RealClearPennsylvania editor Charles McElwee joins Theodore Kupfer to discuss economic development in the Lehigh Valley, the political trajectory of the Keystone State, and the race to fill retiring senator Pat Toomey’s seat.

Audio Transcript

Teddy Kupfer: Welcome back to the 10 Blocks podcast. This is Teddy Kupfer, an associate editor of City Journal. Joining me on the show today is Charles McElwee. Charles is the editor of RealClearPennsylvania, which launches this month and covers the goings-on in the Keystone State. He's a former City Journal editor who still writes for us from time to time, his latest contribution being a long print feature about the Lehigh Valley, which has become the key warehousing and logistics hub of the Northeast. Charles is also from Hershey, Pennsylvania, or thereabout, which happens to be 20 minutes from my hometown of Camp Hill. So Charles, thanks very much for joining me.

Charles McElwee: Thanks, Teddy. That's right, we grew up on opposite ends of the Susquehanna River. You were a West Shore kid. I was an East Shore kid. Good to talk to you today.

Teddy Kupfer: Appreciate it. Let's dive right into your print story, which is about the Lehigh Valley. The region includes the cities of Allentown, Bethlehem, and Easton, and spans, as you note, more than 700 square miles of residential neighborhoods, suburbia, rural locales, and farmland. It was once an industrial powerhouse which began to boom after the discovery of anthracite coal, and later became the home of Bethlehem Steel. Now it boasts a flourishing 21st-century industrial economy that centers around logistics. Surging demand for quick delivery makes the region an ideal location to distribute goods throughout the East Coast, and this has boosted the region's jobs, property values, and tax revenues. Why don't you tell a little bit about how this transformation unfolded and what the region looks like today?

Charles McElwee: Yes, Teddy. This region is really a global hub for industrial facility growth. If anything, it's continuing its long tradition in terms of fueling industrial America. That goes back, as you noted, to the early 19th century with the discovery of anthracite coal northwest of the Lehigh Valley and the Lehigh River, which runs through the Valley itself, that supplied coal to the New York and Philadelphia markets. The region itself became this booming center thanks to coal and, ultimately, Bethlehem Steel, which emerged in the late 19th century, and then by World War II, had employed 30,000 people in the Allentown, Bethlehem, and Easton area.

Really, this is a region that benefits from both geological and geographical serendipity. Thanks to that, it became in recent years this center for warehousing and logistics growth. Really, post-Great Recession, you really saw the emergence of warehouses in the Lehigh Valley. Today, the warehousing and logistics industries, they employ about 30,000 people, which is essentially equal to what Bethlehem Steel employed after the war.

It's within one hour of the New York metro area, New York City. For perspective, Walmart does not have a store in New York City. Therefore, the nation's largest retail market, when people order from Walmart, it's a Lehigh Valley warehouse that supplies the goods, that serves New York City. That is just is one illustration of the importance of the Lehigh Valley to metro New York, but also to the East Coast, because this region is within one truck shift in terms of supplying 100 million people across the coast.

Teddy Kupfer: This is really, in part, a story about a region transitioning from heavy industry in the 20th century to something else, while still keeping its economy, including its labor markets, intact. Many post-industrial regions have struggled to enact this transition successfully, and their failure has, of course, been an important part of the country's social-political history over the last 50 or so years. So how did the Lehigh Valley manage to pull off what seems to have been a relatively smooth transition? Is it just an accident of, as you mentioned, favorable location, natural resources, and other attributes that may not be generalizable; or is there an institutional and public policy dimension to this success from which other locales might learn?

Charles McElwee: Well, geography doubtless played an essential role in the Lehigh Valley's resilience, but in addition to that, the Lehigh Valley is really a story of regional coordination. This was even the case during the Great Depression, when Bethlehem City marketed itself to become the Christmas city, a tourism destination. Then after World War II, amid numerous strikes, Lehigh Valley civic leaders began to forecast the day that Bethlehem Steel would no longer be around, and that indeed happened.

They really rolled out a decades-long economic development effort to ensure that the Valley itself was well prepared for whatever turbulence would occur at the local economic level. First, we had the Lehigh Valley Industrial Park, a nonprofit economic development organization. Fast forward to, let's say, 2001, when Bethlehem Steel had filed for bankruptcy. This was just a few years after the steel mills closed. Well, the city of Bethlehem itself, 20% of the land in the city was the steel mills. Well, they converted that brownfield site, the largest brownfield site in the nation, into a Lehigh Valley industrial park. That industrial park today includes warehouses that employ people in the region.

