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Cities' Messy Futures

March 1, 2013 11 minute Read by Carl J. Schramm

For roughly 50 years America has observed the profound decay of a large number of her once most productive and wealthiest cities. These unhappy places have been concentrated in the Northeast and along the Great Lakes. In the 1980s the neologism “rust belt” was invented to describe the place from which the industries based on steel had decamped. In their wake lie rusting boilers, broken assembly lines, and rotting steel-structures that were once polished modern factories. There are more than 50 cities in this area, starting with the knitting mills in New Hampshire and running through to foundries of Milwaukee. The zone includes Syracuse, Rochester and Buffalo; Erie and Pittsburgh; Youngstown, Dayton, Toledo, and Cleveland; Hammond and Gary and points further west.


Urbanologists like to provide some dignity to these lost places by referring to them as legacy cities. New names for these cities suggests that despite showing no signs of reversing their loss of population that started roughly in 1960, they are worth attending to because of their former importance. Indeed, it is argued, these cities should have a presumptive claim on federal and state dollars to fund their renaissance.

A flourishing industry of experts suggests that if cities just get the right formula in place, one that usually involves new publicly-financed building, people will return and business will again prosper. Therefore, they argue, public spending should be looked upon as an “investment.”

Urban experts rely on four recipes. The first is the notion of building a city’s future around a “cluster” of new industries that might be appropriate to the specific area. This approach springs from the analysis of Michael Porter at the Harvard Business School. Boil away all the caveats and the promise is that the prosperity that has characterized the iconic Silicon Valley can be the future of, say, Schenectady or Akron. The key is getting a keystone industry built up surrounded by satellite companies. Every year hundreds of cities around the world look to this solution to secure their futures and restore past economic success. The problem, however, is that no one seems to have figured out what industries make a cluster that works in a given place. The Silicon Valley model, tried hundreds of places, has never once taken root elsewhere.

Richard Florida gets closer to the mark understanding that local economies, if they are to be smarter, need smarter people. To attract what he calls the “creative class” to, say, Albany or Dayton, the town must remodel its downtown with loft apartments and reshape its social memes to be more tolerant of those who pursue alternative life styles. Build a nest and they will come! Again, the problem here is that no one can identify with any specificity the creative class that is ready to stop roving around and occupy a given city bestowing upon it a new economic meaning. There is no real place that has managed to entice the geniuses in this nomadic squadron put down roots and significantly improve the growth trajectory of any city. Rather, as cities fall apart, the smartest minds leave first. They see the decay coming and their skills make them more mobile, so they move. Alvin Gouldner referred to those who pursue fortune by moving as “cosmopolitans” and their lesser skilled cousins as “locals.”

The urban economists at the Brookings Institution have a third formula: They believe cities should be approached as businesses. Like all good businesses, especially start-ups, the city hoping to recover should have a formal business plan. A city must express a vision, a mission, a product, and a marketing strategy. One problem with this approach is that successful companies like Apple and IBM never had formal business plans. And those established businesses that go through the motions of business planning know that it is largely done as a matter of good corporate hygiene. Analysts covering publicly traded companies seldom read them or even know they exist. Simply, the notion of a business plan for a city is about as useful as a business plan for a corporation.

A CEO once told me, “Of course I have a business plan. We write a new one every two years. I keep it in my desk drawer in case someone comes to acquire us. It’s the prop I’d use to inflate our enterprise value.” Much as Moltke once said of war plans and the enemy, city plans do not survive the first encounter with reality. In the case of a city if, say, the bond rating falls or the town’s biggest employer decides to take the tax incentives offered by another town, the city’s plan is suddenly useless. And, for the record, having a business plan will have no impact on any city’s bond rating. Indeed, it might work to hasten a city’s downgrade because it would seem so frivolous.

