Thursday, March 27th, 2014
I recently sat down to talk for about half an hour with Louisville, Kentucky Mayor Greg Fischer. We had a wide ranging discussion that ventured from branding to globalization, regionalism, talent attraction, legacy, and more. If the audio player below doesn’t display, click here for the MP3 file.
Mayor Greg Fischer. Image via Wikipedia.
Here are some edited highlights of our discussion. For those who prefer reading to listening, a complete transcript is available.
On an economic development partnership between Louisville and Lexington, Kentucky’s second largest city:
[Globaization] is central to who we are as a city. We have a very high export ratio here. We out export, we punch above our weight if you will, as a city. My background is one as an international business guy and we’ve spent a lot of time growing a broader regional economy. The city of Lexington and Louisville have a joint economic development plan that we did with the Brookings Institution called BEAM, Bluegrass Economic Advancement Movement. And a central thrust of that is growing exports throughout the region. We have people that go out and help businesses understand that’s the way of the future.
As a business guy, I’ve been more of a small, medium sized business person, 500 employees and below, so frequently I would compete with large, multinational corporations. When you start your career, you’re like, “My gosh, how can I compete against this firm that’s got manufacturing plants or offices all over the world and 10,000 employees?” What you find is as a small company, you have a lot of advantages that the big company doesn’t have. You’re closer to the customer. You’re nimbler. You can speak for the company.
So when you take a look at the challenges of a state like Kentucky, we’re not one of the biggest states. We’re certainly not one of the smallest, either. So what we’ve got to do is be excellent at partnering with each other internal to the state so that we can use that as a competitive advantage when we compete with other countries or other states for economic development. Louisville and Lexington combined metro region, including Southern Indiana, is about two and a half million people or so, more scale than just us at 1.3 million and certainly, more scale than just Lexington.
On regional cooperation with Southern Indiana:
When people move to Southern Indiana, they identify as moving to the Louisville area, typically. Our restaurants over here, our housing options over here are complementary to what’s in Southern Indiana so if a company is going to say, “Okay. I’m going to be in Southern Indiana or I’m going be in Missouri,” I want them in Southern Indiana.
Southern Indiana’s got some advantages that we don’t have. We don’t have that much open land left in Jefferson County. River Ridge, which is just opening across the river, is going to be helped by these bridges going in right now, these megaprojects, the Ohio River Bridges Project. It will be where a lot of these businesses are going to locate. I’d rather they locate there again than in some other state. So we win as a region because people live regionally. We’re happy to cooperate and brainstorm with Southern Indiana.
On how Louisville’s relationship with the state of Kentucky is evolving:
Evolving is the right term. Louisville produces about $2.4 billion a year of taxes and we get back $1.2 billion. Kentucky has been cited as the fourth most centrally controlled economy in the country in terms of states. In other words, sending taxes to our capital and redistributing them throughout the state. So it’s a challenge for us. I’m working right now to get the state constitution changed so that all cities and counties have the right to levy a local option sales tax where their citizens have the right to vote on specific capital projects, paid for in a specific way with that temporary sales tax sunsetting. Part of that is so local cities, whether it’s Louisville or Pikeville or anywhere in the state, could have more specific control over their built environment. So, that’s one way to address it.
Long term, we need some type of overall state tax reform. But in any state, you’re going to have an economic engine like we are here in Kentucky that contributes more to the balance of the state than what it is they generate. Our rural legislators are very good at teamwork, if you will, and our metropolitan legislators are not so good at teamwork. So they can be our own worst enemy in terms of directing more funds back to where they were originally generated – in this case, Louisville.
On the local food scene:
It’s been an interesting way to see how the rural parts of the state and the metropolitan areas really appreciate the partnership that we have with our local food movement. Like many places around the country but particularly here, when you go into restaurants, you’ll see the origin of the food in terms of the farmers that they came from. We were the first city in the world that we know of to do a demand analysis for local food, how much local food do people want to consume here. We did that deliberately to help our partners in the rural areas of the state, the farmers, so that they can understand that they’ve got a big, growing market in the biggest city in Kentucky.
When we did this survey, no matter what somebody’s socio-economic background was, everybody supported local food. They said, a), it’s healthier and b), we want to help local businesses. So, it kind of busted this myth that local food, farmers markets, all this was just yuppie kind of thing. Everybody appreciates good local food.
On why a 2014 college grad would choose Louisville over other cities such as Cincinnati or Nashville:
One, you want to take a look at the culture of the city. Are you going to be able to fit in? Are you going to be able to make a difference? You know, not every city is perfect for every student. So, is there a connection? Do you like our art scene? Do you like our local food scene here? What about the innovation we’re doing with the makerspace, for instance? Because I think we’re among the best in the country in that regard.
Take a look at the economic development clusters that are important to a city. In our case, are you into lifelong wellness and aging care, or food and beverage, or logistics and e-commerce, or business services, advanced manufacturing? Where is that fit for you? I can guarantee if you’re going to live here, you’re going to have a good quality of life and enjoy yourself, but are you going to be able to be employed in a meaningful way?
Any city that says they’re everything for everybody is being disingenuous. It’s just like a company. When you look at the city, find a place whose values mirror yours and whose opportunities mirror your interests at the same time. Make sure it’s got a beautiful, natural environment like we have here that’s full of nice people, and then you’ll have a good place to live – and it would be nice if it was Louisville.
There’s a lot more where this came from so listen to the whole thing or read the complete transcript.
Some may be wondering about the Ohio River Bridges Project. There were no restrictions on what topics I could ask about, and I haven’t changed my opinion on it. But I felt the discussion time would be productively spent elsewhere so did not ask about it.
Friday, February 21st, 2014
I’ve said many times that it is predominately larger metropolitan regions of 1-1.5 million people or larger that are best positioned to succeed in the global economy. This is in effect the minimum viable scale to compete. These cities have bigger talent pools, thicker labor markets, the right infrastructure (e.g., major airports) and amenities, bigger local markets, more specialized suppliers, and more entrepreneurial ferment. Smaller places that don’t have a unique asset (such as a major university) are going to struggle.
We see that on display again in Michigan, where Battle Creek based Kellogg’s is opening an operations center in Grand Rapids. This will employ 300-600 people, including some transferred from the headquarters. As the company put it:
Kellogg CEO John Bryant told The Grand Rapids Press/MLive they chose Grand Rapids for the new center after looking at nine possible locations around the U.S. as part of a new corporate restructuring initiative dubbed “Project K.”
Bryant said the company chose Grand Rapids because 40 other corporations have created similar service centers in the area, creating a labor pool from which Kellogg hopes to draw.
