Chairman's Corner

Chairman’s Corner: October 2005

October 10, 2005

Katrina’s Case For Smarter Investment

by Mario Morino, Co-founder of VPP and Carol Thompson Cole, President and CEO

Editor’s note: Katrina exposed to the world the consequences of America’s decades-long failure to invest in critical physical and social infrastructure. But the problem is not limited to the Gulf states. In the piece below, VPP Chairman Mario Morino and Managing Partner Carol Thompson Cole discuss this national failure, and the importance of new thinking and investing in more effective ways.

Long before Katrina hit, a tragedy of immense proportions had already hit New Orleans and hundreds of other urban centers and rural hamlets across America. More than 35 million people in America are poor, tens of millions more live paycheck to paycheck, and, for too many of them, the American dream that historically has driven progress and has given parents hope for their children’s future is no longer there.

While Katrina exposed to the world America’s growing class and racial problems, she also blew the covers off our country’s decades-long failure to invest adequately and effectively in physical and social infrastructure at all levels. The result: weakened governments, underfunded services, failing homeland defenses, inadequate education and healthcare systems, and divided communities in too many cities and towns. But a strong, robust infrastructure ensures that our nation, organizations, systems, and people have the capacity to get the most-needed things done well, producing tangible outcomes, and creating real value in return. It is the foundation for our economy and quality of life. It serves as the building block for effective homeland security that should protect us and help us recover from terrorism, natural disasters, and epidemics. And, it is at the core of our economic competitiveness in a radically changing global economy. But our prosperity and the future of our children are severely threatened because we have failed for decades to invest in critical infrastructure, and the investments we have made have not been as effective in producing the much needed results.

While the President has committed to rebuilding the Gulf Coast with the largest reconstruction project in American history, our country’s problems are much bigger and much deeper than that. Across our nation, our physical and social infrastructure has been allowed to erode and weaken—from bridges and water treatment systems, to public education and healthcare, and now all too obviously, to investments that ensure our personal safety. Just as in business, one can stay competitive only so long by continuing to cut costs and not investing to build for the future. Time runs out, the business disappears, and its stakeholders lose their investments. This is one fate we cannot allow to happen to our country.

In the wake of 9/11 and the devastation of Katrina, the real question facing us is: Will we proactively marshal the political will and the resources necessary to reinvest smarter and more effectively in infrastructure at all levels, starting now? Or will we continue the neglect and, instead, be short-term and reactionary, dealing piecemeal with major events as they unfold? And if we don’t act on a larger scale now, how will we handle a bio-terrorism attack, a 9.0 earthquake, or a global pandemic?

The infrastructure so crucial to our country’s future has at least four parts—homeland defense, physical plant, community and civic capacity, and social fabric. The first is our defense on our own shores, which spans everything from our emergency and recovery systems to how we protect our borders, power grids, water systems, e-commerce, and ports. As Katrina demonstrated, much more needs to be done to face the natural and man-made threats of the 21st century.

Physical plant, what used to be called “public goods”—highways, bridges, sewer/water plants, transportation systems, communications networks, etc—is key to our everyday existence. When they break down, as we witnessed with Katrina, we come to a chilling, even killing, shutdown.

Next is community and civic capacity—educational and medical institutions; governing bodies and court systems; and public services through government agencies, nonprofit institutions, and firms serving public needs. Although community and civic capacity affects everyone, as does homeland defense and physical plant, it impacts some more than others because the social safety net is found here. If the government does not allocate enough money for low-income housing, not many bankers, lawyers, and CEOs will suffer. Rather, thousands of low-income families will be forced to do without, or turn to shelters of last resort. Similar problems occur with cuts in healthcare, education grants, childcare, and income subsidies. But shortchanging these investments and not being effective with those we’ve already made have a cumulative effect of weakening our economic competitiveness, limiting opportunities for many to climb to the next rung of our socio-economic ladder, and cementing a permanent underclass.

