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Wednesday, May 19, 2010


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Someone should make a matrix of "things that are similar" and "things that are different" for various Midwest places. Then you can look at policies the same: what are the things we should do in common and what are the things we should pursue on our own. I've always said that your prescriptions around areas for collaboration are all items that should be implemented. Maybe there are even more we could add to the list. Then there are other things people need to do to differentiate themselves in the marketplace.

For all its good intentions, my fear is that the report will stimulate a largely meaningless debate about whether or not the seven new city typologolies it identifies are more meaningful that the megaregions concept advanced by Richard Florida and others. Who cares?

Meantime, the elephant in the room is globalism. More importantly, its the assumption that globalism — the force that's been reaking havoc for the past 30 years on Midwest cities and the two-thirds of Midwestern workers who are not members of the "creative class" — was inevitable. I say not. It's an outcome that has been facilitated by Federal trade policies, cheap energy and other direct investments (including our military) that make possible corporations' ability to offshore work to countries with early industrial age working conditions and environmental regulations. Somehow I think Chairman Mao would spin in his grave to know that that China — the last major "people's republic" — had become the ultimate union busting tool of western industrialists.

Perhaps the most devasting aspect is the globalism has been allowed to have a free reign without a backup plan in place those who would inevitably be the hardest hit. To me, it's analgous to the impacts of urban renewal 60 years — massivley invasive strategies that destroyed entire communities — but this time without the follow up investment that created the inner city freeways and public housing projects, however awful they were.

Banks too big to fail that made unwise business decisions got a trillion and half dollars thrown their way to get themselves righted. Formerly prosperous Midwestern cities, however, have apparently been deemed not worth saving through any unified action and in fact are being encouraged to "right size" as quickly as possible on their own.

Some may think that it's goes against the grain of American entreprenuership for the Fed to step in and bail out Midwest cities. The reality is this — governments, especially Federal governments — make markets. Government policies and direct investments help to determine who the economic winners and losers will be, and this is true in Europe, China and the good old US of A. This reality has been cast into sharp relief during the recession of the past two years.

Federal market making capabilities cannot explain everything that's gone wrong in the Midwest, but until our political and institutional leaders retake the reigns, it will be very difficult to change the path that we are now on. And that argues strongly for the kind of regional dialogue and coorperation that Mr. Longworth advocates.

Carl, protectionism (federal trade and industrial policies) would not have saved Midwest jobs or Rust Belt cities.

American consumers just luuuuv those price rollbacks at the yellow starburst and the red bullseye stores, as well as high-quality sedans, front-load washers, and flat-screen TVs. This is especially true of the 2/3 who don't have degrees and aren't in the creative class.

That is an immutable economic force that no amount of federal policy will change.

Richard, this assertion about Indianapolis ("None has taken the hit in the global economy that General Motors, Delphi and Maytag have") has achieved the status of urban legend. I suggest checking the actual history.

When I moved to Indianapolis in 1981, the largest employers were industrial, largely in pharma, automotive and consumer electronics: RCA (3 divisions--Records, Consumer Electronics, and VideoDisc), Eli Lilly, GM (3 divisions--Metal Stamping, Allison Transmission, Allison Engine), Chrysler (two divisions--foundry and alternator/electrical plant), Jenn-Air (upscale appliances; later bought by Maytag), International Harvester (foundry and engine plant; now Navistar and closing next month), Ford, and Western Electric.

All are gone or about to close, except Eli Lilly and the two Allison operations. Gone along with them from Central Indiana are smaller supplier companies in the tool & die, plastic-molding, chemical-blending, metal-forming, wholesale supply and packaging businesses.

That's a huge hit in manufacturing and supporting jobs. Not least among the losses are the well-paid back-office, administrative, managerial and engineering jobs that left with the factories...including the one I moved here for.

Manufacturing job losses have been largely offset by a lot of growth in State government staff (and the accompanying rent-seekers in law, lobbying and trade associations), as well as Wellpoint (everyone's new villain), logistics (FedEx's second-largest hub, which provoked development of a gazillion square feet of distribution warehouses), the convention/tourism/hospitality sectors, and a nascent IT/electronic marketing cluster. Add an NFL team with a very large annual payroll and high average wage of its own (and a lot of players and staff who actually live here all the time).

Add significant growth at the IUPUI/Clarian "meds and eds" complex; IUPUI is Indiana's largest state university campus and houses IU Law, IU Med, Herron School of Art, and the largest graduate program in Public and Environmental Affairs in the US. Several scholars on ROI for urban investments, Greg Lindsey [urban trails/greenways], Mark Rosentraub [stadiums & pro sports], and Craig Johnson & Joyce Man [TIF districts] made their reputations and published while at IUPUI.

You once accused me of making Indy sound like Oz. What it sounds like is a real Midwestern success story, one of painfully losing the traditional manufacturing and moving aggressively to services and more modern jobs. Lansing in particular should be asking "why not us" and wondering how to do the same as Indianapolis, Columbus, and MSP.

Chris, if you would have said to me in 2005 that our Federal government was going to cough up $1.5 trillion to save the banking industry in 2008 and 2009, I would have said you were immutably wrong.

I understand the genie is indeed out of the bottle with globalsim. I also know that other countries like Germany did not let go of their good paying manufacturing jobs so easily.

