Profitwise News and Views: August 2012

Industrial Cities Initiative: Working Paper Summary
Last Updated: 01/15/13

“Rust Belt” is an epitaph for cities large and small throughout America’s midwestern and northeastern regions. It encapsulates social and economic changes: “population loss, rising crime rates, loss of union jobs, particularly in manufacturing, White flight to the suburbs, and a generally declining urban environment,” in which which “massive, but abandoned factories rusted away and scarred the landscape of once vibrant cities.”

More recently, some observers have suggested that globalization is putting the finishing touches to the decline that began in the 1970s and 1980s. “In the age of globalism,” one writer asks, “Do many of the Midwest’s have a future? For that matter, does the Midwest have a future?”

In 2011, the Community Development and Policy Studies (CDPS) division of the Federal Reserve Bank of Chicago undertook the Industrial Cities Initiative (ICI) to gain a better understanding of the economic, demographic, and social trends shaping industrial cities in the Midwest. The purpose of this article is to explain the motivation and context for this initiative and summarize the observations and opinions of leaders in Seventh Federal Reserve District industrial cities. This is a story of cities that are changing—some more strategically and some more reluctantly than others. It is a story of how different cities have responded to national and global economic changes either by striving to maintain the status they once derived as manufacturing and industrial centers by transitioning to a more diversified economy, serving local, regional, or global markets.

It is important to emphasize that this paper provides summary observations and analyses about ten midwestern industrial cities, and not comprehensive or determinate findings. We include the opinions of leaders in ten cities, attempting to capture their sentiments about the general well-being of their respective cities and the challenges they face as they define their places in the twenty-first century economy; we compare and contrast these opinions, along with our data analysis, across the collection of cities in the study.

Recent economic conditions have challenged even the most visionary and well-managed communities and cities. In the words of Federal Reserve Chairman, Ben Bernanke, “While the scale of the problems has been exceptional, many of the problems themselves are not new for lower-income families and… communities that were already relatively poor, with fewer community assets and insufficient drivers of insufficient drivers of economic growth.”

Over six months during 2011, CDPS staff interviewed dozens of leaders in each of the ten cities to explore how they perceived their success in responding to these changes. As a result of the preliminary analysis and the subsequent interviews, CDPS staff organized the ten cities into four categories, summarized in table 1:

  • Resurgent Industrial Cities – cities that have relatively smaller declines in manufacturing employment with relatively larger increases in measures of wellbeing: Cedar Rapids, IA; Fort Wayne, IN; Grand Rapids, MI; and Green Bay, WI.
  • Transforming Cities – cities that, despite relatively larger declines in manufacturing employment, have seen relative improvements in measures of well-being: Aurora, IL; and Joliet, IL.
  • Fading Cities – cities that have relatively smaller declines in manufacturing employment with relatively small declines in measures of well-being: Racine, WI; and Waterloo, IA.
  • Overwhelmed Cities – cities that have relatively larger declines in manufacturing employment and relatively larger decreases in measures of well-being: Gary, IN; and Pontiac, MI.

While each city has a unique story, they share themes that explain both positive and negative aspects of their present economic health. A partial list of these themes follows; some apply more than others, and may call for further analysis.

Relatively pervasive themes include:

  • Workforce Development/Skills Mismatch: Resurgent and Transforming cities appear to have developed workforce development infrastructure (at community colleges, trade organizations, etc.) that addresses skills/jobs mismatches identified by major employers and emerging industry leaders.
  • Regionalism/Globalism: Resurgent and Transforming cities have adopted at least a regional, if not always a global mindset, while their underperforming peers struggle with ongoing, locally focused interests that restrain their progress.
  • Economic Development Finance: Resurgent and Transforming cities have developed financing mechanisms for their economic development strategies that emphasize fully engaged public– private partnerships; an ability to leverage limited public funds with significant private dollars; and an often higher level of philanthropic support.
  • Leadership: Resurgent and Transforming cities appear to have leaders that work together to marshal the resources necessary as public assets that attract people and businesses, with a shared vision and strategy for their communities’ economic well-being.

The following discussions explore how each of the four themes is manifested in the ten selected cities, and the relevant successes, challenges, lessons learned, as well as opportunities seized and, sometimes, missed. As stated above, these are preliminary discussions. In some cases additional information needs to be gathered; in others, the story is still unfolding.