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Manufacturing a Comeback

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Manufacturing a Comeback

Grand Rapids has become a midwestern economic star and is generating new industrial jobs. Spring 2018
Economy, finance, and budgets

In 2011, Newsweek branded Grand Rapids, Michigan, as one of “America’s Dying Cities.” Outraged locals quickly pulled together a response, in the form of a quirky YouTube video of residents lip-synching to Don McLean’s “American Pie” that became a viral sensation, racking up more than 5 million views.

It was easy for outsiders to assume that Grand Rapids was dying. Michigan is America’s most notorious case study of industrial decline. The state never really recovered from the downturn of the early 2000s, spending the entire decade mired in a malaise that became known as the “one-state recession.” Long before then, though, gloomy headlines from cities like Detroit and Flint dominated national news about Michigan. Grand Rapids seldom rated a mention nationally.

During the 2000s, the Grand Rapids metro area lost 12.1 percent of its jobs. Only Detroit and Cleveland did worse among major midwestern regions. The regional population expanded, but at only 5.9 percent—well below midwestern leader Indianapolis, at 13.7 percent. The city of Grand Rapids itself lost 4.9 percent of its population.

Yet coming out of the Great Recession, and particularly since 2010, Grand Rapids has become a surprising economic star in the Midwest. Its job count has swelled 19.8 percent since 2010—the fastest rate of any major midwestern metro area, more than making up for the previous decade’s loss. Its regional population growth has also been more robust, rising by 5.8 percent, putting it in the top tier of midwestern cities. The city’s population also reversed its 2000s era decline, growing by 4.5 percent since 2010, according to Census Bureau estimates.

Grand Rapids accomplished this while remaining heavily dependent on manufacturing. The region has the highest manufacturing-job share of any major midwestern metro, at 20.5 percent. It’s also the only one of those regions that has more manufacturing jobs today than it did in 1990. Manufacturing growth has come from several sectors: office furniture, autos, aerospace, medical devices, and more. GM added 300 jobs at its Wyoming, Michigan, plant. Auto supplier Swoboda added 37 jobs; Swan Machines added 30. Robotics firm Axis is adding 50 jobs. California wood-planking company Stickwood expanded to Grand Rapids and hired 73 people. Abcor Industries, which powder-coats wood, expanded from nine to 30 employees and expects to hit 110 positions soon. Chinese firm Dicastal opened its first U.S. facility in the region, with plans to hire 300 workers to make aluminum wheels. The list goes on.

But Grand Rapids’s job growth is not just a manufacturing story. Other sectors—professional and business services, education, health care, and leisure—have also been growing. In addition to these headline economic stats, traffic has increased at Grand Rapids airport four consecutive years and has reached an all-time high. Downtown office vacancies have fallen from 22.8 percent to 9.9 percent in six years, according to Colliers International. With a vacancy rate of just 2.7 percent, premium downtown space is effectively sold out. Last year, nearly 2,000 apartments were completed or under construction, with another 1,500 in the pipeline. And Grand Rapids lends itself to further urban development. The city has numerous classic neighborhood commercial districts, many physically intact and in various stages of redevelopment. These are all potential nodes for further investment. Major developments are also under way in suburban areas, like Ada.

The city’s cultural amenities are proliferating. Microbreweries have become ubiquitous in the United States, but Grand Rapids can justly claim to be a center for craft beer—it bills itself as “Beer City USA”—with well-known Founders and many smaller brewers located there. A Grand Valley State University study found that the city attracts 13,000 beer tourists a year from outside Michigan. So many breweries are being launched in Grand Rapids that local observers fear that there may be a glut.

The city is even becoming a cultural destination, thanks to ArtPrize, a decade-old public art event created by Rick DeVos, scion of one of Amway’s founding families. ArtPrize takes a unique and democratic approach: any artist who can find a local venue willing to host his art can exhibit, all installations are open free to the public, and prizes are determined by popular vote. Though the traditional art world was skeptical, ArtPrize became a huge hit and major regional draw, with as many as 400,000 people attending. ArtPrize has garnered major national press, including repeat coverage in the New York Times. It is perhaps the best example of Grand Rapids’s new national profile.

