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Sunday, January 10th, 2010

Will Anyone Stand Up For American Industry?

Esau for one morsel of meat sold his birthright. For ye know how that afterward, when he would have inherited the blessing, he was rejected: for he found no place of repentance, though he sought it carefully with tears.” – Hebrews 12:16-17

The Bay Bridge

SF Public Press ran a lengthy article on the Bay Bridge replacement span. It’s an interesting piece, but I was struck by a couple of passages that really drove home to me the erosion of America’s technical and industrial capacity:

Some of the most expensive overhead involves keeping qualified Caltrans engineers and contractors on the ground overseas to ensure bridge components can stand the test of time and the next big earthquake. Much of the steel fabrication and know-how for the self-anchored suspension span—the project’s crown jewel—has been outsourced to at least seven countries: Canada, China, England, Japan, Norway, South Korea and Taiwan. In previous eras it would seem inconceivable that the major steel components for such a project would be built in China, but that is exactly what is happening.

Randy Rentschler, director of legislation and public affairs for the Metropolitan Transportation Commission, the Bay Area’s lead transit planning agency, said the extensive foreign involvement is simply because “we’re just not doing anything anymore as a country.”

Factories big enough to construct the Bay Bridge components were hard to come by in the United States. Were an American fabricator bundled in the winning bid package, it is likely that an entirely new facility would have needed to be built before work could begin.

“No one would have been happier than we if we had had this bridge fabricated in the United States,” Heminger said. “But we also have an obligation to the taxpayer that we spend their money wisely. And I think it says more about the state of the American steel industry than it says about China or Japan.”

A key element of ABF’s winning bid was its steel fabricator, the Shanghai Zhenhua Port Machinery Company (ZPMC), a subsidiary of China Communications Construction Company….While foreign fabrication may be less expensive, it creates problems of its own. For two years, Caltrans and ABF have been sending quality-control inspectors to ZPMC’s plant in Shanghai to oversee construction….Auditors anticipated construction of a new facility—devoted entirely to fabricating the tower—by the following spring and that ZPMC would purchase equipment necessary to comply with manufacturing requirements….Materials auditors expressed concern that “ZPMC does not have the required experience” or knowledge to fabricate this complicated type of bridge….To insure that fabrication meets standards, Caltrans and ABF collectively have 250 inspectors at ZPMC’s facility in Shanghai.

We built the original Bay Bridge – along with other engineering masterworks like the Golden Gate Bridge, the Hoover Dam, and the Empire State Building – in the 1930′s, during the height of the Great Depression. Today, we lack the ability to build the Bay Bridge’s replacement.

This motivated me to write a piece on our need to maintain America’s manufacturing and industrial capability, which is posted over at New Geography. It’s called, “Will Anyone Stand Up for American Industry?

Industrial World Views

There seem to be three primary schools of thought on this matter in America.

  1. Dogmatic Free Trade. This logic says “So what?” to any decline in American manufacturing. In this world view, open markets are always best, regardless of what anyone else does. If the Chinese want to subsidize our bridges, who cares? It’s also pointed out that industrial production in the US has not gone into a downtrend (true) and that most jobs losses are due to productivity gains (true) and that this is a good thing and we should be no more sad about their loss than we are about the huge losses in jobs and job share in agriculture.
  1. Post-Industrialism. This view embraces the knowledge economy and high technology as the future. Manufacturing (except, perhaps, that chimerical “advanced manufacturing”) is seen as yesterday’s news. Focusing on industry is a loser’s game for people who don’t want to adapt to the modern economy. Also included here might be various urbanists who increasingly see industrial uses in cities as a form of blight, and environmentalists who are more or less opposed to all industry on green grounds.
  1. Paleo-Industrialism. This view believes we ought to be trying to preserve the former system of American industry, with large number of high wage jobs for low value added work. This is the view of people who blame NAFTA and free trade for industrial decline and who don’t just like things the way they are, they like them the way they used to be.

It isn’t hard to see from this that there isn’t much of a constituency for industry in America, at least not a viable 21st century version of it. As for those industrial production numbers, a look at the chart show a clear flattening of the chart since 1999.

FYI: This was taken directly from a Federal Reserve publication.

Why Support Manufacturing?

I am a strong and unapologetic believer in free trade. I don’t support protectionism (i.e., import quotas or tariffs designed to protect American firms from more efficient foreign producers). I believe in a world of comparative advantage, where we shouldn’t aim for autarky, and where we need to be realistic that other countries can do certain things better or cheaper than we can, and we should let them. I don’t support traditional industrial policy in the form of picking winners and losers. And I’m not worried about trade deficits per se, nor do I think boosting domestic industry is a jobs panacea.