The final element of infrastructure is the social fabric, the connective tissue that weaves our communities together. This starts with leadership, from our prominent civic leaders to the activist who rallies a neighborhood. It also includes such “old-fashioned” ideas as unifying around shared values, civic engagement, public spiritedness, cooperation, common purpose, and, yes, even patriotism. Extreme partisanship, racial and ethnic conflict, and the growing gap in wealth and income that threatens to cement a permanent underclass, all erode national unity, weaken economic competitiveness, undermine our ability to get things done, and, in the end, perpetuate the chronic problems facing working class and low-income families.

Infrastructure gaps not only result in lost opportunities for millions of people individually, but collectively, a lost opportunity to improve our society. The tragedy in New Orleans laid bare these failures, but these same problems lie just below the surface in just about every major city and rural outpost.

Fixing this investment problem requires us to be smarter and more effective at all levels. That means a different way of thinking and investing by governments, corporations, nonprofits, and individuals. And there are groups “on the ground” learning what it takes to invest and build for the long term. Our organization, Venture Philanthropy Partners, and our nonprofit investment partners are doing that right here in our National Capital Region so the examples of success are within a commute for key policymakers. We can show them what happens when you apply new ways of thinking and acting to the traditional work of nonprofit organizations, which are vital components of community capacity and social fabric, and are a growing part of government service delivery. We believe our experience can be adapted and expanded to address the challenges we now face nationally, regionally, and in the Gulf states especially.

Certainly, rebuilding and fortifying our country’s infrastructure will cost a lot of money and take a lot of time to do it right. But the investment issue goes beyond just more money. Our experience shows there are better, more effective ways to allocate this money to those leaders and organizations having the greatest impact and to provide them the strategic assistance necessary to succeed. Skilled managers and staff, supported by effective systems and held accountable for their performance, are essential to ensure that the monies invested are applied for maximum gain to society.

In addition, real change entails new thinking, rigorous analysis, compelling leadership, strong management, clear vision, fiscal integrity, and quality products and services—all delivered in a way that understands and respects key stakeholders. The mechanisms and leadership must be in place to ensure that capital flows to the most important areas, and not to favored constituencies or special interests. And, there has to be the management on the ground to see that money and human capital are deployed in the most effective way to bring about real, tangible outcomes for people.

Finally, everyone has a role to play. Certainly, government will be the largest actor, but it cannot and should not do it all, because the things we do together make all of us stronger. Government has to do its work smarter and more effectively. But corporations, foundations, philanthropists, nonprofits, small business, and individuals have a crucial role to play in mobilizing capital, manpower, expertise, ingenuity, and volunteerism, demonstrating leadership at all levels and setting a new expectation for effectiveness. This is also a defining moment for corporate America and the private investor to realize that real wealth and long-term value can come from investing—wisely and effectively—in our country’s infrastructure.

As daunting as fixing this infrastructure problem may be, we have a fundamental moral and patriotic duty to do so. Why? Because with the challenges our country faces today—natural disasters, terrorism, globalization, and more—we need every single set of hands, every good mind, and every resource we have available in this fight. America can’t afford to abandon to poverty and lack of opportunity the many future doctors, scientists, mathematicians, or political leaders, as well as mechanics, carpenters, and healthcare workers who live in our nation’s urban centers and rural areas. Our nation can continue the status quo, further widening the political and ideological divides that balkanize our country and further weakening our competitiveness. Or, we can set a different course for our country, one that does much more to invest in our future resources—the children and youth of today—and the infrastructure necessary to protect our country and help give all people the opportunity to carry on the American dream for themselves and their children.

But we can’t keep chanting the mantra of “do more with less.” We must become partisans of the “common good,” investing in and building strong, high-performing organizations serving the public interest, whether they are government, nonprofit, or private. Post-Katrina, we have an opportunity to set a different course for our country—one that invests in American’s traditional strengths of individual opportunity, community capacity and social fabric, and the future of our children and youth. These investments, if done thoughtfully and then strategically supported, will yield meaningful economic and social benefits for decades to come.

The real issue is not whether we do this, but can we afford not to?