Thanks to growth and changes to federal boundaries, the Grand Rapids metropolitan area recently crossed the 1 million population threshold, taking its place among America’s major urban centers. In a region desperate to turn around its many struggling communities, does Grand Rapids provide the formula? A closer look at the area suggests that many factors—some not readily duplicable—have contributed to its good fortunes.

One of the most important factors in Grand Rapids’s recent success is the city’s industrial past. Unlike most other Rust Belt cities, which focused on large heavy industry in sectors like autos, steel, rubber, glass, and chemicals, Grand Rapids developed early strengths in agriculture and natural resources—gypsum mining and then logging. The auto industry set up shop here, too, but when Grand Rapids transitioned from agriculture to industry, it became known as the Furniture City, a natural outgrowth of the region’s logging tradition. After deindustrialization, the home-furniture business mostly moved south to North Carolina, and then overseas. But greater Grand Rapids remains a leading center of office furniture, with companies like Steelcase (more than 3,000 local employees) and Zeeland-based Herman Miller (about 4,000 employees). These companies are globally respected for their high-quality designs, such as Herman Miller’s iconic Aeron chair.

One of the most important factors in Grand Rapids’s recent success is the city’s industrial past.

Perhaps even more important was the city’s diverse base of small firms, recognized as a major strength long ago. A 1946 study by sociologists C. Wright Mills and Melville Ulmer contrasted Grand Rapids with Flint in this context. At the time, Flint was more prosperous, but the authors saw storm clouds on the horizon. GM-focused Flint was dominated by a few large employers, whereas Grand Rapids was more diversified, with many small firms. In 1940, Flint had 42 industrial firms, with an average of 1,270 employees each; Grand Rapids had 409 industrial firms, with an average of 83 workers. Flint had more jobs but was vulnerable to the decline of even a small number of large employers. Mills and Ulmer found that on many measures, cities dominated by small businesses had greater civic welfare than those with large employers.

This historical economic profile helped Grand Rapids and some other western Michigan cities stave off the catastrophic economic and demographic collapse that affected eastern Michigan cities like Detroit and Flint. Grand Rapids hit a peak population of 197,659 in 1970 and fell to a low of 181,843 a decade later—a loss of less than 10 percent. It recovered to hit a new high of 197,800 by 2000 and is only slightly below that level today. By contrast, Detroit hemorrhaged 64 percent of population from its peak, and Flint about half. In nearby states, Erie, Pennsylvania, is down 29 percent from its top population; and Akron, Ohio, is down 32 percent.

Another factor potentially underpinning Grand Rapids’s success is its Dutch demographic legacy. Nearly 20 percent of Grand Rapids’s Kent County identifies as Dutch. Next-door Ottawa County, which includes the tourist center of Holland and Herman Miller’s headquarters in Zeeland, is 31 percent Dutch.

The Dutch who settled western Michigan came to the United States much later than their predecessors, the colonists who founded New Amsterdam. They first arrived in the area in the mid-1800s, with a familiar story: they were religious dissenters, fleeing persecution. Originally bound for Wisconsin, they were forced to winter in Detroit when the Straits of Mackinac froze over. Michigan boosters persuaded them to stay in the Wolverine State rather than move on, and they established their settlement in what became Holland. Later waves of Dutch followed this migration path but with economic, rather than religious, motives. By 1900, about a third of all Dutch immigrants to America lived in Michigan. Other locations in the U.S. heavily settled by the Dutch have also done well economically. A separate group of Dutch religious dissidents, for instance, wound up in northwestern Iowa at nearly the same time as those who settled in western Michigan. A recent New Yorker feature branded the town of Orange in northwestern Iowa “the place where the small-town American Dream lives on.” And though there are few Dutch there today, the former Dutch colony now known as New York City remains the world’s premier metropolis.

