Can America’s Dying Cities Be Saved?

 

A city shrinking to a shadow of its once-bustling prosperous self is difficult to understand. Buffalo once ranked with New York, Philadelphia, and Boston as among the wealthiest cities per capita in America. The coming of the railroad in the 1860s allowed Cleveland, Chicago, Dallas, Denver, and St. Louis to become wealthy too.  In the early twentieth century, Detroit was emblematic of how a paradigm shift in technology could radically change the destiny of a city. Specifically, when Henry Ford combined the internal combustion engine with the assembly line, he realized his dream of making automobiles a game-changing mass-produced consumer product. In the 1920s, Detroit became the nation’s fastest-growing city and one of the wealthiest. George Eastman’s impact on Rochester, New York, was similar. His breakthroughs in chemistry, manufacturing, and marketing allowed anyone to capture “Kodak moments.” This turned his hometown into a technology center that later birthed Xerox, which helped kick-start Silicon Valley.

 

In the 1970 U.S. Census, St. Louis became the first city to have 25% fewer residents than it had twenty years earlier, in 1950.  By 1980, the systematic loss of population in larger cities had gathered such momentum that nine cities were at least 25% smaller than they had been in 1960. The trend has since continued without interruption. In 2010, 17 cities were at least 25% below their residential high-water marks. And of course, many have lost even larger numbers: Detroit today is home to just 44% of its 1960 population.

 

In each of these 17 formerly-much-larger cities, population loss has been accompanied by a near doubling of the population living in poverty, with none of them having less than 20% of their residents living below the federal poverty standard. Data from the 2020 census are likely to show that this count has now increased to at least 20 such cities. Like Detroit and Rochester, each will have lost at least a quarter of its population in the past five decades and, of residents remaining, at least a fifth will be living in poverty.

 

We call these “dying cities” because there is no evidence that anyone has devised any effective interventions that can reverse their downward course. The nation has actively pursued “urban renewal” and “slum clearance” since the Great Depression, as well as “innovation hubs” and “tech corridors” more recently. Yet, none of these consciously devised revitalization solutions has stemmed decay in any significant way.

 

Why is this?

 

According to Carl Schramm, a noted entrepreneurism expert, “To survive and thrive in modern market democracies, cities must be resilient. Above all, they must be able to respond to

 

- transformational changes in the structure of the economy,
- creative destruction caused by technological innovation,
- evolving labor markets, and
- competition from a globalized economy.

 

For instance, economic dependence on a single industry is a well-known danger. The effects on Detroit of rising global competition in automobile manufacturing have been apparent for at least five decades.”

To avoid this fate, cities that survive and thrive create new businesses as fast or faster than they lose them. But, equally important, they must be able to maintain a good quality of life for their citizens, so residents want to stay and participate in their city’s evolution and future.

 

This means that cities must not only be economically flexible; they must be politically creative as well, so they can respond to changing pressures and opportunities required for good governance. For instance, the key roadblocks to improved policing are typically police unions and, “The greater the political pressure for reform, the more defiant the unions often are in resisting it - with few city officials, including liberal leaders, able to overcome their opposition.”

 

Another factor is the dismal performance of public schools. If a city’s schools produce students deficient in math and science, its future workforce can never be competitive. This sad reality is the result of decisions made in the 1960s by many mayors who traded away control of schools to teachers’ unions.  As with the power of the police unions, teachers have been allowed to set work rules and enjoy immunity from the consequences of their own poor performance.

 

This problem goes still deeper, to the heart of what it takes to make a city financially and fiscally healthy over the long haul. The quality of urban life depends on the delivery of a wide variety of public services.  That means safe streets and good schools, as well as the provision of clean water, collection of trash, delivery of firefighting and emergency services, and maintenance of sewers, sidewalks, and bridges. Unfortunately, the cost of offering good public services tends to increase over time. But due to restrictive work rules and politics, those increases have not been offset by productivity gains, which are the norm in the private economy,

 

The implications for cities are obvious. They need vibrant and growing innovative private sectors, to assure a growing tax base. But, equally important, they need the political flexibility to reform public sector services, or they will become financially unsustainable. The political history of twentieth-century cities helps explain how some cities maneuvered themselves into this political dead end that robs them of the capacity to meet the evolving needs of their citizens.

