Wednesday, February 29, 2012

Rural Return Migration: Mexico

Last year, 400,000 Mexicans returned to Mexico from the United States. Rural communities are bursting at the seams trying to deal with the influx of repats. On the balance, the growth is good:

"The difficulties in finding a job in the US and the threat of new immigration laws in states like Arizona have led to a curb in migration," says Carmen Dorantes, director of Hidalgo's government office to help returning migrants.

"Mexicans who live there are now deciding to return, or at least send some members of their families back to Mexico," she says. ...

... "People come with their assets to establish new businesses. Those returning may speak three languages - English, Spanish and their local indigenous language. They have new skills. In a way, it will be easier for them to find a job than for those who never left the country," Mrs Dorantes says.

And that might cause some misgivings in the local communities, as the returning migrants change the make-up of their home towns, local authorities fear.

Emphasis added. I've seen similar behavior in Rust Belt cities. Locals are less than welcoming to repats. Going home can be hard. For example, return migrants to Ireland experience social isolation. You might be from there. But you no longer belong.

The part I put in bold face type speaks to the economic development that occurs thanks to migration. Better to leave than to stay. People develop, not places.

Anchoring Pittsburgh's Boom

Pittsburgh is changing, fast. The economic acceleration is undeniable, even among the most ardent regional cranks. The strengths in eds/meds, finance, and energy are impressive enough. But none of the three are really a game-changer. Slow and steady as she goes ...

The recent news about entertainment-tech is the pop that has been lacking in Pittsburgh. 31st Street Studios is the anchor, the missing ingredient for the city's entrepreneurial scene. One of themes that Mike Madison explored at the sorely-missed Pittsblog is economic anchor tenants. The concept ties in neatly with liberal thinking about talent migration. Ideas and people should move around freely. The economic anchor tenant also encourages talent to take on more entrepreneurial risk. Employees leave the anchor for a startup. But the talent flow isn't a zero-sum game. The rising tide raises all boats, even the anchor tenant hemorrhaging talent.

The driving force behind Pittsburgh's economic anchor tenant is the Entertainment Technology Center (ETC) at Carnegie Mellon University. There has been some spillover activity from the ETC such as Etcetera Edutainment and Schell Games. The growth of these companies has been interesting to track. But the activity is a very small piece of the overall economic pie. 31st Street Studios changes all of that:

Major movie studios are cashing in with increasingly popular digital animated movies.

And Michael Kadrie believes Pittsburgh's zoetifex Studios LLC can join those Hollywood heavy hitters as he works to establish an animation production studio here.

"We're not going to be a little boutique animation studio," said Kadrie, who founded zoetifex and works as art director for a Strip District advertising agency. "We want to compete with Pixar and Dreamworks." ...

... A number of people in the industry who live in Pittsburgh or have ties to the region are supporting Kadrie's efforts.

And in a deal that further raises Pittsburgh's profile, 31st Street Studios this week announced it will establish in Lawrenceville the nation's only high-tech "motion-capture" studio outside Hollywood.

"The reputation of the city is becoming huge," said Todd Eckert, who will run the motion-capture studio and also serves on zoetifex's advisory board.

"I think the work that zoetifex is doing is timely," Eckert said. "It is another piece in a comparatively large puzzle. Maybe 10 years ago it might not have been a great idea, but today it's perfect."

Emphasis added. There is a synergy between the 31st Street Studios anchor and the ambitions of zoetifex. They will be competing for the same talent without really competing. Both are close to the source at the ETC. Talent and knowledge will, hopefully, flow easily between the two companies. My bet is that ETC culture will make sure that happens.

The entertainment-tech cluster is distinctive and Pittsburgh is a great site for such development. I think this economic activity will come to define the city, more so than eds & meds or even energy. Where have you gone, Roboburgh? Hello Hell with the Lid Off productions.

Domestic Migration Contrasts: Cleveland Versus Pittsburgh

I spent most of 2011 studying Cleveland MSA migration patterns. I failed to notice an important feature of the region's connectivity profile. This morning, I've been playing with the Urban Land Institute's interactive map detailing metro domestic migration for the period stretch from 2004-2010. You scroll your cursor over any city for a snapshot that includes the trends for inmigration and outmigration, as well as the top sources and destinations for these flows. Cleveland's profile is decidedly Ohio-centric. That's not good news. On the other hand, Pittsburgh enjoys strong connectivity (inbound or outbound) with Washington, DC, NYC, and Philadelphia.

Skewing the data for Cleveland is Akron, a metro you might as well lump in with Cleveland. The problem, as I see it, is the presence of so many sizable cities within Ohio. Nationally, interstate migration isn't as common as intrastate migration. The former should be of more concern than the latter. In parochial fashion, talent is circulated around Ohio. All these cities could use a vitality injection of outsiders.

The balance of net migration is mostly irrelevant. How much inmigration is there and where are they coming from? You can tell a lot about the health of a city by answering those two questions.

Tuesday, February 28, 2012

Pittsburgh Out-New Yorks NYC

New York City, Pittsburgh is putting you on notice. Remember how Brooklyn was pining for Carnegie Mellon University last December? The vision is to put an entertainment-tech campus in the borough. Thanks, but no thanks:

Four movie-making institutions have banded together in Pittsburgh to create what they believe is the best production site outside of Hollywood.

If a producer wants to find comparable capabilities, "it would have to be in LA. Not even New York has what we're talking about today," said Chris Breakwell, chief executive officer of The 31st Street Studios in the Strip District.

His studio, the site for major films including "The Dark Knight Rises," announced long-term agreements to house Paramount On Location, some classes for Carnegie Mellon University's Entertainment Technology Center and Knight Vision, which did the groundbreaking digital effects for "Avatar." The studio occupies a 300,000-square-foot former Crucible Steel plant on 10 acres along the Allegheny River.

Emphasis added. Why do something in New York City when you can do it in Pittsburgh, where the talent is produced? The Big Apple will have to settle for sloppy seconds. The creative Brooklyn exodus to Rust Belt cities will continue. Pittsburgh doesn't need New York. New York needs Pittsburgh.

To understand how this flip-flop occurred, you have to look at the brain circulation between the two metros. Pittsburgh and NYC are major talent trading partners. The brain drain to the alpha global city is finally paying dividends for a third tier city more renown for being stuck in a cul-de-sac of globalization. Pittsburgh just staked its claim to the title of Sixth Borough.

Monday, February 27, 2012

Youngstown Diaspora Advantage

Youngstown is shrinking. That's a big problem. The Youngstown Business Incubator makes lemonade out of lemons:

The downtown real estate market had collapsed in Youngstown, so they made that a selling advantage to software developers. Instead of paying hundreds of dollars per square foot in San Francisco they can pay $8-10 in Youngstown. I spent a lot of time during my working career in software companies all over the world and the YBI offices are as hip and nice as any.

There is a lot more that could be said about YBI, but this is Warren Expressed, not Fortune or Business Week. As YBI’s story relates to Warren, the thing I found most interesting is that they found a way to use what Cossler calls the “Youngstown diaspora” to their advantage.

They searched the database of Linked-In (the professional person’s Facebook) to find people who attended YSU and who currently work for a group of major software and technology companies – people YBI thought could be helpful to their clients. They then began a thoughtful campaign to recruit those people to the YBI cause. Cossler told me:

“Each of those people had a soft spot in their heart for their old home town. Many only left because they had to do so for professional reasons; most of them still have family and friends here; they wanted to see Youngstown make a come-back and many were willing to help us make it happen.”

I had a hand in helping the YBI craft its diaspora strategy. Looking back on it now, just two years after completing the project, the effort was more of an experiment than well-designed initiative. I learned a lot from that experience. Diaspora networking can catalyze economic development and urban revitalization. Downtown Youngstown is proof of concept.

The journalist who wrote the above article ends on this note:

How many of you know someone who left Warren and became successful and how can we tap that power to fuel a renaissance in this town?

And there is a powerful lesson in the story of YBI: Success can happen here.

Success can happen in your community, too. I can help you tap the power of your diaspora just like I have for Youngstown, Pittsburgh, and Cleveland. People develop, not places.

Sunday, February 26, 2012

Shale Gas And Talent Geopolitics

Big Coal, you have been warned. China is ready to kick the habit. The reason? Talent:

The Wall Street Journal's Jeremy Page adds another important angle to the story -- that [the smoke may help to trigger an exodus of wealthier Chinese out of the country altogether.] Page profiles a couple of these potential émigrés and trots out a compelling statistic -- a 1,000 percent rise in the last four years in the number of Chinese applications for special U.S. visas accorded to investors putting $1 million into an American company. There is a complex bundle of reasons why some newly rich pull up stakes from emerging economies and head to more established ones, including education and less corruption. One does not often hear pollution cited as one of the rationales. Now it is.