However, there’s a long way from that to saying we should do nothing to support our own industry when other countries aggressively promote theirs. It doesn’t mean we have to do nothing while other countries manipulate their currencies, or that we shouldn’t do anything to open up other countries’ closed markets, or that we have to allow foreign billionaire controlled firms built through dubious state connections to buy strategic US assets, etc., etc.

And given how well dependence on Middle East oil has worked out for us, it isn’t a huge leap of logic to suggest that we might not want other strategic parts of our economy – such as our ability to construct major infrastructure projects – controlled by or dependent on dubious foreign powers.

Just as one example of thinking differently, how about instead of implementing a disastrous cap and trade regime, we implement a trade neutral carbon tax on products that includes global emissions at all stages of the supply chain, with a deduction for bona fide carbon taxes paid in foreign jurisdictions?

I’m convinced that a major impetus for the offshoring of production is not just cost or traditional comparative advantage, but regulatory arbitrage. In this scenario, the fact that foreign countries are non-democratic or even corrupt isn’t necessarily a problem – and may even be an advantage for firms looking to get deals done. At a minimum we should make sure we aren’t hobbling out own firms here at home.

Manufacturing and Cities

What does this have to do with cities, you might ask. Good question. I’m getting there.

Again, in urbanists circles there appears to be an implicit or even explicit anti-industrial bias. For example, in the NG piece I note how Portland wants to remove an active barge builder from the waterfront to bring in higher class uses like condos. I think even Rust Belt urban advocates often think this way. They see industry, and the paleo-industrial mindset that is often still entrenched, as a relic of the past. They are eager to shed that dowdy image and reinvent themselves as cool knowledge cities and talent magnets.

Also, as people begin coming back into the city, residential development often encroaches on industrial areas, bringing conflict. Mixed us, it seems, only extends to neighborhood retail and office space, not industry. Indeed, there may even be legitimate conflicts between old school heavy industry and residential.

We saw this play out recently in Louisville, Kentucky where residents of a neighborhood called, I kid you not, Butchertown, asked the city to shut down a long established meat packing plant that employs over 1,000 people. The city didn’t do it, but the fact that the residents got a quite a hearing, and that the firm was left to twist in the wind for some time, sends off an unmistakable odor of “bad for business” to industry in that city.

Craft and Specialty Manufacturing

I won’t try to solve this problem entirely in this blog post, but want to focus in again on craft and specialty manufacturing. You may want to read my previous piece on the topic entitled “The New Industrial City.” In it I call for a pro-industrial policy in urban areas based around these. I’ll give a couple examples of these types of businesses and how they are potentially threatened by urban redevelopment.

You may not be familiar with Chicago’s Horween tannery, but you surely know their products. They make the leather for all NFL footballs (not actually pigskin, interestingly) and are also by far the dominant supplier in the world (and one of only a handful of producers anywhere) of shell cordovan leather, which is highly coveted for high end shoes and other products.

Horween is located in the greater Goose Island industrial district along Elston Ave. next to a redi-mix plant. However, a Best Buy anchored complex just opened a stone’s throw away, and as retail development pushes down the Elston strip, it isn’t hard to imagine this land coming under pressure. I’m told the firm has already had many complaints about the odors from their operation. It has been there for about a hundred years.

Another Chicago original is Oxxford Clothes. Oxxford is simply the finest suit maker in America, and the only one whose product commands the respect of the world. Their hand made suits are cut and sewn in house at their headquarters in an old factory building in the West Loop, where residential construction has gone crazy. While I’m not aware that their operation is in any danger, their tax bill at a minimum has to be going through the roof.

These are just two super high end products that are actually manufactured in Chicago. Horween leather and Oxxford suits rank up there with the best Italy has to offer. They are true handcrafted, specialty products. But they are both in the cross-hairs of gentrification. Again, I don’t want to start a panic or claim either of them are on the way out. But clearly they are in neighborhoods undergoing radical change.

Urban Manufacturing Ecosystems

But beyond just losing the production of products with cachet, the loss of specialty supplier companies to some extent robs the city of being able to incubate different types of new businesses. In her book The Economy of Cities, Jane Jacobs noted that the proximity to suppliers played a key role in where businesses located. She related an anecdote about an acquaintance who went through just that sort of process:

My acquaintance could start another company producing something different, anywhere but in California. He decided to produce the amplifiers, and to sell them nationally from the first. Thus he did not have to be concerned about a local market for his product and he could choose any location that struck his fancy as long as it provided the goods and services his new company would need to get started. During a three-month scouting trip he visited more than twenty cities with the result that he found his choices more limited than he had anticipated…Only Chicago, Baltimore, Boston, and New York offered the goods and services – many of them highly technical – that he required.

