City Club of Cleveland Speech “This is Cleveland”

I was born a loser. Not in a character impediment kind of way, but rather in a time—1976: on the cusp of a great recession—and in a region: the Rust Belt, which would slide into a prolonged period of economic contraction—and in a place: the inner-city of Cleveland, which would lose 25% of its population in the decade of my birth alone.

The bright side of all this is that I didn’t know any better. “This is Cleveland,” I thought growing up. Like thousands and thousands of others.

In one of the greatest commencement speeches of all time, called “This is Water”, writer David Foster Wallace opens with a story about two fish swimming along. They cross paths with an older fish swimming the other way who says, “Morning boys, how’s the water?”

“And the two young fish swim on for a bit,” Foster writes, “and then eventually one of them looks over at the other and goes, “What the hell is water?”

Now imagine two Clevelanders walking down Prospect, another comes up and says, “Morning boys, tough loss.” The one Clevelander turns to the other and says, “What the hell is loss?”

not famous

This is what life has felt like for many Clevelanders born after the heyday of Mr. Jingeling, Bob Feller, and Bob Hope, or those birthed into a sea of shutterings and downsizings—of those having known hometown life as a punchline—your city motto forever and for now being: “Cleveland—you got to be tough”.

After long, the anxious air begins to saturate across the whole of the collective—regardless of birthplace, age, outlook, or the will to be aware of possibility outside of what can become a very normal-like sense of suffering. This aura has been given a name, “Only in Cleveland”, or “OIC’ for short. The name is meant to connote an inevitability that the region will suffer loss after loss, not only in sport, but also in economics, demographics, or more generally: in the city’s “life”.

But the truth is loss happens everywhere, not “Only in Cleveland”. Cities the world over are afflicted with the hangovers of history. Lisbon has its saudade: a feeling of aimless loss tied to the city’s legacy of vanishing seafarers. Istanbul has huzun: a brand of melancholy rooted in the city’s nostalgia for its glory days. Closer to home, Boston, Pittsburgh, and D.C. have each lost more than 200,000 residents over the last 60 years, just like Cleveland. But acknowledging that all cities experience growing pains makes our suffering less special, which it makes it less useful, because it makes our identity less “us”.

“I have…never lived in a place whose proud residents so consistently and gleefully disrespect their hometown as Cleveland,” noted legendary Jeopardy champ Arthur Chu in the Daily Beast. Chu, a Cleveland newcomer, goes on to write that though he hates to “engage in victim-blaming,” the reason “everyone dogs on Cleveland is that we ask for it.” Why? Chu concludes: “If we weren’t suffering, we wouldn’t be Cleveland anymore.”

But why is that? Why is our identity so entangled with suffering? The short answer is that’s how we’ve come together in the face of trying times. I’ll explain.

Before I went into urban studies, I got a graduate degree in psychology in Chicago. I studied social psychology, and my exit paper was on the collective stress related to 9/11. What I learned was that collective emotions — think fear and pride — run our societies more than we care to look. Said the great sociologist Emile Durkheim: “What holds a society together — the “glue” of solidarity — and what mobilizes conflict — the energy of mobilized groups — are emotions.”

Again, the emotion in Cleveland’s case is collective hurt—what drives it? The hurt is driven by loss, or the prospect of loss. Cleveland’s losses were due to a macroeconomic restructuring. The region lost jobs, which caused a loss of people. Schools closed. Houses became abandoned. But we also lost a feeling. Cleveland lost its status. We were a contender: the “best location in the nation” turned into the “mistake on the lake”. We became shameful as a result. Our shame was given a nickname: the “Rust Belt”.

But shame isn’t necessarily a destructive emotion. Collective shame can be good. “The very fact that shame is an isolating experience,” notes the author of “Shame and the Social Bond”, “also means that if one can find ways of sharing and communicating it, then this communication can bring about particular closeness with other persons.” Collective shame, then, can strengthen the bonds between members of a group, which can lead to a process of self-exploration and restoration of a social identity.

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Or it can be chronic. It can hang like a storm that won’t clear. This is what happened in Cleveland. And the mentality associated with it has been going on for decades. Take a 1980 report by Cleveland State’s Richard Knight called “The Region’s Economy: Transition to What?” Near the end, Knight sounds the alarm:

“What concerns me most, and I admit it is only an impression that I have gained from a rather extensive series of intensive interviews over the last five years, is that Cleveland is not fully aware that it has a choice, that it can determine its own future. There seems to be a general resignation and acceptance of the inevitable demise of a once proud city”.

The problem, here, is not that the region’s resignation is bad for city morale, but rather that it fuels a kind of policy mentality—one I call the “shrinking city syndrome”—that replaces vision with managed decline. Because if your policy scope is restricted to managing decline, then decline is what you will get.

For example, we Rust Belt folks are obsessed with population decline, particularly “brain drain”. This has led regions to combat this perceived threat with a number of strategies. One particular desperate attempt was in Pittsburgh, circa 2000. They thought of a character, a Barney Fife type, who was to be plastered on billboards and in magazines. His message to folks would be “Don’t Go”. Writing in the Pittsburgh Post-Gazette, economist Chris Briem picks it up from here:

“The focus on retaining vs. attracting workers is pervasive in local policies. One marketing character thought of by the Pittsburgh Regional Alliance… was the genial “Border Guard Bob.” The image was of an older, uniformed sentinel on Pittsburgh’s borders keeping our citizens, in particular the younger workers, from leaving the region. This is the same logic that inspired the East Germans to build a wall around Berlin and is likely to have as much success in the long-run.”

Think about this for a moment: your policy prescription in the age of information is to figuratively build walls so no one gets out. But this also means no one gets in. In fact, a lack of in-migration into Cleveland shows up strongly in the data. 75% of Greater Clevelanders are born in Ohio. That ranks Cleveland 6th worst in the nation when it comes to the number of newcomers from out of state, sandwiched in between Detroit and Birmingham, Alabama. By contrast, only 50% of San Franciscans are born in California.

connectivity

This lack of birthplace diversity is a problem. Historically, it is the migration-heavy port cities that birthed advances in science, governing, philosophy, and the arts. Port cities are the global nodes of commerce. That’s because migration is economic development. Along the paths of migrants flow ideas, trust, and capital—key components to the success of a modern, globalizing city. Without migration comes insularity—a “stuckness”—one derived from a lack of new voices or perspectives. The problem with that is when the echo chamber is one of decline as fate, there’s less agency to change your city’s destiny.

Voices from outside the echo chamber are needed, and this will not only come from outsiders, but from native Clevelanders who have left and came back. We call them “boomerangers”. These folks flee the nest, get connections and context. They get perspective. Data show they go to New York and Chicago mostly. But the numbers also show they are increasingly coming back. In fact, Brooklyn, New York sends the most people on net to Cuyahoga County than any other county in the nation. They are returning to start families. They are returning because of costs. They are returning because in their journey collective shame became something else.

“Chicago and New York City are wonderful places…” pens local writer Pete Beatty, a Berea native who recently moved from Brooklyn to the Detroit-Shoreway neighborhood after years away. “But they didn’t need me, and I didn’t need them, at least not in the same way that I needed Cleveland.”

There are thousands of “Pete’s” returning to Cleveland. One is named LeBron James. LeBron, like all sons and daughters of the Rust Belt, is a product of collective shame. For them, leaving is difficult, but necessary. “If I had to do it all over again…I’d still left for Miami,” LeBron wrote in his letter. Later in the letter, LeBron would echo Pete: “My presence can make a difference in Miami, but I think it can mean more where I’m from.”

In other words, the returning is not just a pull by an ache for Cleveland, but also by a desire to be part of healing Cleveland’s ache. The secret sauce, here, is the perspective gained in the journey, and then bringing it back to a community that could use more than its fair share.

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Now, are Cleveland’s issues simply a matter of vision? Will positive psychology alone save us?

fans screaming

No. The region, particularly the inner-city, has real problems: high poverty and unemployment, a loss of manufacturing jobs, low housing values, and high rates of vacancy. But leaning over the edge in our Browns gear and screaming into the post-industrial abyss doesn’t accomplish much. But a clearer understanding of our situation does, and part of this means knowing that the growing pains Cleveland’s gone through is transition as opposed to some doomed destiny. I call this transition “crossing the valley of economic restructuring”. The old mercantile and mill town Boston has done it. The Steel City is doing it. And there’s evidence that Cleveland is coming out the other side. But to know this you need the right lens of inquiry, which to a large extent means getting beyond the notion that population growth alone equals success, because it doesn’t.