To plug this brain drain, China will shift fuels for electricity production from coal and nuclear to natural gas. The pollution problem is pushing out talent. Captive labor is unable to force much change. The most geographically mobile can.

The above is a good example of the importance of international talent migration. It can have major implications for a small coal town in West Virginia that sees no immigration. Teasing out the emerging economic geography of shale gas just got a lot harder.

Case For Economic Regionalism

Poaching industry from another state is common. This is also true within states and metro regions (job sprawl). Less notoriously, there is a war for talent and taxpayers. Somebody has to foot the bill for all those incentives:

The Pittsburgh-to-Paris flight has cost Pennsylvania and Allegheny Conference on Community Development at least $7 million of the $9 million guarantee, as the revenue generated by Delta did not meet certain minimums during the first two years of operation.

“That’s one of the risks of starting a new product,” said Ken Zapinski, senior vice president of the conference. “We sold as many tickets as the business model projected, but what we didn’t anticipate was the worst economic climate in the last 60 years and the bottom dropping out of the airfare market and ticket prices dropping 35 to 40 percent.”

Pittsburgh had flights to Paris, London and Frankfurt in the late 1990s, but they were all canceled by 2005 — leaving several area companies upset and forcing their executives to make connections to get to these cities.

Without the new flight to Paris, Zapinski said, “any of these companies might have thought about moving to New York, Chicago or Atlanta. We didn’t lose those jobs.”

And this, he added, made the $9 million guarantee a wise investment.

Classic brain drain boondoggle. If we don't pay, then everyone and everything will leave. Metros cling to airport hubs and nonstop flights like they do professional sports franchises. It's more a matter of status than economic development. Pittsburgh lost its status and the world didn't end. Industry didn't flee. Pittsburgh isn't a model for revitalization because the ACCD subsidized a flight to Paris.

I've previously tackled this issue. Pittsburgh would be better served by leveraging its existing connectivity advantages, not pandering to a few disgruntled CEOs. The low-hanging fruit is DC, New York, and even Cleveland/Columbus. I'd rather see $9 million invested in Tech Belt connectivity.

Flying into and out of DC, I can think logistically about three airports. The same is true for Pittsburgh. While living in Denver, I flew direct to Akron/Canton on Frontier Airlines. But the links between CAK and Pittsburgh are weak. Having everything at PIT is nothing more than hubris, a bit of chest-beating. The three major Tech Belt airports compete against each other instead of working in concert. $9 million falls into the cracks. Waste.

Lastly, economic fortunes can change quickly. The European Union is in crisis. Shale gas is booming. Flying to Paris seems less important than a direct to Oklahoma City. Investing in any route is a risky proposition. A regional approach diversifies the options and enhances economic resiliency. Those $9 million won't disappear like they will if Pittsburgh-to-Paris fails.

Saturday, February 25, 2012

San Francisco Is A Talent Backwater

By now, you know the drill. San Francisco is dying. If you are an artist with big aspirations, then you need to leave to succeed. The Bay Area exodus:

One company is looking to change all of that. Expose SF is an organization which intends to shed new light on San Francisco's art scene. They will do so by promoting local artists through exciting events & social media which will culminate in a large, highly publicized competition.

The creators of this organization, two San Francisco natives and an Italian, began thinking after meeting with curators of upscale galleries in Los Angeles and New York.

“They were discussing a sort of ‘artist brain drain’ that San Francisco is currently going through,” says co-Founder Zack Chen.

“I love my city. My parents moved here from Norway and Hong Kong because they knew that this is one of the best cities in the world. I was not about to sit around and let [San Francisco’s] talent leave for other places.”

What's wrong with San Francisco? What's fueling this brain drain of the Creative Class? I'm guessing intolerance and lack of first class urban amenities. That's what killed Pittsburgh. Shrinking city San Francisco is hurtling towards Rust Belt status.

More seriously, San Francisco is in good company. Similarly, Brooklyn is dying. The migration of artists is much more complicated than Richard Florida suggests. We are witnessing the rise in global prominence of second and third tier cities. You don't have to pay top-dollar to surround yourself with world class talent. Which leaves San Francisco in a pickle. The city is too expensive to be Rust Belt Chic and the quality of the artist scene there doesn't justify the cost. The talent spiral is ever downward or across the bridge to Oakland.

Friday, February 24, 2012

Pittsburgh Real Estate Boom Keeps Getting Better

The Urban Institute ranks US metro housing affordability:

According to this index, Pittsburgh, Wichita, Syracuse, Buffalo, and Youngstown were the most affordable metros in 2010 (rent burdens of 13 percent and homeownership burdens of 11-12 percent). Los Angeles, Honolulu, San Francisco, San Diego, and San Jose were least affordable (rent burdens of 18-23 percent and homeownership burdens of 34-42 percent). Overall, the figures reflect a high level of affordability. In all but the costliest 8 of the largest 99 metro areas, costs amounted to less than a quarter of income. In 81 areas, cost burdens were under 20 percent.

Pittsburgh is the most affordable metro in the entire country. However, being grouped in with the likes of Buffalo and Youngstown will not entice civic boosters to jump up and down. Never fear, Pittsburgh's real estate market (both residential and commercial) is impressively healthy:

Jeffrey Ackerman, the national director of the private capital group for CBRE, detailed how much outside investment was being made in Pittsburgh-area real estate, presenting a graphic detailing how real estate acquisitions were being made by companies and investors from far-flung places such as Arizona and 10 other states, as well as Germany.

In the process, he sees the region’s reputation undergoing a change as Pittsburgh becomes better known as a good real estate investment.

“I really think the secret is out,” he said. “And the secret is out in the institutional world.”

Most interesting to me is the expectation that shale gas companies located in the suburbs (e.g. Southpointe) will start cramming into an already crowded downtown office market. Where job density is increasing, higher rents can't be far behind. That's driving the speculative investment from far afield. Everyone is betting on Pittsburgh to win.

How The Diffusion Of Globalization Is Impacting Urbanization

The future in the Sun Belt is looking dire. The dramatic restructuring of the global economy going on now is picking a new round of winners and losers. The dark side of globalization is taking aim at the metros of the South:

The types of manufacturing for export that grew most rapidly in China during that time included the production of textiles, clothes, shoes, leather goods, rubber products — and one notable high-tech area, computer assembly. Most of these production activities involve soft materials and hands-on finishing work. “These are labor-intensive, low-value-added [forms of] production,” Autor says. “Certainly the Chinese are moving up the value chain, but basically China has been most active in low-end goods.”

In conducting the study, the researchers found more pronounced economic problems in cities most vulnerable to the rise of low-wage Chinese manufacturing; these include San Jose, Calif.; Providence, R.I.; Manchester, N.H.; and a raft of urban areas below the Mason-Dixon line — the leading example being Raleigh, N.C. “The areas that are most exposed to China trade are not the Rust Belt industries,” Autor says. “They are places like the South, where manufacturing was rising, not falling, through the 1980s.”

The Sun Belt is the new Rust Belt. As for the old Rust Belt, globalization is now working in favor of those cities:

The Great Lakes demographic and economic turnaround does not mean that growth has occurred in the pattern of the early 20th Century. Instead we see the emergence of a new set of leadership cities. If Akron, Detroit, Cleveland and Chicago paced the region’s early 20th century ascendency, the new “winners” appear to include affordable, attractive cities, many of whom are home to major universities, state capitals and key research institutions.

These areas have done well in attracting many people from the less successful metropolitan areas of the region. Columbus, for example, evidenced strong growth from the rest of Ohio and other parts of the Midwest, notably Michigan and Illinois. But perhaps more importantly, the area enjoys strong in-migration from those parts of country -- notably the Northeast and California -- that have traditionally dominated knowledge-intensive industries.

A similar pattern can be seen in Indianapolis. In recent years, as urban analyst Aaron Renn notes, the Indiana capital has enjoyed “a profile closer to the Sun Belt than the Rust Belt.” It grew its population at a rate 50 percent greater than the national average, and also had strong net inmigration, with almost 65,000 net people deciding to pack up and move to the Indiana capital.

There is a sorting going on within the Rust Belt, changing the look of the urban economic landscape. But Joel Kotkin (see above) also highlights a rebirth of prosperity in traditional manufacturing hubs. The entire Rust Belt is benefiting from globalization. I agree with Kotkin that we will see a shift in focus from the coasts to the interior. The same thing is happening in China:

A big change is now coming. Jintang is administered by Sichuan’s capital, Chengdu, which like other inland cities is beginning to boom, thanks to a flood of government investment in recent years and the transfer of some manufacturing away from the coast in search of cheaper land and labour. In Fuxing walls and lampposts are plastered with job advertisements, not for work in distant coastal factories but for positions in and around Chengdu. Some of them offer jobs with Foxconn, a huge Taiwanese firm which makes Apple’s iPads and other computer products at a plant near the city (for pay of more than 2,000 yuan—$320—a month, says one pink poster). Foxconn’s largest factory is in Guangdong, but it opened a huge, modern operation in Chengdu in October 2010, and has talked of expanding to an astonishing 500,000 staff within five years. Chengdu officials have been scrambling to make sure that as many jobs as possible go to locals (who appear undeterred by a number of unexplained suicides at Foxconn’s huge plants in China).

