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Monday, June 4th, 2012

Replay: A Midwest Megaregion

Note: This post originally appeared on December 13, 2009.

This is the last installment in my series on megaregions. The first was Mega-Skepticism, an earlier take I had the was down on the concept. The second was a review of the book “Megaregions”, edited by Catherine L. Ross.

In this piece I am going to look for potential applications of megaregional geography to the Midwest. Since my blog is about cities, I’ll primarily focus on the large urban aspects.

While there is not a truly hierarchical relationship between cities in the Midwest, it is useful to think of it like a solar system. Chicago is the sun at the center, and the rest of the large cities orbit around it like planets. The smaller cities of the Midwest orbit these other cities in turn like moons, creating a sort of three tier system. Is there a basis of collaboration across these cities (and their rural surroundings and states they are in) that would lead to synergies? Let’s see if we can find some.

Shared Best Practices

It’s no secret that the Midwest has struggled in the global age. Structural economic changes in agriculture and manufacturing have led to serious problems in many places. Not everyplace is doing poorly, but there are plenty of challenges to go around.

In his book “Caught in the Middle“, Richard Longworth not only documented the problems, he showed how these states and communities were basically dealing with the problems as islands. Not only were people not collaborating across state lines, they usually didn’t even know what was going on in the next city. I’ve seen this myself many times. People in places like Indianapolis, Louisville, Cincinnati, St. Louis, and Columbus are almost totally ignorant of what is going on in the other towns in that group.

Since the conditions and problems are similar, there is plenty of scope for sharing the “R&D” costs of looking for solutions. Longworth suggests a Midwest think tank would be a good place to start, and also a Midwest newspaper. Both good ideas.

Politics

Attempting to create a regional political block is one possibility. There are any number of issues affecting the Midwest – trade and industrial policy, environmental rules like cap and trade, transportation, and more – where having a common voice in Washington might be beneficial.

One way to do this would be through a sort of regional legislative caucus. I scanned the list of House caucuses and did not see anything that looked like a Midwest regional caucus, though I did find a “Friends of Liechtenstein” caucus. The closest thing I found was an Automotive Caucus. There’s caucus for Africa’s Great Lakes, but not the Midwest’s.

I don’t want to read too much into these member organizations, but clearly there would be plenty of scope to improve regional coordination on matters of mutual interest. Also, there might be some scope for joint lobbying efforts and that sort of thing.

Transportation

The proposed Midwest high speed rail network is an obvious area of collaboration. Most of the proposed routes span states. They also involve multiple endpoint cities who need to agree on basic things. The governors of the Midwest states have already signed a statement endorsing a plan to coordinate their efforts on high speed rail and agree on a set of priority corridors.

From the standpoint of other modes, I don’t see as much collaboration possibility, other than traditional urban regional projects such as the Ohio River Bridges Project in Louisville. Local transit, airports, and highways seem to be very parochial. It is harder to draw out the common interest and synergies.

The four state study on I-70 dedicated truck lanes is a notable exception. Possibly taking this concept and scaling it up could create a Midwest with a superior freight network – possibly including things like extended trailer-sets and much higher weight limits – that would give it a competitive advantage within the country. If private money built these as toll lanes, even better.

Economic Development

This is a particularly interesting challenge. I would argue that in the golden age of manufacturing, the Midwest was in fact a true megaregion. The Midwest was a true hierarchical system in those days, with twin poles in Chicago and Detroit. There was a true hinterland relationship. It created “agglomeration economics” where the Midwest had natural resources, location, transportation infrastructure, physical and human capital that made it a true cluster in agriculture, automotive and other manufacturing, and metals.

Today that has all broken down as those industries have dramatically shrank. In particular, the global trade regime, very low cost labor, and dramatically lowered transportation costs have reduced the advantage of geographic proximity in these industries. Selected industries like financial and producer services retain the clustering advantage, but within a vastly reduced geographic scope restricted to isolated areas such as Chicago’s central core.

Tridig Banerjee in the “Megaregions” book categorized megaregions as mosaic (mesh) vs. network (hierarchy). The Midwest was a hierarchical network in that framework, similar to my solar system analogy. The question is whether or not there is some class of economic activity for which intra-megaregional geographic proximity is valuable without having to be of the daily face to face sort you find in Chicago’s Loop. In my view, one place to look is in that old hierarchical structure. Can we re-establish some hierarchical subdivision of production that is relevant to the modern age?

I wrote a series of posts in early 2009 called “Reconnecting in the Hinterland” in which I explored this very notion. I started out looking principally at Milwaukee and Indianapolis, the two closest major metros to Chicago. I also made a assumption we had high speed rail connections between the cities. What might this enable us to do that we couldn’t do before?