“We’re very excited about the Grand Rapids location. There’s a good population base for this sort of activity,” Bryant said.
Leaders in Battle Creek are angry about the company choosing to open in nearby Grand Rapids:
“This was a unilateral action by the Kellogg Company,” [former Battle Creek mayor and U.S. congressman Dr. Joe] Schwarz said Monday, “blindside, if you will. And that’s not the way people in Battle Creek, especially those that have been here a long time and worked with Kellogg on so many issues like myself, that simply is not the type of behavior we’ve come to expect from the company.”
At the time, Jim Hettinger was CEO of Battle Creek Unlimited. In a column for the Battle Creek Enquirer, Hettinger expressed his frustration over Kellogg’s announcement, saying the city has continually gone to great lengths to accommodate the company’s needs.
I understand the frustration, but at the end of the day, this is the reality of the modern world we live in. We see similar business decisions every day. Kellogg’s is in Battle Creek for historical reasons. There’s no way the company would ever choose to locate there today. The changing demands of the global marketplace create a need for skills that are easier to find in or lure to a place like Grand Rapids (metro population one million) than Battle Creek (metro population 135,000). That’s reality.
Note here that cost is simply not the issue. Both Grand Rapids and Battle Creek are lower cost locations. It’s clearly about being in a place that has better scale to serve the needs of a business serving upwards of 600 white collar employees.
This divergence understandably fuels resentment and bitterness within states, as I noted in a recent column in Governing magazine. I frequently find that to locals it’s particularly galling when a company does something like this within the state boundaries. Had Kellogg’s opened in Austin, Texas, I strongly suspect Battle Creek wouldn’t be nearly so bitter. I’ve long noted the same thing in Indiana, where smaller towns and cities would far rather see an out of state company buy their local bank or whatever than have an Indianapolis company come in. (Though I’ve also noticed this has changed for the better in the last 20 years). The reality is these jobs could have left the state entirely. Had Grand Rapids not been there, they probably would have.
This is one reason I have pounded the table for more expanded regional thinking by the likes of Grand Rapids. It’s not an easy problem, but if they can’t demonstrate that there’s a win-win in here somewhere for regional metros like Kalamazoo and Battle Creek, resentment will become entrenched. This can be difficult because the answers aren’t obvious and places like Grand Rapids – which itself is of marginal scale and what’s more not on the trade routes in the way a place like Columbus, Ohio is – are pedaling hard to just to make sure they themselves can make it. But longer term I think it’s imperative.
In the meantime, it’s important for state leaders to understand and respond to these realities. If they don’t, they will only drive business out of the state completely, just like effectively Indiana’s entire banking industry got gobbled up with little to show for it.
PS: One exception I’ve noted to this rule: Chicago. I didn’t seem to hear the same anger from Decatur over ADM that we see here. I think in part it’s because they understand Chicago is just a far different place than them. It’s such a unique city that losing a small executive headquarters doesn’t even seem like genuine poaching. Plus the entire leadership of the state is Chicago-centric, and and their top priority is building up global city Chicago.
Thursday, January 30th, 2014
An idea that’s been kicked around by many is to help turn around struggling cities like Detroit by offering geographically limited immigrations visas. That is, to allow foreigners get their green card if they agree to live in a particular city for a certain number of years.
Michigan Gov. Rick Snyder has now officially endorsed the concept, calling for Detroit to be awarded 50,000 city-specific immigration visas for skilled workers over five years. As the NYT put it:
Under the plan, which is expected to be formally submitted to federal authorities soon, immigrants would be required to live and work in Detroit, a city that has fallen to 700,000 residents from 1.8 million in the 1950s.
“Isn’t that how we made our country great, through immigrants?” said Mr. Snyder, a Republican, who last year authorized the state’s largest city to seek bankruptcy protection and recently announced plans to open a state office focused on new Americans.
Later, he added, “Think about the power and the size of this program, what it could do to bring back Detroit, even faster and better.”
The appeal of the idea is obvious. I’ve probably said positive things about it myself in the past. But examine it more closely and it’s clear this is an idea that’s fatally flawed. By requiring immigrants to live and work in the city of Detroit for a period of time, this program would effectively bring back indentured servitude, only instead of having to work for the people who paid for their trip to America, these immigrants would have to work for Detroit.
I’ve got to believe that the courts would look skeptically at such a scheme that so radically restricts geographic mobility and opportunity. What’s more, I think it’s plain wrong to invite people into our country with the idea that they are de facto restricted to one municipality.
L. Brooks Patterson, county executive of wealthy Oakland County in suburban Detroit, took huge heat again this week when he was quoted in the New Yorker saying “I made a prediction a long time ago, and it’s come to pass. I said, ‘What we’re gonna do is turn Detroit into an Indian reservation, where we herd all the Indians into the city, build a fence around it, and then throw in the blankets and the corn.’” Yet isn’t this idea of city specific visas almost literally treating Detroit like a reservation, only for immigrants instead of Indians?
Some have likened this to programs to entice doctors to rural areas by paying for medical school. I’m not sure how all of those are structured, but they may have questionable elements as well. But more importantly, my understanding is that they are purely financial, where medical school loans are paid off in return for a certain number of years of service. If a doctor elects to leave the program, they are in no worse shape than someone who didn’t sign up would be. They are still licensed to practice medicine and have to repay their loans just like every other doctor.
I don’t think Gov. Snyder is motivated by any ill will in this. I think he’s genuinely looking for creative solutions to the formidable problems Detroit faces. He’s taken huge heat for finally facing up to the legacy of problems there, and hasn’t shied way from making tough calls. He’s even willing to call for some bailout money, which many in his own party don’t like. But this idea is a bad one. He should withdraw it, and the federal government should by no means open to the door to these types of arrangements.
Immigrants remain a great way to pursue a civic turnaround, however. Detroit just needs to lure them on the open market the same way Dayton, Ohio and others are trying to do.
Thursday, January 23rd, 2014
My latest post is online over at New Geography and is called “How Houston’s Missing Media Gene Hobbles Its Ambitions.” In it I contrast San Francisco and Houston as representative champions of two different models of both urban development, and future vision for the US economy. But while San Francisco has risen to the challenge, Houston has largely not because it has failed to tell its story to the world. That’s in part because it feels no need to self-promote and especially focus on getting its narrative out via the media.
Here’s an excerpt:
The second big divergence relates to media. After all, the media, understood broadly, is how we come to have knowledge about or opinions of many things. Simply put, San Francisco and the tech industry get the power of media, while Houston doesn’t.
