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Sunday, May 6th, 2012

The OECD Reviews Chicago

Update 5/20/12: This post has been edited to reflect a correction. Please see here for details.

The Organization for Economic Cooperation and Development (OECD) is an international organization that has its roots in the administration of Marshall Plan aid to rebuild Europe after World War II. The OECD was invited by the Chicagoland Chamber of Commerce* to perform a “territorial review” of Chicago’s regional economy. I believe this is the first such review the OECD has ever undertaken in the United States. The results were released a couple months ago. The Chicagoland Chamber graciously sent me a copy. (The report is available online here – thx Jim Russell for the link). I did a read through of this inch-thick, 332-page report and wanted to share a few observations about it. As the quote at the top might indicate, this report, like Rahm Emanuel’s economic strategy, was fairly gloomy. My points will be topical and not an integrated narrative as I did not get to undertake as thorough a review as I might like.

Interesting Statistics

The OECD review amassed quite a bit of interesting statistical data on Chicago and puts them in the context of other major cities in the 34 countries that comprise in the OECD. I think that by itself made the review worth doing. I might suggest other cities take a look at this to determine if such a study would be relevant to them, particularly as international comparisons can be difficult to pull off.

This report is a goldmine of stats and there’s way too much to list here, but a few things that jumped out at me:

• The OECD report benchmarked labor productivity, which is less commonly looked at in economic studies. Chicago’s is above average but growing more slowly than average.
• Chicago has trailed the nation in job growth. Had Chicago simply matched the national average in job growth since 1990, the region would have 600,000 more jobs than it does today.
• There was quite a bit of sectoral analysis of Chicago’s economy. In fact, they actually normalize the sectoral composition of Chicago’s economy when looking at job growth to see if its under performance in job growth was due to concentration in slow growing sectors – but it was not.
• Chicago is known for having America’s second largest business district, but it ranks only fifth out of the top ten regions in America for the percentage of its jobs in the core city. Between 1960 and 1990, over 96% of new regional jobs were created outside downtown.
• There were many other interesting statistics around labor force participation, mobility of educated labor, elderly dependency ratios, educational attainment, poverty, patents, the structure of governments, taxation, etc.

Excess High End Talent

According to the OECD, Chicago suffers from a skills mismatch in its workforce. This is not just true at the bottom end of the economy as might be expected, but also at the top end, where there is a surplus of highly skilled labor:

At the high end, there is a large pool of high-skilled, highly educated workers, in principle more than sufficient to fill the jobs available at that level … at the high-skill end, data for the tri-state region points to an apparent oversupply.

To some extent this shouldn’t be a surprise. Chicago is a desirable city for people to live in, particularly for educated workers inside its heartland catchment area. As with other big city talent magnets, the economy doesn’t always supply the right employment for all the people who want to live there. The many articles about unemployment in Portland, for example, illustrates this, and Chicago is similar. In that regard, you might see the skills surplus as a sign of local strength.

However, the skill concentration in Chicago isn’t producing the type of high end innovation economy seen elsewhere. As the OECD notes, “Indicators suggest that the Chicago Tri-State metro-region does not rank as highly among the US knowledge hubs as one might expect, given the size of its economy and population and its concentration of world-class research universities.”

Also, Chicago may not be as attractive a talent hub as its aggregate numbers indicate. Again per the OECD:

To be sure, the Chicago Tri-State metro-region remains an attractive place for many migrants, but it is less attractive than many of its US metro-region peers. Moreover, if the analysis is confined to highly educated people of prime working age (25+, with at least a bachelor’s degree), then the picture is even more problematic. During 2005-09, more such people moved into the area than left it, but the net gain was relatively small compared with other large US metro-regions. Los Angeles, for example, benefited from a net gain of nearly 80,000 highly educated people in 2009, compared with 3,500 for the Chicago Tri-State metro-region.

When you under-perform as a talent magnet and still can’t put high skilled labor to good use, that’s a definite sign of trouble. This was one thing that was eye opening for me in the study as I’d previously assumed the high end of the market was in pretty good shape and that skill mismatch problems were the result of a large under-educated population vs. open jobs requiring mid-tier skills.

Policy Prescriptions

The OECD’s recommendations were not nearly as strong as its assessment of the region’s conditions. This shouldn’t be surprising as it is easy to look at data and see what may be wrong, but it is not always obvious what to do about it. The recommendations fall into five broad categories:

• Better Skills Matching
• Improving Innovation and Entrepreneurship
• Investments in Transportation and Logistics
• More Green Industry Growth
• More Effective Institutional Arrangements

First off, including “green growth” as one of only five major chapter headings is a joke. The aggregate number of jobs identified as specifically green is small. And as I’ve noted many times, there’s no such thing as green industry. Pretty soon there will just be industry again – it will all be green. So if Chicago and the US aren’t doing well at today’s industries, why would we think they would do any better at tomorrow’s? “Green” isn’t some sort of fairy dust you can sprinkle on and work wonders with. If anything, the acceleration of transition to more green practices will only drive more manufacturing offshore, exactly as it did with light bulbs. The track record of trying to create “green jobs” almost everywhere has been poor and has failed to live up to the hype, so I can’t believe the OECD is doubling down on this snake oil.

For the other areas, the OECD doesn’t break much new ground, though does highlight some interesting international case studies of regions getting it right. The sections more or less regurgitate the laundry list of organizations and initiatives already in place, then tag on “do more and coordinate better.” Examples include, “create region-wide capacity to match skills supply with demand” and “broaden the innovation focus [to include] non-science-and-technology-based innovation.”

