How the Gem City Lost Its Luster and How It Can Get It Back: A Case Study of Dayton, Ohio Adam A. Millsap MERCATUS RESEARCH Adam A. Millsap. “How the Gem City Lost Its Luster and How It Can Get It Back: A Case Study of Dayton, Ohio.” Mercatus Research, Mercatus Center at George Mason Univer- sity, Arlington, VA, 2018. ABSTRACT This study examines the economic, demographic, and fiscal history of Dayton, Ohio, from the turn of the 20th century to the present. The purpose of this study is to place Dayton in the context of a declining manufacturing city that must overcome substantial challenges if it is going to succeed as a 21st-century city. In many ways Dayton is the archetype of the declining Rust Belt city. Until the 1960s, Dayton was a thriving midwestern manufacturing hub, initially built around waterways and later railroads and surrounded by fertile farmland. In the mid-20th century, southerners migrated northward to take advantage of the job opportunities and higher wages in places like Dayton. Southern racial discrim- ination and segregation limited educational opportunities for many southern blacks, and this legacy of institutionalized discrimination inhibited the educa- tional attainment of many blacks and contributed to the city’s inability to adapt to changing economic conditions. Highway construction and the nationwide decline in manufacturing also harmed Dayton, and since the 1960s, Dayton and other midwestern cities have experienced declines in population, wages, and home values. The nationwide shift to a service economy has reduced reliance on natural resources, and this, combined with the long-term decline in transporta- tion costs, means that government policies and climate will increasingly decide the economic fate of cities. Dayton cannot change its physical location, so local officials must compete using policy if Dayton is to have a chance at revitalization. JEL codes: R11, R51, R58, O18, N9 Keywords: cities, urban development, municipal finance, regional development, urban history, history of cities © 2018 by Adam A. Millsap and the Mercatus Center at George Mason University This paper can be accessed at https://www.mercatus.org/publications/dayton -ohio-economic-recovery The views expressed in Mercatus Research are the authors’ and do not represent official positions of the Mercatus Center or George Mason University. And our city, shall we fail her? Or desert her gracious cause? Nay—with loyalty we hail her And revere her righteous laws. She shall ever claim our duty, For she shines—the brightest gem That has ever decked with beauty Dear Ohio’s diadem. —Dayton native Paul Laurence Dunbar, “A Toast to Dayton” housands of abandoned factories and homes, miles of underused roads, empty lots, and crumbling infrastructure can be found in nearly every city in the Rust Belt—an area that stretches from Mis- souri to Wisconsin to New York. While many of these problems are Tcommon to all cities, their pervasiveness in Rust Belt cities is what gives the region its name. Since the mid-20th century, the US population has been migrat- ing from the Rust Belt to the Southeast and to the area referred to as the Sun Belt. Researchers have put forth a variety of reasons for this shift: people’s preference for milder winters, more sun, cheaper housing, and market-friendly economic policies are the most common. The Rust Belt itself has been heavily analyzed by scholars from a variety of disciplines, but relatively few works focus on a single Rust Belt city or try to place a particular city in the broader context of regional economic decline. There are thousands of cities within the states that encompass the Rust Belt, and each of them, despite sharing many similarities with its neighbors, has its own history. The details of these histories offer insight into other cities and the region as a whole. This study focuses on Dayton, Ohio, and explains some of the largest fac- tors that contributed to its decline over the course of the 20th century. In a com- plex world people should not expect the decline of a city to be caused by a single, identifiable factor. Instead, urban decline is a multifaceted process taking place MERCATUS CENTER AT GEORGE MASON UNIVERSITY 3 over many decades and caused by both outside forces and internal public policies. On the surface, Dayton appears to be a typical mid- western, Rust Belt city, but an analysis of its past reveals its exceptionalism. Though today it is not as famous as some of its larger Rust Belt brethren such as Cleveland or Detroit, in the early 20th century it was a well-known hub of innova- tion. In 1900 it had more patents per capita than any other large US city, and a few years later, Dayton natives Orville and Wilbur Wright—inventors of the first heavier-than-air flying machine—became two of the most popular people in “On the surface, the world. Dayton