I blogged about this trend back in 2010. It's greenfield urbanism, an abundance of frontier opportunities in a city environment. Talent gets the same benefits of density without the steep costs you find on the coast. The Creative Class is fleeing cool cities in droves. Globalization is diffusing.

Thursday, February 23, 2012

Urban Jewels Of Appalachia

In Northern Appalachia, there is Pittsburgh. Chattanooga anchors Southern Appalachia. Both cities are on the cutting edge of urban chic:

Forget Austin, forget Brooklyn, forget Portland, forget Silver Lake. What are the cities on the verge of hipsterfication right now?

Chattanooga heads the list. Pittsburgh merits runner-up status. Neither city succeeded following Richard Florida's Creative Class program. Thus, the Rust Belt may look to Appalachia for urban revitalization:

Chattanooga has gone from a “tough grimy place where there was no investment, and very few prospects,” said James Brooks, program director at the Washington-based National League of Cities, to a city where quality of place is credited with helping attract investment such as Volkswagen’s $1 billion North American assembly plant that opened last year on a former brownfield site. That VW plant now employs 2,500 people.

It is a place that has “really completely transformed itself and you can see a beginning and end,” Brooks said. ...

... The Detroit Regional Chamber of Commerce, in 2010, led a local delegation to Pittsburgh to learn more about the area’s economic turnaround. The lessons brought back included committed leadership of high-profile CEOs, collaboration, leveraging of higher education assets and diversification that didn’t overlook existing key industries. The chamber is incorporating strategies that reflect those ideas in its economic-development efforts. Its upcoming Mackinac Policy Conference will feature a discussion on urban revitalization.

Benjamin Erulkar, the chamber’s senior vice president of economic development, said Pittsburgh is “a standout” for what it has accomplished. “If people don’t want to move to your city, or if people want to leave, then your prospects of succeeding at urban reinvention are almost nil,” he said.

I can't speak for Chattanooga, but Pittsburgh isn't resting on recent accolades. The full court press continues:

Regardless of the fuss surrounding Mr Obama’s jobs bill, in the fourth quarter of 2011, leading state officials from all over the US were flocking to Asia. In October, Mr Hormats himself joined the six governor-strong mission to Beijing, led by Washington state’s Christine Gregoire, followed a month later by Northeast Indiana Regional Partnership representatives travelling to Taizhou in China and Virginia governor Bob McDonnell visiting Mumbai in India.

On top of that, some US regions are taking an unconventional approach to getting themselves noticed. Suzi Pegg, Pittsburgh Regional Alliance vice-president of global marketing, says that apart from conventional high-level meetings, city representatives tour together with the Pittsburgh Symphony Orchestra to conduct business talks in tune with spectacular renditions of Brahms and Rachmaninoff. “I would characterise our efforts to promote the Pittsburgh region for FDI as robust,” says Ms Pegg.

That's what I call leveraging your legacy assets instead whining about crushing legacy costs. Pittsburgh is a metro dynamo, in the heart of Appalachia. Quoting Nick DeIuliis, president of CONSOL Energy Inc., in the most recent issue of the Pittsburgh Quarterly:

Pittsburgh may be in the Commonwealth of Pennsylvania, but our economic ties make us much more the capital of Appalachia. Look at the drivers of the economy, culture and how we view things socially. These 32 counties have so much in common.

Emphasis added. Mr. DeIuliis is referring to the Power of 32 regional initiative. Organizers are pushing the Appalachian identity. I think this makes more sense than embracing the Rust Belt or a Great Lakes megaregion. Pittsburgh and Chattanooga are thriving in the hills of Appalachia.

Wednesday, February 22, 2012

Rust Belt Return Migration

Global cities function like a university. Young talent migrates to the biggest metros, leaving a few years later after undergoing intense economic development. For the Rust Belt, high school graduates leave the region and matriculate someplace else. Brain drain. Then these college graduates leave the host community for big city. Eventually, many will return home better educated and earning much more money than they would have if they had stayed. Brain gain. The outmigration dividend for Pittsburgh:

A graduate of Woodland Hills High School, Rodgers earned a degree from University of Maryland and moved on to Seattle, a land of opportunity for game developers.

For the next eight years, he worked for gaming companies like Nintendo, Microsoft and WildTangent on titles that included Super Mario Pinball, Gameboy Advance and Conker: Live and Reloaded. ...

... Rodgers returned to Pittsburgh and started HeadRight Games through Innovation Works' AlphaLab program.  He hopes to launch the first game, tentatively called Amusement World, this May, a sort of Disney World meets Willy Wonka theme park with rides, hidden object puzzles and quests.

On average, over 37% of migration to US metro counties is return migration. I figure this percentage is much higher in the Rust Belt. Slice the data any way you want. Return migration is a big deal. Cleveland is tapping into that established flow, hoping to grow the number boomeranging back:

While Pathways focuses on retention of talent, the Boomerang Initiative is all about attraction of talent -- specifically, successful former Clevelanders interested in moving home. Spurring this initiative, said Global Cleveland President Larry Miller, was a study he commissioned that found that more Clevelanders returned from New York City between 1996 and 2008 than moved to the Big Apple.

"We're trying to accelerate that trend," Miller said.

Emphasis added. I'm the one who authored the commissioned study. You can read more the "boomerang" initiative here:

Jim Russell, an economic geographer from Pittsburgh, sifted 13 years of IRS tax-return data to map Greater Cleveland's migration patterns. He found that the beaten paths lead to five main cities: Chicago, New York, Atlanta, Washington and Los Angeles.

For the record, I'm not from Pittsburgh. But I've done similar research for the Garfield neighborhood, crafting a strategy that will help revitalize this part of the city:

Chain Migration Theory describes an efficient way of attracting a designated population to a city or city neighborhood. It is a process that starts with the few in-migrants already in the city: they are the first links in the chain. They have contact with other people like them outside the city and this is used as a way to locate new candidate in-migrants, who become the second links in the chain; these second links are attracted by the personal endorsement of the first link in the chain as well as by targeted efforts by the city to provide them the resources they need or want. The process is iterated so that the chains grow with third and fourth links; and so on.

What makes this chain strategy of in-migration so effective is that it minimizes the risk in-migrants perceive themselves to be taking. They are not moving to an unknown, if interesting, new place. They are moving to the neighborhood with the trusted endorsement of a friend.

Our chain migration mechanism will be supplemented by another resource. It will also capitalize on the good will felt for Pittsburgh by its expatriates (those who have left Pittsburgh and live in other places). Many Pittsburgh expatriates have a strong loyalty and love for Pittsburgh and will support it from afar. Pittsburgh repatriates (those who left Pittsburgh and have now returned) are also intensely loyal to the city. These two groups will be the key groups to focus on to reach our 6% goal.

In order to generate more inmigration, a city should better leverage established flows. The best way to get talent is to export it. Typically, the most important destinations for brain drain are the most important sources of talent for Rust Belt metros. There are other important factors to consider. But you get the gist of the approach.

The work I did for Global Cleveland is my third return migration project. Each iteration, the technique gets more refined and targeted. Most of the development of this idea can be found at my blog, Burgh Diaspora. I'm looking for a community willing to let me craft a fourth iteration of return migration engineering. If you are interested, please contact me via email, jimrussell [at] globalburgh [dot] com.

Shrinking Rich

A dying city is a wealthy city. Education boosts earnings but slows birth rates. In terms of population, why it is better to be a busttown than a boomtown:

For much of the nation’s history, a booming population symbolized economic vitality and growing influence in the world. But environmental groups have questioned how many more people the nation can support, fueling a push for “sustainable” communities that encourage conserving green space and relying less on autos.

“Population does not necessarily equal economic growth anymore,” says Bill Fulton, vice president for policies and programs at Smart Growth America, a coalition of environmentalists, planners and others working to slow sprawl.

He points to Las Vegas’ population boom, which created low-paying jobs that disappeared when the housing market collapsed. By contrast, he says, cities such as Pittsburgh lost population but household wealth went up.

Emphasis added. Population growth matters, but not as much as conventional wisdom contends. Last Friday, I wrote about how the most successful US cities are net migration and net income losers. That flies in the face of brain drain hysteria. If talent leaves, then something is wrong with the region. This line of thinking is backwards and reactionary.

