Tuesday, December 20th, 2011

Chicago: What’s Changed? What Hasn’t? by Richard C. Longworth

[ After reading this blog post on Richard Longworth’s own blog I went out and bought Global Chicago, which I think is still relevant today, even if some of the chapters that are mere compilations of Chicago’s global assets won’t excite out of towners. I wanted to share his post with you, which takes a look at where Global Chicago stands today – Aaron. ]

A few years ago, The Chicago Council published a book called Global Chicago, with two goals in mind. The first was a wake-up call to Chicagoans that their old industrial City of the Big Shoulders was gone, replaced by a global city with new strengths and challenges. The second was an attempt — probably the first anywhere — to study globalization's impact on cities by looking hard at one of those cities.

I was talking recently with the editor of the book, Charles Madigan, then a writer and editor at the Chicago Tribune (as was I), now Presidential Writer in Residence at Roosevelt University in Chicago. We were exploring what's changed in Chicago since the book came out, and what is unchanged — or still undone.

Perhaps the biggest change is that the wake-up call no longer is needed. The educational job is done. Chicagoans get it. Maybe we can take some credit, but mostly, it's the daily evidence of globalization's effect on the city that has convinced Chicagoans that it's not their granddaddy's economy any more. "Global city" and "Global Chicago" are buzzwords now.

The book listed many problems that absolutely needed to be solved — crumbling infrastructure, an antiquated public transportation system, a school system that fails the majority of its students. The sad fact is that so many remain unresolved to this day. As The Chicago Council and other civic organizations have written since, all these issues are still at the top of the city's agenda.

But one item barely appeared at all: how to pay for all this. The book appeared after the recession of the early Bush years, just as the false boom of the past decade began. Money seemed plentiful. It was more of a matter of fixing civic priorities than of financing them. The keywords of today's headlines — "budget," "debt," "deficit," "employees," "pensions," "taxes," "fees" — appear nowhere in the book's index.

How times do change (and remember, this was less than a decade ago). Urban financing, almost a non-topic then, is the Big Issue now. Chicago still needs to fix its schools, roads, sewers, public transport. But mostly it has to figure out how to pay its bills in an era of big debts and big deficits.

The city is awash now in financing ideas, including the privatization of public services like Midway Airport and a plethora of user fees to raise money. Some of this has already happened, like the privatization of the Chicago Skyway, which seems to be working, and of the city's parking meters, which isn't. But none of these new ideas, including privatization, was even on the civic agenda when the book came out. 

Chicago also is toying now with proposals for a casino or other forms of gambling to raise money. Back then, some leaders wanted a casino, but it never came close to being built. 

When the book came out, Chicago was on an upswing, drawing in people and business from around the world, growing in jobs and output. But decline lay around the corner. Since then, as a new report by Metropolitan Strategies says, Chicago has lagged the national average in economic growth, job creation, population growth, patent output and other measures of economic vitality.

Global Chicago celebrated a global city on the make. I suspect a new edition, published now, would be a more somber book.

Since then, Chicago has tackled two huge projects and succeeded at one, failed at the other. The success was Millennium Park, the huge and glittering downtown park that has given Chicago what it always lacked, which was a Tuileries, a central meeting place where the divided and balkanized city could come together. It also has changed the face of the city by revitalizing the Loop, the tattered old business district south of the Chicago River.

The failure was the bid to get the 2016 Olympic Games to Chicago. The bid itself was anemic and inadequate, not a patch of the Olympics project that Barcelona, for instance, used to remake itself. Perhaps more than anything else, the Olympics bid was the work of a tired old guard that, after Millennium Park, had run out of ideas. It was Mayor Daley's swan song, the last big initiative before he retired.

His retirement and the election of Rahm Emanuel as mayor is the most obvious change since the book came out. The book talked about how Mayor Richard M. Daley had taken the Democratic Machine created by his father, Mayor Richard J. Daley, and adapted it to the new chores of a global city. That Machine still exists, but with new people in charge. No one knows whether they will simply pour new wine into the old bottle, as did Daley II, or will reform Chicago politics from the ground up.

