force destroying care."38

Recent Voices: Ignored but Prophetic

The rise of for-profit HMOs and the subsequent deprofessionalization of physicians
should not surprise Americans. Although many people spend time and effort evaluating
the present state of medicine, they fail to integrate one crucial piece of information:
physicians and sociologists predicted all of today's events more than ten years ago. The
most compelling prophecies were those of Paul Starr and Eliot Freidson, both medical
sociology experts, and George Lundberg, longtime editor of the Journal of the Ameri-
can Medical Association.

In the final chapter of The Social Transformation of American Medicine, Starr
painted a dreary picture of the future of American medicine. He envisioned a time when
the corporation, or "private sector," would step in to "rationalize" medical services,
taking over faltering public institutions. As corporations appropriated medicine, new
challenges to physician autonomy and prestige would be inevitable, and in an extreme
case, "doctors will no longer have as much power over such basic issues as when they
retire."39 One backlash of this trend also brings to light for Starr another obstacle,
namely, boundaries. He says, "Another key issue will be the boundary between medical
and business decisions; when both medical and economic considerations are relevant,
which will prevail and who will decide? ... A regime of medical austerity will test the
limits of professional autonomy in the corporate world."40

Also at issue, according to Starr, was the "different techniques for modifying the
behavior of physicians, getting them to accept the management's outlook."41 Physicians
will be "socialized" not merely as doctors but as corporate spokesmen, learning "to do
things the way the plan or the company has them done."42

But his most chilling vision of the future seemed to be the most prophetic. Starr
believed that the medical profession's and the public's complete inability to control the
situation was an invitation to corporations to turn medicine into a for-profit industry.
"Instead of public financing for prepaid plans," he wrote, "there will be corporate fi-
nancing for private plans . . . whose interests will be determined by the rate of return on
investments."43

Freidson also feared for the future of medicine. He too recognized the emergence of
the corporation as the biggest threat to the profession and, more specifically, turned
attention to the detrimental role of inducements to cut health care costs. Freidson as-
serted that "considerably less emphasis on economic incentives would greatly improve
the spirit in which practitioners approach their work."44 More idealistic than Starr, he
believed that a "greater emphasis on professional values" would be the only way to
repair the ailing reputation of American physicians.45

Freidson predicted that the medical community would face a "critical choice" that

New England Journal of Public Policy

would determine the future. "We can passively accept a health care system that, in the
interest of cost containment, slowly moves toward mechanizing and bureaucratizing
services. Or we can actively choose to struggle for a system that . . . [is] designed to do
everything it can to improve the unique lots of all those who need help."46 The first
choice has "physicians and health care workers [following] elaborate rules of proce-
dure" and "patients [as] standardized objects," while the second focuses on "truly hu-
man health services."47

In closing, Freidson takes issue with the way the industrialization of medicine will
inevitably lead to "the loss of something precious" for both physicians and patients.
Within a mechanized health care system, doctors "will have lost the opportunity to do
autonomous, challenging, and creative work" and patients will "lose the opportunity to
regain . . . their full potential."48

Sociologists were not alone in addressing the problems facing the medical commu-
nity and physicians. In a 1985 editorial, Lundberg lashed out at his own profession,
focusing on how "we, the aggregate medical profession, are in big trouble with the
public at large."49 The problems he reports surround the issue of trust, but not technical
or personal trust. Rather, he believes that the real issue is patients who do not trust phy-
sicians economically or morally. He states, "Never in modern history has the medical
profession been weaker ... To a great extent, physicians are becoming seen as highly
successful businessmen who are functioning with the business ethic rather than the
professional ethic . . . We are viewed by many as a restrictive cartel."50 Thus, industrial-
izing medicine has bankrupted the profession of any morality. In this scenario, both
physicians and patients pay.

Lundberg substantiates this point by citing longitudinal data that reflected a severe
decline in patients' trust of physicians, specifically in the area of money. "In 1982, 42%
of the public queried expressed the opinion that physician fees were reasonable. This
declined 15 points to 27% in 1984, a shocking change."51

As an insider in the medical profession, Lundberg, is critical of the conflict of inter-
est between the physician as businessperson and the physician as healer. He offers vari-
ous solutions to the problems at hand, calling on doctors to "reestablish the fact that . . .
as physicians, we will represent the best interests of our patients and the public."52
Changing their image was not enough; Lundberg challenged physicians to "change
reality, thereby becoming viewed as primarily proactive rather than reactive . . . pro-
moting rather than opposing progress."53

In financial matters, Lundberg implored all physicians to be aware of each person's
"financial circumstances," to adjust payment to need when necessary. He emphasized
the need for physicians to take a "leadership position" in cost management and contain-
ment and to be "intolerant of devious cost shifting and of questionable creative account-
ing."54 Above all, physicians "should promote openness and full disclosure of facts
because the truth is more central to medical science and to the practice of medicine
than any other human endeavor."55

Lundberg's conclusions provided room for hope, positive change, and the possibility
of a bright future, but it was all contingent on physicians' reverting to "caring for the
public," choosing altruism over greed, and taking a stand against unethical practices.56
So far doctors have failed to rise to the occasion. Why is that so important? From a
professional point of view, it means no more than successfully adhering to the Hippo-
cratic oath, which asserts "that physicians have duties to (1) be loyal to patients; (2) act
in their patients' interests; (3) make their patients their first consideration, even when

their own financial well-being is opposed."57 Physicians are, more than just technicians,
accepted experts of the body working in an American society obsessed with life and
death. We expect a social contract in which the professional physician serves us as ef-
fectively as possible.

Declining Power and Prestige

The shifts in American medicine are clearly leading to physicians' losing power, which
results in deprofessionalization. In the six criteria for all professions, profit-making
HMOs rob physicians of their ability (1) to be "altruistic servants," as indicated by the
role of monetary incentives to reduce treatment; (2) to have their work and competence
judged by other physicians, because the very structure of managed care works against
camaraderie and collective activity; and most important, (3) to use medical knowledge
to its fullest in a variety of contexts, for their authority and autonomy are tempered by
gag clauses in managed care contracts, which determine what physicians can and can-
not tell their patients and the public.

Altruism has long been a tenet of the medical profession. Many who enter the field
speak of "the call," the need to help others and to save lives.58 The ethics and mission of
medicine encourage nothing less than physicians doing everything possible to help
patients, but for-profit HMOs remove this crucial element by establishing financial
incentives for physicians to reduce services.

Managed care corporations introduced incentives only a few years ago, recognizing
that "other approaches, such as administrative monitoring and penalties for overuse
[were] less effective" in curbing physicians from excessively offering or wasting re-
sources.59 There are obvious flaws in this reasoning according to Marc Rodwin. "If
incentives to provide services cause physicians to use too many resources and to per-
form unnecessary procedures, would not incentives to reduce services result in too few
services? . . . How can we be sure physicians will reduce only unnecessary or wasteful
services?"60

Financial incentives are wrapped in various packages. In their most blatant form,
they deter physicians from administering expensive diagnostic tests.61 In another form,
HMOs "significantly reduce hospitalization," often forcing patients out the door after
major surgery.62, 63 A large proportion of a physician's salary may be contingent on such
incentives. In 1995, "74% of independent-practice association HMOs and 50% of
group-model or staff-model HMOs [based] physicians' payment in part on measures of
utilization and cost."64 In doing so, such for-profit managed care organizations as US
Healthcare bind "primary care physicians' interests to [those of] the [firm] . . . Income
is tethered to conduct that furthers corporate profitability."65 Physicians are rewarded,
"sometimes quite directly, for doing less for their patients," an "inherent conflict of
interest."66 This cuts to the very heart of the altruistic nature of the profession, calling
into question the moral and ethical implications of such activity.

The declining importance of altruism is related to how and by whom physicians are
judged. Doctors have long enjoyed the ability to oversee their profession's educational
standards, ethical codes, and the opportunity to rate one another's performance.67 Per-
formance review is of specific concern. Physicians working within the for-profit HMO
structure find that the quality of their work is based not on their ability to be good prac-
titioners, providing excellent care and developing trust with patients, but on their ability
to cut costs and generate returns.

New England Journal of Public Policy

The system of for-profit HMO denies physicians the opportunity to foster relation-
ships not only with patients but with other physicians. The new wave of corporate medi-
cine includes a loose collection of physicians who work in various locations for the
same entity. Thus, some HMOs are composed not of "a core of dedicated staff' but of
"networks and private practitioners linked by part-time contracts."68 Solidarity among
physicians is impossible in an arrangement that has "forced practitioners to reorganize
into larger units."69 Such an elaborate structure makes measuring performance and qual-
ity of care an intricate, at times frustrating experience.

These issues are important indicators of the deprofessionalization of medicine. Yet
the control of medical knowledge through the restrictions is the most solid, telling
gauge of the trend. The value of medical knowledge and the public's trust in it is a sig-
nificant element in the physician-patient relationship. Placing a high value on knowl-
edge presumably upholds the "legal, moral, and intellectual mandate" of medicine.70

But in the new design of managed care, expertise and knowledge are exploited and
controlled for the good of the corporation, perhaps best exemplified by the use of gag
clauses or rules. Generally, these take several forms, all of which potentially impose
constraints on the physician-patient relationship and on doctors' overall autonomy. The
clauses, to which physicians have to agree, are written into their contracts with man-
aged care organizations. Gag clauses eliminate alternative treatments that the managed
care organizations view as unnecessary or inappropriate for any number of medical
conditions. Physicians who defy these stipulations face, at the least, reprimands, and at
the most, dismissal.

Legal experts identify four types of gag rules, the first of which places "restrictions
[on] doctor-patient discussion of treatment alternatives."71 The rules specifically pro-
hibit physicians from "disclosing treatment options that the [managed care organiza-
tion] determines are inappropriate."72 This restriction declares that physicians may not
discuss alternative treatments with a patient "until the plan has agreed to pay for
them"73 and gives its approval. If the corporation deems them unsuitable, physicians
may not reveal an alternative to the patients.

This type of clause also prohibits physicians from "making statements to patients
that would undermine the patient's confidence in the [HMO]."74 A doctor who disagrees
with an organization's actions may not reveal his or her opinion to a patient. In addi-
tion, "suggesting that a course of treatment may be beneficial or even life-saving, but
reporting that the plan will not cover it, could be construed as disparaging or as suggest-
ing that the plan offers substandard care."75 The physician, unable to share all treatment
options with the patient, may feel trapped.

A second type of gag clause prevents physicians from "discussing conflicts of inter-
est with patients."76 A doctor may not reveal the terms of his or her agreement of asso-
ciation with the managed care organization. Most important, physicians cannot reveal
how they are paid, for this is considered a "business secret requiring protection."77 They
cannot bare the fact that the amount of their paycheck is, to a large extent, contingent
on the treatment options they choose for patients — less treatment translates to larger
salary — which could negatively affect a patient's health.

Another gag clause restricts doctors' ability to recommend facilities where patients
can receive treatment outside their care organization. Physicians are forbidden to rec-
ommend "uncovered treatments" even if they believe such alternatives could help their
patients"78 This rule also prevents physicians from giving advice on the nature of man-
aged care organizations or "offering their perspective on what plans are better for

patients in general, or [one] patient in particular"; therefore, some of their expertise is
denied to patients.79

A final gag rule precludes physicians from publicly "making negative comments
about the plan" with which they are associated.80 It serves to keep physicians silent in
the public debate on managed care, for they are "unable to offer candidly their experi-
ences and expertise to patients and political debates alike."81 Public discussion is com-
promised by the denial of a voice to these eminent actors.

The nationwide debates on the subject of gag clauses grow more heated as these
stipulations are gradually leaked to the public. Yet because of vague language that "dis-
guises" them, the clauses are sometimes difficult to locate in managed care contracts.
Additionally, a "lack of any [nationwide] centralized clearinghouse for contract infor-
mation" that monitors all managed care contracts makes the search even more cumber-
some.82 This scarcity of information adds controversy to the mixture. Proponents of
managed care organizations deny the very existence of such clauses in physicians' con-
tracts, claiming that the agreements are fashioned with patient protection in mind. Op-
ponents insist that these clauses are commonplace, that they blatantly "violate the
physician's ethical duties," and that they must be outlawed immediately.83

Controversy aside, the very notion of gag clauses leads to disturbing conclusions
about this method of cost cutting. Such rules directly threaten the welfare of patients by
controlling the use of medical knowledge. They "threaten to erode the doctor-patient
relationship by silencing physicians and keeping patients uninformed."84 They raise
important legal, ethical, and even constitutional questions. Legally, they pose dilemmas
specifically around the doctrine of informed consent: patients "should be autonomous
over their bodies, which requires that physicians inform patients of their conditions and
options for treatment."85 According to the doctrine, a doctor must inform a patient of all
alternatives. As previously noted, rules that do not allow for full disclosure of informa-
tion violate the doctrine of informed consent. "Gag clauses that prohibit physician dis-
closure of uncovered treatment threaten to turn back the clock to a time when patients
were kept uninformed of their alternatives and physicians made treatment decisions
without regard to the patient's concern."86

Failing to adhere to the doctrine of informed consent suggests that, legally, physi-
cians are not doing their job, which can leave them wide open to charges of malprac-
tice.87 Ethically, gag clauses place physicians in potentially difficult situations, unable
to "advance the patient's health," the overarching goal of medicine.88 Ethics seems to
run a distant second to profit maximization in the new calling of corporate medicine.
John McArthur and Francis Moore write, "When a corporation employing physicians
seeks profit by selling [its] services, the physician-employees cease to act as free
agents. Professional commitment to patient care is now subordinated to new rules of
practice that assure profitability of the corporation."89

Another important consideration is the way gag clauses threaten constitutional
rights of doctors by withdrawing their freedom of speech.90 Some forcibly keep
physicians' voices out of the public domain on health care issues, and violation of these
terms is cause for the dismissal of doctors. Therefore, "a gag rule is an example of the
loss of free speech, not by order of public law, but by the dictates of health care corpo-
rations."91

US Healthcare, one of the nation's largest for-profit HMO corporations, provides an
excellent example of manipulation through gag rules. In 1995 it cared for 2.4 million
members, earning a profit of $1 million a day.92 Steffie Woolhandler and David

New England Journal of Public Policy

Himmelstein note the following clauses from a US Healthcare contract with one HMO.
"Physicians shall agree not to take any action or make any communication which un-
dermines or could undermine the confidence of enrollees, potential enrollees, their
employers, their unions, or the public in US Healthcare or the quality of US Healthcare
coverage . . . Physicians shall keep the Proprietary Information [payment rates, utiliza-
tion-review procedures, and so on] and this Agreement strictly confidential."93 Trans-
lated, these clauses state that physicians cannot openly disagree with US Healthcare on
any ground and that any cost the HMO assumes or does not assume must not be dis-
closed to the patient.

In addition, releasing an employee who disagrees with company policy is also part of
the reality. After coauthoring "Extreme Risk," and speaking out against certain HMO
policies on national talk shows, David Himmelstein, "on December 1, 1995, received
notice from US Healthcare of his termination."94

Gag clauses, which reduce the value of a physician's knowledge to monetary terms,
deleting moral and intellectual components from the picture, are only one of several
questionable tactics created by managed care corporations whose primary concern is
profit realization. In an effort to combat corporate control, more and more physicians
are turning to the public for support, a move that has both positive and negative effects.
On the positive side, physicians and patients working together represent increased
people power and increased opportunity for physicians to educate the public about the
potential harm profit-making HMO policy can generate. For example, many profes-
sional doctors organizations have produced offspring in the form of patient organiza-
tions. Physicians Who Care, a group of more than 30,000 doctors, is allied with the
15,000 members of Patients Who Care.

Yet bringing concerns to the public and inviting citizens to join forces with them has
not necessarily resulted in success for the physicians. They face the fact that quality
health care alone may not be enough to sway public opinion. Indeed, physicians place
themselves in the position of having to deal with countervailing modes of influence.
The history of propositions 214 and 216, two proposals aimed at ending unfair and
unethical managed care practices in the state of California, are prime examples of this
phenomenon. Both propositions, introduced as precursors to the creation of the Health
Care Patient Protection Act of 1996, called for the following measures, reported in the
Fall 1996 Physicians Who Care Newsletter.

A. Banning all written gag clauses;

B. Outlawing financial bonuses tied to the denial of necessary care;

C. [Giving] patients the right to [pursue] a second opinion before denying
doctor-recommended care and [publicizing] HMO guidelines for denying
treatment;

D. Requiring "just cause" for [terminating services] of physicians and other
professionals.95

Proposition 216, the more radical of the initiatives, also added clauses that included
establishing "a consumer watchdog organization, and [imposing] taxes on health-care
mergers and acquisitions, hospital closures, and bed reductions."96

The goals of both propositions offered something for everyone. Not only would pa-
tients be protected against financial incentives that may influence a physician's quality
of care, but the doctors themselves would be free from the threat of the gag clauses that
silence them. Both measures gained huge support from more than 1 50 interest groups

and individuals on the state and national level. Activist Ralph Nader proclaimed, "Pass-
ing the Patient Protection Act is the single most critical health care battle this year for
California and as an example for the rest of the nation. . . . The denial of care, gag rules
for doctors and nurses ... are a national scandal."97

It is also important to realize that neither proposition called for "new taxes, litiga-
tion, or government agencies."98 Considering the propositions' comprehensive pro-
grams, it was almost impossible to imagine the public's not passing them. Yet both
failed on the ballot, even with the support of thousands of physicians and ordinary citi-
zens nationwide. In a poll conducted days before the election, 46 percent of the 824
people surveyed indicated that they would vote against both propositions, while an
additional 25 percent and 26 percent remained undecided about 214 and 216, respec-
tively.99 On Election Day, 214 failed by a ratio of 58 to 42 percent, and 216 by 61 to 39
percent.100

A perplexing question is central to examining the failure: How could the citizens of
California, a state with more than 30 million residents, 58 percent of whom are enrolled
in HMOs, vote against propositions so clearly designed to protect them from unethical
managed care? Some groups, Taxpayers Against Higher Health Costs, for example,
interpreted the defeat as an indication that "Californians [were saying] no to more gov-
ernment involvement in health care," which reflects today's probusiness, promarket,
antigovernment sentiment.101 Health care reform appears to be unnecessary if the market
provides checks and balances as it should. One opponent of the propositions stated,
"Those opposed to [managed care] think we will suffer as soulless bean counters deny
[us] needed care . . . But free-market capitalism creates a powerful check on such ten-
dencies."102

Another explanation points to the lack of voter understanding surrounding the propo-
sitions. When asked specifics about each proposition in a preelection poll, respondents'
answers reflected "confusion about what is what and what each would do" and high-
lighted an overall general confusion about managed care.103

The media's role in the failure offers a further possibility. The proponents of these
proposals, physicians included, were unsuccessful in transmitting the message that for-
profit managed care organizations, through the use of gag rules and unethical incen-
tives, pose a legitimate threat to the health and well-being of patients. The print media
opposed the propositions. Editorials in fifty major newspapers across California recom-
mended a no vote on both.104 The state's largest newspaper, The Los Angeles Times, held
nothing back in its attack. It recognized the "[legitimate] problems"of the HMO system
but stood firmly for the rights of the corporation. In its evaluation of the propositions,
the Times concluded, "They [are] fuzzily worded provisions. Both [for example] try to
eliminate gag rules by allowing caregivers to disclose information 'relevant to the pa-
tients' health care.' While physicians are certainly entitled to freedom of speech, man-
aged care companies should be able to impose some restrictions." Focusing on the need
to contain costs, the editorial further declared that the propositions "would tie the
managed care companies, making it difficult to effect the nimble balance between
quality and cost effectiveness."105

In sheer numbers and ability to reach and educate the public, the battle for power
between a media supporting managed care organizations in California and physicians
desiring to change unethical policies is really no contest. Yet in appealing to the public
for support, physicians must face the media as well as such other forces as antigovern-
ment sentiment that sway opinions. If propositions 214 and 216 suggest anything, it is

New England Journal of Public Policy

that physicians collectively cannot overcome the many powers that influence the public.
On the subject of managed care, they are "pushed and pulled from all directions in the
debate . . . and are likely to remain neutralized."106

Finding a Solution for the Future

Several issues emerge from the foregoing. First, much as physicians would like to be-
lieve otherwise, they have for decades had to grapple with finding a niche in their pro-
fessional role for the businessperson. One must realize that although the public never
approved of this new role and was often frightened and threatened by it, the profession
persisted in its attempts to embrace it. Because their professional status and power al-
lowed it, doctors could manipulate the public and control the interference of corpora-
tions and business in their work.

Now that physicians need help in reclaiming their professional power, they appear to
have nowhere to turn. Corporate takeovers are still rampant in medicine, and although
some state and federal legislation has managed to ban a number of unethical incentives
and gag clauses, problems persist. Americans should be deeply concerned about the
deprofessionalization of medicine and the dangers associated with "bad managed care,
investor-owned, for-profit entities operated by insurance companies and managers with
little or no experience in health care delivery," but confusion and lack of awareness
distance them from the issues.107

Attempting to dismantle managed care is not an appropriate solution — the managed
care model of medicine is apparently here to stay. The number of people in some sort of
managed care arrangement increases every year. For example, "In 1995, 54 million
Americans were enrolled in health maintenance organizations and as many as 130 mil-
lion [were] insured in one or another form of managed care."108 This number represents
an increase of 13 percent from 1994.109 Therefore, abandoning the managed care con-
cept is currently not practical or possible.

To accomplish anything, physicians must come to grips with their position rather
than ignoring indicators that suggest the decline of their professional status. As Freidson
and Lundberg asserted years ago, they must focus on the original goals of their profes-
sion, primarily patient advocacy. Furthermore, unless doctors resist the businessperson
mentality, which historically has always undermined them, their autonomy will vanish.
We will enter an era in which medical knowledge, and its use and distribution, is con-
trolled by businesspeople. As this occurs, patients will suffer and continue to lose faith
in physicians, widening an already large rift between the two camps.

The success or failure of physicians and patients in regaining control of health care
will depend largely on the degree of willingness of all parties to be radical and progres-
sive. Specifically, physicians must be ready and willing to work with the public and
other health care professionals to effect change. As Woolhandler and Himmelstein as-
sert, "We must scale care to a human size . . . Unless HMO physicians, workers, and
patients are centrally involved in planning this transformation, and the movement for
reform, it will surely fail."110

Glimmers of this mentality and its possible benefits are coming to the surface. For
example, in June 1996 the American Medical Group Association (AMGA) was formed
"from the merger of the American Group Practice Association and the Unified Medical
Group Association."111 This new confederation of more than 350 group practice associa-
tions, which brings together administrators, physicians, and patients, states that its

primary goals include serving as "an information resource for group practice administra-
tors and as an advocacy group for physician decision-making and managed care re-
form.""2 The group also plans to continue to build upon a "patient-centered outcomes
database," thus creating for patients a "sounding board" on which they can voice their
concerns and rate their quality of care.113

The birth of the AMGA is certainly an encouraging sign, but for real change to oc-
cur, a more radical approach is necessary. I suggest that the American Medical Associa-
tion become the organization that unifies patients, physicians, and other health care
workers in their battle against corporate medicine. The AMA already identifies itself as
"a grassroots organization [that] has served as a national leader in efforts to extend
access, contain costs, and improve the quality of the American health care system. The
AMA is extremely active in public health campaigns, working vigorously for healthy
lifestyles."114 If this is indeed the mission of the AMA, it should have no problem taking
a stand against the corruptive nature of so many for-profit HMOs, but as Howard
Wolinsky and Tom Brune report, the AMA has never truly attempted to help patients,
and in fact billed itself as one of the "most powerful political lobbies [not] to protect
our rights as patients . . . Rather, it has worked hard to look after physician income and
interest."115

In the health care crisis sweeping the nation, the AMA has the potential to play a
tremendous role. It could, without much internal turmoil, undertake the following:

1 . Advocate socially responsible investing — encourage people to divest
their stock portfolios of profit-making HMOs that use financial incen-
tives and gag clauses.

2. Support any state or federal legislation that encourages increased patient
and physician protection, such as propositions 214 and 216, providing
funds and manpower for campaigns.

3. Launch a national HMO awareness campaign — flood the media with in
formation concerning gag clauses and other pros and cons of managed
care.

4. Develop a code of ethics for all managed care corporations, creating an
obtainable balance between business concerns and medical ethics.

5. Change medical school curricula to include a mandatory internship in a
managed care setting for all students. As of now, only 16 percent of
schools have this requirement.116

6. Create a patient organization that works closely with other AMA groups
in advocacy projects.

7. Invite patients to serve on patient-physician committees designed to
monitor activities of the many large for-profit HMOs.

8. Provide financial support to patients who rightfully sue HMOs for
breach of contract or malpractice.

More radically, the AMA could use its vast resources to support many grassroots
organizations, such as Health Care for All of Boston, which attempt to provide quality
medical care to those who cannot afford it. The possibilities are endless.