 

The power of unions is a central obstacle. As mayors allowed unionization of municipal workers, they magnified the inefficiencies for which public agencies are famous.  In return, mayors latched on to a permanent source of campaign contributions from public-sector unions, and that profoundly changed the balance of power in municipal politics. City employees acquired an immense and permanent advantage over taxpayers. The costs of schools that cannot produce an internationally competitive workforce with basic skills, coupled with inflexible perpetual pressure on city budgets largely related to generous employee compensation and benefits, are directly responsible for the inability to institute reforms that might reverse the exodus of both businesses and residents.

 

Another problem is taxes. It has long been a tenet of municipal finance that residents so love their cities that they are largely indifferent to their taxes. This is belied by the experience of the past two decades, which has overwhelmingly shown that taxpayers around the nation are highly sensitive to comparative tax burdens. The upcoming census will show significant out-migration from high-tax cities into surrounding, lower tax, counties, in addition to migration from high-tax states to those with no income taxes. But despite falling populations, downsizing public workforces is often politically impossible due to long-term collective bargaining agreements that protect workers from layoffs.  New York State, for example, employs 316 public workers per 10,000 citizens while Florida’s ratio is 213; Rochester employs 17 municipal workers for every 1,000 residents while Tampa, nearly twice its size, employs only 11.

 

Dying cities also suffer from long-term political trends that have robbed them of ideological diversity.  Beginning with the Roosevelt administration, and progressing through the Johnson presidency and to the present day, as cities have needed to increase taxes to accommodate the growing cost of public services, they have also become increasingly dependent on federal grants and revenue sharing.  Both of these trends have favored and been favored by Democrats. So, unsurprisingly, that party has monopolized City Hall in many cities: St. Louis has not had a Republican mayor for 71 years, Philadelphia for 68, Detroit for 63, Baltimore for 53.

 

Whatever one’s political views, the dangers of political monoculture should be apparent. Ideological diversity is the lifeblood of democratic problem-solving. Long-term political monopoly has rebuffed dissent and prevented cities from challenging entrenched interests to explore a wider range of ideas to reverse their declining populations, business base, and quality of life.

 

Before the Roosevelt years, most mayors came from the ranks of men who owned businesses. The business experience proved useful to mayors, who had to act as managers when cities were self-sustaining and a city’s tax revenues had to cover its expenses. Replacing that political monopoly with another which largely lacked the experience of working in business has meant the loss of a range of sensibilities that must be a part of a city’s long-term success.

 

And, as fiscal dependency on Washington grew, political options were further reduced, because federal monies were accompanied by regulations that substantially reduced the discretion of mayors to manage traditional municipal services such as education, public health, hospital construction, policing, caring for the poor, transportation, and housing. Since the 1960s, a principal responsibility - often, the most important responsibility - of every city mayor has been to petition the federal government for funds. Notably, in 2018, the once wealthy and self-financing city of Buffalo received 42% of its budget from state and federal funds.

 

This lack of flexibility coupled with an ideological monoculture made it virtually impossible for city leaders to respond to multiple waves of technology changing the world around them.  Consider just four of these.

First, the Interstate Highway System. By 1980 when only half of the federal highway system was completed, Americans were driving twice as many miles as in 1956.  High-speed roads led to the production of much faster, more comfortable, and safer cars. Suddenly, faraway places were more accessible.  A trip from Philadelphia to Jacksonville became a comfortable 12-hour drive.

 

Second, the jet engine transformed commercial aviation.  Demand for U.S. domestic air travel soared from about 4 million passenger trips per year in 1960 to more than 775 million in 2018. Today, budget fares from Philadelphia to Jacksonville can cost less than $100 each way. This cheap air service began to facilitate the decision to move to southern and southwestern cities, with much lower tax burdens.  Commuting back two-hour flight to see family, or to work, became “acceptable.”

 

A third transformative technology that disrupted the competitive position of cities in the Northeast and upper Midwest was air conditioning.  The invention of air conditioning made steamy southern cities, and dry desert environments, livable and workable.  In 1955, fewer than 2% of U.S. homes had air conditioning, but by the end of the 1970s more than half, mostly in the South, did.

 

And fourth, the technology that continues to rearrange America’s economic geography more than any other is the internet, with its capacity to create professional and social networks that are entirely independent of geography. Now, at virtually no cost, high schoolers in West Virginia or Sri Lanka can form ambitions about careers with no proximate role models. They can learn the needed skills and develop supportive social circles that yield income and wealth in real or virtual space.  If cities exist and thrive in great part because of the network effects resulting from people’s proximity to one another, then the internet potentially threatens this fundamental raison d’etre.  And the rapid social and economic adaptation forced by COVID-19 is simply accelerating this threat.

