Posted on 09/09/2012 2:57:41 PM PDT by 2ndDivisionVet
What makes cities grow? This question is the subject of countless magazine articles peddling lists of “best cities” and is fodder for consulting firms looking to sell advice. But in reality, the most reliable measure of a city’s future health is whether employment is expanding or contracting. Declining cities are not home to growing businesses that need people. Only true believers in the come-back story would move to Detroit, Cleveland, or Buffalo right now — the three big cities with the highest unemployment rates in the nation.
So what features of a city correlate with expanding employment? The index-making experts offer all kinds of explanations. Some say it’s smart people, as measured by the percentage of persons holding various university degrees. But using degrees as a proxy for the quality of a city’s human capital can be very misleading, as anyone who has hired real people will attest. Richard Florida advances the “smart people expand employment” theme through a surrogate measure — the housing and entertainment infrastructure and culture (of tolerance) that attract creative people. My observations suggest that these ideas are headed in the right direction, but it is doubtful they are insights that suggest actions able to improve a city’s growth path.
Sometimes such expert advice proves ruinous. Kansas City provides an example. About eight years ago the city bought into the notion that a downtown entertainment district that included open-container laws would bring needed life to the inner core. So called “creatives” would flock to the Emerald City from all over the Midwest to start businesses and give needed vibrancy to America’s least dynamic town — it won’t grow and it won’t shrink. After operating for several years this multi-block restaurant, bar, and night-club zone is underperforming — it is producing only about a third of projected revenue to service its city-issued debt. The real winner is the Baltimore-based developer who sold the city on the idea in the first place. Since the days of Jim Rouse, developers from Charm City — one of the nation’s lowest growth cities — have been selling the future to others. What municipality doesn’t think their future would be improved by having a downtown mall, an aquarium, or new sports stadiums?
But in the case of Kansas City, it looks like the “creatives” took the wrong turn — moving instead to Omaha, Nebraska, where the population is growing by about 1% a year. Private initiative is reforming downtown Omaha just as it is in Austin, Texas. Omaha and Austin both enjoy AAA/Aa1 bond ratings, while Kansas City pays through the nose to service its AA/Aa3 debt.
The flaw with the Kansas City strategy is common to many municipal growth strategies. They are founded on the implicit belief that outsiders are smarter than native people and the city must attract talent. This is similar to the even greater development fallacy of “smokestack chasing” — recruiting existing businesses to relocate to a city in response to tax relief and public subsidies for new plant and equipment spending. History tells us that the essence of growth in any place is the exertions of people who already live there. Any city’s history of economic success is a story of its resident entrepreneurs (even if they were born someplace else) who decided to take the risk of starting a business.
A look at the fastest growing cities in terms of labor demand hints at the surrogate we should be focused on. Every city enjoying notable increases in jobs and declining unemployment has a university. Urbanists have casually made this observation for years. But, in truth, having a university, even a great research institution, doesn’t guarantee economic success for a city. The counter narrative needs only to include Rochester, Baltimore, New Haven, and Cleveland to make the case.
What’s important isn’t so much the university itself, but rather the entrepreneurial culture that accompanies many of them. Indeed, the cities with faster growing work forces are home to universities with particularly entrepreneurial cultures. The cultures in Seattle, San Diego, Columbus, Raleigh, and San Jose (proximate as it is to Palo Alto) reflect the particularly entrepreneurial capacities of their universities. One might even offer that, in the future, the universities that will be regarded as the best will be the ones with an explicit focus on inventing and innovating in their research and teaching such that they become schools for creative entrepreneurs.
For 18 years I taught at Johns Hopkins. Hopkins is the home to more funded research than any other university in the nation. Yet it has a lamentable record in terms of birthing new businesses based on the breakthroughs happening in its laboratories. Baltimore is seldom among the cities that entrepreneurs chose to start businesses in. Contrast this to MIT, which has generated so many companies that together they have revenues exceeding those of some entire nations. MIT, where I am a visiting scientist, has perhaps the most entrepreneurial environment of any university in the world. It is no stretch to say that more than any other factor, Boston’s economic vitality is connected to the new firms spawned by MIT.
Mayors, local elites, business leaders, and citizens interested in improving the future of their local economies should encourage their universities to strengthen their faculty and research to produce more ideas that can be commercialized. Recently, universities that care about the economic future of their communities have begun to develop programs that encourage new firm formation using the discoveries coming from their laboratories. Syracuse, Ohio State, Arizona State, Wisconsin, Illinois, and North Carolina have each established policies specifically designed to assist the development of their home cities. The University of Miami’s Launch Pad is a program that helps new graduates create firms as a means of making their own jobs. It has been enthusiastically embraced by local businesses, in part, because it has created 65 new firms in the last four years. Students who went to Miami to study are staying to become local businesspersons.
These programs represent a new and important innovation in town/gown relations. The result should be a culture that is mutually supportive of the university and the local business community. Its success should be measured by one factor — are there new jobs in town?
The aforementioned Buffalo tried that and is still trying that. Richard Florida's economic prescriptions are, at the same time, snake oil and ambrosia-for-liberals. They can justify spending public dollars for "economic growth", but if the growth fails to come, at least they'll have a nicer city to live in.
It's really not a hard thing to figure out. Entrepreneurs flock to cities where the tax and regulatory climate allows a decent profit. The inner-city liberals don't believe that for a second which is why Detroit, Cleveland, and Buffalo [not to mention Pittsburgh and Baltimore] are still in their death throes.
MIT has gone way down hill. Not so much in the student body, but in the leadership. That anti-American CEO of Pepsico is (was?) a trustee, the president, another woman, drinks the global warming kool-aid, yet another woman biologist at MIT helped end Larry Summers tenure at Harvard. Not a big fan of Larry, but he was halfheartedly trying to get control of the asylum from the inmates in the liberal arts faculty.
So as not to appear misogynist, some of the nuttier MIT "males", allegedly with the XY chromosome, include Noam Chomsky, Lester Thurow, and that fellow, whacked out traveler, Paul Krugman got his doctorate there.
I can tell you how to destroy a city.
One party (democrat) corrupt rule for 50+ years and insane public unions...
I graduated WVU in 2000, PA was trying with limited success to turn the lower Mon valley into a high tech corridor. Effectively their plans were anchored by Pitt and Carnegie Mellon University on the north end and WVU on the south end. Despite having relatively good road, rail and water transportation they were not getting the economic expansion they wished due in part to stereotypes dating back to labor problems in the 1880s, Taxes that were higher than some of the alternatives like TX, and the fact the topography limited the size and locations of airports.
Another aspect of the "creative class" frenzy is the participation of colleges and universities in economic development. In Buffalo, it's UB. The newspaper and the politicians continually rave about the public-private "partnership" of the University of Buffalo.
Little comes of the "partnership" except beautiful renderings, utopian "Master Plans," and, of course, increased funding for the university.
Profit rarely figures in the plans.
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