Robert Larsen states, "There is a window of opportunity for someone to step up to
the plate and provide the vision that can eliminate many of the current [health care]
dilemmas."117 I believe that the AMA can accomplish this task. It comes down to the

New England Journal of Public Policy

organization's willingness to change reality, not simply an image, as Lundberg sug-
gested. The American Medical Association stands ready to deliver, but will it meet the
call or retreat? Only time will tell. Until then, we have to wait, hoping that the situation
does not become progressively worse. **

/ extend special thanks to Professor Jeanne Guillemin and Professor Ritchie Lowry for
their comments on earlier drafts of this work.

Notes

1. S. Woolhandlerand D. Himmelstein, Extreme Risk The New Corporate Proposition
for Physicians, New England Journal of Medicine 333, no. 25 (December 95):1706 —
1708.

2. E. Freidson, Medical Work in America: Essays on Health Care (New Haven and
London: Yale University Press, 1989).

3. P. Starr, The Social Transformation of American Medicine (New York: Basic Books,
1982).

4. E. Hughes, On Work, Race, and the Sociological Imagination (Chicago: University of
Chicago Press, 1994).

5. Since it is impossible to do justice here to the vast sociological literature on profes-
sions, I decided to use Cogan s breakdown because it seemed to be the most
succinct and provided an excellent framework for the arguments posed later (M.
Cogan, Toward a Definition of Profession, Harvard Educational Review23 [1953]:
48—49).

6. Cogan in R. Lowry, A Guide to Sociology (New York: Free Press, 1972), 464.

7. E. Hughes, The Sociological Eye: Selected Papers (New Brunswick and London:
Transaction Books, 1984), 372.

8. Ibid., 288.

9. Ibid.

10. Ibid.

1 1 . Starr, The Social Transformation of American Medicine, 17.

12. Ibid.

13. Ibid.

14. Ibid.

15. Ibid., 137.

16. Ibid., 89.

17. Ibid., 117.

18. J. G. Burrows, AMA — Voice of American Medicine^ Baltimore: Johns Hopkins Univer-
sity Press, 1963).

19. Starr, The Social Transformation of American Medicine, 112.

20. Ibid.

21. Ibid., 123.

22. Hughes, The Sociological Eye, 293.

23. Ibid.

24. H. Wolinsky and T. Brune, The Serpent on the Staff (New York: Tarcher/Putnam
Books, 1994), 97.

25. Ibid.

26. Ibid., 98.

27. Ibid.

28. D. Stone, The Doctor as Businessman: The Changing Politics of a Cultural Icon,
Journal of Health Politics, Policy, and Law 22, no. 2 (April 1997): 545.

29. Wolinsky and Brune, The Serpent on the Staff, 97.

30. Ibid., 98.

31. Woolhandlerand Himmelstein, Extreme Risk.

32. W. K. Mariner, Business vs. Medical Ethics: Conflicting Standards for Managed Care,

100

Journal of Law, Medicine, and Ethics 23, no. 3 (Fall 1995): 237.

33. D. Light, Countervailing Power: The Changing Character of the Medical Profession in
the United States, Perspectives in Medical Sociology, ed. Phil Brown, 2"- ed. (Pros-
pect Heights, III.: Waveland Press, 1996), 661.

34. Mariner, Business vs. Medical Ethics, 236.

35. Ibid., 237.

36. Ibid., 238.

37. Ibid.

38. S. Woolhandlerand D. Himmelstein, Galloping Toward Oligopoly: Giant HMO A or
Giant HMO B ? in Perspectives in Medical Sociology, 491.

39. Starr, The Social Transformation of American Medicine, 446.

40. Ibid., 447.

41. Ibid.

42. Ibid., 448.

43. Ibid., 449.

44. Freidson, Medical Work in America, 260.

45. Ibid.

46. Ibid., 264.

47. Ibid.

48. Ibid.

49. G. D. Lundberg, Medicine — A Profession in Trouble? Journal of the American
Medical Association 253, no. 19 (May 1985): 2879.

50. Ibid.

51 . Lundberg is referring to statistics generated from data collected by the American
Medical Association s Council on Long Range Planning and Development, 1984.

52. Lundberg, Medicine — A Profession in Trouble? 2880.

53. Ibid.

54. Ibid.

55. Ibid.

56. Ibid.

57. M. Rodwin, Conflicts in Managed Care, New England Journal of Medicine 332, no.
9 (March 1995): 607.

58. Burrows, AM A.

59. M. A. Rodwin, Medicine, Money, and Morals: Physician s Conflict of Interest (New
York and Oxford: Oxford University Press ,1993), 155.

60. Ibid.

61. Woolhandlerand Himmelstein, Extreme Risk.

62. Rodwin, Medicine, Money, and Morals. 104

63. Recently state and federal legislation has attempted to put a halt to this practice. See
a detailed account in F. Hellinger, The Expanding Scope of State Legislation,
Journal of the American Medical Association 276, no. 13 (October 2, 1996): 1065 —
1069.

64. Woolhandlerand Himmelstein, Extreme Risk, 1706.

65. Ibid.

66. M. Angell and J. P. Kassirer, Quality and the Medical Marketplace — Following
Elephants, New England Journal of Medicine 335, no. 12 (September 1996), 884.

67. Starr, The Social Transformation of American Medicine.

68. Light, Countervailing Power, 662.

69. Ibid.

70. Hughes, The Sociological Eye, 288.

71. J. A. Martin and L. K. Bjerknes, The Legal and Ethical Implications of Gag Clauses in
Physician Contracts, American Journal of Law and Medicine 22, no. 4 (1996): 443.

72. Ibid.

73. Ibid.

74. Ibid., 444.

75. Ibid.

76. Ibid., 446.

77. Ibid.

101

New England Journal of Public Policy

78. Ibid.

79. Ibid.

80. Ibid., 448.

81. Ibid.

82. H. Brody and E. Alexander, Gag Rules and Trade Secrets in Managed Care Con-
tracts: Ethical and Legal Concerns, Archives of Internal Medicine 157 (October
1997): 2039.

83. N.J. Picinic, Physicians, Bound and Gagged: Federal Attempts to Combat Managed
Care s Use of Gag Clauses, Sefon Hall Legislative Journal 21 (Winter 1997): 567 —
620.

84. Martin and Bjerknes, Legal and Ethical Implications, 449.

85. Ibid., 450.

86. Ibid.

87. Ibid.

88. Brody and Alexander, Gag Rules and Trade Secrets, 2039.

89. A. H. McArthur and F. D. Moore, The Two Cultures and the Health Care Revolution:
Commerce and Professionalism in Medical Care, Journal of the American Medical
Association 277, no. 12 (March 1997): 986.

90. Ibid.

91. Ibid.

92. Woolhandlerand Himmelstein, Extreme Risk, 1706.

93. Ibid.

94. Gag Rule Gets Himmelstein, He Says, Medicine and Health B0 (January 1996).

95. Physicians Who Care Newsletter, Fall 1996, Comment@pwc.org.

96. R. L. Rundle and L. Mc Ginley, California Voters Are Cool to Hot HMO Issue, Wall
Street Journal, October 31, 1996, B1, B12.

97. G. D Andrea, Patient Protection Acts Evolve from AMA Model, But Issues Endure,
BNA s Managed Care Reporter 26 (1996): 426.

98. Ibid.

99. Rundle and Mc Ginley, California Voters Are Cool, B1.

100. R. Sabin, Propositions 214, 216 Failed to Tap Outrage, San Francisco Chronicle,

November 7, 1996, A19.

101. Voters Again Reject Reform Proposals, BNA s Managed Care Reporter 26 (Novem-
ber 12, 1996): 1084.

102. S. Chapman, Refusing to Be Scared of Managed Care, Chicago Tribune, November

10, 1996, 23.

103. Rundle and Mc Ginley, California Voters Are Cool, B12.

104. Business wire, November 5, 1996.

1 05. Los Angeles Times, Metro section, November 6, 1996, B6.

106. Sabin, Propositions 214 and 216 Failed, A19.

107. Mariner, Business vs. Medical Ethics, 236.

1 08. D. Blumenthal and S. Thier, Managed Care and Medical Education — The New

Fundamentals, Journal of the American Medical Association 276, no. 9 (September
1996): 726.

109. P. Busowski, Managed Care Enrollment Up 13 Percent to 150 Million in 1995, AAHP
Survey Finds, BNA s Managed Care Reporter 26 (June 26, 1996): 776—777.

110. Woolhandlerand Himmelstein, Galloping Toward Oligopoly, 494.

111. Group Practice Association Merge to Represent 350 Organizations, BNA s Managed
Care Reporter 26 (June 26, 1996): 626.

112. Ibid.

113. Ibid.

114. From the AMA home page, Membership@Web.ama.assn.org

115. Wolinsky and Brune, The Serpent on the Staff, 3.

116. J. Veloski et al., Medical Student Education in Managed Care Settings, Journal of
the American Medical Association 276, no. 9 (September 1996): 661 — 667.

117. R. Larson, Health Care: Whose Business Is It? Postgraduate Medicine 99, no. 2
(February 1996): 21.

102

Cambodian Political
Succession in
Lowell, Massachusetts

Jeffrey Gerson, Ph.D.

This article asks, What factors have in the past affected and will continue to af-
fect the degree of Cambodians' participation and representation in Lowell poli-
tics? Gerson argues that five key factors, three internal — coming to terms with
the legacy of mistrust resulting from the holocaust wrought by Pol Pot's murder-
ous regime; lacking a tradition of democratic participation in their home country;
and generational differences between those who regard themselves as Cambodian
and the American-born — and two external — Lowell's two-tiered political sys-
tem and the response of the city's elected officials to the influx of Southeast
Asians that began in the early 1980s. The author believes that oral history is an
indispensable tool for studying ethnic and urban politics.

Since its 1826 founding as an industrial city on the banks of the Merrimack River,
Lowell, Massachusetts, has continued to attract immigrants. The Irish arrived
before the Civil War, the French Canadians during and after it; from the late 1800s
through the early 1920s, the Greeks, Lithuanians, Portuguese, Swedes, Jews, and Poles
came to the city and established ethnic communities. In the decades after World War n,
as the once mighty Lowell textile mills fell all but silent, the most recent stream of
immigrants and migrants made their way here. First, from the Hispanic Caribbean came
Puerto Ricans, Cubans, and Colombians; following the Vietnam War, Southeast Asians,
mainly Cambodians, fleeing the horrors of civil war.

Demography

The most remarkable change in the mosaic of Lowell's ethnic population has occurred
over the past fifteen years. In 1980 Southeast Asians comprised less than one percent of
the city's population (604 of 92,418); today that number hovers around 24 percent, or
24,148 of 105,000. Eighty percent of Lowell's Southeast Asians are of Cambodian an-
cestry. The only rapid demographic change comparable to the past decade and a half
was the growth in Lowell's population during the first half of the nineteenth century,
thanks to the boom in textile manufacturing and Irish immigration. The "city of
spindles" grew from 2,500 to 33,000 between 1826 and 1850.1

Jeffrey Gerson, assistant professor of political science, University of Massachusetts
Lowell, specializes in ethnic and urban politics.

103

New England Journal of Public Policy

Theory and Literature: A Survey

Succession as a concept was first developed by sociologists. Political scientists came
late to the study of ethnic groups. In the 1920s, the Chicago School of sociologists, led
by Robert W. Park, argued that ethnic groups move through various stages in their rela-
tions with dominant ethnic groups. Some of these processes are described as conflict,
accommodation, and assimilation — groups that have lived in one area for extended
periods frequently become dispersed and are finally assimilated. The pluralists believe
that ethnic groups coexist peacefully while holding on to some of their culture. While
Park's model considered conflict as part of the succession process, it saw an orderly,
irreversible sequence of change.

Based on models of plant ecology, Chicago School succession is defined in demo-
graphic terms. Michael J. White of Princeton University explains: "Succession is the
dynamic process by which the population composition of small areas (neighborhoods)
within cities changes. We can define succession as the replacement of one identifiable
population subgroup by another within the boundaries of a given neighborhood."2 Suc-
cession is seen as a basic process of urban ecological change.

White continues: "Succession proceeds as the new group (often newcomers to the
metropolis) replaces the previous group. The rate of replacement and the amount of
resistance offered by the original group are elements of the process that may vary with
circumstance."3

Economists also use succession theory to study urban housing and spatial location of
ethnic groups by income. Along with sociologists they see succession as a series of
stages, beginning with initial penetration, proceeding through invasion and consolida-
tion, and concluding with piling up. In sum, succession has been useful to scholars
studying geographic, socioeconomic, and housing characteristics as well as the ethnic
composition of neighborhoods. However, few political scientists have studied succes-
sion and minority group relations together.

One of the few works by a political scientist to address the phenomenon of political
succession was a book by a sociologist and a sometime political scientist who doubles
as a U.S. senator from New York. In the early 1960s Nathan Glazer and Daniel Patrick
Moynihan collaborated on a study of ethnic groups in New York City, Beyond the Melt-
ing Pot.4 In it they argued that ethnic political succession, though not a main theme of
the study, was "a central dynamic of the city's organizational life."5

In an article reviewing succession since Beyond the Melting Pot, Moynihan observed
that the Irish had dominated the political life of New York City for decades but by 1977
not one Irish person served on the city's major government boards. Succession by Jews
and Italians had been achieved. One of the chief reasons for this accomplishment was
the persistence of ethnicity in general and ethnic groups' role in American life as inter-
est groups making claims for benefits from the state. The state in turn found it helpful
to organize claims made on it through ethnic fines.

Succession is defined by Moynihan as a dynamic process consisting of "the displace-
ment of established groups (established in a neighborhood, a profession, a church, a
sport, a trade union) by another group and also ... the attainment of one group to the
condition of another."6 By this Moynihan means that in a mixed ethnic group in which
one faction is dominant, its norms appear to be normal for everyone. Attainment to the
condition of the other means that the designated inferior ethnic group achieves the
norms of the dominant group. According to Moynihan, the latest wave of migrants and

104

immigrants that he and Glazer studied, blacks and Puerto Ricans, were acting according
to their theory of political succession, by both challenging and emulating the norms of
previously dominant groups.

The glass-half-full optimism of Moynihan's analysis is shared by pluralist theorists.
The most current example of a theoretical model that views ethnic politics through a
pluralist lens, one that addresses the latest group of immigrants and refugees in America,
is Lawrence Fuchs's The American Kaleidoscope.1 This brief review of the literature
singles out Fuchs because he epitomizes the pluralist ethnic political model of succes-
sion, which is the underpinning of this article.

The debate of the elite versus pluralist models in urban politics has centered on the
role of the urban political machine. Did the machine incorporate or exclude new ethnic
groups in city politics? Studies by Steven Erie and Diane Pinderhughes argue that the
machine tried its best not to share the spoils of patronage for a number of reasons.

Erie, who surveyed a dozen cities around the nation that experienced Irish control of
the party apparatus, found some of the main reasons to be the machine's limited re-
sources as well as pressure from middle-class homeowners to keep property taxes low.
For Pinderhughes, who studied the Chicago machine under Daley, blacks achieved
symbolic or descriptive representation only because a monopoly of political power
prevented substantive issues such as discrimination in employment, housing, and educa-
tion from reaching the political agenda.8 Generally speaking, as Roger W. Lotchin has
written, elite theorists find machine leaders partial to a strategy of limited ethnic mobi-
lization; a smaller electorate, which is more manageable, was preferable.9

Pluralist theorists view the role of the machine more favorably. Their concern is the
rate of succession, not whether it occurs. They believe that the speed at which an ethnic
group moves up the ladder of political power depends on a number of factors. Among
these are the rate of demographic change within a political jurisdiction, the size and
distribution of the group, the intensity of political party competition for the ethnic vote,
the degree of independence of the new ethnic voters, the quality of ethnic group leader-
ship, and legislative reapportionment.10

Fuchs's View of Ethnic Political Succession

Lawrence Fuchs considers succession a three-stage process.11 The first stage witnesses
the forming of associations for religious and fraternal solidarity, the second organizing
for economic success, and the third achieving political power. I argue that the first and
second parts of the process are well under way in the Cambodian community of Lowell,
as they have been for other Southeast Asians across the country. For example, such
religious and civic organizations as Buddhist temples and mutual assistance associa-
tions, in addition to such communication outlets as newspapers, radio and cable TV
programs, and public ceremonies, serve the same purpose they did for earlier immi-
grants and refugees: to "express their sensibilities, protect their interests, or promote
some public good through organized activity."12 Moreover, they help newcomers to
"keep in touch with each other and to cope with loneliness, vulnerability, and fear that
immigrants often experienced."13 Economically, newcomers form small businesses and
business associations that benefit the community, for example, beauty salons, auto re-
pair shops, jewelry stores, and so forth. Lowell already has a hundred small businesses
run by Southeast Asians, most of whom are Cambodians. Cambodians concerned about
the health of small businesses have formed groups like the Cambodian League of

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New England Journal of Public Policy

Lowell to help obtain bank loans, mortgages for first-time home buyers, and so on.
Interestingly, Cambodians in California have found a niche in the doughnut business,
running 20 percent of all such shops there.

In the third stage of succession, new ethnic groups call for greater ethnic power,
which is usually threatening to established groups. Fuchs believes that those in the
latest wave have joined the older wave immigrants in exercising their right to express
themselves. New groups catch on to the fact that public expressions of ethnicity through
group action are legitimate in the United States. Even resident aliens, without the vote,
are active because they were encouraged to be so by foundations and corporations'
providing the training ground for leadership development. "Newcomers have [also]
followed the pattern of older groups ... in mobilizing their claims and defending their
interests."1" Disagreements about old country politics occur among all groups, new and
old, who are often divided by class, region, ideology, and generation.

In response to the advocacy of immigrant ethnic interests, local and state govern-
ments create citizen advisory groups concerned with immigrant affairs, which, Fuchs
writes, encourages the creation of immigrant and refugee advocacy groups and their
participation in politics. Many of these organizations reach out to newcomers, which is
especially important in places where the political machine has withered.

Even such refugee groups as the Southeast Asians, '"who, much more than immi-
grants, tended to be preoccupied with old country politics, moved with remarkable ease
to participate in American politics/'15 Fuchs argues that refugee groups in particular
have great potential for political mobilization because of their sheer numbers (in 1985
there were 634,200 Vietnamese, 218,400 Lao, and 160,800 Cambodians in the United
States). Moreover, refugees are in a better position to become mobilized than immi-
grants because settlement programs organized by voluntary agencies with the assistance
of state and federal government agencies are enormously helpful. This argument is
supported by literature in the field of political socialization. Gillian Cohen notes,
"'Refugees experience a different kind of political incorporation process than other im-
migrants, have more frequent and in-depth interaction with government and migrate
involuntarily."16 While hard times, lack of language skills, and poverty have retarded
their political incorporation to a degree, like other immigrant ethnic groups, they are
starting to naturalize in large numbers once they realize they cannot return to their
homeland. "Once naturalized, they feel empowered in American politics."17 Fuchs re-
ports a burgeoning of political clubs and citizen/voter leagues within the refugee com-
munity.

Finally, the latest wave of refugees also have several other advantages over second
wave (1880-1920) immigrants: a higher proportion of persons with education and fi-
nancial resources and a larger proportion of people who wish to reunite with close fam-
ily members already in the community.

Fuchs concludes by taking note of one of this study's chief findings: their experience
with genocide may slow the succession progress of Cambodians. Fuchs writes that
among the Southeast Asians, "the Cambodians were most passive, possibly because of
their persecution under the Khmer Rouge dictatorship in Cambodia, but some of them
became active in local politics and even in the Dukakis presidential campaign. It was
only a matter of time until the Laotians and the Cambodians became more active."18

My thesis is that Cambodians have begun the process of political mobilization. How-
ever, while my study of Cambodians in Lowell concurs with Fuchs 's argument gener-
ally, I am fully cognizant of the pitfalls in Fuchs's rosy analysis of ethnic and racial

106

history. As April Schultz accurately points out, Fuchs tends to ignore "the pain, the
ambivalence and multiple identities of those living at the confluence of ever-changing
borders" of ethnic power in America.19 Moreover, adds Jesus Salvador Trevino, '"in his
zeal to demonstrate the impressive ways in which Americans of all backgrounds have
made the American civic culture work for them, he tends to downplay the human price
paid for these gains."20

Therefore, while I concur with Fuchs that the process of succession is indeed under
way among the Cambodians in Lowell, they comprehend that the road is full of in-
equalities, struggles, and contradictions.

The Literature of Cambodian Politics in America

A survey of the literature about Cambodian politics in the United States reveals a pau-
city of research on the subject. One reference work on Asians in America describes
Cambodians as inactive in U.S. politics.21 A work on the political socialization of
Southeast Asians in Lowell, however, critiques this notion and lends support to Fuchs.
Gillian Cohen argues that Southeast Asian refugees in Lowell quickly "acquired the
political knowledge necessary to successfully force the Lowell city government to ac-
quiesce to demands concerning their children's educational needs."22 She further asserts
that the special resources Southeast Asian refugees received from federal and state gov-
ernments, as well as the establishment of a dense network of voluntary agencies, inter-
national, national, and local, which assisted particularly with the establishment of local
mutual aid associations, allowed Southeast Asian activists to gain an important political
education that may serve them well in future political activity.

Cohen acknowledges that the success of the Southeast Asians was largely the result
of an alliance created between Puerto Rican activists in Lowell and an outside legal
advocacy group, Multicultural Education, Training, Advocacy, which filed the federal
lawsuit that was instrumental to a compromise settlement which ended discriminatory-
and segregated conditions in Lowell's public schools.

Though political participation in the schools' struggle was led by a small group of
well-educated Southeast Asian professionals, nearly one hundred parents attended meet-
ings to protest unequal conditions. Cohen's is a limited study, however, examining the
years 1984—1988. In the years following 1988, the Cambodian Mutual Aid Association
experienced internal upheaval, and the Lao Mutual Aid Association closed its doors.
These events raise doubts about whether the skills Southeast Asian activists learned
during the school conflict will translate into "potentially learned strategies and gained
knowledge that they can apply in new political contexts."23

Given the limited material and the difficulty hypothesizing just how active Cambodi-
ans are in American local politics, I have undertaken an audio and video oral history of
the community's political experience.

Research Methods

The lack of meaningful papers, diaries, photographs, memoirs, and letters relating to
Lowell politics, and urban politics in general, requires that the serious scholar of politi-
cal history resort to oral history. Political leaders in particular rarely keep documents
because they conduct most of their business in person or on the telephone.2" As an oral
historian, I hope to give voice to those whose stories have not yet been told.

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New England Journal of Public Policy

The late labor historian Herbert Gutman understood the value of oral history and
argued that immigrants especially must be understood in terms of how they deal with
large social forces, making deliberate choices among perceived options. Though their
choices may be limited, they must never be reduced to being merely passive victims.25
C. Wright Mills, too, saw an important place for oral history, stating that social science
must be "the study of biography, history, and of the problems of their intersection
within the social structure. To study these problems . . . requires that our work be con-
tinuously and closely related to the level of historical reality — and to the meanings of
this reality for individual men and women."26

I believe that oral history is the best tool for capturing the human struggle of politi-
cal life, intimate views of political relationships, and stages and periods in the process
of individual and political development. As a method, it holds in esteem the way people
view their life and times. It asks researchers to inject less of their own perceptions of it.
The people's views, critically assessed, provide the greatest understanding of history.

Oral historians realize that people's accounts may be several steps removed from
actual occurrences. Impressions have their own biases; all memory is selective and
fallible. The potential for fabrication, prejudice, and exaggeration is always present.
Oral history must be approached open-mindedly and with skepticism. A scholar must
remember that nothing recounted can be cavalierly dismissed nor uncritically em-
braced.

To prepare for the oral histories, I reviewed scholarly articles on the political history
of the city, an oral history collection of ethnic group impressions of Lowell, and exam-
ined the clipping files of the city's sole newspaper, the Lowell Sun, for the years 1985
through 1995.27

I interviewed eighteen community activists and scholars, most of them current and
former city government officials and social service workers. Language was not a barrier
to these interviews with Cambodian participants because the community's activists have
a solid grasp of the English language. There were, however, cultural hindrances to this
study.

The Cambodians I interviewed regarded me, a college professor of non-Cambodian
heritage, as an outsider, and initially a few of them were reticent about talking with me.
My inability to speak Khmer barred me from employing a familiar and comfortable
means of communication. I considered hiring a Cambodian research assistant to remedy
this condition but recognized that it was important for me to meet face to face with
community leaders to establish a rapport. At the start of the interviews, it was tough to
pierce the Cambodian community's inner workings partly because Cambodian culture
places great value on courtesy and indirectness; individuals were always outwardly
polite and refused to be critical of one another. I soon learned to change my manner of
questioning. It is understandable that a vulnerable immigrant group would not wish to
reveal its internal divisions and tensions to a potentially hostile world.

