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Rust Belt, USA


Rust Belt, USA

May 30, 2018
Economy, finance, and budgets

Aaron Renn joins Seth Barron to discuss the divide between the country’s economically booming metro areas and its depressed non-urban and rural areas.

An Empire Center report released last month highlighted the disparity in job growth between “upstate” and “downstate” New York: of the 106,000 jobs created between April 2017 and April 2018, more than 85 percent of them were in the New York City metro area. Similar imbalances in urban-rural economic development can be found in Midwest states like Illinois, Indiana, Minnesota, and Ohio, as well as in California and others.

Struggling towns across the country are attempting to revitalize their communities by following the examples of other regions that have rebounded. However, lingering local issues and global economic realities make competing with elite coastal cities a near-impossible task.

Audio Transcript

Seth Barron: Welcome back to 10 Blocks.  This is Seth Barron, associate editor of City Journal. A new report indicates that cities in upstate and western New York are doing poorly, in many ways upstate is similar to the part of the country called the “Rust Belt.” The Midwest or the Great Lakes region. What are the unique challenges facing this area and and why is the decay so hard to overcome? I'm joined by Aaron Renn senior fellow at the Manhattan Institute and a contributing editor to City Journal. Aaron is a nationally regarded analyst on cities and what makes them successful he writes frequently for city journal and has published in a wide variety of other publications as well his blog the urbanophile is widely read and cited. Hi Aaron, thanks for joining us today

Aaron Renn: Thank you, Seth.

Seth Barron: So what's the situation in upstate New York and how does it compare to other parts of the country?

Aaron Renn: Well there was an interesting report out from the Empire Center that looked at year-over-year jobs data from April New York State created 106,000 jobs. 92,300 of them were downstate, so in metro New York. And actually you know 67,000 of them were actually in the city. So we have sort of a metro-centric economy today, but what we also see is big global cities like New York have done well but post-industrial regions in the Northeast and Midwest and then a handful of similar cities in the south have just really struggled to reinvent themselves for the 21st century economy after going through a long process of deindustrialization in the 60s 70s and 80s. So what are some of the problems facing these regions? One of the biggest problems is very simply demographics. People don't want to move there, bluntly. A lot of these cities and counties have been stereotyped as people are fleeing them. In fact, not that many people leave them but even fewer people move in. So you have vast regions of the country today that attract very, very few migrants. Either domestic migrants, you can think of a place like Nashville, Tennessee or Charlotte or the Texas cities that are just people are moving there they're growing people want to be part of them. Nor really that many international migrants like New York City, in the Bay Area, Seattle, have feasted on immigration. Even immigrants from other countries are, really by and large, bypassing these places and ahis is important because the most important factor of where a company chooses to locate is the labor force. Can you get the labor force that you need? New York is able to attract the kind of businesses the city is able to attract kind of businesses that it does because it has the best workforce in the country for so many occupations. Whereas in much of the Rust Belt, the actual labor force is shrinking in some places the actual population as a whole is shrinking. But even in ones where the population is still growing marginally often we see prime working age population is in decline or at best slow growing so when your labor force is stagnant or declining you really can't add any jobs and you're not gonna get a lot of economic dynamism until the demographics improve in a lot of these places.

Seth Barron: Well I mean you mentioned Nashville and Charlotte like these are boomtowns. Well why can't oh, I don't know, Akron or you know some other Midwestern city or Pittsburgh? Why aren't they boomtowns?

Aaron Renn: That's interesting. I thought a lot about this. What has caused these places to essentially fall off the map for migrants? One theory is that it's the cold, that people don't want to be in the cold and that they don't want to be in the snow, and that the invention of air conditioning in the south really made a huge difference.  I don't think we can discount just weather as one reason, although you know often the weather in New York City's not that great either.

Seth Barron: Well the weather's not so great in Houston.