I identified two possible value points here. The first was expanded labor markets, which I wrote about in my article “Metropolitan Linkages”. The idea here is to target people who seen to be in Chicago semi-regularly (say a day or two per week) for face to face sessions but otherwise live in a place like Indianapolis. Read the original article for full details.

The other was “onshore outsourcing“. The Midwest is a perfect place for BPO in my view. Its small manufacturing cities in particular would make good candidates for service centers. I actually use the example of a finance and accounting center in Danville, Illinois. (With the South Shore connection already in place, South Bend might be a particularly well placed locale for Chicago-centric BPO). I also noted legal services, where lower cost firms in regional cities could partner with Chicago’s large firms to handle the more routine side of some legal matters. I can tell you of at least one reader of my blog who makes a good living as a patent attorney in Fort Wayne from work he gets sourced from Chicago because he is significantly cheaper.

I hypothesize that the Midwest has a unique cost profile. If you plotted the cost of doing business on say one of Richard Florida’s spike charts, I think you’d find a big spike in Chicago that plunges precipitously at its border. Where else in America can you go from a moderately expensive housing market like Chicago to Indianapolis, the cheapest big city housing market in America, in just a three hour drive? Figuring out how to exploit this cost gradient to me looks like the major opportunity area.

Another thing I might suggest is non-compete agreements. Indianapolis already has a fairly successful regional non-compete. Various towns in the metro area have agreed not to offer incentives to existing businesses to relocate within the region unless the current town of residence grants a waiver. I don’t have all the details, but it seems to work well in practice. And towns do in fact offer such waivers. Is there something similar that could be done across regions? It would probably be difficult. I’m not sure it could be done on a state level, but perhaps metro areas could do it, starting on a bilateral basis. It’s something to explore at least.

Education

A good number of the major research universities in the Midwest are already part of the Big Ten conference, so know each other well and get along well in many respects. However, theses universities have programs that overlap heavily and are often directly competitive. Spin-off rules and such seem to privilege local environments.

If there were one game-changer in the Midwest from collaboration, it would probably be some sort of academic specialization, reciprocal in-state tuition, and more geographically generous technology transfer programs. You already see academic specialization and hierarchies within states, where it often works well. I think Indiana’s a great example. However, the prospect of this happening across states seems extremely low. We can always dream though.

Other

The examples above illustrate the principles at work. Go down the list of functional domains in a city and ask if there is a way we can leverage the megaregional geography for something unique it enables. As noted in previous installments, value levers including things like specialization and the division of labor, fixed cost efficiency, diversification, and purchasing/monopoly/cartel power.

I’ve primed the pump with a list. I’d be very interested to hear any additional contributions from all of you, so please add your thoughts on additional applications in the comments.

4 Comments
Topics: Economic Development, Regionalism

4 Responses to “Replay: A Midwest Megaregion”

  1. Matthew Hall says:

    The ‘onshoring’ dynamic and resurgent industrial supply chains have certainly helped the U.S. I do think Ohio wastes a lot of money having so many public universities, though. The University of Cincinnati just announced that it is effectively moving into competition with Ohio State in many areas. That may be good for Cincinnati, but is it good for Ohio?

    “UC will pour $100M into academics” http://communitypress.cincinnati.com/article/AB/20120521/NEWS/305210023/UC-will-pour-100m-into-academics?odyssey=nav%7Chead

  2. Bremen@14th says:

    @Mathew,

    I think Ohio does have challenges with so many Tier 2 and 3 cities competing to have strong Universities. Having a strong public university is very important to the Cincinnati Region and it’s many industries… just like it would be important to Dayton, Toledo, Columbus, Cleveland and Akron. I think it’s going to be very tricky for the state to figure out that funding.

    With State boundaries becoming less and less important it is ever more important to be in a strong region. In Cincinnati you have Northern Kentucky University growing in leaps and bounds trying to catch up with the University of Cincinnati only 10 miles away. Wouldn’t it make more sense for the Northern Kentucky Region to provide funding to UC instead of trying to compete from the other side of a river?

    States seem to be becoming more pointless all the time. City-States make more sense…

  3. Evan Summers says:

    I really like this idea of economic development non-competes. Politicians love stealing businesses from across the street; it does nothing to develop economies.

  4. Pierce says:

    Minnesota has had tuition reciprocity with Wisconsin, North Dakota, South Dakota, and Manitoba for decades now. This allows Minnesota residents to enjoy in-state or very near in-state tuition at public institutions in the aforementioned states. Residents of the other states can also take advantage of in-state tuition at Minnesota institutions.

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