Bill Fulton is also guilty of fetishizing population statistics. There is no such beast as "sustainable" growth. Regions have to manage a boom or a bust. Density can help address either problem. We need to move the discussion away from population data.

Friday, February 17, 2012

Fearing Urbanization

We must save the Heartland. Our identity is at stake. That's a common rationale given for rural economic development. Perhaps in a future post, I will discuss the genealogy of this peculiar cultural geography. Today, I want to highlight how this perspective undermines urbanization and promotes sprawl:

Over the next 20 years or so, the global urban population is expected to rise to approximately 5 billion. This explosion of urban life could be greeted enthusiastically, as a sign of progress and development – moving people off the land and out of back-breaking labour. But far too often, urbanisation is instead seen through the contemporary prism of social, political and ecological concerns: overpopulation, fears about the breakdown of traditional communities, and the dangers cities create for the broader environment, to name but a few.

Emphasis added. Cities pull people from the hinterlands, from established communities. Talent moves from places rich in social capital to an anonymous existence defined by weak ties with fellow urbanites.  Urbanization means more bowling alone. Cities make Alexis de Tocqueville cry. Democracy is dying.

Migration is defined as a detriment to community development. Group interests should trump individual interests. The migrant is self-interested and disruptive, a threat to a way of life. That's true whether one is leaving or a recent arrival. Migration is bad.

For cities, migration means vitality and growth. Too much social capital is bad. Individual interests trump group interests. Concerning nationalism, cities have long posed an existential threat, from anxiety about epidemics to the erosion of state sovereignty. Quite simply, cities threaten the status quo.

Regarding suburbanization, the greenfields of the outer-ring are a bucolic sanctuary from the evils of the city. It's supposed to be the best of both worlds, balancing the urban and rural. Density means filth, disease, and depravity. The rural is, ironically, the cradle of culture. The countryside is a touchstone for our true, good selves. Spend time in the city at your own peril.

The xenophobe is anti-city and anti-migrant. In my view, policies designed to stop brain drain are fundamentally anti-urban and anti-immigrant. These policies are, as Brookings might claim, anti-economic development. Investing in urban amenities in hopes of retaining talent is an incoherent strategy. Successful cities are net exporters of talent:

The notion of American class mobility is deeply rooted in the ability to make more money. But class mobility can also be measured in the ability to actually move. Using IRS migration data from the 2009-2010 period — which measures the inflow and outflow of citizens who file taxes from county to county — Eric Rodenbeck and his team at San Francisco-based design firm Stamen created a map of America that is as extreme as ever. By using the IRS figures and mapping them out on U.S. highways with open-source technology provided by OpenStreetMap, they've created a roadmap of the parts of America that are losing and gaining, and the results are surprising. "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." But between the two is a middle that doesn't move, that actually exists in the middle: King and Loving counties in Texas remained unchanged. The rural areas between coasts show movement not from coast to coast, but off the beaten path, within state lines. Stamen presents an America that is in both a state of unrest, and unable — or unwilling — to move at all.

Emphasis added. US global cities develop talent like a university. The entire country (and the world) benefits from these urban graduates. Geographic mobility is economic development. People develop, not places.

Thursday, February 16, 2012

Rust Belt Romantic

No, it isn't a Midwestern thing. It is a Rust Belt thing. Rust Belt culture, that is:

Raised in Erie, Pa., Casey now makes her home in Cleveland, where she initially moved to attend the Cleveland Institute of Art. Following school and a brief stint of living in Chicago, she returned to the city and has referred to herself as a Rust Belt romantic.

"It's not too uncommon to find people here who sort of love the broken-down industrial history of the area. It's very bittersweet, which may be a Midwestern thing," she says. "There are people here transforming leftover remnants - old manufacturing commercial buildings into studios and apartments and other interesting projects. It's a pretty slow process, though I find a great deal of inspiration from the landscape."

Amy Casey is an artist, a painter, and the Rust Belt is her muse. Ms. Casey and I share a hometown. We share a landscape:

Casey has lived more than a third of her life in Cleveland, but she grew up in Erie, Pennsylvania. The family home is in a quiet neighborhood, with a patch of sloping backyard above a shallow ravine and a creek. As you travel the two miles from there toward the small city's downtown area, the route is soon lined with decaying walls. Empty windows perforate time-abased late-19th-century manufacturing plants. Such sights are a fixture in the consciousness of anyone living at this end of the northeastern manufacturing economy's long ebb. Depression, recession and the lower costs of doing business elsewhere have stripped the flesh from places like this — Youngstown and Akron, Cleveland, Toledo and Detroit. Coldly framed for much of the year by the blank paper of off-white skies, they have their own desolate beauty, which many romantically inclined artists have photographed, drawn and painted.

Like them, Casey may be a closet romantic, but generally, her practical façade is front and center. Her particular brilliance is to snatch all this visual material up like a child putting away a floor full of toys, stuffing it deftly into pictorial space with All-American, Dr. Seuss-meets-Rube Goldberg-meets-Edward Hopper combinatory panache. "There you go," she seems to say. "All done," and slams the door.

Except that Casey is very much not a child, and her motives aren't merely a matter of admiration for texture or atmosphere. Mainly, she is too pessimistically kind to pronounce facile judgment on the post-apocalyptic scenes she depicts. If anything, she's trying to shore up her native landscape, proposing impractical solutions (what else?) to insoluble problems.

Emphasis added. I am drawn to intractable problems. I obsess about them. But I never thought about that impulse as a romantic notion. I see beauty and hope in ruin porn. Some of my favorite paintings are the dreary city-scapes of Charles Burchfield. I'm romantically attached to the images. Childhood nostalgia, I suppose.

From Erie, my Rust Beltness stretched northeastward, not midwestward. Buffalo, Rochester, Utica, Schenectady, Troy, and on to similar cities in Massachusetts. This experience taught me that the Rust Belt is not the Midwest. Rust Belt culture isn't Midwestern culture. If anything, the Rust Belt has replaced the Midwest.

New England, Appalachia, and the Midwest have all fused together to form the Rust Belt. Try to forget the historical regional narratives you were taught in school. Really, the heart of it all is Cleveland. The spheres of Chicago and New York overlap in Ohio. That's where the Rust Belt gumbo is most apparent. Amy Casey seems to be at home there. I suspect I would feel the same way.

Wednesday, February 15, 2012

City Public Schools Aren't Broken

A little over a year ago, my wife accepted a job offer that required a relocation from Greater Denver to Greater DC. At that time, both our children were pre-K. School quality was a major factor in our decision about where to live. However, with "good" schools came dear rental costs. What to do?

I started looking for geographic arbitrage opportunities. I'm of the mind that most people get a poor return on their real estate investment in terms of schooling for their children. A substantial foreign born enrollment in a public school is a strong indicator of an under-valued institution. ESL issues drag down test scores and stories about illegal immigrants route native born domestic migrants elsewhere.

A few years back, Herndon was a lightening rod for the hysteria about immigration to Northern Virginia. A number of people warned us to steer clear of Herndon because it was dangerous and the schools were horrible. Relatively lower rent costs supported the negative reputation. So, I focused our housing search in Herndon. I was pleased with many of the options we found there and the associated schools reminded me of life in Colorado. There are large numbers of Latinos, which is what attracted us to our former neighborhood in Longmont.

We ended up in Leesburg because of other considerations (e.g. proximity to extended family). But I still think Herndon would have been a good choice. I like the idea of my children going to school with other kids who have parents born in another country. That's my definition of an excellent education. I'm in good company:

In interviews, affluent foreign-born New Yorkers said that like all conscientious parents, they weighed various criteria in choosing schools, including quality, cost and location. But many said they were also swayed by the greater ethnic and economic diversity of the public schools. Some said that as immigrants, they had learned to navigate different cultures — a skill they wanted to imbue in their children.

“When they go to public school, they’re in a whole new world, a whole world of different people and different values, which is what the world is like,” said Lyn Bollen, who grew up in Birmingham, England, and attended — and taught at — state-run schools. “Shielding them from that is doing them a disservice.”

Well said. I share this sentiment. Urban public schools mimic the economic development that happens because of migration. Private schools are walled-off and territorial. This is a world of borders, the old economy. The benefits of affluence are muted in such an environment. You want to give your child a leg up in the world? Start by looking at the public schools with lousy test scores.

Tuesday, February 14, 2012

Rust Belt Chic Brooklyn Is Dying

Working class cool Brooklyn is hard to find these days. That's the price you pay for gentrification. Eventually, even the hipsters get priced out of the neighborhood and move to Cleveland. From BBC News:

In the years since, the neighbourhood has transformed not once, but twice. First came the arty hipsters scene and now gentrification has turned old industrial sites into residential developments with rents almost as expensive as Manhattan.

