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Thursday, January 16th, 2014

How Globalization Isolates Struggling Cities

My latest piece is in the January issue of Governing Magazine. It’s called “How Globalization Isolates Struggling Cities. In effect, this is a companion piece to my recent post on metro-centric economic development strategies. Here’s an excerpt:

In the age of globalization, cities and states would rather build bridges to the world than to the town next door. Some of this is simply the way the economy works. As Richard Longworth, senior fellow at the Chicago Council on Global Affairs, wrote in his book Caught in the Middle: America’s Heartland in the Age of Globalism, “Chicago probably deals more, daily, with Frankfurt or Tokyo than it does with Indianapolis.”

He went on to identify the problem at hand, noting that “Globalization is beginning to isolate cities from their hinterlands: The hinterlands see this trend and are disinclined to do anything to speed it up. They perceive that most of these people—globalization’s winners—have never spent 30 seconds worrying about globalization’s losers.”

This is the two-tier society we see developing nationally playing out at the local level. It creates a tug of war at the state policy level, and it tears apart the whole notion that we are a commonwealth. It creates states that are, as Longworth put it, “hives of warring interests.”

15 Comments
Topics: Economic Development, Globalization, Public Policy, Regionalism, Strategic Planning
Cities: Indianapolis

15 Responses to “How Globalization Isolates Struggling Cities”

  1. Andrew says:

    Aaron, I’m interested to hear how you think the quoted view squares with the idea that remittances to the state’s struggling communities essentially throws good money after bad (e.g. Ed Glaeser on Buffalo: http://www.city-journal.org/html/17_4_buffalo_ny.html). Or is Glaeser’s view unmerited? Seems to me that in an increasingly globalized world, we ought to celebrate the allocative efficiency of global cities, not saddle them with payments to Rockford in the hopes of staving off decline. On the contrary, I’d argue that the citizens of Rockford would be better served if they all decamped to the Windy City and that support payments therefore only distort the incentives to leave. I’m not married to that view, of course, but I’m just not sure I understand the best arguments against it.

  2. Andrew, I believe that some redistribution is inevitable and not necessarily a bad thing. The key is not to starve successful places of the resources they need to prosper. If you starve them, then you soon won’t have much to distribute. I do think plans for many left-behind places need to be realistic as to what can be achieved.

  3. Matthew Hall says:

    What about second and third tier cities that don’t fit so neatly into the hinterland of a single larger urban center? How do they fit in a globalizing economy? I’m thinking of Pittsburgh, Kansas City, Nashville, Raleigh. They don’t have the clearcut hierarchical relationship of Chicago and Indy, for example.

  4. Sean S. says:

    There’s a certain amount of tautological thinking at play here, namely that smaller cities are doing worse because they aren’t “globalized” and that clearly then they must imitate their bigger brethren who have won because they have “globalized”, though there is no significant evidence that this is why they are failing or why those larger cities are “winning” (and more importantly, winning what exactly?).

    Part of the reason alot of cities economic development efforts aren’t successful is because they continue to be obsessed with becoming some sort of hot commodity for a limited, but sexy, economic sector that has no interest in ever living in Poughkeepsie, or landing huge outlier factories, as opposed to looking at their own local strengths and unique advantages. What are the industries that they have had historically, what industries do they have now, and how can they target those sectors for expansion? How can agriculture, oftentimes one of the larger sectors in a local economy, be incorporated into expansion? Little of this has anything to do with globalization, but the kind of grinding on the ground work that is not in anyway sexy and has little to do with being “globalized.”

  5. DBR96A says:

    Pittsburgh seems to be gradually getting pulled into the New York/Philadelphia/Washington DC orbit as people and essential business operations get priced out of the megalopolis. Those three cities happen to be Pittsburgh’s three strongest migration networks, which seems to fly in the face of the perception of Pittsburgh as a “Midwestern” city, among some people. Also witness the recently merged Bank of New York Mellon. The company is headquartered in New York, and the executives all live there, but Pittsburgh remains the primary operations base since it’s less costly to do business there. This arrangement makes sense because Pittsburgh is the first major metropolitan area (1,000,000+ population) west of the megalopolis.

