Opinion | Reviving America’s Fading Cities Isn’t Impossible

Here is a list of the biggest U.S. cities by population in 1900: New York, Chicago, Philadelphia, St. Louis, Boston, Baltimore, Cleveland, Buffalo, San Francisco and Cincinnati. Some of those cities have continued to thrive, but others have faded. This year Baltimore is the 30th biggest city, Cleveland 54th, St. Louis 75th and Buffalo 79th.

Is the shrinkage of some American cities, towns and villages an inevitable consequence of economic change or something to be vigorously resisted? And if you do want the government to help rejuvenate places that have fallen behind, what’s your argument? Is it a simple matter of mercy, a political calculation or an economic case that bringing opportunity to people is more effective than bringing people to opportunity?

There’s a lot to think about. At the moment, efforts to spread the wealth geographically are underpowered. True, the Biden administration has put “place-based” policies at the center of its industrial policy agenda. But Congress hasn’t laid out the funds to make those policies a reality. For example, congressional committees authorized the spending of $10 billion for regional technology and innovation hubs over five years, but appropriators laid out just $500 million for them this fiscal year, according to a Brookings Institution tabulation. (Here is how that works.) The National Science Foundation got only about 6 percent of what it was authorized to receive for regional innovation engines, Brookings calculated. And a pilot program for distressed areas called “re-compete” got a fifth of what was authorized.

At the same time, the forces of agglomeration — which lead the rich metros to get richer and the poor ones poorer — are pushing against what the government is trying to achieve. Surprisingly, even in the era of Zoom, Slack and other collaboration tools, people on the leading edge of new technologies still end up working in the same few big, crowded, expensive metro areas. In July, Brookings issued a report on generative artificial intelligence, which found that nearly half of all job listings in the field were for jobs in six metro areas: San Francisco, San Jose, New York, Los Angeles, Boston and Seattle.

Artificial intelligence has the potential to become a general-purpose technology, underlying advances in all kinds of other fields from medicine to transportation, so the concentration of the best minds in a handful of already successful metros bodes poorly for rebalancing economic power in the United States. “I would argue it’s not a good outcome,” Mark Muro, a senior fellow at Brookings, told me.

The first thing the people who favor place-based policies need to do is clarify, both for others and for themselves, precisely what they’re trying to achieve. There are two rationales for place-based policies, and each applies to a different kind of place, Timothy Bartik, a senior economist at the W.E. Upjohn Institute for Employment Research, in Kalamazoo, Mich., told me. “Frequently you hear people go back and forth between them and not really distinguish,” he said.

One rationale is that government support can turn promising cities into innovation hubs — not replacing Silicon Valley and other existing centers, but complementing them. The concept is that these cities already have the ingredients for success. They just need a catalyst, after which the market forces of agglomeration will take over.

The following table shows the top 10 of 102 metro areas identified by Jonathan Gruber and Simon Johnson of the Massachusetts Institute of Technology in their 2019 book, “Jump-Starting America: How Breakthrough Science Can Revive Economic Growth and the American Dream.”

I lived in Rochester — the No. 1 city on this list — for three years in the early 1980s while reporting for The Associated Press. Digital photography was still in its infancy then and the Eastman Kodak Company, maker of the world’s best photographic film, was riding high. I find it sad that Rochester is in need of a jump-start these days, but it certainly is. The good thing is that Rochester’s people still have valuable skills that could be used to create new companies. The same goes for the other metros on this list.

The second rationale applies to metros that lack such prerequisites. They tend to have less-skilled work forces, low incomes and high unemployment. For these metros, the goal of place-based policies would be to bring in employers whose jobs are suited to the local work force, and invest in worker training. This next chart shows the metro areas that had the highest unemployment rates in the nation as of July, and that would seem to be candidates for the second category of place-based help.

For completeness, here are the five metros with the lowest jobless rates.

For urban as well as rural places with chronically high unemployment, Bartik told me, the aim isn’t only to uplift the poor for moral or political reasons. It’s also to increase the nation’s productive capacity. Everyone is better off if people who are out of the labor force or on the fringes of it become gainfully employed, even if what they’re doing is comparatively low-tech. And once people do become employed, they have the opportunity to gain skills and climb the ladder.

My colleague Paul Krugman, whose Nobel in 2008 was for his analysis of trade patterns and location of economic activity, wrote this year: “The economic forces that have been hollowing out rural America are deep and not easily countered. But it’s certainly worth trying.”

I’d say Krugman’s idea goes for forgotten cities and suburbs as well. Place-based policies aren’t cheap. Just think of the billions spent by the Tennessee Valley Authority and the Appalachian Regional Commission over decades. And it’s easy to waste taxpayer money on projects that end up enriching developers but leaving the locals as poor as ever. (Try searching online for “enterprise zone” and “boondoggle.”) Also, it’s important not to confuse rationales and try to turn a downtrodden area into the next Silicon Valley.

But the effort is important. As new technologies such as electric vehicles and artificial intelligence arise, there’s fresh opportunity to spread the wealth. More geographic diversity in economic development can be good for everyone.

Elsewhere: Conflicting Fed Bank Forecasts

Two of the 12 regional Federal Reserve banks, Atlanta and St. Louis, are producing wildly different estimates of the current growth rate of the economy. According to the Atlanta Fed’s GDPNow, which recalculates automatically as new data comes in, the economy is projected to grow at an annual rate of 5.9 percent in the quarter ending Sept. 30. According to the St. Louis Fed’s Real GDP Nowcast, the economy is projected to grow at a 0.5 percent rate. The numbers don’t represent official forecasts by the banks. So that clears everything up, right?

Quote of the Day

“As my friend the economist Skip Laitner says, the free market needs an invisible foot to give it a swift kick in the [expletive] now and then.”

— Saul Griffith, “Electrify: An Optimist’s Playbook for Our Clean Energy Future” (2021)

Peter Coy has covered business for more than 40 years. Email him at [email protected] or follow him on Twitter. @petercoy

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