Some of the old stalwarts remain. "The neighbourhood very drastically changed from immigrant to artistic", says the owner of Beata Delicatessen, Mieszko Kalita. Most of the newcomers, he notes while packing the shelves with Polish foods, are English speakers.

Zach Schieffelin, the owner of CarbonNegative, an upmarket shop for scooters, is catering to this new crowd. "I had friends who rented a big studio here for $800 10 years ago, now I don't know anybody who is paying less than $2,000", he says.

Check out the video associated with this story. One of the people interviewed was an urban pioneer in Greenpoint. There is a romantic attachment to those early days of gentrification, when a neighborhood is still an undiscovered gem. Eventually, the migration is seen as wrecking the authenticity of a place.

The stabilization of a neighborhood's identity is an indicator of a dying community. Residential churn is a hallmark of vitality. The best times for a place seem to be when the two are in balance. There is churn, but not enough to change the current dominant identity. That's the tipping point. It's all downhill from there and the urban pioneers move somewhere else in order to get that Rust Belt Chic fix.

Monday, February 13, 2012

A Pittsburgh House

Thanks to Ben Schulman, I picked up on a good Pittsburgh story in the New York Times that I would have otherwise missed:

Ms. Zielinski, who is 54, grew up in Michigan. School didn’t interest her much, she says; she wanted to get out and work. She did a number of jobs, like cleaning house and bartending. She and Mr. Zielinski met after she moved to Pittsburgh. They married in 1985, raising her children from her first marriage, Melissa, now 33, and Cass, 32.

They wanted to spend the next chapter of their lives near their business, but were hoping for a radical departure from the traditional homes they had lived in. The hilly lot they owned behind the factory was not very large, so building a house on top of the factory made sense. For inspiration, they drove along the rivers, photographing old steel structures; the one they liked most was a steel building on concrete pillars that jutted out over the Monongahela. But when they showed the photos to architects, their ideas, Ms. Zielinski says, were awful.

“One architect just made a section of our factory roof flat and put a traditional house on top of it,” she says. “One did a house where one section was glass, and we could look down into the factory. I said: ‘Why would I want to look into my shop? I just spent the whole day there.’ ”

Mr. Fisher, who had started his own firm, Fisher Architecture, a few years earlier, studied the picture, and then suggested something different: building the spine of the house on the lot behind the factory and cantilevering a section over the factory roof. At one of their first meetings, Ms. Zielinski recalls, he drew a sketch for her on a paper towel. “I was very calm, but my whole insides, there was like a party going on. I went out to the factory and said to Bob, ‘We have our architect.’ ”

The pictures of the house associated with the article are thrilling to behold. It's very Rust Belt Chic Pittsburgh. Glorious.

More Exceptionally Good Pittsburgh

When good enough looks like a boom:

[Of all the housing markets shown,] only Pittsburgh, Little Rock and Oklahoma City (indicated on the Fed chart as Oklahoma) had a higher cost per square foot in 2011 than in 2006. In Raleigh, N.C., prices were about flat.

Not bad for a dying city.

Rust Belt Chic: Pittsburgh Taverns

Chicago is dying. If you are looking for a blue collar fix, then you must move to Pittsburgh or Buffalo. While Chicago's tavern culture wanes, it is cherished elsewhere:

Some cities celebrate old-fashioned taverns. The Pittsburgh History & Landmarks Foundation organizes tours of local drinking spots, says Arthur Ziegler, the foundation's president. About 50 people participated in the December outing of the Society of Tavern Seekers. Many taverns are unknown even to Pittsburgh residents and retain historical architecture and signage. "It's all very appealing," he says.

In Buffalo, Marty Biniasz and Eddy Dobosiewicz founded Forgotten Buffalo, which leads tours of local sites, including pubs. "The neighborhood tavern became an oasis" for men who worked in steel mills and other factories, Biniasz says. A resurgence in interest is being driven by young people who "are looking for authenticity and are rediscovering there's a real heart and soul in these places," he says.

Emphasis added. That would explain why talent would skip Chicago and opt for Buffalo, Rust Belt Chic. Chicago may be more global, but the city is losing its "heart and soul". "Rust Belt" transforms from pejorative to desirable character.

No doubt, regional economics will privilege Chicago over other places in terms of attracting migrants. But such a boutique flow can jump start a Rust Belt city like it did in Austin or Portland. The resurgent interest in authentic taverns is a leading indicator of hipster migration. I witnessed such a trend firsthand while working at Al Nye's Polonaise in Minneapolis during the recession of the early 1990s. The two martini lunch generation mingled with art students from the University of Minnesota for wild Friday and Saturday nights. Look at how Nye's characterizes itself today:

Al Nye bought the place in the late 1940's, and being a machine shop foreman himself, he kept it close to it's blue collar roots. In 1964, his success at running the bar enabled him to buy the building next door for a dining room addition, which he renamed The Polonaise Room. Thankfully, all the 1960's hipster regalia is in full bloom at Nye's: the curved piano bar with Chopin portrait, the red carpeting, the dark wood paneling and the gold flecked booths. Like it has since it opened, Nye's still anchors the gateway to the Nordeast and continues to add to the funky, indescribably irreverent personality of this section of town.

I think the above place narrative captures the allure of Pittsburgh and Buffalo (as well as other Rust Belt cities). Neither city does a very good job of selling that brand. Regardless, the migrants keep coming.

Sunday, February 12, 2012

Loco Localism

Anxiety about brain drain comes from a dark place, xenophobia. Homegrown talent is better than talent from someplace else. The locals-only ethos is strongest in dying communities. Welcome to Rutland, Vermont:

And so four boys from the Bronx arrived in September 2010 and a fifth a few months later, moving in with host families in this faded city of 16,500 and enrolling at a school that, with only 95 students, was barely afloat.

Quickly, the basketball team was transformed, notching a record of 16-7 for the 2010-11 season, a stunning turnaround from the previous year’s 2-18. This season, the Mounties, as the team is known, are 15-1 and sailing toward the state playoffs.

But the story of the Bronx boys in Rutland is not a uniformly happy one. Some students and parents are livid about their presence on the team, saying it deprives local players of court time and is an underhanded tactic by Mount St. Joseph to improve its team.

Forget the feel-good story of some kids from the Bronx getting a good high school education. Little Ethan isn't getting enough court time. If a star player grew up in the Bronx, then that's cheating. You need four generations to count as a real Vermonter, ayup.

Thinking, acting, and buying local isn't sustainable. We fear the foreign and somehow that's okay. It's more environmentally friendly. We justify our exclusion of outsiders in bizarre ways. People develop, not places.

More Dark Clouds Over Silicon Valley

Migration is economic vitality. Immigration can (typically does) gloss over a negative net domestic migration story. Matthew Yglesias speculates about the impact of the Facebook IPO on the future of Silicon Valley:

In The Gated City, Ryan Avent observes that population in the Silicon Valley area actually fell at the height of the 1990s tech boom. Try to imagine the birth of the great American industrial clusters if the invention of mass produced automobiles hadn't led to large-scale population migration toward Detroit? You can't have a boom without boomtowns.

Yglesias is sounding the alarm. Upward spiraling real estate prices can strangle the tech boom. On one hand, I'm sympathetic to this argument. Expensive New York City is pushing talent to Istanbul, where you can live out your Jane Jacobs fantasy on the cheap. Furthermore, global talent migration patterns are shifting away from the economic giants in the United States. Like Canada, Silicon Valley is too dependent on international flows.

On the other hand, I've learned that churn is more important than net migration. The strongest US metros tend to be domestic migration losers. Immigrants bolster the population numbers. No one sees a demographic crisis. I concede that a city can't shrink forever and thrive. But we give way too much weight to the population number. Talent is still moving to New York in droves, even if the metro spits out more than it lets in.

I know that Silicon Valley is concerned about the lack of local talent production. The population decline that Avent mentions might be a function of increasing education and declining birth rates. The number of young dependents could be plummeting. Likewise, the workforce is booming. It's a boom without boomtowns if we only consider population across all ages.

Finally, the next tech boomtown may be in India. But Silicon Valley will be plugged into that growth. Talent trade is not a zero-sum game. Declining population and all, Silicon Valley will be at the heart of global innovation.

Saturday, February 11, 2012

The New New York City

Any American who wants to move to New York City will have to leave the country. Sao Paulo is one possibility. Istanbul is another option. From the latest New York Times Magazine:

On my way out, I ran into Mari Spirito, a longtime director at 303 Gallery in New York. Spirito had just moved to Turkey to set up a nonprofit called Protocinema. Above our heads, Arabic script was etched into the marble: “He who earns money is God’s beloved servant.”

“In New York it feels like the best years are behind us,” she said. “In Istanbul it feels like the best years are yet to come.”

