Few US states were hit harder than Michigan when the automobile industry began to look for cheaper places to operate from the 1960s onwards. Largely forgotten among stories of urban decay in Michigan locations such as Detroit is the city of Kalamazoo, where a concept called 'community capitalism' could be bearing fruit.

Created by Ron Kitchens, chief executive officer at the development body Southwest Michigan First, the basic premise of community capitalism is that creating growth is both a philanthropic and a capitalist process. Key areas for investment are education and infrastructure, with a heavy focus placed on human development, the nurturing of talent and the viability of the community’s government and economy. Furthermore, the concept specifies that economies must be in a constant state of change, looking for new industries and opportunities, so that they do not become overly reliant on one industry. This is a lesson that resonates especially well in Michigan, where the auto industry was previously so dominant. It is not enough simply to cut taxes and red tape and to offer exceptional deals to bring in companies, according to the theory.

Economic revitalisation

Mr Kitchens has encapsulated this theory in an easily readable 110-page book called Community Capitalism: Lessons from Kalamazoo and Beyond. In his book he writes: “It’s an economic development strategy that rests on a set of initiatives, partnerships and public-private efforts to revitalise the local economy by tapping into existing resources. Rather than a centrally planned group of policies, the efforts have grown up organically, taken shape and coherence and fed upon one another.”

The results of this effort have so far been mixed. Unemployment in Kalamazoo was a whopping 14.6% in April 2010, well above the state and national average. However, prior to the global financial crisis, unemployment had been on the decline and was far lower, at only 5.2% in December 2007. Poverty rates are also problematic. In 1999, 24.3% of the city's population was below the poverty level, and in more recent years this number has been above 30%. According to the Center for Michigan, Kalamazoo's economic output grew by 9% in the years from 2001 to 2008, but only by 2% in 2005 to 2008.

Yet, at the same time, enrolment in universities in the city is at an all-time high, thanks to more investment in education and anonymous donors who said they would pay the university tuition fees of every graduate from Kalamazoo’s public schools. Crime is also down considerably as a long-term trend, even though it has grown slightly in the past year.

Generating interest

The simple and approachable doctrine of community capitalism is generating interest. Mr Kitchens says that close to 100 other US cities and districts have been in contact for more information about his organisation and project. It is far from certain whether community capitalism will work, yet its basic tenets are making a lot of sense to other city municipalities, particularly smaller places such as Kalamazoo that do not have a large budget. As such, one of the biggest issues for Mr Kitchens’ organisation and theory is that it is highly dependent on donors. Southwest Michigan First is entirely privately funded and non-profit. Some cities are asking local companies for donations, while others have been pondering legalising gambling to provide them with the necessary revenue.

While Mr Kitchens remains focused on his efforts in south-west Michigan, he has no doubts that community capitalism can be applied to other parts of the world. He says: “The model can be easily replicated and we believe that if an economy is actively nurtured, be it small or large, it can thrive.”

Mr Kitchens' future also appears to be in his current role. He dabbled in politics before taking on the job in Michigan, but he has little interest in a return to government, saying he can be more effective in the private sector.