By contrast, there was little focus on what counterproductive initiatives might be trimmed. While, for example, the report notes that many of the excessive numbers of local governmental units probably should be eliminated or merged, it doesn’t really look at how many of the alphabet soup of various non-governmental civic development groups might likewise be better off euthanized. Given the unified civic leadership nexus of Chicago, this should in theory be much easier than killing off governments, which are famously resistant to elimination. It’s hard for civic sector leadership to scold state legislatures about the need to consolidate when they can’t even do it themselves. This shows that the OECD had to deal with local political reality, so it probably pulled a lot punches in the recommendations. Statements of raw flattery such as “All key public and private stakeholders are keenly aware of what needs to be done to address these issues effectively” show the extent to which the OECD wanted to avoid ruffling feathers and challenging the Chicagoland status quo, which is disappointing.

I might also take issue with the way the problems were attributed to these structural factors without addressing at any great length many of the clear drivers of Chicago’s under-performance. For example, Chicago is the regional capital of a greater Midwest that has been struggling as a whole. It’s tough to swim upstream against that. (I’ll have more to say on other underlying factors in a subsequent analysis of my own).

In short, this report got it half right in giving us a very good look at the current conditions, strengths, challenges, and international comparisons. Where it lagged was in fully articulating the structural landscape driving the under-performance and developing compelling strategies for turning the ship around. Still, if I were a region out there looking for a good snapshot of where I stood in the marketplace, the OECD would be on my list of people to call.

* Disclosure: I won a competition sponsored by the Chicagoland Chamber in 2009.

Sunday, April 29th, 2012

Replay: Megaregions – A Review by Aaron M. Renn

This review of the book Megaregions, edited by Georgia Institute of Technology Professor Catherine L. Ross, is the second in my three part series on megaregions. I put my cards on the table in my post with initial skepticism about the usefulness of the concept. I will follow this up with a look at potential applications of megaregionalism in the Midwest.

I was very struck by the quote at the top when reading the book. How often to do you find people questioning the very validity of the topic at hand when writing a piece for a book on it? The fact that Ross brings in people who are willing to ask tough questions about megaregions is a testament to her intellectual integrity. It would have been very easy to simply glom onto a topic that shows some early stage notions of being popular in the world at large and trying to flog it for all it was worth. Indeed, Ross is known on this topic, but here she takes an opportunity to shine a light on this emerging concept to see what she might find without excessive boosterism on the subject. As she notes herself in the book, “The quality of a new idea can be judged by the possibilities it creates, especially when such possibilities stimulate new and unbounded interpretations and allow more innovative and beneficial outcomes.” I see this book as dedicated to exploring some of those possibilities and trying to collect and develop frameworks for understanding it and applying it.

The book consists of thirteen chapters, each written by different authors, exploring some aspect of the topic, including looks at Europe and Asia. I will focus primarily on the United States, but don’t want to mislead into thinking this is a US only book.

One of the key questions to answer is, just what the heck is a megaregion? There are a few definitions, but the one I thought was best came from America 2050, a project of New York’s Regional Plan Association. They describe it as “a large, connected network of metropolitan areas that are joined together by environmental, cultural, infrastructural, and functional characteristics.” In short, it is a collection of linked metro areas in a given region. There is an entire chapter in the book devoted to ways to identify and delineate megaregions. And, of course, map them. Here’s the map America 2050 created using their approach:

A few things jump out from this map. First, the megaregion is really an eastern US concept. West of Texas, most of these regions have one main dominant metro, possibility with a satellite or two. The exception the Pacific Northwest “Cascadia” region. Second, the megaregion concept relies heavily on intuitive eyeball appeal. That is, we look at the map and see these clusters of regions and it just seems to make sense that they are related, apart from any academic methodology of boundary delineation. That’s not to say there isn’t logic behind the map, but I believe a lot of the popular appeal comes from its intuitive plausibility. America 2050 does a great job of recognizing this when they reference the cultural aspects of the megaregion. We think of, for example, the Midwest and Northeast as having distinct regional history, culture, values, and economic structures. This powerfully reinforces the intuitive appeal of megaregions. The idea is that we have cities in close proximity, with a lot of common culture and problems, so wouldn’t it be great if they figured out how to work together to solve them?

America 2050 doesn’t have the only map going. Richard Florida, a leading popular exponent of megaregions who wrote a paper on the subject with Tim Gulden and Charlotta Mellander called “The Rise of the Mega-Region“, used images of light emissions from the space to draw boundaries of areas that seemed continuously developed. Here’s his map:

Florida’s definition is based on continuously built up areas, but doesn’t necessarily imply any functional integration, though he has posited this is the case.

And here is the map that is being distributed with the Ross book’s promo materials:

Reading the book and looking at these maps really crystallized in my mind possibly the biggest appeal of megaregions to federal level planners in the Unites States and Europe, even though I have never seen it actually stated anywhere. Namely, megaregions are a convenient abstraction for federal level thinkers to make sense out of the large number of diverse metro areas in America and Europe.

Think about it, there are a huge number of metro areas in the United States. There are a bit over 50 metro areas of over one million people. The Brookings Institution Metropolitan Policy Program deals with the top 100 metros in America. These numbers are simply too high to give proper attention to each.

I’ve championed the notion that there is no one size fits all urban policy and that cities need to develop unique strategies and solutions based on their unique local context (see, “The Mayor as CEO” for instance). But think about it from the standpoint of a think tank in Washington or New York, or from that of Adolfo Carrión, director of the White House Office of Urban Affairs. How do you cope with policies for 250, 100, or even 50 metros? It would be extremely difficult. But it is certainly feasible think about 10-12 megaregions. I think that’s one reason why people so much want there to be validity to the megaregion concept. It provides a very convenient intermediate level of abstraction between the large scale United States (or Europe) and the fine grained detail of individual metro areas.