The financial sector of the city suffered back then from the lack of a major locally-owned bank. That hasn't changed. But in 2004, the big LaSalle Street markets, like the Board of Trade and Chicago Mercantile Exchange, were permanent parts of the financial landscape. Now the Merc is threatening to leave town to a more tax-friendly haven.

One question not asked in the book: is it possible to have a first-class city without first-class newspapers? No need to ask the question then: Chicago had two fine papers. The papers still exist but are so crippled by job cuts, coverage restrictions and bankruptcies that no one would call them first-rate.

The book talked about the impact of immigrants on Chicago. Even then, demographic shifts were reshaping the city. Both blacks and whites have moved out of the city. Immigration into the city has slowed (possibly a blip, due to the recession), meaning that Chicago lost 200,000 people between 2000 and 2010: it's now down no less than 1 million persons, or 25 percent of its population, since its industrial peak in 1950.

But there's more to this shift than raw statistics. First, the Chicago region is sprawling, with exurban town and counties growing, mostly with whites. Latino growth is weakest in the city, strongest in the suburbs. White population is shrinking in the inner ring suburbs, but is growing strongly in the center of the city.

What's happening is something that wasn't seen when the book came out — the Europeanization of Chicago. As in many European cities, the center of Chicago is increasingly going upscale, becoming a province of wealthier white global citizens, while both blacks and Latinos are pushed out of the city into the suburbs.

One cause and result of this is improving public schools — for some Chicagoans. There is considerable anecdotal evidence of good public schools in more upscale city neighborhoods, plus private schools for those who can afford them. But all other evidence indicates that schools in less favored parts of the cities haven't improved at all, and still fail to graduate 40 or 50 percent of their students.

The book focused on continued economic vitality but seldom asked: vitality for whom? As urban financing moves front and center, Chicago has to ask itself what kind of a city it wants to be. It clearly wants to be a global city, drawing in the sort of people who can afford to live anywhere. But can it do this without pricing everyone else out of the city? Those census figures mentioned above don't give confidence.

Finally, the question of Chicago's relationship to its region is more vital now than then. This doesn't mean its relationship to the broader Midwest, although this is still important. But rather, in these straitened times, how can the city take its immediate economic region — from Milwaukee through northern Indiana and into western Michigan — and get it work together across state lines, to reinvent itself as a global megacity, as so many other cities and regions around the world are doing? 

Richard C. Longworth is a Senior Fellow at the Chicago Council on Global Affairs, author of the book Caught in the Middle: America’s Heartland in the Age of Globalism, and host of www.globalmidwest.org.

This post originally appeared in The Midwesterner blog of the Global Midwest Initiative of the Chicago Council of Global Affairs on October 25, 2011.

Tuesday, May 17th, 2011

The Wars Between the States by Richard C. Longworth

It would seem impossible for Midwestern states to get any sillier and more irrelevant, but they're trying. In a time of continuing recession and joblessness, with crunching budget problems, failing schools, crumbling infrastructure and no real future in sight, these states have decided to solve their problems by stealing jobs from each other.

The most recent example is the so-called "border war" between Kansas and Missouri, as the two states compete to see how much money they can throw at businesses to move from one state to the other. The focus of this war is Kansas City — both the Kansas one and the Missouri one, basically a single urban area divided not only by an invisible line down the middle of a street but by a mindless hostility that keeps its two parts from working together.

This competition is not new, but it seems to have heated up since 2009, when Kansas passed a law that lets companies relocating to the state keep 95 percent of their employee withholding tax for up to 10 years. This has lured several companies to move from Kansas City, Missouri, to Kansas City, Kansas (known locally as KCK) and its suburbs, bringing several hundred jobs with them. Stung by the moves, the Missouri KC has offered multi-million-dollar packages to keep firms, like the National Association of Insurance Commissioners and AMC Entertainment, from decamping to the Kansas side.