While my outsider status at first inhibited me, it soon proved to be an enhancement
to the study. My position as a university professor was a big plus, given the Southeast
Asian community's deep respect for education and educators. Furthermore, the commu-
nity leaders see the university as one of the city institutions that has come to their aid.
For instance, the university, through its faculty, obtains grants that are of some benefit
to community social service agencies. Several professors have worked closely with the
community. For example, political science professor Hai B. Pho, an immigrant from
Vietnam, who was instrumental in assisting the resettlement of Southeast Asian refugees

108

in Lowell during the early 1980s, is well respected by the community.28

My desire to win the confidence of Cambodian community leaders is evident in the
conditions I established for the interviews. I offered the interviewees a cassette tape of
the interview along with a written transcript, giving them the opportunity to negotiate
any desired editing. Oral historians generally frown on allowing interviewees the power
to alter their initial conversations. As trust develops between the community leaders and
me, this condition may no longer be necessary.

Before interviewing the community leaders on audiocassette, I requested permission
to interview them on camera as well. Most were pleased to learn that they might appear
in a videocassette and may have cooperated to guarantee their participation in the en-
deavor. This documentary film is a complement to my article.

Cambodian Political Succession: The Early
Stages of Political Mobilization

Throughout American history, ethnic tension followed the move of a new immigrant or
refugee group into an established community. It is only natural for older, well-rooted
groups to feel ill at ease when there is an abrupt tear in their community's fabric. The
key question remains: How do they manage the transition and juxtaposition of power
and culture?

To date, following a trend in the immigrant and refugee political experience, no
Southeast Asians are represented in Lowell's elective institutions, the City Council and
the School Committee. Political succession takes time. Though the first Irish arrived in
Lowell during the 1 820s, the first Irish mayor, John J. Donovan, was not elected until
1882. The French Canadians waited even longer for one of their own — Dewey
Archambault became mayor in 1936. Although 20,000 Greeks immigrated to Lowell
before World War I, they waited until 1951 to see George C. Eliades elected the first
mayor of Greek descent in Lowell — and in the United States.29

The process of Cambodian political succession is under way in Lowell and Massa-
chusetts. More than seventy-five Southeast Asian-owned businesses have been estab-
lished in Lowell, and five Cambodian officers have been added to its police force. The
campaign to end school overcrowding and create well-funded bilingual and multicul-
tural educational programs resulted in the state's paying $131 million to build ten new
schools, refurbish six others, and establish bilingual education programs. In the elec-
toral arena, a Cambodian community activist has campaigned for the Lowell School
Committee. In what can only be viewed as a pioneering effort, Sambath Chey Fennell
ran for office in 1995 and again in 1997. His poor showing in both races — twelfth
place finish in 1995, eleventh in 1997 — reveals how long a row Southeast Asian candi-
dates must hoe in the city.30 An encouraging sign did appear in the town of Randolph,
where Daniel Lam became the first Cambodian-American elected to a local office, as a
selectman, in Massachusetts. Moreover, Revere's mayor, Bob Hass, credits his 283-vote
margin of victory in November 1997 to the Revere Cambodian community of 3,500.
Roughly three hundred new voters were registered by the Hass organization.31

At the national level, ironically, succession received a boost from anti-immigrant
sentiment in Washington. The Immigration Reform Act of 1995 dramatically cut ben-
efits for legal immigrants, rendering many Southeast Asians ineligible for several cru-
cial federally funded programs such as food stamps, Medicaid, and Supplemental Secu-
rity Income. According to the Massachusetts Immigrant and Refugee Advocacy Coalition,

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New England Journal of Public Policy

applications for citizenship in the state skyrocketed in 1995 and 1996. Nationally, in
1995, the Immigration and Naturalization Service received nearly one million applica-
tions for citizenship, three times the annual average of 300,000. In a survey conducted
by the Federal National Mortgage Association, 84 per cent of immigrants who acquired
citizenship cited the ability to vote as a reason for doing so.

So great was the movement toward citizenship that the Clinton administration was
repeatedly taken to task by the Republican Congress for making it too easy for new-
comers to become citizens. Evidence of the growing power of immigrant voters can be
found in the 1996 election of Congresswoman Loretta Sanchez and the defeat of incum-
bent Robert K. Dornan in California, the nearly break-even Clinton vote in the Cuban-
American community, once a Republican stronghold, and in Massachusetts, which
witnessed the defeat of the state's only two Republican congressmen.

Apparently the Republican congressional leadership recognized the folly of its anti-
immigration measures. On November 12, 1997, Congress undid two key provisions of
the 1996 Immigration Act, a law that severely harmed immigrants' rights and sped the
deportation of hundreds of thousands of people who had lived in the United States for
many years. Likewise, Clinton and the Congress agreed to ease the suffering caused by
the 1996 Welfare Reform law, which also spurred successful movements in the states,
most notably Massachusetts, New York, and California, to pressure legislatures to par-
tially restore funds for programs that were cut at the federal level.

As the result of a complex set of factors, including but not limited to language, their
refugee status, and the brutal destruction of their culture at the hands of the Khmer
Rouge, many Cambodians are not yet citizens and therefore cannot participate in local
elections. The exact number of Lowell Southeast Asians who are citizens, and of that
group the number that are registered to vote, is unknown. One estimate was made in
1994, before welfare reform was announced, of 700 citizens and 300 registered voters
— the Cambodian American Voter League (CAVL), the only group actively seeking
such information, is the source for these figures.32 In a city of 46,000 registered voters,
it's no wonder that their community lacks political clout. One thing of which those who
are active in city politics are certain is that, with a fifth of the city's population South-
east Asian, half of whom are under 18 years of age, and an average family consisting of
5.03 people as compared with 3.06 for white families, this group's numbers will con-
tinue to grow and Southeast Asians will be a political force to be reckoned with in the
coming years.33

The central question I pose is: What factors have affected and will affect the degree
of Cambodian participation and representation in Lowell politics? My answer is that
five key factors, three internal and two external to the community, help explain the
seeming absence of an active local political community as well as elected or appointed
Cambodians in Lowell city government. The first three, deemed internal because they
are largely within the control of the Cambodian community, are most crucial for under-
standing the succession process. These are (1) coming to terms with the legacy of fear
and mistrust that resulted from the holocaust wrought by Pol Pot's murderous regime;
(2) the lack of a tradition of democratic participation in their home country and there-
fore little familiarity with American political institutions; and (3) one of the key divi-
sions within the Cambodian community: the problem of generational differences be-
tween those who consider themselves Cambodians, and perhaps speak only Khmer, and
the American born, who have no recollection of Cambodia and think of themselves as
American. These factors make the establishment of an organized political effort to en-

110

courage citizenship, registration, and capturing elective office in Lowell very difficult.
The two relevant factors that are considered external, or outside the immediate con-
trol of Cambodians, are (1) the structure of Lowell's political system, which has two
important components, the city's political party organization and the electoral system of
representation; and (2) the response of the city's elected officials to the influx of South-
east Asians that began in the early 1980s.

Internal Factors

The Legacy of Fear

On April 17, 1975, the Khmer Rouge invaded the Cambodian capital of Phnom Penh
and Lon Nol's five-year government fell. Hours later a forced evacuation and relocation
of the city's residents to the countryside began. Former members of the Nol regime
were executed. Reeducation labor camps were established to wipe out any remnants of
Cambodian culture and ancient traditions, including religion. Resisters were killed.

Not enough can be said about the impact of the next four years of Khmer Rouge
"killing fields" on the lives of Cambodians. It is estimated that between two and four
million Cambodian men, women, and children were killed, the reason Cambodians
have come to the United States. They see it as the time that has changed all time.

Two interviewees describe how they believe Cambodia's history of regime change,
civil war, and the tragic events that followed created a deep distrust of politics and poli-
ticians.34

Samkhann C. Khoeun, the executive director of Lowell's Cambodian Mutual Aid
Association, had served in that capacity for a year and a half at the time of the inter-
views. He addressed the issue of grave mistrust and fear in the Cambodian community.

In Cambodian history, there have been a lot of invasions from neighboring coun-
tries. Cambodian leadership itself has been completely neglected. If we don't train
our leaders, someone else will train mem. The same problem will befall us here as
happened in Cambodia. A history of Cambodian politics reveals that in 1970 we had
a change in government to a republic under Lon Nol from the royal government
under Prince Sihanouk; in 1975 another change: the Khmer Rouge came to power;
in 1978 the Vietnamese military invaded Cambodia and took control. Connections
to former governments was a liability; death under the Khmer Rouge. It was not
safe to be active in politics. It is hard to take sides, to know who to believe. It is
dangerous to be educated.

In Cambodia, Cambodians were taught mat education was the key. Then the
Khmer Rouge came to power and sentenced the educated to death. A mixed mes-
sage. To be a better person, education is still believed important but mere is ambiva-
lence about it. Education was a weapon to kill you. Mistrust exists.

There is a real fear of death, real concern; they don't want to jeopardize their
family; they've lost so much, family members, village, homeland. They're not ready
to lose another member of the family; if they can do without confronting anything
they will choose to be in the back seat, to be outside, as long as they survive. Maybe
their children can do something to change that . . . They are most likely not to trust
someone just because they claim to do something for them. They have to see for
real that that person or those persons will really do something for them. They are
also interested in benefits, if they help them right away. They can't wait for the next
five to ten years.35

Ill

.\Vh England Journal of Public Policy

Khoeun is echoed by Michael Ben Ho. cofounder of the Cambodian Mutual Aid
Association (CMAA) in 1984. the area's first Cambodian Buddhist temple in 1985, and
the Cambodian American Voter League in 1990. Trust. Ho says, is the key to commu-
nity empowerment.

Who would want to teach them to become involved, given the past? They are afraid
that the leaders draw you to the river, to the hole, again. The people feel the leaders
just use them to get the power for themselves. Suppose I try to educate the people to
do something, they will say that I want the power for myself. They don't trust any-
more, even their own people. . . . You have to build the trust and the relationship
back.36

In sum, it appears that one legacy of the Cambodian holocaust is that Cambodians in
America are reluctant to engage in local political activity until they are able to trust
leaders from within and without their community7.3" There is little to indicate that suffi-
cient trust has been forged between the community7 and its leaders to build an electoral
movement in Lowell. If anything, the lack of trust has grown, in light of School Com-
mittee candidate Sambath Chey Fennell's political blunders.3* Still, even with their
reservations. many Cambodians backed Fennell for the same reason previous newcom-
ers have given: he was the first of their people to seek office.

Another result of the brutality of the Pol Pot regime is the mental health problems
that have been diagnosed among Cambodians who lived under the Khmer Rouge.
Michael Ben Ho, who is still enduring nightmares, is not alone. Khoeun said many have
nightmares, bad memories, post-traumatic stress syndrome, and other emotional prob-
lems. Some social service workers refer generally to these illnesses as Pol Pot syn-
drome.

[It] includes insomnia, difficulty in breathing, loss of appetite, and pains in various
parts of the body. ... 84 percent of Cambodian households in California have re-
ported that at least one household member was under the care of a medical doctor,
compared to 45 percent of Vietnamese households and 24 percent of Hmong and
Lao households.

Post-traumatic stress disorder, a delayed reaction to extreme emotional stress, has
also been found among Cambodians in the United States. It is a malady that plagues
numerous Vietnam veterans.39

Cambodia's Lack of a Democratic Tradition

Activists and scholars have noted that Asian- Americans have roots in societies with
little tradition of political participation. Daphne Kwok, executive director of the Orga-
nization of Chinese Americans, a Washington-based lobbying organization, states that
political participation in America "is a very new concept for most Asians who are immi-
grants. In their home countries, political participation was not done or was looked on
with skepticism and sometimes fear."40

David Chandler, a scholar of Cambodian history, has written that whether it was the
colonial French or Cambodian Prince Norodom Sihanouk's government, Cambodia's
time-honored political practice was paternalism between patrons and client, government
and the masses, with "the one providing protection and cash, the other delivering loy-
alty and votes." After 1945, the 'Trench and high-ranking Cambodian officials shared
the view that Cambodia's 'little people' were not ready for self-government or for civil

112

rights." Moreover, when efforts were made, through a small but growing democracy
movement in the legislature, to allow for greater political participation, the French and
royal governments cracked down hard on them.41

Another student of Southeast Asian politics and history, Hai B. Pho, argues that this
is a crucial point for understanding Cambodian participation in Lowell. He believes
that, unlike Western nations, Southeast Asian countries have no experience with demo-
cratic institutions. Southeast Asian power was centralized either in the nation's capital
or in regional centers. Village life did not train or socialize the people for decision mak-
ing in government.42

The following interviewees confirm the experts' opinion regarding the importance of
one's political heritage for local participation. Vesna Nuon has worked for the Middle-
sex County district attorney's office as victim advocate and cultural consultant since
1990. He also is a member of the CMAA Board of Directors.

There was little political participation in Cambodia and that might be responsible
for the tendency to believe we are here in the U.S. for survival purposes only; that
we shouldn't ask for more than basics. We learned from the Khmer Rouge [that] we
have to accept what is given to us. Say yes, don't ask for more; mat is the legacy
from the king and his puppet, to go along; we can't use mat as an excuse as to why
we are not politically active here in the U.S.; even back home there were a lot of
educated students who were ready at the moment to voice their concerns, knowing
that voicing that concern could affect their and their family^ welfare/3

Michael Ben Ho agrees

Yes, we believe in Cambodia [that the person] who is born king is a gift from God
to manage the whole population. . . . We feel evemhing belongs to him and believe
that he should direct the country. We need to teach people how to make decisions
for themselves and not expect people to do [it] on [your] behalf. . . . We need to
organ-ize with the middle-age generation, age thirty- to fifty, because they can still
learn.44

Cambodians have been in the United States a relatively short time. One should not
assume that individuals whose political socialization process did not include learning
about the fundamentals of representative government and civil liberties and civil rights
can step easily into the American political process. Millions of Americans have not
been socialized to political efficacy, the notion that what they think and do really mat-
ters in public life. Political efficacy is tied to class, education, race, and many other
important factors.

Generational Differences

Political activity is less likely in those who view themselves as Cambodian, not Ameri-
can — usually the older Cambodian population. As Tern Chea sees it. these people are
more interested in the politics of their homeland than their younger counterparts. Mean-
while, the younger, American-oriented generation, who may find politics a route to
social mobility as past immigrant and refugee groups have, show little interest. Vesna
Nuon asserts that the younger folk are hesitant to participate in community organiza-
tions because they feel that the older generation does not treat them with respect and is
out of step with American cultural and political traditions.

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New England Journal of Public Policy

In Tern Chea's opinion, two-thirds of Cambodians think that Cambodian homeland
politics is their first priority, which makes it very hard to organize and interest Cambo-
dians in Lowell politics. Factions fiercely debate Cambodian politics.

[One group] have in their own mind to go back to Cambodia to help establish and
rebuild the country. The other group would like to do that but feel it is beyond their
capacity, so they think it is better to organize and survive in this country by being
involved in politics at this time. If we are strong here, we may contribute that to
help rebuild our country back home, they believe. . . I should say that we as a com-
munity are not divided by age or education or financial background as much as we
are divided into two groups by the issue of Cambodia.45

The divisions over Cambodia have boiled to the surface over the local Cambodian-
language newspaper, the Cambodian Press, which is published twice a month and dis-
tributed free of charge in stores and restaurants around the country. The paper's pub-
Usher, Eang Bunthan, has been severely criticized by Lowell refugees for supporting the
Khmer Rouge, whom he calls nationalists, as he characterizes himself.46

Noun believes that there is a genuine cultural divide between the old and the young.

It leads back to Cambodia where the belief is that [because] they are older than you
. . . you have to bow to them. You have to listen to their advice and oftentimes you
have to accept it. Which is not true. We came here and we went to Western schools
and we learned the importance of it is that each one of us has a voice. If the other
voice did not really apply in this case you just reject it or somehow reject it in a
polite and constructive way. I ran into that a couple of years ago when I first be-
came involved in the community ... A lot of young people are not involved in the
community. I was told, "You are too young," "You were just born yesterday."
"You're too young, you don't know what you're talking about and not mature
enough to give your own voice or to run this organization or to do this or that." My
question to them is: How long do I have to listen to you? It's a compromise, so to
speak.

That same thing happened in the community, the old versus the young. An ex-
ample of mat is when parents pull their kids in one direction, to come home and be
Cambodian kids. You have to be polite, nice. If you are a girl, you have to be shy,
timid. If you like a guy, don't show him that. You are shy, stay in your room. When
the kids go to school, their peers then would say to them, "Why are you so shy?"
Their teacher would say, "You have to raise your voice up, I cannot hear you." All
of those things confuse the kid. Should I stay in school and act like my mother said
at home or stay at home and act like what my teacher said to me?47

Khoeun adds supports to Nuon.

The older generation hope to go home. Stronger feelings among older adults, forty
years and older, that they want to go back. But they also have the feeling, after
visiting, that their homeland is not theirs anymore. Parents gone, children gone . . .
to find out their environment is just not suitable for them. The weather. Living
conditions. They are used to living in an apartment. Running water. TV. Electricity.
Gas to cook their meals. Everything is within reach. In Cambodia it's not. There is
insecurity. Corruption. No running water. No phone. It's hard for them. They're
older. They don't have the energy to farm, to gather water. It's not a life that's pos-
sible to them. The people there are completely different people. Their mentality is

114

different from before the war. People don't look each other straight in the eye.
They're more dishonest. They only care about today. Some want to go for a month
but come back in a week. Can't eat the food there. No clean water. Even food that
was cooked still makes them sick in Cambodia. If forced to go back, they will go.
And they will adapt, but it will be hard.48

Furthermore, young people are confused about their role in society. Dr. Sam-Ang
Sam, a Cambodian musician, scholar, and activist, currently director of the Cambodian
Network Council in Washington, D.C., believes that "many young people are plagued
by identity problems, leading them to discard their Cambodian first names in favor of
English first names, and they must often deal with racism from classmates and with
being teased about their foreignness."49

Additionally, many young men have lost their fathers to the civil war, and some of them
have found that gangs are an attractive means of acquiring a sense of belonging that
they cannot develop at home. Will many of these youngsters who are leading troubled
lives find a way out of despair through participation in the political arena?50

External Factors

Political Structure: Party Organization

During the early part of the century, immigrant groups who settled in northeastern
American cities were often greeted by a local political party organization, which came
to be known as a political machine. The name has both a negative and a positive conno-
tation. Those who were critical of the "machine," the self-labeled reformers, were un-
happy with the party organization's mechanical efficiency in winning the immigrant
vote in exchange for support to the fledgling immigrant community, usually in the form
of much appreciated jobs, contracts, and city services. Political machine supporters,
known as regulars, took pride in their helpful relationship with the newcomers, who
would surely fall prey to powerful business interests, among other hostile city institu-
tions. Machines were created in large and small cities by members of both the Republi-
can and the Democratic parties.

The once potent political machines are largely a thing of the past. The latest wave of
immigrants has arrived in cities with no strong political party present to assist their
succession into local office, and as a result, they are worse off than their historical
counterparts. Boston-based political consultant Michael Goldman believes:

Political power is harder for new ethnic groups to gain than it was at the turn of the
century, when Irish and then Greeks and French moved up the ranks in government.
It's totally different since there are no parties out there the way there used to be. In
the past, in cities like Lowell, the Democratic party bosses came from the ethnic
groups in their neighborhood, making sure their group got a piece of the govern-
ment jobs. The party system bred competitors for political office that kept whole
neighborhoods politically active. But that system has been replaced by TV ads and
primaries. Either of two things could get minority voters into the booth and convert
population strength into political strength: a charismatic leader or a coalescing
issue.51

It's interesting that there is a parallel to the Russian Jews when they first came to this
country . They were terrified of the political process and thought that being invisible

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was the way to stay out of trouble. In fact, after a short period of time in America, they
realized that the way to gain power was to use the political parties that were then in
play. In particular the large ethnic communities such as Italians, Greeks, Jews, Irish.
They all understood that by controlling neighborhoods, controlling votes, they would
access government jobs which were plentiful.52

The absence of political parties in Lowell is in part attributable to the turn of the
century municipal reformer's success in creating local nonpartisan elections — or elec-
tions in which party labels do not appear alongside candidates' names. Instead, reform
Lowell style has given birth to elections dominated by family and friendship networks
organized along ethnic lines. To win a local election in Lowell a candidate must de-
velop a personal following of family members, friends, and acquaintances, who then
carry out the numerous laborious tasks that are required in campaigns, from stuffing
envelopes to raising money. In return, the candidates reward the faithful, just as the
political machine did, with jobs, contracts, and municipal services. It is reported that
the Lowell School Department is rife with political appointees.53

An important difference between partisan and nonpartisan elections is that, tradition-
ally, parties were decentralized. Organized through ward or district boundaries, new
immigrants were often able to capture pieces of patronage commensurate with their
organized voting strength. These "submachines" allowed immigrants to bargain votes
for symbolic and substantive rewards. According to those who are in a position to know,
the nature of Lowell's familial political system closes the door to newcomers and has
entrenched certain ethnic groups, such as the Irish, French, and Greeks, in a seemingly
impenetrable wall of protection from Hispanics and now Southeast Asians desirous of
acquiring greater political clout.

Michael Conway, who owns an insurance company in Lowell, has run for Congress
and the state Senate as a Republican. His family owns one of the oldest continuously
operating businesses in the commonwealth. Conway might be the last person likely to
claim that Lowell's political scene is closed, even to those with connections like his.

When I first got involved in politics back here in Lowell in 1979, the Democratic
Party was very much in control and it was stifling. There was no room for anyone
else to participate in the system unless you were a Democrat, and then only if you
were part of the machinery that was in place at the time. In a sense you could al-
most make the case that Lowell is a feudal society. There are only certain groups
and certain people who participate in politics, social circles, different things, and
then everybody else who is excluded from that is angry or doesn't participate in the
system and that is what a feudal system is. There is a certain segment of the popula-
tion who are very politically involved . . . make sure that it runs to their benefit.
Those who are excluded become very angry. They're motivated eventually to do
something. At what point and what event sparks that motivation always remains to
be seen.

When the Cambodians started becoming politically involved in the community,
they found that there really wasn't much room for them in the Democratic structure
because the Democrats didn't need the votes. . . . One of the stories is that South-
east Asians definitely feel excluded from a lot of things here, and I think at some
point the city is going to have to accept them and open up the doors because it's like
a banquet hall and there is a banquet going on inside and the Southeast Asians are
banging on the door trying to get in. And they're mad and they want to get in. Once
they get in they are going to knock that banquet table over because they're so mad.

116

It's a good story and I think that people ought to pay attention to it and let them get
involved and help them along their way.54

Traditionally, there are a handful of older, ethnic group leaders who are wise enough
to see the handwriting on the wall and make efforts to reach out to the newest immi-
grant group. Conway stands all alone in this category, one reason being the perception
among elected city officials that their constituency would be extremely angry with them
if they sought out Southeast Asian votes. Those constituents understand that there are
only so many patronage positions to go around. Sharing the spoils of victory with
Southeast Asians means fewer resources for the incumbents and their faithful, needy
communities.55

Political Structure: At-Large versus District Elections

I believe that Lowell's at-large election system also makes it difficult for Southeast
Asians to move swiftly into elective office. Political scientists and federal courts have
long found that district-based elections enhance immigrant opportunities to win office
while at-large systems limit chances for capturing elections.56

Another feature of machine rule was a decentralized electoral system. Voters chose
candidates for local office from district or ward boundaries, often created during reap-
portionment to fit the contours of the latest immigrant group population. Ward-based
elections allowed immigrants to parlay their population density into electing local eth-
nic leaders to party posts and, soon after, city councils and school boards.57

During the Progressive era of the early 1900s, reformers successfully implemented
changes in electoral systems of representation. To weaken machine rule, reformers
made it harder for immigrant groups, largely working class, whom they viewed as the
grease that made the machine run smoothly, to win office. District-based electoral
schemes were overturned in favor of at-large or citywide districts. To capture local
political office, immigrant group leaders would have to campaign citywide. Reformers
felt that this would shift the machine politicians' focus away from caring for their own
ethnic group first, to the detriment to the public good of the city as a whole. In effect,
established groups, with many resources to draw on, such as money, education, and
professional qualifications, and with allies throughout the city, would be favored to win.
Not surprisingly, it was the reformers, largely middle- and upper-class Republican Yan-
kee Protestants who were well placed to take full advantage of the at-large plan. Today,
Lowell's entrenched old guard, the Irish, Greek, and French groups, are the beneficia-
ries of the system.58

Federal courts have thrown out the at-large system in numerous cities, ruling it an
unconstitutional form of government violating the one-person, one- vote standard of the
U.S. Constitution. The courts have recognized the effect of at-large electoral systems in
reducing the representation of geographically concentrated minority populations. They
argue that smaller districts within cities ease access to elective office and increase rep-
resentation for minority ethnic groups.

The most recent Massachusetts case involved the city of Holyoke, in the western part
of the state, where an underrepresented Hispanic population won a federal lawsuit to
overturn the city's at-large electoral system.59 Daniel J. Gleason of the Boston firm
Nutter McClennen and Fish argued the complaint of the city's Puerto Ricans.