The content creators may still prefer a New York, LA, or DC but the tech moguls are circling the last redoubts of entertainment and information. Apple now has a dominant position in content distribution for music and is expanding in other areas. Google generates huge advertising revenues that are greater than the entire newspaper and magazine industry. Despite its many troubles, Yahoo remains one of the most-visited news sites. Meanwhile in just last year or two, Facebook co-founder Chris Hughes has bought the venerable New Republic while Seattle’s Jeff Bezos recently bought the Washington Post. Pierre Omidyar, founder of Ebay, recently announced a $250 million new media venture featuring Glenn Greenwald.
Houston, by contrast, has close to zero media influence or impact and seems not to care. It’s much less an influencer of media than one whose reputation has been shaped by it, and often not in a good way. Though there are many sprawl dominated metropolises in America, it’s Houston that has become the bête noire of urbanists.
One commenter highlights a point I wish I’d made. Gary B contrasts Houston with Atlanta, where Ted Turner built a media empire. Here’s what he had to say:
To my mind, the more interesting straight-up comparison is Houston to Atlanta. They are both new cities, roughly comparable in size (in the 5-6+ million range) and growing at roughly the same rate; they share much the same Southern background and climate (though Houston is more diverse, drawing immigrants from a much greater portion of the world) and political orientation (thoroughly conservative leadership class, but emerging liberal demographics beneath, at least in the central cities). So why has most national press about Atlanta over recent decades been glowingly positive while those about Houston have been mostly negative? A great deal of it has to do with media presence. Atlanta has had Ted Turner’s media empire, and to a great extent has broadcast its own version of its story nationwide; Houston has left its image to be determined by often envious media empires located thousands of miles away.
Thursday, January 16th, 2014
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.”
Sunday, January 12th, 2014
Globalization, technology, productivity improvements, and the resulting restructuring of the world economy have led to fundamental changes that have destroyed the old paradigms of doing business. Whether these changes are on the whole good or bad, or who or what is responsible for bringing them into being, they simply are. Most cities, regions, and US states have extremely limited leverage in this marketplace and thus to a great extent are market takers more than market makers. They have to adapt to new realities, but a lack of willingness to face up to the truth, combined with geo-political conditions, mean this has seldom been done.
Three of those new realities are:
1. The primacy of metropolitan regions as economic units, and the associated requirement of minimum competitive scale. It is mostly major metropolitan areas, those with 1-1.5 million or more people, that have best adapted to the new economy. Outside of the sparsely populated Great Plains, smaller areas have tended to struggle unless they have a unique asset such as a major state university. Even the worst performing large metros like Detroit and Cleveland have a lot of economic strength and assets behind them (e.g., the Cleveland Clinic) while smaller places like Youngstown and Flint have also gotten pounded yet have far fewer reasons for optimism. Many new economy industries require more skills than the old. People with these skills are most attracted to bigger cities where there are dense labor markets and enough scale to support items ranging from a major airport to amenities that are needed to compete.
2. States are not singular economic units. This follows straightforwardly from the first point. As a mix of various sized urban and rural areas, regions of states have widely varying degrees of economic success and potential for the future. Their policy needs are radically different so the one size fit all nature of government rules make state policy a difficult instrument to get right. Additionally, many major metropolitan areas that are economic units cross state borders.
3. Many communities may never come back, and many laid-off workers may never be employed again. Realistically, many smaller post-industrial cities are unlikely to ever again by economically dynamic no matter what we do. And lost in the debate over the n-th extension of emergency unemployment benefits is the painful reality that for some workers, especially older workers laid off from manufacturing jobs, there’s no realistic prospect of employment at more than near minimum wage if that. As Richard Longworth put it in Caught in the Middle, “The dirty little secret of Midwest manufacturing is that many workers are high school dropouts, uneducated, some virtually illiterate. They could build refrigerators, sure. But they are totally unqualified for any job other than the ones they just lost.” This doesn’t even get to the big drug problems in many of these places. This isn’t everybody, but there are too many people who fall into that bucket.
I want to explore these truths and potential state policy responses using the case study of Indiana. An article in last week’s Indianapolis Business Journal sets the stage. Called “State lags city with science, tech jobs” it notes how metropolitan Indianapolis has been booming when it comes to so-called STEM jobs (Science, Technology, Engineering, Math). Its growth rate ranked 9th in the country in study of large metro areas. However, the rest of Indiana has lagged badly:
Indiana for more than a decade has blown away the national average when it comes to adding high-tech jobs. But outside the Indianapolis metro area, there isn’t much cause for celebration.
Careers in science, technology, engineering and math—typically referred to as STEM fields—have surged in growth compared to other careers in Marion and Hamilton counties. It’s a boon for economic development, considering the workers earn average wages almost twice as high as all others, and employers sorely need the skills. Dozens of initiatives focus on building STEM jobs in the state.
A recent report ranked the Indianapolis-Carmel metro area ninth in the country in STEM jobs growth since the tech bubble burst in 2001. But while the metro area has grown, the rest of Indiana has barely budged from the early 2000s, an IBJ analysis of U.S. Bureau of Labor Statistics found.
Indianapolis grew its STEM job base by 39% since 2001 while the rest of the state grew by only 10% (only 6% if you exclude healthcare jobs). Much of the state actually lost STEM jobs.
This divergence between metropolitan Indianapolis (along with those smaller regions blessed with a unique asset like Bloomington (Indiana University), Lafayette (Purdue University) and Columbus (Cummins Engine)) and the rest of the state is a well-worn story by now. Here are a few baseline statistics that tell the tale.
|Item||Metro Indianapolis||Rest of Indiana|
|Population Growth (2000-2012)||15.9%||4.1%|
|Job Growth (2000-2012)||5.9%||-7.2%|
|GDP Per Capita (2012)||$50,981||$34,076|
|College Degree Attainment (2012)||32.1%||20.1%|
Additionally, there does appear to be something of a brain drain phenomenon, only it’s not brains leaving the state, it’s people with degrees moving from outstate Indiana to Indianapolis. From 2000-2010 a net of about 51,000 moved from elsewhere in Indiana to metro Indianapolis. As Mark Schill put it in the IBJ:
“Indianapolis is somewhat of a sponge city for the whole region,” said Mark Schill, vice president of research at Praxis Strategy Group, an economic development consultant in North Dakota.
The situation in Indiana, Schill said, is common throughout the United States: States with one large city typically see their engineers, scientists and other high-tech workers flock to the urban areas from smaller towns.