But it really even transcends warehousing, Teddy. The local healthcare system is robust and has expanded in recent years, the Lehigh Valley Health Network and St. Luke's.

Then there's also a very storied regional university network. You have local Protestant groups that had settled in the Valley in the 18th century. They were really focused on building colleges, so today you have, for example, what was the German Lutheran college Muhlenberg. You have Moravian College. Bethlehem was a commune for Moravians, a Czech-Protestant sect that settled there in the 1700s. You also have Lehigh University, which was founded by Asa Packer, who had established the Lehigh Valley Railroad, which ran through the region and also supplied coal throughout the states and into other metro areas.

So yes, there's this regional coordination, Teddy, but in addition to that, we're seeing now regional coordination in a sense of a bipartisan consensus that the region itself is now saturated with warehousing, and there actually needs to be reforms to the state municipal planning code to ensure sensible warehousing development moving forward.

Teddy Kupfer: Right. On that note, this transformation hasn't been universally hailed by residents. As you write in the story, all that warehousing space has to go somewhere, and sometimes that somewhere is the region's green spaces. Farmland has been swallowed up in some cases by industrial development. Then if you add to that inflows of workers from nearby cities enabled by remote work, you have a potentially tense situation. Can you describe a bit how locals have reacted to these changes, which carry benefits but also appear to come with some costs?

Charles McElwee: Yes. In Pennsylvania, every municipality has to reserve land for every form of development. It goes back to the 1960s, with the state municipal planning code that was passed by the legislature. It's really a policy that is frozen in time. In other words, legislators in the 1960s couldn't forecast the dawn of warehousing development.

In the Lehigh Valley, you have 62 municipalities that are confronting overdevelopment of warehousing and the attendant truck traffic congestion, and just the fact that a warehouse, for example, can go up next to a residential neighborhood, which we're seeing in places locally, like Upper Macungie Township outside of Allentown. This is a persistent issue and acute problem, one that residents are now expressing concern and even dismay about. It's really a catch-22 because this is an economic force. The warehousing logistics sector has played a crucial role in the Valley's economy. It contributes to the fact that it has an approximately $43 billion GDP that surpasses some states, like Wyoming.

The reality also is that, right, we're losing all this farmland, and this was the colonial breadbasket of America. Some of the richest, most fertile farm soil in the world can be found in the Lehigh Valley. It's what drew German farmers in the 1700s. There's a long tradition of agriculture in the Valley. The reality is, in spite of some successful preservation efforts of farmland, much of that land is going away.

We're actually seeing this new trend. The Lehigh Valley market itself is now saturated with warehousing, they're running out of space. Developers are looking at places like the Hazleton area, where more than 10 million square feet of warehousing is proposed around a six-square-mile radius, which is the city limits; or in the Harrisburg area, where you see really a massive warehousing development emerging around Carlisle and the Route 81 corridor.

If anything, Teddy, what happened was the commercial real estate sector is confronting this crisis. In cities, you have all this vacant office space. It no longer in the commercial real estate sector's interest to focus on that form of development. In Philadelphia alone, last year, employers vacated approximately 887,000 square feet of office space. As a result, this sector is now turning to warehousing, whether it's leasing warehousing space in the Valley, other parts of Pennsylvania, but also New York City.

More than 50 Amazon warehouses have gone up in metro New York since the pandemic, for example. Red Hook in Brooklyn is becoming a center for logistics and warehousing. We're even seeing the emergence of micro warehousing, just smaller fulfillment centers that supply online consumers. It's no longer next-day delivery. It's "we'll get that to you in a few hours."

This sector, while the downside, of course, is a loss of space, it's an inescapable sector. I think, at least in Pennsylvania, there's this concern among municipal leaders that there are necessary reforms that need to be made in Harrisburg for sensible and balanced development while also supporting the sector.