The eight at-large seats were used as a permanent majority for the white establish-
ment, and ward lines were drawn to dilute the voting strength of Hispanics . . . We

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sought a compromise with the city, but they refused to acknowledge there is a corre-
lation between the city's political structures and the dramatic underrepresentation of
Hispanics in local government. . . . Hispanics in Holyoke can't win citywide elec-
tions because Hispanics account for 20 percent of the voting-age population, and
they don't vote. Yes, there is Hispanic voter apathy; in 1993, only 2 percent of the
Hispanic voting-age population voted, but that apathy is the by-product of exclusion
from public life. Moreover, whites as a bloc haven't voted for Hispanic candidates
under any circumstances . . . The real fear of old-line ethnic leaders is that district-
based elections will open politics to new groups, meaning patronage, in the form of
municipal jobs, a valuable commodity in a city stuck in economic decline, will have
to be shared.60

Politicians ' Response to the Southeast Asian Migration

Another key ingredient for an effective succession is assistance from leaders of the
city's older, established ethnic groups. The response of those in power can run the
gamut of possibilities: at one end, they have the ability to welcome and accommodate
new groups; at the other, they can exhibit hostility and attempt to exclude them from
political participation.

In Lowell, the response has been mixed. During the middle to late 1980s, some lead-
ers, albeit a vociferous minority on the School Committee, expressed open disdain for
the migration of Southeast Asians to the city and through school board policy exerted
every effort to make the newcomers unwelcome. During this time the schools were the
scene of great ethnic conflict over the still controversial issues of bilingual education
and school busing. A group, dubbed the gang of four by the Lowell Sun, was hostile to
Southeast Asians in the city and refused to act quickly to remedy the overcrowding that
developed in the Lowell public school system.

Granted, by all accounts the city was overwhelmed by the massive influx into the
schools. Still, the schools' leaders were unprepared and inflexible to change. Moreover,
they felt that the city was unfairly being asked to take in the Southeast Asian refugees,
while neighboring communities were not asked to share the burden, and the city's al-
ready poorly funded school system was strapped for resources.

Paul Sullivan, host of a morning talk show on Lowell's WLLH radio station, echoes
what many social service workers and Cambodian leaders have reported: that succes-
sion is proceeding apace, and that several city leaders, particularly city manager Jim
Campbell, mayors Richard Howe and Robert Kennedy, and district attorney Tom Reilly,
did reach out to the Southeast Asian community and helped them settle into Lowell.
The near absence of hate crimes and the hiring of four Cambodian police officers are
two prominent achievements of the city to date. Moreover, the defeat of one of the more
vociferous gang of four School Committee members, Sean Sullivan, was a sign to many
that the city, at the very least, felt uncomfortable with bigoted officials representing
them.

We're talking about the largest influx of change in a community, probably in the
history of this nation, and in three to four years, 30 percent of the city's ethnic
population changed. And [the city] absorbed it without riots, no fights, very little
discord, and still were criticized by the liberal press . . . and it wasn't fair.
People were thrilled, in my opinion, to have youngsters of all colors coming into
their classes. They would have accepted Southeast Asians coming into their neigh-
borhoods to go to school with their youngsters, shoulder to shoulder out in the
playground, but they didn't want their kids going from one end of the city to an-

118

other end of the city. And again, the characterization that that is not inclusive and
has racial overtones somehow is unfair. And frankly, I think it deflects the real
issue: Why do cities have to do it, why do cities have to bear the whole brunt of
integrating society?

"Look at what the Irish went through and the Greeks went through in the city of
Lowell and how long it took for them to achieve what they achieved versus the
Southeast Asians, who in less than fifteen years are accepted and in some cases
thriving, and certainly their issues are being addressed by the city. I don't think
they've got a lot to squawk about. And the truth is, I don't hear a lot of squawking.
Now maybe I'm not in the right circles, but I think anything that has to be done is
fine-tuning. I don't think there is racial discord in the city. I think the white crowd
is concerned with whatever issues of color in the city. And that's why we have spent
so much time on the gang situation, which is really an intramural fight that is taking
place in the Cambodian community. Somebody that was insensitive would ignore it
and they aren't. Cambodians, Vietnamese, and Thai communities have done very
well under that system. And ... in fifteen years they've done very well in what
they've achieved. And that's not because they've had a helping hand.61

Sullivan's perspective, that the city has reached out to the Southeast Asian commu-
nity and deserves a lot of credit for doing so, is a position that is supported by the oral
histories I collected for this article. Even the U.S. Immigration Commission, under the
leadership of the late Congresswoman Barbara Jordan, marveled at Lowell's succession
achievements compared with other cities that experienced great demographic change in
the 1980s.62

An expanded version of this article will explore in greater detail the city, state, and
federal government's response to the settlement of Southeast Asians in Lowell. Prelimi-
nary evidence indicates that Lowell sought to accommodate the needs of Southeast
Asians. There were, however, interest groups that pressured the city to live up to its
commitments.63

The preliminary findings of this study revealed that Cambodians have begun the
political mobilization phase of the succession process. Nevertheless, there remains a
long road ahead for Cambodian political succession in Lowell. Even with all the ob-
stacles before them, there is no reason to believe that the process will be a longer one
for Cambodians than it was for the various ethnic groups that settled in Lowell before
them. What has emerged is the importance of both internal and external factors in the
challenging endeavor of political succession. However, the internal factors seem a little
more important than the external ones. The special legacy of the Cambodian holocaust,
the absence of a Cambodian tradition of participatory politics, and generational differ-
ences all work against the development of an electoral movement that might challenge
or overcome the city's at-large representative system and the lack of active political
parties.

Interviewees suggested other areas for research that will undoubtedly shed greater
light on the succession process. Class divisions: 70 percent of Cambodians living in
Lowell are at or below the poverty line at the same time that a solid middle class has
been established. Gender: women's participation in politics is frowned upon in Cambo-
dian culture though there are signs that young women are poised for leadership roles.
Religion: the monks of the Cambodian Buddhist temple are the most revered figures in
the community. Lowell's two Buddhist temples are at odds on Buddhist practices as
well as the proper place of religion in American politics; one of the temples has shown
signs that it may indirectly lend a helping hand to political education and organizational

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efforts.64

While external factors appear to be less important than internal factors, matters of
political structure are still relevant. A number of questions remain unexplored at this
time. To overcome the obstacles to minority empowerment that at-large elections
represent, it seems that Cambodians must form alliances with the city's other sizable
minority group, Hispanics, and a bloc of sympathetic white ethnic voters to win elec-
tion citywide. Because a structural change of the electoral system is unlikely anytime
soon, coalition building is of the highest order. Still, a failure to elect Southeast
Asians to local office in the coming years could lead to a lawsuit similar to the one
filed by Hispanic residents of Holyoke.

While local elections are nonpartisan, state and federal elections are not. Even
with a mere 500 registered voters, Cambodians have it within their power to tip the
scales in favor of either the Democrats or Republicans in closely fought state and
national races. Successful bloc voting would force the powers-that-be to show the
Cambodians greater political respect. Michael Conway's efforts on behalf of South-
east Asian Republicans represent just the kind of interethnic cooperation that has sped
succession in other cities. Efforts by Republican and Democratic candidates for the
1998 governor's race to reach out to Cambodian activists is evidence that state politi-
cians have taken notice of their potential.

Finally, a word about method. Oral history was extremely useful in uncovering the
political conflicts within the Cambodian-American community. Knowing more than
ever how reluctant Cambodians are to reveal internal squabbles, it is imperative for
students of Cambodian politics to seek corroborating testimony from those who work
closely with the community. Also, while more in-depth interviews are essential to the
further exploration of succession in Lowell, an examination of the growing effort to
increase citizenship, voter registration, and voting levels among Cambodians through
the scrutinization of voting records and voting behavior is necessary. The campaigns
to elect Sambath Chey Fennel to the Lowell School Committee must be assessed; the
University of Massachusetts Lowell's Center for Immigrant and Refugee Community
Leadership Empowerment (CIRCLE) program, a university-community collaboration
seeking to develop sustainable leadership, which is in its third year, should also be

Notes

1 . Massachusetts Municipal Profiles (Lowell, Mass.: Middlesex County, Lowell Public
Library, 1992), 162. The latest population figure is from the Lowell Public Schools,
"Enrollment by Race," October 1, 1996, 1, Table 3. A total of 4,644 Southeast Asian
children attended Lowell schools in 1996. Using a widely accepted formula for
projecting community population created by the Massachusetts Office of Refugees and
Immigrants, 4,644 is multiplied by 5.2 (estimated average family size) to establish the
population figure of 24,148. The largest growth spurt occurred between 1985 and
1990 when Lowell experienced a secondary migration pattern of Southeast Asians
from within the United States. A variety of reasons account for it: family reunification,
available jobs and job training, and the establishment of a Buddhist temple and a
mutual assistance association in the city. Interview with Hai B. Pho, October 2, 1995,
audiocassette, and Jean Larson Pyle, "The Impact of Immigration Policy on Local
Economies: The Importance of the Phenomenon of Secondary Migration," unpublished
paper prepared fortestimony at a public hearing of the U.S. Commission on Immigration

120

Reform at the Boott Cotton Mills, Lowell, August 1, 1994. The source for Lowell's
nineteenth-century population is Mary Beth Norton, David Katzman, Paul Escott,
Howard Chudacoff, Thomas Patterson, and William Tuttle, Jr., A People and a Nation:
A History of the United States, Volume 1: To 1877 (Boston: Houghton Mifflin, 1994),
281.

2. Michael J. White, "Racial and Ethnic Succession in Four Cities," Urban Affairs Quarter-
ly 20, no. 2 (December 1984): 165.

3. Ibid., 166.

4. Nathan Glazer and Daniel P. Moynihan, Beyond the Melting Pot: The Negroes, Puerto
Ricans, Jews, Italians and Irish of New York City (Cambridge: MIT Press, 1963).

5. Ibid., 4.

6. Daniel Patrick Moynihan, "Patterns of Ethnic Succession: Blacks and Hispanics in New
York City," Political Science Quarterly 94, no. 1 (Spring 1979): 1.

7. Lawrence Fuchs, The American Kaleidoscope: Race, Ethnicity, and the Civic Culture
(Hanover, N.H.: University Press of New England, 1990). Fuchs, the Meyer and Walter
Jaffe Professor in American Civilization and Politics, Brandeis University, served as
executive director. Select Commission on Immigration and Refugee in 1981.

8. Steven Erie, Rainbow's End: Irish-Americans and the Dilemmas of Urban Machine
Politics, 1840-1985 (Berkeley: University of California Press, 1988), 320, and Diane
Pinderhughes, Race and Ethnicity in Chicago Politics: A Reexamination of the Pluralist
Theory (Urbana: University of Illinois Press, 1 987), 64.

9. Roger W. Lotchin, "Power and Policy: American City Politics between the Two World
Wars," in Ethnics, Machines, and the American Urban Future, ed. Scott Greer (Cam-
bridge: Schenkman, 1981), 6.

10. See Jeffrey Gerson, "Building the Brooklyn Machine: Irish, Jewish, and Black Political
Succession in Central Brooklyn, 1919-1964" (Ph.D. diss.. City University of New York
Graduate School, 1990). Some earlier pluralist writers on the subject include: Wallace
S. Sayre, "The Immigrant in Politics," in Our Racial and National Minorities, edited by
Francis J. Brown and Joseph S. Roucek (Englewood Cliffs, N.J.: Prentice Hall, 1967),
643-660, and Lawrence H. Fuchs, "Some Political Aspects of Immigration," Law

and Contemporary Problems 21 (Spring 1966): 270-283.

1 1 . Fuchs, American Kaleidoscope, 343. Fuchs's supporters include Robert A. Dahl, Who
Governs: Democracy and Power in an American City (New Haven: Yale University
Press, 1961 ); Elmer Cornwell, "Party Absorption of Ethnic Groups: The Case of
Providence, R.I.," Social Forces 38 (July 1961): 87-98; and "Bosses, Machine, and
Ethnic Groups," Annals 353 (May 1964): 27-39.

12. Fuchs, American Kaleidoscope, 343.

13. Ibid.

14. Ibid., 346.

15. Ibid., 349.

16. Gillian Dara Cohen, "Knowledge of How to Combine: The Political Socialization of
Southeast Asian Refugees in Lowell, Mass.," bachelor's thesis. Department of Social
Studies, Harvard University, 1994. Cohen cites Jerome Black, "The Practice of Politics
in Two Settings: Political Transferability among Recent Immigrants to Canada,"
Canadian Journal of Political Science, December 1987, 731-753, and "Government as
a Source of Ass i stance for Newly Arrived Immigrants to Canada," in Education for
Democratic Citizenship: A Challenge for Multi-Ethnic Societies, edited by Roberta S.
Sigel and Marilyn Hoskin (Hillsdale, N.J.: Erlbaum Associates, 1991), 167-192.

17. Fuchs, American Kaleidoscope, 353.

18. Ibid., 554, fn 52.

19. April R. Schultz, "Searching for a Unified America," American Quarterly 45, no. 4
(December 1993): 642.

20. Jesus Salvador Trevino, "The Pluribus That Makes the Unum," Los Angeles Times
Book Review, February 10, 1994, 11.

2 1 . The Asian-American Almanac: A Reference Work on Asians in the United States, edited
by Susan Gall and Irene Natividad (Detroit: Gale Research, 1995), 29-39, 105 (the
most up-to-date survey of the status of Cambodians in the United States), and Peter
Nien-chu Kiang, "When Know-Nothings Speak English Only: Analyzing Irish and

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New England Journal of Public Policy

Cambodian Struggles for Community Development and Educational Equity," in The
State of Asian American Activism and Resistance in the 1990s, edited and introduced
by Karin Aguilar-San Juan (Boston: South End Press, 1994), 125-145.

22. Cohen, "Knowledge of How to Combine," 7.

23. Ibid., 106.

24. Ivan D. Steen, review of "Don't Call Me Boss: David L. Lawrence, Pittsburgh's Renais-
sance Mayor," Oral History Review 17, no. 1 (Spring 1989): 183.

25. Herbert Gutman, "Labor History and the Sartre Question," Humanities], no. 1 (Sep-
tember/October 1980): 189.

26. C. Wright Mills, The Sociological Imagination (New York: Oxford University Press,
1959), 134.

27. Useful background information was found in Mary H. Blewett, "The Mills and the
Multitudes: A Political History," in Cotton Was King: A History of Lowell, Massachu-
setts, ed. Arthur L. Eno, Jr. (Somersworth: New Hampshire Publishing, 1976); 161-
189; Brian Mitchell, The Paddy Camps: The Irish of Lowell, 1821-1861 (Urbana:
University of Illinois Press, 1988); and the archival collections. The Working People of
Lowell, Lowell National Historical Park, Mary Blewett and Martha Mayo, University of
Lowell, Center for Lowell History, Mogan Center, 1987.

28. Professor Hai B. Pho of the University of Massachusetts Lowell ran a program, under
the aegis of the Indochinese Refugee Foundation, that provided job training and
placement as well as education programs to Southeast Asian refugees in Lowell from
1980 to 1985. He has also written on Southeast Asians in Lowell; his latest work on
the subject is "The Impact of Recent Southeast Asian Immigration on Lowell and
Lawrence,"a paper prepared for a round table discussion, Multiculturalism and
Transnationalism: An International Conference, October 14-16, 1994, University of
Massachusetts Lowell. Pho interview.

29. Not until the 1850s, thirty years after the Irish first arrived in Lowell, did Benjamin F.
Butler organize the Irish into a bastion of the Lowell Democratic Party. See Blewett,
"The Mills and the Multitudes," 168, 174. On Franco-Americans, see Ann
MacGibbon's paper, "The Franco-Americans of Lowell, Massachusetts: Ethnic Politics
in a New England Industrial City," 1996. The most prolific author of Greek life in
Lowell is Nick Karas; see his Greek Immigrant Chronicles (Lowell: Lowell Hellenic
Heritage Association, 1991), 120.

30. See Cohen, "Knowledge of How to Combine," and Kiang, "When Know-Nothings
Speak English Only."

31 . In what can only be described as a pragmatic and opportunistic strategy for winning,
Fennell ran on a conservative ideological plank: eliminate school busing and bilingual
education. It is reported that one of his advisers is a longtime School Committee
member, George Kouloheras, who made a name for himself in the 1980s as a staunch
opponent of busing and bilingual education. Fennell is also backed by a small group of
Southeast Asians who consider themselves Republicans. Interview with Michael
Conway, August 18, 1995, audiocassette. Craig Sandler, Lowell Sun, October 11,
1995, 4; Lowell Sun, November 8, 1995, 1. Lam showed the importance of per-
sistence, winning election on his third try. Interview with Daniel Lam, October 9,
1997, audiocassette. Mayor Hass is quoted in Kay Lazar and Mark Arsenault, Lowell
Sun, "Cambodian Vote Seen as Untapped Force in Lowell," November 9, 1997, 15, 17.

32. Interview with Tern Chea, August 8, 1995, audiocassette. In May 1990, the CAVL was
cofounded by Tern Chea and Michael Ben Ho. Its goal is to encourage Cambodians to
become citizens and registered voters. He is a school social worker in the Special
Education Department of the Lowell public schools. I am investigating the latest figures
for Southeast Asian citizenship and registered voters in Lowell.

33. See The Asian-American Almanac, 33, for figures on family size.

34. I have edited some oral histories in the interest of clarifying language.

35. Interview with Samkhann Khoeun, June 14 and 21, 1995, audiocassette, August 4,
1995, videocassette; interview with Michael Ben Ho, August 1, 1995, audiocassette.
Ho, who was born March 29, 1942 in Cambodia, is a supervisor in the Massachusetts
Department of Social Services in Lowell. He is highly respected as an elder statesman
in the Cambodian community.

122

36. Ho, August 1, 1995, interview.

37. One federal government study suggests that Southeast Asians, African-Americans, and
Latinos view leadership differently. Southeast Asians, for example, believe the develop-
ment of trust is instrumental for political participation. See "Providing Leadership," in
The Future by Design: A Community Framework for Preventing Alcohol and Other Drug
Problems through a Systems Approach (Washington, D.C.: U.S. Department of Health
and Human Services, 1991), 60. My experience confirms this study. I have facilitated a
political leadership workshop for immigrant and refugee activists in Lowell since 1995.
Trust is a recurring issue in the discussions with all the Cambodian participants.

38. Although it is not possible to present here a full explanation of the events that have set
back the development of trust among Cambodians, a few words on the subject are in
order. Fennell engineered a coup d'etat against the CMAA in 1991, forcing out the
executive director, Vera Godley. The manner in which it was carried out reminded
many Cambodian activists of the worst political traditions of Cambodia. Fennell was
dictatorial, acting without the support of the community and its leaders. CMAA was
able to stabilize itself in the fall of 1996, when a new board of directors that opposed
Fennell was voted in. Fennell, because he is the only Cambodian who has run for
political office, remains a force in the community even though his ability to garner
votes from the white ethnic or minority communities of the city is extremely poor.

39. The Asian-American Almanac, 37. Also, for a moving and harrowing story of the war
trauma some Cambodian women refugees have experienced as a result of witnessing
unimaginable horrors, see Alec Wilkinson, "A Changed Vision of God," The New
Yorker, January 24, 1994, 52-68.

40. Steven A. Holmes, "Anti-Immigrant Mood Moves Asians to Organize," New York Times,
January 3, 1996, A1, A11.

41. David Chandler, The Tragedy of Cambodia (New York: Cambridge University Press,
1991), 29.

42. Pho interview.

43. Nuon was born in Phnom Penh and lived through the holocaust. When the Vietnamese
Army took over the country, he and his family fled to Thailand, through fear of again
being placed in concentration camps. Nuon was fourteen when his father and mother
and he and his seven brothers and sisters made it to the United States in 1982. He
serves on the board of the Cambodian American League of Lowell. Interview with
Vesna Nuon, June 12, 1995, audiocassette, and September 7, 1995, videocassette.

44. Ho interview.

45. Chea interview. Chea points out several other obstacles to organizing: older Cambodi-
ans cannot read or write English, and younger Cambodians have no interest in applying
for U.S. citizenship because of their perceived lack of an immediate benefit. The latter
point has lost some of its strength since the 1996 passage of national welfare reform.
The fear of losing Supplemental Security Income, public assistance, and food stamps
led many immigrants and refugees to apply for citizenship in record numbers.

46. Ashley Dunn, "Cambodians in the U.S. Say the Dark Shadow of the Khmer Rouge is
Back," New York Times, August 14, 1995, A10-11.

47. Nuon interview.

48. Khoeun interview.

49. The Asian-American Almanac, 38.

50. It appears that some of Lowell's Cambodian youth are not faring well in this regard.
James Higgins and Joan Ross, photographers, film makers, and authors, have traced
the development of a group of Cambodian children whom they photographed for
Southeast Asians: A New Beginning in Lowell (Lowell, Mass.: Mill Town Graphics,
1986). Higgins found that many of the children are troubled; several found their way
into local gangs, a continuing problem in the Southeast Asian and Latino communities.
Interview with Higgins, Lowell, April 22, 1995. See Higgins and Ross, Fractured
Identities: Cambodia's Children of War (Lowell, Mass.: Loom Press, 1997).

51 . Goldman, quoted in Craig Sandler, "For Minorities in Lowell, There'll Be Little Impact at
the Polls," Lowell Sun, September 18, 1994, 22.

52. Interview with Michael Goldman, Boston, July 27,1995, videocassette.

53. Interview with Sean Sullivan, August 8, 1995, audiocassette. Sullivan, who was

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New England Journal of Public Policy

elected to the Lowell School Committee in 1987, served until 1989, when he failed to
win reelection. He was elected on an anti-immigrant, antibusing, and antibilingual
education platform. He was defeated for his vocal opposition to the school desegrega-
tion plan designated as central enrollment and his support for an extension for Superin-
tendent Henry Mroz by an active parent-supported school reform group and a larger
than usual minority voter turnout.

54. Conway interviews.

55. Interview with Larry Martin, April 3, 1996, audiocassette. Martin, a Lowell City
Councilor from 1993 until his defeat on November 7, 1997, was also the director of
admissions at the University of Massachusetts Lowell for many years.

56. Frank J. Mauro and Gerald Benjamin, eds., Restructuring the New York City Govern-
ment: The Reemergence of Municipal Reform (New York: Academy of Political Science,
Proceedings 37, no. 3, 1989), 16-30.

57. Gerson, "Building the Brooklyn Machine." I maintain that, owing in part to the district-
based election units of Brooklyn's Democratic Party organization, Jews and later blacks
of the borough were able to effect a relatively fluid political succession. Otherfactors
that assisted succession were rapid demographic change, favorable reapportionment of
districts, astute ethnic group leadership, and a history of great competition from within
and without the party for the new ethnic vote as well as independent voting on behalf
of Jews and blacks.

58. The classic statement of this thesis is in Samuel P. Hays, "The Politics of Reform in
Municipal Government in the Progressive Era," Pacific Northwest Quarterly 55 (1964):
157-169.

59. The First Circuit Court of Appeals in Boston ordered federal district court judge Michael
Ponsor to review his findings in the voting rights case brought by Latinos against the
city of Holyoke. "The ruling set aside Ponsor's order reducing the number of at-large
seats on the 15 member City Council from eight to two"; Boston Globe, October 1,
1995, 26. In the fall of 1997, Judge Ponsor reversed his previous ruling, which held
that Holyoke was discriminating against Latino voters. The city did, however, settle,
favorably to the plaintiffs, that part of the suit alleging violation of section 203, which
sets forth the legal requirements for bilingual elections. The Docket, ACLU of Massa-
chusetts 27, no. 2 (November 1997): 3.

60. Gleason is quoted in Kevin Culien, "Judge's Ruling Divides Holyoke," Boston Globe,
April 24, 1995, 1. Also, interview with Daniel J. Gleason, Boston, July 27, 1995.

61. Paul Sullivan interview, videocassette, August 3, 1995; Diane MacLeod interview, July
29, 1995, audiocassette; Jeffrey Davidson interview, July 30, 1995, audiocassette.
MacLeod was Lowell's affirmative action officer from 1982 to 1994. Davidson has been
with the Lowell Police Department for twenty years. Both served on Lowell's Southeast
Asian Task Force and are well respected by Southeast Asian activists. Both believe that
several of the city's political leaders during the 1980s, from the mayor to the city
managerto the police chief, are deserving of praise. MacLeod cited the establishment of
a revolving housing court that meets in Lowell, as well as in Salem and Lawrence,
Massachusetts.

62. U.S. Commission on Immigration Reform, "Summary of Public Hearing, Local Impacts
of Immigration," hearing held in Lowell, Massachusetts, August 1, 1994.

63. Paul Hudon, "The Ethnic Covenant," paper prepared by this VISTA volunteer at the
University of Massachusetts Lowell, Office of Community Service, May 1996.

64. Terry Tun interview, August 8, 1995, audiocassette. Tun offers a Cambodian woman's
perspective on the expected role of women in the community. In the fall of 1995, Tun
left her position with a Cambodian community organization to become congressman
Martin Meehan's liaison to the Southeast Asian community. This is yet another
indication that ethnic political succession is proceeding. I thank Pov Ye for her wisdom
in this regard, as well as her research assistance for this article. Interview with Pov Ye,
September 22, 1995. I hope to interview many more Cambodian women. For insight
into the division among the Cambodian temples, see Samkhann Khoeun interview,
June 21, 1995.

