Will 5G Rescue Detroit?
How the informal economy of Detroit may be able to utilize emerging technology to save itself.
The benefits of new 5G cellular networks are being widely touted by network providers as the most important thing to happen to telecommunications since the cellphone. Some proponents of 6G are taking it up a notch and saying that while 5G will be tremendous, 6G will actually be the most important technological advancement in human history, ever.
This might seem like a tall order, but it’s important to remember that 3G did in fact usher in the app revolution, while 4G went a step further and turned that revolution into global infrastructure. Keeping that in mind, it’s not that difficult to imagine 5G having similar disruptive effects across the planet.
While proponents of 5G, and 6G, are making no effort to downplay expectations, they are not talking about how the technology might actually replace many existing informal networks that currently exist. If this happens, it could allow many small businesses that currently operate in the shadows to enter into the formal economy.
Technology rendering restrictions obsolete
Many people that are bullish about 5G credit the reduced power consumption and low-latency of the new cellular networks as the reason that the technology will usher in an era of sci-fi style future tech that includes such things as remote surgery and self-driving vehicles. 5G is further said to greatly improve the reach and efficiency of cellular networks for smartphones, and may even replace the need for consumer fiber optics for establishing an internet connection.
The replacement of fiber optic cable is where this technology becomes interesting for Detroit, a city where many small businesses currently try to function legitimately, however they are required to engage with the corrupt and criminal elements of the city.
The city of Detroit was once the fourth largest city within the United States and the automotive capital of the world. Today, much of the city is in ruins and it is a hotbed of corruption that has allowed for the informal economy and black markets to flourish (Lendrum et al., 2017).
In Detroit, connectivity is hard to come by, and for many, it is a resource that is unfortunately embedded within corrupt social networks. The only way for many small businesses to access that resource is to engage with the corrupt social network that controls it, thus putting the business and individuals that work for it at personal risk.
Today, 40% percent of the population in Detroit has no access to the internet, while the percentage for school-aged children is 70%. Because of Detroit’s corruption, crime, and rampant poverty, large telecommunications companies simply haven’t invested in the city. As a result, many small businesses and entrepreneurs in Detroit have had to settle for makeshift informal cellular networks, and in many instances, these networks are controlled by criminals and corrupt officials.
While there are some stewards in Detroit who help residents establish connections with neighborhood intranets, their noble efforts are unfortunately quite limited in what resources they can actually provide.
In short, it’s difficult to survive as a small business in Detroit without breaking the law. However, 5G may change that for many businesses that can benefit from a high-speed connection to the internet.
Big telecom as an unlikely hero
Because 5G can be installed with physically smaller or lower cost connection nodes, large telecom companies such as Verizon are finally going to invest in the largely neglected city of Detroit. This much welcome change in infrastructure could be what finally liberates many small businesses from relying on corrupt and criminal social networks, as it may provide them with the ability to directly access the internet on their own.
This is also good news for startups in Detroit
Entrepreneurs are part of social networks, and they transmit information via those networks (Granovetter 1985), and both social capital and legitimacy are established when the information sent from entrepreneurs is in harmony with the values of their social network. It is, therefore, vital for entrepreneurs to conform to the social values and acceptable behaviors of the social network that they exist within, as this is how entrepreneurs establish their own legitimacy (DiMaggio and Powell 1983).
In other words, in order to establish itself as valid and valuable, a small business must fully integrate themselves into the social networks that control the resources that they need to sustain themselves. If they fail to do this, then small businesses risk not having access to those vital resources.
Today, it is near impossible for a small business to be considered legitimate without an online presence, and therefore any business that cannot connect to the internet is at a serious disadvantage. 5G technology in Detroit may finally offer these businesses the ability to connect to their broader social network and establish legitimacy.
Saving small business across America
Small businesses are of vital importance to the economic engine of the United States, and Detroit is just one example where many small businesses have no choice but to function in the shadows.
According to the Small Business and Entrepreneurship Council (SBE), small businesses account for 47% of the total private sector workforce, however, the USA is facing a disturbing trend in the decline of these small businesses.
In 2016, Chief Economist for the SBE Council Raymond Keating stated the following regarding the state of small business in the United States:
“According to various measures of entrepreneurship and business activity, the U.S. has suffered, at best, a dramatic decline in entrepreneurship and in the number of businesses over the past near-decade.”
Even more concerning is that while the small business formal economy is shrinking, the informal economy is growing.
According to the IMF, the informal economy in the USA is at least $1.6 trillion annually, with much of that comprising of small businesses that do not properly register with regulatory agencies or tax authorities, due to their reliance on corrupt social networks. Lack of internet access is forcing many of these small businesses to remain in the shadows.
As both 5G and 6G are being heralded as having the potential to usher in a new age for humanity, economists and policymakers may want to consider the more immediate benefits for society that could come from supporting 5G network infrastructure in neglected cities such as Detroit, as well as across America.