While the colonists who founded New Amsterdam brought an open, globally oriented trading mind-set, the later settlers of Michigan and Iowa were much more conservative, politically and culturally. The Dutch Reformed faith remains strong in Grand Rapids. The city is home to various Christian denominations like the Christian Reformed Church and several evangelical Christian institutions like Zondervan Publishing and Calvin College, as well as the Catholic Acton Institute. The area has been a Republican stronghold since the 1860s and was the home city of Gerald Ford, whose presidential museum is located in downtown Grand Rapids.

The city also proved less hospitable to unions than metros in the eastern part of the state, where the United Auto Workers union holds sway. In 1911, thousands of workers went on strike against 50 furniture companies in the Grand Rapids area. The union members who walked out were largely Polish, German, and Scandinavian, with Catholic bishop Joseph Schrembs supporting the strikers. By contrast, the Dutch Reformed Church prohibited its members from joining unions and striking, effectively undermining the strike—and the labor movement—in western Michigan. While working conditions improved locally and unions made some inroads, the failure of the 1911 strike helped create a distinctively different trajectory for Grand Rapids from that of Detroit and Flint. Even today, while 12.8 percent of metro Detroit’s private-sector workers are unionized, only 3.8 percent are unionized in Grand Rapids.

Community leadership in Grand Rapids has come more from the private sector than from the public sector. This perhaps helps explain why Grand Rapids and other western Michigan areas have fewer unfunded liabilities than eastern Michigan. According to an analysis from the Reason Foundation’s Pension Integrity Project, Grand Rapids’s Kent County government pension and retiree health-care obligations are funded at 77.6 percent. Next-door Ottawa County is at 77.4 percent. By contrast, Wayne County (Detroit) is at 48 percent, Genesee County (Flint) is at 44.3 percent, and Saginaw County is at 42.3 percent. On the other hand, weak unions mean that manufacturing wages are lower in Grand Rapids. The city’s average weekly manufacturing wage is $1,132, compared with $1,384 in Detroit.

In addition to commercial success and social conservatism, the Dutch also brought a communitarian ethos. This can be seen in the unusually high levels of commitment to the community on the part of the local wealthy elite and high levels of local charitable donations generally.

The charitable habit has been especially notable in the Van Andel and DeVos families. Jay Van Andel and Richard DeVos founded Amway in 1959. Today, Amway is a multibillion-dollar company that generates 90 percent of its revenues overseas, but it remains headquartered in the Grand Rapids area, where it employs about 4,000 people. Van Andel and DeVos became billionaires. Too often today, local billionaires are more likely to extract value from their communities, via tax-subsidized transactions, than to put money back in through investment. While the Van Andel and DeVos families have done their share of public-private deals, they have clearly invested in and donated heavily to the community. The historic Pantalind Hotel was renovated into the Amway Grand Plaza Hotel in 1981, with an adjacent tower added in 1983—a $60 million investment at a bleak time for America’s downtowns. More recent years have seen the construction of the Van Andel Arena, the DeVos Place Convention Center, the Helen DeVos Children’s Hospital, and other projects.

Other wealthy locals, like the supermarket-owning Meijer family, have also poured money into development projects like the Frederick Meijer Gardens and Sculpture Park. In nearby Holland, industrialist Edgar Prince, who became wealthy manufacturing sun visors for the auto industry, among many other products, helped bankroll that city’s revitalization into a bustling tourist center. Holland’s thriving downtown is packed with stores and even features a sidewalk snow-melting system. James Fallows of The Atlantic cited locally based wealth as a key factor in Holland’s success. Prince’s daughter, Betsy, became Betsy DeVos when she married Rich DeVos’s son Dick. Prince’s son Erik, a former Navy SEAL, founded the military contractor Blackwater.

Beyond financing the major civic landmarks that bear its names, this committed local leadership has helped underwrite an entire ecosystem of nonprofits—many of them faith-based, like the Inner City Christian Fellowship—that provide housing and other services to those in need. They’ve also been instrumental in creating economic-development infrastructure, including the StartGarden start-up initiative and Lakeshore Advantage, an economic-development corporation in Ottawa County.