Top Corporate Leaders Urge Governors to Stop Poaching Neighbors’ Businesses, Kansas City Star, April 11, 2011
Businesses Stand to Gain Most in Rivalry of States, New York Times, April 7, 2011

Kansas and Missouri aren't the only Midwestern states raiding each other's watermelon patches. The governors of Wisconsin, Illinois and Indiana, which would seem to share a common economy, have been squabbling over which state has the lowest taxes, to the point that Indiana and Wisconsin have posted billboards on their state lines urging Illinois companies to flee north or east, as the case may be (presumably passing en route all those Democratic legislators from Indiana and Wisconsin who hid out in Illinois to avoid having to vote for objectionable legislation back home.) 

In Kansas and Missouri, all this has reached the point that even businesses in the two KCs, which presumably could benefit from these bribes, have told their two states to grow up. Seventeen leading businessmen from both sides of the border sent an open letter to Kansas Gov. Sam Brownback and Missouri Gov. Jay Nixon, urging them to voluntarily "agree to a bilateral halt" in this "economic border war."

Nixon responded positively. Brownback basically told the businessmen to go jump in the Missouri River. This probably has something to do with the fact that, so far, Kansas has been winning most of these battles. Whatever the reason, Brownback's press secretary said Kansas would keep on poaching, because the state "needs to compete and win against 49 other states plus Europe, India, China and the rest of the world."

Well, no argument there. Except competition with "Europe, India, China and the rest of the world" has nothing to do with this juvenile job-raiding. In fact, this "border war" keeps Missouri and Kansas from competing globally — indeed, robs them of the tools they need to compete globally.

Some rational thought shows why. It's precisely these states' inability to compete globally that causes them to declare war on the folks next door.

In a global economy, Kansas and Missouri aren't competing with each other, any more than Illinois, Indiana and Wisconsin are competing with each other. The real competition is 10,000 miles away and all Midwesterners know that we're losing it. The region — not just the individual cities and states but the entire region — is losing companies, manufacturing, jobs, people, congressional seats and college grads, which means they're losing the resources needed to compete in a global economy.

Clearly, what the Midwestern states are doing isn't working. You'd think they'd do what the Europeans, Indians, Chinese and other competitors are doing, which is to form regional alliances to leverage all their strengths, to maximize their economies of scale, to merge their assets in to a single world-beating economy. On a global scale, Midwestern states are tiny: there are more than 30 Chinese cities with more people than there are in all of Kansas. But as a region, the Midwest has more than 60 million people which, even on a global scale, counts for something.

But this involves political initiative. It also involves spending on education. It requires the sort of imagination necessary to recognize that the old ways don't work and a new approach — to economic development and job creation — is needed.

But governors seemingly don't get paid for imagination and, these days, they're avoiding all the spending they can. Especially, they don't get paid for anything that benefits the states next door. By mandate, they are geography-bound, forced to limit all thinking and action within their state lines. Any business they can steal from next door looks good to their voters, whether it makes sense or not. Their economic development people, who know from hard experience that this is insane, go along, because the governor signs their paychecks and, as one official told me, "governors just love to cut ribbons."

One reason this doesn't work is that poaching businesses involves giving tax breaks to the poachee. Right now, states aren't spending on the future because they're broke, and one reason they're broke is that they're giving away badly-needed tax money. The letter from the Kansas City businessmen made this point clearly:

"At a time of severe fiscal constraint, the effect to the states is that one state loses tax revenue while the other forgives it. The states are being pitted against each other and the only real winner is the business who is 'incentive shopping' to reduce costs. The losers are the taxpayers who must provide services to those who are not paying for them." 

Neither does this poaching usually create new jobs. Most of these cross-border raids, in Kansas-Missouri and in other states, involve companies just moving a few miles away across the state line — usually so close that their workforce changes not at all. People just commute in different directions. The overall impact on job totals, incomes and economic gain in the region itself is absolutely nil.

Only one person gains if a business crosses the state line, and that's the "winning" governor, who gets to claim short-term job growth on his turf during his tenure. This, of course, is why this practice continues. The payoff to the governor is immediate and gives him a boost in his next campaign. Really creating jobs in the region and restoring genuine economic growth is a long-term project that spans many gubernatorial terms and, hence, holds no charm for the incumbent of the day.