Here are some facts. Las Vegas’ population grew by 47% since 2000—the 3rd biggest gain out of America’s largest 52 metros. Yet they rank 50th in personal income, at about $37,000 a year. Portland’s population grew by 20%, tied to the hipster influx into the region. But Portland’s struggling too, ranking 32nd in income at about $43,000 a year. Conversely, Greater Cleveland had the slowest population growth behind New Orleans since 2000. Worse than Detroit. Yet the metro ranks 22nd in income, at about $45,000 a year.

Of course being a Rust Belter, the inclination is to assume Greater Cleveland is trending downward. We will be last in income in no time. But the data says otherwise. Over the last three years, Cleveland has the 8th highest gains in income in the nation, just behind Denver and Dallas, and well ahead of Chicago, New York, and Portland. Las Vegas is last in income gains. When taking in cost of living, Cleveland’s income gains are 3rd best in the country.

What’s going on here? In the case of Vegas, this is classic, old-school “boomtown” economics. People come, population grows, a local consumer economy arises, and a primarily low-wage service industry develops. As for Portland, a not dissimilar dynamic is occurring, but replace the “boomtown” with “lifestyle” economics. Here, the young and educated come—but not for a job, but to consume a scene.

“Jobs are thinner here,” said a young Portlandian to a New York Times reporter recently. “But the intelligent urban planning makes my heart sing”. Such sentiment has led to a new motto for the city: “Portland—where young people go to retire”.

But what about Cleveland? What’s driving our income growth? The short answer is higher productivity. Put simply, even as our population stagnates, our total income is going up. This is because we are becoming smarter and more skilled. Again, some facts: from 2006 to 2013, for every one person the metro lost without a college degree, we gained one person with a college degree. Greater Cleveland has added nearly 60,000 people with a college degree over the last 8 years. One third of this increase came in the last year alone.

A lot of these gains are being driven by young people, like Pete and LeBron. Over the last 3 years the Cleveland metro was 3rd in the nation in the percentage increase in the number of young adults with a college degree, trailing Nashville and Orlando. We gained over 15,500 young educated adults. More than Chicago. And seven times more than Portland. These young adults are both employed and highly skilled. Greater Cleveland is 8th in the nation in the percentage of 25- to 34-year olds in the workforce with an advanced degree, just ahead of Chicago and Seattle.

Advanced Degree Chart Pic

And it’s not just the young adult workforce that’s highly skilled, but workers of all ages. Cleveland’s 10th in the nation in the concentration of workers over 25 with an advanced degree. The metro moved up 12 spots in the rankings from 2005—the third largest jump in the nation.

That said, Cleveland’s rise in the knowledge economy is not supposed to be happening. What’s supposed to be happening, according to experts such as Cal-Berkeley economist Enrico Moretti, is a thing called the “Great Divergence”, wherein in the battle for brainpower, the “haves”, such as Silicon Valley, will continue to have more, and the “have-nots” will continue to have less. Who are “the have-nots”? “Detroit, Flint, Cleveland,” Moretti told NPR’s Morning Edition recently.

But with Cleveland, the data are beginning to say otherwise. What’s going on here? What’s driving Cleveland’s rise?

My colleague Jim Russell and I are crafting an emerging theory in a working paper to try and explain it. I will boil our thinking down to a few points, but the takeaway is this: we theorize that Cleveland and Pittsburgh are two emerging metros in a new economic epoch we call the “Legacy Economy”.

First, to know where we’re going we got to know where we’ve been. In the age of manufacturing, Pittsburgh and Cleveland were the Silicon Valleys of the early 20th century. But like the agricultural economy needed less people to produce more output, so it has been with manufacturing. Also, costs got high, and manufacturing firms dispersed down South and overseas. Economists call this “capital equalization”. That’s the bad news. The good news is that the industrialist wealth early-seeded construction of our great hospitals and universities. Why this important will be touched on shortly.

Second, the Innovation Economy, centered on tech and housed in Silicon Valley, is beginning to feel the same cost pressures as the manufacturing economy before it. During the 2000s, the only sector to lose more jobs than manufacturing was in the IT industry. As well, housing prices in Northern California are becoming unsustainable. Remember, a very high housing cost for the worker means a very high wage for the company.

Third, what we hypothesize can happen is the possibility of Silicon Valley being the next Detroit. There appears to be a scattering of the knowledge economy from the coasts and back into middle America, particularly those cities, like Cleveland and Pittsburgh, which have great legacy “eds and meds” institutions that produce high levels of human capital. A recent Harvard Business Review piece touches on this shift:

“It goes without saying that no matter how much talent a company might have, there are many more talented people working outside its boundaries. Yet all too many companies focus solely on acquiring talent, on bringing talent inside the firm. Why not access talent wherever it resides?”

That’s why you have Google moving offices to Pittsburgh, to be near Carnegie Mellon’s computer engineering program. Perhaps Google sees the handwriting on the wall. Big tech, where it’s housed, is becoming too costly. Specifically, attracting talent to live in Silicon Valley and San Francisco is becoming too costly. So why not go to lower-cost areas where talent’s produced?

In his book The New Geography of Jobs, economist Enrico Moretti acknowledges the possibility of such a scenario playing out. “The prediction of this view is the convergence of American communities,” writes Moretti. “Low-cost areas will attract more and more of the new, high-paying jobs. Cities that have been lagging behind-the Clevelands…-will grow much faster. Bogged down by their high costs, San Francisco, New York, Seattle, and similar cities will decline.”

But Moretti doesn’t believe convergence is taking shape. “[T]he data don’t support this view,” Moretti continues. “In fact, the opposite has been happening.”

But the data that do support this view, and it begins to sketch a newer geography of jobs that’s enabling an increasing concentration of highly-skilled workers into Cleveland. AOL Co- Founder Steve Case has dubbed this convergence back into the Rust Belt “the Rise of the Rest”.

A recent Plain Dealer story gives flesh to the theoretical bone of how Cleveland’s rise is playing out. The piece covers the recent visit of Youngstown-born Eric Spiegel, the president and CEO of Siemens USA, which is a $24 billion dollar subsidiary of Munich-based Siemens and employs about 52,000 people in advanced manufacturing, energy, and health care.

Spiegel announced Siemens is moving their regional office on medical imaging to Cleveland, and they are opening offices in the Global Center for Health Innovation. “The city has become quite a hub for the healthcare industry,” said Spiegel. “We think there’s a good talent base here. [Cleveland’s] a good location for a lot of our businesses.”

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Imagine that: a multi-national firm exec excited about the prospects of Cleveland. Understandably, given Cleveland’s past and the fact it has a long way to go in its present, visualizing a future beyond suffering is difficult. After all, loss is difficult. Life is difficult. But pain should be no city’s identity. Part of Cleveland’s evolution, then, is to acknowledge that Rust Belt shame has pervaded here—or that hurt is in the air we breathe—in the water we drink.

Which brings us back to the speech “This is Water” by David Foster Wallace: “The immediate point of the fish story,” Wallace writes, “is that the most obvious, ubiquitous, important realities are often the ones that are the hardest to see and talk about”.

This is Cleveland indeed.

Cleveland’s brain drain hysteria breeds bad policy

This piece originally appeared in Crain’s Cleveland Business.

Desperate times call for desperate measures. The Rust Belt, a region familiar to the air of anxiety, knows this all too well, particularly the “desperate measures” part.

A case in point: During the 1990s, Pittsburgh, like many of its Rust Belt peers, was in the midst of a fit of brain drain hysteria. Strategic policy was needed. So the powers that be thought of a marketing campaign meant to saturate the minds of the educated “young and the restless” who were thinking about exiting the Steel City. Pittsburgh demographer and economist Chris Briem, in a 2000 op-ed in thePost-Gazette, picks it up from here:

The focus on retaining vs. attracting workers is pervasive in local policies. One marketing character thought of by the Pittsburgh Regional Alliance, whose mission is to promote Pittsburgh, was the genial “Border Guard Bob.” The image was of an older, uniformed sentinel on Pittsburgh’s borders keeping our citizens, in particular the younger workers, from leaving the region. This is the same logic that inspired the East Germans to build a wall around Berlin and is likely to have as much success in the long-run.