Like London, there's no more frontier left in New York. Punk is dead. The city's own success squeezed the life out of it. Jonathan Raban, author of "Soft City", provides the best epitaph for New York while lamenting what became of wild London:

The inevitable consequence is that diversity is being driven from the central city to its remote peripheries – a trend that is reflected in metropolitan areas around the world. Here in Seattle, for instance, to find good Indian, Chinese or Korean restaurants one now has to make a 20-mile drive into the suburbs, which is where immigrants, along with artists, students, freelance writers and other natural denizens of the soft city are increasingly moving because they can’t afford the alpine rents of downtown. The densely populated inner-urban honeycomb – what Henry James, writing of London, once called “the most complete compendium in the world” – has become so expensively reconstructed, so tarted-up, that only people with a merchant banker’s income will soon be able to live there, outside of the steadily diminishing supply of low-rent public housing.

Either you move to the suburbs or head to Istanbul. If you aren't up for playing expat and would like the soft city experience in an actual city, there are domestic options. For the Left Coast, Portland beckons. For the East, it's Pittsburgh. Pittsburgh more so than Portland, the best years are yet to come. In the Midwest, Chicago's best years are behind it. The urban frontier is now in Detroit. The South? That's easy. Big Easy. Atlanta peaked about a decade ago. And as you know, Miami is dying.

But if you want to experience what New York was like in the 1970s, then you must go to Istanbul or another emerging cosmopolitan center. You have to find an "Instant City" that suits you. For Americans, life is elsewhere. Time to emigrate.

The Trouble With Silicon Valley

Silicon Valley is too dependent on talent migration. The same is true for Portland, Oregon. The Financial Post sees the same problem in Canada:

Canadians have long taken for granted that a constant stream of skilled foreign workers dream of the opportunity to immigrate here.

The country’s growth model is essentially built on that assumption.

But as the world economic order shuffles, so do the opportunities for mobile talent.

“They are not lining up,” said Benjamin Tal, deputy chief economist at CIBC World Markets. “We’ve got to wake up to this realization.”

That's just the introduction to an article that details a crisis in the making, a slow motion demographic train wreck. Increasingly, immigrants are returning home and enticing others to stay. From the BBC:

Hugo Stevens is part of a new generation of innovators in Mexico. Young and well educated, he is choosing to develop his career in Mexico City rather than take his expertise abroad. ...

... Mr Stevens feels the need for young people to leave Mexico is no longer so acute. He says Mexican internet companies are in same stage some of the big Silicon Valley companies were barely a decade ago.

This emerging talent crisis is not something that progressive immigration reform can solve. In fact, it makes the situation worse. What happens if (when) the talent supply dries up?

Pittsburgh Railroad Cluster

Pittsburgh is overly reliant on eds and meds. Shale gas can't save a postindustrial city in decline. A Pittsburgh that booms certainly can bust. It has happened before with steel. That's about the sum of the cynicism about the recent run of good fortune in Southwestern Pennsylvania. The goods times can't possibly last.

Pittsburgh is much more than eds and meds (e.g. finance) or shale gas (e.g. nuclear power). Introducing (at least for me) the railroad industry cluster:

The railroad industry is picking up steam again, after losing ground decades ago to the nation's trucking industry. And Pittsburgh's expertise and history in the business -- Andrew Carnegie and the city's other industrialists needed good ways to move their steel a century ago -- has put the region on track to benefit from rail's resurgence. ...

... It's no accident that so many railroad-related companies happen to be based in the Pittsburgh region.

The relationship between the railroads and the industrialists during the boom years of Pittsburgh's steel industry was a close one because railroads were so important in delivering steel and materials used to produce steel.

The rise of eds and meds did not displace legacy industries so much as it diversified the regional portfolio. Just so happens that right now, many sectors are swimming in the same positive direction. A shale gas bust (the current state of affairs) won't matter much to the Pittsburgh economic engine. Williamsport, PA is a different story. What happens there when the rush ends? At least residents there won't have too far to move to find jobs.

It's Halftime, America

We are all workers. Imported from Detroit. It's halftime in America. The common thread is the Wieden+Kennedy agency in Portland, OR. The Rust Belt ethos can sell jeans and cars. It also signals a swing in political fortunes:

The two-minute commercial is a magisterial piece of film-making. The choice of 81-year-old Mr Eastwood, a movie hero revered by both conservatives and liberals as the face of this new spirit of American industry, ranks as a stroke of genius. Over moody shots of everyday American life, he talks of a nation where “people are out of work and they’re hurting”, but promises: “This country can’t be knocked out with one punch. We get right back up again – and, when we do, the world is going to hear the roar of our engines.” The ostensible purpose – selling cars – emerges only at the end, when Chrysler’s brands appear on screen.

For critics on the right, such as Republican strategist Karl Rove, the message of re­vival was a payback from the carmaker to its patrons. Chrysler was bailed out with federal loans and equity investment in 2009; and was part-owned by the government until last July, when the Treasury sold its remaining stake to Italian carmaker Fiat. Of the $12.5bn taxpayers committed, about $1.3bn will not be recovered, the Treasury says. “I was, frankly, offended by it,” Mr Rove told Fox News. “The president of the United States and his political minions are, in essence, using our tax dollars to buy corporate advertising.”

At Chrysler’s Jefferson North plant in Detroit, where part of the advert was filmed, they see the advert differently. When it is mentioned, workers puff out their chests in pride. “It expressed how we feel,” says Sean Love, a 41-year-old assembly line worker from west Detroit whose enthusiasm is infectious. “There’s a primal, real, tangible sense of optimism here now.”

Emphasis added. I hazard to guess that Karl Rove was thinking exactly what I was thinking while watching the spot during the Super Bowl. It's Morning in America:

The over-the-top optimism propelled Reagan to a second term in the White House. And there was Clint Eastwood, last Sunday night, standing before viewers as a vintage Reagan Republican selling the success of Barack Obama. That's all well and good if there is actual optimism to tap.

As I recounted yesterday, workers are sticking around Michigan instead of looking for greener pastures. The state is a leading indicator of economic recovery. Migration is a useful measure of optimism. The timing of the ad couldn't have been better.

Obama is banking on the Rust Belt Reset strategy. His campaign will align itself with success stories such as Pittsburgh's:

Six days from now, Eve Picker, cityLAB’s intrepid CEO, will be meeting at the White House and wants to hear from you:

Help wanted! 6 days from now I’ll be at the White House, in a meeting with the administration and other Pittsburgh business and civic leaders.They want to hear how they can help spur job creation and economic development in Pittsburgh.They want to hear our ideas about what they could be doing more or, or less of.

While I have ideas, I’ll bet all of you have more. Send them to me and I’ll write them up and take them along!

The White House is putting its chips down on Rust Belt cities. That's a smart bet. The Republicans, on the other hand, are hoping for failure. It's halftime, America and the GOP doesn't want to leave the locker room.

Friday, February 10, 2012

Rust Belt Reset Re-Elects Obama

Obama will win the upcoming election regardless of whom the Republicans trot out to challenge him. The economy is a strong predictor of voter behavior. The New York Times with the analysis:

Ryan Avent has an eye-opening post on The Economist’s Free Exchange blog, noting that the economy is improving more rapidly in swing states than in the rest of the country.

There's a migration tale buried in the political prognostication. Michigan is one of those swing states hard hit by the recession, but recovering quickly. I blogged about a demographic report yesterday to make a point about the misconceptions about Michigan outmigration. More from state demographer Ken Darga:

"Michigan usually leads the nation out of a recession," says Darga, "and that is what is happening again. This is what normally happens during a recession."

Darga points to new numbers released recently by the Michigan Department of Technology, Management and Budget. Those stats show over the past 3 years, fewer people appear to be leaving Michigan for other states ... especially young adults. Darga says that could be because the economy is improving and more jobs are being added in the state. He says part of that is due to interest rates. As rates go down more people buy cars and more jobs are created in Michigan to deal with the demand.

Emphasis added. Michigan's charge out of the recession is already showing up in the migration data. That's bad news for the GOP. The downturn did spark an exodus from Michigan. That's over now, along with the Republican chances of reclaiming the White House.

Thursday, February 09, 2012

The Michigan Exodus Myth

Everyone is leaving Michigan! We must plug the brain drain! Please, recent graduates, stay! What a bunch of nonsense:

Contrary to common belief, Michigan’s overall rate of migration to other states has consistently been lower than the corresponding national rate. Michigan had lower rates of domestic out‐migration than the nation as a whole from 2009 to 2010 for all age groups below age 60.

Michigan’s overall rate of domestic outmigration for 2009-10 was actually the 5th lowest (i.e. 5th best) in the nation, surpassed only by California, Ohio, Texas, and Pennsylvania. Michigan also had the 5th lowest rate of out‐migration for 2006-07, but it dropped to 6th lowest for 2007-08 and 8th lowest for 2008-09.