The state governments and governors, like Brownback, claim that these tax lures are necessary to draw in companies not from next door but from far-away states. If so, they aren't working. A University of Illinois study showed that there are some 300 significant corporate relocations in the United States every year, and about 15,000 different economic development organizations — state, county and local — competing for them. In other words, the odds against success are fifty-to-one. No wonder states go for a quick and dirty kidnapping across the state line.

Even when truly new investment takes place, such as the building of a Japanese car factory in the United States, the states let themselves be played for suckers. State economic development officials tell me that the company, such as Honda or BMW, simply announces that it intends to set up a new assembly plant somewhere in the Midwest. Then the company just sits back and watches the states throw money at them, trying to outbid each other with tax holidays, free land, training subsidies and other lavish gifts.

All the states know this goes on. All know they could stop it in an instant by banding together and refusing to play the game. But all are so jealous of each other, and all governors are so anxious to cut that ribbon, that they just can't help themselves.

Mark Drabenstott, in his Heartland Paper for the Global Midwest Initiative, Past Silos and Smokestacks, wrote that these recruiting incentives and other bribes account for no less than 80 percent of economic development budgets in the twelve Midwestern states. That leaves virtually no money left over for approaches that might really work.

Every economic development professional knows that this adds nothing to the Midwest's long-term growth or its ability to compete globally with China and other rising nations. The only true solution is to create truly  new companies and industries by building them from the ground up  — by investing in local education, encouraging local entrepreneurs, setting up incubators, growing business services, increasing venture capital.

This is called economic gardening, and it works. It means working regionally. It means spending money, not giving it away in tax breaks. It means planting seeds now, knowing they won't sprout until some other governor is in office.

Right now, Midwestern governors are competing not with China but with each other to see how much they can slash spending in the next few months while stealing jobs from the next state. It's easier. It makes a better headline. And it's useless. 

Richard C. Longworth is a Senior Fellow at The Chicago Council on Global Affairs. He is the author of Caught in the Middle: America’s Heartland in the Age of Globalism.

This post originally appeared in The Midwesterner on April 15, 2011.

Tuesday, November 2nd, 2010

Can Global Cities Work? by Richard C. Longworth


Photo Credit: Flickr/wallyg

Crain's Chicago Business, the city's business weekly, has a first-rate lead article this week on Chicago after 21 years of the reign — there's no other word for it — of Mayor Richard M. Daley. The article is of greatest interest to Chicagoans, of course. But it also raises crucial questions for anyone interested in global cities, and whether they can work.

Chicago is a global city — perhaps the only one in the Midwest. These cities are the places where, increasingly, the world's business is done. They have the most corporate headquarters, the key global business services, the universities, the foreign students, the busiest airports, the immigrants and the most vibrant culture. As the Crain's authors Greg Hinz and Steven R. Strahler make clear, they also have problems that, as this global era dawns, are nowhere near being solved.

The big problem is that global cities make some of its neighborhoods and their citizens very rich and very well-served, while leaving most of their people farther behind than before.

Daley took office in 1989 — coincidentally, the year the Berlin Wall fell, Communism began to crumble and no less than 3 billion new workers — mostly from ex-Communist countries like China but also India and Indonesia — joined the world economy.

These events, together with the communications revolution since then, created globalization. One result was the exodus of heavy manufacturing from old industrial areas, like the Midwest, to formerly Third World countries, like China. A second result was the creation of global cities — metropolises that became command-and-control centers for this new economy. If the manufacturing spread around the globe, it was controlled by the global citizens — the bankers, managers, lawyers, consultants — who gathered in the global cities.

New York, London, Paris, Tokyo and Hong Kong stand atop this new global Hanseatic League. Just below them are a second tier — Los Angeles, Singapore, San Francisco, Sydney and the like. Chicago ranks at the top of this second tier: it was eighth in the top 10 in a ranking published by Foreign Policy magazine two years ago. Even with the recession since then, it undoubtedly ranks that high today. No other Midwestern city comes close.

