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A New Take On Reviving Older Industrial Cities

This article is more than 5 years old.

The success of America's coastal cities over the last 25 years is certainly something to celebrate.  They've been the foundation of American economic growth for a generation, accelerating their lead in fields such as technology, finance, government, professional services, medicine and healthcare, higher education, entertainment and media, and other fields.

But their growth has come at a cost -- a deepening regional divide that pits coastal urban prosperity against middling to declining economic prospects in our nation's former manufacturing centers, largely centered in the Northeast and Midwest.  In an American economy far less reliant on manufacturing, these cities have struggled to transition to a modern global economy.  The growing regional disparity is having an impact on our nation today.

A new report just released by the Brookings Institute takes a deeper look at the nation's "older industrial cities" (OICs), as they name them.  The report notes that such cities, whether large centers like Baltimore and Detroit or smaller hubs like Schenectady, NY or Terre Haute, IN, have struggled to develop new jobs in new sectors, particularly in areas with larger numbers of people of color.  However, the report notes that OICs have significant assets that can form the foundation of their rebirth, but require thoughtful and strategic public and private investment and a deeper focus on inclusive economic growth to overcome their challenges.

The report identifies 70 OICs nationwide based on three criteria: 1) in an urban county with more than 50,000 residents; 2) had manufacturing employment in excess of 20% of all jobs in 1970; and 3) less success in adding new jobs in new sectors to make up for manufacturing job loss since 1970.  They're heavily concentrated in the Northeast and Midwest, with only six located outside of those regions (in the South).  None are located west of Beaumont, TX.  Counties as large as Kings County, NY (Brooklyn, with 2.6 million residents) and as small as Howard County, IN (Kokomo, with 83,000) were included in the analysis.  Together, the counties that include the nation's OICs hold one-eighth of the nation's population, jobs and GDP.

Brookings developed a typology that allows categorization of the 70 OICs, based on economic growth, prosperity and inclusion indicators since 2000.  The typology:

Strong OICs: Ranking in the top half of the Brookings performance index, the 16 counties in this group are those that rank well on prosperity and inclusion, and have nearly completed their transition from manufacturing hub to a modern global economy.  Most are located near existing global centers on the East Coast.

Emerging OICs: The 24 counties in this group are also nearing the end of their transition from manufacturing hub to modern global economy, but don't rank quite as well on prosperity and inclusion measures.  These are also largely concentrated on the East Coast, with a few Midwestern counties joining the mix.

Stabilizing OICs: Largely ranking in the bottom third of the Brookings performance index, the 16 counties in this group are still recovering from the job loss of the 2000s and are still struggling on prosperity and inclusion measures.  Mostly small-to-medium sized counties in Ohio, Indiana and Michigan, Brookings notes that their worst days are behind them and they're slowly regaining their footing.

Vulnerable OICs: The 14 counties here rank in the bottom 5 percent on the performance index and in the bottom quartile on prosperity and inclusion measures.  Once again largely concentrated in Ohio, Indiana and Michigan (with a handful also located in smaller Southern counties), this group has seen some economic rebound in recent years but still economically smaller and poorer than they were at the turn of the century.

Brookings' key findings?  Larger OICs are performing better than smaller OICs, and those on the East Coast are performing better than those elsewhere.  That suggests that there are significant spillover effects at work in some areas; the growth of the Washington, D.C. metro area is having an impact on Baltimore, for example, just as Manhattan's growth has impacted Brooklyn and Queens.  The report also finds that improved economic performance among non-white households correlates with overall improved economic performance.  From the report:

"Among 14 strong OICs for which data are available, four posted gains in non-white median household income from 2000 to 2016, versus only one that registered a decline (the remainder saw no change). By contrast, in 10 of the 14 vulnerable OICs, non-white household income is significantly lower today than in 2000, by an average of nearly $10,000 (the other four counties saw no change). This indicates that the economic strength of OICs overall, and the economic resiliency of their racial and ethnic minority populations, are closely related."

Located within the report are the seeds for renewal among OICs.  Brookings implies that perhaps the strongest indicator of improved OIC economic performance might be proximity to already-transitioned local economies.  The report highlights the three broad forces that have reshaped local and regional economies over the last generation -- technological change, urbanization and demographic change -- and it's clear that the most successful OICs have been close to or adjacent to areas that underwent an earlier transition.  Strong and emerging OICs on the East Coast have benefited from the networks that come with physical proximity to growing regions.

The OICs in the stabilizing and vulnerable categories are generally located in the Midwest, usually smaller than their East Coast counterparts, and lack the proximity to the more prosperous areas on the East Coast.  It's conceivable that the East Coast growth model should be put to use in the Midwest.  The region's largest cities, like Cleveland, Cincinnati, Detroit, Indianapolis, Milwaukee and others, should set the example of overcoming their unique challenges -- large numbers of vacant industrial and residential parcels; smaller municipal budgets due to population and business loss; finding the resources to improve public schools and public safety.

Part of the difference lies in the fact that East Coast OICs largely embraced the recent economy-shaping forces, while Midwestern OICs have largely resisted them.  East Coast OICs have done a better job of adapting to technological change, and have demonstrated improved research capacity among their top research universities.  East Coast OICs have also embraced the benefits of urbanization, like well-developed pools of labor and capital, physical and social infrastructure, and cultural amenities, even as many Midwestern OICs ran away from those strengths over the last half century.  Midwestern OICs have also been more resistant to inclusive growth measures as a strategy for improving overall growth.

Midwestern OICs are making gains, but the transition has been slow.  They'll require leadership from the region's largest cities, learning from their East Coast counterparts, to demonstrate to the region's small-to-medium cities that there is a viable path to rebirth.