Amid these powerful forces pushing against the growth and very survival of many cities are a number of strategies for reinvigorating urban economies and livelihoods. The most commonly encountered strategy is to try to invent a new industrial cluster - often modeled on a city’s once prosperous past. Michael Porter of Harvard Business School proposed the process: a city first discerns an unattended frontier of technology and then induces local entrepreneurs to develop a cluster of complementary companies that can develop a new market.

 

In aspiring to become home to more start-ups, many cities have turned to another strategy. Twenty years ago, the urban planning scholar Richard Florida wrote that troubled cities could recruit an imagined group of untethered college graduates, artisans, and designers - called the “creative class” - to jumpstart local economies. He continues to advise cities hoping to attract new residents from this demographic by redeveloping former industrial neighborhoods and making old factory space into loft apartments, studios, and shops.

 

But no city that has lost most of its historic industrial base has been able to create the tens of thousands of new jobs necessary to revitalize its economy by turning to outside creative talent. Research suggests that the so-called creatives being recruited are much more likely to be artists opening galleries or lifestyle entrepreneurs running microbreweries, than tech inventors who build companies that employ thousands to manufacture and supply important products to national and world markets.

 

Schramm also mentioned four other futile approaches that many cities have tried:

 

- Building light-rail systems, to make it easier for more people to get to and from jobs but also as an emblem of the city’s commitment to environmental sustainability.

 

- Building downtown sports venues aimed at reshaping a city into a tourist destination. Even cities that have built museums, aquariums, and other attractions near new stadiums have experienced no discernible change in their overall economies.

 

- Merging a dying city with wealthier surrounding suburbs, thereby enlarging the city’s tax base. But 50 years of consolidation efforts by cities looking for more tax revenue have failed in almost every instance. And,

 

- Enlisting the help of deep-pocketed “hometown champions.” History suggests that even truly admirable rejuvenation efforts by local champions are unlikely to have a long-term impact. In 1977, Ford Motor Company led an immense effort to restore downtown Detroit. Unfortunately, the project had minimal spillover effects in other parts of downtown, and surrounding businesses continued to leave.

 

So, what’s the bottom line?

 

Content with comfortable political monocultures and unable to abandon the same tired solutions that have failed to arrest the erosion of competitiveness, America’s dying cities are doomed. From a national perspective, the good news is that there are plenty of cities that have the very traits needed to stay competitive in new markets that they are helping to shape. And the only hope for America’s “long-troubled cities” seems to be emulating these thriving cities.

 

Given this trend, we offer the following forecasts for your consideration.

 

First, cities that emerge from a death spiral will have leadership dedicated to managing their municipal enterprise in honest, efficient, and business-friendly ways.

 

Most dying cities have experienced similar to Baltimore’s, whose last two mayors and recent police chief have gone to prison for corruption. One reason is that most big-city mayors have no business background. As a result, few know how to manage complex organizations, including the challenge of minimizing opportunities for graft. Corruption-free cities where mayors and city councils are experienced in working the intersection of business and citizen interests include Boise, Idaho; Delray Beach, Florida; Huntington Beach, California; and Provo, Utah.

 

Second, mayors and other urban leaders who succeed in turning around dying cities will focus on developing productive entrepreneurship that will make their cities more competitive in the future.

 

However, research shows that after two decades of betting on local entrepreneurs to generate new economies, few cities have benefited from their investment. Mayors should rethink their expectations of entrepreneurs and the resources they provide to the town’s efforts to encourage new firms.  Emphasis should be focused instead on building partnerships with local engineering schools and firms.  Research by Carl Schramm shows that persons with engineering educations and experience are responsible for starting the majority of new firms that survive and create demand for new jobs.

 

Third, dying cities that turn themselves around will create incentives for residents, especially racial and ethnic minorities, to become owners of local businesses.

 

In this regard, Schramm points to the much-maligned Trump Tax Bill of 2017. It established “opportunity zones,” a long-neglected policy innovation that uses tax incentives to attract new businesses and property restoration in center cities, for example through relocation of factories from suburban industrial parks to commercially depressed downtowns, and new housing investments proximate to relocating factories.  Many cities are already working to build out opportunity zones. San Jose, Nashville, San Diego, and Houston are among those in the lead. In the wake of this spring’s demonstrations, the government will probably make even more resources available to encourage entrepreneurship in neglected downtowns. Although this latest iteration of opportunity zones has not been in place long enough to assess its impact, the Urban Institute has noted that its success will significantly depend on the inclusion of local residents in implementation, a commitment to transparency in reporting on how dollars are being spent, and a focus on projects that meet local needs.  And,

 

Fourth, cities that demonstrate serious purpose in school reform will have a great competitive advantage.

