New Markets Initiative, Embraced by Ms. Clinton, Led to Privatization of Public Schools
This post has extensive quotes from Lily Geismer’s Jacobin article, “The Places Left Behind” that provides an insight into how Bill Clinton’s “New Markets” economic plan failed to improve the lot of those living in “the places left behind” by globalization. In so doing, the article provides the rationale for why neo-liberals like the Clintons believe the privatization movement might help those being raised in poverty… and offers evidence that it has failed to do so. Ms. Geismer offers this description of the “New Markets” initiative, which was based on the premise that public-private partnerships could find a way to develop dilapidated sections of the cities and communities devastated by the changing economy:
The centerpiece was the New Markets Tax Credit (NMTC), which offered a write-off worth up to 39 percent to corporations, venture funds, and community development banks that invested in businesses like shopping centers, factories, retail stores, and technology firms in places where the individual poverty rate reached at least 20 percent…
…The private sector would assume the dominant role in this partnership, with very meager allocations for social services. While Clinton’s programs promised to bring capital reinvestment and job opportunities to areas that for decades had been abandoned, they simultaneously reinforced the notion that retail opportunities and access to credit — rather than more social services and government funding — would solve the problems that beset distressed communities and their residents.
Instead, Clinton advanced the idea that the “places left behind” could push the economic boom of the 1990s to new heights. As he explained in a speech in a Walgreens parking lot in East St Louis, investing in underserved communities could boost economic prosperity for the entire nation. “I say to myself every day when I get up, now what can I do to keep this going?” he told those assembled, referencing the expanding economy. “The only way to keep it going — more growth with no inflation; more jobs and higher wages without bringing it to a halt — is to have new people working, and new people buying.”
he Great Recession threw into sharp relief the limitations of Clinton’s market-based scheme. Because his New Markets program didn’t mandate that corporations remain in unprofitable areas, many closed their factories, service centers, and franchises when the downturn came. Left to rely on the vagaries of the market, many resource-starved communities have continued to be just that.
Even worse, these programs’ fixation on profitability led several companies and banks to recognize the exploitative potential of low-income areas. The supposed saviors of struggling residents instead ensnared them in a web of predatory loans, foreclosures, and credit card debt. The rise in mass incarceration and the loss of social services — which Clinton frequently promised market forces would replace — piled on still more hardship.
Many of the places Clinton visited during his New Markets tour have been the hardest hit by this unforgiving onslaught. In East St Louis, for example, the foreclosure crisis devastated the city, causing significant budgetary woes that resulted in sharp cuts to public services. By 2013, the city suffered from the nation’s highest per-capita murder rate and had come to serve not as a model, but a cautionary tale.
Despite this track record, however, the NMTC continues to receive support, both in Washington and on Wall Street. Several leading firms and funds have taken advantage of the tax credit to invest in charter schools and other projects located in underserved areas, eager to pay less taxes at the same time they line their own pockets.
So here’s the progression: the banks offered loans to people who were willing to invest in areas with high poverty rates helping to fund stores and businesses, took tax credits for those loans, but when the market crashed they insisted that the loans be paid or they would foreclose on the businesses. The banks assumed no risk and reaped a sizable reward… and instead of the rising tide lifting all boats when the economy ebbed the new businesses withered and while the banks got tax credits the borrowers lost their credit ratings. In the meantime, instead of the government using its resources to provide social services desperately needed in these areas it effectively gave money to the banks and corporations who invested in the economically depressed areas, areas that were in worse shape after the recession than the bankers or corporate heads. But, as Geismer notes, this bad idea from the late 1990s is still alive today:
In her run for the White House, Hillary Clinton hasn’t acknowledged the inegalitarian effects of the New Markets initiative. Instead, she’s advocated expanding and simplifying the NMTC as a way to reduce economic disparities between Silicon Valley and Appalachia and spur long-term macroeconomic growth.
Her “Breaking Every Barrier Agenda” proposes doubling the amount of NMTC credits available to low-income communities and adding new credits for communities “hardest hit by decline.” Clinton, in spite of evidence to the contrary, promises this will generate investment in long-neglected areas.
Like her Republican counterparts who overlook all adverse information on climate change or trickle down economics, Ms. Clinton continues to have faith in “market forces” as the best means for addressing social issues…. and eventually that is going to mean that corporations who are eager to line their pockets and present themselves as good citizens will continue to take advantage of programs like NMTC… and one way they will be able to do that is by investing in deregulated for profit schools that will help take young and innocent children out of “failing public schools”.