A BOOTSTRAP MODEL FOR MICROENTERPRISE DEVELOPMENT OF A DISTRESSED COMMUNITY

Aworuwa, Olorundare E

INTRODUCTION

The success of any economic development strategy can be measured by evidence of increase in personal income, corporate profitability and higher public revenues. The latter usually results from an increase in the economy's taxable base, due to an expansion in national productive capacity. For most economically distressed communities, recovery efforts generally fall into two major categories, which can be described by (1) the promotion model; and (2) the inducement model.1 These two strategies usually include the provision of special inducement packages to entrepreneurs to invest in the affected communities. In addition to financial incentives, the community would make an effort to provide prospective investors with what it considers to be its comparative advantages (e.g., plenty of highly educated and skilled labor resources; competitive wages; abundance of raw materials; good schools; efficient and well-developed communication systems, etc.). The overall goal of any viable economic development strategy is to retain existing business investments and attract new ones. Unfortunately, many development strategies often fail to achieve their desired goals and as a consequence, the community may not be able to attract new investments and create jobs, or raise the level of public revenues.

The promotion and inducement approaches have failed to revitalize many economically depressed areas in the U.S. (e.g., Benton Harbor, Detroit, and St. Louis in the 1970s and 1980s).2 Failure was due primarily to (1) rapidly changing business environment due to increased global competition; (2) inadequate local resources to restructure, for example, the infrastructure and make it more attractive to prospective investors and enhance its ability to compete with other communities for investment; (3) the myth that in most distressed areas recovery can only be achieved through the successful recruitment of large manufacturing businesses into the community. As a consequence of this approach or belief, many distressed communities often squander their meager resources on efforts to recruit large manufacturing concerns, instead of enhancing the ability of local entrepreneurs to create wealth. Even when communities succeed to secure investments from large businesses, there is no guarantee that the incoming or new manufacturing enterprises would create many jobs or operate profitably enough to significantly increase the local tax base. Quite often, the businesses recruited are unable to provide enough benefits to the local community to make up for the resources expended in the recruitment process.

Finally, many distressed communities often lack the institutional infrastructures to provide the support systems that are needed to channel internal and external resources into priority development areas? In many developing countries, where most of the world's economically distressed areas can be found, political instability (including violent ethnic mobilization), unmanageable external debts, corruption, financial mismanagement, and other politically induced problems, have been responsible for the failure of economic development strategies.

THEORETICAL ISSUES

There are two fundamental issues that do not often receive adequate attention from policymakers or other government agents in the drive for economic vitalization of distressed communities. First, there are the long-term economic, social, and political costs to a community arising from excessive reliance on economic development through promotion. second, the granting of generous tax incentives to prospective investors does not necessarily guarantee comparable returns in jobs created and tax revenue generated. Unfortunately, throughout most of the developing world or distressed local communities, many policymakers often equate successful promotion with increased jobs and revenue collections. The attraction of foreign manufacturing enterprises into the community is often equated with sustained economic growth and development or considered insurance against future downturns in the macro economy. Many of the politicians who pursue incentive-driven community development strategies tend to expend public resources aggressively to attract foreign businesses without any guarantee that the presence of these enterprises would have any significant positive impact on the alleviation of poverty.4

