States III: What Can We Do?

The Industrial Age that created the American Midwest is ending. The Global Era that will define its future is beginning. It took decades of industrial growth and investment to make the Midwest the economic powerhouse it once was. It's taken three or four more decades, from the 1960s on, to humble the Midwest and turn it into the economic backwater it is now.

In other words, the Midwest's problems didn't arise yesterday and they won't be solved tomorrow. But enough Midwesterners recognize the depth of these problems that it's not too soon to start thinking about solutions. The Global Age will be around for a century. If it took decades to make us the way we are, it will take more decades to change into the way we'll be -- or should be. 

The key solution will be a new role for the Midwestern states, a new relationship between states and cities, a new way of governing ourselves that meets the new needs of this new era.

Previous posts (here and here) described the incompetence of state governments and the reasons, many of them rooted in the states' very history, for this incompetence. But these posts also noted that the federal system is here to stay. The states aren't going to go away.

The solution is to leave to the states the chores they can still do best, while encouraging them to delegate functions to others who can do them better.

The first imperative is to abandon the habit of looking to state capitals for all solutions. States now control so much public life -- over cities, schools, universities, infrastructure, taxation and other finances -- that almost nothing can be done unless the state capital signs off on it. But states, as we've seen, just don't have the money anymore to do this job. The recession has underlined this fact, but the end of the recession won't change it. This means that all these players -- cities, schools, highways, taxpayers -- get short-changed. If anything is to change, Midwesterners first have to break the habit of looking to state capitals for both money and permission. 

From this changed mindset, much else can flow. For instance:

• It's obvious that the global future belongs to cities. Strong cities, competitive in the global economy, will enrich the Midwestern society. But states now control what cities can do. Bruce Katz of Brookings has written (http://www.brookings.edu/speeches/2005/0929cities_katz.aspx)  that state governments decide how many units of local government there will be, set their borders, fix their powers, decide whom they can tax and how much they can tax them, dictate the shape of the urban environment through public spending, and help or cripple cities through spending on education and control over schools. Katz was speaking about Ohio, but his criticism applies to states and cities everywhere.
  
  "An Urban Age..........will not occur until and unless we alter the rules of the development game," Katz wrote.
  
  It's way past time for states to yield this control over cities and let cities chart their own future.
  
  Defenders of states will argue that cities can't survive without the money they get from state governments. But almost all Midwestern cities send more money to the state capital in taxes than they get back in subsidies. If cities are going to take over the powers now held by states, they're going to need the money to do this. This means an end to the unhealthy financial relationship between states and cities.
  
  Cities should be free to expand their urban areas across state lines without asking approval from state governments. Chicago and Milwaukee (and the suburbs between them) are part of one big metro area, and have more to do with each other than either has to do with Madison or Springfield. Chicago's third airport should be in Gary, a move that would benefit both places, and the existence of the Illinois-Indiana border should have no bearing on this decision.
  
  The Quad Cities of Iowa and Illinois have a terrible time getting together, partly because of mutual jealousies and conflicting tax laws between the two states. Springfield and Des Moines should cut these cities loose to frame their own future. While they're at it, they might encourage the Quad Cities' hinterland, an oval stretching from Waterloo and Cedar Rapids to Peoria, to build a new and larger region on the industrial and educational strengths that unite it.
  
  Cleveland, Erie and Pittsburgh are talking about becoming one region, and should. Steubenville, Ohio, already sees itself as an appendage of Pittsburgh, across the state line.
  
• State governments clutch control over state universities and keep them from combining with other state universities to create true centers of intellectual excellence that would draw in students, researchers, grants and investment from around the world. The states argue that, since these universities are supported by the taxpayers in these states, the states need to control what goes on there, to make sure the taxpayers get their money's worth.
  
