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Cities’ Elusive Quest for a Post-Industrial Future

Stefano Negri's picture



What do rusting industrial cities have in common with outmoded BlackBerries? In this era of constant technological progress, talent mobility and global competition, it's striking how many similarities can be drawn between cities and companies, and the need for both to continuously adjust their industrial strategies to avoid oblivion or bankruptcy.

Cities can lose their vigor and vitality just as surely as a once-hot product can lose its cutting-edge cool. RIM, the maker of the the once-ubiquitous BackBerry,
has been leapfrogged by companies with more nimble technologies; Kodak, once synonymous with photography, went bankrupt when it failed to make the transition
from film to digital. The roll call of withering cities – once proud, yet now reduced to rusting remnants – shows how cities, like companies, can lose their historic raison d’etre if they fail to hone their competitive edge.

Heavy industries like steelmaking and automobile assembly once powered some of the world’s mightiest economic urban areas: Traditional manufacturing industries shaped their identity, giving their citizens income and pride. But globalization, competition, shifting trade patterns and changing consumer trends are continuously reshaping the competitive landscape, with dramatic impact on cities and people. Over the past century, industrialized regions like the Ruhr Valley of Germany, the Midlands of Great Britain and the north of France – along with the older shipbuilding cities around the Baltic and North Seas, and the mono-industrial cities of the former Soviet Union – have struggled to make the transition to different industries or toward a post-industrial identity. Their elusive quest for a post-industrial future has had a dramatic impact on their citizens.

The same issue has become daunting in recent decades for aging manufacturing regions in the United States, which have suffered the prolonged erosion of their industrial-era vibrancy. That kind of wrenching change is bound to soon confront other cities in the developing world, as they struggle to adapt their urban cores, civic infrastructure and industrial strategies to an era that puts a higher premium on nimble cognitive skills and advanced technologies than on bricks-and-mortar factories, blast furnaces and big-muscle brawn.

For fast-growing cities in the global South, many of which are urgently seeking solutions amid their sudden urban growth, there could be many lessons in the experience of older cities in the developed world in making such a transition.

A series of recent conferences among urban policymakers and practitioners – backed by a wide range of rigorous academic research and practical client-focused experience in building competitiveness – provide insights that city leaders and the World Bank Group’s practitioners can leverage as they craft programs for transformative urban strategies. 

The Rust Belt

Nowhere has older cities’ struggle been more painful than in the so-called “Rust Belt” of the United States, having endured a decades-long trauma of industrial decay and urban decline. The recent bankruptcy of the city of Detroit, along with the near-collapse of the Detroit-centered North American automobile industry, have dramatized the region’s decades of deindustrialization. For almost half a century, the plight of the Rust Belt around the Great Lakes has been stark reminder of how difficult it is to breathe life into moribund industrial regions, despite decades of well-meaning policy interventions. Yet some recent urban-revival efforts are providing signs of hope, boosted by a strong partnership between the private sector and local government institutions.

Pittsburgh lost more than 150,000 manufacturing jobs – many of them in steel and related industries – during a painful regional downturn in 1981 and 1982. Cleveland lost almost half of its population from 1970 to 2006, as dramatic shrinkage hit its steel, automobile-assembly and auto-parts industries: After peaking in 1950 at about 915,000, Cleveland's population declined in the latest census to about 397,000. Similarly, Detroit lost more than a million people, being reduced nowadays to less than 40 percent the population it had in the 1950s and 1960s, during the glory period of Motown. With a median city household income that is 20 percent less than what it was a little over a decade ago, 40 percent of Detroit’s population is now living in poverty – compared to 15 percent nationwide.

Two recent urban-policy symposia in major Rust Belt cities – Pittsburgh and Cleveland – showcased ideas that can help inform the renewal of other faltering old industrial regions. The “Remaking Cities" conference in Pittsburgh, and the “Transforming Urban Ecologies: What Work for Cities” conference in Cleveland, illustrated how coordinated strategies for revitalizing cities – especially core inner cities – have made tentative yet promising progress toward reviving those onetime centers of steel and auto manufacturing.