Obviously the internet and modern logistics make virtual supply chains much more feasible today. But there are still benefits to having expertise and suppliers close at hand. It should be no surprise that Los Angeles is where the stylish and inexpensive clothing line American Apparel is based. LA already had a significant garment manufacturing industry. LA is also home to the production of many high end denim lines, among other fashion products. New York as well famously has its garment district, and often close working relationships between fashion designers and fabricators. Brands like Engineered Garments carry the “Made in New York” label.

A recent article that I unfortunately did not save talked about the challenges Chicago had in trying to build an indigenous fashion design industry. In addition to the difficulty of trying to break into a field with already dominant players, the lack of fabricators in Chicago was cited as a problem. Chicago simply lacks a complete ecosystem for fashion. (Unsurprisingly, Oxxford does all their work in house)

The Agricultural Analogy

Agriculture seems to be further ahead than manufacturing. There is already significant mindshare around organic and regional foods. Books like Home Grown Indiana document the burgeoning scene. Farmers markets are going crazy in America, as are specialty groceries like Goose the Market. Microbreweries, now nearly ubiquitous in America, are in the same line. There are more and more local processed food producers, in house charcuterie operations, etc. There is significant awareness of the distance food has traveled from farm to market. There is a developing ecosystem that is actually starting to relink cities to their rural hinterlands. It’s not a huge employment or economic base yet, but it is getting there.

I would like to see something analogous happen on the product side.

Why High End Products?

The products I am discussing in this post tend to higher end specialty or luxury products. Of what relevance is this to the broader economy, one might ask.

For things like organic and locally sourced foods or other artisanal and craft products, they are often targeted and marketed as luxury products today. However, there’s room to believe they could be more mass market tomorrow. Many product categories started out as luxury products for the rich such as automobiles and flat screen TV’s. But eventually scale economics won out.

Products that are truly hand crafted will likely always be somewhat pricey due to the increasing scarcity value of human labor. But it is easy to see how the values embodied in them could be applied to more mass market products. Especially for food, many people associated with that movement are interested in promoting broader changes in the American diet and lifestyle. That can only be done by getting to the right price points and volume.

Of course, that might again lead to offshoring, but there is a lifecycle to these things. Nevertheless, I feel we ought to take a balanced view of urban economies, one that embraces, protects, and champions a 21st century manufacturing industry.

What Others Are Saying

There has been quite a bit written on this topic elsewhere.

Paul Krugman devoted a column to Chinese mercantilist policies. Regardless of whether you like or dislike his politics, Krugman is a first rate economist.

The January 2010 edition of the politically left American Prospect has a special section on manufacturing:

Ryan Avent, writing in the Economist, takes a dim view of all this hand wringing.

He also pointed me at some articles on this topic by Noam Scheiber in the New Republic:

As always, I don’t endorse what all these people say, but am trying to present interesting points of view.

Post-Script

As a post-script, I snapped this photo while at an open house at the Columbia Club in Indianapolis, traditionally the most important Republican city club in town. It was founded around helping to elect local Benjamin Harrison president. It is apparently a piece of campaign paraphernalia for his candidacy.

20 Comments
Topics: Economic Development, Globalization, Public Policy, Technology, Transportation
Cities: Chicago, San Francisco

20 Responses to “Will Anyone Stand Up For American Industry?”

  1. James Mellon says:

    I guess my main question is: do you think N. American cities can develop an industrial sector that is naturally competitive as opposed to dependent on the positional value upper middle class urbanites derive from it?

    It’s all well and good to get niche manufacturing making things Yuppies will pay a premium to buy “locally” (i.e. luxury bicycle equipment), but I don’t see how this addresses more macroeconomic gaps in industrial capability such as the high strength steel needed for the Bay Bridge or persistent balance of trade deficits.

    In terms of regulation, I can just about guarantee that any “resident’s group” worth it’s salt would have an aneurysm if someone proposed building a large scale steel facility anywhere in a major N. American metropolis. Just like I can guarantee that all the fashionable “locavores” would bust a spleen at the thought of a full scale commercial farm being anywhere near them (“what’s that smell?!?!”).

    I can’t help but feel that most manufacturing (and agriculture) that can’t derive high levels of value from its location* should locate to more remote periurban, purpose built clusters where externalities like noise levels or street effects and low upward pressure on land values from things like retail or residential.

    * In Toronto, the old railcar roundhouse immediately opposite Downtown attracted a fairly large brewery. It can rent out parts of the facility to corporate events (and it’s right downtown, so it gets good traffic) and gets good publicity from it. It’s close to all the major entertainment districts, so it’s got easy deliveries. Even then though, the only way it worked was because muni heritage regs made the building worthless to 99% of the City so Steamwhistle could pick it up at discount prices while all it’s neighbors became large scale luxury condos. The Brewery shares the facility with a discount furniture outlet. Not exactly value creation…

  2. david vartanoff says:

    FWIW the soon to be shuttered NUMMI plant in Fremont CA has operated efficiently as the only UAW represented plant managed by Toyota for 20+ years. Tom Peters once praised it as the best run auto facility in North America. Seems obvious that Toyota is using GM’s pullout as the opportunity to return to fully non-union status. That notwithstanding, the fact that Toyota management was able to manufacture price competitive products at union scale speaks volumes about American incompetence/disinterest in learning how to function in an unfixed market.