Luckily for Pittsburgh, Border Guard Bob never materialized. Policywise, building walls is terrible form in the age of information. Still, the aura of desperation remained in the region, despite its illogicality. For instance, in his 2002 piece called “Young people are not leaving Pittsburgh,” Briem crunched the numbers to find the region’s brain drain wasn’t. Yet he found it hard “to convince Pittsburghers that the outmigration of youth is not the problem it once was,” blaming “a persistence of memory” stemming from the regional exodus in the 1980s.

As a demographer and economic thinker in Cleveland, I can sympathize with Briem. Cleveland, too, is prone to bouts of brain drain hysteria. A recent report highlighted in The New York Times called “The Young and Restless and the Nation’s Cities” was enough to set off a flare-up. The report found that between 2000 and 2012, Greater Cleveland added less than 800 25- to 34-year-olds with a college degree—an increase of 1%. The metro ranked second last out of 51 metros, behind only Detroit.

Obviously, those numbers are not good. That said, from a methodological standpoint, the study has its limitations. Specifically, the analysis cuts through four economic eras: 2000, the end of a prolonged expansionary period; 2005 to 2007, the middle of a jobless economic recovery; 2008 to 2010, the throes of a deep global recession; and 2011 to 2012, a period of economic recovery.

Why does this matter? Migration patterns are affected by quite different economic circumstances nationally. This is especially true for the 25- to 34-year-old cohort, who are the most mobile, if not fickle, group.

For example, Greater Cleveland’s lack of a young adult brain gain from 2000 to 2012 resulted from a substantial decrease of nearly 16,000 25- to 34-year-olds with a four-year college degree from 2000 to 2006. The 2001 recession and subsequent jobless recovery hit Cleveland hard. However, my research at the Center for Population Dynamics at Cleveland State University showed that Greater Cleveland recouped the losses from earlier in the decade, gaining approximately 17,000 25- to 34-year-olds with a four-year degree from 2006 to 2012 — an increase of 23%.

Moreover, the Census recently released data for 2013, which allows a comparison of the nation’s top big-city metros for 2011 to 2013: the current era of economic recovery. Put simply, what large metros have the momentum? Has there been a shift in where the “young and the restless” are attempting to settle down?

The results are surprising (click here for table). Cleveland ranks third in the nation, with a 19.85% increase in the number of young adults with a college degree, behind the Sun Belt metros Nashville and Orlando. And no, this percentage “pop” for the region is not simply due to the fact that Cleveland had a really small base of young college graduates. In fact, the region’s three-year gain of 15,557 ranks Cleveland 15th in total gains, despite being the 29th largest metro in the nation. To put this in perspective, Greater Cleveland had a larger total growth than Chicago, and nearly seven times the gain of Portland: the nation’s poster child for where the “young and restless” go to “live, work, play.”

What gives?

Part of the answer may be economic. For example, my colleagues Joel Kotkin and Aaron Renn recently analyzed the growth in per capita GDP from 2010 to 2013 for Forbes in a piece titled “The cities that are benefiting the most from the economic recovery.” Cleveland ranked 15th in the nation, with a 6% increase. In terms of income, the metro area is fifth in the nation in the total per capita income increase from 2010 to 2012, behind Houston, San Jose, Oklahoma and San Francisco.

In understanding Cleveland’s nascent young adult brain gain, the broader economic performance is important. Healthier economies become “stickier” for those here and more of a magnet for those who aren’t. And while there is the element of “Rust Belt Chic,” or the lure of so-called “authentic” places that counter the “Brooklynization” of American cities, Cleveland as a destination, or a “consumer city,” will always take a back seat to Cleveland as a “producer city,” which is a city of good jobs, good schools and affordable housing. The producer city focuses on the creation of value, not simply the consumption of things. This is not to say amenities, such as a good culinary and microbrew scene, are not important, it only says that if the talent you attract has nothing to produce or nowhere to live, well, all play and no work makes Jack a dull boy.

Talent attraction, then, is only part of the formula in Cleveland’s ongoing and difficult economic restructuring. Talent production is also needed, for both natives and newcomers, regardless of the age group. But emphasizing the latter entails knowing the score on the former. Brain drain hysteria breeds desperation.

And desperate times call for desperate measures — and bad policy.

The newer geography of jobs: A rise of the rest?

This post originally appeared in Crain’s Business Cleveland.

In a recent Harvard Business Review piece, Roger Martin, former dean of the Rotman School of Management at the University of Toronto, detailed a changing of the guard within American firms. In 1963, nearly three-quarters of the nation’s top 50 firms were natural resource-based. By 2013, only 20% of top firms focused on raw materials. Instead, notes Martin, knowledge-intensive industries such as Apple comprised over 50% of top firms. The takeaway: Talent is the new oil.

With this economic shift also came a shift in the nation’s demographics. Stanford economist Enrico Moretti calls it the “Great Divergence”, whereby a geography of “the haves” and “the have-nots” has developed in the battle for brainpower. The “haves” are those cities that have been able to cluster a critical mass of expertise. Think Boston and biotech. San Francisco and information technology. New York and finance. What’s more, these cities have created such a center of gravity that they form “black holes” so to speak — sucking up all the capital in their wake. This is likely to continue according to Moretti.

Who are “the have-nots” in this tilted landscape? “Detroit, Flint, Cleveland,” Moretti told NPR’s Morning Edition recently. In other words, those “haves” of the industrial age became lacking today. This brings to mind a quote by legendary Motown singer Marvin Gaye. “Detroit turned out to be heaven,” Gaye said, “but it also turned out to be hell.”

Such is the nature of things. Wrote poet Robert Frost: “So dawn goes down to day, nothing gold can stay”.

Except, of course, Silicon Valley and the like, which — according to proponents of the Great Divergence — are curiously immune to future economic shocks. But what if these experts are wrong? Or more provocatively: What if Silicon Valley is the next Detroit, or a region becoming a victim of change, if not its own oligopolistic success?

One major mechanism for such a radical transformation is called “geographic arbitrage”, loosely defined as the practice of high-paid professionals moving to less-expensive areas. From the firm perspective, the movement from high-cost areas is called “capital equalization”. AOL Co-Founder Steve Case has speculated these cost-cutting mechanisms will lead to a “the Rise of the Rest” — a moniker coining the nascent reemergence of second-tier cities.

“The prediction of this view is the convergence of American communities,” acknowledges Moretti in his book “The New Geography of Jobs”. “Low-cost areas will attract more and more of the new, high-paying jobs. Cities that have been lagging behind — the Clevelands, the Topekas, and the Mobiles — will grow much faster. Bogged down by their high costs, San Francisco, New York, Seattle, and similar cities will decline.”

But Moretti goes on to note that the data don’t support this view. “In fact,” he writes, “the opposite has been happening.”

Yet there is data that do support this view. Specifically, in a new report brief I co-authored for The Center for Population Dynamics at the Maxine Goodman Levin College of Urban Affairs called “A Newer Geography of Jobs: Where Workers with Advanced Degrees Are Concentrating the Fastest”, the results suggest there is a next generation of second-tier metros that are entering into the top ranks of the knowledge economy hierarchy. Greater Cleveland is one of these metros.

The analysis found that in 2005, 11.68% of Greater Cleveland’s workforce had a graduate or professional degree, ranking the metro 22nd in the nation out of 40. By 2013, however, the region gained about 44,000 workers with a graduate or professional degree, bumping its percentage of workers with an advanced degree to 17%, ranking the metro 10th in the nation — one spot ahead of Pittsburgh (See Figure 1 in the report below). Greater Cleveland’s 12-point jump in the rankings was third largest in the country, behind Indianapolis and Providence. Moreover, the region’s change in its concentration of highly skilled workers from 2005 to 2013 was fifth largest, behind Washington, D.C., Providence, Indianapolis and San Francisco.

Now, in terms of broader economic growth, why does a concentration of highly educated workers matter? From the report brief:

“[A] region’s highest-educated workers are likely to be job creators, not just job consumers. This primarily comes about two ways: (1) through direct job creation, such as a research doctor starting a biotech spin-off firm; and (2) through indirect job creation, particularly relating to the “downstream” effect a high-paying job has on the local service economy. Put simply, more income, more spending, equals more jobs.”

Also, there is the “jobs follow people” effect. A perfect example of this is Google’s presence in Pittsburgh. Carnegie Mellon’s computer engineering program is top ranked in the nation. There is an established pipeline from Pittsburgh to Silicon Valley, yet it is a pipeline that is increasingly going two ways. Google isexpanding its office footprint in the city’s Bakery Square development. The process of knowledge transference between the regions is intensifying as well. For instance, the new dean of Carnegie Mellon’s School of Computer Science is Google Vice President Andrew Moore .