POTENTIAL CONSEQUENCES OF OVER-RELIANCE ON INCENTIVE-DRIVEN RECRUITMENT OF LARGE BUSINESS ENTERPRISES

While, in theory, offering generous incentives to foreign businesses to invest in depressed communities may first appear to be sound public policy, such an approach to development can impose severe costs on society. Policymakers in many developing countries and depressed communities in developed countries have often failed to take into consideration the competition posed by other communities for foreign investment. In fact, many African policymakers, who pursue similar approaches to attracting foreign investment, often behave as if theirs is the only country seeking foreign investment, and as a consequence, usually fail to transform their economies well enough to successfully attract and retain investment. For example, while their embassies abroad squander scarce resources to encourage foreign businesses to establish subsidiaries in their home countries, domestic politicians and civil servants in many African countries refuse to implement institutional reforms necessary to create the appropriate environment for such investment. As a result, these countries continue to suffer from relatively high levels of corruption and continue to maintain highly inefficient bureaucracies.5 In other words, these African countries maintain governmental structures that are hostile to entrepreneurship but while at the same time going around the world squandering scarce resources on investment promotion schemes.6 Many countries in Africa have now come to realize that the large expenditures devoted to attracting investment to their economies have often generated very few, if any, benefits for the people. First, if they are successful in convincing a foreign business to invest in their country, chances are many of them would not succeed because of the government's unwillingness to restructure domestic critical domains (e.g., the civil service) to make them more receptive to entrepreneurial effort and thus, wealth creation. second, many foreign businesses, especially those located in the industrial North, have very little interest in establishing viable manufacturing facilities in the African countries, given the risk associated with financial, economic and political instability, corruption, poorly educated and highly unskilled labor force, etc. Third, most of the interest expressed by transnational companies in Africa and other economically depressed areas of the world is for raw materials and cheap labor, and as a consequence, many of these firms tend to bring to the poor countries (or communities) only temporary structures, those that can easily be dismantled and relocated, once other more attractive arenas become available. In fact, in times of economic downturns, many foreign companies may exacerbate the economic malaise by pulling out and leaving for greener pastures, making it more difficult for local policymakers to successfully implement recovery programs.

Fourth, the types of jobs generated by these companies require significantly more skills than are possessed by inhabitants of most distressed areas. In fact, in many economically distressed areas in the U.S., businesses often find it very difficult to secure the skilled labor resources that they need to "man" their operations. As a consequence, many of them often end up importing the necessary labor resources (instead of training local individuals), a policy that usually exacerbates the unemployment problem in the community.7

Finally, the evidence shows that few distressed communities ever succeed, without external assistance (e.g., from state and/or federal government) in attracting the foreign investment that they need to successfully engage in economic recovery. In most developing countries, efforts to attract foreign business often must be subsidized or underwritten by foreign assistance from developed countries. Of course, in distressed areas in the developed countries, recruitment efforts must be subsidized or in many instances, completely underwritten by the central government.

Economic recovery requires the cooperation and participation of a community's non-business segment. In developing countries, for example, economic planning and implementation of development programs is usually the prerogatives of lawmakers and civil servants, with some assistance from the private sector. Rarely are civil society organizations (e.g., churches and other nongovernmental organizations) provided facilities to participate in the process of development and economic recovery. Failing to include a large part of society in the planning and implementation of development programs creates many problems. The most important of them is that many of the center elites, who lead the planning, as well as the implementation processes, usually do not have the appropriate time-and-place information to design the kinds of programs that would generate maximum benefits for the local communities. Unless the local people are given the opportunity to participate fully and effectively in the design of policies affecting their lives, the resulting programs, especially if non-stakeholder groups dominate their design and implementation, usually are not viable and sustainable.8

In the case where a business, responding to new opportunities elsewhere for profit, decides to leave the community (that is, divest), local labor resources are the first to feel the full brunt of the departure through job loss and decreased earnings. In some cases, the departing company may leave behind a severely polluted environment for the community to clean. Abandoned buildings, toxic waste, and other types of pollution are only a few of the things that the emigrating company may leave behind, forcing a community already suffering from inadequate tax collections to seek help from external sources to clean-up the mess.

To minimize the costly consequences of failed community economic development programs, planners must involve, as much as possible, the relevant stakeholder groups. Since each program will affect the different sections of society, it is important that they be provided facilities to participate fully and effectively in both design and implementation of development programs. In addition, each potential investment should be investigated as much as possible to make certain that it fits properly in the community's long-term development plans. Investments that address, as well as, fit properly within the community's long-term development plans are most likely to be viable and provide benefits for the entrepreneur (i.e., profit) and for the community (e.g., jobs, tax revenues, etc.). Also, investments that complement local efforts and make adequate use of local resources are most likely to succeed and become viable sources of economic growth and development.

The present article introduces the Bootstrap Community Development Model as an effective approach to revitalize an economically distressed community. The Bootstrap model is supply-side oriented with emphasis on developing and strengthening the productive capacity and capability of the community. This includes developing and sustaining appropriate institutional infrastructures; providing for the training of the community's labor resources; increasing local capital formation efforts; and establishing a strong local entrepreneurial class.9 The model is premised on the thesis that every community is endowed with natural resources and enjoys comparative advantage in certain economic sectors. Such a comparative advantage could be used to enhance local development.