 

One such example is New Orleans, which is in the midst of becoming the nation’s first nonprofit, all-charter district. Although the performance of New Orleans’s schools still leaves much to be desired, overall they now display an attribute absent from many other cities: continual, albeit too slow, year-after-year improvement. Kansas City is pursuing a similar path, supported in part by school reform work carried out by the Kauffman Foundation. Among other efforts, the foundation built a model charter school that now enrolls 90% of students of color and last year graduated its first 12th-grade class - with every student going on to college. Nearly half of Kansas City’s K-12 students are now in nonprofit charter schools, and performance is on the rise. Charter schools signal to those fleeing other cities that their students are more competent in all the basic skills schools are expected to teach. But that’s not all. School managers are free to operate with much greater freedom of curriculum and teaching methods. Parents of children in charters have the same market power as parents with children in private schools. They are able to shop for the best schools as they determine standards of success. Therefore, charter schools can help give cities a competitive advantage.

 

** References

1. Real Clear Policy. August 18, 2020. Carl Schramm.   Save America’s Dying Cities.
https://issues.org/americas-dying-cities-carl-schramm-revitalizing-competitiveness/

 

2. Economic Studies at Brookings. 2017.   Martin Neil Baily and Nicholas Montalbano.  Clusters and Innovation Districts: Lessons from the United States Experience.
https://www.brookings.edu/wp-content/uploads/2017/12/es_20171208_bailyclustersandinnovation.pdf

 

3. The Unheavenly City: The Nature and the Future of Our Urban Crisis. Edward C. Banfield.(New York, NY: Little, Brown, and Company.)
https://www.amazon.com/Unheavenly-City-Nature-Future-Crisis/dp/B0006CUBPG

 

4. The American Economic Review 57, no. 3 (1967): 415–426. J. Baumol.  Macroeconomics of Unbalanced Growth: The Anatomy of Urban Crisis.
https://www.jstor.org/stable/1812111?seq=1

 

5. A History of Future Cities. Daniel Brook, (New York, NY: W. W. Norton & Company).
https://wwnorton.com/books/A-History-of-Future-Cities/

 

6. The Rise of the Creative Class.   Richard Florida.  (New York, NY: Basic Books.)
https://www.basicbooks.com/titles/richard-florida/the-rise-of-the-creative-class/9781541617742/

 

7. The Death and Life of Great American Cities.   Jane Jacobs.  (New York, NY: Vintage.)
https://www.penguinrandomhouse.com/books/86058/the-death-and-life-of-great-american-cities-by-jane-jacobs/

 

8. The City: A Global History. 2005. Joel Kotkin. (New York, NY: Modern Library.)
https://www.penguinrandomhouse.com/books/95242/the-city-by-joel-kotkin/

 

9. Five Cities. The Story of Their Youth and Old Age. 1939. George R. Leighton.   (Boston, MA: Harper & Brothers.)
https://books.google.com/books/about/Five_Cities.html?id=QTA2AAAAIAAJ

 

10. How to Kill a City: Gentrification, Inequality, and the Fight for the Neighborhood. 2018. Peter Moskowitz. (New York, NY: Nation Book.)
https://www.boldtypebooks.com/titles/p-e-moskowitz/how-to-kill-a-city/9781568585246/

 

11. City Life. Witold Rybcznski. (New York, NY: Touchstone,
https://www.amazon.com/City-Life-Witold-Rybczynski/dp/0684825295

 

12. Burn the Business Plan: What Great Entrepreneurs Really Do. Carl J. Schramm. (New York, NY: Simon & Schuster.)
https://www.simonandschuster.com/books/Burn-the-Business-Plan/Carl-J-Schramm/9781476794372

 

13. Great Society: A New History. Amity Shlaes. (New York, NY: HarperCollins.)
https://www.harpercollins.com/products/great-society-amity-shlaes?variant=32206254276642

 

14. The Future Once Happened Here: New York, DC, LA, and the Fate of America’s Big Cities. Fred Siegel, (San Francisco, CA: Encounter Books.)
https://www.encounterbooks.com/books/the-future-once-happened-here-new-york-d-c-l-a-and-the-fate-of-americas-big-cities/