What Could the Legacy Economy Mean for the Rust Belt?

Image showing vacant land between existing structures on Detroit’s East Side.  Source: wikipedia.org
A favorite blogger of mine, Ta-Nehisi Coates of The Atlantic, often has a feature on his blog where he urges people to “talk to him like I’m stupid”.  I think it’s a wonderful thing to ask of others so you can gain an understanding of a complex matter.  Reminds me of when my preacher father would read a Scripture and then “make it plain”.

Anyway, lately my blogger buddy Jim Russell has been touting the emergence of what he calls the “Legacy Economy”.  Here’s how he describes it, at Pacific Standard:

I see the Legacy Economy as a the reattachment of economic activity to the geography of natural resources, albeit talent replacing abundant coal. Talent is the new oil, or something like that. Given the demographic decline taking over the globe and more places actively competing for the same creative labor, I expect the sites of talent production (i.e. universities) to anchor a diverging economic landscape.

The thought of this has given me a good deal of hope, because nearly six years after the financial collapse that launched the Great Recession, I think most people struggle with what the “Next Big Thing” is going to be that drives our economy.  Four years ago an educated guess might have been “sustainability”, but is anyone thinking about an economy aligned on those lines today?

Meanwhile, the Innovation Economy, notably the tech and finance industries, regrouped and recovered.  In the process, what used to be clustered in the innovation and tech hubs of America is now spreading across the country.  In the recent past the best and brightest migrated to where their talents fit best.  Today, the hubs are high cost and the businesses are looking for cheaper talent and cheaper alternatives.  Hello, Legacy Economy.

As I look at Rust Belt cities, those that were never really able to compete in the Innovation Economy, I see glimpses of a prosperous future, but not for all people and certainly not for all Rust Belt cities.  A few things seem to be happening in this emerging economic environment:

  • Talent goes where it wants to go, and for the tech industry that no longer includes only Silicon Valley, Austin, Boston or the other usual suspects.
  • Tech is converging, and the impacts of that are now being seen in other industries.
  • The producers of talent, wherever they are, may be the biggest beneficiaries of a “boomerang” that brings talent back to its source.  Prodigal sons (and daughters), if you will.
I see this happening, but someone’s going to have to “talk to me like I’m stupid” or “make it plain” to help me see how, or how much, this will help the Rust Belt cities I care most about.
Case in point: two recent news items involving Chicago and Detroit.  Over the weekend, the federal government announced that metro Detroit was the winner of a $140 million initiative to develop Advanced Manufacturing Institutes.  The Windy City and Motor City were both awarded with Manufacturing Institutes, as described below:

The Pentagon will fund each institute to the tune of $70 million, with the consortium members raising and appropriating an equal amount.

The Chicago consortium is made up of 73 companies, universities, non-profit groups and research labs, the White House said. It will be led in Chicago by UI Labs, a research and supercomputing center established last year by the University of Illinois.

EWI, an Ohio-based manufacturing company with a Detroit plant, will head up the 60-member consortium focusing on lightweight metals.

For the Department of Defense, the White House said lightweight and modern metals will mean “armored vehicles strong enough to withstand a roadside bomb but light enough for helicopter-transport.”

In my reading of this, the Chicago consortium is the one that is moving in the direction of the Legacy Economy, because it is linking the talent and research capability of Global Chicago to do broad-scale, next-level manufacturing research  Meanwhile, Detroit seems to have gotten funding for a group that will focus on a far more specific endeavor in lightweight metals technology, with a much lower ceiling.

Also over the weekend, the other news was an excellent interview with Thomas Sugrue by the Detroit Free Press.  Sugrue is a Detroit native, professor of history and sociology at the University of Pennsylvania, and author of “The Origins of the Urban Crisis”, an influential book that chronicles the dual role of race and deindustrialization on the Motor City.  One might think that Sugrue would believe that Detroit’s Dan Gilbert-led downtown revitalization efforts in the midst of bankruptcy is the start of something entirely different for Detroit.  He’s not so sure:

Look, Detroit is more interesting for a visitor now than 15 or 20 years ago for all the amenities that appeal to creative class types like me. It’s great. I have more restaurants that I want to try in Detroit and more bars that I want to go to than I can possibly visit even on several trips. But there’s not really robust evidence that unless that kind of infusion of capital and population on a large scale happens that (the creative class) is going to play a really dramatic role in remaking cities. And no city in the United States faces such a big obstacle to that kind of transformation than Detroit, even for all of its appeal to artists, musicians and other folks involved in creative pursuits.

Here’s the kicker:

 How do you stabilize the housing market in neighborhoods where residents are city employees, blue-collar workers, folks working the service sector? The odds are pretty steep because there’s not a lot of bling in revitalizing outlying lower middle class neighborhoods. Developers aren’t particularity interested in them. 