Michigan’s recent losses of population share have primarily been caused by low rates of inmigration from other states rather than high rates of out‐migration.

For the outmigration obsessed in Ohio, the emphasis added is for you. Remember that the next time Governor John Kasich tries to sell you a boondoggle designed to keep graduates from leaving. He's trying to fix a problem that doesn't exist.

As for Michigan, we've known for some time that anemic inmigration is the issue. But the myth persists because politicians see the value in stoking the brain drain fires. Rick Snyder:

Snyder isn't the first governor hoping to reverse Michigan's so-called "brain drain" -- remember "cool cities?" -- but as the head of a former tech company, he's hoping to engage young people online and keep them from becoming "just another yuppie in Chicago."

Snyder should be making his pitch to those faceless yuppies in Chicago, not engineers graduating from the University of Michigan. Wherever you hear the bang of the brain drain drum, bad policy is sure to follow. The party at the top changes, but the song remains the same. Everyone is leaving the Rust Belt. Michigan is dying.

Oregon Is Dying

Today's domestic migration winner is tomorrow's loser. Without immigration, the top of the population list would be heavy with shrinking cities. As US geographic mobility continues its decline, Oregon has some soul-searching to do:

As Oregon’s total fertility rate remains below the replacement level and deaths continue to rise due to ageing population, long-term growth comes mainly from net in-migration. Working-age adults come to Oregon as long as we have favorable economic and employment environments. During the 1980s, which included a major recession and a net loss of population, net migration contributed to 22 percent of the population change. On the other extreme, net migration accounted for 73 percent of the population change during the booming economy of 1990s. This share of migration to population change declined to 56 percent in 2002 and it was further down to 32 percent in 2010. As a sign of slow to modest economic gain, the ratio of net migration-to-population change will increase gradually and will reach 70 percent by the end of the forecast horizon. Although economy and employment situation in Oregon look stagnant at this time, migration situation is not expected to replicate the early 1980s pattern of negative net migration. Potential Oregon out-migrants have no better place to go since other states are also in the same boat in terms of economy and employment.

Emphasis added. Other states are not in the same boat as Oregon. What about Texas? I think a return to the early 1980s pattern is a distinct possibility. At least, if you swallow whole the offered rationale for the rosy projection.

As far as Portland is concerned, I cast an eye towards the real estate market in Silicon Valley. The New York Times offers some speculation about the impact of Facebook going public:

It will be some time before the first Facebook shares are sold to the public, and even longer before Facebook’s employees are able to turn their paper wealth into cash and officially take their places as the newest members of the 1 percent. But the mere anticipation of the event may pour a little kerosene onto what is already a fairly hot local real estate market.

That should excite the folks in Oregon. Bay Area real estate refugees have been very good to Portland. The geographic arbitrage play looks to be getting stronger. And, if the economy is relatively worse in California, then neighboring Oregon would benefit from even more inmigration. Concerning migration, proximity matters.

Wednesday, February 08, 2012

Take II: Miami Is Dying

Miami is dying. Around here, that's old hat.Why migrate to the South of Florida when you could be thriving in Sao Paulo? Another story about destination Brazil:

After decades pouring onto to the shores of Miami, Haitians now travel the banks of Amazon rivers into Brazil looking for work. In Brasileia, where the state of Acre borders Bolivia, over 1,200 Haitians are awaiting visas. In Tabatinga, in the state of Amazonas at the triple border with Colombia and Peru, the government is unable to process visas fast enough for Haitians to move on toward larger cities, like Manaus and Sao Paulo.

Thousands of Haitians are arriving, and they are not alone. People from neighbouring countries have been coming to the Brazilian Amazon for better opportunities for a long time. Peruvians and Bolivians increasingly cross into Brazil, seeking work as well as social welfare benefits, whereas Colombians arrive escaping their own civil conflict.

The massive arrival of Haitians reveals that people are coming from afar too. Even Bangladeshis are showing up looking for work, betting on Brazil over Dubai to support families back in Dhaka.

Over 1,600 Haitians have been recently granted visas, and Minister of Justice Jose Eduardo Cardozo is in the process of normalising the legal status of about 4,000 Haitians already in the country with work visas valid for five years. Meanwhile, the Ministry of Health has promised R$1.3 million per year to help the state of Acre address the emerging needs of these new immigrants.

Quite frankly, the more well-established Cubans never cared for the Haitian refugees. As a graduate student, I spent a few weeks at Florida International University in the TIRES research training program. To my surprise, Miami was intolerant and parochial. I can appreciate why a migrant would forego Little Haiti and give Brazil a try instead.

More importantly, there is much more opportunity in Sao Paulo than in Miami. However, the news isn't all bad for South Beach. Brazilians like Miami real estate because it is cheap:

“We come to Miami to invest because in my country housing is very expensive,” said Claudio Coppola Di Todaro, a hedge fund investor from São Paulo who recently bought a condominium at Trump Towers in Sunny Isles Beach and another at the Trump SoHo in Manhattan (Brazilians also love New York). “We like Miami to go on vacation a few times a year. Many Brazilians do this now.”

The world is spiky, just not in Miami.

Pittsburgh Among Job Growth Elite

The economic recovery is picking up steam. But almost every metro still has a lot of ground to make up in terms of jobs lost during the recession. The exceptions to this rule:

Thirteen of the nation's 100 biggest labor markets have regained all of the jobs that slipped away during the recession. The other 87 are still fighting to break even.

For the period 2006-2011, only 13 metros have posted gains in employment. Dying Pittsburgh is in this elite group. A surprise to no one, Texas cities dominate the list.

During the recession of the early 1990s, Seattle and Minneapolis were the two cities I heard about as a good place to weather the downturn. The buzz helped establish the two metros as destinations for talent from elsewhere in the country. I expect Pittsburgh to follow a similar path.

Tuesday, February 07, 2012

Moby Selling Rust Belt Chic Los Angeles

Moby is trying to poach creative talent from New York, London, and San Francisco:

new york and london and san francisco used to be run down cities where artists and musicians and writers could go for cheap rent and amazing creative communities. now new york and london and san francisco are losing artists and musicians and writers (thus: brain drain) because the artists, writers, musicians, architects, gallerists, publishers, designers, etc can’t afford the rent. and, lucky for l.a, lots of the artists and writers and musicians and designers and architects who’ve been priced out of other cities come to los angeles because it’s cheap, it’s weird, there are tons of other artists here, and it’s 75 degrees in february.

I've seen compelling evidence that creative types are leaving expensive New York for Cleveland, Pittsburgh, and Detroit. L.A.? Wishful thinking.

Moby's efforts are emblematic of the anxiety gripping cool, creative hot spots such as Brooklyn. Los Angeles is dying. Everyone is moving to Berlin.

Monday, February 06, 2012

New York City Is Dying

I've covered the decline of Brooklyn. What about the rest of New York City? The lure of Brazil's boom speaks to the tarnished luster at the top of the US urban hierarchy:

It just made sense to be in South America’s economic heart, Jonathan Rosenthal reasoned, no matter that he had been working on Wall Street with some of the investment world’s most heady firms. ...

... “When you’re talking about skilled labor, there’s a huge lack of supply, so as a result if you have the courage to come down to Brazil, or you have the language skills, or you’re Brazilian American, it’s a no-brainer to come down here,” said Rosenthal, 31, who runs Newfoundland Capital Management with a Brazilian partner.

In New York, Rosenthal had a golden career. At 22 he joined Morgan Stanley, and he later worked for one of Julian Robertson’s Tiger Cub funds. But the culture of New York’s financial world can be stiff and closed, Rosenthal said, and he was attracted by the investment possibilities in Brazil and neighboring countries.

Here, Rosenthal said he runs into the executives of big firms at the gym, and he is a cab ride away from 80 percent of the firms on the Sao Paulo exchange. “Those interactions are priceless,” he said. “You don’t get that in New York.”

Emphasis added. Use to be, not too long ago, that one could get anything in NYC. Americans didn't need to migrate to another country. They could move to the Big Apple and tap into the world. BRIC economic geography is changing that. Sao Paulo (not Brazil) is where the action is.

This talent emigration pattern helps me to rethink the prospects of hegemonic transition. Will China or India replace the United States at the top of the heap? The question ignores the current urban century and the rise of the metro hegemon. The economic power of New York and London challenges that of nation states. The main metric for measuring that power is migration. The domestic and international draw of NYC is a testament to that metro's might. But talent choosing Sao Paulo over New York is a sign of the times.

Sunday, February 05, 2012

Rust Belt Rebound

Pittsburgh is at the center of economically surging Rust Belt. From Bloomberg News:

The recovery isn't just about autos and shale; it's all sorts of related industries, said Huntington Bancshares CEO Steve Steinour. ...