  3. Ziggy says:

    I think what this post and others that have popped up lately on other blogs point to the unprecedented ability of governments to create markets — and, by extension, to help destroy them.

    The travel section of today’s NY Times lists \The 31 Places to Go in 2010.\ At number 20 is Shenzhen, described as \one of China’s wealthiest cities.\ Forty years ago it would not have been listed because it was only in 1979 that Deng Xiaoping \selected the sleepy fishing port as a special economic zone.\ But, you could have visited Detroit, already past its peak population but hardly the hallowed out metropolis it has become.

    Shenzhen grew because of federal policy decisions and intense financial investments. Detroit and other rustbelt cities have declined precipitously because of federal trade policies and the absence of compensating financial investments.

    We know who the ultimate beneficiaries in this country have been of the policies that have allowed jobs paying a sustainable wage to be offshored to countries like China, the supposed \peoples republic\ that made toxic working conditions a patriotic obligation of its people in order to enter the industrial age en masse.

    That Wall Street and global corporations have prospered through the market-making powers of our federal government should come as no surprise. Here in Illinois we decry the shame of pay to play politics, but that is indeed what our federal government has become as well. The political classes of both parties and their dues paying benefactors feed at our government’s trough through favorable policies and/or direct financial support enabled by political campaign contributions.

    It’s not so much that Midwest’s Main Street rank and file are sheep. It’s that we’ve lost our political representation, and so have lost our voice at the place where the most significant decisions are being made. Perhaps it’s not so much the loss of jobs that hurts as it is the void in favorable federal market making investments to help replace what was lost.

    I think what the discussion about industrial policy points to is the need for a broader discussion about the ability of government’s, at all levels, to make or break markets. The notion of \free markets\ is often a myth. Governments, especially the federal government, play a leading role in determining the winners the losers. Government is suppose to be us, but that doesn’t seem to be the case right now. Thanks to the internet and its ability to support a transparent dialogue, that’s become clearer with each passing day.

  4. Alon Levy says:

    Aaron, the problem with doing construction work locally is that it’s really expensive. What happens is that the local government agency outsources the planning to a consultancy firm, which German railroad expert Hans-Joachim Zierke claims doubles construction costs. The relevant government regulations are often outdated as well, raising costs regardless of who gets to build the project; in such an environment, staying within budget is especially difficult with local contractors.

    There are things the US is good at – just none that involves public works or auto manufacturing. The commenters on Noam Schreiber’s article mention the semiconductor industry. In general, the US is strong in hi-tech, especially biotech and software. It has advantage over Europe and Japan in that it speaks English and is more culturally familiar worldwide, which means that by default it gobbles talented people of Russia and India and China (or at least did until 9/11 – alas, identifying terrorists without harassing civilians is not one of America’s strengths). I’ve read that half the people who start companies in Silicon Valley are immigrants. This is something that could not happen in today’s Japan, where the political elite openly says a national dying out would be better than admitting more immigrants.

  5. David says:

    “We saw this play out recently in Louisville, Kentucky where residents of a neighborhood called, I kid you not, Butchertown, asked the city to shut down a long established meat packing plant that employs over 1,000 people. The city didn’t do it, but the fact that the residents got a quite a hearing, and that the firm was left to twist in the wind for some time, sends off an unmistakable odor of “bad for business” to industry in that city.”

    - do your homework and you would see the residents complaint were specific to the ‘oder’. Also, announcements by Ford and GE would suggest the winds are blowing very favorably for business/manufacturing in Louisville.

  6. The Maglev (magnetically levitated train) was in vented in America and built in China, Japan, and Germany, but not in the US. Please read my Op-Ed piece that appeared in Long Island’s Newsday in December

    Maglev-A Vision of Future Transportation Newsday Dec 4th 2009

    Two hundred seventy miles per hour was the reading on the digital speed indicator as we swiftly moved from Shanghais to the airport. We were riding the Maglev in China.
    The Maglev is a transportation system that travels on a dedicated guideway and is supported by a magnetic field and moves without mechanical friction. The result is a very quiet, efficient, and fast mode of transportation.

    The Chinese Maglev was the product of an effort that was made on Long Island by Drs. Gordon Danby and James Powell while they were working at Brookhaven National Laboratories. The Germans built this Maglev train, employing the inventors as consultants.