Taken together, perhaps Google sees the handwriting on the wall. Big tech, where it is housed, is becoming too costly. Specifically, attracting talent to live in Silicon Valley and San Francisco is becoming too costly. So, why not refine talent where it is produced?

“It goes without saying that no matter how much talent a company might have, there are many more talented people working outside its boundaries,” begins a Harvard Business Review piece. “Yet all too many companies focus solely on acquiring talent, on bringing talent inside the firm. Why not access talent wherever it resides?”

The Center for Population Dynamics’ current analysis suggests that top talent is increasingly residing in the Rust Belt. Again, such is the nature of things.

“Out of the huts of history’s shame,” writes poet Maya Angelou, “I rise.”

Cleveland, LeBron, and the Evolution of Collective Shame

This piece originally appeared at the Huffington Post.

“Shame is fear of humiliation at one’s inferior status in the estimation of others.” — Lao Tzu

Sitting with fellow Clevelanders at a since-demolished bar, July 8th, 2010, LeBron James, local boy, uttered the words that hurt: “I am taking my talents to South Beach.” It was a shot heard around the world, but felt sharply inside the Rust Belt city’s heart.

“He had before invoked all the connotations of home, only to leave it,” wrote Cleveland sports columnist Bill Livingston the next day, in a piece entitled “By rejecting his hometown team, LeBron James earns his slot on the [Art] Modell list of shame.” Livingston upbraided LeBron for scheduling a cable event to “exploit this city’s suffering.” His words were intent on shaming LeBron for leaving, yet in doing so reared Cleveland’s collective shame for having again been left.

Collective shame is an underappreciated subject. But it, like other collective emotions — think fear and pride — run our societies more than we care to look. “What holds a society together — the “glue” of solidarity — and what mobilizes conflict — the energy of mobilized groups — are emotions,” acknowledged the great sociologist Emile Durkheim.

For decades, Cleveland has been held together by a solidarity in loss, especially the collective shame that came with it. Unlike guilt, which is about what one did, shame is an affront on the self, or what one is. And what was blue-collar Cleveland without a wealth of blue-collar jobs? It was a city of losses — be it of income, population, and a way of life.

2014-07-28-betough.jpg Photo by Michael Lapidakis

Walk down many Cleveland streets and you can see how this loss has played out in disinvestment. Often, the effect on the viewer is the same: status was here, but no longer. The constant reminders of loss give shame currency. Cleveland is not alone here. Cities the world over are afflicted with the hangovers of history. From the “Geography of Melancholy” in the American Reader, the author writes:

Nearly every historic city has its brand of melancholy indelibly associated with it — each variety linked to the scars the city bears. Lisbon has its saudade: a feeling of aimless loss tied to the city’s legacy of vanishing seafarers, explorers shipwrecked in search of Western horizons. Istanbul has huzun: a religiously-tinged brand of melancholy rooted in the city’s nostalgia for its glorious past.

Instead of seafarers, Cleveland had steelworkers, and others who’ve had their working-class status stripped. Yet while the loss was personal, it was the result of macro forces, leaving many feeling powerless and alone. This aloneness was tied up in the feeling of shared suffering.

“The very fact that shame is an isolating experience,” notes the author of Shame and the Social Bond, “also means that if one can find ways of sharing and communicating it this communication can bring about particular closeness with other persons.”

There are many ways collective emotions are shared. Much of the vessels are informal. Think oral tradition and rumors. Fashion is another channel, like a city’s t-shirts. In fact perhaps nothing says implicit understanding between natives like city mottos emblazoned chest level. Cleveland’s most famous t-shirt said simply: “Cleveland — you’ve got to be tough”. It was made in 1977, in the heyday of the city’s decline. So the symbolism wasn’t. You had to be tough in the face of a post-industrial headwind. Today, iterations remain on this “the world is against us” mentality. “Defend Cleveland” and “Cleveland VS Everybody” t-shirts are worn liberally. Another favorite that tips more toward shame than to a defensiveness against judgment says: “Cleveland Low Life” — a play on “Miller High Life.”

2014-07-28-Clevelandloser.jpg Courtesy of BCTZ Cleveland

Is all this productive? No doubt, collective shame, according to scholars, can strengthen the bonds between members of a group which, in turn, can lead to a process of self-exploration and restoration of a social identity. Or it can be chronic. Here, you get a city with a persistent inferiority complex — or a city going from seeking esteem in the face of perceived shame to finding esteem in self-shame. Cleveland is well-known for its self-flagellation. It’s especially obvious to folks who aren’t native Clevelanders.

“I have, in fact, never lived in a place whose proud residents so consistently and gleefully disrespect their hometown as Cleveland,” notes legendary Jeopardy champ Arthur Cho in his recent Daily Beast piece “Cleveland Comes Crawling Back to LeBron: The Masochism of Rust Belt Chic.” Cho, a Cleveland newcomer, goes on to write that though he hates to “engage in victim-blaming,” the reason “everyone dogs on Cleveland is that we ask for it.” Why? Cho concludes: “If we weren’t suffering, we wouldn’t be Cleveland anymore.”

But this Cleveland mindset does little for opening the region up to new ideas. Just as the messages become defensive, so do the policies and politics. Nativist culture reigns. Nepotism and patronage become the grease that runs the status quo. And so the communal shrouding effectively disables the possibility of possibility. Hence, the region’s struggles in its economic restructuring in the era of global connectivity.

In that sense, Cleveland’s collective shame can be a source of bad policies which ensure the collective shame. But why would a city want to do that, albeit implicitly, subconsciously?

“Economic struggle can be a cultural unifier in a community that people tacitly want to hold onto in order to preserve civic cohesion,” writes urban theorist Aaron Renn in Governing. Beyond that, those with power can lose it with community change. Continues Renn:

…[I]t isn’t hard to figure out that even in cities and states with serious problems, many people inside the system are benefiting from the status quo.

They have political power, an inside track on government contracts, a nice gig at a civic organization or nonprofit, and so on. All of these people, who are disproportionately in the power broker class of most places, potentially stand to lose if economic decline is reversed. That’s not to say they are evil, but they all have an interest to protect.

Does this mean Cleveland is doomed? Hardly. The region is experiencing a brain gain. The city has incredible assets — namely, its educational, hospital, and cultural institutions — that have been dragging it along toward a point of turning the page. But more is needed. Specifically, more perspective — a perspective that the city’s inferiority complex isn’t about what others think of Cleveland, but about what Clevelanders are compelled to think about themselves.

2014-07-28-lebronmural.jpg Courtesy of Graney and the Pig

Which brings us back to LeBron. Soon after his announcement that he was leaving, The Onion wrote a satirical piece called “Despite Repeated Attempts To Tear It Down, Massive LeBron James Mural Keeps Reappearing.” In it, the iconic “We are All Witnesses” banner keeps hauntingly resurfacing. At one point in the piece, city workers removed it panel by panel, “only to find an identical mural hanging directly behind it.” The article ends, “As of press time, nobody outside the Cleveland area had seen the mural once since it was originally taken down…”

The takeaway, then: When suffering has become your identity, you have clearly suffered long enough.

The beauty of cities and societies is that they are constantly evolving. Some get stuck in their identity, like Cleveland. Cleveland’s path to progress, then, means letting go of that which has stubbornly remained. There’s hope that the change is coming, largely due to the presence of the new generation.

In many ways LeBron is an embodiment of the next generation of Cleveland and the Rust Belt. His return epitomizes possibility. No, I am not talking about championships, nor the collective Prozac-effects that a parade down E. 9th St. would have on the region’s psyche. Nor the game day economics. I am talking about perspective.

The day LeBron announced his decision he was leaving Cleveland, he was in Akron. According to an ESPN piece, he knew the decision would hurt people, and that nothing would ever be the same for him. “Somehow he got through the final day of his annual basketball camp in Akron without confessing,” the authors write. “By the time [former teammate] Damon Jones drove him to the airport, where he would fly to Connecticut and reveal his infamous decision to the world, there was a lump in his throat.”

LeBron, like all sons and daughters of the Rust Belt, are a product of collective shame, and so his self-battle with leaving is no surprise. But sometimes leaving is the answer. No person should ever self-sacrifice out of a loyalty to place. And sometimes coming home is the next answer. If only because intermittent personal aspiration will often take a backseat to that evolutionary and endearingly human value of needing to belong.

