Economic Restructuring in the Rust Belt
Total Page:16
File Type:pdf, Size:1020Kb
The Center for Population Dynamics urban.csuohio.edu/cpd ceosforcities.org FROM METAL TO MINDS: ECONOMIC RESTRUCTURING IN THE RUST BELT By Richey Piiparinen, Jim Russell & Charlie Post | April 2015 TABLE OF CONTENTS FORWARD 4 - 5 SECTION 1 Separated at Rebirth 6 - 10 SECTION 2 The Anti-Social Network Failing to Succeed 11 - 14 “Forums” versus “Fountains” 14 - 15 SECTION 3 A Pittsburgh Story From the Ashes of Steel 16 - 19 The Software City 19 - 22 Succeeding in Failure 22 - 29 SECTION 4 The Rise of the Knowledge Society 30- 35 SECTION 5 Cleveland’s Cure The Kardiac Kids 36 - 41 Moths to a Flame 41 - 44 Keeping the “River” Burning 44 - 45 Contact: Richey Piiparinen, Director, Center of Population Dynamics at [email protected] FORWARD There has been no lack of ink spilled on the effects of company that improves health for millions of people.” deindustrialization in Rust Belt cities. The narrative arc This contrast, then—i.e., one between making for human is usually the same: loss of manufacturing jobs led to consumption versus making for human production— depopulation and disinvestment. Intuitively, the policy drives the heart of this paper. It is an analysis that charts prescription is to get the factory jobs back. To the extent the economic restructuring of Boston, Pittsburgh, and this is doable is one thing, to the extent this is strategic is Cleveland, looking specifically at the role the “eds and another. meds” sector is playing in the creation of the “knowledge Enter “Saxophone Santa”. society”, or those milieus where economic gain is driven via industries of human progress. A recent Economist1 piece details the other side of globalization, looking at the Chinese city of Yiwu, dubbed A further explanation of the “knowledge society” is in the “Christmas Village”. Yiwu makes 60% of the world’s the pages that follow. For now, it is enough to hint at Christmas trinkets. One of the trinkets is a Santa Claus its development. “The profound global changes that with a saxophone. They get made, boxed, shipped, we are facing today will be comparable in depth and and consumed, all of which is technically economic magnitude to those which brought about the shift from development. Ask people in Yiwu, though, why Santa has the agricultural to the industrial society,” writes French a saxophone “and no one quite knows why”. But it doesn’t mathematician Michael Demazure3. “This change should matter. People are getting paid minimally to make it and be addressed successfully through careful and wise people are spending marginally to buy it. policies.” Meanwhile, making in Rust Belt Cleveland is occurring The current analysis attempts to do just that: inform with as well. “Big Data pioneer Explorys plans to expand in the intent for wise policies, particularly for regions such University Circle” reads the Plain Dealer2. Explorys does as Pittsburgh and Cleveland that are still “feeling” their big data analytics with the reams of information pouring way through economic restructuring. But one thing is out of global healthcare institutions like University for certain: the Rust Belt’s future is not returning to the Hospitals and the Cleveland Clinic. The software being past. Well, at least not exactly. developed is helping reduce healthcare costs while Wrote poet philosopher George Santayana: “Those who aiding in treatment innovation. As such, Explorys makes do not remember the past are condemned to repeat it.” longevity, with the aim the production of value, not simply Those who do, however, are not. the consumption of things. Saxophone Santa this isn’t. Angry Birds this isn’t. 1 “Oh what fun”. Economist, Print Edition. Dec. 2014. “You can work for a cool tech company with a texting 2 Smith, R. “Big Data pioneer Explorys plans to expand in University Circle”. Plain Dealer, Jan. 2015. 3 Michel Demazure, “New governance for a new society,” Organization for Economic Cooperation and app,” noted the co-founder. “Or you can work for a Development, The OECD Observer, Paris, July 2001, p 3. First, as legacy assets of the industrial age. Put simply, the industrialist wealth SECTION 1 amassed in Rust Belt cities seeded early-stage construction of universities and hospitals that today form the “eds and meds” sector of the economy. Yet at SEPARATED the time of their creation, these legacy institutions were formed for humanist purposes, not as engines of economic growth. Things changed. “In 1950, AT REBIRTH Boston’s universities may have seemed like a quaint anachronism of the city’s Brahmin past,” noted Glaeser, but those universities would prepare Boston “HUMAN HISTORY once America entered the knowledge economy9. BECOMES MORE AND Second, decades of manufacturing embedded regions with collective “know- MORE A RACE BETWEEN hows” related to the design, finance, and