Brookings did this by positing a “Great Lakes” region to help organize a portion of its thinking. And I did too. As someone who has expressed skepticism on megaregions, I’ve got to admit that my own blog is to some extent a product of that thinking. One of the keys to its success was to pick a topic scope greater than the individual city (and thus to have more than purely parochial interest) but smaller than the nation (where I likely would never have been able to gain traction amongst long established big names). The 12 one million plus metros I focus on is conveniently similar to the total number of megaregions in the US (and the 12 Florida identifies in Europe). And I’ve been able to extrapolate out lessons from them that are relevant cross-regionally, and also to a broader audience as well. The metros of the Midwest actually have a lot of diversity. The strengths, weaknessnes, challenges, and opportunities of, say, Chicago, Detroit, and Columbus are radically different. They require very different policy approaches. Nevertheless, there seems to be some benefit in thinking about them together.

So apart from any real world manifestation megaregions might have, they are an important organizational construct in creating a hierarchy in any sort of large, multi-city geography like the United States or Europe. Megaregions enable people to conceptualize and manage these complex, fine grained territories. It is applying to metro areas the same regional aggregation concept used for functions like the Federal Reserve System (12 regional fed banks) or the federal district court system (11 appellate districts). That is, megaregions are necessary purely as a level in the hierarchy, even if they prove to be a phantom level. They can be defended purely on the basis of organizational and managerial theory even if they have no other application. Indeed, the fact that people persist in trying to find applications for them despite the lack of clear cut success to date shows that at some level they intuitively understand this organizational need.

Robert E. Lang and Arthur C. Nelson had a chapter that hints at this as well, noting that the mere act of formalizing a construct by the government causes people to start paying attention to it. Their example is how the OMB created the construct of “micropolitan areas”. Clearly the idea is that if the federal government created official megaregion definitions, and reported data against it, the concept would take on a life of its own by virtue of that. (Data collection would likely be trivial since megaregions would no doubt be made up of counties, such as by creating a layer above Economic Area). Their idea seems more to create something called a megapolitan area rather than a megaregion, however.

Tridig Banerjee has an interesting chapter further trying to refine the megaregion concept by identifying types of megaregions along a two by two matrix (which, with my management consulting background, I of course love). The dimensions are “galaxy” vs. “corridor” and “mosaic” vs. “network” (hierarchical). The Midwest would be a galaxy-network. Scott Campbell has a chapter asking a number of useful questions, such as the one at the top of this piece.

Ross herself seems particularly interested in the transportation aspects of megaregions, and this is one where it seems to have the most direct applicability. For example, most of the various high speed rail proposals out there revolve around megaregions. There are shared corridors of interest, such as interstate highways, and other important features, such as the Great Lakes. The question is whether these are items of relevance to a megaregion properly so-called, or if they are just the focus of ad-hoc “coalitions of the willing”. I actually suspect the latter as there are many of these (think of the I-69 and I-35 NAFTA corridor coalitions for example, or California’s high speed rail proposal) that exist independently of megaregions. In my view a megaregion would need to represent some true community of interest, in the way that a metro region does, to represent some sort of truly functional element, and I haven’t seen it yet. In fact, I have argued that even things like the Midwest high speed rail network shouldn’t be thought of as a network, but rather as a series of point to point connections linking outlying areas to Chicago. Chicago will not be an HSR hub in the way that O’Hare is a hub – that is, for traffic interchange. Indeed, in we see this in Europe, where there is very little transfer traffic of this type. There seems to be something to this megaregional transportation idea, but I’m not sure what is yet.

The piece I found most compelling was the chapter by Saskia Sassen. In my original piece on megaregions I noted that lots of people talk about them, but no one says what it is we should actually do with them in order to create real value. Sassen suggests how this might happen. Here’s an excerpt:

I argue that the specific advantages of the megaregional scale consist of and arise from the coexistence in one regional space of multiple types of agglomeration economies. These types of agglomeration economies are distributed across diverse economic spaces and geographic scales: central business districts, office parks, science parks, the transportation and housing efficiencies derived from large (but not too large) commuter belts, low-cost manufacturing districts (today often offshore), tourism destinations, specialized branches of agriculture (e.g., horticulture or organically grown food), and the complex kinds of agglomeration economies evident in global cities. Each of these spaces evinces distinct agglomeration economies and, empirically at least, is found in diverse types of geographic settings, from urban to rural, from local to global.

The thesis is that a megaregion is sufficiently large and diverse to accommodate a far broader range of types of agglomeration economies and geographic settings than it typically does today. This would take the advantages of megaregional location beyond the notion of urbanization economies. A megaregion can then be seen as a scale that can benefit from the fact that our complex economies need diverse types of agglomeration economies and geographic settings, from extremely high-agglomeration economies evinced by specialized advanced corporate services to fairly modest economies evinced by suburban office parks and regional labor-intensive low-wage manufacturing. It can incorporate this diversity into a single economic megazone. Indeed, in principle, it could create conditions for the return of particular activities now outsourced to other regions or to foreign locations.

I wrote a four part series in early 2009 called “Reconnecting the Hinterland” which was all about searching for value in attempting to foster a re-created interlinked economy between Chicago and the rest of the Midwest. An answer to Sassen’s question is actually what I was looking for. The simplified idea being, to find some economic activities in which geographic proximity, though not necessarily always in a dense, face to face setting like downtown Chicago, is a source of value; to ask, is there some medium between the “spiky world” of Manhattan and the Loop and the “flat world” of China and India?

I don’t want to jump the gun and go into detail, since that is a part of the next part in this series, but if you are interested, you might want two check out two pieces in that series, “Metropolitan Linkages” (about extended labor markets) and “Onshore Outsourcing“.

One curious omission from this book was the difference between megaregional and non-megaregional locations and whether there was some benefit to being in a megaregion. I can’t help but notice that in the Midwest, Kansas City (in most maps) and Des Moines are both outside of the megaregion yet are two the of the absolute best performing metro areas. Not being part of a megaregion does not appear to have hurt them any. I’d be interested to see some analysis on this.