Aaron Renn: Right yeah and the weather's not that great in Houston, either. And then you also have the fact that a lot of these places especially in upstate have very unattractive business climates in terms of things like taxes, the strength that unions have in the state of New York, that likely plays a role. But again I don't think also that's probably not the only story, because you have a place like Indiana that's triple-A rated, a very favorable business tax climate, right to work. People don't want to move there either so there are a variety of possible factors but they affect even the best performing of these Midwest cities the port of the place that has the best reputation is Minneapolis/St. Paul-area. I think that their unemployment rate is down in the two percents two point something percent range. Many, many Fortune 500 companies, above average incomes, it's everything people say that they want. And yet far, far fewer migrants than similar cities if you compare them to say Denver or Seattle kind of comparable size regions. It's stunning. So I just pulled some data here Denver has had since 2010 net migration of a hundred and sixty thousand people have moved there from elsewhere in the United States hundred sixty thousand people Seattle 125,000 people have moved there. But in Minneapolis, it's been three thousand so that goes to show you like very few people are moving in there and even international migrants a lot of what they're attracting is refugees like Somali refugees who don't really necessarily get a choice about what city they're sent to so it's a really uh it's really a challenge there I think a lot of it is the social states of these places kind of a culture you know New York is the quintessential open city they say if you can make it there you can make it anywhere but the fact is you can come to New York and if you have the goods if you can deliver you could make something yourself here you're not going to be locked out of certain certain fields because you're not native whereas in a lot of other places it's very difficult to penetrate the social structure for example in a lot of the old river cities like Cincinnati and St. Louis. One of the first questions people ask you and you moved there is where did you go to high school it tells you so much about a city that the place you went to high school people even think to ask it and that it matters so much and you often hear stories that is very difficult if you're a newcomer to these cities to even make friends people have friends this the same friends that they've had since high school and it was just very very difficult to penetrate that market and I even had one business owner in Cleveland you know leave a comment on my site says look I don't even recruit people to come to the Cleveland area from out of town unless that person or their spouse is originally from Cleveland because otherwise I know they won't stay and so that really is I think very very telling there and so I feel like that the culture there that is hard to penetrate for newcomers there hasn't been a lot of new blood in a long time so that used to people coming in I think that's a big that's probably something of a factor I also personally find it unlike New York where or Silicon Valley where there's this idea that you dream big and you try to create things I think it was Steve Jobs who famously said let's be insanely great or just unlimited ambition I mean you know Donald Trump is probably the quintessential example of New York ambition this guy just says I'm gonna run for president I'm gonna go for I'm gonna do it the Midwest tends to be much more than these Rust Belt areas in general also including the Northeast they tend to be very suppressive of the pursuit of excellence I call it the active suppression of the pursuit of excellence so that's very toxic to attracting people to your town who you know are gonna be part of that 21st century high skilled labor force you need there was a great story of this this woman who'd grown up in a small town in Indiana wrote this blog post that went viral and ultimately got profiled in the wall street journal' because they kept telling her in school she wanted to go off to this essentially charter school type type Academy at state they're like no you can't do that what makes you think you're better than the rest of us it's like even wanting to get an education and better yourself could be suppressed and that just becomes an environment that comes a an environment that's just very suppressive of people moving in. Whereas when I visit Nashville, Tennessee, which I try to go to as often as I can at least once a year if I'm able, you just don't sense that negativity at all. Open to outsiders welcoming of ambitions and new ideas and so I think in a sense the social state of these Rust Belt communities is in many ways as inhibitive or even more inhibited than bad weather which lots of places have. Or you know it may even like trump taxes in some cases in places where you have a low tax states.

Seth Barron: At the same time that kind of social cohesion sort of sounds appealing you know we often hear about social capital it sounds like a city where people know each other trust one another people have deep roots that at the same time sounds like well that seems like it would be an ideal type of place.

Aaron Renn: I believe that there needs to be a balance of essentially rudeness and dynamism if you end up with a situation where you have too much sort of dynamism and people coming going nobody rooted there. There's this phrase they use about Singapore, it's the “hotel Singapore.” People just come there on assignment for a few years, make a little money, and leave. But no you know very few people are really coming there to be to be part of a Singapore to commit themselves to Singapore. On the other hand, when you have no new blood, you know, you essentially calcify and it's very very difficult for you to adapt to new problems. There was a famous study by it was his doctoral dissertation actually by a guy named Sean Safford it was called “Why the Garden Club Couldn't Save Youngstown” and he looked at the structure social structures of the elite in Allentown, Pennsylvania and Youngstown, Ohio. Both were steel cities that got hammered hard. Allentown adapted much better than Youngstown and one of the things they discovered was that Youngstown had all of this social capital in institutions like the Garden Club but those institutions essentially just linked the same group of people over and over and over and there wasn't a lot of connections to the outside world. There's kind of two people talk about two kinds of social capital bonding. Social capital that binds people tight together and bridging social capital that connects people and so you need to have both. And so when people talk about declines in social capital we often have kind of declines in bonding social capital but probably what's missing in some of these Rust Belt communities bridging social capital. Then in a sense there's some of these things just become a self-fulfilling prophecy. If you're not from someplace then you're out invested in the way things have always been done there so if you have a critical mass of people who show up in a place for any reason whatsoever they're like the natural constituency for the new. So the question is how do you get there how do you get some constituency for the new some dynamism in these places without destroying the essence of what is there in the culture?