Teddy Kupfer: Let's switch gears a bit and look across the Keystone State. You're editor of the newly launched RealClearPennsylvania, as I mentioned at the outset of this show, and Pennsylvania will be home to a number of major primary and general races this election season that some observers nationally have pegged as bellwethers. With Pat Toomey retiring from the Senate, the primaries to replace him in both parties have been competitive, with Conor Lamb and John Fetterman occupying moderate and populist lanes over on the Democratic side. Meanwhile, for the Republicans, you have former Bridgewater CEO David McCormick and TV personality and doctor Mehmet Oz jockeying for both position and Donald Trump's endorsement. Then there's Lou Barletta, the veteran Hazleton pol and immigration restrictionist, mounting a race for the Republican gubernatorial nomination. So what are you going to be watching for this election season in these races, both for what they say about the nation's political trajectory but also about the political evolution of Pennsylvania itself?

Charles McElwee: Right. This is an issue that I've extensively written about, this political realignment in Pennsylvania, for City Journal, including a piece last year about the twilight of the blue-collar Democrat which we are really seeing in the state.

There's a lot to cover, Teddy, but on the Senate side, yes, when it comes to Democrats, you have Conor Lamb, who's trying to follow the Bob Casey playbook. He's from a dynastic Democratic family in Pittsburgh. His grandfather was a legislative leader in Harrisburg in the 1970s. His uncle is a local political leader. He's trying to take that centrist path, one that Casey successfully followed in 2006, when Republicans were deeply unpopular in Pennsylvania. Of course, many voters remember Casey's father, Bob Casey, who served as Pennsylvania governor from '86 to '94.

Then you have John Fetterman, who is from the Left, a populist, who is even trying to campaign hard in rural parts of Pennsylvania. All polls currently indicate that Fetterman currently holds the lead on the Democratic side.

Then on the Republican side, polls indicate that McCormick presently has the lead. McCormick, yes, was in charge of the world's largest hedge fund, Bridgewater. He is backed by a number of Trump alumni. He is himself from another political family in Pennsylvania. His father was the first chairman of the state higher education system under Thornburgh, who was a Republican governor in the '80s.

Dr. Oz is not from Pennsylvania. He is trying to win, and he's getting accused of being a carpetbagger, as is McCormick. Of course, there's a long tradition in Pennsylvania of carpetbaggers prevailing, whether that's Ed Rendell as governor. He was originally from the Upper West Side. Even Pat Toomey, he grew up in Rhode Island, now a Lehigh Valley resident. And John Heinz, we associate his name with the iconic condiment company, but he actually grew up in San Francisco. So I don't think that's the issue here per se.

The broader issue, of course, is who can speak to the concerns of Pennsylvanians. If anything, the Democratic Party has not spoken to the concerns of Pennsylvanians in recent years. Even though Biden won the state in 2020, for example, down ballot, Republicans have been quite successful, including in statewide row office and appellate judge races. So we're seeing this realignment, Teddy, where you have places like Luzerne County, which had a more than 30,000 Democratic voter registration advantage, even when Trump won in 2016, that's down to 12,000.

That creates an opening for gubernatorial candidates on the Republican side. Very competitive primary, crowded field. That includes, as you know, Lou Barletta, who is from Hazleton and really was at the forefront in terms of seeing some of the social and economic concerns that are pervasive among working-class regions in the state. But they had to have this battle of voting margins with places like suburban Philadelphia, including Chester County, which was reliably Republican in even recent years, but now is competitive, if not blue. There's a lot at play, but all signs indicate that this remains a purple state, and places like the Lehigh Valley, where this warehousing explosion has occurred, remain prime bellwether competitive territory, in terms of it could go either way.

It could be a strange year. We're really seeing, for example, I think, if anything, the Democrats are now where Republicans were in 2006, deeply unpopular and on the losing side on many issues. That creates an opportunity for GOP candidates, but this is a strange state. We have a very mercurial voting base. There could be a scenario where it's a banner Republican year, a wave year nationally, but Democrats can still prevail in certain scenarios.

Teddy Kupfer: Well, I'd say that brings it full circle. Listeners, don't forget to check out Charles's work on the City Journal website. We will link to his author page in the description. You can also find City Journal on Twitter @CityJournal, and on Instagram @cityjournal_mi. Charles is on Twitter as well. We will provide a link in the transcript. As always, if you like what you heard on the podcast, please give us a rating on iTunes.

Charles, thank you very much for joining me.

Charles McElwee: Thanks for having me, Teddy.

Photo by Michael M. Santiago/Getty Images

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