    There is a version of the technology that has been built in Japan as well, also inspired by the inventions of Danby and Powell. It is remarkably successful. The Japanese version has carried many thousands of passengers and has recorded its highest speed of 361 MPH. Japan is now building a 300 mile link connecting Tokyo and Osaka. They plan on being able to move 100,000 passengers per day at 300 MPH.

    Senator Patrick Moynihan passed a bill in the Senate in the early 90’s that provided $750 million for the testing and building of the first Maglev in America. But corresponding legislation was killed in the House of Representatives because of the pressure created by various interests including, airlines, truckers and auto manufacturers.

    Creating a working American Maglev is a matter of national pride. It is also a matter of not letting an economic opportunity slip through our fingers. If we do not manufacture enough of the world’s important technology, we will be beholding to those countries that do. In the process we lose the high skilled, high paid jobs that the American worker has proved that he or she can do. We can’t afford to lose that segment of our society. We need to create those jobs again.

    America has an extensive rail network. That network and right-of-ways are an incredible resource. We can move freight on that network using Maglev, and we can do it inexpensively. In fact we can move entire tractor-trailers in aerodynamic envelopes across the country at 300 MPH and save $3,000 worth of fuel and tolls. The trip will take less than a day and deliver a refreshed driver on the other end. The trip will be half the cost to the trucker , and profitable to the Maglev owners.

    This is a more advanced Maglev system than the first generation system now operating in Japan and China. The cost of making this new system is a fraction of the cost of those versions. The Chinese Maglev floats on a magnetic cushion that has very critical clearances (about ½ inch). The process of building that system is costly and time consuming.

    Danby and Powell have never stopped improving their Maglev design. Their second generation superconducting Maglev system allows the vehicle to float 4 ½” to 6” above a guideway. That system can be built in a factory and shipped by truck to a construction site, and be quickly erected using ordinary cranes. The higher clearances allow the vehicle to operate in ice storms, and snowstorms. Another innovation that Danby and Powell have solved is the compatibility with existing rail tracks. The modification is low in cost and allows conventional trains to operate alternately.

    This project will take as long as Eisenhower’s Interstate Highway System. There will be jobs created on a long-term basis. We project Maglev manufacturing, and guideway fabrication will extend thirty years out, and all of that investment can be privately funded because it will be profitable. Presently the inventors and the Town of Riverhead have government grant in process to prove the new technology an a three mile track at Calverton

    Ernest M. Fazio, Director of Communications- Maglev 2000 and Chairman of Long Island Metro Business Action (formerly Long Island MidSuffolk Business Action)

  7. Christine Romesburg says:

    The author’s comments about recent events in Butchertown are incomplete and factually inaccurate. Here is the rest of the story.

    Butchertown is located in downtown Louisville. The neighborhood association, which is comprised of businesses and residents alike, requested the hearing because the manufacturer violated its conditional use permit by carrying out an unauthorized expansion of their structure. Clearly, the company’s failure to obtain proper permits in order to expand their facility is a concern for everyone who lives and works and has to breathe in the neighborhood.

    We did not ask, not once, that the manufacturer shut its doors. Rather, the hearing was to determine if a penalty would be imposed. From what I understand, the legal statute they violated provides only one remedy and that is to revoke the permit. This is not to say the company would close its doors, rather, they would apply for a new permit, or possibly relocate to a new location (in the local area)—the city and company have been working towards this end for 15 years, and this is an integral part of the city’s neighborhood strategic plan.

    In short, the hearing occurred because the company broke the law, not because, as you claim, the residents wanted to shut the company down. It’s such an obvious law that they broke, too. Everybody knows you need a building permit to add-on to an existing structure, or at minimum to investigate whether you’re required to get one.

    Last year, the company violated air pollution standards and was fined $48K which is a mere drop in the bucket for the $10B Brazilian corporation that posts profits of hundreds of millions of dollars quarterly. Clearly, the manufacturer has found it’s more profitable to break the law than to follow it. I think this is the message the city is sending industry.

    What can the 760 residents and 5,000 people who work in the neighborhood do but ask the city to ensure this corporate menace is compliant with the law. I mean, we’re talking about the air we breathe for heavens sake!

  8. Alon Levy says:

    I’m not familiar with the Louisville case, but I am somewhat familiar with the history of separate-use and mixed-use zoning. Separate-use zoning came about as a solution to industrial pollution in residential neighborhoods. Mixed-use zoning is a reaction to the fact that separate-use zoning bans many non-polluting uses in residential areas, such as retail and office buildings. Jane Jacobs brings up bakeries as an example of acceptable activity in residential areas that zoning laws nonetheless ban, arguing that only polluting industries should be excluded from where people live.

