The Midwesterner: Blogging the Global Midwest

The Future of Manufacturing

American manufacturing is bigger than ever. But if we expect manufacturing to support the U.S. and Midwest economies, forget it. 

These two statements sound contradictory, but they're facts that need to guide some of our thinking as we plot the Midwest's post-recession future.

The contradiction was laid out in a fascinating article by William Strauss, senior economist at the Federal Reserve Bank of Chicago, presented in the invaluable blog run by Bill Testa, the Chicago Fed's vice president and director of regional programs. Strauss' article is entitled "Is U.S. Manufacturing Disappearing?" His answer is no, but the real interest is in the details.

Despite Blago, Chicago Soars

A couple of new rankings of global cities are just out, and Chicago scores big. For Chicagoans swimming in the swamp of the Blagojevich trial, the idea that their tarnished town might be leading the world's way into the 21st century is cause for astonishment, even derision. But these rankings aren't frivolous and a look at them might tell us something not only about Chicago but about what it takes to be a global city.

The first listing was done by A.T. Kearney and The Chicago Council on Global Affairs and is just published in Foreign Policy magazine. The top five cities are the ones you'd expect -- New York first, then London, Tokyo, Paris and Hong Kong, the true big apples among global cities. But Chicago ranks next, in sixth place among all the world's cities, ahead of Los Angeles, Singapore, Seoul and Shanghai. You can see the bare-bones listing in Foreign Policy. Kearney and the Council will publish a more detailed report in early September, showing why we ranked the cities as we did and comparing this year's lineup to the 2008 one.

Kearney, like the Chicago Council, is based in Chicago, so some hometown boosterism could be suspected here. But the other ranking comes from PricewaterhouseCoopers, the London-based accounting and consulting firm, and the Partnership for New York City, and they seem to like Chicago, too.

All Aboard

Since we're talking about Germany (see previous post), it's a good time to look at the German high speed rail system and see whether, in this area too, that country has something to teach the Midwest.

Germany and the Midwest are roughly the same size. Both are mostly flat. Germany has more people but both areas -- especially the Midwest east of the Mississippi -- are densely populated.

But in rail, they couldn't be more different. Germany has its Intercity-Express (ICE) network of high-speed trains, many of them running up to 200 miles per hour on tracks so smooth that the wine in your glass barely jiggles as you race through the countryside. The Midwest, like the rest of the United States, has Amtrak. If you haven't ridden Amtrak, be assured that all the awful stories you hear about it are true.

For the Midwest, there's got to be a better way and copying the German ICE system might be it. Many Midwesterners want to see this happen -- the Midwest High Speed Rail Association is the best source. All this was discussed at a meeting in Omaha this summer. One result was a paper from the German company, Siemens, called "High-Speed Trains Running on Freight Line Tracks: The Experience of Germany."

Another Way To Work

For Midwesterners viewing the post-industrial collapse of their region's economy, one big question has to be: how do the Germans do it?  

Germany has all the ingredients of a Midwestern-style economic catastrophe -- a reliance on heavy industry, big health and pension costs, especially unionized workers. Partly because of the unions, Germany has those "rigid labor markets" that have convinced a generation of American economists that the German economy is doomed to obsolescence.

So, once again: how do the Germans do it? German industry is booming and, unlike American industry, it's still in Germany. The global recession, being global, has hit Germany, too, but unemployment there now is 7.6 percent -- not great, but a lot better than the American rate of 9.5 percent. Unemployment among young people aged 16 to 24 in Germany is 10.5 percent. Again, not great. But the U.S. youth jobless rate is 26 percent, which amounts to the economic massacre of a generation.

German labor costs and social costs -- all those pension and health programs -- are high. Its currency, the euro, also is high. This means it should be uncompetitive on world markets, leading to a big trade deficit -- right? Wrong. Germany, as usual, runs a trade surplus and that surplus ($98.7 billion so far this year) is actually up 26% over last year. Meanwhile, the United States, as everybody knows, runs a trade deficit and that deficit in the first five months of this year is up 37%, to $197 billion, over last year. (Don't blame it on on China: $12 billion of that U.S. deficit is with supposedly uncompetitive Germany.)

So yet once again: how do the Germans do it? A new book just out tries to tell how. The answer is not that the German succeed despite their heavy industry, their high costs and their unions. It's that they succeed just because of all those supposed handicaps, including unions.

Race and Racism in the Midwest

The Shirley Sherrod affair has ignited new charges of racism from left and right and raised the issue of whether -- and to what degree -- racism survives in a nation led by an African-American president. Let's take this issue and bring it home. Does racism survive here in the Midwest which is, after all, Barack Obama's home turf?

Well, sure. Racism survives in the Midwest, just as it does in the rest of the country (and, as any traveler knows, around the world). The real question is where it survives, and to what degree, and is it affecting the way people think and vote?

Any report on this has to be pretty impressionistic. If there any accurate studies on Midwestern racism, I don't know about them. But I've been traveling the Midwest constantly for several years now and have tried to take the region's pulse on racism, as well as on other issues. So let me take an admittedly imperfect stab at this.