With the current campaign finance structure it will be very difficult to redirect our government's enormous market making capabilities to once again favor significant wealth creation for our middle class. But the first step towards doing so is to decide that the way things have been in the past are not necessarily the way things have to be in the future. Right now I think fairer trade policies will have to be among the strategies that emerge to address the loss of good paying manufacturing jobs and the overall plight of the middle class.

I think that as our jobless recoveries continue to become ever more jobless, people will begin to pay more attention to folks way smarter than me — like Elizabeth Warren — who are speaking plainly about what's going on with middle class incomes (here's a quote of hers from 2006 and the link, but I encourage you to Google her name and read everything you can about her perspective):


"From the middle-class family perspective, much of this, understandably, looks far less like an opportunity to exercise more financial responsibility, and a good deal more like a frightening acceleration of the wholesale shift of financial risk onto their already overburdened shoulders. The financial fallout has begun, and the political fallout may not be far behind."

Chris, globalization is like suburbanization. Yes, the market forces and value were there. But the way it went down (and is going down) was a choice. Nobody said that we had to delink environmental and labor standards from the WTO process, for example. Nobody forced the US government to spend a trillion dollars bailing out Wall Street instead of investing in the future of the country through things like high speed rail, brownfield remediation, funding Clean Water Act cleanups, worker retraining, etc. I'd have certainly spent a good chunk of that money differently, that's for sure.

Carl, there's a difference between what government intervention can DO and what it can STOP.

Through the industrial age, mature economies have survived only by moving up the value chain. Look at textiles: the mills migrated from England to New England to the US South and then to the Third World; most of the workers didn't move. The apparel makers have followed.

England tried government policy to prevent this shift, by outlawing technology transfer. We know how well that particular "industrial policy" worked. There aren't too many mill workers in England today, but theirs is still a leading economy.

Economists all understand that particular individuals or demographic slices face dislocation during economic transformations and that the individual or collective stories can be horrible.

But consider the social-psychological factors: the most powerful stimulus for individual economic changes (temporary or permanent consumption changes, de-leveraging, relocating, upgrading skills, changing career direction etc.) is economic hardship. In short, the engine of creative destruction sows the seeds of re-construction for individuals.

Further, feeding and maintaining the economic engine (fiscal and monetary policy) is different than trying to steer the ship by picking winners and losers, which would require far more information and skill than exists today. The Soviet central planning system didn't turn out so well. Venezuela's experiment with state control to promote national policy objectives isn't working so well either.

I'm not quite sure why you're introducing the "middle class" and bank bailout arguments here, as they don't seem germane to the rise and fall of metro areas due to a combination of macroeconomic and internal factors.

Chris, the $1.5 trillion is very related to what is going on with cities. Places like New York, Boston, and Chicago benefited HUGELY from the "Greenspan put" and financial market deregulation that clearly went too far.

You do nail it that Indy was always a manufacturing dependent city. It also never was a major white collar employment center in its past. Even in the present day look at Fortune 500 lists and such and you won't find many Indy companies on them. The city was branch plant for white collar too. Eli Lilly was the big exception. There were also a smattering of small insurers (all gone). But certainly nothing like the corporate base of a Chicago or Cincinnati or Pittsburgh.

One theory someone posted on my blog is that Indy, manufacturing dependent though it was, simply didn't lose the sheer quantity of jobs as places like Cleveland and Pittsburgh. That's possible. I'd love to see the stats, particularly focusing on manufacturing job losses not in the metals dependent heartland that really did take a particular wallop, but rather vs. places like Milwaukee, Cincinnati, Louisville, and St. Louis.

I think people beat themselves too much about the decline of various towns and cities throughout the country. Two notes: 1) If building and occupancy were restricted as they are in Europe, many of our "dying" towns would look more vibrant, which would in turn encourage more vibrancy. But that's not going to happen. 2) How many cities does a country NEED? Most countries have only one or at the most two great cities. The U.S. arguably has 3 mega-cities, which as Mr. Longworth notes in the case of Chicago sucks up the energy in its area. It's doubtful there is room or need for more.

Why does the midwest even need a plethora of successful cities?

What is wrong with a few really successful metros, and a bunch of quiet, sleepy towns?

In other words, my point is this: why is it being painted as a problem that Chicago, Minneapolis, Indianopolis, etc are "sucking the midwest's talent dry"? Why does every corner of America have some desire to be some great, powerful economic engine? Clearly the industrial age in America has passed and our nation's new economy is focused on major talent centers instead of the umpteenth factory town down the road.

What's wrong with letting cities be cities, small towns be small towns, and farms to be farms?

I'll tell you why: States. That extra layer of Government that feels entitled to getting its slush fund. Ohio doesn't WANT Chicago to be successful because that doesn't benefit Ohio. Detroit's decline is too bad for Michigan, but why should Indiana care?

That, to me, creates this environment in which every state wants to be rich and powerful, even though it's not really necessary. I would much rather see the United States invest in its most economically successful cities instead of attempting to spread the goodness around as we have for so long.

So my response to Mr. Longworth: Flint and Grand Rapids, Michigan are bleeding talent and population. So what? What, exactly are we clinging to? Why not invest in where the economic activity is currently happening?

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