  9. I always appreciate your insights, Aaron, and this post is no exception. I do spend most of my time with urbanists, however, and don’t see nearly as much evidence as you do of anti-manufacturing bias among those who are serious about what they do (although that’s not to say there aren’t growing NIMBY pressures that force cities to manage where industry expands.)

    I worked with John Norquist in Milwaukee, where city economic development and planning policies helped condos, shops and mixed-use development enliven riverfront loft districts. But there was still a major push to reclaim the city’s moribund center of heavy industry, the Menomonee Valley, as a renewed manufacturing center. The return of manunfacturing there has been quite robust, speeded by a vision for jobs co-existing with bike trails and reclaimed wetlands and riverfront. Mayor Tom Barrett is now doubling down on a similar plan for a vast tract on the north side abandoned by AO Smith/Tower Automotive, part of a vision for a spine of manufacturing running along the 30th Street Corridor that includes Eaton Corp., Master Lock and others. I’d expect you’d find similar things happening in a lot of cities.

    As you know, there’s an evolution that occurs in city neighborhoods as some former loft and multi-story factory buildings become less attractive to manufacturers and incredibly more attractive to residents attracted to urban life. Although it’s important for cities to capitalize on the immense potential for building value and vibrancy in places like the Pearl District in Portland or Historic Third Ward in Milwaukee, providing settings and incentives for good job creation (never overlooking engineering and manufacturing) is the bread-and-butter of any successful urban politician and urbanist, especially in cities where jobs and growth aren’t abundant.

  10. Roland S says:

    >>>I can’t help but feel that most manufacturing (and agriculture) that can’t derive high levels of value from its location* should locate to more remote periurban, purpose built clusters where externalities like noise levels or street effects and low upward pressure on land values from things like retail or residential.<<<

    Couldn't agree more. I realize the hazards of taking economics lessons from an architecture firm, but the Danish firm BIG made a good point when designing a Baltic Sea port. Increasingly in Europe as well as in America, former industrial areas in the inner-city have gained value.

    Partly, this is cultural, as people appreciate the architecture of 1800s warehouses and factories, but it's also socioeconomic – the low land prices, isolation from existing (and possibly dangerous/crime-ridden) residential areas, and large square footage of these large industrial districts allow them to be refashioned into whole new communities, with residences, shopping, and workplaces where upper-class people can enjoy urban living without having to worry about integrating themselves into a community where they are not welcome.

    Racist or not, people like to live among their own kind. In most cities, this means creating large new communities on brownfield sites – gentrification is too slow to produce the large-scale transformation that lures upper-class people. Only New York, Chicago, and a few other cities have enough gays, hipsters, etc. to overwhelm residential neighborhoods and create upper-class communities through rapid gentrification.

    The result of all this is that the urban brownfield sites that saw emergence of America's industrial might are now too valuable to use for industrial purposes, which is why government intervention is often needed to preserve manufacturing in cities (Chicago's PMDs, for example).

    I do think that America needs to do a better job of caring for industry, but that industry should not be in cities. Governments need to embrace a policy of encouraging/allowing industry to relocate from urban to suburban areas to allow for the greatest improvement both to the growth of urban wealthy areas and the growth of employment in suburban areas. These suburban areas offer the same supply-chain benefits of the cities and often better road or rail access.

  11. west town ed says:

    At various times I have lived just east of the Clyborne/Elston Avenue/Goose Island Planned Manufacturing Districts (PMD) and I now live just north of Chicago Avenue where they begin. I certainly have no beef with the new businesses that have been created on Goose Island between Chicago and North Avenue, they have produced not only jobs but provide much needed services for the economy of the central city and the north side of Chicago.

    On the other hand; if you’ve ever taken one of the marvelous Chicago Architectural Foundation river boat tours, you know that they travel north to Chicago Avenue then turn around and head back south. The reason is that from that point on, you have to be interested in 19th century industries to continue. This is not so much case for Goose Island which has managed to attract “clean” businesses but once you are north of North Avenue, a river cruise would provide only the back sides of big box retailers and the horrors of a steel recycling business. Until you are north of Armitage a river cruise should issue gas masks and a sleep mask to save your finer senses.

    It ain’t pretty, visually or otherwise.

    The Lincoln Park area of Chicago is one of the most exclusive and expensive neighborhoods in the country. A single family house will cost you 7 or 8 figures, a small condo, maybe, $250,000. And if you live, as I did, what you get for your money is a next-door mini-mill (Finkl Steel) and a leather tannery. Finkl Steel is a pretty quiet place but it’s input needs to be shredded and this shredding provides noisy explosions and fine steel filings that drift throughout the area. You tend to keep the windows closed so this debris doesn’t filter in but also to keep the odor of the tannery out. I wish I could bottle the smell of a tannery so you could appreciate how horrible it is.