I peer into my crystal ball and I see a Chicago in 20 years that could be an advanced manufacturing leader, given its talent production assets.  Twenty years hence for Detroit, I see a city that looks like Chicago does now — bifurcated, a safe and dynamic inner core filled with creative class types, and outlying areas  that still struggle to maintain their viability.  Without question, an improvement over current conditions there.  But I wonder if it has the ability to transcend its legacy to improve even more lives.

Someone please make it plain.

8 thoughts on “What Could the Legacy Economy Mean for the Rust Belt?

  1. What it seems to say to me is that colleges and universities are going to be the primary drivers of the economy in the future, because that's where the innovation is coming from. The size of the oasis will depend on two things: the number of colleges and universities in an area, and the reputation they have. New businesses will be born from these colleges and universities, and big businesses will locate operations nearby to tap into the talent that they produce.

    Excluding New York and Washington DC from the discussion since they're going to remain viable for their own unique reasons, it seems to me like the biggest winners of all will be Boston and the San Francisco Bay Area since they both have multiple colleges and universities with sterling reputations. Boston has Harvard, MIT and Boston College. The San Francisco Bay Area has Stanford and Cal. At least four of those five are regarded among the top 20 to 25 colleges and universities in the United States.

    Not far behind Boston and the Bay Area are Chicago (University of Chicago, DePaul), Los Angeles (UCLA, USC) and Philadelphia (Penn, Temple). Not far behind those three cities are Atlanta (Emory, Georgia Tech), Houston (University of Houston, Rice), Miami (University of Miami, Florida Atlantic, Florida International), Pittsburgh (Carnegie Mellon, Pitt) and Raleigh/Durham (Duke, NC State).

    Excluding Chicago, the clear winner among “Rust Belt” cities is Pittsburgh. In fact, Pittsburgh has a pair of sledgehammers that could make even Chicago squirm a bit. Carnegie Mellon is routinely compared with MIT, Stanford and Cal; and Pitt is a known powerhouse for research and development, especially in health and medicine. Pittsburgh is definitely lucky to have them, but it's not entirely luck. The reputations of Pitt and Carnegie Mellon took generations to build, and the city recognized long ago how important they are.

    As for other Rust Belt cities, I think Cincinnati, Cleveland and St. Louis can benefit as well, though not to the degree of Pittsburgh. Cincinnati has the University of Cincinnati; Cleveland has Case Western Reserve, and St. Louis has Washington University. Unfortunately, it seems like Detroit is behind the eight ball in this regard as well. Wayne State University seems to be more of a regional player than a national or global player, and the city can only indirectly benefit from the University of Michigan. Maybe Wayne State can increase its profile over time and build prestige that way, but it'll take time for those efforts to pay off.

    Of course, this isn't to say that cities have to have prestigious colleges and universities in order to do well, just that they have the best chance of becoming dynamic economies due to innovation and global connections. Kansas City seems to be doing OK despite having only UMKC, a regional draw. What Kansas City really has going for it is logistics. Chicago is the logistics hub of the north-central United States, and Dallas/Fort Worth is quickly becoming the logistics hub of the south-central United States. Kansas City is halfway between the two, and it already acts as an auxiliary freight rail hub when Chicago gets overwhelmed. In the future, I expect Kansas City to be the auxiliary hub for Dallas/Fort Worth as well, and become sort of a liason between the megacities to its north and south.

    I think the cities that are going to thrive in the future are those with strong educational and/or logistical assets.

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  2. DBR96A: You always offer the most thorough and insightful comments. Thanks for commenting.

    I think you're right about the future of talent-producing cities. And I think the hierarchy or tiers you mention here are spot on. One note on Chicago: you neglected to mention Northwestern. How could you do that? 😉

    I also agree that Detroit is lacking in this department. Wayne State is indeed a regional player, a commuter school with a growing academic reputation and broadening research focus, but not at the level of nearby U of M. I don't think a more dramatically more reputable Wayne State is feasible in the near or mid term. U of M is certainly nearby, but sometimes it feels that U of M impacts Detroit as much as Stanford impacts, say, Oakland. Which is to say not very much.

    What's missing in Detroit is an elite, private research university, on par with a Washington/St. Louis, Carnegie Mellon or Case Western. The University of Detroit-Mercy is a small Catholic school but has never approached that level. On another blog I jokingly wondered when the Ford family would endow a STEM-focused Ford University in Detroit, but there could be some actual merit to that.

    Lastly, cities like Detroit that lack elite educational institutions might benefit from being the affordable magnet in which talent congregates. Detroit already has one of the highest concentration of engineers, thanks to the auto industry. It's very affordable compared to cities on the coasts and Chicago, and is just now beginning to develop an entrepreneurial spirit. Time will tell.

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  3. I just discovered this blog a few months ago, and you have had some interesting perspectives. I've learned more about Detroit in the process as well.

    Since the best way to inspire somebody to keep blogging is through feedback, I make sure to leave some comments from time to time, though I have to say that the comment interface on your blog is not very user-friendly. If there's a way to streamline the process at all, then that should make it easier for people to leave comments.

