The right step.

In addressing the approaches business may take to help regenerate urban America, we deviate only slightly from our mission to help CEOs meet competitive challenges. That business cannot long prosper in a dysfunctional socio-political environment is inescapable. The question is: What can political leaders do to make a material difference? What can CEOs do?

We take a somewhat different approach to reporting on this issue's roundtable. In addition to the CEO dialogue with Jersey City Mayor Bret Schundler, who is among the most progressive mayors nationwide, we talk with two big-city mayors, Rudy Giuliani of New York and Ed Rendell of Philadelphia.

All three cities have suffered terribly from the familiar ills of crime, drugs, and--as business flees to the suburbs--eroding tax bases. All three mayors, too, have formulated innovative responses to such urban pathologies, fighting along the way entrenched bureaucracies and vested interests. Rendell has ruthlessly slashed the cost of government. Giuliani, formerly one of the nation's most ferocious prosecutors, is attempting to crack down on crime, reasoning that safety is prerequisite to a sound economy.

Yes, cities have been mismanaged. But better or more efficient management alone will do little to change things. Leaders must work out a new role for local government, one that is consistent with market realities and the expectations of their constituents. For example, many politicians act as if the globalization of markets and the revolution in communications technology hasn't changed their job. Playing with local tax rates affecting companies within 50 miles of a state or city boundary is meaningless if the same company can produce in another country or another continent.

Several months ago, I spoke with the chief executive of a subsidiary of a leading New York financial-services company. Most of the unit's business is international. I asked this native--though no longer resident--New Yorker, whose firm employs some 25,000 people in lower Manhattan, a simple question. If asked to make the decision again, would he elect to locate the business in New York? He paused and said, "I'd have to think hard about being here."

There is a great conceit in believing, because of New York's size, that its problems are unique, and that it can learn little from the experiences of other cities. Linda Morrison, director of Philadelphia's competitive contracting program, tells of a visit to the city last year by Peter Vallone, the president of New York's City Council, and other council members. The contingent traveled south to explore privatization strategies for Philadelphia's services.

"We explained carefully that our purpose was to introduce competition--not to take jobs away from city employees," Morrison says. "On occasion, our employees reorganized themselves in a way that allowed them to underbid private contractors. But I sensed that Vallone and the others weren't really listening to us. They returned to New York and issued a press release the day after saying Philadelphia's experiment was anti-union and inapplicable to New York."

At the close of our roundtable discussion, ADP's Josh Weston poses a question: What are the next steps for chief executives? How can they make better use of the business/government coalitions to which they belong? A useful start would be for CEOs to pose one question at the outset of their next meeting with politicians: "Do you accept that the world has fundamentally changed?"

If the answer is "no," you may as well close your notepad and leave the meeting. Your next step is to help elect somebody who will answer "yes."