    And why? Finkl Steel was bought by a Canadian company (?) and will be relocating their facility to a one-time industrial area on the south side and will, presumably, sell their acreage on the north side. As far as I can tell, the metal recycling facility will remain where it is, on a half mile stretch of the Chicago River from North Avenue to Armitage.

    Chicago has hundreds of acres of ex-industrial, read brown field sites, Finkl Steel is moving there, with I’m sure, many incentives from the city.

    Why not move the tannery? Why not move the metal recycling facility to where it’s most needed?

    As a final note, the biggest effect of the north side PMD’s (except for Goose Island) is that the one-time industrial buildings have not been converted to residential lofts (which was the great fear at the time) but have been either adapted for retail use or torn down to provide space for retail use.

    I hope I don’t come off as judgmental about urban industrial policy — if I do I apologize. I only wish to report what I see and have seen about me.

  12. stunoland says:

    With respect to Louisville’s Butchertown neighborhood and Swift please read the coverage of http://www.Brokensidewalk.com before you make uninformed statements like the one in this post. Also as a resident of east downtown Louisville I can assure that the odors from Swift’s meat swine processing effect more than Butchertown. In my neighborhood there is pretty much a little bit of everything: residential (single family houses, Condos, and apartments), retail, and industrial. In my experience all stakeholders seem to want to improve the livability of the neighborhood except for the industrial tennants. industry has no incentive to plant street trees, replace ugly fences, or to generally improve their properties. So they invest as little as possible into their properties except maybe “upgrading” a chain link fence to have razor wire. Their employees essentially get the message that the company is trying to discourage the concerned stakeholders in the neighborhood and act accordingly by throwing their trash all over the surrounding properties. I really don’t have a problem with industry in urban areas in theory, except for industries with an unacceptable level of externalities (Meat Processing for instance), but in practice it seems to break down. What can be done to incentive industries in urban areas to be better neighbors?

  13. Pete from Baltimore says:

    MR Renn : Thank you for the interesting article and also for the links. I do appreciate the fact that you are willing to link to articles that you disagree with.

    One thing that always bothers me is the fact that the few times the President,Congress, or any politician ,seems to meet with someone from the industrial sector ,it usually is someone like the auto exectutives .Excuse me for being blunt , but these guys helped run their companies into the ground.They are failures.

    Just for once i would like to see Congress and/or the President meet small scale manufacureres that still make things in America .And WITHOUT taxpayer handouts! I would like for the politicians to ask the manufacurers how they are able to keep production in America.And what could be done to keep more production in America.They could also ask them what their biggest problems are. And what the government [whether National,State or local] could do to help .Or how it could keep out of the way.After all, these small scale company owners are the real experts on these things.

    My point is that our politicians should listen to people that actually DO succeed, instead of big companies that have lawers for CEO’S and who alway seem to be looking for a handout from the taxpayers.

    I also wish that some of our mayors would talk to these small businessmen/women. Instead of just talking to big campaign contributers and/or the big companies that only inhabit the downtown areas, and not the actuall neighborhoods.

    Many people say that it is impossible for things to be made in America nowdays.Yet i use an “Eastwing” hammer everyday that is made in America. And the chisel that i sometime use was actually made in Baltimore! It was made by a small company called “Baltimore Toolworks”. I would more curious to hear what that company owner had to say than one of the auto exectutive.

    I simply wish that our politicians would listen to some of the SUCCESFUL company owners instead of just the failures.

  14. Thanks for the comments, everyone.

    James Mellon, I don’t want to suggest that the type of products I blogged about are the only things we can manufacture. Germany and Japan show that relatively high cost industrial nations can make a range of things successfully. Obviously, they’ve got their own deindustrialized zones and I won’t say focusing on manufacturing is a Rust Belt turnaround strategy or anything.

    Your mention of steel mills interesting. There are heavy industrial zones in America, but when people want to put things in them, they are, in fact opposed. That’s actually the anti-industrial mindset I’m talking about.

  15. Steve, appreciate the insights from Milwaukee, which I don’t know well enough to comment on. From what I’ve seen, cities do have various industrial parks that they try to preserve. But the vision doesn’t extend much beyond that. Not to pick on you, but a search for “manufacturing” on CNU’s web site turned up almost nothing (manufacturing of New Urbanist developments, housing on old manufacturing sites, etc). You rarely see any urban advocacy groups that aren’t manufacturing specific that ever even mention it. So perhaps even where there’s no overt hostility, there’s limited mind share for. (Contrast the endless writings on bike lanes, transit, reclaimed waterfronts, tearing down freeways, new condods, etc).

  16. west town ed, you are certainly entitled to share your views. As I’ve always said, I welcome people who feel differently. Part of what I want to do here is provoke discussion of these issues.