In any case, for those interested in these things, this is a nice survey book to pick up. It is accessible to the general educated public, but is written in the style beloved of academics, so is likely to be very dry to all but those who are wonky about this stuff. Read the Sassen excerpt to get a sense of what is in store. For those who are in the planning or related fields, it is worthwhile to educate yourself on the megaregion concept to be able to parse a lot of the rhetoric out there about it. Reading this book would be a good way to do so.

I’ll leave you with this quote from Lewis Mumford’s The City in History, to give a perspective from one of the all time great screedmasters on this subject:

Instead of creating the Regional City, the forces that automatically pumped pumped highways and motor cars and real estate development into the open country have produced the formless exudation. Those who are using verbal magic to to turn this conglomeration into an organic entity are only fooling themelves. To call the resulting mass “Megalopolis”, or to suggest that changes in spatial scale, with swift transportation, in itself is sufficient to produce a new and better urban form, is to overlook the complex nature of the city. The actual coalescence of urban tissue now taken by many sociologists to be a final stage in city development, is not in fact a new sort of city, but an anti-city. As in the concept of anti-matter, the anti-city annihilates the city whenever it collides with it.

Don’t hold back Lewis, tell us how you really feel.

This post original appeared on December 6, 2009.

Thursday, April 5th, 2012

Louisville and Lexington Point the Way to Greater Inter-Regional Cooperation

I’ve written before about how Louisville Mayor Greg Fischer saw cooperation with Lexington as a vehicle for making his smallish region more competitive. This has gone beyond talk. As Louisville and Kentucky fought it out on the basketball court, the New York Times was reporting on how the two cities are planning to become economic teammates. Amy Liu of the Brookings Institution also wrote about this initiative.

The first concrete step in this is something called the Bluegrass Economic Advancement Movement. It’s a partnership around advanced manufacturing between the two cities developed in conjunction with Brookings. Here’s a video about it. It’s a big goofy, and the production values clearly need improvement (such as the two minutes of basically dead air at the end of it), but it should illustrate what they are trying to get at. (If the video doesn’t display for you, click here).

I’ve historically been a bit skeptical of the mega-region concept. I could never figure out exactly what it is mega-regions were supposed to accomplish that would provide step change improvements in metro area performance. It’s not exactly clear here either what is going to ultimately happen. However, if you are going to make mega-region type development happen, Louisville and Lexington are pretty well placed to prove out the concept. They are in the same state, they are both too small to plausibly go it alone in the global marketplace, and they are close – only about 80 miles apart. They are just far apart to be separate media markets and spheres of influence, but close enough to make going back and forth a breeze. They also decided to pick just one area to start with, which I think was smart. I’ll be very interested to see what comes out of this. Anyone interested in cross-regional collaboration should keep an eye on what’s happening here.

Sunday, June 5th, 2011

Replay: Metropolitan Linkages

[ The New York Times ran an article recently discussing the trend of big city law firms hiring non-partner track attorneys in smaller cities to handle routine work at lower cost. It reminded me of this post where I floated a similar idea back in 2009. I hope you enjoy - Aaron. ]

In my kickoff of the year of celebrating the 100th anniversary of the Burnham Plan in Chicago, I argued that while Chicago was performing well in a globalized world, it was only riding the wave of globalization and wasn’t defining its own uniquely successful future, one where it first and most fully grasped the implications of our new world. I also promised ideas on where to look to do that, starting with re-embracing its own unique culture and identity, resisting homogenization.

Today I start a four part mini-series looking at another opportunity area. It’s been widely noted that globalization has worked to separate global cities from their traditional city-regions. Indeed, Chicago and others have almost deliberately turned their back on their past in this manner to focus exclusively on the global conversation. With most global cities doing that, the question immediately comes to mind: is there overlooked opportunity in the hinterland? I argue that there might be, and I’ll look at two specific items: metropolitan linkages and on shore outsourcing. Each of these will have a main article with a follow-on more fully discussing a particular aspect. Today, we talk about metropolitan linkages.

There have been many calls for greater cross-regional (or “mega-regional” or “pan-Midwest”) cooperation. The idea is that similar challenges beset the Midwest as a whole and they are best solved collectively. There’s a certain surface appeal to this, but I’ve been reluctant to accept it before. The basis of my argument is in my previous posting “Mega-Skepticism“. My problem is fundamentally that people don’t explain what it is we are actually supposed to do to implement cross-regional collaboration, and there are few tangible benefits offered for it. Consider: we’re told to build a Midwest high speed rail network. Ok, but so what? I built it. What does it do for me? What does this allow Minneapolis and Chicago to do today, for example, that hourly shuttle flights on multiple airlines don’t? What’s going to be different once it’s built? This is the great unanswered question. We must be able to articulate the value levers we want to pull (for example, scale economics, specialization, or purchasing power) and why and how places will take advantage of them.

Having the Midwest try to work as a whole is a “boil the ocean” type solution. I’m not convinced rural areas, small towns, small manufacturing cities, and larger cities intuitively have enough common ground to try to create fully common solutions. Even among just the Midwest’s large cities, there is incredible diversity. Again, how much in common do Chicago, Detroit, and Columbus have? And to do so so would require enormous trust and consensus building.

So what I’m going to suggest today is that we narrow our focus to specific city pairs, and see if we can articulate a basis for cross-regional cooperation. For my example, I’m going to use Chicago-Milwaukee and Chicago-Indianapolis. Why? Several reasons:

• They are all cities that have the minimum scale to have economies that can operate effectively in the globalized world. Indeed, Chicago is a successful global city, Indianapolis is by many measures the most successful city in the Midwest, and Milwaukee is hanging in there. This isn’t a “dinosaurs mating” type situation where a bunch of failing cities try to band together. Rather, it is looking at reasonably successful places. Can they enhance their success even further through cooperation?

