Poverty often hides in plain sight. That much we learned when Hurricane Katrina slammed into New Orleans and focused national attention on that city's economically downtrodden African-American community. But the data don't lie. While it often seems we are surrounded by McMansions and Hummers, poverty in this country has grown for four years running. Recent statistics show that many of the worst-hit cities have been here in the industrial heartland. This is troubling for Chicago, because so much of the local economy is tied to the region's health. What to do?

In the previous two Sunday editions, the Tribune examined how persistent job loss has devastated Detroit, how isolationism has done much the same with Rockford and how those cities have struggled, with varying degrees of success, to respond.

Milwaukee is exploring something different. The nation's erstwhile beer capital has become a laboratory for a contrarian idea that is quickly gaining currency in economic development circles. The idea is this: Depressed inner-city communities have a lot more economic potential than initially meets the eye. Like deep-value stocks, they are held down by perception that exaggerates reality. What they require is imagination and a healthy injection of capital.

Call it opportunity hiding in plain sight.


When Wal-Mart called him in 1999, it was an education for Robert Schmidt.

The retail giant had its eye on one of Milwaukee's most decrepit shopping malls and wanted Schmidt's real estate company to redevelop it with Wal-Mart as the anchor tenant.

To the average Milwaukean, the nearly vacant Capitol Court Shopping Center had become a symbol of urban blight. It sat like a wart near one of Milwaukee's most poverty-stricken inner-city neighborhoods and was a magnet for teens looking to hang out and make trouble.

But in faraway Bentonville, Ark., the data spoke unemotionally. What Wal-Mart saw was that 222,000 people lived within three miles of Capitol Court, and they had a median household income of $38,000. The richest of Milwaukee's mostly white suburbs had per capita income almost twice that high. But they couldn't touch the inner city in terms of concentrated spending power.

"The mall had tainted people's perception of the surrounding neighborhood and that just wasn't fair," said Maureen Goetz, development coordinator for Schmidt's company, Boulder Venture.

"People were pretty skeptical at the front end," Schmidt said.

For Milwaukee, overcoming skepticism about its blighted inner city is becoming its last, best hope of arresting an economic slide that has been going on for decades.

Ever since proud, old manufacturers like Schlitz Brewing and Allis-Chalmers began to wither in the 1970s and 80s, an exodus of high-paying jobs has hollowed out the community, shrinking the middle class and creating a yawning gap between rich and poor.

"Laverne and Shirley don't live here anymore," declares Mayor Tom Barrett, referring to the staunchly middle class 1970s-era sitcom characters. Gone are the days when "anyone with a strong back and a good alarm clock" could support a family in Milwaukee's inner core, he said.

While the city gets raves for Summerfest, its spectacular new art museum and the bustling redevelopment of its historic Third Ward area, a recent series in the Milwaukee Journal Sentinel documented a more disturbing trend. Once one of the very best places in America for a black family to earn a living, Milwaukee is now one of the worst. Census data show that the city's poverty rate ranks among the highest in the country, especially among its children.

Astoundingly, almost 60 percent of the city's black males over age 16 lack a full-time job.

To civic leaders like local attorney James Connelly, this is evidence that Milwaukee is slowly "dying of congestive heart failure." But he and others also see a rich opportunity to implement a redevelopment strategy based on free-market incentives, not the usual government handouts.

What they're counting on is just the sort of calculus Wal-Mart used at Capitol Court--a new recognition among marketers, retailers and big money investors that in an aging economy with mature markets, the inner cities are increasingly where the action is.

The buzzword in financial circles is "EDM" or "Emerging Domestic Market." What it means is that the inner cities are both underserved as consumer markets and underutilized as sources of eager workers and energetic entrepreneurs.