The primary purpose of the Bootstrap model is to capture the resources used by a local community to purchase goods from outside sources and use them to develop local production facilities. The latter can then be used to produce those goods that society currently imports. The success of the import-substituting sector should eventually provide the capital for the development of an export sector. This model is directed primarily at economically distressed communities that do not have the resources to attract foreign investment and currently do not have the capacity to produce for export.

The relatively poor business environment that obtains in many developing countries, especially those in Africa, informs the Bootstrap model. The economies of most African countries are in serious economic distress, primarily because of (1) many years of political instability, including destructive ethnic conflict; (2) the lack of efficient basic infrastructure (e.g., communication networks, financial institutions, educational institutions, health facilities, etc.); (3) inadequate social amenities; (4) shortage of skilled and highly educated individuals to manage the economy; (5) shortage of capital (both human and physical); and (6) the inability of these countries to attract foreign investment. During the last forty years, many African countries have been unable to successfully attract investment to their most depressed and distressed communities. Part of the problem comes from the fact that these countries do not have the resources to engage in successful strategies to secure foreign investment.

RATIONALE FOR THE BOOTSTRAP MODEL

Limited capital outlay

One of the most important characteristics of economically distressed communities, as well as poor countries in Africa, is the fact that these economies are constrained by their relatively limited capital outlay. Basically, these societies have relatively poor capital formation habits and have not been able to supply themselves with the appropriate capital base on which to build industrial production. This situation, however, cannot be reversed by external intervention alone or by the securing of foreign manufacturing investment. According to the Bootstrap model, a reversal of such economic malaise must begin with the development and implementation of strategies that take into consideration community needs and effectively utilize local resources. Under this process, the local community can produce the goods that it currently imports, develop a strong local market and eventually secure the capital it needs to venture into export manufacturing. In the case of distressed communities within developed countries, "exporting" could imply selling to other parts of the country and not necessarily to markets in other countries. Thus, an economically distressed community in the State of Mississippi (USA) can begin by developing a manufacturing base to meet local needs, then expand to meet the needs of neighboring communities in Mississippi, Florida, Louisiana, Georgia, South Carolina and other adjacent states. Eventually, its manufacturing sector would mature enough to allow it to compete nationally and globally.

Home grown businesses

In seeking to deal effectively with the economic problems that plague distressed communities (including especially those in Africa), one must emphasize the importance of seeking local or homegrown solutions. Along this line, the development of local (or indigenous, as in the case of Africa) entrepreneurship is critical. Thus, the first line of business in any recovery program must be the development of institutional structures that enhance and nurture local entrepreneurship. Such an approach has three important benefits. First, it provides an enabling environment for the growth of local business enterprises. sec ond, it enhances the ability of the community to recruit and retain foreign (or external) investment. Finally, it promotes long-term development in the community.

The creation of small enterprises to form the base for the community's revitalization effort should not require a lot of capital. In many communities, the required start-up capital can come from personal savings, and loans from family and friends. Formal credit unions and informal savings associations (especially in African communities) can also serve as important sources of financing for these projects. Since such small business enterprises form the foundation of a sound redevelopment program, it is essential that they be encouraged and nurtured. A program to revitalize a distressed community is not likely to succeed without the appropriate foundation-homegrown small enterprises represent such a sound foundation.

Employment opportunities

Unemployed labor resources represent an important social and economic challenge to distressed communities. Any strategy to deal with such distress must emphasize job creation so as to increase not only the economic but also the social wealth of the community. In developed countries such as the U.S., more than two-thirds of the jobs created annually come from small and homegrown business (primarily sole proprietorships and partnerships) enterprises. Although the large corporations generate a significant portion of the U.S.'s gross domestic product (GDP), they are not responsible for most of the job creation that occurs in the country annually. In many developing countries, many of the transnational companies that operate there are highly capital intensive and employ very little labor. The latter often consist primarily of highly skilled foreigners, with most local people unable to find work at these enterprises. Thus, economic rehabilitation of distressed communities must emphasize local entrepreneurship, which is expected to create the jobs that the people need.

The cost of creating a job through community entrepreneurial activities is often lower than that incurred by the community when job creation comes through business enterprises recruited from outside the community.10 As mentioned earlier, often, the local community must spend a significant amount of scarce resources to recruit and retain these "foreign" companies. In addition, the community's government may have to grant the in-coming manufacturing concern significant tax benefits, effectively reducing the ability of the people to derive income for spending on public programs such as health, education and social overhead capital. In addition, homegrown businesses are most likely, than their "foreign" counterparts, to utilize local resources (including labor) effectively, invest excess earnings in local expanded capacity, and participate in activities that generally enhance the community's overall welfare.