• Chicago is the logical place to start because it was historically the dominant city of the Midwest. To envision a highly successful cross-regional collaboration that does not somehow involve Chicago is hard to do. Also, because Chicago is such a unique place in the Midwest, smaller cities like Indy and Milwaukee don’t have to feel bad about playing second fiddle in some respects. Those places know they aren’t Chicago. Whereas trying to get the “3C’s” in Ohio to agree on things would be much tougher. I use the term “hinterland” in the title deliberately, despite its pejorative connotations. That’s because I think there may be opportunities to re-create a true urban hierarchy in some ways.

• These cities are highly complementary, especially Chicago and Indy. That is, each is strong where the other is weak. This means they are not natural competitors and there is reason to believe that specialization and the division of labor – one of the key advantages of scale – can work. By contrast, Indianapolis and Columbus are nearly identical cities. Specialization is harder for them to do, so there would have to be another basis for cooperation to have benefits.

• Their common culture eases the path of cooperation. America 2050 has an interesting framework for relationships that create mega-regional linkages. Their relationships include environmental systems and topography, infrastructure systems, economic linkages, settlement patterns and land use, and shared culture and history. It is easy to see how these apply here.

• They are geographically close, which would seem to simply matters. I include both Indy and Milwaukee because in fact Milwaukee is so close that it is possibly experiencing the “sixth borough effect” we’ve see in NYC and Philly, where Chicago’s massive growth is just taking Milwaukee into its orbit. Indy provides a control study for that to make sure we are dealing truly cross-regionally

Considering these cities, we now have to ask ourselves the question: how do they cooperate? The globalized economy seems to have two sorts of operations: one tends towards “flattening”, where routinized operations like manufacturing or answering phone calls can be done anywhere in the world. The other is towards “spikeyness” and valuing the face-to-face interactions of highly creative people in the cores of places like Chicago. Is there an model somewhere between them that we can imagine?

Richard Florida just issued a call in this month’s Atlantic Monthly to build “rail connectivity within the mega-regions. There are the fast trains along the Boston/New York/Washington corridor that have allowed Washington, in effect, to become a commuter suburb of greater New York. But how about a place like Detroit? If Detroit were better connected to Chicago, one could imagine Detroit having a better reason for existing. Or Pittsburgh. If Pittsburgh were better connected to Chicago or even to Washington, D.C.—it’s only a four-hour drive—that could spur growth.” I won’t use his example cities, but will assume in our example that we’ve got high speed rail between Chicago and Milwaukee and Chicago and Indy that provides a terminal to terminal journey time of 90 minutes. In the case of Milwaukee, this is actually already true – future rail upgrades will only shave that time down even further.

What could we imagine the benefits of this being? I see two: a labor force play and a division of labor play.

The labor force argument goes something like this. You’ve got these highly creative jobs in Chicago. But not everybody is a trader at the Merc making megabucks. There’s a lot of joe average type white collar jobs too. Many of these pay solidly, but the quality of life you can purchase for the money in Chicago might not be the greatest. Chicago may not have high taxes and housing prices compared to the coasts, but its does compared to the Midwest. Some people crave urban excitement, shopping at Neimans, the opera, etc., but a huge number just go home to the suburbs. I’ve long argued that if you don’t take advantage of the things that only Chicago gives you, and are just trying to live an average suburban lifestyle, that’s crazy. Why pay the premium to live in a Chicago suburb in terms of housing, taxes, and above all congestion when you aren’t getting much more than you’d get elsewhere? Obviously lots of people are asking themselves that question, because Chicago’s metro area had net domestic outmigration to the tune of 57,000 people last year – a pace of almost 600,000 per decade. Of those, a net 7,000 moved to Indianapolis in just the last few years. Now I don’t know the makeup of this. Some of it may be second order Latino immigration or something. But I’ve got to believe some of it is Chicago’s precious talent bleeding away because they cost/benefit isn’t worth it to them.

Now consider what a 90 minute train ride does to the equation. If you are a suburb dweller who loves that lifestyle, you can now move to someplace like Carmel, Indiana outside Indianapolis. You cut your living costs dramatically and increase your quality of life. Plus, you can realistically commute to Chicago, at least 2-3 days a week. That’s a PITA in a car @ three unproductive hours, but when you can work on the train for 90 minutes with wi-fi, it’s a different story, even with collection/distribution tacked on at each end. Combine this with modern flexible work arrangements and you’ve got the makings of an extended labor pool. It could be a win-win-win. Chicago gets the access to talent it would otherwise lose. The worker is happy with access to both great job opportunities and higher quality of life. And Indy get the imported income and improved connectivity to the global economy via Chicago. I already know several people who routinely make the trip up and down I-65 in car or fly every single week. It is easy to imagine this exploding with 90 minute train service with wi-fi and electric power outlets. This both makes the time productive and makes it feasible to do daily commuting, skipping the hotels, nights away from home and other assorted costs.

A similar effect could happen with Milwaukee. Indeed, I already see people commuting down from Milwaukee. But I imagine a separate demographic. To me, Milwaukee is a bit of a “mini-me” Chicago. So what you get are people who want the more urban lakefront experience, but can’t afford or don’t want to pay for Chicago. You are already seeing this happen a bit I think. Same dynamics apply.

The other direction, think about what it does for Indy and Milwaukee in terms of ability to attract their labor force. Both cities have dramatically upgraded their offerings from the day when you couldn’t get a good meal or a decent cup of coffee. Both of them now have a nearly full spectrum of urban amenities. But what they are missing is that creme-de-la-creme. They don’t have elite international opera or true high end shopping. But by putting Chicago within easier daytrip reach via train (imaging sipping champagne on the trip back from your Oak St. spree), Chicago’s amenities become more accessible to people in those other cities. This helps them in recruiting people as well. Oh, and those Chicago workers can now work “domestically” if there is an option. Increasing the labor supply even further. And, people who come to work locally might be more willing to do so knowing that commuting to Chicago (again, only part time using flexible working arrangements as is becoming more common) means they aren’t captive to the “only game in town” for employment prospects in a smaller market like Indy or Milwaukee.