manufacturing of products. The EDUCATION AND historical DNA that resulted is a competitive advantage that’s translatable into newer work, such as advanced manufacturing. For instance, while steel- CATASTROPHE” making collapsed in Pittsburgh, the metro knows how steel is made, and this — H.G. WELLS. labor expertise has allowed Pittsburgh to transition from a steel maker to a 10 Despite progress, Greater Cleveland is still steel technology cluster . As well, Cleveland’s making legacy has enabled its in the grips of an economic restructuring position as a key cog in the manufacturing of medical imaging machines and into a knowledge-based economy. other biomedical devices. Employment gains are moderate. Taken together, as America’s position in the global economy continues to Population growth is lacking. Home values specialize in knowledge production, the regions that can give their educational are low. These facts are known. Less known history currency will win the day. This is done by leveraging legacy institutions is that many of today’s urban success stories and labor expertise. Boston is one metro that has crossed “the valley” of had a similar Rust Belt profile not long ago. economic restructuring. Increasingly, Pittsburgh is another. Take Boston. The city’s population dropped by “[B]eneath the collapse, stagnation and misery,” noted a 2014 Politico feature, nearly 200,000 from 1920 to 1980, and 75% of its “[Pittsburgh’s] core assets remained largely intact, in the form of human capital housing stock was below the bricks and mortar cost of housed in the city’s cultural institutions, foundations, an overlooked industrial construction4. Today, the Boston metro has the 4th highest per capita income research sector and above all its great universities—Carnegie Mellon, Pitt, of big-city metros5. It has the 5th largest number of residents with at least a Duquesne—built and endowed by the 19th century robber barons who gave the bachelor’s degree6, and its median housing value is now $363,2007. city its first golden age. Pittsburgh wasn’t dead; it was just sleeping.” 11 What happened? “The source of Boston’s recent success is not unknown,” How Pittsburgh “woke up” will be detailed below. It is first necessary to wrote Harvard economist Ed Glaeser8. “[B]oston in 1980 had a strong skill base document the “Steel City’s” divergence from its Rust Belt sibling Cleveland. relative to its rustbelt peers…This skill base, which is most strongly related to The task is less about how Cleveland failed, rather how Pittsburgh is the educational history of the region, enabled Boston to become a successful succeeding. city in the information age.” From 1990 to 2013, Greater Pittsburgh gained nearly 117,900 jobs. The region In other words, Boston’s skill base was the engine that drove the metro from is now at an all-time high for labor force participation12. Conversely, Greater seafaring, to textiles, to the likes of biotech and education technology. But it was Cleveland lost 2,200 jobs, creating a job growth “gap” of 120,100 between the a skill base enabled by Boston’s “educational history”. For Rust Belt metros, this two regions. Figure 1 details where this divergence occurred. The two regions educational history has come about two ways. had equal total employment numbers in 1999, before separating ever since. Why? 8 Glaeser, Edward L. “Reinventing Boston: 1630–2003.” Journal of Economic Geography 5.2 (2005): 4 Glaeser, Edward L. “Reinventing Boston: 1630–2003.” Journal of Economic Geography 5.2 (2005): 119-153. 119-153. 9 Ibid 5 Source: Bureau of Labor Statistics, 2012. 10 Treado, Carey Durkin. “Pittsburgh’s evolving steel legacy and the steel technology cluster.” Cambridge 6 Source: American Community Survey, 2013. journal of regions, economy and society 3.1 (2010): 105-120. 7 Source: Ibid 11 Thrush, G. “The Robots that Saved Pittsburgh”. Politico, Feb. 2014. 12 See: http://nullspace2.blogspot.com/2013/01/tale-of-two-charts.html Figure 1: Total Employment for Cleveland & Pittsburgh Table 1: Manufacturing Employment 1990—2013 | Source: BLS Cleveland/Pittsburgh | Source: BLS 1,200 Change % of Labor % of Labor 1990 2013 1990-2003 Force 1990 Force 2013 1,150 CLEVELAND 211,700 123,900 -87,900 20.6% 12.1% 1,100 PITTSBURGH 130,600 89,400 -41,200 12.6% 7.7% 1,050 1,000 Table 2: Knowledge Service Sector1 Employment 950 Cleveland/Pittsburgh | Source: BLS TOTAL JOBS (IN THOUSANDS) (IN JOBS TOTAL 900 Change % of Labor % of Labor 1990 2013 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 1990-2003 Force 1990 Force 2013 YEAR CLEVELAND 234,100 342,100 108,000 22.8% 33.3% PITTSBURGH 286,800 415,200 128,400 27.6% 35.9% Pittsburgh, PA Cleveland-Elyria-Mentor, OH 1 Knowledge Service Sector includes Education and Health Services and Professional and Business Service sectors To answer this, job change by industry sector was analyzed.