ASSUMPTIONS OF THE BOOTSTRAP MODEL

In using the Bootstrap model to revitalize a distressed community, the following assumptions are made. (1) Every community, even the poorest and most distressed, is endowed with some level of resources (human, financial, organizational, natural, etc.). With careful planning, and given the appropriate institutional environment, these resources can be used to provide a foundation for economic recovery. '1 (2) Most depressed and distressed areas usually do not have the resources to compete effectively and fully in larger (and competitive) national and/or global markets for investment. Poor communities within the U.S., for example, find it very difficult to compete with more endowed regions for corporate investments and thus must continue to depend on subsidies from the federal government. In developing countries, especially those in Africa, obstacles such as poor governance structures, heavy external debts, destructive ethnic mobilization, and other social and economic ills, make competition in the global economy for foreign investment virtually impossible. (3) Most of today's manufacturing operations are more technology driven and less labor-intensive, effectively reducing the ability of distressed communities, most of which enjoy a comparative advantage in the supply of cheap labor, to participate. In fact, many poor countries in Africa are unable to attract high-tech manufacturing operations because these societies cannot provide the type of skilled labor resources that these industries require. The same is true for many distressed communities in the developed countries. Like their counterparts in Africa, many people in these communities are practically illiterate in the new technologies that drive today's manufacturing industries.12 (4) Most distressed areas usually have surplus labor resources as evidenced by high unemployment rates. Thus, a scheme to revitalize the community must emphasize labor-intensive production process, those that would be able to absorb all the excess labor that exists in the community. (5) Orthodox economic theory argues that export-led growth is an effective way to develop a community. However, the Bootstrap model argues that a proper program to revitalize a distressed area should emphasize, at least in the early stages, import substitution industrialization. (6) Finally, a stable institutional environment (e.g., predictable laws and regulations; stable financial system; relatively low levels of corruption; etc.) is essential for wealth creation and thus, economic growth and development. Without appropriate institutions, the community would be unable to attract and keep investment, as well as develop and sustain a local (indigenous) entrepreneurial class.

EXPECTED OUTCOMES OF THE MODEL

Successful implementation of the Bootstrap model should generate a lot of benefits for the local community. First, local resources would be developed to provide the society with the capacity to create the wealth that it needs. second, in the process of developing structures to create wealth, the model will enhance the community's ability to use its natural and human resources more effectively. Third, proper implementation should provide the community with the foundation for long-term sustainable economic growth and development. Fourth, since the model emphasizes reliance on local resources, the squandering of resources to seek external investors that is usually associated with other models of economic revitalization can be avoided. Fifth, since the model creates the basis for internally generated economic growth, it actually empowers the local community to own and control the pace, direction and nature of its development. Finally, with a solid foundation for sustained economic growth in place, the community should find it much easier to recruit foreign investors.

One must recognize, however, that the model's ability to succeed as an effective tool for economic revitalization depends on (1) correctly identifying and harnessing the internal resources of the community; (2) availability of skilled change agents (e.g., economic development experts) that possess the appropriate time-and-place information (e.g., the community's development priorities; resource endowments; social, political and economic constraints; institutional limitations, etc.). Such change agents must be competent, highly skilled, well constrained by the law (so as to minimize their engagement in corrupt activities) and be able to effectively mobilize and involve popular forces during the planning and implementation ot the community's economic recovery efforts.

STRUCTURE AND FUNCTIONS OF THE MODEL

The Community Economic Revitalization Agency (CERA)

The Community Economic Revitalization Agency (CERA) is designed to be the centerpiece of the Bootstrap model and is supposed to be a nonpartisan community development agency. Its membership would consist of representatives of all relevant stakeholder groups in order to provide effective and full community representation and ownership of the programs that flow from the model. Although CERA, as a community organization, is expected to be independent of the local government, the latter, as the representative of the people, should be granted representation. A staff member from the local government, preferably the government's economic development officer, should work closely with CERA to make certain that the latter's programs are in line with those being promoted by the elected officials. The major responsibility of the government official who serves on the CERA is to coordinate the government's recovery efforts with those of CERA in order to avoid duplication and enhance the overall strategy of transforming the society economically. Both groups-the government and CERA, working together should significantly enhance development in the community.