124

Governing Assessing the 1993

Massachusetts Massachusetts

Public Schools Education Reform

Act

John Portz

The Massachusetts Education Reform Act of 1993 created a number of important
changes in public education. In the area of local governance, the act was guided
by a corporate model in which authority and responsibilities were reallocated
among school committees, superintendents, principals, and newly created school
councils. School committees in particular assumed a policymaking role, and super-
intendents became the chief executive officers of their school districts. This article,
based on responses to a mail sur\-ey, is an early assessment of the act's governance
changes. Superintendents are most satisfied with their role, especially their author-
ity over principals and teachers. School committee members are least satisfied
with the changes, although they still provide general support for the goals of the
act. Although they are concerned about their job security under the ne^v system,
principals are supportive. A comparison of the corporate model of governance with
political leadership and shared governance models indicates that two important
challenges lie ahead: developing support from other local political leaders and
fostering a cooperative environment among local governance actors.

American public education is one of the most central institutions in our society, yet
it is also one of the most troubled. Dissatisfaction with public schools is a recur-
ring theme in the media, among policymakers, and for the general public. Low test
scores, poor pedagogy, weak management, and a host of other criticisms are heard fre-
quently. Proposed solutions are many. Various "waves" of reform, from statewide stan-
dards to restructuring, have swept through school systems in recent years.1 Criticisms,
however, continue.

Educational governance is on the target list of problems as weD as solutions. Gover-
nance, which involves the establishment of educational goals and the allocation of re-
sources, is fraught with controversy and debate. Goal setting raises controversial ques-
tions about the very purpose of teaching and learning; resource allocation involves the
contentious division of limited and often shrinking resources. The critique of school
governance ranges from the lack of parental and community participation in the gover-
nance process to incompetence of educational professionals to deliver education effec-
tively in the classroom. Solutions are equally broad from enhancing the parental role
with school vouchers to reallocating responsibilities among educational professionals.

John Portz. associate professor. Department of Political Science. Northeastern L'niversiry.
teaches and writes about state and local public policy, emphasizing education and eco-
nomic development.

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New England Journal of Public Policy

This article focuses on one piece of the governance debate: the allocation of author-
ity and responsibility among educational professionals and leaders at the local level.
My analysis is based on a case study of governance changes under the Massachusetts
Education Reform Act of 1993. This act, described below, adopted a corporate model of
governance in which important educational responsibilities were reallocated among
superintendents, principals, school committee members, and school councils. Superin-
tendents, for example, became the chief executive officers of school districts, while
school committees became policymaking boards. The following analysis, based on mail
survey responses from superintendents, school committee members, and principals, is
an early assessment of these important changes under the act.

Governance Models

Educational governance can be achieved in a variety of ways. One prominent example
is a decentralization model in which governance responsibilities are moved to the
school level.2 The thrust of this reform movement is to shift decision making around
goals and resource allocation to the individual school. School-based management, for
example, appears in various forms as a means to empower local school councils com-
posed of teachers, parents, and principals. Under school-based management, many of
the key decisions that shape the learning environment are made in each school building.
Chicago, Miami, and other cities have experimented with this governance reform.

A market model of governance, in which competition is the key dynamic, comprises
another popular reform. Vouchers and school choice, for example, are forms of gover-
nance in which schools compete for the attention of educational consumers, that is,
parents and students.3 In this competitive model, governance arrangements are a
byproduct of consumer choice. Successful governance is among the attributes of those
schools which succeed in the educational market by attracting more students.

Many popular reforms combine elements of both the market and decentralization
models. The charter school movement, for example, encourages competition among
schools as well as a school-based approach to educational governance. Charter schools
operate under a contractual arrangement with public authorities, but they are outside the
direct supervision of traditional public school authorities and have increased flexibility
to alter curriculum, hours, and other aspects of the learning environment.4 Privatization
is another reform movement that builds upon these models, particularly the market
model. In Baltimore, for example, the private firm of Educational Alternatives, Inc.,
was hired to operate a number of schools in the city school system.5

The traditional governance model, however, focuses more squarely on public-sector
actors. Superintendents, local school boards, mayors, state boards of education, state
legislators, governors, and even members of the U.S. Department of Education are pub-
he actors who assume governance roles. Debates over governance reform often center
on the proper allocation of authority and responsibility among these various players in a
federal system.

There are three variations of the traditional governance model at the local level. One
variation, a corporate model of governance, is the focus of this article.6 Central to this
model is a clear demarcation of roles and responsibilities among governance actors.
School board members, for example, concentrate on the broad issues of educational
policy; superintendents focus on implementing board policies. Each governance per-
former should be held accountable for his or her actions and responsibilities. As the

126

chief legislative sponsor of the Massachusetts Education Reform Act writes, "Account-
ability is the key to successful education reform."7 With the business world as a guide,
the corporate model argues for a separation of policy and management that is character-
istic of the relationship between a corporation's board of directors and the chief execu-
tive officer.

Shared governance is a second variation of the traditional model. Rather than empha-
size a sorting out of authority and responsibilities, as in the corporate model, it high-
lights dialogue and interdependence among governance actors.8 In this model goal set-
ting and resource allocation are shared responsibilities; communication and cooperation
become critical.9 School committee members and superintendents, for example, must
develop a high level of trust and respect that facilitates the sharing of responsibilities
and tasks. Similarly, superintendents and principals become partners in the management
of the school system. Collective, rather than individual, accountability is characteristic
of this model. Shared governance can even be expanded to include community actors,
thereby creating networks in which collaboration and creative dialogue become criti-
cal.10

A third variation focuses on political leadership. In Chicago, Boston, Baltimore, and
several other cities, mayors have assumed a central governance role in their respective
school systems.11 In Boston, for example, Mayor Thomas Menino appoints members of
the school committee and has taken a leading role in educational goal setting and the
allocation of resources. As the mayor stated in a 1996 speech, "I want to be judged as
your mayor by what happens now in the Boston public schools. I expect you to hold me
accountable ... If I fail, judge me harshly."12 The mayor of Chicago has also assumed a
major role in his city's schools. Labeled by one group of researchers as "integrated
governance," this centralization of authority under Mayor Richard Daley appoints mem-
bers of the school board and exercises considerable control over the allocation of re-
sources to the schools.13

Local Level Educational Governance: Education Reform

The Massachusetts Education Reform Act of 1993 covered a broad range of educational
activities, including school finance, teacher certification, learning standards, and cur-
riculum models as well as governance. In the last area, the corporate model clearly
guided the reform efforts. As the state Department of Education notes in a publication
explaining the act, "We view the school committee as the publicly elected or appointed
equivalent of a board of directors of a corporation . . . [and] the superintendent serves as
the school committee's chief executive officer and educational advisor."14 With this
model as a guide, governance responsibilities were reallocated among four local bodies:
school committees, superintendents, principals, and newly created school councils.

The major reform thrust for school committees is an emphasis on their policymaking
role. Their major responsibilities are to

• establish educational goals and policies;

• negotiate and approve collective bargaining agreements;

• vote on school choice policy;

• adopt general disciplinary policies;

• approve all school department expenditures;

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New England Journal of Public Policy

• review and approve the budget;

• hire superintendent and several other identified districtwide personnel;

• establish compensation policy for principals;

• establish performance standards for all personnel; and

• adopt a professional development plan for all personnel.

The most significant authority removed from school committees is the hiring of prin-
cipals and teachers. A superintendent no longer submits to the school committee the
names of candidates for principal and teaching positions.

Superintendents, on the other hand, assume administrative and management respon-
sibilities. As chief executive officer of the schools, superintendents are responsible for
the day-to-day operations of their school districts. In this context, major responsibilities
include:

• appointing principals and other personnel not assigned to specific

schools;

• reviewing and approving the appointment of teachers and staff proposed
by principals;

• publishing the school committees' district policies on teacher and
student conduct;

• recommending employee performance standards to the school commit-
tees;

9 maintaining records on all students and staff and filing a detailed
annual report;

• reviewing and approving the process for the formation of school
councils; and

• overseeing the general operation of their school districts.

The most significant new responsibilities for superintendents are in the personnel
area. Superintendents now have total authority over hiring principals and indirect con-
trol over hiring teachers.

Principals are also recognized as key actors in school governance. Although they are
appointed by superintendents, each of them has considerable authority over the alloca-
tion of resources within his or her school building. Major responsibilities include:

• administering and managing resources within the school;

• suspending and expelling students;

• hiring and firing all teachers and school staff, subject to approval of
the superintendent, relevant collective bargaining agreements, and state
law;

• establishing and serving as cochair of the school council.

Increased accountability is the purported theme of the Reform Act for principals.
They exercise greater authority over school personnel and are individually accountable
for teaching and learning in their school buildings. Significantly, principals, defined as
managers, can no longer engage in collective bargaining. Each principal negotiates an
individual employment contract (up to three years) with his or her superintendent.

Finally, the Reform Act required the creation of a school council in each school in

128

the state. These councils are composed of teachers, parents, community members,
principals, and at the high school level, students. Through the councils the Reform Act
encourages the participation and involvement of parents, teachers, and community
members in the governance of individual schools. The major responsibilities of coun-
cils include:

• advising the principal in setting educational goals and school policies,
as well as reviewing the school budget; and

• preparing and reviewing an annual school improvement plan.

Evaluating the Impact of Governance Changes

To assess the impact of these changes, I sent a survey questionnaire to all Massachu-
setts school committee members, superintendents, and principals. Of the 4,310 ques-
tionnaires mailed, 957 (22 percent) were returned. (See Appendix A for a discussion of
the survey.) In addition to demographic questions, the survey posed a number of ques-
tions concerning governance changes under the Education Reform Act. Questions
probed the level of satisfaction with a respondent's governance role, the impact and
importance of governance changes, and the support for or opposition to other possible
governance changes. My analysis focused on the similarities and differences among
responses by the three local governance actors. Their impressions and self-reported
experiences of educational professionals and leaders form the basis for the following
assessment of the corporate governance model adopted in Massachusetts.

General Assessment of Roles

On a measure of general "satisfaction" with their governance role, superintendents are
clearly the most satisfied with changes under the Education Reform Act. Survey re-
spondents were asked, "How satisfied are you in your current governance role?" The
average responses for all three groups are provided in Table 1 .

Table 1

Satisfaction in Current Governance Role

Dissatisfied Satisfied

1 2 3 4 5

School committees 3.2

Superintendents 4.0

Principals 3.3

The feeling of satisfaction among superintendents is striking: an average score of
4.0. In fact, 75 percent of superintendents circled 4 or 5; only 9 percent expressed
dissatisfaction by circling 1 or 2. To be certain, some superintendents complained of
continuing micromanagement by school committees, but the overall level of satisfac-
tion is quite high.

In contrast, school committee members are the least satisfied among the three types
of governance actors. In response to the same question, the average response is only
3.2. Only 43 percent of school committee members circled 4 or 5, while 33 percent

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New England Journal of Public Policy

expressed dissatisfaction by circling 1 or 2. Principals lie in the middle on this measure
of satisfaction, with an average score of 3.3. In response to the question, 52 percent of
principals circled 4 or 5, and 29 percent circled 1 or 2.

A second question concerning general governance roles reveals a similar trend.
Question 3 of the survey uses a 1 to 5 scale for the following question: "In the alloca-
tion of governance responsibilities in your district, how would you rate the role of each
of the following [school committee, superintendent, principal, school council]."

Too Weak Just Right Too Strong

12 3 4 5

From this perspective, 81 percent of superintendents describe their role as "just
right"; only 13 percent viewed it on the weak side of the scale (1 and 2). This was the
highest self-assessment score among all three groups. Furthermore, superintendents
look favorably on the role of the other two governance categories. With respect to the
role of principals, for example, 85 percent of superintendents view the principal's role
as "just right." The role of school committees rates a slightly lower 75 percent "just
right" score, while school councils score 70 percent on the same measure. In general,
superintendents appear to be quite satisfied with their role as chief executive officer of a
school system.

School committees, again, show a sharp contrast and different assessment of their
governance role. In assessing it, only 41 percent of the members rate it as "just right,"
while 53 percent rate it weak (scores 1 and 2). Clearly, school committee members have
concerns over their role in governance. Not surprisingly, this cohort also questions the
roles of other governance participants. Although 48 percent of committee members
view the superintendent's role as "just right," an almost equal number, 44 percent, rate
it on the strong side (scores 4 and 5). For principals, the picture presents a greater split:
51 percent of the members view the principals' role as "just right," with the remainder
divided between weak and strong. Finally, 41 percent of school committee members
view school councils as weak (scores 1 and 2) , while 37 percent rate them "just right."

Principals again fall in the middle, although their assessment lies closer to that of
school committee members than of superintendents. In assessing their own role, a bare
majority, 52 percent, rate their role as "just right." In contrast, 39 percent of principals
offer a self-assessment on the weak side of the scale. In light of this judgment, a signifi-
cant number of principals view the role of other governance actors as too strong. With
school committees, for example, 53 percent of principals perceive the committee role as
"just right," while 35 percent perceive it as strong. The pattern is almost identical for
superintendents: 52 percent of principals consider the superintendent's role as "just
right," while 37 percent consider it as strong. With school councils, however, principals
are more sympathetic. For these partners at the school level, 62 percent of principals
think their role is "just right," while 29 percent think it is weak.

Assessing the Importance of Changes

To assess the relative importance of specific changes under the Massachusetts Educa-
tion Reform Act, the survey uses a 1 to 5 scale for the following question: "Listed
below are major governance changes under the Education Reform Act. Regardless of
the impact on your district, how important do you think each is in improving educa-

130

tional governance?" The tables below list the average response for the three types of
governance personnel.

School Committees and Superintendents

One of the most important changes under the Education Reform Act involves a shift in
school committee responsibility from general hiring decisions to a policymaking board
that hires only the superintendent. The companion to this change is the assumption of
authority by superintendents to hire principals and teachers. These two changes are
central to the corporate model that was instrumental in guiding reform legislation:
board of directors (school committee) making policy and chief executive officer (super-
intendent) responsible for hiring.

The assessment of each change is reported in Tables 2 and 3. Each change was per-
ceived as quite important in school governance, particularly by superintendents. For
both survey questions, the average response for superintendents is 4.8. In the case of
each question, 85 percent of superintendents circled 5 on the response scale. In contrast,
school committee members are less inclined to view this change as very important.
Their average response is 3.8 or 3.9 for these questions. For the first question, only 39
percent of school committee members circled 5, and for the second question only 35
percent did so. Principals fall between the two, although they are more closely aligned
with superintendents. Their average response rating is 4.6 and 4.4, respectively, for the
two changes. In general, the responses indicate a fairly strong endorsement of the cor-
porate model of governance, although school committee members have significant
reservations.

Table 2

Hiring Authority

(School committees' focus on policy and budget with less hiring authority)

Not Important Very Important
1 2 3 4 5

School committees 3.9

Superintendents 4.8

Principals 4.6

Table 3

Superintendents' Responsibility for Hiring Principals

Not Important Very Important
1 2 3 4 5

School committees 3.8

Superintendents 4.8

Principals 4.4

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New England Journal of Public Policy

Principals

For principals, several of the changes under the act are greeted with considerable sup-
port. In particular, those which enhance the authority of principals are perceived as
important to educational governance. The authority of principals to hire teachers, for
example, receives strong endorsement (see Table 4). The average response for princi-
pals is 4.8, with 82 percent of principals circling 5. Superintendents are also highly
supportive of this change. Their average response is 4.6, with 71 percent circling 5. Not
surprisingly, school committee members, who lose authority under this change, see it as
less important to improving governance. Their average response is 4.0, and only 38
percent circled 5.

Table 4

Principals' Responsibility for Hiring Teachers

Not Important Very Important
1 2 3 4 5

School committees 4.0

Superintendents 4.6

Principals 4.8

Enhanced authority for principals over student discipline receives an approximately
similar level of support from all parties. As Table 5 indicates, school committee mem-
bers, principals, and superintendents gave an average response of either 4.1 or 4.3.

Table 5

Principals' Authority over Student Discipline

Not Important Very Important
1 2 3 4 5

School committees 4.1

Superintendents 4.3

Principals 4.3

One final change regarding principals, namely, their removal from collective bar-
gaining, receives less support as important to governance, particularly by them (see
Table 6). This controversial provision in the Education Reform Act is deemed by many
principals to be a removal of protections from arbitrary actions by superintendents. The
principals' average response is only 3.2. Equally significant, 33 percent of principals
circled 1 , indicating strong sentiment against this change. On the other hand, many
superintendents and school committee members regarded this change as an important
step in enhancing principals' accountability. The average response of both of these
groups is 4.0.

132

Table 6

Principals' Loss of Collective Bargaining

Not Important Very Important
1 2 3 4 5

School committees 4.0

Superintendents 4.0

Principals 3.2

School Councils

A final area of change involves the creation of school councils. These site-based advi-
sory groups are newly created under the Education Reform Act. Support for school
councils is fairly consistent across respondents (see Tables 7 and 8), although the level
of importance in educational governance is less than that attributed to several other
changes, particularly the changes in policymaking and personnel responsibilities.

Table 7

School Councils' Advice to Principals

Not Important Very Important
1 2 3 4 5

School committees 3.8

Superintendents 3.9

Principals 3.7

Table 8

School Councils and Principals' Development
of Improvement Plans

Not Important Very Important
1 2 3 4 5

School committees 3 . 9

Superintendents 4.1

Principals 4.0

Possible Changes in Educational Governance

In addition to the changes made under the Massachusetts Education Reform Act, a
number of other governance reforms are under consideration or are the subject of de-
bate. Another part of the survey used a 1 to 5 scale (strongly oppose to strongly support)
for the following question: "Listed below are possible changes in educational gover-
nance and policymaking. Would you support or oppose these changes?"

School Committees

For school committees, one possible change is to restore their hiring authority, prima-
rily the choice of principals. Survey respondents were asked whether they supported or

133

New England Journal of Public Policy

opposed allowing school committees to vote on the hiring and dismissal of principals.
Under the new Education Reform Act, superintendents have sole responsibility in this
area. Not surprisingly, this change receives support from school committee members,
with an average response of 3.8, but strong opposition from superintendents, whose
average response is 1.5. In fact, 70 percent of superintendents, indicating their strong
opposition, circled 1. Principals, 51 percent of whose responses to a hiring process that
opens their appointment to the scrutiny of school committees circled 1, were also
strongly opposed to this change (see Table 9).

Table 9

Should School Committees Vote on Hiring
and Dismissing Principals?

Strongly Oppose Neutral Strongly Support
1 2 3 4 5

School committees 3.8

Superintendents 1.5

Principals 2.1

One method of limiting the likely scope of school committee action — restricting
school committees to quarterly meetings — also sparks divergent responses (see Table
10). School committee members, not surprisingly, strongly oppose such restrictions.
Their average response is 1 .4, with 80 percent of them circling 1 . Superintendents,
however, find more merit in this proposal. Their average response score of 3.7 indicates
sympathy with a change that might lessen micromanagement of the school system by
the school committee. Principals, with an average response of 3.3, evidence a more
neutral position on this change.

Table 10

Limiting School Committees to Quarterly Meetings

Strongly Oppose Neutral Strongiy Support
1 2 3 4 5

School committees 1.4

Superintendents 3.7

Principals 3.3

Finally, a more radical change in choosing school committees — appointment rather
than election — receives general opposition from all parties, particularly school com-
mittee members, whose average response is 1.8 (see Table 11). It appears that despite
their support by former governor William Weld, this concept and Boston's experiment
with an appointed committee have little advocacy among local educational leaders
around the state.

134

Table 11

Allowing Local Communities to Appoint School Committees

Strongly Oppose Neutral Strongly Support
1 2 3 4 5

School committees 1.8

Superintendents 2.1

Principals 2.6

Superintendents

Two possible changes in the responsibility and authority of superintendents receive
mixed responses. One proposed change is to require superintendents to negotiate labor
contracts, which is currently the responsibility of school committees. It can be argued,
however, that this is not an appropriate function for a policymaking board. Rather, it is
a management function that should rest with the chief executive officer of the corpora-
tion. Such a proposal draws divergent responses (see Table 12), with school committee
members generally opposed (2.5), principals in favor (4.1), and superintendents slightly
opposed (2.8).

Table 12

Requiring Superintendents to Negotiate Labor Contracts

Strongiy Oppose Neutral Strongly Support
1 2 3 4 5

School committees 2.5

Superintendents 2.8

Principals 4.1

A second change would reduce superintendents' authority by removing the require-
ment that a superintendent approve the hiring and dismissal of teachers. Under the Edu-
cation Reform Act, principals have primary responsibility for teacher personnel deci-
sions, but superintendents retain final approval authority. This proposed change draws
quite strong opposition from school committee members (2.0) and superintendents
(1.6). Opposition is particularly strong among superintendents, of whom 70 percent
circled 1 on the survey. Principals generally support this change, but their level of sup-
port is mild (3.3) compared with the opposition of the other two groups.

Table 13

Allowing Principals Sole Authority to Hire and Fire Teachers

Strongly Oppose Neutral Strongly Support
1 2 3 4 5

School committees 2.0

Superintendents 1.6

Principals 3.3

Principals

The authority and responsibility of principals is another important governance area.
One proposed change, to involve them in the teachers' collective bargaining process, is

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New England Journal of Public Policy

designed to enhance the accountability of principals. Since collective bargaining contracts
often restrict the authority of principals and other administrators, a role for principals
in the process appears logical. The reaction, however, is mixed among respondents.
School committee members, who probably perceive this as a loss of authority, tend to
oppose such a change (2.6), and principals generally support (3.6) it, although neither
group stakes out a strong position on this issue.

Table 14

Allowing Principals to Participate in
Teachers' Collective Bargaining

Strongly Oppose Neutral Strongly Support
1 2 3 4 5

School committees 2 . 6

Superintendents 3.2

Principals 3.6

Job security is a second important issue for principals. Under the Education Reform
Act, principals are no longer allowed to participate in collective bargaining and avail
themselves of concomitant job protections. Many principals perceive this as threat to
their positions and a change that undermines their accountability. A proposal to require
minimum two-year contracts for principals receives support or a neutral response (see
Table 15). Support by principals is particularly strong (4.6); 73 percent of them circled 5.

Table 15

Requiring Minimum Two-year Contracts for Principals

Strongly Oppose Neutral Strongly Support
1 2 3 4 5

School committees 3.1

Superintendents 3.4

Principals 4.6

School Councils

A general reluctance to expand the scope of governance is evident in a question that
proposes to give school councils authority over a portion of the school budget. School
councils possess only advisory authority under the act; they lack the decision-making
and financial authority that is often sought by advocates of school-based management.
This proposal, however, is generally opposed by educational professionals (see Table
16). Superintendents (2.0) and school committee members (2.2), in particular, tend to
thwart such a diminution of their authority.

136

Table 16

Giving School Councils Authority over
Part of the School Budget

Strongly Oppose Neutral Strongly Support
1 2 3 4 5

School committees 2.2

Superintendents 2.0

Principals 2.8

Other Changes

The reluctance to share governance responsibilities is even more evident when the
proposal is made to allow municipal officials more authority in collective bargaining.
Under the Education Reform Act, the chief executive in each city or town — the mayor
or town manager — sits with the school committee to vote on collective bargaining
contracts. The intent of this provision is to involve municipal officials, who are respon-
sible for the allocation of funds to all departments, including the schools, a greater role
in determining how funds are spent. Education leaders, particularly superintendents,
oppose an expansion of authority for municipal officials (see Table 17).

Table 17

Increasing Municipal Officials' Authority
in Collective Bargaining

Strongly Oppose Neutral Strongly Support
1 2 3 4 5

School committees 2.3

Superintendents 1.6

Principals 2.4

A final proposal reveals a general ambivalence on the part of local education leaders
toward significant changes within the school system. This proposal would enable local
districts to establish within-district charter schools. Like Boston's pilot schools, the
charter schools would be exempt from many regulations and procedures mandated by
the district office and labor contracts, but the individual schools would still be part of
the local school district. This proposal receives a generally neutral response from re-
spondents, although superintendents indicate mild support (see Table 18).

Table 18

Allowing Local Districts to Establish Charter Schools

Strongly Oppose Neutral Strongly Support
1 2 3 4 5

School committees 3.1

Superintendents 3.4

Principals 3.0

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New England Journal of Public Policy

In general, governance changes under the Massachusetts Education Reform Act of 1993
receive support from educational leaders at the local level. Superintendents, particularly,
are satisfied with their new role and responsibilities as the chief executive officers of the
school system. School committee members and principals express a number of concerns,
but they also are generally supportive of the overall thrust of the act.

One of its most important changes — the reallocation of hiring and dismissal author-
ity — is supported by governance actors, albeit with some significant reservations. Un-
der reallocation, school committees are restricted to hiring and dismissing superinten-
dents (and a few others in districtwide positions); superintendents, who hire and dismiss
principals, have final approval of teachers and other school-based personnel; and princi-
pals assume primary responsibility for hiring and dismissing teachers and others in their
buildings.

