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Several recent socioeconomic and demographic trends threaten the future health and competitiveness of North Carolina and other states. [1] Despite enormous economic growth and wealth generation, the gap between the haves and the have-nots in North Carolina widened during the 1990s. This continues a three-decade national trend of growing inequality.[2]

Preliminary analyses of the 2000 census results reveal that this trend is undergirded by an increasing “balkanization” of the U.S. population (that is, an increasing division of Americans into smaller groups).[3] Over the past decade, the state and the nation have both become racially and ethnically more diverse, but only as a whole. Confirming the findings of earlier research, the 2000 census indicates that non-Hispanic whites are increasingly concentrated in economically prosperous communities, while blacks and other people of color are clustered for the most part in declining or economically marginal communities.[4]

These two developments—growing inequality and population balkanization —have had a devastating impact on the youth of North Carolina and the nation. Segregation along racial lines in the public schools has worsened during the 1990s, paralleling growing disparities in black-white achievement.[5]

The two developments also have exacerbated race relations in the nation and the state. Throughout the 1990s— especially in U.S. cities that were left behind in the economic boom but experienced population growth fueled by immigration—tensions, conflicts, and confrontations with racial or ethnic overtones have triggered protest demonstrations and civil unrest.[6] In North Carolina, which became a major magnet for immigration during the 1990s, the schisms to date have been limited to isolated incidents of violence against immigrant newcomers and hostile verbal exchanges between them and the state’s long-term white and black residents over access to housing, jobs, and other scarce resources. However, if history serves as an accurate barometer, the situation might worsen in the current statewide economic downturn.[7]

To thrive and prosper in the new economy, North Carolina municipalities, particularly those with substantial populations in economic distress, will have to adapt to the federal government’s recent policy shift toward letting free enterprise solve pressing urban and rural problems.[8] They also will have to adjust to the philanthropic community’s increasing preference for funding entrepreneurship and socially responsible undertakings.[9]

In view of these dramatic policy shifts, I propose in this article a conceptual model for understanding, evaluating, and enhancing community health and competitiveness in the twenty-first century’s knowledge-based economy. The model identifies six types of “community capital”—polity, physical, financial, human, cultural, and social—that North Carolina communities will have to develop in order to thrive locally in the global economy.[10]

In the following sections, I describe the six sources of capital and present manifestations of each in selected highly competitive communities of the new economy. I also discuss what North Carolina municipalities must do to develop the full complement of capital assets that are known to exist in highly competitive communities. Finally, I outline a three-step action plan that North Carolina municipal leaders can pursue to improve the health and the competitiveness of their communities in the marketplace of the new economy.

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About the Author

James H. Johnson, Jr. is the William Rand Kenan, Jr. Distinguished Professor of Strategy and Entrepreneurship in the Kenan-Flagler Business School and Director of the Urban Investment Strategies Center in the Frank Hawkins Kenan Institute of Private Enterprise at UNC-Chapel Hill.

The Kenan Institute fosters mutual understanding between members of the private sector, the academic community, and their government, and to encourage cooperative efforts among these groups.

The Kenan Institute serves as a national center for scholarly research, joint exploration of issues, and course development with the principal theme of preservation, encouragement, and understanding of private enterprise.

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