How many people should serve on CERA? The number would be determined by each local community based on its needs. Membership, however, should be limited to credible (most preferably, elected) representatives of the main stakeholder groups within the community. These groups include (1) entrepreneurial community; (2) financial institutions (including insurance); (3) city/county/village government; (4) educational institutions (at the elementary and secondary, as well as at the higher education level); (5) chambers of commerce; (6) religious community; (7) labor unions; and (8) other relevant civil society organizations. How many members represent each group should be based on the critical importance of the group to the revitalization effort.

Major responsibilities of the CERA

Developing an effective economic recovery program for a community requires a comprehensive analysis of the community's short- and long-term development needs, as well as the challenges presented by its socio-political environment and the community's resource base. Before beginning any work in the community, however, the CERA must be registered with the proper authorities as a non-profit entity in order to secure its legal status.

The major functions of the CERA include, but are not limited to: (1) Comprehensive study of the community to identify opportunities for expanding existing businesses, establishing new ones, and generally enhancing the capacity of local entrepreneurs to operate. (2) Providing assistance to local entrepreneurs who want to start their own businesses by giving them training, professional guidance, monitoring and mentoring to enhance their ability to remain competitive. (3) Coordinating activities with local stakeholder groups to enhance their ability to participate fully and effectively in the development process. (4) Meeting regularly with external actors to enhance their ability to assist local entrepreneurs or engage in entrepreneurial activities themselves. (5) Actively recruiting and bringing to the community entrepreneurs and businesses that may contribute to the recovery effort. (6) Identifying domestic (i.e., local) and external funding sources to assist current and prospective investors to develop and implement their business plans. (7) Assisting local businesses in assessing their performance so they can identify trouble areas and effect the necessary changes to enhance performance.

Functions of CERA 's Sub-committees

The CERA usually maintains sub-committees whose job it is to provide a variety of services that enhance the community's revitalization effort. Each sub-committee is designed to be responsible for a specific area of business operations (e.g., accounting; finance; marketing; sales; etc.). Although members of each sub-committee do not necessarily have to be experts in their areas of responsibility, a certain level of competence in the relevant area is expected and considered essential for their successful service. For one thing, the sub-committee members must be able to effectively identify the problem as well as determine which consultants to hire to deal with it.

Additionally, sub-committees are expected to coordinate and administer the overall recovery programs, counsel business enterprise owners, seek and secure expert and professional assistance for these businesses, and enhance the ability of local entrepreneurs to interact with the larger (national or global) economy.13

PHASES AND IMPLEMENTATION OF AN ECONOMIC RECOVERY PLAN

Phase I: A situation analysis of the target community

The first place to start is to undertake a comprehensive study of the distressed community. Such a study should provide important information on (1) the community's existing resource base; (2) institutional environment to be faced by entrepreneurs; (3) constraints and obstacles to business operations (e.g., bureaucratic bottlenecks, corruption, etc.); (4) patterns of demand for goods and services (what is the nature of local markets?); (5) the community's existing productive capacity-how many firms exist in the community and what are their manufacturing capabilities? and (6) local savings and capital formation efforts. This information should enhance the ability of CERA staff to put together a plan that would help the community begin its recovery process.

Phase II: The recruitment and training committee

Once the comprehensive survey is completed, the information gathered is then used to build a base for further action. Problems identified from the survey are then attacked systematically. CERA staff should engage relevant stakeholder groups in a discussion of the results of the survey in an effort to obtain their input and prioritize the phases of the recovery program. Development of economic recovery programs must be informed by input provided by the community. In addition, the information gathered from the CERA's engagement with the relevant stakeholder groups should also be made available to the different levels of government so that it could be used to drive these agency's economic revitalization programs. For example, in making an effort to recruit businesses from outside the county, such an activity would yield more effective results if it were informed by community needs as expressed by the relevant stakeholders. The recruitment and training committee would then use the information gathered from the surveys and the consultations with the relevant stakeholder groups to design its training programs for local entrepreneurs.14

What is the purpose of the training programs to be offered by the recruitment and training committee? The latter would design programs to recruit prospective local investors and train them in basic business operations to enhance their ability to succeed and remain competitive. Such training should include (1) how to develop a business plan; (2) how to start and manage a small business; (3) financing a business plan; (4) setting business goals and objectives; (5) bookkeeping procedures; (6) personnel recruitment and retention; and (7) tax issues, including government regulatory activities and how they affect business operations. After they successfully complete their training, the entrepreneurs would then be able to move on to start and operate their businesses. Such training is critical because it reduces the changes that the entrepreneur will fail and thus improves the overall performance of the recovery program.