The secret sauce, here, is the perspective gained in the journey. And then bringing it back to a community that could use more than its fair share.

Visualizing a Future without “Rust-Colored” Glasses

This piece originally appeared in the Cleveland Plain Dealer.

Cleveland is dying. It used to be the “best location in the nation”. Now it is a place that people left.

This is the view of Cleveland’s future through “rust-colored glasses”. Population decline equals a failed city. Period. But there’s more to the story. Greater Cleveland’s demographic decline may be more a transition than some doomed destiny. This transition has macroeconomic underpinnings.

The region’s heydays were due to manufacturing. Many had a job getting their hands dirty, at least up to 1980. Also, the pay was good, which supported the local economy. Every manufacturing job created an additional 2.2 service jobs—be it in construction, insurance, retail. But then the national economy shifted, going from less brawn to more brain. Much of the unskilled manufacturing jobs went elsewhere or became automated. From 1980 to 2005, manufacturing employment declined in Cleveland by 43%, taking a variety of service jobs with it.

This brawn-to-brain shift is a main factor in the region’s population drop, as well as the effects of disinvestment that came with it. People once tied to factory and service work are decamping for places with better job prospects. Greater Cleveland lost an additional 50,620 people from 2006 to 2012. The losses were driven by a decrease in people aged 35 to 44. Tellingly, 90% of the decline in this group were people without a college degree.

Where did these people go? The Sun Belt is one likely landing spot, particularly Phoenix and Tampa. According to the IRS, these fast-growing metros are the top two out-of-state destinations for those leaving Greater Cleveland.

So, Tampa and Phoenix are economically “booming”? While Greater Cleveland dies on the vine?

Not exactly. Greater Cleveland’s per capita income, $44,775, is far ahead of both Phoenix, $38,006, and Tampa, $40,862. The gap between the metros is growing. Greater Cleveland’s per capita income grew by 37% from 2002 to 2012, compared to 27% and 33% for Phoenix and Tampa, respectively.

Part of what’s occurring is the dynamics behind “boomtown” economics. “The weak spot in…Tampa’s economic story, is that a lot of job growth is concentrated on the lower end of the service scale,” noted a Florida economist recently. The economist explained that housing construction and in-migration are the pillars of the Florida economy, yet the jobs that develop “don’t necessarily come with robust salaries”.

Deep in the Southwest, there are similar concerns. “Like in many Sun Belt cities,” writes a former Phoenix resident, “Phoenix’s economic plan devolved into merely adding people, no matter the enormous long-term costs”.

By contrast, the metros with robust economies have a foothold in the production of value, not just the consumption of things. Increasingly, this value is tied to how well a city can “think” its way into the global marketplace. Termed the “Innovation Economy”, job and wage growth are tied to emerging industries like advanced manufacturing, life sciences, medical devices or any job that generates new ideas and new products. Like factory work before it, knowledge jobs enable a local service economy, but even more so. Every high-tech job creates an additional 5 jobs in the local market.

In other words, if Cleveland wants to chart a path to growth—and in turn mitigate the effects of shrinkage—it ultimately needs to develop its emerging industries. The service economy will backfill as needed, and the beeline from the Sun Belt to the Rust Belt will be on.

Greater Cleveland is in the midst of transitioning from brawn to brain. The metro’s STEM and health care employment grew 25% over the last 10 years. Employment in Cleveland’s Health Tech Corridor—which goes from Downtown to University Circle—grew by 22%. Also, while the metro’s overall population declined, the workforce is more educated. From 2000 to 2012, Greater Cleveland gained 1 college-educated resident for every 1 under-educated residents lost. The metro added 40,000 people with college degrees from 2006 to 2012, with 41% of those gains coming from the 25- to 34-year-old age group.

“Old Clevelanders as a whole will remain undereducated,” writes Joel Kotkin in the recent Forbes article “Shaking Off the Rust: Cleveland Workforce Gets Younger and Smarter”, “but likely not the next generation”.

A similar dynamic is happening in the region’s urban core. Yes, the City of Cleveland is still shrinking. Yet from 2006 to 2012, the inner city added 1 college-educated resident for every 2.5 undereducated residents lost. The number of educated 25- to 34-year-olds residing in the city increased by 68%, with many landing in Ohio City, Tremont, Downtown, and Detroit Shoreway.

Given the problems plaguing the inner city, it is easy to scoff at such trends as some kind of cosmetic, ancillary developments as “Rome crumbles”. This interpretation would be unfortunate. Specifically, the infill exists because Ohio City and the like are bedroom communities for Cleveland’s emerging innovation economy. For instance, in Cleveland’s 44113 zip code—which makes up Ohio City, Tremont, and parts of Downtown—41% of the residents are employed in the knowledge sector. Also, the zip code’s residents making over $40,000 a year increased from 23% of the neighborhoods’ working population in 2002, to 42% of the neighborhoods’ working population in 2011.

But, we shrink. We lose people. We fail. Period.

Such has been the focus of Greater Cleveland’s longstanding existential crisis with itself. The collective exasperation brings to mind the 1957 sci-fi classic “The Incredible Shrinking Man”. In it, the lead actor is afflicted with the anti-natural: shrinkage in a world of growth.

“I was continuing to shrink, to become… what? The infinitesimal? What was I? Still a human being?” the incredible shrinking man wonders in the film’s closing monologue.

“Or was I the man of the future?”

Is Cleveland the city of the future?

Not yet. But getting there requires further clarity as to where we are now and where we need to be.

Removing our “rust-colored” glasses is a good first step.

Building the Ugly City Beautiful

Courtesy of BCTZ

Courtesy of BCTZ

When it comes to the future, Detroit and San Francisco act as poles in the continuum of American consciousness. Detroit is dead and will continue dying. San Francisco is the region sipping heartily from the fountain of youth. Such trajectories, according to experts, will go on indefinitely.

Harvard economist Ed Glaeser has a grim outlook for the Rust Belt. “[P]eople and firms are leaving Buffalo for the Sunbelt because the Sunbelt is a warmer, more pleasant, and more productive area to live,” he writes in City Journal.

Glaeser echoes this sentiment in a recent interview with International Business Times, saying “[s]mart people want to be around other smart people”, and the Rust Belt has a long slog ahead given that “post-industrial city migration is dominated by people moving to warmer climes”.

But is this true? Is there a “brain drain” from the Rust Belt to the Sun Belt and Coasts? In a word: no. But Rust Belt leaders have bought this narrative hook line and sinker, and the subsequent hand-wringing has led to wasteful public investment.

“Michigan’s cities must retain and attract more people, including young knowledge workers, to its cities by making them attractive, vibrant, and diverse places,” reads a 2003 memo from the National Governor’s Association about Michigan’s “Cool Cities” campaign.

But the campaign struggled. “Government can’t mandate cool,” reflected Karen Gagnon, the former Cool Cities director. “As soon as government says something is cool, it’s not.”

What’s worse, “cooling your city” with talent attraction expenditures can exacerbate economic disparities on the ground. Cities, like Chicago, are increasingly becoming bifurcated cities based on faulty assumptions that “trickle down urbanism” works. That said, the challenge of the day—for not only Rust Belt cities, but all cities—is not “brain drain”, but “brain waste”. Those cities who can best rebuild middle class communities tied to emerging markets will be the future of investment, like they were in the past.

Through Rust-Colored Glasses

When a people fall from grace, the sentiment of decline tends to stick. The Rust Belt’s demise is cemented. Meanwhile, the future is elsewhere. Like toward the sun. For instance, from 2000 to 2010, the Sun Belt metros of Houston, Dallas, Atlanta, Riverside, Las Vegas, Miami, Orlando, and Phoenix experienced the largest population growth. The biggest losers? It’s a “who’s who” of Rust Belt metros, led by Detroit, Cleveland, Pittsburgh, and Buffalo.

America is a country governed by growth: big cars, big belt buckles, big houses, and big populations. Shrinkage is weakness. It is a sign of place failure. The problem here is that population growth is an ineffective, broad-brush measure when trying to understand regional underlying dynamics. A new study by Jessie Poon and Wei Yin in the journal Geography Compass called “Human Capital: A Comparison of Rustbelt and Sunbelt Cities” details exactly that.