That trio of Midwestern cities – Pittsburgh, Cleveland and Detroit – is iconic in industrial history. As urbanologist Richard Florida has noted, “Nineteenth-century Pittsburgh and Henry Ford’s Detroit were the Silicon Valleys of their time.” Public policy, as well as private enterprise, was a catalyst for the Great Lakes region’s industrial growth: Just as Silicon Valley sprang from 20th-century government investment in information technology and military-related hardware, 19th-century industrial policy played an active role in shaping those Midwestern cities.

Pittsburgh has been the pacesetter in the recent revival of some Rust Belt cities. Both the “Steel City” in the Appalachian hills and nearby Cleveland along Lake Erie – which have now shed almost all of their once-signature steel mills – have enjoyed the stirrings of a renaissance. Both cities seem to have escaped the dire fate of beleaguered Motown, even if they continue to face severe challenges – including underperforming public school systems, strained race relations, chronic public-sector management woes and pockets of intense inner-city poverty – that must be overcome if their recent progress is to be sustained.
 
Honing Comparative Avantage via 'Anchors’ and ‘Clusters’

Cities are complex organisms – with rhythms of commerce and information-flows that keep them constantly evolving – and turning around a faltering city poses intense challenges.

Michael Porter, who founded the Initiative for a Competitive Inner City (ICIC) and who keynoted the Cleveland conference, presented a detailed analysis and agenda that emphasized practical steps to support the three drivers of urban vitality – which are being leveraged by local policymakers in the three cities to renew their industrial strategy: the environment for doing business; development focused on clusters of economic activity; and the sophistication of companies’ operations and strategy. 

Under Porter’s agenda, cities should pursue well-defined programs to improve the local business environment by pursuing an “anchor institution” strategy to capture opportunities to create “shared value” and should invest in the local support framework for business, including infrastructure and workforce skills. In addition, cities should pursue a cluster-based growth strategy by strengthening existing and identifying emerging industry clusters, and should focus resources on capacity-building, ensuring that companies have access to leadership and management education.

Public-private cooperation – with constructive government bodies playing a coordinating role – must be an active element of the process of mobilizing civic resources in a metropolitan area’s economic core, Porter said, echoing several other conference speakers. Government activity alone is necessary but not sufficient to reshape the urban economy: Private-sector companies – which create jobs, meet payrolls, make investments, and seek new markets for their products – are the true drivers of every region’s economic activity.

Finally, activist approaches and a continuous strategy renewal matter, Porter said: Inner cities and their surrounding metropolitan areas can succeed in strengthening their performance if they focus on making the most of their strategic location, their under-utilized workforce, their unmet local demand, and their links to regional growth clusters. He exhorted conference-goers from “every city represented in this room: You’ve got to have an ‘anchor strategy.’ It works.” The grand challenge is to “organize public policy around clusters.”
 
Pittsburgh: Coalition of University, Business and Government Propels a Revival

Pittsburgh has managed to bridge its way from heavy industry to high technology, conference-goers heard at the recent “Remaking Cities Congress.”
That gathering was a 25-years-later follow-up to a similar conference held in Pittsburgh in 1978 – at a moment of civic crisis, as the city’s steel industry seemed near collapse. The city’s turning point was the adoption of what became to be known as “Strategy 21” – more formally, “the Pittsburgh/Allegheny Economic Development Strategy to Begin the 21st Century.” That strategy was drafted by a coalition formed from the city’s anchor education institutions (the University of Pittsburgh and CMU), the city’s Mayor’s office and the surrounding area’s Board of County Commissioners.

Strategy 21 documented four overarching goals and presented five practical projects to be implemented over the next 15 years, aiming to maximize the comparative advantages of the city and metropolitan area and the potential return on investment in terms of both jobs and revenue. The document also identified financing sources, with 60 percent coming from private sources, and the publicly provided financing relying on federal grants, state and local sources. Most local public investment was earmarked as revenue-supported investment.

Leveraging existing skills and the presence of an energetic education cluster, one of the five projects focused on investing in university-driven technology research. The result was the creation of, among other institutions, the National Robotics Engineering Center at CMU. Gradually, the university grew from a regionally focused technical school into a nationally renowned engineering powerhouse – now the world’s largest robotics research and development organization. The center was built on the research coming out of the university’s engineering school and the on local skills emerging from its steel and metals industries.