Phase III: The finance committee

Quite often, qualified entrepreneurs may not have the capital to start their own operations. The job of the finance committee is to work with such individuals and help them secure the financing that they need to proceed. Here, the finance committee can assist in the preparation of the business plan, identify potential financing sources, and help the entrepreneur present the plan to a prospective lender. Usually, the finance committee will work with the entrepreneur until the necessary start-up capital is secured. The sub-committee is also expected to help the entrepreneur set-up for business; including setting-up customized accounting and financial management systems. It is important to note, however, that the finance committee, like other CERA structures, serves only in an advisory capacity to the entrepreneur, and is not expected to take an equity position in the operations.

Phase IV: The incubator system (execution phase)

This is perhaps, the most important phase of the Bootstrap model. There are two types of business incubator systems-in-house incubator system where start-up small businesses are housed in a central location and monitored carefully; and the incubator-system at large, in which technical assistance is provided entrepreneurs who operate their own businesses from different locations throughout the community. Under the first incubator system, a group of small businesses are brought together under one roof and allowed to remain there for at least 3 years. These businesses are provided significant public subsidies, including rent and other services in an effort to reduce their operating expenses and enhance their ability to earn a profit. Despite the fact that businesses participating in the second model are not provided a physical location, they still enjoy substantial subsidies from the government. The latter, through CERA, may provide such businesses tax breaks, subsidies to purchase inputs for operations, protection from external competition, and other services designed to enhance the ability of these businesses to grow and mature. Basically, the local government is expected to provide these businesses the nurturing environment to grow and eventually become competitive.15

The incubator system has gained popularity as an intervention strategy that is essential for economic development, especially in highly depressed areas. Support facilities provided incubator firms include (1) managerial training and assistance; (2) shared secretarial services; (3) telephone services; (4) utilities; (5) warehousing; and (6) janitorial services. The incubator system provides significant shelter from brutal global competition, allowing local firms to grow and mature and eventually gain the ability to compete globally.16

In addition to serving as a place of nurture to start-up companies, the incubator house can be used for regular training for prospective and existing small business owners and their employees. A successful incubator system should significantly enhance the survival rate of small businesses and improve the ability of the local community to undertake its recovery program.

Establishing the incubator system

In each community, the CERA must acquire a building that (1) has enough room to house all the businesses participating in the incubator program; (2) is located close to the community's industrial area; (3) is adequately served by the community's transportation system; and (4) can appropriately serve the needs of the firms recruited to participate in the incubator program. Since the building is likely to serve successions of clients, it should not be too specialized.

As a non-profit organization, the CERA would have to depend on local contributions to be able to secure the building. Of course, given the nature of its mandate, it would not be inappropriate for the organization to seek assistance from the government; especially when one considers the fact the job creation and wealth generation are two important objectives of the incubator system. In countries such as the U.S., it has been determined that it costs at least one and the half to four and the half times less to create a job through the incubator system than through traditional manufacturing concerns such as the automobile industry.17 In developing countries, the cost of creating jobs through the incubator system is expected to be even smaller.18

The rate of business failure, even in the developed nations, is relatively high. In fact, it is believed that 4 out of 5 new businesses fail in their first year. However, if these businesses are developed through the incubator system, their chances of survival are much improved.

Management of the small business incubator

To ensure efficiency, it is preferable to have the business incubator managed by professional, highly skilled and experienced individuals. Thus, it is necessary to recruit individuals with training in accounting, economics, management, marketing, finance, human resource management, and law and allow them to manage the system. Since the incubator house staff regularly counsels tenants and their employees, it is necessary to supply the former with individuals who can perform the job well.