Seth Barron: I want to back up to something you said about immigration. Some people have said that the the answer for these you know dying cities or depopulated places like Detroit is to bring in more immigrants from outside the country to repopulate these cities and revitalize them. I've even seen that there's been proposals to give people some kind of limited visas that would require them to live and work in in a particular state. What do you think about these proposals? Is that the answer? I mean, it sounds like Minneapolis is doing great with all Somalis. Maybe they could come in to help revitalize Youngstown or Detroit.

Aaron Renn: Well a lot of these places have really staked their you know they're betting their future on immigration, and I think part of it is just born of desperation. They feel like they need to have population especially these course these core cities even in kind of regions that are growing a lot of times the central cities of places like Youngstown or Dayton have been falling so much they're basically who wants to live here are immigrants. But what we often see is one immigrants are motivated by opportunity and so immigrants are going to come where they see there's opportunity and it's going to be probably where they're going to come to New York City they're going to go to Houston. So to the extent that we have immigrants coming into the United States immigrants aren't really choosing these these communities either to any great extent if immigrants are indeed this you know great hope to the future of the country, that's actually bad news for these places because more immigration is just gonna fuel the divergence between them and other places. No place, not even a Chicago, is really a big immigrant destination that's in one of these these Rust Belt areas. The other thing that you see is you know things like refugees in these locations specific visas. I have I have a lot of problems with those anyway, you know people if a refugee is essentially your most vulnerable person why would you dump a refugee into a place with no economic growth and where it's hard to find a job? It'd be one thing if somebody came here on their own and decided they wanted to move to one of these places. And so you know that’s what I see and I think you know people tend to talk today about immigrants are just is there anything they can't do. They create economic growth, they orient you to the world, they do all of these things and a lot of that's true. But there's been a tremendous minimization of the downsides and immigrations a lot of these places you mentioned Minneapolis. There was just a big story out of Minneapolis involving a day care fraud in which essentially a group of Somali people living there had managed to defraud the state out of us you know as much as nine figures, over a hundred million dollars in bogus childcare subsidies and is funneling it out into terrorist controlled areas in suitcases full of cash. So that becomes a problem that you didn't have before in a place like minnesota that had traditionally been a very homogenous high trust environment now you have to set up systems that are designed to be more accommodating of people who have different types of structures and so that because that's an adaptation process that they will have to go through and those are often discounted I think in that so you know what immigrant immigrants come to your community they can be a positive but immigrants are also challenges to immigrate to integrate and other things and and so I would not be looking at immigration necessarily as a magic elixir for these communities although again in the places that have proven very good at absorbing immigrants like New York City in Houston you see that you see the same same dynamism that they die so if you're if you're the community like New York that has a good record of bringing in immigrants in and helping them to assimilate and do well you're probably gonna do much better off then you are gonna be if you're Rust Belt community that's in a pinching crisis fiscal crisis and you know you can barely provide services and there's no jobs and all that stuff oh I see so I mean if you were to bring in all these Syrian refugees into Detroit what would they do they're necessarily a lot of there's a lot of challenges even you bring in someone who's educated doesn't mean that they're it doesn't mean that their skills are necessarily are their credentials are gonna be recognized United States if you're a foreign doctor you can't just start practicing in the United States you have to go through a process to do that so that's been one of the things many people have complained about is credentialing it can even be a problem just to move between states with occupational licensing and so yeah the idea that we're just going to take people out of a war zone and essentially force them to be indentured servants to rebuild Detroit is not something that I think is something that I would advocate although if immigrants want to choose to come to the Detroit area which many Middle Eastern immigrants have they become business owners and the like and that's a different story

Seth Barron: Okay but how about so maybe bringing in migrants from other countries might not work but let's talk a little bit about domestic migration I mean you've talked about the big 10 schools the Big 10 schools I mean these are world-class universities right I mean basically anywhere else in the world this would be like the top university and they produce all kinds of like amazing graduates but you said that the people who graduate what happens to them don't they they don't stay and live in the state necessarily.

