Las Vegas Migration Hangover

Las Vegas has a bad headache and feels nauseated. There is a sense that the city did something naughty over the last decade, but recollection of the deed is fuzzy. The sobering reality is that the boom has gone bust. What happened?

Like many Rust Belt communities, Las Vegas got drunk on one economic rocket:

Las Vegas may have more in common with Pittsburgh and Detroit than many people realize, says Mary Riddel, a UNLV economist and the interim director of the Center for Business and Economic Research.

Riddel, who helped prepare a report for Las Vegas’ 2010 economic outlook, says even with the deep recession Southern Nevada is in, it’s premature to compare the decline to that in Rust Belt cities that have suffered for decades. But Las Vegas is like one-industry cities such as Detroit is to autos and Pittsburgh was to steel manufacturing.

I don't agree with the comparison. The history of the Interior West is full of dramatic ups and downs. Las Vegas went wild with growth and the entire region just went along for the ride. Real estate refugees from California inflated the impact of a successful tourism economy. Las Vegas may have been the center of a nation living on borrowed time for the better part of the last decade.

Looking to the future, Denver would be a good model for Las Vegas to emulate. Denver was able to successfully diversify its economy. But there were already some assets in place that aided with the transition, such as the myriad of government laboratories in Boulder, Golden and Denver.

A closer look at how Pittsburgh did it would reveal a more daunting course. The focus is typically after the exodus of the early 1980s. But the move away from the monocrop of steel started well before then. That's the point I was trying to make to the Las Vegas reporter who asked me to weigh in on the woes there:

Jim Russell, a geographer and Colorado redevelopment consultant who writes about the struggles of Rust Belt cities on his blog Burgh Diaspora, says the lesson Las Vegas can learn from faded industrial cities is: “There isn’t any quick fix. There isn’t any way to recapture the glory. The sooner you put the past behind you, the better.” ...

... Russell, the geographer and Burgh Diaspora blogger, says rapid growth masks hidden problems.

“An influx of migrants makes policymakers lazy. If you screw up, the growing numbers of people will hide your mistake,” he says.

Unfortunately for Las Vegas, Pittsburgh's redevelopment is at least 50-years in the making. Perhaps Hunter Morrison puts it more eloquently than I did:

The proposed $600 million casino and a $475 million convention center/medical mart that are supposed to be built in Cleveland this decade get lots of attention, but they don't really matter much, Morrison said. "What we have is a longtime weakening that began 40 years ago and it's not subject to silver bullets," Morrison said. "Casinos and convention centers don't reverse the decline of population or attract immigrants to knowledge economy."

One can see "silver bullet" projects in Pittsburgh, such as the sports stadiums and the convention center. But I would argue that the investment in human capital is the source of the turnaround. All the other stuff works because of this foundation. Chris Briem indicates that the redevelopment strategy goes all the way back to 1947.

Both Las Vegas articles discuss education as a way forward. Back to Mary Riddel:

“Let’s be cautious in talking about Las Vegas,” Riddel says. “Our story hasn’t played out yet, but we are in decline. In my assessment, when we look at the data, we are at the crossroads. What we need is new industry.

“The idea is that we can learn from Detroit and Pittsburgh. We need to look at what resources we have that we can do better and cheaper than other places, and those are the industries we want to go after.”

One way is to start investing in people and higher education because cities and states with the lowest education levels have suffered the worst during the recession, Riddel says. Cities like Denver that are more highly educated have fared much better, she adds.

Denver didn't really invest in people and higher education. Pittsburgh did, but started decades ago. Denver has managed to attract a lot of well-educated people to the region, which is how many of the boomtowns look so brainy now. In a sense, Charlotte and other Sun Belt cities were built with Pittsburgh dollars. As long as these migrants keep coming, there is no reason to raid the public coffers. When the talent spigot turns off, then the hard choices begin and recovery is a long way into the future.