How long should a company remain in the incubator house? Many proponents of the incubator system suggest that tenants be allowed to stay within the house for a maximum of three years. After that, they may still receive incubator services but must leave to allow new businesses to be brought into the system. CERA and the incubator sub-committee, however, would support the "graduating" firm in its efforts to establish an independent existence for itself outside the house. Some incubator proponents argue that tenancy be made more flexible so that tenure can be determined on a case-by-case basis. If a firm is found to be too weak to graduate, such a business can be allowed to remain in the incubator house for as many as five years, so it can gain the experience that it needs to survive and become competitive outside the house. During this extended period, incubator staff would work more diligently to make certain that the company acquires the necessary wherewithal to become independent.

TECHNICAL ASSISTANCE SUPPORT NETWORK

An important component of any successful economic recovery program is the type and quality of the technical and professional support system available to development planners, program managers, and business incubator systems. A comprehensive support system should be made up of (1) a network of public and private educational and professional institutions; (2) appropriate social and political institutions (e.g., a well functioning legal system; a well constrained police force; etc.); and (3) adequate social overhead capital (e.g., communications networks; healthcare system; etc.).

The establishment of an incubator system is a "win-win" proposition. To the community, this is a relatively inexpensive way to identify, develop and nurture crops of community-based entrepreneurs and enterprises. To the local government, the system can lead to a significant increase in the community's taxable base, as well as deal effectively with unemployment. The increased wealth that results from expansion in the community's productive capacity should enhance the welfare of the people. Finally, the incubator system can serve as a learning laboratory, where local businesses can acquire the skills that they need to succeed in a more competitive and complex national or global economy.

SUMMARY AND CONCLUSION

From the beginning, it is important that local officials recognize the fact that pulling a community out of its economic malaise usually requires a lot of time. Thus, any recovery program designed for a community must emphasize the long-, as opposed to the short-term. Quick fixes should, thus, be avoided.19

A community that is suffering from economic distress usually does not have that many options. First, it has limited resources to expend on recruiting outside businesses to invest in its economy. second, since unemployment rates in these communities are usually quite high, most available resources must be devoted to supporting a population that is not currently creating any wealth. Finally, the community is competing with other communities for scarce global (or national) investment resources. Therefore, it is necessary for community leaders to look inward, mobilize internal resources (no matter how meager they may be) and develop the local entrepreneurial class, which can then serve as the foundation on which to build the community's recovery program.

For any recovery program to succeed, there must exist within the community, the appropriate institutional environment. For example, without the existence of predictable and stable rules (i.e., laws), property rights are likely to be severely insecure, driving investors, including domestic ones, away. Poor laws and institutions can enhance the ability of civil servants to extort bribes from prospective entrepreneurs, effectively stunting the development of the entrepreneurial class that is critical for wealth creation. Thus, before any effort is made to design and implement a recovery program, institutional reforms should be undertaken to make certain that the community has the enabling institutional environment for growth and development (that is, for wealth creation).

To carry out a recovery program, it is necessary to have a relatively well-educated, skilled and competent work force, as well as a professional bureaucracy. Without an appropriate educational system, such human capital cannot be developed. Thus, it is essential that as part of the overall provision of social overhead capital for economic recovery, arming the society with appropriate educational institutions should be made a priority.

Development requires the participation of the relevant stakeholder groups. Facilities should be provided so that all relevant stakeholders participate in the design and implementation of development programs affecting their lives. Since people at the local level have more time-and-place information than the civil servants at the center, it is necessary that the participation of local communities in development programs be maximized. Thus, the provision of the enabling environment for the growth of manufacturing enterprises must emphasize decentralization that enhances the ability of the various stakeholder groups to participate in the process.

The ability of the Bootstrap model to deliver improvements in the quality of life of local communities depends on several factors. First, there must be a stable political and economic environment from which to operate. Where there is significant political turmoil, as witnessed in many developing countries, implementing a Bootstrap strategy for community revitalization may be impossible. second, there must exist institutions that enhance entrepreneurship and maximize wealth creation. Finally, there must exist institutions that adequately constrain the state, minimizing corruption and other forms of opportunism that interfere with wealth creation in particular and economic development in general.20

The CERA is an important tool for implementing the Bootstrap model and enhancing the ability of the community to transform itself economically. In accordance with earlier discussions, it is important that those who serve in the CERA be members of the community, for, only such people can effectively determine and define community needs, desires and aspirations. In other words, effective community economic development efforts are those that involve community-wide participation at all levels of the recovery. When the community is provided facilities and allowed to participate fully and effectively in development programs, they can claim ownership of the latter and make certain that these programs succeed. Although this model has not been subjected to much empirical testing, its theoretical assumptions, and structure and organization are informed by the personal experiences of the author and a good understanding of the internal and external forces responsible for many of the conditions of distressed communities.