I don’t know if this will really work out or not, but it seems surface plausible – if you had the rail connections at true high speed service levels and the right amenities and price point. This might not involve huge numbers, but it might not take a huge number to move the needle if it is the right kind of people with the right skill sets.

The second point involves re-establishing the regional division of labor. As Chicago becomes more specialized, and its urban core more successful, that will push costs up in that city, making creative but lesser value-added functions less competitive. Is there an opportunity to offload some of that to an Indy or Milwaukee where the highest functions are done in Chicago but lower value added – but still high knowledge worker content, creative type work – is done in those other cities?

Again, as I said in my original posting, I can’t promise The Answer, only an exploration of the problem space. I want to use one sample industry to consider this: law. One, it is harder to offshore legal work I think. Even my own employer won’t let routine work be passed on by someone who isn’t domestic. Two, I was intrigued by something I noticed something the other week when I saw Tristan und Isolde at the Lyric Opera. I opened up the program guide and what did I see but a full page ad for Barnes and Thornburg. This is one of the largest law firms in Indianapolis, yet they have a full page ad in Chicago. I’m told they have a rather large office in Chicago too. What is the reason for this? It could just be expanding where the action is. On the other hand, is there a basis for cooperation between law firms where a large international Chicago firm is the lead firm handling the orchestration and most complex portions of the work there while sending some work to lower cost firms in Indy and Milwaukee, using those firms’ Chicago points of presence and the capability for easy face-to-face meetings to make it happen?

I don’t know a lot about the law business, but I do know that they are under enormous price pressure and even many very successful firms are doing layoffs. I expect a major transition where old school type relationships don’t necessarily translate into premium pricing opportunities anymore when there is lower cost competition for what is effectively commodity work in many cases. I’ve seen this in other industries and it seems reasonable that is could happen in law. Could this ability to tap a “near shore” pool of lower cost lawyers give Chicago firms an advantage? It might be the only elite city in the country where you can get access to a far lower cost point just by going beyond the immediate metro area.

I’ll admit, I’m speculating here, but it is the general concept that is important. It goes something like this. The most specialized components are in Chicago where it justifies the cost of being in the Loop. Specialized but less value added work that nevertheless requires close coordination, time-zone commonality, and potentially significant face to face meetings are in Milwaukee or Indy. I don’t know for sure what, if anything might be out there that fits this. Maybe law, maybe something else, or maybe nothing. But those to me seems the characteristics of the types of work that would lead to cross-regional collaboration.

If you are able to make these two cross-regional items work with Chicago, Indy, and Milwaukee, then you can look to see if they scale up or extend across distances.

So the question is, how do you go about making these sorts of relationships happen? Good question again. I don’t have the answers. But perhaps this is where the “holding conferences” aspect of mega-regionalism comes in. That is, you get business, academic, community, and political leaders talking to each other, establishing trust, and seeing what collaborations might form. This also brings up another good point as to how to implement it. Chicago has long been the magnet for young, ambitious people from the greater Midwest. Look at all the Big Ten sports bars in Chicago for an example of that. So can you mobilze those expatriate or diaspora communities to form the “glue of the relationship”? I noted before the concept of the “urban alumni association“. Something like this could be leveraged to help forge those business and cultural relationships. In fact, there is already an organization called the Indiana Society of Chicago. I believe this is mostly a networking club. Could organizations like this, plus Big Ten alumni associations, be used as a catalyst to make things happen?

I think this is an area that warrants further research and discussion. The general idea is to figure out how to give Chicago’s companies competitive advantage through an expanded labor pool and potentially lower cost operations that don’t involve the messy coordination of a far flung network. At the same time, it provides mutually beneficial returns to smaller cities in the region.

Reconnecting the Hinterland – Additional Previous Entries:
1B – High Speed Rail
2A – Onshore Outsourcing
2B – On Innovation

This post originally appeared on February 11, 2009.

Tuesday, May 24th, 2011

The New Provincials by Jason Tinkey

America has never been a very curious nation. Sure, we’ve produced great inventors and entrepreneurs, but you could probably count the great “American philosophers” on one hand (at least one of whom, de Tocqueville, wasn’t even American). Americans are not prone to world travel, evidenced by the fact that only 37% of us own a passport. A lack of curiosity is not the sole blame, obviously it costs us far more to travel abroad than it does for Europeans, with flights so cheap they make Southwest look like a legacy carrier. But in the wake of the 9/11 security changes, lack of a passport means 2/3 of Americans aren’t even flying to Canada, Mexico or the Caribbean, destinations which are often cheaper than, say, Florida.

I have long posited that we are victims of our own geography. The vastness and relative emptiness of the North American continent gave the young nation room to grow and flourish, while leaving it free from foreign influence. Immigrants were generally eager to assimilate, as the threat of repeated bodily harm at the hands of nativists would entice you to try and blend in. Europe consisted mainly of poor, oppressive backwaters in those days, so most didn’t see much point in holding onto the old ways in a land that gave them an opportunity to reinvent their identities.

Last month, I attended the Global Metro Summit here in Chicago. One of the panelists, Barcelona Deputy Mayor Jordi William Carnes, made the observation that “America is important to the rest of world, but spends too much time looking inward”. I would agree, but even within the United States, infighting and provincialism rule the day. As Richard Longworth has written extensively, the states compete against one another for finite resources, whether in the form of federal transportation dollars, or in wooing corporations to set up shop. This is a losing battle, since state borders are completely arbitrary lines which have no real effect on the life of metro areas, other than to unnecessarily complicate things. Eight of the twenty-five largest metros in the US span state lines that were established two centuries ago. In effect, we govern ourselves under a system that was designed for the 1820s.