Even I find it very surprising that of my high school classmates with college degrees, half of them live in Indianapolis – this from a tiny rural school along the Ohio River in far Southern Indiana near Louisville, KY.
What has Indiana’s policy response been to this to date? I would suggest that the response has been to a) adjust statewide policy levers to do everything possible to reflate the economy of the “rest of Indiana” while b) making subtle tweaks attempt to rebalance economic growth away from Indianapolis.
On the statewide policy levers, the state government has moved to imposed a one size fits all, least common denominator approach to services. The state centralized many functions in a recent tax reform. It also has aggressively downsized government, which now has the fewest employees since the 1970s. Tax caps, a comparative lack of home rule powers, and an aggressive state Department of Local Government Finance have combined to severely curtail local spending as well. Gov. Pence took office seeking to cut the state’s income tax rate by 10% (he got 5%), and now wants to eliminate the personal property tax on business. Indiana also passed right to work legislation.
I call this “the best house on a bad block strategy.” I think Mitch Daniels looked around at Illinois, Ohio, and Michigan and said, “I know how to beat these guys.” Indiana is not as business friendly as places like Texas or Tennessee, but the idea was to position itself to capture a disproportionate share of inbound Midwest investment by being the cheapest. (I’ll get to Pence later).
The subtle tweaks have been income redistribution from metro Indianapolis (documented by the Indiana Fiscal Policy Institute) and using the above techniques and others to apply the brakes to efforts by metro Indy to further improve its quality of life advantage over many other parts of the state (see my column in Governing magazine for more). One obvious example is a recent move by the Indiana University School of Medicine to build full four year regional medical school campuses and residency programs around the state with the explicit aim of keeping students local instead of having them come to Indianapolis for medical training.
What there’s been next to nothing of is any sense of metropolitan level or even regional thinking. The state does administer programs on a regional level, but the strategy is not regionally oriented and the administrative borders don’t even line up. Here are the boundaries of the various workforce development boards:
There’s a semi-metropolitan overlay, but as I’ve long noted places like Region 6 are economic decline regions, not economic growth regions. Here’s how the Indiana Economic Development Corp. sees the world:
These are not just agglomerations of the workforce districts, there are numerous differences between them. The point is that clearly the organization is driven by administrative convenience and the political need for field offices, not a metro-centric view of the world or strategy.
Add it all up and it appears that Indiana has decided to fight against all three new realities above rather than adapting to them. It rejects metro-centricity, imposes a uniform policy set, and is oriented towards trying to reflate the most struggling communities. I don’t think this was necessarily a conscious decision, but ultimately that’s what it amounts to.
When you fight the tape, you shouldn’t expect great results and clearly they haven’t been stellar. Since 2000, Indiana comfortably outperformed perennial losers Michigan and Ohio on job growth (well, less job declines), but trailed Kentucky, Wisconsin, Minnesota, Iowa, and Missouri. But notably, Indiana only outpaced Illinois by a couple percentage points. That’s a state with higher income taxes (and that actually raised them) that’s nearly bankrupt and where the previous two governors ended up in prison. Yet Indiana’s job performance is very similar. What’s more, Hoosier per capita incomes have been in free fall versus the national average, likely because it has only become more attractive to low wage employers.
Fiscal discipline, low taxes, and business friendly regulations are important. But they aren’t the only pages in the book. Workforce quality counts for a lot, and this has been Indiana’s Achilles heel. (My dad, who used to run an Indiana stone quarry, had trouble finding workers with a high school diploma who could pass a drug test and would show up on time every day – hardly tough requirements one would think). Also aligning with, not against market forces is key.
I will sketch out a somewhat different approach. Firstly, regarding the chronically unemployed, clearly they cannot be written off or ignored. However, I see this as largely a federal issue. We need to come to terms with the reality that America now has a population of some million who will have extreme difficulty finding employment in the new economy (see: latest jobs report). We’ve shifted about two million into disability rolls, but clearly we’ve to date mostly been pretending that things are going to re-normalize.
For Indiana, the temptation can be to reorient the entire economy to attract ultra low-wage employers, then cut benefits so that people are forced to take the jobs. I’ve personally heard Indiana businessmen bemoaning the state’s unemployment benefits that mean workers won’t take the jobs their company has open – jobs paying $9/hr. Possibly the 250,000 or so chronically unemployed Hoosiers may be technically put back to work through such a scheme – eventually. But it would come at the cost of impoverishing the entire state. Creating a state of $9/hr jobs is not making a home for human flourishing, it’s building a plantation.
Instead of creating a subsistence economy, the focus should instead be on creating the best wage economy possible, one that offers upward mobility, for the most people possible, and using redistribution for the chronically unemployed. You may say this is welfare – and you’re right. But I would submit to you that the state is already in effect a gigantic welfare engine. In addition to direct benefits, the taxation and education systems are redistributionist, and the state’s entire economic policy, transport policy, etc. are targeted at left-behind areas (i.e., welfare). Even corrections is in a sense warehousing the mostly poor at ruinous expense. So Indiana is already a massive welfare state; we are just arguing about what the best form is. I think sending checks is much better than distorting the entire economy in order to employ a small minority at $9/hr jobs – but that’s just me. Again, we are in uncharted territory as a country and this is ultimately going to require a national response, even if it’s just swelling the disability rolls even more. I do believe people deserve the dignity of a job, but we have to deal with the unfortunate realities of our new world order.
With that in mind, the right strategy would be metro-centric, focusing on building on the competitively advantaged areas of the state – what Drew Klacik has called place-based cluster – and competitively advantaged middle class or better paying industries.
Contrary to some of the stats above, this is not purely an Indianapolis story. Indiana has a number of areas that are well-positioned to compete. Here’s a map with key metro regions highlighted:
This may look superficially like the maps above, but it is explicitly oriented around metro-centric thinking. Metro Indy has been doing reasonably well as noted. But Bloomington, Lafayette, and Columbus (sort of small satellite metros to Indy) have also done very well. In fact, all three actually outperformed Indy on STEM job growth.
Additionally, three other large, competitively advantaged metro areas take in Indiana territory: Chicago, Cincinnati, and Louisville. These are all, like Indy, places with the scale and talent concentrations to win. True, none of the Indiana counties that are part of those metros is in the favored quarter. But they still have plenty of opportunities. I’ve written about Northwest Indiana before, for example, which should do well if it gets its act together.
This covers a broad swath of the state from the Northwest to the Southeast. It comes as no surprise to me that Honda chose to locate its plant half way between Indianapolis and Cincinnati, for example.
