Revival of the Rust Belt History, Challenges & Opportunities National Multifamily Housing Council Chicago Illinois, April 18, 2019 John Austin, Brookings Institution Non-Resident Senior Fellow Director, Michigan Economic Center Lecturer, University of Michigan THE BROOKINGS INSTITUTION METROPOLITAN POLICY PROGRAM There is a unique economic and social development story to the Upper Midwest. As our Northwest Territories they were organized with shared values, governance, political structure… The Old Northwest Territory Values • Education • Free Labor • Local Governments • Civil Rights • Religious Freedom Source: Youngstown State University, Center for Urban and Regional Studies, 2005 . Region’s resources and natural features made it target of early development. Rail and water links opened…immigrants poured in “Inspired tinkerers” - conversion of raw materials and natural bounty built the great industries of America’s 20th century The Great Lakes region created and dominated the agri- industrial era…birthplace of great enterprises, innovations, arsenal of democracy, and builder of middle class Great Enterprise: •Armour •Ford •Rockefeller •Sears •Lilly •Heinz •Carnegie •Dow •Pillsbury Great Innovation: •Assembly Line •The skyscraper •Land grant university •The airplane •The Internet Source: B. Affolter-Caine, 2006 Industrial cities boomed and a network of large and small factory towns spread across fields and forests of Midwest… The Great Lakes Economic Region at Night Source: S. Swan, UM CSCAR, 2003 Immigrants came from abroad. The Great Migration of blacks and whites from the South and Appalachia saw millions come North for jobs and a better life… Large employers and a workers’ movement forged America’s social compact: companies and labor created unique American model of employer-based health care, pensions, unemployment insurance… Union Membership in 1982 Map Source: B. Affolter-Caine: 2006 This is us, the factory economy that gave us jobs, great wealth and great life here in Michigan, the Midwest, until….global competition, technological change restructured our industries…wiping out good paying assembly-line jobs…shuttering doors of employers in many company towns… the “Rust Belt” Region is in Transition FromTo “Tech Industrial Belt” Powerhouse… Our History Left Many Strengths: Region is 3rd Biggest “Country” by GDP Large Share of Global Companies…200 of Fortune 500 in region World Universities: 20 of the top universities globally Legend Research (Canadian) Research Extensive (U.S.) CIC (U.S.) Source: B. Affolter-Caine, 2007 More than any other region on earth… Great Lakes’ Top Ranked Universities in the World That drive our nation’s innovation… …and educate and train the nation’s talent… Share of U.S. degrees awarded in the Great Lakes Center of US Global Trade Spectacular Natural assets… 10,000 miles of coastline, 30,000 islands and inland lakes, forests and parks…with climate change wreaking havoc, a region with “woods and water” becomes ever more attractive Immigrants have been major source of recent population growth – 37% of total growth in Midwest, responsible for new business, innovation and are better educated… Share of Foreign- Born Residents with a BA Degree or Greater Map Source: B. Affolter-Caine: 2006 Region’s legacy of industrial economy leadership built many place-based assets Lots of Wealth & Resources: Company, Philanthropy, Pension Funds Water and water fronts Historic cities and towns Civic, culture, education, learning, and anchor research institutions Our water matters in new and different ways… Source: U.S. Census Bureau Now that we have cleaned it up and it is not toxic, noxious, or on fire… Cleveland But history endowed region with BIG challenges: including educating all to higher levels - factory economy left legacy of low education attainment levels Share of State Population with a Bachelors’ Degree or Greater Much of the region has “brain-drain” of college educated 25-39 year olds… 40 Net 12.4 15.5 20 Migration 0 Rate -20 -11.3 -40 -60 -80 -100 -86.7 -88.2 Net Migration Rate -120 -112.4 -107.7 -140 -160 -142.3 Ohio Illinois Indiana Michigan Minnesota New York Wisconsin Pennsylvania Source: U. S. Census Bureau, Census 2000, special tabulation.. The young are those who were aged 25 to 39 in 2000; the single are those who were never married, or were widowed or divorced in 2000; and the college educated are those who had at least a bachelor's degree in 2000. Need to clean up the mess and legacies of industrial economy leadership Region has 60% of