This civic-minded ethos permeates much of the local culture. One survey ranked Grand Rapids as the 13th-most generous city in the United States. Another found that Ottawa County was the most generous in Michigan, with residents giving away 9.1 percent of discretionary income to charity, compared with about 4.5 percent nationally.

To see the Grand Rapids difference, consider the financial crisis that hit Calvin College in 2013. The incoming college president revealed that the school had more debt than people had realized. After making a series of budget cuts, he launched a $25 million fund-raising campaign, setting a four-year time frame to hit that target. It was reached in just eight months. All donors elected to remain anonymous, but several wealthy Grand Rapids residents either attended or are associated with Calvin College, including Betsy DeVos.

Grand Rapids has also benefited from major institutional realignments, such as Grand Valley State University’s opening of a downtown Grand Rapids campus in 1988. The campus has grown to about half the size of GVSU’s main campus in small-town Allendale, a de facto suburb about 15 miles west of Grand Rapids.

A wave of realignments in health care began in the 1990s. Two of Grand Rapids’s major hospitals, Butterworth Hospital and Blodgett Memorial Medical Center, had planned expansions. Community leaders saw this as duplicative, and promoted a merger of the two hospitals in 1997 into what is now Spectrum Health. Spectrum has expanded significantly, becoming a Grand Rapids–based network with 12 hospitals. It is now western Michigan’s largest private-sector employer. The Spectrum merger made up part of what became Grand Rapids’s “Medical Mile” district, along Michigan Street. The other piece came with the founding of the Van Andel Institute for biomedical research in 1996, backed with $1 billion from Jay Van Andel and his wife, Betty.

With its beefed-up hospital cluster and independent research institute, Grand Rapids persuaded the Michigan State University College of Human Medicine to relocate from East Lansing to Grand Rapids in 2010. (The college retains an East Lansing campus and others throughout the state, but its main campus is now in Grand Rapids.) In 2012, Ferris State University, based 55 miles north of Grand Rapids in the town of Big Rapids, opened an extension of its College of Pharmacy on the Medical Mile. All third- and fourth-year students in its pharmacy program attend classes on the Grand Rapids campus. More than half the pharmacists practicing in Michigan went to school at Ferris State.

Unsurprisingly, “eds and meds” job creation has soared in Grand Rapids. Positions in these sectors have more than doubled since 1990 and grown by nearly 20 percent since 2010. The city trails only Minneapolis and Columbus among major midwestern regions in eds and meds growth since 1990.

Michigan showed political boldness in its willingness to relocate multiple university assets into Grand Rapids when the region was still struggling with an image as a global-economy loser. The state made a bet on Grand Rapids, and it has paid off.

This highlights another possible factor behind Grand Rapids’s comeback: the emergence of the region as Michigan’s western hub, complementing Detroit to the east. Grand Rapids has been pulling in people and institutions from surrounding areas. According to IRS tax-return data, since 2010, the Grand Rapids metro area has seen a net gain of movers from nearly the entire state of Michigan (plus the Chicago region, among whose movers are possibly some former Michiganders). This includes all the nearby urban counties, including those containing Kalamazoo, Lansing, Battle Creek, and Muskegon.

Grand Rapids’s resurgence is reflected in other ways. One is the rise of Grand Valley State at the same time that Western Michigan University in nearby Kalamazoo has struggled. According to MLive, in the 1990–91 academic year, WMU had 21,299 students vs. only 8,981 at GVSU. By 2016–17, WMU’s enrollment had dropped to 19,632 while GVSU’s had exploded to 22,906. This change of fortunes can’t be easily attributed to any single factor, but GVSU’s downtown Grand Rapids campus helped drive growth there, with enrollment rising by about 3,500 in the five years after its opening. Students clearly perceived downtown Grand Rapids as an attractive location. Another example: in 2014, Kellogg’s announced that it was moving 300 to 600 employees from its headquarters in Battle Creek to suburban Grand Rapids. The company did not even give Battle Creek an opportunity to bid on the jobs.

