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Vigor in the Heartland

from the magazine

Vigor in the Heartland

America’s “flyover country” is stronger than you think. Autumn 2017
Economy, finance, and budgets

To hear the news media tell it, it’s game over for America’s “flyover country”—the vast expanse of land between the East and West Coasts, which, on the presidential-election map, is usually colored predominantly red. Yet the American interior is hardly monolithic, consisting of a collection of disparate regions: there’s Mountain West, seen in some respects as an extension of the West Coast; the Great Plains, where rural areas have long been shrinking but cities are showing surprising growth; the South, with its mix of boomtowns and struggling urban and rural regions (Texas is a land unto itself); and the Midwest and the postindustrial sections of the Northeast, still often known as the Rust Belt.

The American heartland suffers from severe problems in many places, as press coverage, including in these pages, has documented. (See “Trouble in Trump County, U.S.A.,” The Shape of Work to Come, 2017.) Many postindustrial cities, especially smaller ones with few world-class assets, have struggled to find a place in the technology and innovation economy. Such cities tend to lag the coasts in per-capita income and GDP, and many have lost population. Flint, Michigan, is an example. The birthplace of General Motors, the city was the site of the famed sit-down strike of 1936 and 1937 that helped make the UAW such a powerful labor union. GM once employed 82,000 people in Flint, a figure representing nearly half the city’s population at that time. Over 90 percent of those jobs are now gone. Flint spiraled into poverty and fiscal crisis, culminating in the state appointment of an emergency manager—a move that didn’t prevent a treatment failure in the water system, which contaminated the city’s water with lead and made Flint a national symbol of failed urban governance. Other cities, ranging from Springfield, Massachusetts, to Youngstown, Ohio, have struggled as well with severe economic and fiscal stress, along with entrenched poverty.

Large swaths of rural and small-town areas continue to suffer from an epidemic of opioids, involving both prescription and illegal drugs. According to an investigation by the Charleston Gazette-Mail, drug companies shipped nearly 800 million opioid pain pills into the state between 2007 and 2012—more than 9 million of them to one pharmacy in the town of Kermit (population 392) alone. Scott County, Indiana, made national news after an HIV epidemic related to needle sharing, with 203 new cases in about 18 months in a county home to only about 25,000 people. Though the opioid crisis affects urban areas, too, some of the hardest-hit places heavily overlap with Appalachia.

Some heartland northern cities remain hyper-segregated, with working-class and poor black residents often isolated in dysfunctional neighborhoods and inner suburbs. Abandoning a region that they once flocked to for economic opportunity, many blacks are returning to the South, this time to its urban centers.

So yes, the portrait of heartland despair holds a great deal of truth—but it tells an incomplete story. Substantial portions of the nation’s interior are doing well. What’s more, just as macroeconomic forces such as technological innovation and globalization have undermined the interior, other factors are working in its favor. These include structural housing-cost advantages, new-economy strongholds, and strength and dynamism in old-economy sectors. In short, America’s interior has significant potential for reinvention—but not without pain.

As life on the coasts becomes increasingly unaffordable, the heartland’s foremost advantage is livability at reasonable prices. Its communities remain pro-growth. Major coastal cities and states have become infamous for placing restrictions on development—whether housing, infrastructure, or commercial space. Overregulation has sent housing prices soaring, pricing out most new residents unless they earn high incomes or enjoy some kind of special deal, such as a below-market subsidized apartment. Absent major housing reform, New York City and San Francisco, with their populations at record highs, are essentially “full.”

As a result, population growth in coastal cities has lagged. Of the 15 fastest-growing major metro areas since 2010, only one, Seattle, is a coastal city. Limited urban land and anti-sprawl, anti-development politics make it unlikely that these places will solve their affordability and growth challenges anytime soon. Growth is moving to the nation’s interior.

Certain regions are already showing the signs. In the Mountain West, Denver, Salt Lake City, and Boise are growing fast. Major cities in Texas and the central plains—Dallas, Oklahoma City, Des Moines, and others—are also expanding, as are parts of the Southeast. The Midwest on the whole has not kept up, but cities like Columbus, Ohio, and Grand Rapids, Michigan, are thriving. And a number of older, northern midwestern cities—such as Cincinnati and Milwaukee—could, if redeveloped, provide an alternative to overflowing coastal centers. Most now possess the amenities once unavailable except on the coasts, whether it’s top-quality coffee, local microbrews, fresh farm produce, exceptional restaurants—or, with the advent of Uber and Lyft, de facto cab service. Heartland universities boast critical strengths. Pittsburgh’s Carnegie Mellon University hosts the nation’s top-ranked computer-science department. Business schools at Northwestern University and the University of Chicago are among America’s top-ranked. The interior is also home to elite medical facilities like the Mayo and Cleveland Clinics.