In it, the authors compare human capital levels between the Sunbelt metros in California (including San Francisco and L.A.), Nevada, New Mexico, and Arizona with Rust Belt metros in Michigan, Ohio, Indiana, Pennsylvania, and upstate New York. When it comes to share of population with a college degree, the authors find that the Rust Belt is experiencing a brain gain equal to their Sun Belt peers from 1980 to 2010. Poon and Wei also found that skill ratios of immigrants is higher in the Rust Belt than Sunbelt. The authors note that despite population decline, the Rust Belt continues “to be important sites of human capital accumulation”.

The study coincides with recent work out of the Center for Population Dynamics that shows Greater Cleveland’s number of 25- to 34-year olds with a bachelor’s or higher increased by 23% from 2006 to 2012, as well as Pittsburgh economist Chris Briem’s work that shows the metros of Pittsburgh, Detroit, and Cleveland rank 1st,, 6th, 7th in the country respectively when it comes to the number of young adults in the labor force with a graduate or professional degree.

Beyond human capital, the Rust Belt continues to produce and export wealth at a massive pace. The “Chi-Pitts” mega-region, which mirrors the Rust Belt boundaries with the addition of Minneapolis, generates $2.3 billion in economic output, second only to the “Bos-Wash” mega-region that makes up the Northeast Corridor.

Also, using IRS migration data from the 2009-2010 period, a team of researchers led by Michal Migurski showed that Los Angeles County, New York County, and Cook County sent the most people and money to the rest of the United States. Detroit’s Wayne County was fourth. Cleveland’s Cuyahoga County was 9th, one spot ahead of San Francisco County. Speaking to Esquire, which published the work in a visual called “Where Does the Money Go”, Migurski explains the findings:

We realized that if you look at the biggest ‘losers,’ essentially what you’re looking at are the biggest cities in the U.S.,” Migurski says. One of those losers: New York County, which lost $1,306,548,000 and 15,100 people. “But does that actually mean New York is a big loser?” Migurski asks. “One of our ideas was that, you’re not a loser if you’re losing money. You’re an exporter.” The sort of exporter, he says, that boosts the rest of the U.S. economy. Traditional Sun Belt retirement areas comprise the gainers; areas like South Florida and Southern California in particular, create what Migurski calls “money sinks.”

Still, the notion of “loser” for Wayne and Cuyahoga County sticks, despite evidence to the contrary. But why? Why the constant “poor post-industrial people” sentiment, if not a low-grade captivation that comes with “ruin porn” rubbernecking?

Well, if an ideal exists—you know, the experts beckon: be the “new” city, the “hot” city, the “creative” city—then a study in contrasts is necessary. The Rust Belt, with its connotations of smoke stacks and demographic decline, fits the bill.

“[Richard] Florida suggests that Rustbelt cities’ high concentration of less creative blue-collar workers also produces unhappy residents,”Poon and Wei conclude in their Rust Belt/Sun Belt study. “We suggest that such a doom and gloom picture of urban and regional development for the uncool industrial Rustbelt needs to be tempered with a trend of brain gain that is growing across cities in the region.”

But for this tempering to happen a clearer understanding of the importance of accumulating human capital needs to be ascertained. More exactly: Is it to put your city to work, or to “live-work-play”?

Build it and they will…what?

In his 1921 work Economy and Society, social scientist Max Weber details a city’s raison d’etre. Cities can be producer cities, wherein importance is derived from industries that demand national and international trade. Think Detroit and cars. Additionally, cities are consumer cities, in which growth is tied to how much is spent consuming goods and services in the local economy. Think eating, drinking, and buying houses.

The cities that are the most economically robust have wealth generated from global production, which in turn enables local consumption. San Francisco’s tech economy drives it real estate market and artisanal toast scene. That is, if the question was “What came first, the farm-to-table chicken or the egghead?” The answer is “the egghead”, hands down.

But this logic—i.e., in order to go to a restaurant, you need a job, and your job prospects are tied to the viability of your region’s global industries—is often turned on its head in economic development. Here, the goal is growth, no matter the rhyme or reason.

“Like in many Sun Belt cities,” writes a Seattle Times columnist and Sun Belt expat, “Phoenix’s economic plan devolved into merely adding people, no matter the enormous long-term costs”. The columnist goes on to note that while the population has boomed, the city lags on most measures, such as per capita income (see Figure 1 below).

Graph Portland

Moreover, the Phoenixes of the world exist partly because of retired Baby Boomers and the disposable income that comes with it. The Sun Belt feeds off the legacy of production in the Northeast and Midwest. Other cities, like Portland, are fed by a not dissimilar dynamic. But it’s not the retired who come, rather the pre-retired.

“The Portland metro area’s young college-educated white men are slackers when it comes to logging hours on the job,” lead’s a piece in the Oregonian about a study conducted last year, “and that’s one reason people here collectively earn $2.8 billion less a year than the national average.” Figure 1 demonstrates Portland’s sluggish income gains compared to Rust Belt peers Pittsburgh and Cleveland.

Similarly, in a paper circulated by the Federal Reserve Bank of Atlanta, the author analyzed the top 86 “brain gain” metros in the nation to determine whether or not a region’s increase in human capital was paying off in terms of per capita income, labor force participation, poverty rate, and unemployment. The author found Portland was one of twelve metros that experienced zero economic outcomes. Pittsburgh scored 4 for 4. The authors suggest that talent attraction and retention—when untethered to production capacity—“may be largely inefficient, a kind of traditional economic development ‘buffalo hunting’”.

Portland is perhaps America’s consummate lifestyle city. No doubt, the city has experienced a significant brain gain over the last decade. Portland is a talent attraction model. But it is not a talent producing or refining model. Rather, Portland is producing a scene that is run by the consumption of the scene’s aesthetic. Writes one young worker who left:

I can’t stay too long because I know if I stayed a day too long in Portland, I’d suddenly be happy to embrace the slow pace of the city and stop working… I’d end up getting sleeping real late every day, drink some coffee, maybe write some poetry on my porch (or not), and then find a part time job selling cigars like I had in college.

The lesson is that accumulating talent is not enough. There has to be something for the talent to do, or a context that fosters “doing”. It is also a warning for cities investing in the lifestyle game. Spending on creative class amenities ensures nothing. Creating a field of dreams won’t pay the bills. But it will run up the tab.

The Ugly City Beautiful

In 1998, the Chicago Sun-Times ran a piece called “Building the City Beautiful”. “The mayor of the city of Chicago, Richard M. Daley, is a big admirer of Martha Stewart,” it begins, before describing Daley’s plans to begin the “Martha Stewart-izing” of Chicago. The article goes on to quote a University of Illinois at Chicago professor who said Chicago is turning from a producer city to a consumer city. “The producer city was the industrial city — the smoke and the noise and the industrial jobs,” noted the professor. “The consumer city is the city of Starbucks, boutiques and so forth.”

The professor was only partly right. By the 1990s, Chicago was indeed becoming brainier. But its emerging knowledge economy was an outgrowth of its “big shouldered” manufacturing base. Columbia University professor Saskia Sassen recently noted that pundits overlook this when examining the city’s transformation, with the bias being that “Chicago had to overcome its agro-industrial past, [and] that its economic history put it at a disadvantage”. Notes Sassen:

[I]n my research I found that its past was not a disadvantage. In fact, it was one key source of its competitive advantage. The particular specialized corporate services that had to be developed to handle the needs of its agro-industrial regional economy gave Chicago a key component of its current specialized advantage in the global economy.

Similar economic transformations from legacy cost to legacy asset are found throughout the whole of the Rust Belt. Pittsburgh, for instance, no longer provides the muscle for steel making, but it does act as the “brain center” for the world’s steel frame. How this came about is detailed in the article “Pittsburgh’s evolving steel legacy and the steel technology cluster”.

With the arrival of the new economy also came “new economy” tastes. Sassen noted that when she arrived in to study in Chicago in the 90’s she was greeted by “old lofts transformed into beautiful restaurants catering to a whole new type of high-income worker—hip, excited, alive.”

In other words, local consumption patterns began setting up around the emergent worker demand. Going was the Italian Beef and arriving was pickled beets. This demand also impacted housing, with the attraction to urban living setting the stage for gentrification. This, in a nutshell, is the dynamic driving the transformation of urban neighborhoods nationwide: a new economy demands new workers which in turn demand a new kind of lifestyle. The problem, though, is that leaders have the causality backward, or that creating a new lifestyle will incur new worker supply and then poof: new industries. But as we see with Portland, it is not that easy. The industrial DNA and social history of your city matters more than the cosmetics atop the topography.