Schools are slowly adjusting to this new allocation of responsibilities. Thus far,
superintendents appear to be most satisfied with their role. Their authority over the key
official at each school, the principal, is enhanced considerably. A majority of school
committee members, on the other hand, are concerned about their loss of authority over
personnel, particularly principals. In fact, 68 percent of school committee members
support (circled 4 or 5) resumption of their power to hire and dismiss principals. Princi-
pals, for their part, strongly endorse their authority to hire and dismiss teachers, thereby
enhancing their accountability for the quality of teaching. Some principals, however,
remain troubled about collective bargaining restrictions and legal roadblocks to dismiss-
ing teachers. As one elementary principal writes, "Why not put teachers on the same
one-to-three-year contracts and abolish tenure and professional status? Do that and
you'll revolutionize education overnight."

Furthermore, many principals are disturbed about their new status outside collective
bargaining. A common refrain is that they are vulnerable to the whims of the superin-
tendent. As another elementary principal writes, changes should be made to "reduce a
superintendent's power — absolute power corrupts; principals are at the mercy of super-
intendents." Emphasizing this point, 88 percent of principals support (circled 4 or 5)
requiring a minimum two-year contract for individuals in their position.

School councils, newly created under the Education Reform Act, receive general
support from participants in the survey. School improvement plans, which are approved
by school councils, also receive a favorable rating. One principal writes, "The school
improvement plan helps to bring together the vision, goals, and objectives for the
school from principal, staff, and parents."

In general, school committee members, superintendents, and principals favor many
of the act's reforms, but they are also cautious and protective of their authority and
position. When faced with reforms that might alter the balance of power, local actors
are typically opposed or neutral. Appointed school committees, for example, are op-
posed by all three groups. Similarly, more extensive budget authority for school coun-
cils is opposed, chiefly by school committees and superintendents. All three groups are
opposed to granting municipal officials more authority in the collective bargaining
process, and they are generally neutral about the prospect of creating within-district
charter schools. For these educational leaders, there are limits to the acceptable scope
of educational reform. Future legislative proposals to alter the governance framework
need to take this cautious perspective into consideration or risk strong opposition from

138

major educational constituencies.

The Massachusetts Education Reform Act is inspired by a corporate model of educa-
tional governance. The essence of this model is a sorting-out or demarcation of respon-
sibilities among governance actors. A policymaking board of directors, the local school
committee, and a managing chief executive officer, the superintendent, are central to
this model. In addition, school principals are to take charge of their individual build-
ings, and school councils provide a forum for teacher, parent, student, and community
input to the decision-making process.

On the basis of the self-assessments of school committee members, superintendents,
and principals, the Education Reform Act has generally been effective in clarifying
governance responsibilities and enhancing accountability. However, major challenges
he ahead. In fact, the two other variations of the public-sector approach to governance
outlined earlier — political leadership and shared governance — point to two of them.
Each variant points to a different piece of reality in the world of educational gover-
nance.

From a political leadership perspective, the key challenge is the development of
support for public education from among political and community leaders outside the
schools. This is an external concern generally lacking in the corporate model, which
instead focuses on policy development and management within the school system.
School committees focus on educational policies; superintendents concentrate on
systemwide administrative and management responsibilities; and principals are con-
cerned with the operations of their own school. Under a corporate model, fostering
broad political support from external constituencies in the community is not central to
the tasks of these governance actors. Mayors and city councillors, for example, are not
of major concern from a corporate model perspective. Indeed, this model eschews the
political world for the bias and influence that it might exert over a policy and manage-
ment process which should focus on educational rather than political matters.

The political leadership model, however, poses a different reality in which broad
political support for education is critical. This perspective is particularly pertinent in
Massachusetts, whose school districts are fiscally dependent on local governments. The
latter, composed of city councils, mayors, managers, and others, must approve the over-
all school appropriation. If the schools lose favor with these political leaders, the school
budget suffers. Of course, the funding formula of the Education Reform Act requires a
certain level of local fiscal support for the schools, but this is essentially a minimum. To
go beyond this level, local government leaders must be convinced that the schools merit
additional funding. Thus, governance actors must add to their duties the political tasks
of seeking and lobbying for support, particularly fiscal support, from these leaders.

In this context, it is interesting to note that Boston stands apart from other state com-
munities, for, unlike other school districts' system of independently electing school
committees, the city's mayor appoints the members. Boston thus benefits from a politi-
cal leadership approach to governance that has translated into considerable fiscal and
administrative support for the school system. As noted earlier, Boston's Mayor Menino
has staked his political future on improving the schools.

The second major challenge is apparent from the shared governance approach. From
this perspective, the critical concern is how to build an environment of cooperation and
mutual respect. As this model emphasizes, governance in local school districts often
defies the demarcation and sorting-out rationale of the corporate perspective. As one
educational association notes, "[The] line between policy and administration is rarely

139

New England Journal of Public Policy

clear-cut."15 Dialogue and interdependence can be as important as division of authority
and responsibilities. The question, then, is whether the corporate model can foster this
cooperative environment while retaining its emphasis on the policy-management distinc-
tions.

A major challenge to building a cooperative environment comes from suspicions and
divisions among governance actors. Under the Education Reform Act, for example, the
job insecurity noted by many principals can be disruptive to the development of shared
governance. Many principals perceive their position as subject to the whims of the super-
intendent. The act's intent is to make principals more accountable for their schools, but
so mandating, it also increases the authority of superintendents over principals. The
result has not always been a more cooperative environment for governance. As one prin-
cipal noted, policymakers need to "rethink collective bargaining for principals — we are
much too vulnerable in our present position."

A Public Agenda Foundation study raised a similar point in its conclusion that build-
ing a cooperative environment is the critical step in educational reform.16 "Good ideas
about curricula, textbooks, tests, financing and governance will founder if the parties
who must implement them cannot get along."17 One superintendent in this study com-
pared his school district to a "giant dysfunctional family," while in several communities
surveyed, educational reform fell "victim to division, factionalism, and gridlock."18 In
Massachusetts as well, fostering a cooperative environment is difficult. As one superin-
tendent notes, "There has been a distinct and open polarization of school committees
and superintendents. In fact, Education Reform has created an even greater and more
intense political climate."

The challenge is formidable. A cooperative governance arrangement implies that all
sectors work together and that accountability is collective. From this perspective, school
committees, superintendents, principals, and school councils are in the governance
game together. Each plays a part in a collective enterprise that is judged on its overall
success — the educational achievement of students. A critical task is to combine this
collective accountability with the individual accountability of the corporate model. It
requires a means of assessment that discriminates between the collective and individual
responsibilities of governance actors. Principals, for example, are individually account-
able for their school buildings, but they are joined by other governance players in over-
all accountability for the educational performance of students. Measuring and assessing
such distinctions is difficult, as is establishing an acceptable system of rewards. Never-
theless, this is an important task that lies at the heart of improving educational gover-
nance. **

For their assistance in preparing and mailing this survey, I thank the Massachusetts
Department of Education, the Massachusetts Association of School Committees, the
Massachusetts Association of School Superintendents, John Schneider of the Massachusetts
Legislature, and Paul Reville of the Massachusetts Education Reform Review Commission.
Partial financial support was provided by the Research and Scholarship Development Fund,
Northeastern University.

140

Appendix A

Survey Methodology

A survey questionnaire was mailed to all Massachusetts school committee members, su-
perintendents, and principals in the fall of 1996. School committee members received
theirs in a quarterly mailing from the Massachusetts Association of School Committees,
superintendents and principals in a regular Massachusetts Department of Education mail-
ing. Several questions were open-ended, while others used a five-point scale to assess the
respondents' impressions. Questions also sought information regarding various demo-
graphic and other background characteristics of the respondents. The response rate was as
follows:

Surveys
Mailed

Responses
Received

Percentage
Returned

School Committee Members

Superintendents

Principals

Total

2,200

280

1,830

4,310

391
138
428
957

18 percent
49 percent
23 percent
22 percent

Available demographic data for the entire population of each governance group form the
basis for the following comments on the representativeness of the responses.

School Committee Members. Compared with a 1995 membership survey conducted by
the Massachusetts Association of School Committees as characteristic of the entire state
population, my respondents are representative in terms of gender and education. Distribu-
tion of males and females in both is roughly equal, and approximately 50 percent of the
respondents and the school committee population have graduate or professional degrees.
In years of service, however, my group is more experienced. Among them, 58 percent had
five or more years of service on a school committee, whereas the comparable figure for the
state total is 34 percent..

Superintendents. Population characteristics for this group are based on an annual survey
conducted by the Massachusetts Association of School Superintendents. My survey
group is representative in terms of age and size of school district. Among both respon-
dents and the state population of superintendents, 34 percent are between the ages of 36
and 50, while 66 percent are 51 or older. By school district, 66 percent of my sample and
69 percent of the state population are superintendents of districts with enrollments be-
tween 1,000 and 5,000. In terms of years in their current governance role, my respondents
are more experienced than the typical total state population. Among all superintendents,
44 percent have been in their jobs for 1 to 3 years and 39 percent for 4 to 10 years. In my
survey, the comparable percentages are 24 percent and 52 percent, respectively. Again, as
with school committee members, my respondents are somewhat more experienced than
the overall state population.

Principals. The Massachusetts Department of Education reports that the gender distribu-
tion of state principals is 64 percent male and 36 percent female; my respondents reported
identical figures.

141

New England Journal of Public Policy

Notes

1. Chester Finn, Jr., and Theodor Rebarber, Education Reform in the '90s (New York:
Macmillan, 1992).

2. Joseph Murphy, Restructuring Schools: Capturing and Assessing the Phenomena {New
York: Teachers College Press, 1991 ); Cross City Campaign for Urban School Reform,
Reinventing Central Office: A Primer for Successful Schools (Chicago: Cross City
Campaign for Urban School Reform, 1995); Paul Hill and Josephine Bonan, Decentrali-
zation and Accountability in Public Education (Santa Monica: Rand Corporation, 1991 ).

3. Edith Rasell and Richard Rothstein, eds.. School Choice: Examining the Evidence
(Washington, D.C.: Economic Policy Institute, 1993); Carnegie Foundation, School
Choice (Princeton: Carnegie Foundation for the Advancement of Teaching, 1992).

4. Paul Hill, Lawrence Pierce, and James Gutherie, Reinventing Public Education: How
Contracting Can Transform America's Schools (Chicago: University of Chicago Press,
1997).

5. Craig Richards, Rima Shore, and Max Sawicky, Risky Business: Private Management of
Public Schools (Washington, D.C.: Economic Policy Institute, 1996).

6. Twentieth Century Fund, Report of the Twentieth Century Fund Task Force on School
Governance (New York: Twentieth Century Fund Press, 1 992); Jacqueline Danzberger,
"Governing the Nation's Schools: The Case for Restructuring Local School Boards," Phi
Delta Kappan, January 1994, 366-373.

7. Mark Roosevelt, Education Reform: Where We Stand Today (Boston: Massachusetts
Legislature Joint Committee on Education, Arts, and Humanities, 1994), 14.

8. Paul Bauman, Governing Education: Public Sector Reform or Privatization (Boston: Allyn
and Bacon, 1996).

9. American Association of School Administrators, Roles and Relationships: School Boards
and Superintendents (Arlington, Va.: American Association of School Administrators,
1994), 13.

10. Sandra Waddock, Not by Schools Alone: Sharing Responsibility for America's Educa-
tional Reform (Westport, Conn.: Praeger, 1995).

11. Rochelle Stanfield, "Bossing City Schools," National Journal, no. 6 (February 8, 1997):
272-274; Charles Mahtesian, "Handing the Schools to City Hall," Governing (October
1996): 36-40; Richard Hunter, "The Mayor versus the School Superintendent: Political
Incursions into Metropolitan School Politics," Education and Urban Society 29, no. 2
(February 1997): 217-232.

12. Thomas Menino, "State of the City" Address (Boston: City of Boston, Mayor's Office,
January 17, 1996).

13. Kenneth Wong, Robert Dreeben, Laurence Lynn, Jr., and Gail Sunderman, Integrated

Governance as a Reform Strategy in the Chicago Public Schools (Chicago: University of
Chicago, Department of Education and Graduate School of Public Policy Studies,
1997); Kenneth Wong, ed.. Advances in Educational Policy: Rethinking School Reform
in Chicago, vol. 2 (Greenwich, Conn.: JAI Press, 1996).

14. Massachusetts Department of Education, Advisory on School Governance (Maiden,
Mass.: Commonwealth of Massachusetts Department of Education, 1995), 2.

15. American Association of School Administrators, Roles and Relationships, 6.

1 6. Steve Farkas, Divided Within, Besieged Without: The Politics of Education in Four
American School Districts (New York: Public Agenda Foundation, 1993).

17. Ibid., 28.

18. Ibid., v.1.

142

Citizen Participation
and Strategic Planning
for an Urban
Enterprise Community

Michael Leo Owens

Public policies rarely have single objectives. For the federal Empowerment Zones
and Enterprise Communities initiative, bettering the socioeconomic opportunity
structure among a collection of the nation 's low-income areas is only one of its
goals. Another initiative objective is to foster the representation of common citi-
zens, especially residents, in the planning and implementation of strategies and
programs designed to redevelop these low-income areas. Strategic community
planning was the method chosen by the initiative's designers to achieve both ob-
jectives. This article, which makes use of the case study approach, addresses stra-
tegic community planning as an instrument of advancing citizen representation in
urban redevelopment processes. Specifically, it describes and critiques the process
jointly administered in three upstate New York cities — Albany, Schenectady, and
Troy — that are participating in the urban portion of the federal initiative. The
purpose of this study is to assess the degree to which residents of the low-income
areas of these three cities participated in the strategic community planning pro-
cess.

Residents who participate directly in the process of urban redevelopment planning
have the opportunity to acquire expertise in the subject matter, patience to see
projects through from problem definition to implementation, and new skills, for ex-
ample, idea formulation, deliberation, negotiation, and consensus building, along with a
sense of political efficacy.1 Moreover, citizen engagement in urban redevelopment, both
at the planning and policy implementation levels, holds out a possibility for "the devel-
opment of responsible social and political action on the part of the individual,"2 which
democratic theorists like Carole Pateman and Jane Mansbridge envision as the end
product of political participation and the central aim of democratic societies.3 Conse-
quently, urbanists of all types, for example, planners, philosophers, and political scien-
tists, assert that urban redevelopment should be democratized, namely, that citizen
participation in urban decision making should be increased and widespread.4 Scholars,
however, are not alone in calling for greater citizen participation; governments have
also made this assertion. Consider the example of the Clinton administration5 and the
implementation of the urban Empowerment Zones and Enterprise Communities initia-
tive by its Department of Housing and Urban Development (HUD).6

Michael Leo Owens, a doctoral candidate in the Program in Political Science, State Uni-
versity of New York at Albany, is affiliated with the Urban and Metropolitan Studies pro-
gram, Nelson A. Rockefeller Institute of Government.

143

New England Journal of Public Policy

In the early stages of the initiative, which is a reincarnation of earlier federal poli-
cies targeting grants and tax incentives to low-income urban neighborhoods,7 strategic
planning was relied upon to provide for and encourage citizen participation in the
redevelopment decisions for low-income neighborhoods nominated by their cities to
receive federal reinvestment funds from HUD under the initiative.8 In the hands of
common citizens, strategic planning is a tool for identifying community problems and
priorities; scanning their community's weaknesses and strengths vis-a-vis those of
other communities; formulating plans aimed at minimizing the disadvantages of their
communities and exploiting their strengths in relation to new opportunities; and target-
ing community resources more efficiently and effectively.

HUD required prospective applicant cities to administer strategic community plan-
ning processes that were bottom-up driven and open to all who had stakes in the future
of the targeted communities.9 As Marilyn Gittell notes, "The Clinton Administration
invited — indeed encouraged — communities, including community organizations as
well as rank-and-file citizens, to pull together in drafting blueprints for future eco-
nomic growth and urban development."10 A cross section of affected groups — com-
munity residents, social and religious organizations, representatives from the private
and nonprofit sectors, and local governments — were to be involved. However, of the
ordinary citizens who were expected to participate in the planning process, no group
was considered more important than the residents of the low-income communities that
would eventually be targeted for federal funding: it was expected that they would be
full partners in the process.11 This notion was mortgaged to a belief that the representa-
tives from low-income neighborhoods should be, would want to be, and are capable of
being active participants in the redevelopment of their communities.

An evaluation of the Empowerment Zones and Enterprise Communities initiative
showed that, among the sample of eighteen cities selected for study, most of the strate-
gic community plans submitted to HUD were initiated and designed through processes
that included cross sections of citizens.12 This study of participation and governance in
the planning phase concluded that "the citizen participation that occurred during the
development of strategic [community] plans was significantly and substantively
greater than that which [took] place under previous federal urban initiatives."13 How-
ever, "because community involvement is solicited," notes Gerry Riposa, "it does not
necessarily follow that . . . [political elites] will divide authority and decision-making
powers with those whose input is sought."14

Despite the finding of "significant and substantive" citizen participation, some stra-
tegic community plans submitted to HUD were formulated with very little, and some-
times without any, citizen involvement. In an undetermined number of cases, the
Clinton administration's call for citizen participation and community empowerment
went unheard. In some instances, as John Gaventa and his colleagues found, "regional
development districts or industrial boards led the effort to draft [strategic community
plans]. Because some institutions had tittle experience with bottom-up planning, strat-
egies that they devised largely flowed from the top down."15 As a result, "participation
of community groups was only an afterthought; for the most part, professional bureau-
crats and politicians shaped [their] city's plan."16 Absent high levels of government
involvement, private-sector elites from both the non- and for-profit realms assumed
responsibility for and control of their city's strategic community planning process.17
While a wide range of groups may have been present "around the table," those
involved in designing and setting the agendas that created the plans for their cities

144

were "the same old players who had always managed planning and development [in
their cities]" — government, philanthropic, and economic elites.18

Looking through the lens of citizen participation and participatory planning litera-
ture, this study evaluates HUD's use of strategic community planning in its Empower-
ment Zones and Enterprise Communities initiative. It describes and critiques the strate-
gic community planning process that took place in one of the nation's sixty-five urban
enterprise communities, namely, Albany-Schenectady-Troy.19 The survey centers on the
case study approach to detail the strategic community planning process that took place
among the poorest sections of these three cities prior to their joint submission of an
application to HUD for designation as an enterprise community. It (1) identifies the
actor(s) who initiated and guided the strategic community planning process that was
administered; (2) describes the level of resident participation throughout the strategic
community planning process; and (3) outlines how such planning for federal urban
neighborhood redevelopment initiatives can be enhanced to promote greater citizen
participation in the future.

The Urban Enterprise Community Program

According to HUD secretary Andrew Cuomo, the urban Empowerment Zones and En-
terprise Communities initiative is the Clinton administration's opportunity "to prove to
the nation that we do know how to revitalize devastated areas."20 Functioning as the
nation's urban policy, the initiative targets low-income urban neighborhoods for concen-
trated and coordinated federal resources; coordinates redevelopment and revitalization
efforts among both the public and private sectors; promotes long-range strategic com-
munity planning as a vehicle for citizen participation and community empowerment;
and promotes holistic redevelopment strategies that combine physical, social, and eco-
nomic revitalization activities.21 The Clinton administration hopes that HUD's imple-
mentation of the initiative, which incorporates federal funds with regulatory relief,
technical assistance, and the participation of stakeholders — residents, business owners,
service providers, and governments — will yield inner-city low-income communities
that provide security, community, and opportunity to their residents.22

The initiative is comprised of two components — the Empowerment Zones program
and the Enterprise Communities program. The former targets $815 million in flexible
grants and $900 million in federal tax credits among a few central cities;23 the latter
targets far less money at a far greater number of small to medium-size cities.24 Of the
two, the Empowerment Zones portion has received the bulk of the academic
community's attention.25 The Enterprise Communities program,26 however, while not as
well funded or administered in the nation's largest cities, cannot be overlooked: Over
the next ten years it will aim an estimated $195 million in Title XX Social Services
Block Grants and $195 million in federal tax credits at improving the economies and
social environments among a number of U.S. urban low-income communities.27

Cities in this program, as well as those in the Empowerment Zones program, were
chosen by HUD on the basis of their submission of strategic community plans that (1)
identified specific geographic areas that met the initiative's criteria for socioeconomic
distress;28 (2) detailed how the economic, physical, and human capital among the resi-
dents of the identified impoverished communities would be increased; and (3) noted the
degree to which state, local, and private resources would be made available for redevel-
oping these communities. Taken as a whole, a city's strategic community plan had to
address the creation of economic opportunities and sustainable community development

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New England Journal of Public Policy

in its low-income neighborhoods by identifying strategies that could effectively lower
the barriers to employment faced by the residents of their city's low-income communi-
ties and rebuild the physical and social environments of such places. But that was not
all.

Developing strategies for bettering the socioeconomic opportunity structure in the
nation's low-income areas was only one requirement for cities applying to the urban
Enterprise Communities program. For another, the cities had to foster the participation
of ordinary citizens, especially residents, in planning and implementing strategies for
redeveloping their low-income areas. This participation, according to the Clinton
administration's written record and the rules and regulations for the Empowerment
Zones and Enterprise Communities initiative, was to be direct and have the effect of
empowering average citizens.29 As a consequence, applicant cities had to describe the
extent to which rank-and-file citizens, especially residents of target communities, par-
ticipated in the strategic community planning process, along with their anticipated roles
in the post-designation process.30

Empowerment through Participation: A Note on Praxis

Susan Fainstein and Clifford Hirst discern a strong belief that "participation in urban
politics and community life [is] a potentially transformative experience."31 Those favor-
ing citizen participation, especially among residents, in the public decision-making
processes surrounding urban planning and redevelopment consider collaboration itself
to be educative and socially transformative: participation fosters the development of
"public regardedness" and a concern for collective interests over individual interests.32
But beyond serving as a means of fostering public regardedness and collectivism, citi-
zen participation in urban redevelopment is promoted as an instrument of empower-
ment, notably among the residents of low-income urban neighborhoods.33

Empowerment is centered around the axiom that the inclusion and ongoing involve-
ment of residents in the formulation and implementation of community-based agendas
are essential to the sustained revitalization of low-income communities.34 As Robyne
Turner informs us, empowerment "is more than agenda access; it is the ability to
change direction and be responsible for making it happen. ... It addresses the question
of who defines the process rules and ultimately the agenda."35 In their study of neigh-
borhood participation in five U.S. cities, Jeffrey Berry, Kent Portney, and Ken Thomson
conclude that it "may not transform people to the degree that participation theorists
have anticipated, but it does make a difference in the attitudes of people who become
involved in such political activities"; resident empowerment can come from participa-
tion in public decision-making processes.36 Through education and encouragement by
governments and philanthropies, residents can play a direct role in and influence, if not
control and determine, the course of their communities.37

"Making the case for [participation and empowerment] on theoretical grounds is
much easier," caution Berry et al., "than demonstrating that it will work."38 But theory
is being put into practice and yielding the expected results. Around the United States,
low-income communities are being reconverted to stable places of residence through
the organization and mobilization of their occupants, coupled with external funding
from not-for-profit and public institutions.39 In these situations, residents are often the
primary instruments for reversing the downward trajectory of their neighborhoods.
Boston's Dudley Street Neighborhood Initiative (DSNI), for example, demonstrates

146

empirically that participation and empowerment are not only possible but fundamental
to the redevelopment of low-income localities.40

In the Dudley Street neighborhood, incorporation and involvement not only encour-
aged the leadership of residents in addressing community issues but increased their
political efficacy, which was necessary to the success of resident-controlled community
redevelopment.41 The DSNI illustrates that in choosing action over resignation (accept-
ing neighborhood conditions as unalterable) and exit (flight from a neighborhood),
citizens can be effective at community problem solving.42 Although resignation and exit
remain viable options for them, the residents of such neighborhoods can also choose to
engage in day-to-day, grassroots, community-based activities intended to reverse spiral-
ing socioeconomic conditions in their surroundings.43 Examples of these activities in-
clude neighborhood crime watches, incumbent upgrading, community gardens, forma-
tion of neighborhood associations, and chartering community development corpora-
tions.