Some heartland communities also maintain dominant positions in more traditional and ‘old economy’ sectors.

Some heartland cities have become new-economy strongholds. Downtown employment is at an all-time high in Chicago, which boasts key strengths in finance and professional services, along with an emerging technology cluster—notwithstanding the city’s grave fiscal problems. (See “Chicago’s Debt Dereliction.”) Detroit is crowded with engineers. Nashville is a major health-care center and also a creative capital, thanks to its music industry. Drawn in part by low costs, coastally based companies have set up shop in the interior—JPMorgan Chase employs more than 20,000 in Columbus, Ohio, for example, and Indianapolis is the second-largest hub for San Francisco–based tech giant Salesforce.com.

Beyond knowledge-economy industries, some heartland communities also maintain dominant positions in more traditional and “old economy” sectors: manufacturing, logistics, energy and natural resources, and agriculture—industries that often provide a critical source of employment for many without traditional college degrees. Detroit remains the center of the North American auto industry, for example, even if it employs far fewer factory workers than it once did. Virtually every major global auto-parts supplier has its North American headquarters in Detroit. Houston is the global capital of the energy industry.

For all the virtualization of our world, we still need food, energy, and physical products. (See “Brawn in an Age of Brains,” The Shape of Work to Come, 2017.) We can either grow and produce them here or import them from elsewhere. Even the most committed globalist might be troubled by a world in which the U.S. completely outsourced food production and manufacturing. This is the premise of Michael Lind and Joel Kotkin’s “Report on the New American Heartland” (to which I was a minor contributor), which points out that while many new products, especially those involving technology, will be designed on the coasts, they will be manufactured—when that’s done domestically—in the nation’s interior.

U.S. manufacturing jobs are down about 30 percent since 2000, in part because this sector continually improves its efficiency, with labor productivity growing robustly and industrial production having rebounded from the recession. The coasts retain significant manufacturing, especially in cities like Seattle; but on the whole, coastal manufacturing has underperformed. Since 2000, Los Angeles, New York, Philadelphia, and Boston have lost a higher share of their manufacturing jobs than has Detroit.

The heartland also plays a key role in the nation’s logistics. The American interior’s rail lines, highways, pipelines, and inland waterways distribute natural resources and agricultural and manufactured products across the country. The often-overlooked Gulf Coast is increasingly critical, especially at major ports in Houston and New Orleans, with their recent evolution into export hubs for liquefied natural gas. The interior is home to some of America’s most important hubs for air travel, in Chicago, Dallas, and Atlanta, and air freight, in Memphis, Louisville, and Indianapolis. Here, as with manufacturing, new technologies—in this case, driverless trucks and increasing warehouse automation—threaten some existing employment, but logistics will remain a key industry.

While American coal production is declining, oil and natural gas are booming, thanks to the fracking revolution—a heartland success story. Employment booms in North Dakota’s fracking fields sent local wages soaring, with even Walmart paying over $17 per hour in some areas. A highly cyclical business, energy remains an important part of many states’ economies.

Finally, the interior remains America’s breadbasket, a major exporter of products like corn and soybeans—and thus, a central player not only in U.S. food production but also in feeding the global population. U.S. farm production leads the world in many food categories. New technologies, like GPS data and driverless tractors, will only enhance the American advantage.

In this environment, some cities’ success stands out. Columbus, Indiana, is one. Home to the headquarters of Cummins Engine, a Fortune 500 company, Columbus (2016 population: 46,850) has flourished, even as it remains manufacturing-dependent. Starting in the 1950s, J. Irwin Miller, CEO of Cummins and owner of Columbus’s largest bank, invested in an architectural program that brought international renown to the city. The Cummins Foundation, the company’s nonprofit charitable organization, would pay the architectural fees for public buildings if the city agreed to pick from Miller’s list of architects. The result: a collection of landmark buildings by a Who’s Who of renowned architects, such as Eero Saarinen, Cesar Pelli, and I. M. Pei. Today, Columbus enjoys strong job and population growth. It’s home to 20 factories owned by Japanese companies, such as Toyota, NTN, and Enkei. Firms based in Germany, China, and France also run factories there, as does Canadian-based Dorel, which is relocating its operations for manufacturing children’s car seats to the city, from China.

