Wednesday, October 22nd, 2008
The Indy Star is on a roll. Fresh on the heels of starting a dialog on the priorities of public services in Indy versus aspirational peers, they run a major story highlighting something that’s been evident for some time, namely that there is a large and increasing disconnect between Indianapolis and the rest of the state.
The facts are stark. Consider, the Indy metro area is 25% of the state’s population, but it has:
- 13% of manufacturing jobs lost in the state
- 31% of all the jobs currently existing
- 43% of all the college graduates
- 44% of all entrepreneurial income
- 47% of professional services workers
- 64% of all the population growth since the 2000 Census
Also, while Indy has gained jobs since 2000, going from 862,700 to 908,200, the rest of the state lost jobs, with the total non-Indy employment slipping below 2 million. The income gap is even more severe. Indy actually exceeds the national average in income per job, at $47,777 vs. $47,286. That’s not rock star performance, but probably not awful either on a cost of living adjusted basis. But the rest of the state earns far less than the national average per job, only $38,226, and continues to fall further behind.
Why is this? Simply put, it’s the globalized economy. The new economy we are in favors big cities over small ones and rural areas. The new economy also requires more than just low cost, low skilled labor – at least in Indiana, which will never be cost competitive with a $200/month worker in China. Consider this, quoting, “What sustains the Indianapolis-area economy is a diversified mix of hospitals and insurers, colleges and government offices, logistics and life science, advanced manufacturing and entertainment, bars and restaurants. Together, these sectors provide more than 400,000 jobs, or almost half the metro-area jobs, U.S. Bureau of Labor Statistics reports show.” Many of these sectors are much smaller or don’t exist elsewhere.
Given the realities of the new, globalized economy, what should be done? There are many things, but one of them is to recognize the centrality of cities as the engines of the world economy. And not just cities, but larger cities. There seems to be some sort of minimum scale necessary to support an economy that can compete in the 21st century. As a rule of thumb, I set that level at around one million in a metro area, though I think smaller places can succeed in certain instances.
In that regard, Indiana needs to adopt metro-centric thinking in how it develops economic development strategies. Conveniently, there is already an organizational concept that more or less maps this out. It is called the BEA economic area, and it is effectively the extended economic “solar system” of a city. This would map the state into seven regions, each of which should create a regional economic development strategy and look to stimulate economic growth in the periphery through closer linkages to the core. In that geography, Indiana would be made up of seven basic regions:
- Chicago (Northwest Indiana)
- South Bend/Mishawaka/Elkhart (extends into Michigan)
- Fort Wayne (includes a Michigan County, but should probably also be expanded to Ohio)
- Indianapolis (which includes part of east central Illinois). This is clearly the largest and most important in Indiana, and includes half the state’s population, including Richmond, Terre Haute, Marion, Kokomo, Bloomington, Lafayette, Anderson, Muncie, and Columbus.
- Evansville (includes part of Kentucky and Illinois)
- Louisville (Southern Indiana)
- Cincinnati (Southeastern Indiana)
This is much more realistic that the current model of “economic growth regions”. For example, EGR 6 includes Blackford, Delaware, Fayette, Henry, Jay, Randolph, Rush, Union, and Wayne counties. That’s not an economic growth region, it’s an economic decline region.
Fortunately, four of my seven regions include a city over one million in population, which means they can be efficiently articulated with the global economy. The others may find it more challenging, but I think there’s clearly hope and indeed, those medium sized cities in Indiana have actually been hanging in there.
Each region would create its own regional strategy based on its unique circumstances. For example, Northwest Indiana is well positioned to become even more integrated with Chicago. Its cost of living compares favorably to the south suburbs. It has the Lake Michigan shore line. And it still has a strong heavy industrial base, albeit one that does not employ nearly as many people as it used to. Extreme fragmentation has long bedeviled the region and it won’t be easy to fix. But Rep. Visclosky has long been championing improvements and the state created a Regional Development Authority that is looking to jump start several initiatives.