Albany, Schenectady, and Troy in a Regional Context

As in other northeastern U.S. cities, economic restructuring has had a profound effect
on Albany, Schenectady, and Troy, which, 150 miles north of the Bronx, are in New
York State's Capital Region.44 For example, over the last quarter of a century, manufac-
turing jobs in and around these three cities have decreased by more than 40 percent 45
while technology and advanced service industry employment has increased. Between
1973 and 1995, manufacturing employment in the region dropped from 19 percent to 9
percent, while service employment increased to 36 percent, up from 25 percent.46

Besides experiencing alterations in the private-sector employment structure of their
economies, public-sector employment, which has been central to the three cities and
their economies, especially Albany's, is declining.47 By century's end, the public sector
is expected to have contracted by 10 percent.48 If predictions prove true, government
employment will account for fewer than 20 percent of the region's jobs, down from the
current 30 percent.49 The restructuring of employment opportunities in the public sector,
particularly at the state government level, is expected to have "major direct and indirect
impacts for the long term stability of the region's economy," for instance, retail vacan-
cies, declining home ownership and housing values, and decreased local revenues, espe-
cially in Albany, Schenectady, and Troy.50

In addition to transformed economies, the region's urban housing markets have un-
dergone noticeable changes; a majority of the region's population has shifted from its
cities to its suburbs. In 1970, 53 percent of this population resided in the three cities.51
Twenty years later, less than half (44 percent) of this population resided in one of the
three.52 Coupled to the region's increased suburbanization of population and housing is
the increased suburbanization of commercial activity and employment. In 1972, Albany,
Schenectady, and Troy accounted for 63 percent of the region's retail sales, but by 1990
the figure was less than 50 percent.53 Windshield tours of the three cities reveal that
commercial vacancies have increased; in some sections, whole commercial blocks have
been abandoned. Buildings in which large retailers like Woolworth once prospered are
empty; they are too large and too expensive for most local entrepreneurs.

The migration of human, financial, and social capital to the suburban peripheries of
the region's three urban centers has depressed the socioeconomic conditions of the inner

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cities. Social distress, as measured by indicators such as poverty and physical deteriora-
tion, have risen.54 In Albany, for example, the poverty rate has grown and the number of
people on public assistance has doubled.55 This downward mobility has occurred despite
the fact that the city's residents have experienced an overall increase in their median
household incomes.56 Moreover, in the poorest communities of the three cities —
Albany's South End, Arbor Hill, and West Hill neighborhoods, Schenectady's Hamilton
Hill neighborhood, and Troy's North Central neighborhood — representatives of neigh-
borhood-based and grassroots community development organizations assert that munici-
pal services, the quality and quantity of housing, and the public infrastructure of roads,
parks, and sewers are all in decline.57 Unemployment and poverty, along with other
measures of socioeconomic distress, are believed to be higher in these communities
relative to their cities and the region.

There is no statistical proof to support the claims made by community organizations
regarding municipal malfeasance. But there is evidence that the social environments of
the cities' poorest neighborhoods differ markedly from the rest of the Capital Region.
While unemployment stood at 10 percent in the poorest urban neighborhoods of Al-
bany, Schenectady, and Troy at the start of the decade, the rate for the region was 5
percent.58 In terms of poverty, 33 percent of families residing in the cities' low-income
neighborhoods were in poverty in 1990, compared with 9 percent of f amities throughout
the region.59 As for the proportion of households on public assistance, 19 percent of
those in the region's poor urban communities received public assistance compared with
5 percent for the region.60 Finally, 67 percent of adults residing in the cities' low-income
neighborhoods were high school graduates, compared with 87 percent for the region as
a whole.61

These statistics show clearly that the low-income neighborhoods of Albany,
Schenectady, and Troy would be nominated to participate in the urban Enterprise Com-
munities program. They typify the districts the Clinton administration's Empowerment
Zones and Enterprise Communities initiative intended to target. As one mayor wrote to
HUD, 'The neighborhoods that would benefit the most from [the Enterprise Communi-
ties program] are overwhelmed by the more complex and life-threatening burdens of the
drug war and the associated social ills of unemployment, teenage pregnancy, and sub-
stance abuse."62

Planning for the Albany-Schenectady-Troy Enterprise Community

HUD issued criteria for the selection of city-nominated communities to participate in
the Empowerment Zones and Enterprise Communities initiative in January 1994.63
Applicant cities were given six months to organize residents; involve representatives
from both the public and private sectors; formulate strategic plans for their communities
and submit them to HUD. Applicant cities were required to form strategic community
planning committees comprised of a cross section of people broadly representing the
racial, cultural, and economic diversity of the neighborhood. HUD mandated that com-
mittees include all stakeholders: residents of target areas, along with officials from
municipal and state government and representatives of the private for- and not-for-profit
sectors had to be chosen as members.64

Generally, local governments were the catalysts for the strategic community plan-
ning process in the cities that applied for federal funding under the initiative.65 Mayors
or city managers usually initiated their cities' application.66 But the mayors of Albany,

148

Schenectady, and Troy initially chose not to apply to the program despite the fact that
an Enterprise Community designation would provide S2 million in federal-state funding
to each municipality.67 The catalyst for the initiation, development, and submission of
the Albany-Schenectady-Troy Enterprise Community application was a nongovernmen-
tal institution established and funded by the 300 largest private for-profit corporations
in the Capital Region, the Center for Economic Growth (CEG). This group formulated
the proposal for a joint-municipality application; convinced the mayors to pursue an
Enterprise Community designation; raised funds to arrange for the strategic community
planning process; served as the liaison between the three cities, New York State, and
HUD; and selected the membership of the strategic community planning committee.68

The Center for Economic Growth

Prior to HUD's inviting applications for the urban Enterprise Communities program,
projects involving the redevelopment of the region's poorest urban communities, espe-
cially those with large African-American and Latino populations, were absent from the
activities of the Center for Economic Growth. In line with the perspective of Paul
Peterson on urban economic development, CEG adheres to the notion that urban policy
alternatives are limited by cities' having to be economically competitive.69 Emphasizing
the commercial intensification of land use and economic growth, CEG seeks to expand
commercial opportunities for established companies, attract new firms to the region,
and provide services to firms that either relocate to the region or are starting up.70 It
attempts to increase its ability to accomplish such goals by advocating for public poli-
cies assumed to increase the region's competitive advantage in relation to its economic
position, political influence, and social prestige, namely, tax abatements, wage credits,
and low taxes, which are common government inducements to entice investors, produc-
ers, and consumers to relocate from other areas.71

CEG's interest in the low-income neighborhoods of Albany, Schenectady, and Troy
was fostered by the urban Enterprise Community program's emphasis on economic
opportunity, especially job creation and entrepreneurship, rather than on social ser-
vices.72 Because the program was not redistributive in terms of policy, CEG's involve-
ment would not gainsay its growth-oriented agenda. (It is plausible that had the applica-
tion for the program required a financial commitment from the private and local public
sectors, CEG would probably not have initiated the pursuit of an Enterprise Community
designation for the three cities. Residents and activists from the target neighborhoods,
however, contend that the motivation behind CEG's involvement was a public relations
campaign aimed at providing its membership with the appearance of being responsible
corporate citizens.)73

Moreover, since the program called for collaboration and cooperation between the
public and private sectors, CEG, which has promoted public-private partnerships since
its inception, viewed it as an opportunity to advance the interests of the region.74 It was
in the spirit of creating a regional private-public partnership that the Center for Eco-
nomic Growth involved itself with the Enterprise Community program: "By working
with [Albany, Schenectady, and Troy] to coordinate the application, CEG [played] the
role of honest broker in an effort which could result in additional federal assistance for
a vast array of economic development and job creation efforts in the region."75

Following HUD's issuance of the Empowerment Zones and Enterprise Communities
initiative's criteria, CEG spent three months promoting the joint application of Albany,
Schenectady, and Troy to the urban Enterprise Community program. In its meetings

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with the mayors of the three cities, CEG proposed to cosubmit to HUD an application
that focused on regional collaboration and cooperation among the for-profit, nonprofit,
and public sectors. Such an application, influenced by the scholarship which contends
that regions, not cities or states, are increasingly the central social and economic units
of society, might prove to be novel compared with others received by HUD.76 Beyond
its originality, regionalization made sense in the context of the Capital Region and the
relationship among its three cities: "No community in the region [was] economically
self-sufficient, nor will they be. . . . The region already functions as a region, not as a
collection of self-sufficient municipalities."77 A region-based strategic community plan
would allow the municipalities to deal together with problems like poverty, unemploy-
ment, and crime, something that had never happened in the region. Should an Enter-
prise Community designation be awarded, a regional plan for the cities' low-income
communities would, in the words of one mayor, "allow for a sharing of successful pro-
grams [that] will greatly enhance the efforts to improve distressed neighborhoods in all
three communities."78 Collaboration would allow the cities to coordinate their policies
and programs and share in a new pool of resources that might allow them to be effective
at turning around their poor neighborhoods.79

There were, however, more practical reasons for CEG's regional approach. If the
cities applied to the Enterprise Community program individually, each would probably
be rejected. Although each city had low-income areas, no single city could identify
enough of them to meet HUD's criterion of socioeconomic distress. In addition, should
an Enterprise Community designation be awarded to the three cities, the moneys that
accompanied the designation could be used to enhance the background conditions that
are believed to influence decisions regarding business relocation, for example, imple-
menting human resource policies that foster and sustain a skilled workforce.80 Finally,
because HUD did not require a financial commitment, the cost of applying for an Enter-
prise Community designation was low.81

The Albany-Schenectady-Troy Committee

With the consent of the mayors of the three cities, along with $30,000 in public funds
— $10,000 in discretionary funding from each municipality — CEG established the
Albany-Schenectady-Troy Enterprise Community (TriCity EC) Steering Committee.
According to HUD, this committee "reflected the age, ethnic, economic, and gender
diversity of the designated neighborhoods and representatives were identified through a
community-based nomination process which identified one resident from each of the
participating neighborhoods as a member."82 This description is inaccurate.83

The committee was comprised solely of representatives of the three cities' private,
nonprofit, and public sectors, and the strategic community planning process was top-
down and elite-driven rather than bottom-up and community-centered. No residents of
the communities that would be targeted by the TriCity EC Steering Committee's strate-
gic community planning process served on the committee, nor was the membership of
the steering committee decided by nomination and election or by governmental ap-
pointment.

The membership of the steering committee was determined by CEG. It extended
invitations to those groups believed to possess the best knowledge about and resources
for developing and submitting a strategic community plan that emphasized regionalism.
These groups then selected representatives to serve on the committee. The result was a
steering committee that represented the interests of the three municipalities: high-level

150

staffers from their economic development and planning departments; the Council of
Community Services, an association of the region's not-for-profit social services agen-
cies and a United Way human services planning affiliate; the Capital District Regional
Planning Commission, a regional planning agency; and the Center for Economic
Growth.84

The TriCity EC Steering Committee charged itself to identify and assess the
strengths and weaknesses of the cities' low-income communities and create a strategic
community plan that would be submitted to HUD by Albany, Schenectady, and Troy.
However, by the time the steering committee convened its first meeting, three months
had elapsed since the application guidelines for the Enterprise Communities program
were issued. It was only three months until the June deadline for HUD's receipt of ap-
plications. To expedite its planning process, the TriCity EC Steering Committee issued
a request for proposals from local economic development consultants and grant writers.
One month later it hired EastWest Planning & Development, a Troy-based firm, to
assist the steering committee in formulating a planning process for the three cities.85 It
would prepare strategic plan narratives, complete the application forms, conduct a sur-
vey, and organize a set of community forums.86 Most important, EastWest was con-
tracted to "structure a strategic plan consistent with Enterprise Community prin-
ciples."87 Its "presence in the process," from EastWest's perspective, "would provide an
opportunity to help the [steering] Committee think critically about the decisions" it
would make concerning its target neighborhoods.88

Citizen Participation and Resident Input

With the hiring of EastWest Planning & Development, the TriCity EC Steering Com-
mittee had three options concerning the strategic community planning process: (1) with
an impending June deadline, the steering committee could limit resident access to the
process, focusing more of its attention and time on institutional cooperation and the
production of a plan suitable for submission to HUD; (2) influenced by EastWest's
knowledge of the importance of legitimacy to comprehensive community initiatives, the
steering committee could open its planning and decision-making processes to direct
resident participation; or (3) the steering committee could apply a midrange approach,
one that would allow for a modest degree of resident incorporation to occur without
jeopardizing the committee's ability to meet HUD's deadline. The TriCity EC Steering
Committee chose the third option.

According to the application the steering committee submitted to HUD, "Many of
the Steering Committee members believed that resident input into the strategic planning
process could be obtained by gathering key human service agencies together to repre-
sent the needs of their constituencies."89 Over time this belief was muted. The opinions
and attitudes of residents concerning their communities and policy priorities entered the
strategic community planning process through two mechanisms that are widely used to
capture citizens' sense of problems and priorities: public forums and surveys. In theory,
when used as part of public decision-making processes, forums and surveys are useful.90
In practice, however, these instruments have been used by political elites to limit the
direct participation of citizens in public decision making.91

To facilitate citizen participation in the strategic community planning process, the
TriCity EC Steering Committee sponsored "structured community workshops."92 A
workshop was held in each of the three cities one month prior to the date the strategic
community plan was due to HUD.93 These workshops introduced the target communi-

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ties to the Enterprise Communities program and the membership of the TriCity EC
Steering Committee. The intent of these public forums was to elicit community partici-
pation and provide the committee with a clearer understanding of the communities'
problems, resources, and prospects for affecting positive socioeconomic and physical
change, that is, job creation, home ownership, and youth enrichment. The workshop
format consisted of a general introduction by the committee followed by a question-
and-answer period and small-group discussions.

The Enterprise Communities program "promised residents authentic input into the
planning process and the opportunity to share feedback on the proposed strategic plan,
giving them reassurance that their voices mattered."94 According to the steering commit-
tee, its workshops fulfilled this promise by providing a mechanism which ensured that
the strategic community planning process for the TriCity EC "was driven by the needs
and wishes of the residents"; "represented the diversity of the neighborhoods"; demon-
strated "hands-on resident support" in its development and implementation; and vali-
dated "the importance of the problems, resources, and obstacles identified in other stud-
ies by residents of the targeted communities."95

The application submitted to HUD by the TriCity EC Steering Committee does not
state the number of attendees at these community workshops, which, with the exception
of the Schenectady workshop, were held outside its targeted neighborhoods.96 But few
residents from these neighborhoods attended the workshops. Those who did attend the
workshops were generally "outnumbered three-to-one by the service providers operat-
ing in the target neighborhoods."97 Consequently, most of the "citizen" input came from
neighborhood social service providers, many of whom "were perceived by neighbor-
hood residents as unaccountable, unresponsive, over-professionalized, and inacces-
sible," as well as "partially responsible for abandoning their problems, choosing profes-
sionally or politically expedient courses of action, and setting up unnecessary program-
matic limitations, guidelines, and rules which isolate many residents from needed ser-
vices and support."98

Concurrently with the community workshops, EastWest Planning & Development
conducted a survey among the five neighborhoods that the TriCity EC Steering Com-
mittee would eventually nominate to participate in HUD's Enterprise Communities
program. This "needs assessment" survey was designed to identify the strengths, prob-
lems, and policy priorities of the neighborhoods, which would be used by EastWest in
preparing the strategic community plan.99 Social services and human resource provid-
ers, along with local businesses serving the neighborhoods targeted by the steering
committee, were surveyed by mail. Resident were also surveyed for their opinions
about the problems and prospects for these neighborhoods. According to the steering
committee, nearly two-fifths of the 600 surveys (38 percent or 227) were completed and
returned to EastWest.100 Of this number, almost three-quarters (71 percent or 162) were
returned by residents of the steering committee's target communities. The resident re-
sponse rate, however, must be put in perspective: fewer than one percent of the five
neighborhoods' 39,072 residents responded to the survey.

Relying on the information culled from the three community workshops and the
survey responses, EastWest prepared the TriCity EC strategic community plan. The
steering committee then submitted the plan, which emphasized three areas of "commu-
nity" concern — employment, youth development, and neighborhood capacity building
— to HUD. At the end of the strategic community planning process, the steering com-
mittee declared in its application to HUD that the degree of participation in the three

152

cities "was designed to maximize community involvement and consensus."10' Pointing
to its public forums and survey, the committee avowed that it had met its requirement of
participation.

Reflections on Strategic Community Planning
and Federal Urban Initiatives

Urban scholars acknowledge that introducing common citizens to the process of public
decision making is difficult; making collective decisions "can be time-consuming, co-
optative, and nonproductive" for rank-and-file citizens.102 Moreover, issues of expertise
and incrementalism, along with citizen interest and ability to articulate alternatives
effectively, influence levels of citizen participation and incorporation into public deci-
sion making.103 Residents of low-income neighborhoods targeted for redevelopment are
prone to be intimidated by the jargon and complexity of redevelopment and, perhaps
rightfully so, suspicious and impatient with the process of incremental urban
policymaking.104 Nevertheless, the inclusion of ordinary citizens in the planning and
implementation stages of public policymaking continues to have its academic advo-
cates.105

Robert Chaskin and Sunil Garg note that there are ethical and practical reasons for
the incorporation of citizens in public decision-making processes that affect their com-
munities.106 "Ethically, to include citizens in policymaking and program delivery is to
take seriously their rights and responsibilities to have some control over policies that
will have an impact on their lives."107 Additionally, as theorists of democratic participa-
tion profess, "the experience of participation [in public decision making] in some way
leaves the individual better psychologically equipped to undertake further participation
in the future."108 Average citizens, whether from poor or nonpoor communities, possess
that which government lacks: "a unique understanding about their own lives, hopes,
aspirations, goals, and preferences and about the manner in which resources should be
provided or services should be designed and delivered."109 In accordance with this idea,
Jeffrey Henig has found that citizens "represent resources in knowledge, information,
creativity, commitment, and energy" that often prove useful to government decision-
makers and policy success.110 Therefore, "practically, involving citizens in planning and
implementing practices that affect them promotes better (i.e., more connected, directed,
and appreciated) public policies."111 Being closest to the problems facing their commu-
nities, citizens can provide perspectives that may go unconsidered by public officials
and their staff in the absence of resident involvement.112 Yet the structure of citizen
participation in public initiatives that promote urban redevelopment makes "a substan-
tial difference in the degree to which such structures can be seen as connected to, and
acting on behalf of, the interests of the community."113

The key terms of the federal administration's urban policy orientation and the tenets
underlying its Enterprise Communities program are cooperation and collaboration;
participation and empowerment.114 Still, the strategic community planning process for
the Albany-Schenectady-Troy Enterprise Community failed to engender cooperation
and collaboration among residents and nonresidents or to promote high levels of partici-
pation from or empowerment in the areas targeted for federal revitalization funds by the
TriCity EC Steering Committee. Surveys and forums proved inferior methods of effec-
tively structuring resident input into the strategic community planning process for the
TriCity Economic Community. "Residents of the [TriCity EC] had participated in the

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community workshops and filled out surveys — but they lacked the capacity to de-
velop a truly 'bottom-up' neighborhood plan."115 Instead, the EastWest Planning &
Development plan outlined a citizen-driven process in the post-strategic community
planning period.116 This was a blueprint for neighborhood planning and resident em-
powerment after HUD designated the three cities as a joint Enterprise Community.117
In short, the strategic community planning process for Albany, Schenectady, and Troy
deferred resident participation and community empowerment to an unknown point in
time. Why?

The rules and regulations for the Enterprise Communities program were not spe-
cific about the role of residents in their city's planning process. Beyond the statement
that community residents were to be included in partnerships with the public and
private sectors, there was no definitive message about the type and quality of resident
participation that should characterize the process. This lack of specificity allowed for
narrow definitions of participation to be used in determining who would be involved
in a city's strategic community planning process and how their connection would be
facilitated. It also impressed upon elites that resident participation was a suggestion,
not a requirement for strategic community planning; resident consultation was ad-
equate to constitute participation.

In the future, policymakers designing federal urban neighborhood redevelopment
initiatives could ensure, through direct language, that citizen participation go beyond
the level of consultation, as expressed through surveys and forums. As Sherry
Arnstein's "ladder of citizen participation" illustrates, unless citizen consultation by
government decision makers is linked to other opportunities for participation, commu-
nities cannot be guaranteed that their resident ideas and concerns will be taken into
account by those guiding the agenda-setting and decision-making processes.118 More-
over, when government decision makers "restrict the input of citizens' ideas solely to
[consultation], participation remains just a window-dressing ritual."119

Residents of areas targeted for redevelopment often want to serve their communi-
ties in capacities that go beyond survey responses or public forum statements.120 If this
is to be believed, policymakers could create opportunities for resident participation by
mandating that urban neighborhood redevelopment programs that receive federal
funds must, during the planning and post-planning periods, include residents of the
affected communities on the committees appointed to formulate neighborhood rede-
velopment plans. Policymakers could also establish formal institutions for citizen
governance of strategic community planning processes. Such neighborhood-based
entities could be charged with arranging, planning, and coordinating strategies for
neighborhood redevelopment. In terms of their membership, these institutions might
be comprised of neighborhood representatives chosen by election or by stratified,
random sampling from communities targeted for public reinvestment and redevelop-
ment.121 Also, policy makers could require that the proposals formulated by neighbor-
hood-based institutions be submitted to resident comment, perhaps through resident-
community referenda.

Citizen participation comes with costs, the most basic being time and money.
Policymakers should grant enough time and public funds to program administrators to
allow citizen participation to reach a level above consultation. In the Enterprise Com-
munities program, cities were afforded six months to create and submit their strategic
community plans. Because of the time it takes to select and organize committees,
orient members with the requirements and processes of a given program, and raise

154

awareness among affected communities, federal urban initiatives relying on strategic
community planning probably should last longer than six months. A period of a year,
for example, would allow planning committees more time not only to organize them-
selves and their communities, but increase the likelihood that their activities, be they
surveys, community forums, or other mechanisms for divining citizen opinions, will
produce better plans in terms of their citizen input and ideas. Not only might more
citizens participate in the planning process, but a greater number of cities might be able
to compete for funding based on their plans, and the quality of the plans submitted to

the program itself increase.

* * *

The Enterprise Communities program is grounded on the belief that citizen participa-
tion and sustained community involvement are essential to the success of federal initia-
tives to influence the revitalization of low-income communities.122 Therefore, residents
of the neighborhoods targeted by the TriCity EC Steering Committee, with the assis-
tance of public, private, and not-for-profit professionals, should have been at the fore-
front of the strategic community planning process of the TriCity EC. But residents were
not significant and substantive participants in that strategic community planning pro-
cess.

The lack of resident participation in the planning for the Albany-Schenectady-Troy
Enterprise Community was partly the result of the steering committee's misunderstand-
ing that resident participation would matter more in the post-designation period, after
areas of Albany, Schenectady, and Troy were designated as an Enterprise Community
and federal funds were secured. It was also the result of the committee's reliance on
forms of participation that discouraged citizen incorporation and community empower-
ment. Moreover, the opportunity for citizens to take part in the planning was limited by
HUD itself: (1) it failed to define what it meant by resident involvement; (2) it did not
account for slow responses from cities and the weak commitment of elites to empower
residents; and (3) it overlooked the importance of funding cities to promote citizen
participation and neighborhood empowerment as part of strategic community planning.

Another reason was the steering committee's displacement of the Clinton
administration's goal of resident incorporation. By placing its goal of meeting HUD's
application deadline ahead of HUD's goal of resident incorporation, the committee
obstructed the realization of high levels of resident participation and community em-
powerment.

The TriCity EC Steering Committee achieved its goal in December 1994: HUD
designated portions of Albany, Schenectady, and Troy as one of the nation's sixty-five
urban Enterprise Communities. This designation was accompanied by $3 million in
federal funds to be shared equally among the three cities. However, this goal was
achieved in violation of the principles outlined by the Clinton administration's written
record and the Enterprise Communities program's formal requirements.

In the pre-designation period, the TriCity EC Steering Committee lost an opportunity
to empower residents of the low-income neighborhoods of Albany, Schenectady, and
Troy. In the post-designation period, however, new opportunities for participation and
empowerment appeared with the establishment of a second steering committee and the
implementation of the Albany-Schenectady-Troy Enterprise Community's strategic
community plan that emphasizes resident planning and neighborhood empowerment.
"The people in the neighborhoods [comprising the TriCity Enterprise Community],"
according to the president of the Center for Economic Growth, "will be making the

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New England Journal of Public Policy

decisions."123 Unfortunately, the residents of the low-income neighborhoods in the three
cities have yet to influence the public decision-making process of their Enterprise
Community.124 Instead, the TriCity EC Steering Committee continues to favor elite
control and expediency. Unfortunately, resident skepticism and reticence concerning the
possibility of collaboration and cooperation between residents and nonresidents of the
targeted communities has deepened.125 *«?

Notes

Peter Medoff and Holly Sklar, Streets of Hope: The Fall and Rise of an Urban Neighbor-
hood (Boston: South End Press, 1994).

Carole Pateman, Participation and Democratic Theory (Cambridge, England: Cambridge
University Press, 1970), 24.

Ibid, and Jane J. Mansbridge, Beyond Adversary Democracy (New York: Basic Books,
1980).

