How long-term factors drive municipal economies
In May 2008, the city of Vallejo, Calif. became the first urban victim of the global financial crisis when it filed for Chapter Nine bankruptcy, the first Californian city ever to do so. Defending this decision, Vallejo’s mayor argued that a weak economy caused by the bursting of the housing bubble had left the city no alternative.
Vallejo is not the only city suffering during the economic downturn. From Charlotte, N.C., where unemployment has doubled, to New York City, where the budget deficit has swollen to $4 billion, municipalities have seen profit models crumble. Still, experts say, these fiscal fluctuations are unlikely to significantly change America’s cities. The crisis may have hemmed in mayors, but it has done little to unravel the broader tapestry of municipal prosperity. Instead, long-term trends including regional integration, human capital, and new technology continue to shape urban economies.
Cities to Recession: ‘Drop Dead’
Thus far, this recession has proven harsh and inescapable yet paradoxically non-transformative for urban economies. Indeed, suffering may mask the ongoing affirmation of cities’ economic centrality. As Edward Glaeser, professor of economics at Harvard, noted, cities are “still where the majority of jobs are.” Certainly, some cities have suffered more negative consequences than others; the average home price in Detroit, for example, has plunged below that of its average new vehicle. Still, Glaeser argues, larger factors shape metropolitan life more profoundly than will the present crunch. “This [recession] is not a transformative event for American cities,” he states.
One factor beyond the recession may be the growing trend towards regionalization. Across the country, integrated regions seem both less affected by and more capable of managing the economic downturn. According to Jennifer Vey, a fellow at the Brookings Institute’s Metropolitan Policy Program, “You see places like Chicago and Denver trying to work together better as a region. It’s not about how the mayor can help his city, but how these people can use the opportunities to help their entire region.” Cooperation also means more effective initiatives. In particular, stimulus money may better hit its mark when directed towards a larger target. “The market,” Vey pointed out, “doesn’t know where the borders are.”
“The Next Industrial Revolution”
These widespread benefits of regional initiatives are matched by those derived from adopting new technologies. As Bart Peterson, former mayor of Indianapolis, told the HPR, “100 years ago, almost every city was based on manufacturing. About 30 years ago, when the first real manufacturing recession hit, some cities like Pittsburgh made the transition into services. Others didn’t, and in the past 30 years they have been declining pretty consistently.” Today, Peterson argues, President Obama’s clean energy initiatives offer a unique opportunity to move toward municipal renewal. Yet adopting new technology means not only transforming industry but also building on existing infrastructure. “You hear it said that manufacturing is dead in the city, but that’s not true. Cities have moved into advanced manufacturing,” Vey contends.
Advanced manufacturing and clean energy aside, however, experts agree that a city’s long-term health depends more on the quality of its human capital than on transformed infrastructure. According to Peterson, municipalities must make themselves livable and attractive to talent. “If your city seems more exciting and welcoming for young people, it is more likely to benefit from the next industrial revolution, whether it’s clean technology or something we can’t yet foresee,” he insists. If cities hope to keep up with a 21st century economy, an emphasis on human capital is essential. Said Glaeser, “The long-run ability of a city to sustain itself is based on the education level of the populace.”
Austin, Texas offers a perfect example of these trends in action. Over the past 30 years, Austin has been a leader in developing alternative energy technologies, due in large part to its major research university and to young entrepreneurs such as Michael Dell, founder of the eponymous company. Indeed, one of the few checks on Austin’s growth has been political conflict between town and suburb. If tight budgets mean an era of regional consolidation, this difficulty might melt away. In Austin, as elsewhere across the country, considerations such as use of new technology, investment in human capital, and integration within a larger region will continue to shape the city’s economic trajectory long after the recession has come and gone.