Above all, these need to be truly regional strategies that include the outlying areas as well as the core urban zone. As I’ve noted before, this would not be a charity mission. It is mutually beneficial for everyone.
This approach is against the trend what globalization has been doing to cities. As Richard Longworth noted, “Globalization is disconnecting cities from their hinterlands”. Saskia Sassen also notes in her global city research how global cities have turned away from their city regions and given primacy to building networks with other global cities. As the facts above suggest, we’ve seen that disconnect happening in Indiana as the performance of the capital city and the outlying areas decouple.
While this might work for New York, I don’t think it will work for Indianapolis or any other Midwestern city in the long haul. For Indy, it is not a matter of “or” but “and”. The city needs to both articulate itself with the global economy, and shore up its base closer to home. It is manifestly not sustainable for Indianapolis to be prosperous while the rest of the state sinks into ruin. That might work for a while, but sooner or later a bankrupt and enfeebled state government won’t be able to provide the support the city needs – for example, in transportation funding – to stay competitive. And an increasingly resentful outstate area will become unwilling to pass the legislation needed to allow the city to even help itself. Any extensive new transit service, for example, is likely to require some sort of state law change to enable a regional governance and financial structure, just like Lucas Oil Stadium did. For most cities that aren’t the top tier mega-global elite, being part of an integrated, successful city-region by embracing the expanded notion of the city is a better route to success.
Traditional regional thinking has revolved around how to keep the urban core strong in an era of suburbanization. In the new world, there needs to be an expanded concept of regionalization, one that embraces not just keeping the urban core strong, but also building strength in exurban areas that are having trouble adapting to the new economy.
Clearly, for Indiana the most critical region to get right is Indianapolis. The worst of the economic storm has hit smaller industrial cities, and most of these are in the Indianapolis zone. The Indy region is half the state’s population, so that’s 50% of the problem right there. What’s more, it is the only in-state metro of over one million, and thus it is more likely to actively embrace its extended Hoosier region than, say, an out of state metro like Cincinnati.
This is not going to be easy. It certainly isn’t going to be high on the city’s priority list. Mayor Ballard has huge problems to deal with at home, and likely isn’t giving much if any thoughts to places like Richmond or Terre Haute. The outlying areas, for whatever reason, also seem hostile to the idea.
Consider Anderson. There is no better place to start that getting Anderson linked into an expanded metro area economy. It is only 26 miles from I-465. Suburban sprawl in the northeast corridor is already hitting Madison County. The county has lost huge numbers of manufacturing jobs. If I were in Anderson and saw my own town struggling but a boomtown only 25 miles away, I’d probably be asking myself, “How do I get some of that?”
Instead, Anderson has taken active steps to try to keep Indianapolis away. Madison County used to be part of the Indianapolis metro area, but I’m told they specifically petitioned to be removed so that Anderson could be a standalone MSA, notwithstanding that Anderson has zero brand recognition outside the state.
There was a golden opportunity on the table to link Andersen closer to Indy in the form of a joint airport with Fishers. This would have been a unified replacement for Indianapolis Metropolitan Airport and Anderson Municipal Airport and it would have been located in southwestern Madison County. The benefits of this would have been huge. Firstly, Fishers would have helped pay for it, so that’s free money. It would have created an institutional vehicle and common concern linking struggling Anderson with booming Fishers, and created a lot of mutual communication and linkages between the cities. It would have really helped bind Anderson into the greater Indianapolis economy. It would have also been a magnet pulling development out I-69 and closer to Anderson and no doubt that city would have reaped spinoff businesses. But last year Anderson’s new mayor decided to pull the plug on the idea because he didn’t want Anderson’s airport relocating outside the city.
Anderson has adopted a “go it alone” strategy in trying to lure foreign companies to locate there. The city recently went on a solo trade mission to China, for example. This type of solo show is costly to keep up, especially for a smaller city.