  Once upon a time, this may have made sense. But states these days provide a tiny and shrinking share of the operating expenses at state universities - only 7 percent in Michigan, not much more in other states -- that these public universities have become private schools in all but name. States clearly aren't willing to support the universities that bear their names, so why should they be allowed to tell the schools what they can teach, who they can admit and what research they can do?
  
  A few states, like Virginia, already have renegotiated their relationship with their state universities, yielding political control while cutting funding. This is the way Midwestern universities should go.
  
• Every Midwestern state competes with every other Midwestern state to gain investment and, especially, to lure companies from elsewhere. All these companies learned long ago that they can play the states off against each other: all any company has to do is to announce that it plans to build a factory in the Midwest, then just sit back and field the bribes -- tax holidays, free land, work force subsidies -- from state capitals. Clearly, investment anywhere in the Midwest benefits the entire Midwest. Governors and economic development officials know this, but they are trapped into this mindless competition, at the cost of millions in taxpayer money. States should simply abandon this game.
  
• At the moment, state governments are competing for federal funds to build a Midwestern high speed rail network. But this will have to be a low-speed network -- about 110 miles per hour, half as fast as the European models -- because state governments have to serve their entire states and so can only promote a train line with stops at many towns, large and small, all with political clout. A real high-speed line will connect major cities and university towns, nowhere else. This sounds unfair to smaller cities, but it's the only high-speed system that makes sense. States should get out of this competition and leave the planning of the network to the cities that will truly benefit from it.

There are many more examples, and still others will arise as the Global Era makes its demands known.

In the meantime, states and their constituents should decide what powers should be left to the states and how they should be exercised. This includes state highways, state prisons, state parks. It includes not only welfare to the poor but unemployment pay and other help to workers displaced by the collapse of the industrial economy. It includes the laying of fiber-optic cable and other communications to rural communities, which also have lost the ability to support themselves.

Clearly, much of this work involves taking care of communities and citizens left behind by the global economy. This is not inspiring work, but it's necessary in a civilized society. Right now, most state governments are so absorbed in succoring the victims of the present that they can't even think about the needs of the future, much less pay for them.

This future belongs to the cities and the universities who have a chance to compete in the global economy. They should control this future, and they should pay for it. State government is an anachronism, a remnant of an earlier economy. It has jobs to do, but nowhere near as many jobs to do as it is doing now. 

We need a new division of labor in the Midwest, and the time to begin thinking about this is now.

For more information on economic competitiveness in the Midwest, visit the In the News section of the Global Midwest Web site.

Comments

[Eric]

"Economic backwater"? Come on.

The Midwest has seen better days, but it's still an important area economically, in the U.S. and in the world. In P.P.P., Chicago metro has the 4th largest GDP of any other metro in the world, behind Tokyo, New York, L.A. and just ahead of London. San Francisco has Apple and Google, but we have McDonald's and Boeing, both less trendy but more important to the U.S. economically.

One might say, "Well, Chicago is special. If you remove Chicago from the Midwest, then it's different." Well, if you remove San Francisco and Seattle from the West Coast, that area looks a lot different too.

The Midwest's manufacturing jobs are at a nadir; it's a problem. But 40% of the population of the richest country in the world live here. Not one but many of the best research universities in the world are here. It's the most productive agricultural area in the world. Dozens of major global brands are based here. If the Midwest seceded and became its own country, it would have a larger, more diverse economy than France.

So: the Midwest has legacy issues and a need to act coherently to deal with the loss of jobs due to manufacturing losses. To suggest that it isn't ready to compete in a global economy or that it's an economic backwater smacks of unproductive self hatred.

[DeeAnn]

I could not agree more with you on the need for the states to get their hands out of all these decisions and let local governments have more flexibility. Having recently moved here from a different area of the country and being somewhat involved in local issues there, I am amazed at the differences in how the states are run. I prefer more power at the local level to make decisions and ardently believe this must happen before real progress will be made. The way it is now, local governments cannot rise above the competence (or lack there of) of the state government.