This provincial attitude reared its tiny head again this past week, when Wisconsin Governor Scott K. Walker (that “K” is crucial to avoid denigrating the proper Scott Walker) slammed Illinois for it’s tax hike and invited businesses to relocate to his state. As James Warren wrote, this shows a lack of a broader vision on Walker’s part. He’s playing for votes within his own little fiefdom, seemingly oblivious to the fact that if Chicago’s economy were to fail, Wisconsin’s would go down right beside it. As much as I love our neighbors to the north, Milwaukee does not have the transportation infrastructure necessary to link it to a global marketplace. This is the same guy, mind you, who basically ran for office on his opposition to high-speed rail, which would be one of the best possible assets in building a regional economy.

So allow me to state for the record my philosophy of how the future is aligned: neighborhood – city – region – planet. Note that “county”, “state” and “nation” do not exist. These are eighteenth-century constructs that serve little useful purpose in a connected, digital global economy. The hard question is asking what it will take to achieve this in these “United” States. No politician has ever voted themselves out of a job, and yet a thorough realignment of local and federal governance is necessary. Industrialized Europe had to be more or less leveled in World War II for the stakeholders to recognize the value of cross-border cooperation and a free exchange of people and ideas. I certainly hope we don’t need such a serious jolt.

Wisconsin and Illinois, despite their football-based loathing, have too many issues which demand cooperation. And you can add Michigan, Ohio, Minnesota, Pennsylvania, New York and Ontario to that mix, as well. In coming decades, stewardship of the Great Lakes will become crucial to the region and to the world. Transportation linkages already radiate from Chicago like an octopus, in a common region with common concerns, these absolutely must be brought up to speed with the rest of the developed world. There is really no other option.

This post originally appeared in The Planner’s Dream Gone Wrong on January 17, 2011. Reprinted with permission of the author.

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, February 22nd, 2011

Collective Pride, Worthy Choices by John L. Krauss

When you ask people locally where they’re from, they’ll specify an area of our community. They’ll say, “I’m from Fishers,” or Avon or Greenwood.

But when traveling, those same people will answer the question differently. They’ll say, “I’m from Indianapolis.”

Indianapolis is Central Indiana’s focal point. If our region were a newspaper, Indianapolis would be the banner headline. If we were sports apparel, it would be our swoosh. If we were a hit song, it would be our chorus.

But while the region needs Indianapolis to be strong, Indianapolis cannot sustain and grow its national status without strong surrounding communities.

In other words, to be a super city, we must be a super region.

To explain our interdependence, choose your favorite cliché: “You can’t be a suburb of nothing.” “We’re all in this together.” “A rising tide lifts all boats.” All these notions are true. So rather than erect more barriers born of fear and parochialism, it’s in our individual and collective best interest to celebrate and invest in regionalism.

Too often, when people hear “regionalism,” they fear we have to become homogenous – that we must evolve into a one-size-fits-all, nine-county Uni-Gov where all the shots are called from the 25th floor of Indianapolis’ City-County Building.

Our super-city status, however, depends not on homogeneity, but on ever-expanding choices available to all of our residents, visitors, businesses, students and more.

From arts to sports, libraries to restaurants, established neighborhoods to new exurbs, choice is what makes our community superb.

We’re more likely to sustain and grow our job market with a broad choice of industries and businesses.

We’re more likely to build value in our homes and control our cost of living with a choice of transportation (e.g., cars, commuter rail, buses).

We’re more likely to have affordable, desirable housing for all if we have choices in every price range and living style.

We’re more likely to have a well-educated work force if we have high-quality school choices for all of our students.

We’re more likely to enhance human health if we have choices for recreation, medical research, health education and treatment of disease.

We’re more likely to stem the brain drain, raise children who want to live here, and attract workers from other places if we have choices in education, enrichment and entertainment.

We’re more likely to succeed in a global economy if we have cultural choices that attract, retain and engage diverse people. Call it a mosaic, a cornucopia or quilt, choices are Central Indiana’s linchpin, our point of difference, our brand. Rather than flee from those choices or isolate one another, we must encourage and invest in them.

In so doing, it’s important that we value and acknowledge the ideas and choices of all kinds of people from all over the region, not just those that emerge from the center outward or from the top down. In considering those diverse ideas and choices, we must value not only our self-interest, but also our collective interest; not only short-term investment, but also long-term return on that investment.

Decades ago, when Uni-Gov was passed, Indiana lawmakers decided that Indianapolis wouldn’t be allowed to grow beyond its Marion County boundaries. Consequently, we are fiscally landlocked.

Today, that puts Indianapolis at risk from a tax base too small to support the city itself and to drive the region and state that depend upon it. Indianapolis is, after all, the principal economic engine not only for Central Indiana, but also for the state.

There’d undoubtedly be great resistance (as there should be) to such alternatives as commuter taxes. But we do need to explore region-wide, issue-specific investments in such measures as mass transit, quality of life or quality water – areas with collective responsibility that reap collective benefit.

We’ve come a long way since the days when we had few choices. Many people from within this city and beyond take pride in telling the world, “I’m from Indianapolis.” But we can’t have it both ways. A community worthy of collective pride depends on choices worthy of collective investment.

John Krauss directs the Indiana University Public Policy Institute and its Center for Urban Policy and the Environment.

This column originally appeared in the Indianapolis Star on February 6, 2010. Reprinted with permission of the author.

Sunday, February 13th, 2011

Super-Regionalism in Kentucky

Joe Nannery sent me a link to an interesting Courier-Journal article where Louisville Mayor Greg Fischer talks about super-regional collaboration with Lexington on economic development and other matters. There’s a great video interview with him that accompanied the story that you can watch below. (The video won’t display in Google Reader or platforms like that, so to watch it please visit my main web page by clicking here). I think he and his economic development director do a great job of laying out the case for a greater regional vision in an accessible way.

It seems pretty clear that Fischer understands one of the key challenges facing Louisville, namely that it is just a bit too small to really have the heft it needs to go to market in the new economy. He sees collaboration with Lexington as one way to help both cities punch above their weight, particularly in attracting international attention. He believes this is essential to the long term relevance of the cities.