This sounds good and, in many ways, it is. It's certainly better than the plight of many cities, like Detroit or Cleveland, where the heavy industry went away and nothing replaced it. Anyone who remembers the grey, rusty Chicago of the late 1980s, when Daley took over, has to be dazzled by the throbbing prosperity that greets any visitor today.

But that's the point, Crain's says. This visitor sees the Loop and the Lakefront. He visits friends and clients in Lincoln Park and Lakeview. He goes to games and restaurants on the near west side, or marvels at the development on the near south side. For sheer urban glitz, these neighborhoods hold their own with neighborhoods anywhere in the world.

Nor are their residents a tiny elite. These residents account for about 465,000 people. This mass of people — bigger than Minneapolis or St. Louis — is a force in the economy, and their sheer presence has transformed the city. About 20 percent of them earn $100,000 per year or more — the same percentage as in the suburbs, which is a big change. According to the Brookings Institution, 32 percent of Chicagoans hold bachelor's degrees or better, more proportionately than in New York. 

But as Crain's points out, these half-million people are only one-sixth of Chicago. How's the rest of the city doing?

The answer is, not so hot. The increase in income in the city's eight wealthiest neighborhoods is greater than the total income in 38 other neighborhoods. High-school graduation rates have risen from 46 to 56 percent, but most of the dropouts still live in the great swatch of the city outside the glittering downtown. The city's murder rate is down sharply, but the victims still come disproportionately from the inner city, not the Gold Coast.

And as Crain's points out, success itself has a cost that must be paid.

In his 21 years in office, Daley has pumped billions into the city to give it the amenities and beauty that any global city must have. The result is new stadiums, Millennium Park, flowers everywhere, a theater district, a rerouted Lake Shore Drive, the revamped Navy Pier, the ongoing modernization of the city's two big airports, and much else. All these are crucial to the city's sheer verve and vitality.

But another result is huge debt. The city's operating budget is running a 16.3 percent deficit, twice that of New York. According to Crain's, total bonded debt and long-term capital leases for city government are up to 263 percent on an inflation-adjusted basis: the city's property-tax base is up too, but barely half as much. Tack on huge unfunded pension liabilities, and the city's in a financial jam.

And then we get to the most glaring statistic of all — jobs. Chicago, even in its old Rust Belt days, had 1,334,000 jobs in 1989, when Daley took over. This was down to 1,235,000 in 2008 and (no doubt because of the recession) was down to only 1,175,000 at the last count, in 2009.

In other words, Chicago – the only old industrial city in the Midwest to transform itself into a global city, a big success story in the global rankings — still can't provide as many jobs for its residents as the old sooty City of the Big Shoulders.

What does this say about the ability of the global economy to create a decent standard of living?

Saskia Sassen, formerly at the University of Chicago and now at Columbia in New York, literally wrote the book — "The Global City" — on global cities, and was a lead writer on the Chicago Council's 2004 book, Global Chicago. She is perhaps the world's leading theorist on global cities, and what Crain's reported didn't surprise her a bit.

Global cities, she told Crain's, are cities within cities. The true global citizens in these cities have more to do with the global economy, and hence with other global cities like Paris or Tokyo, then they do with the rest of Chicago. A global city needs them, because they are a terrific source of income and prestige, and hence lashes out on the parks, schools, theaters and other amenities that bring them in. But these amenities exist to serve these global citizens, not the rest of the city. This is why Chicago today has many excellent public schools, including some good high schools: these global citizens have kids and they demand good schooling. Meanwhile, schools in the rest of the city are nearly as bad as ever.

This is no less than a new class structure. The old industrial city created an industrial middle class, based on good jobs for anyone willing to work hard. That city is gone. The new global city creates a global class, with splendid jobs for people also willing to work hard — and with an MBA to boot. In a global city, some people — quite a lot of them, in fact– move up, and other people — the majority, it seems – move down, leaving not much in the middle. 