The state should align its resources, policies, and investments to enable these metro regions to thrive. This doesn’t mean jacking up tax rates. Indiana should retain its competitively advantaged tax structure. But it should mean no further erosion in Indiana’s already parsimonious services. The state is already well-positioned fiscally, and in a situation with diminishing marginal returns to further contraction.
Next, empower localities and regions to better themselves in accordance with their own strategies. This means an end to one size fits all, least common denominator thinking. These regions need to be let out from under the thumb of the General Assembly. That means more, not less flexibility for localities. Places like Indianapolis, Bloomington, and Lafayette would dearly love to undertake further self-improvement initiatives, but the state thinks that’s a bad idea. (I believe this is part of the subtle re-balancing attempt I mentioned).
It also means using the state’s power to encourage metro and extended region thinking. For example, last year within a few months of each other the mayors of Indianapolis, Anderson, and Muncie all made overseas trade trips – separately and to different places. That’s nuts. The state should be encouraging them to do more joint development.
This also means recognizing the symbiotic relationship that exists between the core and periphery in the extended Central Indiana region, clearly the state’s most important. The outlying smaller cities, towns, and rural areas watch Indianapolis TV stations, largely cheer for its sports teams, get taken to its hospitals for trauma or specialist care, fly out of its airport, etc. Metro Indianapolis and its leadership have also basically created and funded much of the state’s economic development efforts (e.g., Biocrossroads) and many community development initiatives (the Lilly Endowment). Many statewide organizations are in effect Indianapolis ones that do double duty in serving the state. For example, the Indiana Historical Society. (There is no Indianapolis Historical Society).
On the other side of the equation, Indianapolis would not have the Colts and a lot of other things without the heft added from the outer rings out counties that are customers for these amenities. It benefits massively from that, particularly since it’s a marginal scale city. One of the biggest differences between Indy and Louisville is that Indy was fortunate enough to have a highly populated ring of counties within an hour’s drive.
So in addition to aligning economic development strategies around metros, and freeing localities to pursue differentiated strategies, the state should encourage the next ring or two of counties that are in the sphere of influence of major metros to align with their nearest larger neighbor.
Contrary to popular belief, this is a win-win. When I was in Warsaw, Indiana, people were concerned that many highly paid employees of the local orthopedics companies lived in Ft. Wayne. From a local perspective, that’s understandable and obviously they want to be competitive for that talent and should be all means go for it. On the other hand, what if Ft. Wayne wasn’t there for those people to live in? Would those orthopedics companies be able to recruit the talent they need to stay located in small town Indiana?
It’s similar for other places. Michael Hicks, and economist at Ball State in Muncie, said, “Almost all our local economic policies target business investment and masquerade as job creation efforts. We abate taxes, apply TIFs and woo businesses all over the state, but then the employees who receive middle-class wages (say $18 an hour or more) choose the nicest place to live within a 40-mile radius. So, we bring a nice factory to Muncie, and the employees all commute from Noblesville.” Maybe Muncie isn’t completely happy about this, understandably. But would they have been able to recruit those plants at all (and the associated taxes they pay and the jobs for anybody who does stay local) if higher paid workers didn’t have the option to live in suburban Noblesville? Would the labor force be there?
I saw a similar dynamic in Columbus. Younger workers recruited by Cummins Engine chose to live in Greenwood (near south suburban Indy). Columbus wants to keep upgrading itself to be more attractive – a good idea. But the ability to reverse commute from Indy is an advantage for them.
Louisville, Kentucky has one of the highest rates of exurban commuting the country because so many Hoosiers in rural communities drive in for good paying work.
This is the sort of thinking and planning that needs to be going on. Realistically, most of these small industrial cities and rural areas are not positioned to go it alone and they shouldn’t be supported by the state in attempting to do so. They need to a align with a winning team.
There are two groups of places that require special attention. One is the mid-sized metro regions of Ft. Wayne, Evansville, and South Bend-Elkhart. These places are too far from larger metros and aren’t large enough themselves to have fully competitive economies. No surprise two of the three lost STEM jobs. Evansville has done better recently on the backs of Toyota, but has a vast rural hinterland it cannot carry with its small size. The region has done ok of late, but it has also received gigantic subsidies in the form of multiple massive highway investments, and now a massive coal gasification plant subsidy. I don’t believe this is sustainable. These places need special assistance from the state to devise and implement strategies.
The other grouping consists of rural and small industrial areas that are too far outside the orbit of a major metro to effectively align with it. This would includes places like Richmond or Blackford County. They might get lucky and land a major plant, but realistically they are going to require state aid for some time to maintain critical services.
For the last two groups especially, there also needs to be a commitment by the state’s top brain hubs – Indy and the two university towns – to applying their intellectual and other resources to the difficult problem at hand. Part of that involves helping them be the best place of their genre that they can. While cities are competitively advantaged today, not everybody wants to live in one. So there is still an addressable market, if not as large, for other places.
Put it together and here’s the map that needs to be changed. It’s percentage change in jobs, 2000-2012:
Pretty depressing. Urban core counties had some losses, but suburban Indy, Chicago, and Cincy did decently (Louisville’s less well), plus Bloomington area, Lafayette, and Columbus. You see also the strong performance of Southwest Indiana which is fantastic, but the sustainability of which I think is in question. Wages are higher in metro areas too, by the way. Here’s the average weekly wage in 2012, which shows most of the state’s metros doing comparatively well:
In short, I suggest:
- Retain lean fiscal structure but limit further contractions
- Goal is to build middle class or better economy, not bottom feeding
- Align economic development efforts to metro areas, particularly larger, competitively advantages locations. Align capital investment in this direction as well.
- Greater local autonomy to pursue differentiated strategies for the variegated areas of the state
- Special attention/help to strategically disadvantaged communities, but not entire state policy directed to servicing their needs.
- Utilization of transfers for the chronically unemployed pending a federal answer, but again, not redirection of state policy to attract $9/hr jobs.
This requires a lot of fleshing out to be sure, but I think is broadly the direction.
Back to Gov. Mike Pence, would he be on board with this? He’s Tea Party friendly to be sure and interested in fiscal contraction. But he’s not a one-trick pony. He’s actually taken some interesting steps in this regard. He is subsidizing non-stop flights from Indianapolis to San Francisco for the benefit of the local tech community. He also wants to establish another life sciences research institute in Indy. And he’s talked about more regionally focused economic development efforts. It’s a welcome start. I think he groks the situation more than people might credit him for. Keep in mind that he did not establish the state’s current approach, which arguably even pre-dated Mitch Daniels, and he has to deal with political realities. And if as they say only Nixon could go to China, then although a reorienting of strategy is not about writing big checks, still perhaps only someone with conservative bona fides like Pence can push the state towards a metro-centric rethink.