    Kansas City I think will increasingly be influenced by both Chicago and Dallas/Fort Worth. It’s the most central major metropolitan area in the United States, and it has very strong highway and freight rail connections. In fact, it already acts as an auxiliary hub to Chicago, handling freight rail traffic when Chicago is overwhelmed. And with Dallas/Fort Worth becoming the primary transportation hub in the south-central United States, and Kansas City already being part of “Greater Texas” on the unscientific map of Facebook social networks, I expect Kansas City to become the liason between the two mega-hubs to its north and south.

    Nashville and Raleigh are a bit harder to tell. Nashville has an entertainment cluster, and not just for country music anymore, though that’s still the primary driver. It also has a bit of a bohemian vibe, which a lot of people don’t expect in the mid-South. The nearest extra-large metropolitan area is Atlanta, which has its own entertainment cluster, so maybe Nashville is destined to grow closer to Atlanta. As for Raleigh, the entire middle third of North Carolina is a decentralized mess of urbanity and suburbanity halfway between Atlanta and Washington DC. My guess is that North Carolina will become the liason between Atlanta, Florida and the Northeast megalopolis.

  6. myb6 says:

    Sean, I think you’re going to have a hard time convincing anyone that international ties and resulting skill premia shifts haven’t been an important factor in metro economic growth.

    But the main point is that changing perceptions of econonomic priorities are making coordinated action extremely difficult. Aaron often argues that global cities and their hinterlands should re-think that mindset to one that’s more cooperative/symbiotic. EG Indy offers a value proposition that could make it a reliable customer for Chicago global services, both win.

    Matt, there’s no reason a more regional city couldn’t have ties to multiple global cities, and they need to be close socially, not physically (though that can help). I bet Charlotte has pretty strong ties to NYC (banking) despite the distance.

  7. myb6 says:

    Aaron, I do think for Chicago this is complicated by the fact that it isn’t an undoubted winner. Chicago has a large global-loser fraction in a way the other North American alpha-cities don’t (except possibly Philly).

  8. Matthew Hall says:

    If cities don’t have to be close physically, then we can’t explain the relative lack of development in Midwestern cities by arguing that Chicago has crowded them out of investment and trade opportunities by its very proximity.

  9. @myb6 – That’s an interesting point. I wouldn’t characterize as Chicago as having a large global loser fraction, but it does have to work very hard merely to maintain a fairly slow growth environment. Essentially, Chicago has been hoovering up talent from all across the Midwest (i.e. Michigan and Wisconsin transplants, Big Ten grads, etc.) at an massive pace over the past decade, yet that has basically just replaced the corresponding outflow from the metro region. As a result, it’s not as if though Chicago can really afford to cede anything to other Midwestern cities and, if anything, Chicago has to continue to poach Midwestern talent at even a higher pace in order to merely maintain its position as a global player (and I say that as lifelong Chicago partisan).

  10. Sean S. says:

    Sean, I think you’re going to have a hard time convincing anyone that international ties and resulting skill premia shifts haven’t been an important factor in metro economic growth.

    No doubt that’s true, but considering the difficulties of high priced consultants and other cheer-leaders to see results on the ground, well I’m okay being contrarian. It also does little to counter my argument that looking to factors on the ground is any more useless than the outward looking focus that is often recommended as solid gold to those in control of economic development levers. You know the constant drumbeat to appeal to an economic population that has already been clearly sated by other, larger cities, and whose presence does little to challenge the very inequalities that everyone is talking about here.

  11. Chris Barnett says:

    Matthew, I think Chicago’s edge is that it occupies the prime geography mid-continent in a physical sense: on the east-west air traffic divide, the east-west rail divide, and the Mississippi Basin-Great Lakes divide. (Probably not the highway divide; St. Louis probably owns that one because of the river crossings.)

    In almost every locational aspect, Chicago is better than the competitor cities between Pittsburgh and KC, New Orleans and MSP (other than that Indy, Cincinnati, and Louisville may be marginally closer to more US residents by truck).

  12. Thanks for the comments.

    For Sean S. and Matthew Hall especially, what I’d say is that response to globalization doesn’t necessarily equate to being an NYC style global city. I think places like KC, Indy, Nashville, etc. have done reasonably well despite not being in the global city category. So I think it’s important to stress that I’m not advocating that everybody chase the hipster demographic or something. People have to make the best response to economic conditions they can in a way that’s right for them.