    Anyway, I've always been a geography nut, and your blog is now one of four blogs with a geographic focus that I visit regularly. Jim Russell and Aaron Renn have two of the three others, and I think I might have found your blog on one of theirs.

    As for Northwestern University, I forgot about it because I was awake during the wee hours of the morning. Comparing colleges and univiersities, I see the following comparisons:

    University of Chicago = Carnegie Mellon University
    Northwestern University = University of Pittsburgh
    DePaul University = Duquesne University

    That means Pittsburgh and Chicago both have an elite university, a large research university, and a notable Catholic university.

    As for Detroit, maybe it and Buffalo could promote themselves as transnational logistics hubs. Another advantage that Detroit has is mechanical engineering expertise, so if there's any company, domestic or foreign, that deals with mechanical stuff and wants to set up shop in the United States, then Detroit would be a good place to do it. And if the choice is either the city or Oakland County, then maybe the city could prepare some old industrial sites in the northwestern corner of the city so the businesses will be close to action in Oakland County while contributing to the city's tax rolls. (Basically, it'd be beating the suburbs at their own game.)

    Anyway, I'm glad that my comments have helped contribute to some discussion. I might not comment on every post here, but I'll still be reading nonetheless. Keep up the good work.

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  4. One other comment: The same way I believe that Kansas City can benefit from being halfway between Chicago and Dallas/Fort Worth, and Pittsburgh can benefit from being the nexus of the “Rust Belt” and the megalopolitan Mid-Atlantic, I think Detroit can benefit from being halfway between Chicago and Toronto. If the cost of living or doing business in either of those cities starts to really escalate, then Detroit can promote itself as a low-cost alternative with the benefit of proximity to both. Pittsburgh is already becoming an outpost for businesses in New York, Philadelphia and Washington DC for this reason.

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  5. DBR96A, thanks again for your comments. I agree that Detroit has a transnational logistics hub opportunity like Buffalo. And that being halfway between Chicago and Toronto presents it with unique opportunities, much like Philadelphia being halfway between New York and DC, but with an international focus. As far as I know Detroit's underutilized its international border location. And I think Detroit's ceiling as a logistics midpoint between Chicago and Toronto is higher than that of KC between Chicago and DFW.

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  6. Something that has intrigued me, but which I have never seen noted in this type of discussion regarding local universities as engines of economic growth, is whether there is some critical distance beyond which the impact of the university diminishes. I am interested in part with respect to Milwaukee, which has significant if lower ranked universities/colleges (Marquette, Univ of WI – Milwaukee, Medical College of WI, Milwaukee School of Engineering), but which also is situated 90 minutes or less from the University of WI – Madison, Northwestern, and the University of Chicago. Is a 90-minute separation an insurmountable, or even a significant barrier, to collaboration by Milwaukee-area companies with these other universities or for recruiting their graduates? It's only a 45 minute drive from downtown Milwaukee to the Chicago state line at which point you are already 10 or more miles into the official Chicago metro area. Is 45 minutes a barrier?

    Notre Dame is perhaps best viewed as a Chicago resource as well given that South Bend is connected to Chicago by commuter rail.

    I am curious as to exactly why businesses benefit from setting up shop near there major research universities. I suspect it is related to the reality that many graduates students are attending school or finishing their master's thesis or dissertation on a part time basis while working. These students would be available and interested in work, lower cost (as they don't yet have the official credential), and tied to the area until the time they finish their degree.

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  7. Returning to Milwaukee's status, if a 90 minute separation by car is not a barrier for benefiting from a major university (at least in terms of businesses looking to collaborate with researcher or recruit graduates), then Milwaukee would seem to be better situated to benefit from these type of economic driver than cities such as Cleveland, Cincinnati, St. Louis, or Atlanta or Houston. There are disadvantages for Milwaukee in living in Chicago's shadow (or Madison's shadow in terms of university research), but perhaps this is a major advantage.

    This is actually a much more significant topic – the analysis of various cities as if they existed in geographic isolation, when in fact some cities (such as Milwaukee) are greatly influenced by the resources available in neighboring metro areas (I for one – fly more often from O-Hare than from Milwaukee's airport). I remember reading somewhere that the number of computer software professionals in the triangle formed by Chicago, Milwaukee, and Madison actually exceeded the number in Silicon Valley.

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  8. Here's a further fun statistic (based on Wikipedia listings of Nobel Prizes affiliated with different universities or countries). The universities within a 90-minute radius of Milwaukee have 117 Nobel Prizes to their credit to date (89 at the University of Chicago, 19 at UW-Madison, 8 at Northwestern, and 1 at UW-Milwaukee – although there could be some dual credits for researchers affiliated with more than one of these universities). Not too shabby. For comparison, this this total exceeds the combined total for Germany (101), China (8), and India (7).

    So the question would be is Milwaukee an innovation backwater, or a city that is at the center of a research cluster that (in terms of Nobel prizes) has outperformed China, India, and Germany COMBINED?

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