    When I first moved to Lincoln Park in 1992, only the area east of Racine was high dollar value property. The explosion of high rend residential and retail in proximity to the Goose Island corridor is of recent origin. One would think that before buying a million dollar home, one might do some due diligence in the area one is moving. It’s like saying you didn’t know the L was right behind your house. All of these businesses were there long before most of the residents. Remember, it was not long ago that North Ave. and the bridge would be the place to go to grab a hooker off the street.

    Perhaps with enough incentives, you could get the companies relocated (no net job creation). But plenty of places have even outright folded.

    Vienna Beef at one point threatened to simply close up shop if a new housing project were approve near them.

  17. Christine Romesburg, I’m reminded of many a suburban planning meeting. Seldom if ever does a resident stand up and say, “I don’t want any development”. No. Instead, it is always some particular concern about the proposal at hand. Every proposal, it seems, has something wrong with it.

    You almost made it. You were on message about the variance being the issue – right up until the point where you called the plant a “corporate menace”.

    Again, there’s a reason that neighborhood is called Butchertown – and it ain’t the corner meat market.

    By the way, that plant is important in a way you might not understand. Like most city-county mergers, Louisville has the concept of an urban service district. So only taxable property inside the old city limits goes to pay for some services there. If that plant moves out the “county”, there’s a net tax base loss to the urban core – and that matters to residential tax bills.

  18. Curt says:

    Aaron, I had a long thought on this from a personal perspective. Instead, I will post a thought and it is this. What would you say about our country’s ability to get caught up in multiple layers of the process. Layers such as concept, approval, outsourcing to approved entities, etc. I have a feeling, just experiencing the modern corporate grind of today, that our government can hold us back in that aspect. I have a feeling that other countries may “strong arm” their way into having companies build products.

    The somewhat comedic part about the above posts was the incapability of the supplier to build the product. I have a feeling that this happens A LOT with offshore companies.

  19. Wad says:

    James Mellon wrote:

    It’s all well and good to get niche manufacturing making things Yuppies will pay a premium to buy “locally” … , but I don’t see how this addresses more macroeconomic gaps in industrial capability such as the high strength steel needed for the Bay Bridge or persistent balance of trade deficits.

    What you’re seeing is the cycle of import replacement starting in its earliest stages.

    The yuppie economy is not going to help our macroindustrial processes. Not yet.

    The high-value goods serve a market that is in a reaction to the factory-and-Wal-Mart model that is the modern consumer economy. The question is what will happen to it in 25 years — the next generation.

    The initial reaction is a middle finger to mass marketing and mass consumption. So, the enterprises are every bit as solipsistic as they are idealistic.

    What happens as time goes on? Very few of the businesses will end up becoming institutions that can essentially run off their legend. The next category is where the businesses rode a fad or a demographic niche that ran dry. The third category is reinvention and repurposing.

    This is where a different party takes over the business and decides to run it his or her own way. While the previous owner may not have wanted to become a mass-market icon, the new owners realize what a gold mine they have.

    In this case, growth requires the transfer of lower-value functions to lower-value environments. Previously, this had been done in the hinterlands near a major city. Now, the theory is, lower-value processes can be produced anywhere in the world.

    This is the process where a local market item can become the component of macroeconomic policy.

  20. Christine Romesburg says:

    Urbanophile, I’m not arguing that they should move; rather that they just follow the law. It’s that simple.

    And for the reason Butchertown got its name, it surely was not for the $10B multi-national corporation that currently slaughters 10,000 pigs a day within neighborhood limits. This historic neighborhood significantly outdates the company’s earliest traceable roots. Instead, it was named for the dozens of German immigrants that operated butcher shops in their backyards 100 years prior. Unfortunately, the very word “Butchertown” conjures—not the neighborhoods history or heritage—but thoughts of grotesque odors spewing from the Swift plants rendering operations.

    And yet our housing values remain strong. With each year, more and more housing units are added and previously unlivable houses are restored. People want to live downtown, and more and more people are calling Butchertown—with the wide array of housing with everything from low-cost dwellings to luxurious ones—home. Businesses, too, move here.

    It’s foolish to suggest we should tolerate grotesque odors and irresponsible manufacturing because of our neighborhood’s name. 200 years ago, blood from our earliest butcher shops flowed to a creek where residents collected fat in the winter to make candles. 150 years later, disgusting and unhealthy odors spewing from the plant’s operations were considered an acceptable consequence of doing business. Time has, and will continue to, prove spillover effects from polluting and irresponsible industry to be unacceptable, and I can’t imagine Swift will have a future in Butchertown unless they choose to reduce their spillover effects on the environment. It is entirely up to them.

    I’m not responding to the tax issue because it is irrelevant, other than to say that for the last 20 years the city and plant have been negotiating a move to a more suitable location within the city limits that would save both jobs and the tax-base.

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