NOTES

I wish to thank Professor John Mukum Mbaku for his review and comments on an earlier draft of this paper.

1. C. Farr (ed.). "Shaping the Local Economy: Current Perspectives on Economic Development.," in International City Management Association, R. R. Donnelley and Son Company, (Harrison, 1984). pp. 28-29.

2. O. Aworuwa. Guidelines for Setting Up a Small Enterprise Establishment and Development System (SEEDS). Unpublished manuscript, 1986.

3. Ron Shaffer. Community Economics: Economic Structure and Change in Smaller Communities. (Ames, Iowa: Iowa State University Press, 1989.)

4. John Naisbitt. "From an Industrial Society to an Information Society" in Shaping the Local Economy: Current Perspectives on Economic Development, International City Management Association, Washington, D.C. 1984, p 10.

5. J.M. Mbaku. Institutions and Reform in Africa: The Public Choice Perspective. (Westport, CT: Praeger. 1997.)

6. Business Week, September 27.

7. A. Shapero. Entrepreneurship in Economic Development. International City Management Association, (Washington, D.C. 1984). pp. 12-15.

8. J.M. Mbaku. Bureaucratic and Political Corruption in Africa: The Public Choice Perspective. (Malabar, FL: Kreiger Publishing Company, 2000.)

9. E.B. Sharp and M.G. Bath. "Citizenship and Economic Development," in Bingham, Richard and Meir, Robert (eds.). Theories of Local Economic Development. (Newbury Park, CA: Sage Publications, 1993.)

10. D.M. Markley and K.V. McNamara.. "Economic and Fiscal Impacts of a Business Incubator. Economic Development," Quarterly: The Journal of American Economie Revitalization, Vol. 9 (3), 1995, pp. 275-277.

11. Wim Wiewel, Michael Tietz, and Robert Giloth. "The Economie Development of Neighborhoods and Localities," in Richard Bingham and Robert Meir (eds.). Theories of Local Economic Development. (Newbury Park, CA: Sage Publications, Inc., 1993), pp. 80-89.

12. William Bowen, Herbert Rubin, and Edward Hill. "Management of Economic Development," in Richard Bingham et al. (eds.), Managing Local Government: Public Administration in Practice. (Newbury Park, CA: Sage Publications, 1991.) pp. 204-210.

13. O. Aworuwa. Report on the City of Benton Harbor: Economic Trends from 1970 to 1984. Unpublished mimeograph, 1985.

14. Wim Wiewel, Michael Tietz, and Robert Giloth. "The Economic Development of Neighborhoods and Localities," in Bingham, Richard and Meir, Robert (eds.). Theories of Local Economic Development. (Newbury Park, CA: Sage Publications, Inc., 1993.) pp. 92-93.

15. H.A. Goldstein and M.I. Luger. "Theory and Practice in High-Tech Economic Development," in Richard Bingham and Robert Meir (eds.). Theories of Local Economic Development. (Newbury Park, CA: Sage Publications, Inc.1993.) pp. 158-160.

16. D.M. Markley and K. V. McNamara. "Economic and Fiscal Impacts of a Business Incubator. Economic Development," Quarterly: The Journal of American Economic Revitalization, Vol. 9 (3), 1995.

17. Ibid., p. 273

18. Fair and Favero. Local Economic Development: A Strategic Approach Handbook (2nd Edition). (International City Management Association, Washington, DC, 1984.)

19. O. Aworuwa. "Economic Empowerment of Distressed Communities: The Challenge for Economic Development Professionals in the 1990s and Beyond". Researcher, Vol. XV, No. 1, Spring/Summer, 1993.

20. J.M. Mbaku. "Making the State Relevant to African Societies," in J.M. Mbaku. (ed.). Preparing Africa for the Twenty-First Centiury: Strategies for Peaceful Coexistence and Sustainable Development. (Aldershot, UK: Ashgate, 1999.) pp. 299-333.

By Olorundare E. Aworuwa*

*Dr. Olorundare E. Aworuwa is Assistance Professor in the Department of Mass Communications at Jackson State University, P.O. Box 18590, Jackson, Mississippi 39217-0990.

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