nation’s brownfields -- many blocking valuable waterfront and urban land Remedy infrastructure deficits…region has lion’s share of aging water and other infrastructure Combined sewer systems serve approximately 772 communities serving over 40 million people Source: U.S. Environmental Protection Agency ….Clash of race and culture plus housing/education policies enforced segregation –region is home to 15 of nation’s 25 most segregated city-regions. Rank Area Name 2010 1 Detroit-Livonia-Dearborn, MI Metropolitan Division 79.6 2 Milwaukee-Waukesha-West Allis, WI Metropolitan Statistical Area 79.6 3 New York-White Plains-Wayne, NY-NJ Metropolitan Division 79.1 4 Newark-Union, NJ-PA Metropolitan Division 78 5 Gary, IN Metropolitan Division 76.8 6 Chicago-Joliet-Naperville, IL Metropolitan Division 75.9 7 Philadelphia, PA Metropolitan Division 73.7 8 Miami-Miami Beach-Kendall, FL Metropolitan Division 73 9 Cleveland-Elyria-Mentor, OH Metropolitan Statistical Area 72.6 10 Muskegon-Norton Shores, MI Metropolitan Statistical Area 71.2 11 Buffalo-Niagara Falls, NY Metropolitan Statistical Area 71 12 St. Louis, MO-IL Metropolitan Statistical Area 70.6 13 Niles-Benton Harbor, MI Metropolitan Statistical Area 69.3 14 Nassau-Suffolk, NY Metropolitan Division 69.2 15 Peoria, IL Metropolitan Statistical Area 68.6 16 Danville, IL Metropolitan Statistical Area 68 17 Boston-Quincy, MA Metropolitan Division 67.8 18 Beaumont-Port Arthur, TX Metropolitan Statistical Area 67.3 19 Flint, MI Metropolitan Statistical Area 67.3 20 Cincinnati-Middletown, OH-KY-IN Metropolitan Statistical Area 66.9 21 Gadsden, AL Metropolitan Statistical Area 66.4 22 Bridgeport-Stamford-Norwalk, CT Metropolitan Statistical Area 66 23 Youngstown-Warren-Boardman, OH-PA Metropolitan Statistical Are 65.4 24 Birmingham-Hoover, AL Metropolitan Statistical Area 65.2 14/25 most dissimilar black/white metros in Rust Belt Huge legacy costs come with built infrastructure and large number of general governments…hard to do metropolitan “anything”…many communities tax base eroded Number of General Governments in Selected States Paternal culture, industrial structure, lack of VC/early stage capital and talent loss means our innovation is not commercialized into new business at rate it should be … Entrepreneurial Activity Rank Map Source: B. Affolter-Caine: 2006 Region’s innovation and wealth generation isn’t reinvested locally, lack venture capital Great Lakes region’s share of selected national totals. Population 33% Gross National Product 32% Small Business Innovation Research Grants 17% Research and Development spending 33% National Institutes of Health research grants 35% U. S. patents awarded 30% Science and engineering graduates 36% VC allocations of region’s pension funds 47% Venture capital investment 12% Lots of opportunity for deals that’s not being realized. Today the Region is really two Rust Belts…major metros and the leading university cities and towns are thriving in new economy... Other communities have run effective economic development efforts to move through the loss of anchor employers… In other places “company-town” employers stayed on cutting edge… Still others have a unique history, quality of place and life, or are located on a special piece of real estate that makes them attractive places to live, work, and play.… Today – “Tale of Two Rust Belts”--certain places have evolved their economies. Can more leverage their unique strengths for growth? Blueprint for Rust Belt Revival ClevelandLeverage Innovation-BuildTalent Build Infrastructure FoundationsMinneapolis for Grow Innovation Centers in Global Connectivity Emerging Sectors (Energy, Water, Re-lay Transportation, Water/Sewer IT, Health, New Mobility, Food) & Cyber Infrastructures Higher Ed Attainment– Municipal Finance and Local Immigrant Welcoming Government Overhaul Venture Capital pools Build on History, Place, Natural Remake Government & Social Assets: Nation’s “Clean Compact Green & Blue” Playground Remake Social Compact – Great Lakes/waterfront Cleanup Public Pensions/Benefits, Health Care Green Economy/Infrastructure Safety Net/Adjustment Historic community rehabilitation Assistance for Transition Milwaukee Detroit Cleveland Minneapolis Rust Belt can become “Freshwater Coast” Milwaukee Detroit “The opportunity for the Great Lakes region to thrive economically, as a center of innovation and as an environmentally sustainable, ‘clean-green’ playground for our nation’s people to live and work is unrivaled” Ned Gramlich, Former Federal Reserve Board Governor .