Still, from a policy and strategy standpoint, it is easier just to make your city “cool”. And that’s exactly what Chicago has been doing at a significant pace. In a recent piece entitled “Well-healed in the Windy City”, author Aaron Renn details Mayor Rahm Emanuel’s policy of using tax-increment financing (TIF) to create geographic “winners” and “losers” across Chicagoland. “The true purpose of Chicago’s TIF districts—which now take in about $500 million per year,” writes Renn, “appears to be tending to high-end residents, businesses, and tourists, while insulating them from the poorer segments of the city.”

The strategy was spelled out explicitly by Mayor Emanuel during a recent ribbon cutting for a bike path in Chicago’s Loop. Said Emanuel: “I expect not only to take all of their [Seattle and Portland's] bikers but I also want all the jobs that come with this, all the economic growth that comes with this, all the opportunities of the future that come with this.”

Courtesy of Grid Chicago

Notwithstanding the faulty logic in the strategy—e.g., if Portland lacks the jobs for its residents, how can it supply jobs for Chicagoans—the real problem is the costs associated with such bifurcated investment. In West and South Chicago, the byproducts of the City Beautiful approach are downright ugly. But they are not unexpected. They are the long-documented economic and social effects of concentrated poverty and segregation. Continues Renn:

Safety levels in Chicago can no longer be plotted on a single bell-shaped curve for the entire city. Today, that curve is split into two—one distribution for the wealthy neighborhoods and one for the poor ones. A lack of resources is part of the problem: the police department is understaffed… While the city budget is tight, failing to increase police strength during a murder epidemic is a profound statement of civic priorities.

Urban priorities flow from a perception of what is at stake. For long, the push for human capital accumulation has pitted city versus city amidst the backdrop of an urban popularity contest in which the “winner” is assured nothing outside of popularity. But victory in the vanity game is fleeting. The young and the restless are exactly that, and many people who come to New York or San Francisco, or for that matter Portland, leave as they get older and seek out affordable places to raise a family. What remains on the ground is the reality of brain waste. Without the prioritization of equitable, integrated middle-class neighborhoods a city’s progress will be always be disparate, if not illusory. Talent attraction is but part of a redevelopment process. So is talent refinement for those arriving and talent production for those in place. After all, neighborhoods are factories of human capital. Building people, not places, is what a successful city is all about.

But to know this is to “know thyself”. The Rust Belt has been dying for some time now, so say the experts. The region has absorbed the projections, and given that desperate times call for desperate measures investment has been wasted. “[Creative class theory] is bad because it distracts from what’s important,” says Sean Stafford, author of Why the Garden Club Couldn’t Save Youngstown.

Regaining focus entails removing the rust-colored glasses. Rust Belt leaders will see there are assets to work with, not to mention feel the freedom that comes with no longer being a study in contrast for those touting a future that really isn’t.

Population Growth as the Cure for the Incredible Shrinking City?

The 1957 sci-fi classic The Incredible Shrinking Man reads like a Rust Belt city script. In it, the lead actor is afflicted with the anti-natural: shrinkage in a world of growth. The rest becomes existential. From the movie review blog “Twenty Four Frames”:

He hates being a scientific experiment and a spectacle for the media. He is no longer the everyday 1950′s image of the middle class, white picket fenced American man. Instead, he now fights for survival in his own house where everyday objects are now the enemy to his existence. Finally, he must face the biggest question of all. If he continues to shrink, will he eventually even exist?

Such is the mood behind revitalization efforts in shrinking city America, particularly the Rust Belt. There, population decline has been occurring for decades. It still occurs. The Cleveland metro lost nearly 83,000 people from 2000 to 2012. The Pittsburgh metro lost over 67,000. This is in contrast to the region’s “greenfield economies”—defined as “the set of conditions that flow from building on new territory or exploiting new markets vs. the redevelopment of old places”. For example, the geographically-expanding Columbus metro added 260,000 people from 2000 to 2012. The top feeder region into Columbus was Greater Cleveland.

The dynamics behind these demographic patterns are fairly intuitive. Population gains and losses are a factor of a region’s employment picture. Cleveland Fed economist Joel Elvery explains:

Urban economists like to divide a regional economy into two sectors: tradable and nontradable. The tradable sector produces goods and services that are sold outside of the region; the nontradable sector produces goods and services for use in the region…If the industries that make up the tradable sector are growing nationally, then the region will most likely grow. If the tradable sector is struggling, eventually the region will also struggle.

In the case of Cleveland, one of the region’s main tradable sectors is manufacturing. That said, technological advances in manufacturing means it takes less people to make a product. In the 1950s an auto worker made on average seven cars per year. A worker can make 28 today. The effect of the increased productivity is a loss of jobs. The effect of job loss is a declining population.

Put a fork in the Rust Belt, right?

Not exactly. Figure 1 shows the metro per capita income for Cleveland, Pittsburgh, and Columbus. The metros’ incomes were even around 2003, but then Pittsburgh and Cleveland began diverging from Columbus around 2005. Of importance here is that Pittsburgh and Cleveland have had higher per capita income growth than Columbus despite their declining population. This goes against the grain of traditional urban development thinking in which growth is god.

Figure 1: Source, US Bureau of Economic Analysis via Telestrian

Looking at real per capita income at purchasing power parity (PPP), or income adjusted for inflation and how far a dollar goes in a given metro, the trends hold. The map below shows the real per capita income (PPP) for all metros for the United States. Notice Greater Cleveland and Greater Pittsburgh stand out, with values at or above $42,000 a year. In fact, in ranking the nation’s largest metros (over 1 million people), the highest real per capita metros were Hartford, Boston, and San Francisco, followed by Pittsburgh 6th and Cleveland 11th. Not bad for “dying” metros. Columbus clocked in at 28th, while peer Rust Belt metro Detroit was 44th out of 51.

Map: Map of real per capita personal income adjusted for inflation (in 2005 chained dollars) and regional purchasing power. In thousands of dollars (2011). Source, U.S. Bureau of Economic Analysis via Telestrian.

Why is greater per capita income growth happening in the Rust Belt compared to Columbus? We have to keep in mind that a rising per capita income is not necessarily associated with a robust economy, particularly for regions that have flat or declining populations. Specifically, a metro, such as Cleveland, can gain in per capita income simply due to a significant out-migration of low- and middle-income workers. Such a scenario could prove problematic if the area’s total personal income is decreasing across time, because then the overall economy is contracting.

But this is not the case. Figure 2 shows the total personal income for the three metros from 2000 to 2012. Both Cleveland’s and Pittsburgh’s total personal income levels increase despite declining populations. This effect has been called “growth without growth” by the Brookings Institution, and it occurs when a workforce is becoming more educated and productive at the same time overall population declines.

Figure 2: Source, US Bureau of Economic Analysis

This is what is happening in the Cleveland metro. Data from a new study I co-authored with Jim Russell out of the Center for Population Dynamics at Cleveland State University showed that from 2000 to 2012, Greater Cleveland gained over 63,000 educated residents, while simultaneously losing nearly 74,000 residents without a college degree. Over two-thirds of this brain gain occurred between 2006 and 2012. The fastest growing cohort was for college-educated Greater Clevelanders 65 and plus—a 30% increase. The number of Greater Clevelanders with a college degree aged 25 to 34 increased by 23%. Conversely, the vast majority of the out-migration was made by people aged 35 to 44 without a 4-year degree.

This population dynamic is partly the result of Cleveland’s restructuring from a labor- into a knowledge-based economy. Specifically, growing tradable industries, like STEM and health care employment—which have driven job growth in Cleveland—are able to attract and retain skilled residents, whereas slower-growth industries are “pushing” less skilled workers elsewhere. Many of these non-degreed workers find a better return on investment in areas that are gaining in population, particularly if they are employed in the local consumer economy. Think laborers and much of the service class. This notion is supported by the fact that from 2000 to 2011, the average income of a person that moved from Greater Cleveland to Greater Columbus was $38,000 a year. Such a re-positioning of less-educated workers partly explains that while the Columbus metro is gaining on Greater Cleveland in total income, it is not the case with per capita income. Notes the Cleveland Fed: “Per capita income growth [in Columbus] is under increasing pressure to continue rising as population growth exceeds income growth”.