He is weaker on what exactly this collaboration would consist of as the reporter tried to pin him down on specifics. As he put it, “We’re in the early stages of dating.” I wouldn’t feel bad about this if I were him since the mega-regionalism concept is pretty nebulous. Lots of people are saying it’s the next big thing and that cities and states should be thinking this way, but as I myself noted in a previous blog post, nobody tells us exactly what is we’re supposed to actually do to make this a reality. It’s not just about Louisville and Lexington. The reality is that mega-regionalism as an operational program not just a concept is in its early stages. This is part of the process of figuring out what it really means. I do think if we’re ever going to have true mega-regions though, they are going to emerge from bottom-up collaboration between cities like Louisville and Lexington, not from top-down visions and programs.

Fischer also understands that Louisville and Lexington are non-overlapping in their industries in many regards. That’s actually a good thing in my book. This allows them to specialize and gain the advantages of that on some things. My analogy is to a football team. Not everybody is a quarterback. Not everybody is a linebacker. Not everybody is the kicker. Everybody has to know and excel at their own role on the team.

He’s talking about partnering with Brookings to help draw up the plan, and also on a new strategic plan for Louisville itself. I generally like Brookings, but as a former Southern Indiana resident, I can tell you that I did not care for the previous Louisville plan, which suggested any growth outside of Jefferson County was actively bad. I’m all in favor of a strong core, but that plan went too far in its core-centric and almost anti-collar county tone. I can’t imagine it played well anywhere outside Jefferson County because the key goal of the plan was to keep as much regional growth as possible inside the boundaries of that county (notwithstanding that much of Jefferson County itself is suburban or rural in character).

Hopefully this next version is much more actively embracing of the region. I was glad to see Fischer include Southern Indiana explicitly in his regional concept. For too long Kentucky and Indiana have been acting crazy just paying businesses to move back and forth across the Ohio River as if that is some sort of net regional economic add. It would be much better if they could both focus their energy on bringing net new growth to the area instead.

We’ll see where this goes, if indeed it goes anywhere. But it’s certainly interesting indeed to see Mayor Fischer talking about mega-regionalism, and definitely a change from the more Louisville-centric Abramson administration approach.

Sunday, January 30th, 2011

Indianapolis Must Reinvent Itself Again

Indianapolis has often been referred to as the “Diamond of the Rust Belt,” but its performance goes far beyond just being the best house on a bad block. Yet despite outperforming not just the Midwest, but America as a whole, long term challenges facing Marion County put the region at risk.

Few seem truly aware of how impressive metro Indy’s performance has been. Compared other large metros in the greater Midwest, Indy was #1 for population growth from 2000-2009, growing almost 14%, or close to 60% faster than the US as a whole. It also had positive net domestic migration – people moving in minus people moving out – of over 70,000 people while virtually every other Midwest metro was bleeding people. That’s like the entire population of Fishers packing it up from where ever they lived and moving to Indianapolis. People are voting with their feet in favor of Indianapolis.

Indy was also #1 in job growth, adding 19,000 jobs in that same period while the US as a whole lost them. It is #2 in GDP per capita, the basic measure of economic output per person, trailing only the Twin Cities. It even outranked Chicago, showing that far from the stereotypes of a low end economy, metro Indianapolis is in fact a high value economy.

But despite this great regional story, all is not rosy. In particular, Marion County as a whole is now starting to show signs of the urban struggles we typically associate with the inner city. For example, while its population has continued to grow, it has slowed to a crawl. It lost more than 50,000 people to migration in the last nine years. And it lost almost 60,000 jobs – a huge number. A report commissioned by Mayor Ballard early in his administration noted that three of the four largest townships in Marion County have declining assessed valuation. And the township school districts now largely trail those in the collar counties for graduation rates.

In 1970, Unigov united the old city with what were then its suburbs. But this proved to be less a solution to a problem than a stay of execution. Marion County as a whole now finds itself in the same situation the old city did back then. It is struggling with legacy issues while surrounded by fast growing, brand new suburbs. And this time there is no Unigov in the wings to fix things.

In effect, Unigov bought Indianapolis 40 years to create an urban core environment that would prove demographically, economically, and fiscally sustainable over the long term. Unfortunately, that time is running out and the solution hasn’t yet been found. Indianapolis did completely transform its downtown, an accomplishment worthy of every bit of praise that has been given to it, but that is not sufficient to animate an entire county.

The big problem is not with the old city. Center Township, despite its challenges, has seen an uptick in population after decades of decline and neighborhoods over a wide expanse have seen improvement. The real issues are in the old suburban townships. Their problem is that they are selling and older version of the same basic suburban product as the collar counties, only with higher taxes, more crime, and worse schools.

When you are selling an inferior version of a commodity product at a high price point, it should come as no surprise that there aren’t a lot of buyers. Hence the exodus from Marion County we have witnessed. People can get a shiny new product with no legacy problems just by crossing a border, so that’s what they are doing.

To avoid Marion County failing and taking the region – and possibly even the state – down with it, it must change course to redevelop itself around a different type of product, a more urban one that isn’t available in the collar counties. This will take courage, since it won’t be popular in some quarters, but continuing to fight the collar counties in a commodity suburb game is a game Marion County can’t win.

This column originally appeared in the Indianapolis Business Journal.

Wednesday, December 15th, 2010

Bruce Katz at the Brookings Global Metro Summit

The Brookings Institution hosted an event called the Global Metro Summit in Chicago last week. Bruce Katz, director of Brookings’ Metropolitan Policy Program, gave a 30 minute speech that I think is a good summary of the Brookings worldview and prescription for our nation’s cities. Katz hits topics like exports, low carbon, innovation, ramping up industrial production, the primacy of metropolitan regions, collaboration and consolidation, and a push for a robust federal role in cities. (If the video doesn’t display for you, which it won’t if you are in Google Reader, click here).

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