Thursday, October 3rd, 2013

The Rise and Rise of the Global City

Back in 2008 I posted a piece called “Corporate Headquarters and the Global City” in which I observed that global cities, which had previously been defined in terms of financial and producer services firms by Saskia Sassen, were now starting to attract corporate headquarters back as well. These weren’t the old traditional HQ’s, but rather what I called an “executive headquarters” consisting of just the top people.

We see another example of that in the case of Archer Daniels Midland, the agribusiness concern. ADM is currently based in Decatur, IL but is planning to relocate its headquarters. It’s nominally a bake off but Chicago is the odds on favorite and I would expect them to win. Beyond the jobs, which at 100 would be fairly small, this would a nice HQ for the city to have. ADM is a marquee name.

Additionally, Chicago tech startup Braintree, a payments engine, recently announced its acquisition by Ebay/Pay Pal for $800 million. That’s a nice exit. Some people had predicted even bigger things for them, but if someone offers you enough money up front, there’s no shame in taking it! In a bit of further good news for the city, Chicago managed to lure a 10,000 delegate convention from Indy after implementing much-needed work rule changes at McCormick Place.

I could go on, but these few recent news items show that the global city side of Chicago continues to hum along apace. Yet all of this takes place against the backdrop of serious and severe problems in the “other Chicago.” For example, 13 people were recently shot in a park. The long term finances of the city are terrifying and Illinois seems incapable of getting its act together on pensions. And so on.

What does global city Chicago make of all this background? Apparently nothing. That’s not to say no one cares, but it would appear that none of the problems have affected the business climate or attractiveness of Chicago’s global city side at all. Even the prospect of a municipal financial trauma seems not to worry ADM.

Indeed, if you simply come to Chicago as a tourist, you’d probably never know there were any problems at all, at least if you don’t check the news. I was there a couple weeks ago and the Loop and North Side were pulsing with life. You would have thought I was in a boom town. And in a sense that’s right.

Some may say, “Aaron, weren’t you the one who said Chicago wasn’t a global city?” To which I’d respond, I’ve always said Chicago is a global city. I only think that the global city side of Chicago is not sufficient to carry the load for this gigantic region and state. It can’t even carry just the city, though to be fair if you broke off global city Chicago into a standalone municipality of 600-800,000 like San Francisco, Boston, and DC, it would be a very different story, at the municipal level at least.

Even back in the 90s Sassen had noted that globalization tended to detach the global city from its hinterland. However, for a place like Chicago, I had always thought that the two halves of the city would remain linked because global city Chicago would realize that an implosion elsewhere would eventually drag it down to.

But would it? Other than public finances, it’s tough to see trends in most other areas getting materially worse than they are now in the other Chicago. Yet it seems to be having little to no effect on the attractiveness or success of the global city. It’s like a multi-stage rocket separating. The smaller upper stage is rocketing up higher and higher while the larger earlier stage is falling back to earth and burning up on re-entry. But there’s no longer a connection of shared interests holding them together.

One troubling question: what happens when global city Chicago realizes there’s a good chance it can simply let the rest of the city fail and get on with its business? One can argue it’s already happening, but I’ll save that for a future post.

14 Comments
Topics: Economic Development, Globalization
Cities: Chicago

14 Responses to “The Rise and Rise of the Global City”

  1. Tone says:

    While it’s fun to bring up 13 people being shot in Back of the Yards, it really has no bearing for 95% of Chicagoans. The homicides issue in most cities of the US is highly concentrated to effect gang members in minority groups. In Chicago this year something like 250 homicide victims are African American, 50 are hispanic, 5 are white. The vast majority are young black and hispanic men in gangs.

    Unfortunately I have no idea how Chicago can stop gang members from killing each other.

  2. Matthew hall says:

    so you think aron enjoys talking about crime in Chicago? why?

  3. Cleanthes says:

    I don’t know that simply ignoring the public finances is an option. If Global City Chicago continues to be successful, there will likely be a great deal of pressure put on it from the state and the poorer areas surrounding it to alleviate some of the suffering. It seems to me that the more aloof it acts, the more likely it will stir resentment.

  4. Rob Paral says:

    At a gathering in Chicago I recently listened to a very respectable and smart corporate leader comment on what the struggling school system means to corporate relocations. He said he didn’t think it meant much, because people can always go private or go to wealthy suburban districts.

    I thought he nailed on the head the fact of how families of means can indeed insulate themselves very effectively in Chicago.

  5. Chicago Dan says:

    My aunt and uncle recently visited and before they arrived, they joked that they were packing their teflon vests (it had been almost a decade since they last visited Chicago). When they got here, they couldn’t believe how far off their expectations were from reality.