Each of these three formulas for municipal transformation holds intuitive appeal. Untethered to such reality, however, is a strain of thinking in architecture and urban design that is decidedly more about advancing ideology than actually changing any town’s future. This fourth recipe of urban renewal suggest that an admixture of new buildings and parks developed within a Marxist framework will transform even our worst cities into gardens of Eden. Based on the work of writers such as Henri Lefebvre, modern day urban reformers argue that the root cause of the decline of the rust belt is that urban economies are exploitive by their very nature. Urban economics has made the underclass. The city is a central theater of class struggle.

Necessarily, in the established way of the Marxist dialectic, the solution is to establish a “right to the city” which legitimates its inhabitants to possess the city and reorder its economics so that collectivist justice emerges. The theory enjoys the official opprobrium of the United Nations through UNESCO-UNHABITAT, an international agency that militates for the “right to the city.” The rights spoken of are a right to housing, to “space” (meaning distance from other individuals), and to “centrality,” which loosely means collectivist decision making regarding the city’s future.

In the U.S., the movement takes operational life through a slogan that has gained academic adherents, namely, “take back the city.” The hollowness of this battle cry is that no one would want to take back a city with no meaningful economic rationale, or put more starkly, who would want to own a piece of the future in a place that no longer has economic meaning? If a city’s population doesn’t work and has no jobs what is there worth taking back?

Indeed, it could be argued that those who live in any failing city already own a good deal of these new “rights.” To be sure, this ownership is by default. Public housing is available, open space in cities like Detroit is now so abundant that the phrase “urban prairie” is commonly encountered, and the ubiquity of publicly financed community organizations would seem evidence that municipal democracy has reached the grass roots, indeed moved to a near collectivist form.

What is missing in all this is any new economic rationale for cities other than redistribution. What Marxists fail to acknowledge, most critically, is that failing cities have nothing of value, in terms of assets that make wealth, to redistribute. Of course, deus ex machina appears in the form of new “green” structures. When such building commences a new environmentally and worker friendly industry will emerge. Really? Green values are now universal and the first city with a totally “green” church, dormitory, clinic, bus station, car dealership, or even a whole neighborhood, will no longer be seen as a place of the future because of its intelligent environmental design. “Destination green” is not Hamtramck’s future.

The real answer to any city’s future is its economy and its fitness to compete. Ever since the human capital revolution we’ve known that a city’s future is tied to the skills and education of its indigenous population. Professor Porter’s model enforces this reality. Professor Florida’s vision is even more dependent on talented individuals. The answer is in having more market-competent residents ready to operate and make the new economy.

Rather than look to orderly design, be it “green” or not, or to some ideological score settling over ownership of what’s left of a given city, all would do well to remember there is no future without wealth generation. And, as long as some cities are competing and making their own futures, it is unlikely anyone will stop to look at any city with a business plan that inevitably defines an orderly path to a unique industrial future for a given place. Everywhere that Marxist planning has been tried we find places meant to be the future that are as tired, bleak, and unpromising as the “model” cities the Soviets built decades ago.

The past of every American city was messy and the future will be more so. Places that will thrive will do so because they are the home to smart and creative people who could largely care less if they are part of a cluster, the creative class, or a cog in a city’s master plan, much less a soldier in an ideological war. Individuals make the future and cities should strive to provide the basics to make it easier for them to get there. If sufficient numbers find success they will bring everyone else along. Simply, the future belongs to those who make it. They won’t try to make it if they can’t own it.

 


Author

Carl J. Schramm
Carl J. Schramm

2012 Economic Growth Fellow

Carl J. Schramm is recognized internationally as a leading authority on entrepreneurship, innovation, and economic growth. Currently he is university professor at Syracuse University. For 10 years he served as president of the Kauffman Foundation, making it into the world’s premier organization dedicated to the development of high-growth firms and understanding the role they play in economic growth. He serves as a visiting scientist at MIT and as a fellow of the Bush Institute. He is a Batten Fellow at the University of Virginia’s Darden School of Business and is a member of the Council on Foreign Relations. Schramm's most recent book, "Better Capitalism" (co-authored with Robert Litan) was published by the Yale University Press in September 2012. He has written several other books, including “Good Capitalism, Bad Capitalism” and “The Entrepreneurial Imperative.”

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