... The Rust Belt rebound also means office space is nearly full in Pittsburgh as natural-gas exploration companies and others move in, Steinour said. Pittsburgh just received improved outlooks on its credit ratings from Moody's Investors Service and Standard & Poor's, going to stable from negative, after shoring up its pension funds.

The Marcellus Shale hype is impressive. But not all that is good in Pittsburgh proper is about drilling for natural gas. Does the shale gas industry have any presence in downtown Pittsburgh? Regardless, the positive publicity is appreciated.

More Pittsburgh Jobs Boom

In 2011, Pittsburgh's economy took off like a "rocket". The jobs boom is not only exceptional for the region, but the entire United States:

This job growth was not just a national wave that Pittsburgh was lucky enough to ride. The region actually led the nation in job growth in October with the largest percentage of increases in both total jobs and private sector jobs of any major region in the country.

The job surge wasn't a temporary phenomenon, either. Preliminary figures for December indicate that another 1,400 net new jobs were added between October and December, pushing the job count to the highest level in history. Over the 12 months ending in December 2011, Pittsburgh had the fourth-highest rate of job growth of any region in the country.

Emphasis added. Despite the good news, Pittsburgh shouldn't celebrate. There is danger lurking in the data. Harold Miller rains on the parade:

This is why, even though the Pittsburgh region now has more total jobs than any time in history, 27,000 more of our residents are unemployed today than in 2007 before the recession began.

Many of those individuals likely worked in businesses such as manufacturing, construction and retail, where the jobs haven't returned, and they are having difficulty finding work because their skills don't match the needs of the hospitals, research labs and professional-services firms where job growth is occurring.

Can we just ignore the stagnation in manufacturing and other sectors and keep relying on "eds and meds," with a dash of the Marcellus Shale, to drive our economy in the years ahead? That would be a dangerous bet.

Emphasis added. Pittsburgh has too many eggs in the eds and meds basket.  What happens when Big Steel Big Health Care collapses? Exodus. Brain drain! Disaster.

Buried in the gloom and doom is an uplifting tale of migration to Pittsburgh. Miller speculates that the bulk of the unemployed is dislocated talent. One, that means the historical employment peak is a result of newcomers to the region. Two, the dislocated haven't left.

On the first point, inmigration is its own economic stimulus (see Texas). Pittsburgh is benefiting from the same positive feedback loop that is fueling such impressive growth in Dallas. More jobs will stem from people moving to Pittsburgh looking for jobs.

On the second point, better to struggle in Pittsburgh than anywhere else. The push to leave isn't that strong. Instead, talent will stick it out and retrain. Another possibility is manufacturers moving to Pittsburgh to access the spare labor capacity. There is a shortage in Milwaukee but a surplus in Pittsburgh, yet the workers aren't heading to Wisconsin. Time for the Allegheny Conference to go a-courtin'.

Friday, February 03, 2012

Rust Belt San Diego

Like Rochester and Pittsburgh, San Diego was dying. This group of three might strike you as strange bedfellows. But the pattern of economic implosion and revitalization are similar:

After years of decline, Eastman Kodak, once the largest employer in Rochester, filed for bankruptcy protection last month. But rather than following Detroit, Cleveland and other once-bustling industrial cities into decay, Rochester continues to grow at a healthy clip. Why?

The question goes beyond the city limits of what was once called “Snapshot City.” Why does Pittsburgh prosper while Detroit sputters? How did San Diego make the transition from a Navy town to a diversified economic success while Fresno, Calif., has one of the country’s highest home foreclosure rates?

That's the tale of two Rust Belts. There isn't a large swath of the industrial moribund. There isn't even a contiguous region that lends itself to a convenient abstraction. In one cohort, we have metros who have made the transition from one economic epoch to the next. In the other, we have metros still struggling to transform.

To say Rochester is dying (or dead) is to say San Diego is dying. There's too much in the way of poor analysis masquerading as definitive economic geography. Contrasting San Diego with Fresno is telling. Both cities have a growing population. They are both living cities, right? Wrong. "Rust Belt" is shorthand for demographic decline, not economic decline. Unfortunately, the two get conflated.

Thursday, February 02, 2012

Urbanization Of Tech Employment

F.I.R.E. Finance, insurance, and real estate. That's the kind of industry I expect to find in the downtown area of a big city. The wild speed and reach of financial capital defines contemporary globalization. At the heart of it all is New York and London, two global giants undergoing a transformation of economic geography. Silicon Roundabout:

The migration away from the industry’s east London heartland has echoes of a similar trend a decade ago, when the technology companies began a gradual march from the business parks of the Thames Valley to the capital. However, the move into areas traditionally associated with banks and media companies challenges the accepted wisdom that technology companies favour offices – often converted – in the fringe locations surrounding the City.

Tech is not just moving next to finance in London's urban core. Tech is replacing finance. Why? Access to talent:

“Silicon Roundabout has been a magnet for the start-ups for some time but the bigger companies are realising that they need to be in London to hire the best people. The difference is, they need the kind of space usually taken by banks and big consumer-facing companies, so they come into the City or the West End,” said James Roberts, head of commercial research at Knight Frank.

Instead of thinking of London as a global hub of money, imagine global flows of people. That's the geography of the Talent Economy, the next round of globalization. Talent is cramming into center city at considerable expense. You need to be where the migrants are.

During the last round of economic globalization, you went to Harvard for the M.B.A. Now you matriculate there because the best and brightest flock in from around world. Boston is an international hub for talent production. To lesser extent, so is Pittsburgh. The dawning economic epoch will favor such metros, as well as the nimble alpha cities such as London and New York (where the graduates from the likes of Boston and Pittsburgh go to be developed).

This geography of globalization will punish the suburbs, just as the dawn of the knowledge economy emptied out the downtowns of industrial powers. Schools will deteriorate. Legacy costs will crush a declining tax base. American urban patterns (see Florida) will look a lot more like Paris: Wealth in the middle and poverty concentrated in the banlieues. However, the key is not where people reside. It's where the jobs are, where the best talent wants to work. A suburban office park is a lousy place to develop talent.

Wednesday, February 01, 2012

Brain Drain Is Dead

To be anti-brain drain is to be anti-immigrant. Detroit is the poster child for obsessing outmigration. Read about the rampant nativism (against domestic migrants) gripping the city. That's what happens when "patches of earth" matter more than people. Of course, I'm talking about income per natural:

[Clemens and Pritchett] want to call attention to the fact that migration has made a lot of migrants richer. Traditional measures of income tend to mask this fact. In rich countries, we usually ask whether migrants improve the lot of existing residents, not whether migration improves the lot of migrants. Meanwhile, the welfare of migrants rarely figures in debate in developing countries or in development institutions such as the World Bank, because the migrants have gone.

Simply because of the way the discussion is framed, the benefits to migrants tend to be ignored. Imagine a man who moves from earning 10,000 euros in Poland (an above-average wage) to 15,000 pounds in the U.K. (a below-average wage). Simple arithmetic says that he has reduced the average income of both countries; that could be true even if he has impoverished nobody and enriched himself a great deal.

Keep that Poland-to-UK tale in mind. Now consider Tampa brain drain to Silicon Valley (or Charlotte, or Atlanta):

The Tampa Bay Business Journal points to a Dice survey putting the average IT salary in Tampa at $72,802, certainly not the six-figure average of Silicon Valley, but not the dire picture that the CNNMoney article paints, either. The myfoxtampabay article, however, refers to the Tampa “Brain Drain.” It quotes Kaushal Chari, professor of information systems and decision sciences at the University of South Florida, saying that graduates with deep technological skills tend to move to cities such as Atlanta and Charlotte, where there are more tech opportunities with higher salaries.

Imagine a woman tech worker who moves from earning $80k in Tampa (an above-average wage) to $95k in Silicon Valley (a below-average wage). Talent migration is a losing proposition for both places. From the perspective of the migrant, she's making 20% more by moving. What brain drain?

That's my main takeaway from Robert Guest's book, Borderless Economics. I finally finished reading it over the weekend. Income per natural is featured in Chapter 5, "Networks of Trust: How the Brain Drain Reduces Global Poverty." The act of migration is economic development. We're just too focused on turf to recognize it.

The main point of the book is to convince the reader that a cost-benefit analysis of international migration supports the admission of more foreigners to the United States. The destination country isn't stealing brains from the developing world. Instead, it is fighting global poverty much more effectively than providing foreign aid.

Guest does much more than demonstrate how migrants benefit from relocation. Both sending and receiving countries receive a substantial bump. The brain circulation between India and the United States, as well as between China and the United States provide a solid foundation for his argument.

I think Guest's book applies equally well to domestic migration. Eventually, regional economic development will get wise to what is going on in the international economic development arena. Reading Borderless Economics would be a strong kick in that direction.