Tuesday, November 12th, 2013
[ Ramsin Canon is one of the most keen left political observers I know in Chicago. Among other things he's been the politics editor at Gapers Blocks, a union organizer, and is now a law student I believe. Needless to say, he's no fan of "neoliberalism", even when practiced by those on the left. Here he provides his frame and critique of the current reigning governance model in our various levels of government re:cities. I may revisit this topic with my own thoughts in the future, but I'd like to make a couple of observations here. 1) Canon sees the locus of the problems facing cities as being at the federal level or otherwise beyond their control such that the response he decries is at least somewhat rational (if not the right one in his view). I take this as similar to my view that "gentry liberalism" has a certain sort of logic to it. 2) His articulation of the background is one that even many with diametrically opposite policy views could endorse. They just might take different lessons away (e.g., that federal intervention in cities actually caused many of the problems, see:urban renewal, downtown freeways, war on poverty, etc). This provides potential touchpoints for debate. In any case, this definitely makes you think about where we are, how we got here, and what to do about it. - Aaron. ]
Jamelle Bouie, a moderate liberal writer for The American Prospect, tweeted this:
There’s nothing good for workers in places where cities scramble to give benefits to companies for a handful of shitty jobs.
— Jamelle Bouie (@jbouie) December 12, 2012
around the same time that Mick Dumke, a left-leaning Chicago Reader reporter, wrote this:
Desperate for money, state and local governments around the country have explored all sorts of privatization deals, or public-private partnerships, as advocates prefer to call them. Florida, Arizona, and other states have sent inmates to private prisons. Detroit has considered outsourcing management of its street lighting system…Chicago isn’t just part of the trend. For more than two decades, it’s been one of the privatization leaders. “You could say they’re at the head of the pack,” says Leonard Gilroy, director of government reform at the libertarian Reason Foundation. “Chicago is reflective of the outsourcing that’s been going on for years.”
Not long after, we read about this:
Beginning January 1, Chicago’s parking meters will be the most expensive in North America. It’ll cost drivers $6.50 per hour to park in the Loop. Near downtown the rate will be $4 per hour. Other metered areas throughout the city will be $2 per hour.
For Skyway drivers, tolls are going up from $3.50 to $4.
Mayor Rahm Emanuel’s administration will explore the possibility of privatizing Midway Airport but will take a shorter-term, more tightly controlled approach than was employed by former Mayor Richard Daley’s team on the city’s first go-round.
All the while, Mayor Rahm Emanuel continues to be lauded by left-neoliberals and fellow travelers for his aggressively pro-business economic development policies, including mass privatization. Meanwhile labor unions and community organizations scrambled to find a critique of these policies that will resonate with a public increasingly incensed with a policy atmosphere that regressively taxes them while slashing jobs and services.
With the election over and no longer sucking all the air out of the room, and with President Obama comfortable ensconced in his second term but before the 2016 jockeying starts in earnest, now may be the time to step back and think about the big picture. What is this amorphous policy regime to which Mayor Emanuel, and mayors across the country hew? A policy regime that is comfortable enough for the wealthiest and most powerful Americans that they can comfortably donate both to Mayor Emanuel and Mitt Romney?
What we’re feeling viscerally, but seeing from too close to appreciate, is the logical end of decades of neoliberalization of government, which has transformed a managerial state into an entrepreneurial one. Our Mayors are now “entrepreneurs-in-chief,” and the result is that governance has been transformed from a participatory process of pooling resources and regulating behavior for the public good into one of government by private negotiation and enticement of capital through competition between states, cities, and even neighborhoods.
The neoliberalization process, broadly speaking, began in the 1970s. Neoliberalization impacted local governments in various ways, but the most directly relevant are, first, the shift in federal policy from direct spending to “pro-growth” policies and, second, the liberalization of trade and regulatory regimes that introduced international competitive pressures on localities, particularly cities. The abandonment of federal and state commitments to infrastructure and social welfare programs required localities to resort to debt (in the form of bonds) and the active pursuit of capital investment to make up attendant budgetary shortfalls. The introduction of international competitive pressures made this need more acute.
In the pre-neoliberal Keynesian context, cities behaved more managerially, responsible for administering programs like public housing and developing regimes like Euclidean zoning, as well as encouraging business development and protecting labor interests. When cities were “disciplined” by a loss of federal and state funds, they were expected to either shrink in size or find private sources for revenue–the antithesis of the Keynesian principles of recession response. Both to avoid capital flight and to attract new capital, therefore, cities must act entrepreneurially, engaging businesses and enticing them to develop new projects.
Enticing investment can take many forms, of course. Among these are tax incentives like tax-increment financing (“TIF”) overlay districts or sales tax rebates, direct subsidies, and “particularized” regulations that permit the government to be more flexible to the needs of development parties. Particularized regulations (for example, development agreements with developers that exempt them from the controls in a zoning statute) counter the unpredictability and vicissitudes of the administrative and legislative process and thus have inherent value to businesses; it reduces risk by vesting contractual rights, and thus ensuring predictability. The parking meter “lease” deal is a perfect example.
The story of the parking meter lease deal is the perfect neoliberal story. Throughout the late 90s and early 2000s, Chicago’s budget survived in large part on a particular tax, the real estate transfer tax. In the housing bubble years, there was no problem relying on this revenue to fund transportation, mental health clinics, and living wage city jobs. But as with the neoliberal bubbles of the past, it couldn’t last; between 2006 and 2009, revenues from the transfer tax cratered, from $242 million to $63 million. Between 2007 and 2008, the drop was over $80 million–representing nearly 40% of the budget deficit in the year the parking meter lease deal was made. It’s no secret now that Mayor Daley entered the deal to make up for a huge deficit without raising taxes.
Bubble that made some people very rich bursts. Revenues disappear. Working class families pay the price (see above, “most expensive parking.”) Only two options are available to the government of the New Model Entrepreneurial City: race to the bottom in terms of taxes and regulations to encourage “growth,” and thus boost revenues, and start selling off assets.
Why not raise property or luxury taxes, or institute a city income tax, to make up the deficit? Why not divert money from the TIF districts?
See above; Chicago is no longer a political community, it is an economic entity that is in competition with other cities in the region, in the state, across the world. In that mental framework, tax is cost, or price. You raise prices, you drive away your clients. In the case of the neoliberal city, the client is the developer, the investor, the employer. The federal government and the state are not going to give the city any real money; they are not investing in infrastructure, or education, or social welfare in any real way, the way they did up through the late 1970s and 1980s. The name of the game is “growth” through enticement of capital.
