While investments in high technology get a lot of attention, a
number of these new state government investment strategies are also
looking to revive areas devastated by deindustrialization and chronic
poverty. Around the world, "emerging markets" are hotspots for
investment, so many states are treating these poor domestic areas as
"domestic emerging markets" that just need a bit of patient capital to
Back in 2000, California State Treasurer Phil Angelides laid out the philosophy that undergirds the new wave of tough-minded investment in "The Double Bottom-Line: Investing in California's Emerging Markets ."
Angelides compared "the ease with which billions of dollars of American
capital have flowed during the past decade to risky and highly volatile
developing countries across the globe and the difficulties faced by Californiaï¿½s
own underdeveloped communities as they struggle to attract desperately
needed capital investment to fuel their resurgence." But as the state
has increased investments in California communities needing investment, he emphasized the hard-headed investment principles for using public funds:
Community reinvestment initiatives should be structured
to contribute to community revitalization while achieving market
[T]o build a long-term community reinvestment dynamic, these investments must be viewed and approached as primary opportunities offering strong returns ï¿½ not as investments of lesser worth agreed to as a matter of politics.
This last point emphasizes the idea that whether the investments are
in high technology or in urban revitalization, these state investments
deliver economic returns that are measurable on the financial
bottom-line. One study 
found that eight large public pension funds have more than $3 billion
invested in urban development projects ï¿½ and have helped leverage
private equity partners that have validated their economic returns.
This state government and public pension investment is part of a
broader trend of expanding investments in a range of community-based
investment vehicles, from Community Development Banks to Community
Venture Capital Funds, all designed to increase capital access in
communities often starved of the financial capital needed to revive
local businesses. The Social Investment Forum 
highlights the quiet revolution as the assets of community investment
institutions have grown from $4 billion in 1995 to $19.6 billion in
2005, a growth of 388 percent in a decade.
In a multi-trillion dollar economy, even these amounts haven't been
enough to revive all of the communities undermined by
deindustrialization and poverty, but their initial success and growth
point the way towards where public policy should be heading.
More Resources