The city has in the past demonstrated zero sum thinking when it comes to economic development. Consider, they are unhappy that workers have chosen to live outside the city limits, including many city employees. They want to explore potentially requiring new city hires to live in the city. When you have to force people to live in your town, you are already playing a losing hand. The city also bemoans workers at Nestle living in Fishers. And they were extremely unhappy when IBM chose nearby Daleville for a call center. In his book, Longworth repeatedly used Anderson and Muncie as examples of struggling cities that engaged in beggar thy neighbor behaviors rather than collaborating.
Believe me, I get that what municipal limits a business locates in matters. In Indiana it is hard for a city to reap any tax benefits from a plant outside the city limits. If everybody relocates outside the city, the central city will die and that’s not at all healthy. As former Indianapolis mayor Bill Hudnut put it, “You can’t be a suburb of nowhere”. But you also can’t be a city that looks at everything outside the city limits as the enemy. No business or prospective resident looks at things that way. Instead, you’ve got to figure out how to carve out a role for yourself and put your best foot forward in making the case for your city. You have to figure out how to create a compelling environment. And then as part of a healthy region you’ll reap your share of the fruits. A rising tide lifts all boasts. Anderson needs to make sure its boat is part of the Indianapolis fleet that is headed for a safer economic harbor, not on some solo cruise out into the perfect storm.
Fortunately, I’ve seen some positive developments here as Anderson Mayor Kris Ockomon recently called the arrival of a 400 jobs in Muncie “a good day for everybody”. Amen. That’s exactly the right tone. And he went on to say, “I think we can still be very competitive”. Again, I agree. And that’s the fighting spirit, even if I wouldn’t suggest that Muncie is the best place to try to be competitive against. Companies have probably figured out by now they can play Anderson off versus Muncie to get even more gigantic incentives.
One only needs to look at the old industrial cities that surround Chicago to see what might happen. Places like Elgin, Joliet, and Aurora were once dying. Now they are thriving hubs in their own right. It’s certainly tougher for places like Anderson, which are smaller and aren’t located next to an economic colossus. But the successful example is out there to study.
Again, as I’ve said before, it is going to have to be Indianapolis that moves first and makes the case for the benefits of expanded regionalization by finding ways to help these smaller cities. I know that the IndyPartnership already does a lot of good regional work. Maybe Mayor Ballard could make himself available as needed to help lobby for a new plant in one of these cities. The city could help integrate attractions like Columbus, Indiana into its tourism materials. Make sure that people flying into the airport for economic development visits to regional places get the VIP welcome (if that’s not already being done). Arrange for Lucas Oil Stadium tours or even see if someone from the Colts organization might be willing to help make the pitch.
When you are the big dog everyone is naturally going to be suspicious. That puts the burden on you to prove your good intentions. My classic example is the 96th St. bridge on the White River. That project was going nowhere. Then Mayor Goldsmith of Indianapolis agreed to pay 50% of the cost, even though by state law it was a Hamilton County responsibility. Then, when the city went to the southside to expand County Line Rd. where it was on the hook for the cost, it had the moral authority to ask for Greenwood’s help.
Again, this won’t be easy and probably isn’t the top priority for anyone. For example, exurban commuting to Indy is a lot less tenable in a high gas price world. But I believe it is absolutely critical to securing the long term future of the state and turning around a lot of these regions that aren’t doing well.
I think Indiana is well placed here because a good chunk of the state is in the orbit of a million plus metro. Places like Illinois have a much worse geography. Ohio is another state where I think a similar approach is warranted because of favorable geography. Many states have one “primate city”. Ohio has the 3C’s and a few other decent sized places like Dayton and Toledo. This has often been viewed as a weakness, because state investments in cities have to be peanut butter spread across all these larger cities. But again, invert the world and stand the problem on its head. Figure out how to make poly-centricity work. Use those multiple nodes that are capable of operating at scale and build regional economic development strategies around them.
Update: For more interesting reading, here’s a European perspective on city-regions. Also, Louisville has an initiative called Wired 65 that is looking at a more broad regional framework for competitiveness from a talent perspective.