Along with the jobs and revenue generated by the center, the know-how flowing from Pittsburgh’s legacy industries has had knowledge spillovers into the local industrial ecosystem. A onetime engine of the local economy, Westinghouse Electric, which was once one of the city’s largest employers, has slimmed down since selling off many components in the 1980s and 1990s, but it has now reinvented itself as knowledge-driven, technology-focused nuclear engineering and energy company.  

Pittsburgh’s turnaround from threatened industrial collapse to re-industrializing renown was capped by President Obama’s decision to designate the city as the host of the G20 summit in 2009 – confirming Pittsburgh, before a global audience, as a successful example of an urban turnaround from laggard to leader.
 
Cleveland: Leveraging an ‘Anchor' to Engineer an Urban Comeback

Having struggled with its effort to brand itself as the nation’s “Comeback City” in the 1980s and 1990s, Cleveland seems be bouncing back at last from the days when the city’s reputation was marred by its 1979 municipal bankruptcy.

Cleveland’s trajectory from being the United States’ fifth-largest city in 1920 to being a poster child for urban decay in the 1970s provoked the founding of a series of public-private coordinating bodies led by the corporate community and civic philanthropies – now embodied in the Greater Cleveland Partnership, which has more than 14,000 member companies, large and small, from throughout Northeast Ohio. The network of civic-minded bodies has been pivotal in planning for the inner city’s revival – including the downtown construction of new baseball, basketball and football stadia in the 1990s, the expansion of Cleveland State University around the turn of the century, and (after almost a decade of debate) a new convention center in 2013.

Progress has been painstaking, especially in the wake of the subprime-mortgage crisis (where vast swaths of inner-city Cleveland were left forlorn, with foreclosed properties) and a county corruption scandal that sent many senior elected officials to jail in 2010 and 2011.

Cleveland is now once again focusing its resources on the once-glittering, then-seedy, now-reviving Euclid Avenue corridor. The city’s new economic engine is no longer manufacturing but medicine: A sprawling medical complex, anchored by the world-class Cleveland Clinic and nearby University Hospitals, has inspired an array of medical and technology startups along the four-mile Euclid corridor – which the local government has pro-actively boosted by linking them with a cost-effective Bus Rapid Transit (BRT) system – between downtown and University Circle. For years, downtown and University Circle were separated by a strip of inner-city desolation, until the BRT re-energized a broader stretch of Euclid Avenue near the Cleveland Clinic: By making it more appealing for businesses to set up shop there, a virtuous cycle took hold, with land values rising, foot traffic increasing, retail shops moving into the neighborhood, and additional startup firms feeling confident about locating there. The success of the medical cluster, and the surging investment in the neighborhoods around Case Western Reserve University, led to an astonishing 300-percent increase in land prices since the onset of the Great Recession in 2008.

The former showpiece of Cleveland’s economic strength, Euclid Avenue, was the home of the Gilded Age “Millionaire’s Row,” lined with the mansions of the city’s manufacturing aristocracy. Nowadays, one of Cleveland’s continuing priorities, according to officials like city economic development director Tracey Nichols, is to encourage the spillover of the Euclid Corridor’s new prosperity to the impoverished neighborhoods just a few blocks beyond the vibrant medical cluster and academic enclave. Government policies to require housing for low-income residents and the elderly – along with set-asides of a portion of public contracts for minority-owned and women-owned businesses, and a government-set percentage of hiring set aside for local residents – give the neighborhood a mixed-use and diverse character, which promotes not only growth but also inclusion.

The “eds and meds” strategy – drawing on the economic magnetism of the city’s universities and medical centers – seems to be paying off big-time for Cleveland. Although the city’s downtown core does not have the easy walkability of downtown Pittsburgh, there has been a significant youth in-migration to loft-style apartments near Public Square, reinforcing the new energy that is palpable along the reviving Euclid Corridor.
 
Detroit: Betting on a Resurgence Beyond Cars

Detroit’s bankruptcy in July 2013 led to an outpouring of lamentations and analyses about what the city should be doing to overcome its manufacturing woes. The fact that the Detroit area is among the top three U.S. metropolitan regions for engineering degrees per capita – and among the top five regions in Ph.D.’s per capita – gives the region a great deal of human capital to work with.