Aaron Renn: The Wall Street Journal just published some very interesting data on where college graduates move they looked at 445 universities and where their graduates ended up and said how many cities are attracting more than a certain percentage of the graduates of these schools and, you know, one percent, I think it was below one percent it didn't show up it was more than one percent I showed up. And this this sports blogger who goes by the name “Frank the Tank” did some analysis of that and the Big Ten and he said what's interesting about the Big Ten is if you take a Big Ten school like say Purdue University in Indiana. They send a lot of people to the biggest city in their state, they send a lot of people to Chicago, but otherwise they don't really move much to other Midwest states. So even Midwesterners don't want to move other Midwest cities unless it's a city in their own state. If you're from the Midwest and you go to school there, you essentially either go to your state's big city, go to Chicago, or you get out of town for the coasts. Every single Big Ten school was sending significant numbers of graduates to New York, DC, LA, and San Francisco. I'm essentially a paradigm of that I grew up in Indiana I went to Indiana University where have I lived my adult life Indianapolis, Chicago, in New York City am I thinking that I really want to move to one of these other Midwest cities another state. You know, I'm not saying I wouldn't that I would shoot them down in flames but it hasn't been on my mental map. So what that shows is that other than the place you're from the Midwest is not necessarily even attractive to other Midwesterners. That's just part of, like I think that illustrates the migration challenge you know across the board. It's domestic migrants, it's international migrants, etc these places are just not attracting people for whatever reason and figuring out how to crack code on that is important certainly for the major cities. If they want to be competitive and so it sounds like places like Utica, Syracuse, Pittsburgh in Pennsylvania, but you know the whole southern tier of New York. I mean what's gonna happen what I see generally speaking is that if you're a certain kind of city then you can probably do okay. You could be if you're in a large metropolitan area which by that I would mean over a million people in your metropolitan area, or if you're a state capitol, or if you tie have some type of flagship university. Those types of communities are doing okay. So when I look at a place like upstate New York or western New York, I say Buffalo is an interesting place because it has over a million people, they have pro sports, they have an airport, they're one of the you know two major trade gateways for goods and commerce coming out of Canada. They struggle but there's a reason this is a city that potentially has kind of the scale the critical mass and some assets that would enable it to do okay. If you're a rural area if you're a smaller city than that then you can end up in a much more challenged situation a lot of the southern tier is in that in that category and when you've got things like Governor Cuomo who won't allow fracking you know whatever economy could be coming into these places is often suppressed by terrible state regulations so that becomes that becomes a problem and a lot of Upstate is also very heavily dependent on education so there's a lot of universities in New York State Education. A lot of students and after about 2025 the number of students who are likely to attend school is projected to decline significantly, particularly in the Northeast and Midwest which is where a lot of the Upstate schools recruit. So they even see you know kind of challenges in the future there and so with New York's very high taxes and it's strangling regulation I think that you know upstate for the most part is gonna be area remained a fairly stagnant area for the foreseeable future. I don't see it I don't see a change that's time to say there's no hope as I always like to remind people in in the 70s people had given up hope on New York. It's like “game over,” turn it into a huge prison as that 1981 movie Escape from New York suggested. Well, New York came back so we don't predict the future we can't really predict the future but the trends do not look good for most of upstate New York and frankly they don't look good for most of these places throughout much of New England and in the Midwest.

Seth Barron: Well, that's kind of a grim grim perspective you've given us there Aaron but perhaps it'll wake people up. We’d love to hear your comments about today’s episode on Twitter, @CityJournal with the #10Blocks.  You can follow Aaron Renn on Twitter, @urbanophile.  Lastly, if you like our show and want to hear more, please leave ratings and reviews on iTunes.  Thanks for listening and thanks, Aaron, for joining us.

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