appears Yet despite this early promise, the history of this to be a typical exceptional city provides the quintessential example of a Rust Belt city’s life cycle: early rapid population growth, midwestern, Rust relative decline as people migrated to the suburbs, abso- Belt city, but an lute decline as people left the area and jobs disappeared, and finally, a period of relative stagnation that has left city analysis of its officials and residents wondering what’s next as they try to past reveals its reclaim previous prosperity. exceptionalism.” An important driver of this trend is people’s desire to live in warmer, sunnier climates. Since Dayton cannot com- pete based on climate or geographic amenities, its future success depends on changing its economic environment to promote innovation and entrepreneurship. The slower population growth rate in the Midwest and Northeast regions is evident at the metropolitan statis- tical area (MSA) level and overall. Figure 1 uses county-level data to show the population growth of the nine census divi- sions from 1970 to 2013, as well as MSA data to show urban growth from 1990 to 2010 and from 2000 to 2010. Ohio is located in the East North Central division (the third bar from the left). This division had the third-lowest population growth from 1970 to 2013. County-level growth was only 29 percent, just ahead of the Middle Atlantic divi- sion’s 23 percent growth. An examination of the two more recent time periods, which include only large MSAs in order to focus on urban MERCATUS CENTER AT GEORGE MASON UNIVERSITY 4 FIGURE 1. US POPULATION GROWTH BY CENSUS DIVISION totalpopulationgrowth urbanpopulationgrowth NewEngland Northeast { MiddleAtlantic EastNorthCentral Midwest { WestNorthCentral SouthAtlantic South EastSouthCentral { WestSouthCentral Mountain West { Pacific – – – Note: Total population growth was calculated using county data. Urban population growth was calculated using the 184 metropolitan statistical areas that had more than 250,000 people in 2010. Sources: County data are from Bureau of Economic Analysis Interactive Data (table CA1; accessed September 19, 2017), https://www.bea.gov/itable/. Metropolitan statistical area data are from the US Census Bureau, Statistical Abstract of the United States: 2012, table 20. growth, shows that the East North Central region again fared poorly. From 1990 to 2010, large MSAs in this region grew slightly faster than those in the Northeast and Mid-Atlantic regions, but in the most recent period, growth slowed down: from 2000 to 2010 the large MSAs in the East North Central region grew by only 4.1 percent, which was the smallest growth of the nine divisions and well short of the Mountain division’s 25 percent growth. The US population shift that is apparent in figure 1 shows little sign of abat- ing. Research shows that the demand for sunny, temperate weather increases with income, which means that as per capita incomes rise, migration to the Sun Belt is likely to continue.1 Dayton cannot compete with cities in Arizona or in coastal areas such as Florida or Southern California when it comes to weather and other place-specific amenities. But while climate and geography are important factors when it comes to the distribution of people across space, they are not the only things that matter. 1. Jordan Rappaport, “Moving to Nice Weather,” Regional Science and Urban Economics 37, no. 3 (2007): 375–98. MERCATUS CENTER AT GEORGE MASON UNIVERSITY 5 FIGURE 2. POPULATION OF DAYTON AND OF MONTGOMERY COUNTY, 1810–2014 growth relativedecline decline stabilization MonMonttggygomeryomery Couountn y DaDayytton 1810 1830 1850 1870 1890 1910 1930 1950 1970 1990 2010 Source: US Census Bureau, “Population and Housing Unit Estimates,” Census.gov. Policies that cultivate economic growth and allow markets to operate are also important, and it is along this dimension that cold-weather cities can differenti- ate themselves. In order to attract people and firms, Dayton officials will have to compensate for their relatively poor climate and geographic amenities by offer- ing prospective residents a better business and fiscal environment. In order to understand Dayton today, it is necessary to know something about its past. This study profiles the Dayton area during three periods: from the turn of the 20th century to 1930; from 1930 to 1960; and from 1960 to the early years of the 21st century. Finally, the political city of Dayton is examined in detail from the beginning of the 21st century to 2015. The purpose of the first three sections is to set the scene for the final section. This is not a complete history of Dayton, and many details are left out. The study does, however, provide enough historical detail for the reader to appreciate the magnitude of Dayton’s decline— and to shed light on some of the underlying causes of this decline.