It's a puzzlement. In today's global economy, cities may have to become global cities or decline. Chicago, for all its problems, still is much better off than Detroit or Cleveland. But can these global cities create a vibrant economy for all its citizens, not just for a lakeside elite that, in some sense, doesn't really live in the city at all? 

For more information on economic development in the Midwest, visit the In the News section of the Global Midwest Web site.

Richard C. Longworth is a Senior Fellow at The Chicago Council on Global Affairs. He is the author of Caught in the Middle: America’s Heartland in the Age of Globalism.

This post originally appeared in the Global Midwest blog on June 18, 2010. Reprinted with permission of the author.

Tuesday, March 23rd, 2010

Richard Longworth: Paying for Cities

[ Many of you undoubtedly already know Richard Longworth, who wrote Caught in the Middle, the most important book out there on the Midwest. What you may not know is that he has started his own blog, The Midwesterner about the Midwest in the global age. This blog is a must-read for anyone who cares about the future of the Midwest. Add it to your newsreader now. As an added incentive to check it out, Longworth was gracious enough to supply us with a sample of the type of piece you’ll find there. – Aaron ]

The way we finance our cities is broken and must be fixed. A lot of people know this but, so far, most of the fixing amounts to minor measures, a splint here and a band-aid there, a finger in the financial dike, while the big problems grows and grows.

There could be a big new field of academic study out there called Urban Financing, but it’s pretty sparsely inhabited. A few scholars around the Midwest are probing the issue. But no overall picture has emerged, no real attempt to close the gap between the resources now available and the needs of the future.

I hereby offer the use of an oblong table here at the Chicago Council on Global Affairs for Midwestern scholars who want to come together to imagine the urban future. I will throw in a few stuffed pizzas to fuel their thinking and, at the end of the day, some beers to fortify them as they sally forth into the gales of public debate.

But don’t look to me for any solutions – just a statement of the problem. I can’t sing, but I know when the soprano is off key. I can’t balance a civic budget but I know when something isn’t working, and isn’t going to work.

The problem is this:

Midwestern cities have always counted on state governments for big chunks of their funding, especially in infrastructure and education. In return, states have exercised control over much of what cities can do. This includes the power to define units of local government, set the powers of local government, including taxation rights and zoning, dictate how schools are run, and decide what infrastructure will be built, and where.

But many cities are suffering because (1) all states are in a financial jam and the money for cities just isn’t there and (2) state control over cities is keeping cities from doing what is necessary to reinvent themselves. In other words, both sides of this bargain hurt cities.

So the key to urban financing lies in redefining the relationship between cities and states. This is not something that’s going to happen overnight.

There are two big issues here:

1. Restructuring urban finance to enable cities to pay for themselves much more than they do now.

2. Doing this in such a way that it doesn’t price low- and medium-income residents out of the cities themselves.

The Northwest Ordinance of 1787 dictated where Midwestern state lines would be, even before there were cities or states here. The region’s cities and states grew up together. Indeed, they made each other possible. The states funneled food, raw materials and people into the cities. The great manufacturing cities generated the economic vitality that energized the states. Most Midwestern states looked to their major cities – the biggest city, like Chicago or Cleveland, or the state capital, like Madison – for leadership. In that era, cities and their states needed each other.

That relationship has broken down. Food goes into global markets. So do raw materials, and so do people. For the most part, Midwestern cities no longer project enough economic vitality to enliven themselves, let along their states. Most of the big manufacturing cities are rusted derelicts. Some big cities, like Minneapolis-St. Paul – remain powerful but their states share little of this potency: the Twin Cities generate 64 percent of Minnesota’s economy and 75 percent of its personal income, but much of rural Minnesota is dying nonetheless.

Most of these big cities, having been built on rivers or lakes, lie at the edge of states: think Chicago, St. Louis, Cleveland, Cincinnati, Detroit, Milwaukee. But state capitals, sited in days of poor roads and hard travel, usually lie in the center of states. Some state capitals – Columbus, Indianapolis, Des Moines – were never industrial centers but thrive now. But non-capitals, by and large, are suffering. No surprise: the capitals and non-capitals are where they are for totally different reasons – one political, the other economic – and never really had much to do with each other.