Quality of life is excellent. Columbus has managed to attract highly educated immigrants despite being a small manufacturing city. And it continues to make national news for its civic initiatives. It was recently featured in a film, Columbus, and profiled in the New York Times for a new art program, Exhibit Columbus.

Oklahoma City is another high-achiever. Formerly a backwater, the city was forced to regroup after the energy-market collapse of the 1980s, during which it lost out, over quality-of-life issues, on a major United Airlines facility—not to a coastal city but to rival Indianapolis. It then embarked on a series of improvement initiatives called MAPS (metropolitan area projects) to improve downtown, build parks, add sidewalks, and renovate or replace the city’s schools. The 1995 federal building bombing was a major blow, but civic unity helped the city rebuild. Nowadays, Oklahoma City is making the transition to becoming a major American city.

Oklahoma City’s model is more typical than Columbus’s. The cities that have adapted have tended to be larger regions with more than 1 million people. Successful smaller cities are usually state capitals, college towns, the largest city in small states, or possessed of some other unique asset.

What should smaller, purely industrial cities like Youngstown or Flint do, especially when they lack such assets? First, political leaders across the interior should protect the region’s crucial industries. This cannot be taken for granted: the coasts are hostile to old-economy businesses. Coastal-based activists want to end industrial agriculture and stop energy development. New York governor Andrew Cuomo has banned fracking. California is also refusing to develop its own vast oil resources. When Democrats like Hillary Clinton say, “We’re going to put a lot of coal miners and coal companies out of business,” people should take them at their word.

Second, the region must address its own serious problems—among them racial segregation, fiscal mismanagement, and drug abuse. Many of these woes are self-inflicted. Nobody forced Illinois to become arguably the most corrupt state in the union and a financial wreck. Coastal elites did not impose segregation on Milwaukee. Problems like these need to be solved locally, though some, like drugs, are national in scope.

Cultural attitudes can also be crippling, particularly in the Rust Belt and rural areas. There’s a deep hostility to change and often an active suppression of the pursuit of excellence. In some communities, young people find their college ambitions squelched. Other communities have seen so little influx of newcomers that they’ve become culturally narrow and unwelcoming to outsiders, making it hard to build social networks in these insular places. Changing this social trait won’t be easy—yet it is, arguably, essential to all future change. The fact that the civic attitude in Columbus, Indiana, is so different from that of much of the Midwest is a key reason that it has outperformed.

Third, the region needs to develop its human capital. Today’s manufacturing jobs often require computer or other technical skills, for example, so communities need labor-force training programs to help workers develop advanced skills in these sectors. The knowledge-worker labor force also needs upgrades. The heartland suffers because of the “superstar” effect. In today’s world, the spoils often go to the very top of the hierarchy. The heartland is too often good, even very good, but not the best. An exception that proves the rule is Carnegie Mellon University’s computer-science department, which attracted companies like Uber and Google to set up shop in Pittsburgh. The heartland needs to develop more such leading departments in its universities and attract some top talent. To do that, changes in cultural attitudes will be crucial.

Finally, the nation’s interior regions need to find ways to innovate in new, next-generation industries and technologies. The fracking revolution is an example of a homegrown technology disruption that developed local wealth and jobs, while having a global impact on energy prices. Until the heartland can start leading with some of its own innovative industries and technologies, it will always be in a reactive position. It needs to learn how to play offense, not just defense.

These challenges will be especially difficult for places hit hard by decades of deindustrialization and suffering from corresponding social problems. Yet the interior of the country, America’s heartland, is far from being a wasteland. Many sections are prospering already, and many structural advantages, such as pro-growth development policies, will keep working to their benefit. In sum, the interior has real potential to extend or rebuild its past successes. To help ensure the future of the American dream for those who can’t live—or don’t wish to live—in the coastal metropolises, it’s important that it succeeds.

Photo: Thriving Columbus, Indiana, has won a reputation for its architecture: pictured here, Isaac Hodgson’s Bartholomew County Courthouse, completed in 1874; and Maryann Thompson’s Veterans Memorial, built in 1997. (MIKE BRINER/ALAMY STOCK PHOTO)

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