And capital plays the game perfectly. They condition “jobs” they’re supposedly creating on tax rebates, regulatory relief (i.e., from zoning codes), and more and more say in how the city is run–World Business Chicago being an example of that. Big business can always periodically threaten to leave the city, setting off the competition between cities and states that drive down standards, that abrogates regulations, that eliminates taxes.
This is our challenge in the coming era. Breaking this backward idea that the purpose of the city is to prostrate itself in pursuit of investment that is never really satisfied. Part of this will be a political solution: we need a Mayor unsatisfied with his pathetic role as an entrepreneur begging for investment, and willing to work politically to change the status quo. The other answer is a social one: alternative models to big business investment. Whether that means large-scale cooperatives, developing local sources of investment that can be pooled to provide employment, or some other method doesn’t matter. What matters is that cities begin to show that they can remove themselves from the uneven geographic development of capitalism that forces cities to regressively tax working class families and immiserate workers through wage depression and service elimination.
This post originally appeared in Same Subject, Continued on January 4, 2013.
Thursday, October 17th, 2013
A couple weeks ago, noting the apparently immunity of global city Chicago to problems elsewhere in the city, I asked the 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?
I’d argue we’re seeing the results right before our eyes.
At the same time murders in significant parts of the city are even higher than during the peak of the crack epidemic, when the city says its too poor to hire more cops, when 54 schools are closed and a 1000 teachers laid off, half the mental health clinics closed, libraries cut back, etc., Chicago has found a nearly limitless stream of money for elite amenities, most recently – and appallingly – $50+ million in TIF subsidies for a new DePaul arena. There’s also been hundreds of millions of dollars more in corporate welfare under Daley and Rahm.
Investing in success is a great idea – if you plan to harvest a return on that investment to fund city services and your safety net. It’s clear there’s no intention of doing this in Chicago. I discuss this in my most recent City Journal piece, “Well-Heeled in the Windy City.” Here’s an excerpt:
Clearly, cities like Chicago must retain a substantial portion of upscale residents and businesses. Detroit and other cities show the results of failure on this front. Yet the moral case for elite amenities has always rested on the assumption of a broader public good: what benefited the wealthy would also make life better for the rest of the city….Under Emanuel’s leadership, though, Chicago has made peace with a two-tier society and broken the social contract. Rather than trying to expand opportunity, Chicago has bet its future on its already successful residents—leading some on the left to call Emanuel Mayor 1 Percent. The Windy City isn’t alone in following this strategy. Detroit has gone bankrupt, but that hasn’t stopped city government from lavishing $450 million in subsidies on a new Red Wings arena.
Since I critique bike infrastructure as part of Chicago’s splurge for the elite, I want to clarify that point here where there are lots of bike advocates. I strongly support bike infrastructure. In fact, I once gave a presentation where I said protected bike lanes and bike share should be Rahm’s top two transport priorities on taking office because they are cost-effective and can leverage outside funds. However, even the most passionate advocates must admit that the optics are bad on making a full court press on bike lanes when cutting core services elsewhere. More importantly, Rahm’s explicit rationale on bike infrastructure has been luring talent for the tech economy, thus it is an elite focused venture. For example, the Sun-Times reported:
Emanuel called protected bike lanes central to the city’s sustainability plan and his efforts to make Chicago the high-tech hub of the Midwest. Chicago “moved up dramatically” in the list of major cities whose employees bike to work, he said.
“It’s part of my effort to recruit entrepreneurs and start-up businesses because a lot of those employees like to bike to work,” he said.
“It is not an accident that, where we put our first protected bike lane is also where we have the most concentration of digital companies and digital employees. Every time you speak to entrepreneurs and people in the start-up economy and high-tech industry, one of the key things they talk about in recruiting workers is, can they have more bike lanes.”
Thursday, October 3rd, 2013
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.
Sunday, August 4th, 2013
This post originally ran on August 19, 2012.
We hear a lot of talk these days about so-called “global cities.” But what is a global city?
Saskia Sassen literally wrote the book on global cities back in 2001 (though her global cities work dates back well over a decade prior to that book). She gave a definition that has long struck with me. In short form, in the age of globalization, the activities of production are scattered on a global basis. These complex, globalized production networks require new forms of financial and producer services to manage them. These services are often complex and require highly specialized skills. Thus they are subject to agglomeration economics, and tend to cluster in a limited number of cities. Because specialized talent and firms related to different specialties can cluster in different cities, this means that there are actually a quite a few of these specialized production nodes, because they don’t necessarily directly compete with each other, having different groupings of specialties.
In this world then, a global city is a significant production point of specialized financial and producer services that make the globalized economy run. Sassen covered specifically New York, London, and Tokyo in her book, but there are many more global cities than this.
The question then becomes how to identify these cities, and perhaps to determine to what extent they function as global cities specifically, beyond all of the other things that they do simply as cities. Naturally this lends itself to our modern desire to develop league tables.
A number of studies were undertaken to produce various rankings. However, when you look at them, you see that the definition of global city used is far broader than Sassen’s core version. Wikipedia lists some of the general characteristics people tend to refer to when talking about global cities. It cites a very lengthy list, but some of them are:
- Home to major stock exchanges and indexes
- Influential in international political affairs
- Home to world-renowned cultural institutions
- Service a major media hub
- Large mass transit networks
- Home to a large international airport
- Having a prominent skyline
As you can see, this is quite a hodge-podge of items, many of which are only tangentially related to globalization per se. In effect, many of them seek to define cities only in term of global prominence rather than functionally as related to the global economy. That’s certainly a valid way to look at it, but it raises the point that we should probably clarify what we are talking about when we talk about global cities.
To clarify our thinking, let’s look at how various ranking studies have defined global city for their purposes.
One oft-cited such ranking was a 1999 research paper called A Roster of World Cities. The authors, Jon Beaverstock, Richard G. Smith and Peter J. Taylor, explicitly reference Sassen’s work, seeking to define global cities in terms of advanced producer services.
Taking our cue from Sassen (1991, 126), we treat world cities as particular ‘postindustrial production sites’ where innovations in corporate services and finance have been integral to the recent restructuring of the world-economy now widely known as globalization. Services, both directly for consumers and for firms producing other goods for consumers, are common to all cities of course, what we are dealing with here are generally referred to as advanced producer services or corporate services. The key point is that many of these services are by no means so ubiquitous; for Sassen they provide a limited number of leading cities with ‘a specific role in the current phase of the world economy’ (p. 126).
