When the American Federation of Teachers met in Philadelphia Feb. 22, they asked Sociology Professor Elijah Anderson, Charles and William L. Day professor of social science and director of the Philadelphia Ethnography Project here at Penn, to deliver the keynote address. Anderson has written a synopsis of his speech for the Compass.

America's urban centers are being transformed from centers of manufacturing to centers of service and high technology. At the same time, the country's corporations are sending their low-skill jobs to foreign countries--to Singapore, Taiwan, India and Mexico. Job opportunities at home go to satellite cities like King of Prussia. Over the last 15 years, for example, Philadelphia has lost 102,500 jobs; manufacturing has declined by 53 percent.

While the jobs have fled, the jobless residents--large numbers of whom are African Americans--remain, alienated and bereft of hope. Many of these inner-city people are not adjusting effectively to the new economic reality. Unable to understand why they can no longer make ends meet, some of these people turn to the irregular economy.

The welfare system, originally conceived as a safety net to deal with these dislocations, is being slashed with other social programs at the very time it's needed most.

The ghetto economy is delicately balanced between income from stable jobs, welfare and underground activities. The most desperate resort to the illegal cottage industries of drug dealing, prostitution and street crime. As one young drug dealer put it, "Why is it so hard for me to get a job but so easy for me to sell drugs?"

In addition, in certain impoverished communities, a bartering system is in evidence, with favors being exchanged rather than cash. For example, one individual will fix his neighbor's car on the weekend, or help a person paint his steps, or do a plumbing job for someone, but he will take no money for it. Rather, he will wait for the person to pay him back with a favor in the future.

The welfare system is another way of filling the gap between need and opportunity. What will happen when people lose this resource?

In the neighborhoods that will be hardest hit, there is a widespread sense of impending doom. People talk about when the welfare cuts hit, and the general feeling is that the streets will become unusable. People believe that criminals will become even more creative, that drug dealers will prevail and that even bars on windows won't matter.

"There ain't no jobs," people say. "Where the jobs at?" Even though some people do abuse welfare, they say, that's no reason to cut everybody off.

Opportunities in the irregular economy arise where few or none exist in the regular one, and young, inner-city black men are often the casualties. Those who sell crack cocaine are doing so partly as a response to the consumer economy that dangles trinkets and trophies before them on TV, but more profoundly in order to procure money for food, for rent, for the necessities of survival.

It is important to point out that it is not just inner-city residents who are likely to be victimized. There is a spill-over effect into areas surrounding distressed inner-city neighborhoods so that adjacent middle-class areas as well as downtown business districts become targets of desperate people looking for someone to rob or a home to burglarize.

One consequence is that one in three black men between the ages of 20 and 30 is in the hands of the criminal justice system--in jail, on probation, or awaiting adjudication--an amazing statistic. If one-third of white men between 20 and 30 were similarly involved with the criminal justice system, it would be viewed as a national crisis.

A sentencing differential also exists in convictions for crack cocaine versus powder cocaine: Conviction for crack offenses results in more jail time than conviction for powder offenses. The differential disproportionately affects young black men who, for lack of a better way to make it economically, sometimes end up in the drug trade.

Most people in inner-city communities are decent, hardworking, churchgoing and law-abiding. But, given the fact that so many of the most desperate young people have turned to the underground economy, even those who eschew it often become victimized--personally and collectively. Their communities experience high levels of crime and street violence, including shoot-outs over drug turf.

Many in the wider community are likely to associate these developments with the community's self-destruction. Some are inclined to lump the diverse elements of the black community into a single negative stereotype, so that among some whites, black skin color suffices to bring down the full weight of the stereotype onto any black person they encounter. In these circumstances, not only does the black community get a bad name, but the people themselves--particularly young males--become demonized, thus encouraging racial polarization throughout American society.

This further exacerbates the unemployability of such young people. Employers will sometimes discriminate against whole census tracts or zip codes because they cannot or will not distinguish even the decent people from those places.

Many employers who refuse to hire young black males may be prejudiced in a simplistic and pragmatic manner, feeling strongly that the odds are better that a black employee will rob their store than that a white or immigrant will, while in truth, few job applicants of any color are likely to rob the store.

This situation, at times, pits blacks against new immigrants who are similarly poor. In addition, immigrants, notably Koreans, who are able to establish small businesses in the inner city, aren't readily accepted and may even become the focus of tension.

The effect on young inner-city people is sometimes profound alienation, resulting in resignation and bitterness that sometimes results in criminal activity.

Hence, the structural economic changes have created much despair, exacerbating racial, class and ethnic polarization, contributing indirectly to crime, victimization and an atmosphere of mutual hostility in too many local neighborhoods.

Too often, though, American society has dealt with the crime and social discord resulting from joblessness by building prisons.

In fact, prisons have become a growth industry in a way that further hampers black-white relations. Many of these new prisons are located in rural, largely white areas where they provide an important source of income by employing many local people. These residents then acquire a vested interest in maintaining a prison system that disproportionately incarcerates blacks and Hispanics.

To deal with this situation, both government and society must rethink their policies. Government should acknowledge the effects on individuals of the structural changes taking place in our economy and aid people in making the needed transitions.

Young people, in particular, should be educated and trained for future jobs. This requires enriching the schools that the children of working people attend, including placing the best teachers in the school system in inner-city schools.

When the powers that be blame the schools without considering the environments in which such schools operate, they can appear disingenuous.

The world of the streets is often a world that parents as well as teachers may appreciate very little. Yet it is a world that is very much a part of the lives of young people who live in the urban ghetto. It is a world exacerbated by joblessness and the "structural" poverty brought on by increasing de-industrialization and the emergence of high technology. Not to attend to these problems is to risk social and political turmoil.

The new economy is here to stay; the factories are gone for good. Many people who have become redundant must be taught new skills. The creation of jobs, job-training programs and other social services that will help people weather the transition from the old to the new economy should be a government priority of the highest order.

We need to rethink the criminal justice system and to confront the realities of the ongoing economic transition, particularly the fact that people turn to the underground economy when the regular economy fails them.

In short, society needs to reclaim the human capital that is being neglected in inner-city communities--capital that could be developed in the transition from a manufacturing economy to one based on services and high-tech, and effective public schools must be treated as an extremely important part of this effort.