  13. Jon Seisa says:

    Speaking of cities and the globalized marketplace of mobility, here is some interesting data regarding the latest 2013 trends in U.S. city performance and state migration patterns to where jobs, affordable competitive real estate and opportunity harkens. It’s quite fascinating. Science, technology innovation, aerospace, commercialization of research, financial services, natural resources, diversification, and availability of a skilled tech-savvy young talent pool that ensures long term competitive advantage remain the driving force in this “Global Knowledge Economy”, overall producing economies of scale and high multiplier impact on local service sectors and beyond.

    Oregon is the resounding big robust winner and location most preferred with healthy inbound migration, as well as the Carolinas, and of course North Dakota (due to the shale oil boom). Business-friendly Texas continues in a very strong and sustained presence with all of its metros in high ranks and particularly Austin’s rise as a new vibrant tech center.

    The states of the Rust Belt vicinity continue in stagnation pause mode as this area works to redefined itself. Compared to previous years, though, Indiana has improved with its outbound exodus tapering down as it reached a more middle ground. However, two of America’s biggest global city-states did not fare as well, (NYC) NY/New Jersey/Connecticut and (Chicago) Illinois are adversely affected with highest negative migration exodus and West Virginia close behind.

    In the Milken Institute’s top 15 best performing metros in job growth the Austin/Round Rock/San Marcos metro was #1. Unfortunately, no Atlantic Seaboard city placed in the top 15. However, Trenton-Ewing, New Jersey, was shy at 18th place. The biggest gainer and biggest decliners was a diversified healthy mix across the board. Indianapolis-Carmel placed 33rd, just above NY/White Plains/Wayne at 34th. Chicago/Joliet/Naperville (IL/IN/WI) placed 86th, yet this is still a great improvement from its former year’s placement at 104th place, an 18 point gain.

    Overall, Texas and its metros were the big winner, and Northern California’s Bay Area (the San Francisco metro united for the first time with San Jose’s Silicon Valley metro [though it dropped 4 places] into a formidable regional economic West Coast force). Utah and Colorado’s metros and the Carolinas and Seattle metro made strong strides.

    BEST PERFORMING CITIES 2013 – MILKEN INSTITUTE:
    http://www.milkeninstitute.org/pdf/Best-Performing-Cities-Report-2013.pdf

    ABSTRACT ANALYSIS: http://www.slate.com/blogs/business_insider/2014/01/11/best_performing_u_s_cities_of_2013_2014.html

    **********************

    2013 STATE MIGRATION MAPS:

    SETH KADISH OF VISUAL STATISTIX MIGRATION MAP OF UNITED VAN LINES STATE IN-FLOW/OUT-FLOW PATTERN:
    http://vizual-statistix.tumblr.com/post/72705622607/each-year-united-van-lines-a-national-moving

    2013 UNITED VAN LINES MIGRATION STUDY ABSTRACT ANALYSIS:
    http://www.unitedvanlines.com/mover/united-newsroom/press-releases/2014/2013-united-van-lines-migration-study.htm

    BUSINESS INSIDER ARTICLE:
    http://www.businessinsider.com/2013-moving-map-2014-1?utm_source=slate&utm_medium=referral&utm_term=partner

    2013 ATLAS VAN LINES MIGRATION PATTERN DATA & MAP:
    http://www.atlasvanlines.com/infographics/2013-migration-patterns/

  14. myb6 says:

    Frank the Tank, as far as the global-loser fraction, I’m thinking the peak percentage of industrial employment: Chicago wasn’t quite as concentrated as Detroit/Cleveland/Pittsburgh but not far behind, comparable to Philly/Indy/StL. But as far as the larger point, you understand exactly where I’m going with this.

    It’s kind of sad but I wonder if the lowest-hanging fruit for Midwest regional action is federal outlays. The fact that MN/OH/IL/WI are consistently lop-sided net-payers while not being particularly wealthy is an outrage (IN recently joined this list while MI left). The Tax Foundation’s reports make it clear this pattern holds for as long as the records.

  15. myb6 says:

    Sean, I’ve think we’ve got a language barrier here. There are a lot of squishy terms being bandied about, haha so I think your response to Aaron Renn was actually meant for Richard Florida.

    Matt, phyical proximity can influence social proximity. Clearly Chicago and other Midwestern cities have close social ties, but right now they’re perceived to have a competitive relationship when instead it could be cooperative, with each city offering its own package of specialties and value points. Maybe another phrasing: is the important competition between Chicago and Indy, or between the Midwest and the South?

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