    It made me reflect on how Chicago really is a tale of two cities. I just don’t know what the solution to the violence problem is anymore. Politically I lean left, but I often wonder if the right doesn’t also have some valid points. So far the solution is to sit back and let them kill each other, which has been devastatingly “effective”. Is it easy access to guns? Too few/many social programs? Generational poverty? Education? Failure of leadership? Cultural? All of the above? None of the above? I just don’t know what the answer is anymore.

  6. Tone says:

    2.Matthew hall says:
    October 3, 2013 at 11:38 am
    so you think aron enjoys talking about crime in Chicago? why?

    Snark or stupid?

  7. Tone says:

    5.Chicago Dan says:
    October 3, 2013 at 11:59 am
    “Is it easy access to guns? Too few/many social programs? Generational poverty? Education? Failure of leadership? Cultural? All of the above?”

    Definitely all of the above.

  8. Eric says:

    Regarding crime in Chicago, it’s a problem, but it’s not a bigger problem than in most cities; Chicago has an average homicide rate and it’s lower than D.C.’s, Atlannta’s, Miami’s or Houston’s. D.C. is the new Second City, right?

    I think Aaron’s post is great, but if an informed person brings up Chicago crime as being an issue, I think it means they are floundering for a negative talking point to fill out a list.

    On the other hand, the *messaging* around homicides in Chicago is a very real problem. Most people are not well informed. And even if they have a basic understanding or magnitudes versus rates, any city that has the *most* of something becomes a very easy talking point.

  9. the urban politician says:

    The crime issue in Chicago is overblown in its impact on the city, for the same reasons mentioned above by others: it is a phenomenon largely isolated to certain census tracts, the same types of census tracts which happen to be suffering from the same thing in other cities & metros. The overall region is not impacted by murders any more than any other region.

    And a majority of the Chicago region (and still many parts of the city) are still solidly middle class. Yes, there is a “spiky” Chicago downtown and on the north lake front, perhaps in parts of the North Shore as well as some western suburbs, but most of the region is neither glimmering with wealth nor falling apart in a sea of gangland warfare.

    So lets get some perspective: Urbanophile is only talking about the extremes here, not the majority of the metropolitan area.

  10. Paul Lambie says:

    To urb pol: I think Aaron’s point is based upon the extremes and the widening gulf between the two in the City of Chicago. It sounds like you are referring to the whole region, whereas he is talking about the cultural divide between rich and poor in the City, where I suspect the middle class has disappeared, or is rapidly disappearing. The analogy about the multi-stage rocket is a good one.

  11. I guess I shouldn’t be surprised to see some people acting like murders are no big deal. That seems to be the party line. I think there are far more than a handful of struggling blocks. Vast tracts of the south and west sides are really struggling economically and in other ways quite apart from violence.

    I agree that a handful of super-violent areas shouldn’t define a city. However, I was surprised that a significant area had not seen much in the way of safety improvements based on Daniel Hertz’s analysis. Additionally, the murder situation in Chicago has continued to receive national and international press, yet seems not to have hurt the city’s reputation.

    Additionally, things like the finances should have a broader impact, in theory. The key is, they aren’t.

  12. the urban politician says:

    Aaron, I am not downplaying the fact that the murders are terrible. My point to you and to Paul is that it no longer makes any sense to view Chicago city proper outside of its metropolitan context What really is the point of doing that any longer?

    If you look at the entire metropolitan area, and compare Chicago to other metropolitan areas, Chicago’s murder rate is not particularly outstanding. Chicago does have some very concentrated areas where there is gang activity, and many of them are on the south and west sides of the city, but the entire region is not particularly impacted by this activity in the SAME WAY that the entire region is not necessarily dependent on the sexy downtown economy.

  13. TUP, if you look at Chicago on a metro area for every metric (which I agree is a good way to look at it), the numbers aren’t terribly impressive. That’s because there’s a massive left behind area (millions of people) that make the averages look a lot worse than say Boston or the Bay Area. Pete Saunders put up a post that is a sort of response to this article:

    http://cornersideyard.blogspot.com/2013/10/chicagos-best-of-times-worst-of-times.html

    If you took just his New Chicago, it would look as good as anywhere in America (and be about the size of a Boston to boot). You sort of have to do this type of disaggregation to highlight the real success story in Chicago. But it also leads to the failure story.

    What I am observing, however, is that the failure story seems not to have as of yet proven to be a drag on the success story.

  14. myb6 says:

    Hi Aaron,

    I concur with the Tale of 2 Cities narrative, in fact I’ve used it often in conversation with my Chicago roommates (who hail from across the Rust Belt). But even though the narrative seems correct to all of us intuitively, what hard evidence would you suggest we turn to? All metros have favored quarters and rough patches.

    As far as murders, are there examples of large rust belt black populations doing significantly better? I ask with no rhetorical purpose, I’m open to your thesis but this is a gap in the argument. It’s something you should establish if you’re looking to condemn culture/institutions.

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