The city’s downtown DeVos Place Convention Center (ANDREW KUHN/THE GRAND RAPIDS PRESS/AP PHOTO)

The economic fortunes of major midwestern cities have been highly divergent. Successful cities are often credited with navigating the transition to a postindustrial economy more effectively. In Grand Rapids’s case, a combination of a better demographic and an economic starting point, a local wealthy elite willing to reinvest in the community, and institutional realignment partly carried out by state organizations helped pull this off. It’s also the case that once a city starts outperforming, it becomes a draw, disproportionately attracting people and businesses, in contrast with surrounding areas that remain more challenged. We see this not just in Grand Rapids but also in cities like Indianapolis and Columbus. Success breeds more success, as failure breeds more failure, widening the gaps between cities.

Other struggling cities looking for a blueprint for recovery may not find the Grand Rapids example all that useful, because unique factors have paced the city’s success. Regions can’t easily change their cultures; an Appalachian town, say, won’t suddenly start acting more Dutch. The window to reap advantage from hospital consolidations has closed. Institutional concentration and university relocations will mostly benefit bigger cities. To the extent that they have wealthy residents, though, midsize cities can take inspiration from the Grand Rapids example of local investment. This type of committed local capital and leadership doesn’t require a Dutch surname.

Further, Grand Rapids’s big improvement in demographic and economic performance is less than a decade old, and many things could derail it—including its own continued success. To the extent that Grand Rapids starts to entice the gentrifiers who have moved in to many urban centers, the newcomers could dilute or undermine the city’s traditional values. Consider: Amway; Republicans; Betsy DeVos; evangelical Christians; Blackwater. Those names are anathema to coastal progressives. Younger Grand Rapids residents, particularly those coming from elsewhere, will find it harder to ignore put-downs from the New York Times than will their older neighbors.

A member of one of the wealthy local families told me that he believed that Grand Rapids was less of a Dutch city today than in the past, and that stereotypes needed to catch up with reality. That may be true. But that’s not necessarily good news for the city if that culture isn’t there the next time a crisis comes. The Midwest is replete with communities where corporations and wealthy locals made rational decisions that were unmotivated by malice but that led to their functional abandonment of the community. Cities and cultures are dynamic. Change is a requirement for future adaptation, but in places like Grand Rapids, where the local ethos has been crucial, it’s a delicate balance to strike.

Whether Grand Rapids’s resurgence survives the next recession will be a key test. Ironically, the city’s manufacturing strength makes it more exposed to industrial restructuring than communities where most plants have already closed. The future returns to institutional realignment are uncertain; at some point, relocating or consolidating entities in Grand Rapids might provoke a backlash in the rest of the state. Grand Rapids is not a destination medical center like Cleveland, with its Cleveland Clinic, and it’s an unlikely spot for biomedical research and start-ups. The Van Andel Institute is wisely specializing in areas like epigenetics, but whether this will result in significant local job or wealth creation is uncertain—biotech is among the most difficult and costly industries in which to compete.

Grand Rapids’s geographic handicap—the city is off the main trade routes—poses another obstacle. Michigan is a peninsula: few people from outside the state just happen to pass through Grand Rapids, unlike cities like Indianapolis or Dallas or Atlanta, hubs of several transcontinental interstate highways. Today, most new residents in Grand Rapids still come from elsewhere in Michigan. That’s a limitation but perhaps also a strength; remaining a regional Michigan hub could help Grand Rapids preserve its local culture.

In short, good results since 2010 are no reason for Grand Rapids to get cocky. But they are justification for feeling good, particularly just a few years after being considered a “dying” city. Grand Rapids is proof that the Midwest and Rust Belt can produce success in the twenty-first-century economy.

Top Photo: An installation in Grand Rapids’s annual ArtPrize contest, which has become a major cultural draw (EMILY ROSE BENNETT/THE NEW YORK TIMES/REDUX)

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