See John Abbott, Community Participation and its Relation to Community Develop-
ment, Community Development Journal 30, no. 2 (1995); Sherry R. Arnstein, A
Ladder of Citizen Participation, AIP Journal, July 1969; Benjamin R. Barber, Strong
Democracy: Participatory Politics for a New Age (Berkeley: University of California Press,
1984); Jeffrey M. Berry, Kent E. Portney, and Ken Thomson, The Rebirth of Urban
Democracy (Washington, D.C.: Brookings Institution, 1993); Rachel G. Bratt, The Role
of Citizen-initiated Programs in the Formulation of National Housing Policies, in Citizen
Participation in Public Decision Making, edited by Jack DeSario and Stuart Langton (New
York: Greenwood Press, 1987); Robert Chaskin and Sunil Garg, The Issue of Gover-
nance in Neighborhood-based Initiatives, Urban Affairs ReviewZl, no. 5 (1997); Pierre
Gavel, Jessica Pitt, and Jordan Yin, The Community Option in Urban Policy, Urban
Affairs ReviewZl, no. 4 (1997); John Michael Daley and Julio Angulo, People-centered
Community Planning, Journal of the Community Development Society 21 , no. 2 (1990);
Susan S. Fainstein and Clifford Hirst, Urban Social Movements, in Theories of Urban
Politics, edited by David Judge, Gerry Stoker, and Harold Wolman (London: Sage, 1995);
Robert Fisher, Neighborhood Organizing: The Importance of Historical Context, in
Revitalizing Urban Neighborhoods, edited by W. Dennis Keating, Norman Krumholz, and
Philip Star (Lawrence: University Press of Kansas, 1996); Jeffrey R. Henig, Neighbor-
hood Mobilization: Redevelopment and Response {New Brunswick, N.J.: Rutgers
University Press, 1982); Medoff and Sklar, Streets of Hope; Ronald Shiftman with Susan
Motley, Comprehensive and Integrative Planning for Community Development, paper
prepared for the 1989 Community Economic Development Assessment Study Confer-
ence; Randy Stoecker, Defending Community: The Struggle for Alternative Redevelop-
ment in Cedar-Riverside (Philadelphia: Temple University Press, 1994); Clarence Stone
and Heywood T. Sanders, The Politics of Urban Development (Lawrence: University
Press of Kansas, 1987); and Robyne Turner, Political Coalitions and Neighborhood
Initiatives: Comparing Types of Political Responses in Urban Places, paper prepared for
the 1995 meeting of the American Political Science Association.
U.S. Department of Housing and Urban Development (HUD), Empowerment: A New
Covenant with America s Communities President Clinton s National Urban Policy
Report (Washington, D.C.: HUD, 1995), and John Gaventa, Janice Morrissey, and
Wanda R. Edwards. Empowering People: Goals and Realities, Forum for Applied
Research and Public Policy 10, no. 4 (1995): 116-21.

The Empowerment Zones and Enterprise Communities initiative emphasizes both urban
and rural community renewal. The urban portion is administered by the U.S. Department
of Housing and Urban Development; the rural component is administered by the U.S.
Department of Agriculture. This study focuses solely on the HUD-administered portion of
the Empowerment Zones and Enterprise Communities initiative. In particular, it empha-
sizes the small-medium cities component of this urban initiative the Enterprise
Communities program.

156

7. Parallels have been drawn between the Empowerment Zones and Enterprise Communities

initiative and priorfederal urban initiatives such as the Community Action Program and
Model Cities. See Sarah F. Liebschutz, Empowerment Zones and Enterprise Communi-
ties: Reinventing Federalism for Distressed Communities, Publius: The Journal of
Federalism 25, no. 3 (1995); Marilyn Marks Rubin, Can Reorchestration of Historical
Themes Reinvent Government? A Case Study of the Empowerment Zones and Enterprise
Communities Act of 1993, Public Administration Review 54, no. 2 (1994); and Gerry
Riposa, From Enterprise Zones to Empowerment Zones: The Community Context of
Urban Economic Development, American Behavioral Scientist 39, no. 2 (1996).

8. Strategic planning is a method for maximizing the position of an organization in a

changing and competitive environment ; its objective is to provide the organization with
an effective and efficient means of adapting to future economic, social, and physical
conditions. The logic behind strategic planning, which guides corporations and govern
ments alike, is to pull out of losing ventures and concentrate resources on strategic
opportunities. See Todd Swanstrom, The Limits of Strategic Planning for Cities,
Journal of Urban Affairs 9, no. 2 (1987); 139, 152. This way of reasoning, however, is
no longer practiced solely by the institutions of the market and the state. Acting through
neighborhood associations and community-based organizations, common citizens use
strategic planning to prepare and respond to changing environmental and urban condi-
tions. See, for example, Berry et al., The Rebirth of Urban Democracy, and Michael J.
Rich, Community Building and Empowerment: An Assessment of Neighborhood
Transformation Initiatives in American Cities, paper prepared for 1995 meeting of the
Association for Public Policy Analysis and Management.
9. HUD and U.S. Department of Agriculture (DOA), Building Communities Together:

Empowerment Zones and Enterprise Communities Application Guide (Washington, D.C.:
HUD and DOA, 1994); U.S. Government Printing Office, Federal Register 59, no. 11 (18
January 1994): 2700—2710; and HU D, Empowerment.

10. Marilyn Gittell, Growing Pains, Politics Beset Empowerment Zones, Forum for Applied

Research and Public Policy 10, no. 4 (1995), 107—111.

11. HUD and DOA, Building Communities Together. See also U.S. Government Printing

Office, Federal Register.

12. Nelson A. Rockefeller Institute of Government, Empowerment Zone Initiative: Building a

Community Plan for Strategic Change Findings from the First Round Assessment of
the Empowerment Zone/Enterprise Community Initiative (Albany, N.Y.: Nelson A.
Rockefeller Institute of Government, State University of New York, 1997).
13. This study, however, failed to distinguish between citizen participation and resident
participation. The degree to which the residents of the target communities included in
the study sample of eighteen cities were involved in the strategic community planning
process that preceded their city s designation as either an Empowerment Zone or an
Enterprise Community is unknown. See Rockefeller Institute of Government, Empower-
ment Zone Initiative, 2.

14. Riposa, From Enterprise Zones to Empowerment Zones.

15. Gaventa et al., Empowering People.

16. Gittell, Growing Pains, Politics Beset Empowerment Zones.

17. See ibid. See also Marilyn Gittell, Kathe Newman, Janice Bockmeyer, and Robert

Lindsay, Expanding Civic Opportunity: Urban Empowerment Zones, Urban Affairs
Review 33, no. 4 (1998); Gaventa et al., Empowering People ; and Kian Tajbaksh and
Brian Sahd, Community Empowerment in Urban Policy: Comparing the Harlem and
South Bronx Empowerment Zones Processes, paper prepared forthe1998 meeting of
the Urban Affairs Association.

18. Gaventa etal.. Empowering People, 118.

19. This single upstate New York Enterprise Community is comprised of the poorest sections
of the cities of Albany, Schenectady, and Troy.

20. Testimony of Andrew Cuomo before the Subcommittee on Human Resources, U.S.
House of Representatives, Ways and Means Committee, Washington, D.C., March 22,
1994.
21. Liebschutz, Empowerment Zones and Enterprise Communities ; Riposa, From

757

New England Journal of Public Policy

Enterprise Zones to Empowerment Zones ; and Rubin, Can Reorchestration of Historical
Themes Reinvent Government?

22. HUD and DOA, Building Communities Together.

23. Six cities Atlanta, Baltimore, Chicago, Detroit, New York, and Philadelphia/Camden
were designated Empowerment Zones, which were accompanied by an award of $100
million in block grant funding, coupled with another $150 million in federal tax credits,
to assist the cities in the implementation of their strategic plans. At the same time, Los
Angeles and Cleveland were chosen as Supplemental EmpowermentZones, the former
being awarded $125 million in economic development assistance and the latter receiving
$90 million.

24. HUD has designated areas of sixty-five cities as urban Enterprise Communities. These

include Birmingham, Alabama; Phoenix, Arizona; Pulaski County, Arkansas; San Diego
and San Francisco, California; Denver, Colorado; Bridgeport and New Haven, Connecti-
cut; Wilmington, Delaware; Miami and Tampa, Florida; Albany, Georgia; East St. Louis
and Springfield, Illinois; Indianapolis, Indiana; Des Moines, Iowa; Louisville, Kentucky;
New Orleans, Louisiana; Lowell and Springfield, Massachusetts; Flint and Muskegon,
Michigan; Minneapolis and St. Paul, Minnesota; Jackson, Mississippi; St. Louis, Missouri;
Omaha, Nebraska; Las Vegas, Nevada; Manchester, New Hampshire; Newark, New
Jersey; Albuquerque, New Mexico; Albany/Schenectady/Troy, Buffalo, Newburgh/
Kingston, and Rochester, New York; Charlotte, North Carolina; Akron and Columbus,
Ohio; Oklahoma City, Oklahoma; Portland, Oregon; Harrisburg and Pittsburgh, Pennsylva-
nia; Providence, Rhode Island; Charleston, South Carolina; Memphis and Nashville,
Tennessee; Dallas, El Paso, San Antonio, and Waco, Texas; Ogden, Utah; Burlington,
Vermont; Norfolk, Virginia; Seattle and Tacoma, Washington; Huntington, West Virginia;
and Milwaukee, Wisconsin.

25. See, for example, Gittell et al.. Expanding Civic Opportunity ; Gerry Riposa, L.A. s

Empowerment Zones: Can the Community Development Bank Empower South
Central? paper prepared for the 1998 meeting of the Urban Affairs Association;
Rockefeller Institute of Government, Empowerment Zone /n/f;'af/Ve;Tajbaksh and Sahd,
Community Empowerment in Urban Policy.

26. HUD applies two designations to cities participating in the Urban Enterprise Communities

program Enhanced Enterprise Communities and Enterprise Communities. A city s
designation determines the amount of public investment it will receive: Enhanced
Enterprise Communities receive $25 million in Title XX Social Services Block Grants;
Enterprise Communities receive $3 million in Title XX Social Services Block Grants and
$3 million in tax credits.

27. HUD and DOA, President Clinton Announces Designation of More Than 100 Empower-

ment Zones and Enterprise Communities, joint press release, December 21, 1995. See
also HUD and DOA, Building Communities Together.

28. To be eligible for designation as an enterprise community, target areas must have had a

maximum population which is the lesser of 200,000 or the greater of 50,000, or ten
percent of the population of the most populous city located within the nominated area ;
pervasive poverty, unemployment, and general distress; not exceed twenty square miles
in total land area; a poverty rate equal to greater than 20 percent in each of its nomi-
nated census tracts, or 25 percent in 90 percent of the census tracts within the
nominated area, or 35 percent for at least 50 percent of the census tracts within the
nominated area; a continuous boundary or consist of not more than three noncontiguous
tracts of land; been located entirely within the jurisdiction of the unit(s) making the
nomination, and not be located in more than two contiguous States; and not included in
any portion of a central business district unless the poverty rate for each census tract in
the district was at least 30 percent. See U.S. Government Printing Office, Federal
Register, 2701.

29. See, for example, HUD and DOA, Building Communities Together. See also, HUD and

DOA, President Clinton Announces Designation.

30. See U.S. Government Printing Office, Federal Register, 2708.

31. Fainstein and Hirst, Urban Social Movements, 170.

32. Medoff and Sklar, Streets of Hope; Shiffman with Motley, Comprehensive and Integra-

tive Planning for Community Development ;Stoecker, Defending Community; and

158

Richard Taub, Nuance and Meaning in Community Development: Finding Community and
Development [New York: Community Development Research Center, New School for
Social Research, 1990).
33. Daley and Angulo, People-centered Community Planning ; Alan Barr, Empowering
Communities Beyond Fashionable Rhetoric? Some Reflections on Scottish Experi-
ence, Community Development Journal 30, no. 2 (1995); Stella Capek and John I.
Gilderbloom, Community versus Commodity: Tenants and the American City (Albany,
N.Y.: State University of New York Press, 1992); Mel King, Chain of Change: Struggles
for Black Community Development (Boston: South End Press, 1981); Andrea Isabel
Nagel, The Dudley Street Neighborhood Initiative: A Case Study in Community-
controlled Planning, master s thesis, Massachusetts Institute of Technology, May 1990;
Gordana Rabrenovic, Community Builders: A Tale of Neighborhood Mobilization in Two
Cities (Philadelphia: Temple University Press, 1996); and Turner, Political Coalitions and
Neighborhood Initiatives.

34. This presumes, however, that when communities obtain more influence and control over
the definition of their needs, as well as more influence and control over the responses to
them, the visions they hold for their neighborhoods future stand a stronger chance of
becoming a reality.

35. Turner, Political Coalitions and Neighborhood Initiatives, 12.

36. Berry et al., The Rebirth of Urban Democracy, 291.

37. See Barr, Empowering Communities ; Berry etal., The Rebirth of Urban Democracy,
Medoff and Sklar, Streets of Hope; Fisher, Neighborhood Organizing ; and Taub,
Nuance and Meaning in Community Development.

38. Berry et al.. The Rebirth of Urban Democracy, 21.

39. See, for example, Keating et al.. Revitalizing Urban Neighborhoods, and Medoff and
Sklar, Streets of Hope.

40. For more on the Dudley Street Neighborhood Initiative, see Nagel, The Dudley Street
Neighborhood Initiative, and Medoff and Sklar, Streets of Hope.

41. Medoff and Sklar, Streets of Hope.

42. John Orbell and Toru Uno, ATheory of Neighborhood Problem Solving: Political Action
vs. Residential Mobility, American Political Science Review 66 (1972): 471 — 489.

43. Berry et al., The Birth of Urban Democracy; Medoff and Sklar, Streets of Hope; Michael
Leo Owens, Renewal in a Working-class Black Neighborhood, Journal of Urban Affairs
19, no. 2 (1997); Rabrenovic, Community Builders; and Stoecker, Defending Commu-
nity.

44. Rabrenovic, Community Builders, and State Commission on the Capital Region, Growing
Together Within the Capital Region: The Report of the State Commission on the Capital
Region (Albany, N.Y.: Nelson A. Rockefeller Institute of Government, State University of
New York, June 1996).

45. State Commission on the Capital Region, Growing Together, 5.

46. Ibid.

47. Ibid.

48. Ibid.

49. Ibid.

50. ibid.

51. Centerfor Economic Growth (CEG), Albany — Schenectady — Troy Enterprise Community
Designation Application (Albany, N.Y.: CEG, 1994), 20.

52. Ibid.

53. Ibid.

54. Ibid.

55. Rabrenovic, Community Builders, and State Commission on the Capital Region, Growing
Together.

56. State Commission on the Capital Region, Growing Together, 5.

57. Interviews with Aaron Dare, president and chief executive officer (CEO), Urban League
of Northeastern New York, Inc., July 25, 1997, Aaron Mair, executive director, Field of
Dreams, January 22, 1998, and Lloyd Stewart, former president and CEO, Urban League
of Northeastern New York, Inc., October 31, 1995. See also Rabrenovic, Community

159

New England Journal of Public Policy

Builders, especially 60 — 62, 92 — 119, 164 — 190, and Amy Poe, Empowerment Failure,
Metroland, January 29, 1998.
58. U.S. Bureau of the Census, 1990 Census of Population and Housing, Summary Tape File
3A.

59. Ibid.

60. Ibid.

61. Ibid.

62. June 10, 1994, letter from Gerald Jennings, mayor of Albany, to Henry Cisneros,
secretary, HUD.

63. Although the formal guidelines were not available until January 1994, the Empowerment
Zones and Enterprise Communities initiative was announced by the Clinton administra-
tion, along with an invitation for applications, in December 1993. Cities across the
United States were mobilized and began tentatively to plan for submitting applications
to these programs as soon as the regulations were released. See, for example, Gittell et
al.. Expanding Civic Opportunity ; June Manning Thomas, Applying for Empowerment
Zone Designation: A Tale of Woe and Triumph, Economic Development Quarterly 9, no.
3 (1995); and Robin Boyle, Notes on the Detroit Empowerment Zone Process,
manuscript.

64. The justification for including both residents and nonresidents in strategic community
planning processes is that the union of different perspectives, bases of knowledge,
bodies of expertise, access to resources connects professional planning with
grassroots knowledge and intent. In the case of the Empowerment Zones and Enterprise
Communities initiative, residents and nonresident partnerships were anticipated to
combine the skills and energies of professional planners and the residents of the target
neighborhoods to produce consensus documents that outlined common understandings
of the target neighborhoods priorities and pragmatic solutions for advancing community
renewal. See Robert Chaskin and Sunil Garg, Neighborhood Governance, in Core Issues
in Comprehensive Community-building Initiatives, ed. Rebecca Stone (Chicago: Chapin
Hall Center for Children, University of Chicago, 1996), 44; U.S. Government Printing
Office, Federal Register, especially 2701; and HUD and DOA, Building Communities
Together.

65. See Gittell et al.. Expanding Civic Opportunity, 535 — 539, and Rockefeller Institute of
Government, Empowerment Zone Initiative, 1 — 2.

66. Gittell et al.. Expanding Civic Opportunity, 535 — 539, and Rockefeller Institute of
Government, Empowerment Zone Initiative, 2.

67. August 27, 1996 interview with Kevin O Connor, president, CEG , Albany, N.Y. This
finding is surprising considering that local officials had proved quite entrepreneurial in the
past, seeking federal funds for such economic development projects as the Omni Hotel in
downtown Albany. See Rabrenovic, Community Builders, 61.

68. O Connor interview.

69. Paul E. Peterson, City Limits (Chicago: University of Chicago Press, 1981).

70. See CEG, Annual Report (Albany, N.Y.: CEG, 1995), and CEG, Albany— Schenectady—
Troy Enterprise Community Designation Application's.

71 . Michael Leo Owens, Enterprise Zones and their Incentives for Business and Jobs in Poor
Places: A Review, manuscript.

72. O Connor interview.

73. Dare, Mair, and Stewart interviews.

74. O Connor interview.

75. CEG, press release, May 3, 1994.

76. See, for example, William R. Barnes and Larry C. Ledebur, Local Economies: The U.S.
Common Market of Local Economic Regions (Washington, D.C.: National League of
Cities, August 1994); Henry Cisneros, Urban Entrepreneurialism and National Economic
Growth (Washington, D.C.: HUD, September 1995); and Manuel Pastor, Peter Dreier, J.
Eugene Grigsby, and Marta Lopez-Garza, Growing Together: Linking Regional and
Community Development in a Changing Economy (Los Angeles: International and Public
Affairs Center, Occidental College, April 1997).

77. State Commission on the Capital Region, Growing Together, 7.

160

78. Letter to Henry Cisneros, secretary, HUD, from Eugene Eaton, mayor of Troy, June 20,
1994 .

79. See letter to Henry Cisneros from Kay Ackerman, Schenectady director of development,
June 17, 1994.

80. Some believe that CEG involved itself only to acquire federal revitalization moneys for
projects outside the neighborhoods targeted for investment by the Enterprise Community
program, namely, the central business district of Albany, where CEG is headquartered.
This insight was obtained from my interviews with Dare, Mair, and Stewart.

81. In other cities across the country, the private sector made substantial financial pledges
to support efforts of their cities should their target areas be designated Enterprise
Communities. See HUD and DOA, President Clinton Announces Designation.

82. HUD, Albany, New York, Enterprise Community Performance Report, 1995 — 7996
(Washington, D.C.: HUD, 1997).

83. HUD s description is applicable only to the steering committee formed in the post-award
process of the Enterprise Communities program, not the committee that managed the
pre — awarcprocess of strategic community planning for the three cities in the Capital
Region.

84. CEG, Enterprise Community Designation Application, 15 — 17.

85. To supplement the work of EastWest Planning & Development, the membership of the
TriCity EC Steering Committee volunteered their staff and other organizational resources.
CEG provided the committee with the technical assistance for defining the objectives of
the strategic community plan and the blueprint for its implementation if the three cities
received an Enterprise Community designation. It also coordinated the committee s
public relations and media strategy. The Council of Community Services identified the
social, economic, and physical assets of the target communities and identified barriers to
the start — up of new social services and human development programs. Additionally, they
were used to assist the committee in organizing community workshops. The Capital
District Regional Planning Committee analyzed census data and created demographic
neighborhood profiles and mapsforthe committee, which it included in the final version
of its plan. The local municipalities contributed resource materials and considered
changes to their regulations and ordinances. See CEG, Enterprise Community Applica-
tion, 29.

86. Letterto James Conroy, vice presidentforcommunity development, CEG, from John M.
Holehan, CEO, EastWest Planning & Development, June 21, 1994.

87. Ibid.

88. Telephone interview with Margaret Irwin, EastWest Planning & Development, October
26,1995.

89. CEG, Enterprise Community Designation Application, 72. Critics of the TriCity EC
Steering Committee contend that it backed away from significant resident involvement
for fear of being criticized for the past actions of committee members and their organiza-
tions. This information was obtained from my interviews with Dare, Mair, Stewart.

90. Mary Grisez Kweit and Robert W. Kweit, The Politics of Policy Analysis: The Role of
Citizen Participation in Analytic Decision Making, in Citizen Participation in Public
Decision Making, edited by Jack DeSario and Stuart Langton (New York: Greenwood
Press, 1987), 30.

91. Arnstein, A Ladder of Citizen Participation.

92. Albany-Schenectady-Troy Enterprise Community Steering Committee, Strategic Plan
Summary (Albany, N.Y.: Albany-Schenectady-Troy Enterprise Community Steering
Committee, 1994).

93. CEG, Enterprise Community Application, 45 — 51.

94. Ibid., 75.

95. Ibid., 45.

96. Ibid., 45—51.

97. Telephone interview with Doug Sauer, executive director, Council for Community
Services, and member, Tri-City Enterprise Community Steering Committee, October 31,
1995.

98. CEG, Enterprise Community Application, 72.

99. Ibid. This was further supported by my interview with Irwin.

161

New England Journal of Public Policy

100. CEG, Enterprise Community Application, 52.

101. Ibid., 3.

1 02. Norman Fainstein and Susan S. Fainstein, Participation in New York and London:

Community and Market under Capitalism, in Mobilizing the Community: Local Politics in
the Era of the Global City, edited by Robert Fisher and Joseph Kling (Newbury Park,
Calif.: Sage, 1993), and Frances Fox Piven and Richard A. Cloward, Poor Peoples
Movements: Why They Succeed, How They Fail (New York: Vintage Books, 1972),
especially 256—282.

103. Daley and Angulo, People-centered Community Planning ; Berry etal.. The Rebirth of
Urban Democracy; Jack DeSario and Stuart Langton, Citizen Participation and Technoc-
racy, in Citizen Participation in Public Decision Making; Jane J. Mansbridge, Beyond
Adversary Democracy; Medoff and Sklar, Streets of Hope; Stoecker, Defending Commu-
nity; and Taub, Nuance and Meaning in Community Development.

1 04. See Stoecker, Defending Community, and Medoff and Sklar, Streets of Hope.

105. See, for example, Arnstein, A Ladder of Citizen Participation ; Barber, Strong Democ-
racy; Barr, Empowering Communities ; Nigei Berkeley, George Goodall, David Noon,
and Clive Collins, Involving the Community in Plan Preparation, Community Develop-
ment Journal 30, no. 2 (1995); Berry et al., The Rebirth of Urban Democracy; Daley and
Angulo, People-Centered Community Planning ; DeSario and Langton, Citizen Participa-
tion in Public Decision Making;Susar\ S. Fainstein and Clifford Hirst, Neighborhood
Organizations and Community Planning: The Minneapolis Neighborhood Revitalization
Program, in Revitalizing Urban Neighborhoods; and Stuart Langton, Citizen Participa-
tion in America (Lexington, Mass.: Lexington Books, 1978).

1 06. Chaskin and Garg, Governance in Neighborhood-based Initiatives.

107. Ibid., 633.

1 08. Pateman, Participation and Democratic Theory, 45.

109. Daley and Angulo, People-centered Community Planning, 93; see also Henig, Neighbor-
hood Mobilization.

110. Henig, Neighborhood Mobilization.

111. Chaskin and Garg, Governance in Neighborhood-based Initiatives, 633.

112. Henig, Neighborhood Mobilization.

113. Chaskin and Garg, Governance in Neighborhood-based Initiatives, 638.

114. HUD, Empowerment.

115. CEG, Enterprise Community Application,!^.

116. Irwin interview.

117. Ibid, and Sauer interview.

118. The sets of rungs on Arnstein s ladder of citizen participation, from lowest to highest

levels of participation, are nonparticipation (manipulation and therapy), tokenism
(informing, consultation, and placation), and citizen power (partnership, delegated
power, and citizen control). See Arnstein, A Ladder of Citizen Participation.

119. Ibid., 219.

120. See, for example, Berry et al., The Rebirth of Urban Democracy; Medoff and Sklar,
Streets of Hope; Rabrenovic, Community Builders; and Stoecker, Defending Community.

121 . For more on this, see Berry et al.. The Rebirth of Urban Democracy; Chaskin and Garg,

Governance in Neighborhood-based Initiatives ; and Chaskin and Garg, Neighborhood
Governance.

122. HUD, Empowerment.

123. 3 Cities Pave Way for Building Enterprise Zones, Albany Times Union, August 23,
1995, Al.

124. See Poe, Empowerment Failure, and Albany s Enterprise Zone Slowto Show
Progress, Albany Times Union, September 14, 1996.

125. See Poe, Empowerment Failure, and Albany s Enterprise Zone Slowto Show
Progress.

162

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