Unlocking the Potential of Post-Industrial Cities

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Our book takes a new look at economic growth in six old cities; Baltimore, Cleveland, Detroit, Philly, Pittsburgh and St. Louis.  These cities all share the common features that in recent decades they have each lost population, lost manufacturing jobs and have high rates of urban poverty.  In Chapters 1 and 2, we discuss these points in detail.

Unlike other books that explore poverty in cities, we focus on the role of the private sector as the key actor determining whether and when these cities make a comeback.  I do not believe that the Biden Administration or state governments are going to make large lump sum transfers to these deserving cities.   If these cities are going to make a comeback, it will be due to a new commitment to the private sector and improving local quality of life.

Our book has the following structure.

In Chapter 3, we discuss the private sector job growth challenge in these cities.  What would it take for major superstar companies to open campuses in these cities?  What would it take for small new firms to be more likely to succeed in these cities?   Each of these cities features great Universities.  What can be done to achieve the full economic synergies between companies and the researchers at these universities?  What lessons can Baltimore learn from Silicon Valley?  When do new productivity hubs emerge?   A key theme in my life’s work is that local quality of life is essential.  Do talented footloose people want to live and work there? In our emerging Work from Home economy, this question will take on an even larger importance.  

During my time as USC Economics Chair it was clear to me that hundreds of economists want to live in Los Angeles because it features great quality of life.  A Los Angeles University with deep pockets could build up a top 5 economics department because of the desire of the footloose to live in a great quality of life city.  Our 6 cities do not have warm winters and must think about how they can be more competitive for talent.

In Chapter 4; we focus on the supply side and local resident investment in human capital.  We discuss Jim Heckman’s work on early child investment.

In Chapter 5, we discuss residential locational choice and quality of life in these cities.  Baltimore has a national reputation for being a high murder per-capita city.  This reputation slows down its comeback.  What are equitable strategies to address this key quality of life challenge?

In Chapter 6, we discuss urban governance.  The urban mayors of these cities have a key influence on the local “rules of the game”.  These 6 cities compete for people and jobs in our footloose national economy. If outsiders believe that quality of life is low and public services are not of high quality, they will live elsewhere such as the suburbs or a higher quality governed city.   City competition for footloose residents should lead to policy reform.  Why haven’t these 6 cities made greater progress in improving public sector service delivery?

Chapter 7 is an optimistic chapter exploring several of the emerging positive trends taking place in these cities.  For example, each of these cities is close to water and has great “green city” potential in our post-industrial age.   For several of our cities, immigrants are moving to specific neighborhoods in the city and are contributing to diversity and civic life and bringing new energy in a Jane Jacobs sense.

Chapter 8 connects all of these puzzle pieces as we use Paul Krugman’s History Versus Expectations vision to discuss how each of these cities can pivot and “unlock” their full potential. Relative to the rest of the nation, these cities feature relatively cheap housing. This could be a key time for investors to identify arbitrage opportunities.  The future payoff of investing in these cities is tied to an investment co-ordination challenge.

For these 6 cities to achieve their full potential there needs to be 4 levels of re-investment;

1.  Firms investing capital 

2.  People investing in their human capital and health capital

3.  Government investing in upgrading the city’s infrastructure, safety and local public services

4. real estate investors rebuilding the decaying capital stock.

At the end of the day, private sector investment will determine whether these cities recover from recent negative trends.  There is no single “magic” Federal or state policy that will cause success.  Instead, confidence must be built up  by local residents and by firms and outsiders thinking of moving to these cities that their future is bright.  Confidence is tied to economic fundamentals.  Our book offers many potential strategies for how these cities can begin to reverse the disinvestment problem.

The key for these cities to achieve their full potential is to convince private sector actors that these cities are on the rise.   Expectations are key here.   This approach differs from the typical Public Health approach or Social Work approach that places the government and the non-profit sector as the leading actors in reversing urban poverty.  

Given that hundreds of thousands of poor people will continue to live in these cities over the next few decades, the U.S as a whole faces an imperative to ponder how to help these cities to help themselves. My goal in writing this book is to stimulate an honest scientific dialogue.  

I do not believe that moral arguments that state: “the deserving people of these cities merit a $trillion dollar transfer from the Federal government” will be effective in reallocating resources to them.   As an economist, I worry that the expectation that large transfers may be sent to these cities actually creates a moral hazard effect of slowing down their own pro-growth reforms because some local leaders expect that a large check may soon appear if the situation becomes too dire.  

As I think about our book’s contribution to urban studies, we contribute an honest assessment of how medium sized cities compete within a system of cities for capital, and labor.   When cities under-perform, the poor people of that city suffer more.   The good news is that urban living will continue to be desired by many people and this creates new opportunities for these cities to thrive and compete for the post-covid market of new urbanists.