They took lists of firms in four specific service industries – accounting, advertising, banking, and law – and determined where those firms maintained branches and such around the world in order to determine the importance of various cities as production nodes of these services. This has some weaknesses in that it doesn’t necessarily distinguish whether say a particular accounting firm is doing routine type work of the sort accountants have always been doing, or performing advanced work of a type specific to globalization, but it at least tries to derive lists related to the production of services.
As the global city concept grew in popularity, various other organizations entered the fray. Most of these newer lists take a very different a much broader approach closer to the Wikipedia type lists of characteristics rather than a Sassen-like definition.
One example is AT Kearney’s list, developed in conjunction with the Chicago Council on Global Affairs. Their most recent version is the 2012 Global Cities Index. This study uses criteria across five dimensions:
- Business Activity (headquarters, services firms, capital markets value, number of international conferences, value of goods through ports and airports)
- Human Capital (size of foreign born population, quality of universities, number of international schools, international student population, number of residents with college degrees)
- Information Exchange (accessibility of major TV news channels, Internet presence (basically number of search hits), number of international news bureaus, censorship, and broadband subscriber rate)
- Cultural Experience (number of sporting event, museums, performing arts venues, culinary establishments, international visitors, and sister city relationships).
- Political Engagement (number of embassies and consulates, think tanks, international organizations, political conferences)
The Institute for Urban Strategies at The Mori Memorial Foundation in Tokyo published another study called “The Global Power City Index 2011.” This report examined cities in terms of functions demanded by several “actor” types: Manager, Researcher, Artist, Visitor, and Resident. The functional areas were:
- Economy (Market Attractiveness, Economic Vitality, Business Environment, Regulations and Risk)
- Research and Development (Research Background, Readiness for Accepting and Supporting Researchers, Research Achievement)
- Cultural Interaction (Trendsetting Potential, Accommodation Environment, Resources of Attracting Visitors, Dining and Shopping, Volume of Interaction)
- Livability (Working Environment, Cost of Living, Security and Safety, Life Support Functions)
- Environment (Ecology, Pollution, Natural Environment)
- Accessibility (International Transportation Infrastructure, Inner City Transportation Infrastructure)
Another popular ranking is the Economist Intelligence Unit’s Global City Competitiveness Index. They rank cities on a number of domains:
- Economic Strength (Nominal GDP, per capita GDP, % of households with economic consumption > $14,000/yr, real GDP growth rate, regional market integration)
- Human Capital (population growth, working age population, entrepreneurship and risk taking mindset, quality of education, quality of healthcare, hiring of foreign nationals)
- Institutional Effectiveness (electoral process and pluralism, local government fiscal autonomy, taxation, rule of law, government effectiveness)
- Financial Maturity (breadth and depth of financial cluster)
- Global Appeal (Fortune 500 companies, frequency of international flights, international conferences and conventions, leadership in higher education, renowned think tanks)
- Physical Capital (physical nfrastructure quality, public transport quality, telecom quality)
- Environment and Natural Hazards (risk of natural disaster, environmental governance)
- Social and Cultural Character (freedom of expression and human rights, openness and diversity, crime, cultural vibrancy)
Note that these were not all equal weighted. Economic strength is paramount.
Yet another ranking comes from the Knight Frank/Citibank Wealth Report. This ranking is purely subjective and was based on surveying wealth advisors as to which cities they felt would be most important to their clients today and in the future based on four areas: economic activity, political power, knowledge and influence, and quality of life.
It’s worth noting that Sassen contributed to various of these surveys.
Looking at the newer surveys versus the Roster of World Cities, it’s clear that the game has changed. Rather than attempting to look at specific global economic functions, the global city game has become effectively a balanced scorecard attempt to determine, as I like to put it, the world’s “biggest and baddest” cities.
There are quite a few differences in methodologies, which is inevitable. But a few things jump out at me. First the focus on aggregate measures in these surveys. For example: total GDP, total foreign population, number of headquarters. There is a remarkable lack of attention to dynamism variables such as growth in various metrics, though the Economist survey includes a couple.
The focus on static totals versus dynamism tends to reward large, developed world cities versus rapidly growing or emerging market cities. (The AT Kearney survey has a separate emerging cities list). In a sense, these rankings are biased in favor of important legacy cities.
It’s also interesting to see what was included vs. not included in quality of life type ratings. For example, items like censorship, media access, the rule of law, and the environment are listed. But measures of upward social-economic mobility or income inequality or not.
Lastly, a number of the rankings suggest a self-consciously elite mindset, such as shopping and dining options. As with many quality of life surveys, these seem to orient them towards expatriate executive types rather than normal folks.
Looking at these, I can’t help but think that the criteria were the product of an iterative process where the results were refined over time. Thus in a sense the outcomes were likely somewhat pre-determined. That’s not to say that the game was rigged necessarily. But I suspect if anyone were doing a global city survey and London and New York did not rank at the top, the developers would question whether they got the criteria right. In a sense, a global city is like obscenity: we know one when we see it, but we don’t necessarily have a widely agreed upon objective set of criteria to measure it by.
I sense that these rankings attempt to look at global cities in four basic ways:
1. Advanced producer services production node. This is basically Sassen’s original definition. I think this one remains particularly important. Because the skills are specialized and subject to clustering economics, the cities that concentrate in these functions have a Buffett-like “wide moat” sustainable competitive advantage in particular very high value activities. For cities with large concentrations of these, those cities can generate significantly above average economic output and incomes per worker.
2. Economic giants. Namely, this is a fairly simple but important view of that simply measures how big cities are on some metrics like GDP.
3. International Gateway. Measures of the importance of a city in the international flows of people and goods. Examples would be the airport and cargo gateway figures.
4. Political and Cultural Hub. An important distinction should perhaps be made here between hubs that may be large but of primarily national or regional importance, and those of truly international significance. For example, there are many media hubs around the world, but few of them are home to outlets like the BBC that drive the global conversation.
There may potentially be other ways to slice it as well. The fact that these various ways of viewing cities can often overlap can confuse things I think. For example, New York and London score highly on all of these. And there are surely underlying reasons why they do. Yet trying to sum it all up into one overall ranking or score, while making it easy to get press, can end up obscuring important nuance.
So when thinking about global cities, I think we need to do a couple of things:
1. Clarify what it is we are talking about at the time.
2. Relative to the definition we are using, seek to identify the specific parts of the city in question that generate real above average value at the global level.