So yes, Cleveland shrinks. But it is not about brain drain, but about rational choice theory. And while population loss is troubling for any city, it is in many respects a necessary demographic result as a region like Greater Cleveland transitions from brawn- to brain-intensive work.

Think of this as a “one step at a time” approach to the existential plight that is the incredible shrinking city—meaning Cleveland’s migration needs are currently about quality, not quantity. This is because economic growth is not likely to be achieved through an increase in local consumption. Local jobs are created from emerging tradable industries, not vice versa—five service jobs are made for every new high-skill job in fact. And emerging industries are created via human capital, not consumer demand.

“Consumer demand does not necessarily translate into increased employment,” writes John Papola in Forbes. “That’s because ‘consumers’ don’t employ people. Businesses do.”

So where does Cleveland go from here?

It needs to look to Pittsburgh. The sister Rust Belt city has had a human capital formation that has been nothing short of astonishing. University of Pittsburgh economist Chris Briem calculated that the metro ranked fifth in the nation when it came to the percentage of young adult workers with a bachelor’s degree, behind only Boston, San Francisco, D.C., and Austin. What’s more, Greater Pittsburgh ranked first for the highest concentration of young adult workers with a graduate or professional degree.

“Change in the Pittsburgh economy is reflected in many ways,” writes Briem, “but probably no more profoundly than in the educational attainment of its workforce”.

Greater Cleveland doesn’t perform too shabbily either, ranking 17th in the nation in the number of young adult workers with a bachelor’s degree, and 7th in the nation for young workers with a graduate or professional degree, ahead of knowledge hub darlings Seattle and Austin.

In other words, Cleveland’s got something to build on: the quality of its young adult workforce. So instead of dumping money on brain drain boondoggles, or expending significant public expenditure on things like hotels and casinos that intend to drive economic growth from consumption on up, the region needs to pull out all the stops on growing a critical mass of talent. Because, as my colleague Jim Russell puts it, “talent is the new oil”.

Eventually, once the region’s new economy sectors are revved up, then job growth for both skilled and less skilled work will increase, making the region amenable to population gain. This is the case in Pittsburgh, where population loss has recently turned into a slight gain after decades of decline (See Figure 3).

Figure 3: Source, American Community Survey, Bureau of Economic Analysis

But until that growth happens the Rust Belt will be stubbornly mired in its existential crisis. Shrinking, struggling, and wishing on silver bullets and outdoor chandeliers. But maybe there is room for measured hope. More exactly, we shrink therefore we are?

“I was continuing to shrink, to become… what? The infinitesimal? What was I? Still a human being?,” wonders the incredible shrinking man in the film’s closing monologue. “Or was I the man of the future?”

Well, considering what the cost of living is doing to the coasts, maybe the notion of Pittsburgh as the city of the future isn’t so farfetched. The Clevelands of the world would be wise to wager so, and then model accordingly.

Interview with WCPN’s ideastream

fish tank city

Excerpt from the interview:

If your city is a fish tank, and it has circulation—and that means both in-migration and out-migration—that’s a good thing.  Migration is like the laying down of human fiber optics, and Cleveland needs to be connected more than it is.  Clevelanders often think that the world ends at Medina County and Lake Erie, and that’s simply not the case. And from an economic development standpoint you want to be able to chart migrations, even if it’s not a retention strategy, but chart migrations and circulations so you know that you can still do business with someone in Hong Kong if they stayed here for three years. That’s very important.”

You can hear the whole interview here.

New Report Released

nbc

My new report released through the Center of Population Dynamics is here. The report in a nutshell: Good economic development policy means getting beneath broad-brush metrics so you can strategize soundly around your momentum flows. This report does that.

A lot of media on the report. 11 o’clock news ran a feature on the study you can find here. Cleveland.com writes:

Old industries, aging workers and empty neighborhoods paint a portrait of a Cleveland in steady decline. But a new population study signals that image may be as outdated as a Cuyahoga River fire.

While civic leaders worried about brain drain, young professionals from elsewhere were streaming into urban neighborhoods, raising education and income levels and maybe setting the stage for a new economy, researchers say.

According to a report from the Center for Population Dynamics at Cleveland State University, the tide has turned toward brain gain, an influx of well-educated people. Cleveland’s new challenge is to stoke a new population pattern unfolding at an opportune time.

The Remake by the Lake

102

This piece originally appeared in the Cleveland Plain Dealer.

Politico Lee Atwater once said, “Perception is reality.” In other words, our perceptions influence our actions, and our actions affect our reality.

For example, in the 1970s there was a growing perception that America’s inner cities were doomed. “Will the last person leaving Seattle — turn out the lights” read a billboard in Seattle in 1971. What followed was a self-fulfilling prophesy that happened nationwide. The perception that life was better elsewhere became the reality of urban decline. Social psychologists call this “the perception-behavior expressway.”

Today, however, American cities are being given a second look, particularly by 20- and 30-somethings. The number of 25- to 34-year-olds with a college degree increased by 23 percent from 2006 to 2012 in the Cleveland metro. Many of these young adults areplanting roots in urban core neighborhoods. Old warehouses and office buildings —from Chester Avenue to Detroit Avenue to East Ninth Street — are getting the dust knocked off to meet this demand. It is a demand driven by a changing perception. The younger generations do not see Cleveland through 1970s eyes. The river hasn’t burned for decades.

It is this “no apologies” attitude that has driven Positively Cleveland’s branding campaign called “This is Cleveland”.

“We’ve never been flashy, trendy, perfect. And for that, you’re welcome,” reads a line in the video that anchors the campaign.

Overall, the messaging is a self-affirmation that doesn’t painstakingly paper over the reality that Cleveland is a work in progress. At the same time, the message doesn’t plead with those who believe Cleveland can never progress.

Ah, yes. Those “nattering nabobs of negativism” — every city has them, but the Cleveland area is particularly chock-full.

For instance, an Austin, Texas, resident and his wife were recently looking to relocate. They had no ties to Cleveland, but the long-distance vibe they got was of a “city stocked with amenities, friendly people and realness.” The couple came for the weekend and loved the city, and upon their return, the man’s wife was “really pushing hard for Cleveland”.

The main drawback?

“[J]ust a general [negativity] from the people I encountered about their city,” the manexplained. “I got a lot of questions … about why I would vacation in Cleveland, or even consider moving there. It was a little frustrating that I was having to school them on how good it really is. Negativity can feed negativity, and it looked to me to be one of the area’s biggest challenges.”

I agree with the visitor. Cleveland’s negativity is a challenge to the city’s future. Some, though, disagree.

“What causes us to grow is not psychology,” said one regional economist. “It is job growth.”

While the economist is partially right, i.e., people do follow jobs, what’s missing from the equation is that deciding on whether or not to invest in Cleveland is made through a perceptual lens. After all, cities are like stocks, and whether or not Cleveland is a “bull” or “bear” market depends partly on the vibe given off.

“The whole idea that the stock market reflects fundamentals, I think, is wrong,” noted Nobel economist Robert Shiller recently: “It really reflects psychology.”

So, can Cleveland change? If so, what would it mean economically?

For Cleveland to change, it needs a critical mass of people who aren’t blinded by the city’s past failures. Whether they are newcomers, like our Texas friend, or folks who are pulled in by the prospects of a Rust Belt revitalization, the effects are the same: new voices and ideas that will help create a new reality.

Then, once started, investment tends to beget investment, because where human capital clusters, financial capital follows. Specifically, as the cost of living skyrockets on the coasts, companies are looking to invest in areas where there is better return.According to the Harvard Business Review, jobs will increasingly be following people, perhaps into areas like the Rust Belt that have both affordability and great universities. Also, a new report by the Commercial Real Estate Association forecasts that investors are looking to secondary markets like Cleveland, or those cities with “a high concentration of skilled workers and a track record of innovation.”

Now, all we need is skilled workers and a track record of innovation, right? Well, the Cleveland metro is 24th in the nation in patents from 2000 to 2011. Oh, and itranked 7th in the nation in the proportion of 25- to 34-year-olds in the workforce with a graduate or professional degree, ahead of San Francisco, Chicago, and Austin.

Surprised? I was.

As a born and bred Rust Belter, you tend to get used to the narrative of decline. It’s oral tradition. The problem with that is when the social norm is to accept decline as fate, there’s less agency to help change your city’s destiny.

Or, as the poem “Our Town” puts it: “Your town will be what you want to see. It isn’t your town — it’s you.”

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