This worked, more of less, in the industrial era, when the Midwest boomed, when not only cities but smaller towns boasted factories and good wages, when there were still enough farmers to keep rural areas strong. State governments had the money then and shared it.

That day is gone. Even before the recession began, state governments were stiffing their cities, cutting funding for infrastructure, schooling, policing, health. This budget-slashing has now gone into overdrive. Illinois has just announced that the state’s municipalities will be getting 7 percent of the state’s income tax revenue, instead of the usual 10 percent, a difference of about $300 million. Mayor Daley, irate, says the state government must go on a diet. The state no doubt will say that Chicago needs to go on a diet. So it goes.

Illinois’ state government may be notorious but, in its attitude toward cities and in its response to the current economic squeeze, it’s no different from other Midwestern states.

All this was going on before the recession started and it will continue after the recession ends. All Midwestern states face the same double whammy – an eroding economy , meaning less tax income, plus the demands that spring from economic decline, such as the costs of welfare, retraining, rural collapse, imploding infrastructure and widespread poverty.

Each state is so consumed by the burdens of the past that it hasn’t the time, focus or money to deal with the needs of the present and the future, like education or the problems of its big cities.

The recession will end. This disconnect between cities and states won’t. This is why cities must realize that their future lies in their own hands. States won’t help, because they can’t help. If the future is to be bought, cities must pay for it themselves.

Few cities have even begun to think about this. It means a revolution in urban financing, and a new relationship not only with states but with citizens.

Some components of this debate are obvious. One is higher taxes – city income taxes, sales taxes, property taxes. Another is user fees, including higher parking meters rates, higher fares on public transportation, higher dockage fees at marinas, even tolls on highways into town. Another is increased taxes on businesses. Another is privatization of public services, such as bus lines, airports, possibly even schools and some policing. Another is special fees, like the tolls that London charges for motorists who want to drive into the center of the city.

Other possibilities present themselves. One is the consolidation of city and suburban governments, to share tax revenue and achieve economies of scale on public services. Other is the reduction of civic costs, especially cuts in government personnel.

All these possibilities, and many more, will be on the table. Needless to say, not all will become policy. Each gores some well-connected oxen. Business hates the higher business taxes. Homeowners hate higher property taxes. Unions hate civic staffing cuts. Commuters hate higher fares.

But almost all of these solutions exist somewhere in the world, and if American cities are to survive, some of them must be adopted here. None of them will mean the collapse of civilization.

Everyone knows that city governments and other public facilities are grotesquely over-staffed. Businesses may hate to pay higher taxes but will do so to be where the action is. There is no social benefit in clogged highways: if commuters insist on driving, they should pay more for the privilege.

The fact is that cities don’t want to be cheap places to live and work: low-cost places draw bare-bones businesses paying minimum wages, guaranteeing that the cities themselves stay poor. The cities of the future will be those that draw people—both residents and businesses — who are willing to pay for the privilege of being there.

In other words, they need to draw the wealthy, those who can afford to pay the higher costs. Which raises the crucial question – what about everybody else? At what point does economic necessity – the need to pay for the city – bump up against social equity – the need to be affordable to the non-wealthy?

Already, the poor are being squeezed out of cities like Paris, New York – and Chicago. At some point, the middle class could be squeezed out, too. At that time, cities become gated communities, golden ghettoes.

This is not a solution that anyone wants. But neither are cities so cash-strapped that they can’t afford to pay for the amenities of civilization.

This is the terms of the debate to come. How do we pay for our cities, not that the old sources of money are no longer there? But how do we do it without undermining the vibrant economic diversity that has always been the soul of cities?

Richard C. Longworth is a Senior Fellow at the Chicago Council on Global Affairs, author of the book Caught in the Middle: America’s Heartland in the Age of Globalism, and host of www.globalmidwest.org.

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