Additional investment recently in advanced auto-assembly plants has been welcome, but, seeking to maximize the benefits of its historic endowments and location, some far-sighted planners in the Detroit region foresee a future not only in high-tech manufacturing but in the most basic industry of all: food.
Detroit’s home state of Michigan is the country’s second-most-diverse agriculture producer, with more than 300 varieties of produce and food commodities. Detroit’s strategic assets – such as its array of vacant lots, idle industrial parks and unused industrial spaces, entwined by highways and railroads – give it assets that can be retrofitted as food processing, bottling and packaging facilities, along with the warehouse space to prepare it for shipment. The city is also home to a diverse and often under-utilized labor force, with both high-skilled and low-skilled workers in need for opportunities that fit their skill set.

That is after all the advantage of creating a food-industry cluster: Unlike high-tech clusters, they are more inclusive, providing ample employment opportunities not only for high-skilled and specialized workers, but also relatively low-skilled labor.  Detroit’s Eastern Market, a historic commercial district that has been feeding the city since 1891 and that attracts almost 50,000 people each weekend, has been retrofitted to become the centerpiece of such a cluster development strategy.
Eastern Market has recently become the location for a food incubator, aiming to offset constraints posed by regulatory requirements and the availability of capital, which can be prohibitive for a small enterprise. The Detroit Kitchen Connect incubator – providing space, basic equipment and moral support for entrepreneurs – helps start-up companies obtain access to business planning advice and information about licensing and partnerships.

Creating a diversified industrial base, looking beyond a single-minded focus on the automobile industry, will be important to inspiring the kind of inclusive growth that can power the Detroit area’s comeback.
 
‘Competitive Cities’: Strategies for Urban Competitiveness and Success

The experience of the three cities examined in this research – Pittsburgh, Cleveland and Detroit – all offer perspectives on shaping urban development and implementing workable cluster strategies. Now the key question is: How transferable are these learnings?

As Porter told the Cleveland audience, skilled human capital is crucial – and while all three cities have inherited the sad result of decades of underperforming public school systems, they still benefit from being in a developed-world economy with strong universities, and a skills base acquired through the previous economic cycle. This is not a luxury available in, say, many cities in Africa.

But some of the lessons of these cities’ experience are actually applicable to every city in the world. Successful economic growth strategies require continuous market sensing and renewal, patient cultivation of new ideas across a coalition of stakeholders, a determined city leadership, and a pro-active nurturing of the competitive position of their companies in global value chains.

For another thing: The Rust Belt is tackling challenges that are not so dissimilar from the ones faced by cities in the developing world – in particular, the urgent priority of promoting broader social inclusion after suffering from civic balkanization along the lines of socioeconomic class, race and ethnicity, and even geography. And some of their experiments in developing more “inclusive industries” (such as food in Detroit) or inclusion policies (such as in the Euclid Avenue corridor in Cleveland) seem to be working without hurting economic growth.

Worldwide, priorities differ city by city, and solutions must be customized and must evolve over time. Amid a growing a sense of urgency, as urbanization hurtles fast-forward, each city-focused strategy must take into account local conditions and specific civic sensibilities, as the politics of placemaking remain grounded in local circumstances. City leaders must focus on elements that suit their particular local economic conditions, legacy assets and civic heritage.

Faltering cities can suffer the same fate as fading companies that fail to keep up with the challenge of ever-tougher competition. The BlackBerry was beaten by the touchscreen; Kodak film was made superfluous by digital technology; Flint’s auto assembly lines, and Youngstown’s furnaces and forges, were made obsolete by “just in time” manufacturing, high-tech steel mini-mills and global competition.

The autumn conferences in Pittsburgh and Cleveland offer a glimpse of how once-exhausted industrial powers have planned their comeback. Their nascent revivals may have staying power – but they also illustrate the need for cities and city planners, like companies struggling to avoid bankruptcy, to embrace a strategy of continuously re-inventing their competitive strategies to avoid obsolescence and oblivion.


Photo: Skyline of downtown Pittsburgh, Pennsylvania.
Photo Credit: Creative Commons.