Shifting Geography Of Globalization

As you can tell from the title, I'm not done with thinking about emerging geographic paradigms of globalization. The dominant map of the industrial era was the numerous, small fiefdoms that outlined the jurisdiction of one mill or one part of the production chain. I'm watching this landscape legacy play out between the Ohio cities of Youngstown and Girard. The former wealth-producing parochialism is now strangling the Rust Belt.

Contrast the above with the latest geographic pattern to be undermined thanks to the collapse of the last round of globalization, the California cul-de-sac. The circle of trust that enabled strangers to quickly develop a neighborhood or community is the next Rust Belt:

“We had the perfect little cul-de-sac back here, our own little world,” said Eloisa Sanchez, the woman on the porch. “We’re afraid of what’s coming.”

Since January, The New York Times has made regular visits to the fraying neighborhood to chronicle — in print, photographs and video — how, in one small place, the foreclosure crisis has reshaped the view of homeownership as a cornerstone of the American dream. The continuing economic fallout has brought a reckoning for those who believed that home equity would always rise, financing lives beyond their means, while also creating unexpected opportunities for people previously on the sidelines of homeownership.

Over the last two years, half of Beth Court has been in foreclosure, and homes whose owners took out thousands of dollars in equity during the bonanza years are now worth less than half the price paid for them.

What's coming won't favor Joel Kotkin's suburban sprawl or Richard Florida's urban center of innovation. Both Kotkin and Florida are describing the same landscape, the world of Reagan-Thatcher globalization. These were the dominant patterns of living and working, perfectly aligned with the economics of the time.

What will be the new geography of globalization? The primary concerns will be talent shortages and aging demographics. I've found workforce development strategies to be useful for understanding a particular era of globalization. Just for convenience, I'll term the industrial era as "Globalization I". Arguably, there are epochs of globalization before it. But I haven't looked at those geographies. "Globalization II" was born in the 1980s, the decade of the Rust Belt. And we are now entering "Globalization III".

Cultivating talent locally is characteristic of Globalization I. Attracting talent from elsewhere is the hallmark of Globalization II. As for Globalization III:

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

Replace the word "company" with "region" and I think you get the point. As we figure out the logistics of network innovation, more geographic arbitrage opportunities will emerge. Proximity will still matter, but not in a 20-minute rule kind of way. The winners of Globalization III will be the places that have done the best job of talent export. If Chicago rose with Globalization II, then so will Pittsburgh with Globalization III.

Zero-Sum Thinking in Northeast Ohio

Cleveland is not the entirety of Northeast Ohio (NEO). A better definition of Cleveland is a cul-de-sac of globalization. Team NEO's recent Cleveland show-and-tell spells out the entrenchment of parochial politics and the lip service paid regionalization. Even more distressing is the following comment:

To distinguish its red-carpet tours, Team NEO crafts attention-grabbing invitations. For the tour during the Rock Hall's induction weekend, invitees received small guitar cases with invitations tucked inside.

"We are competing for these jobs against Indianapolis, Detroit, Pittsburgh," said Team NEO's Carin Rockind, vice president of marketing and communications. "We have to break through."

Does NEO include Youngstown or not? Is the Tech Belt Initiative dead on arrival? There is considerable overlap in talent and opportunities between Cleveland and Pittsburgh. Nowhere is that more evident than in Youngstown. But Cleveland-centric Team NEO fails to understand this geography. No wonder Richard Longworth characterized Cleveland as a hopeless casualty of globalization:

In all my travels through the Midwest, Cleveland was the only place, big or small, that seemed heedless of the global challenge. Only 4 percent of its population is foreign-born, in an era that demands new blood; the city government isn’t sure it wants more. One of its leading economists told me, ‘You can’t kill manufacturing–that’s stupid,’ but manufacturing is fleeing and cities need new ways to support themselves. In an era of global connectivity, only one non-stop per day, to England, links Cleveland to the world. The first-rate Cleveland Clinic is expanding, but every Midwestern city is building up its health industry: few expect it to carry the city’s economy.

Team NEO, like Cleveland, is heedless of the global challenge. It also seems ignorant of the challenges facing its regional satellite cities. At least, that's what the comment about Pittsburgh suggests. That kind of zero-sum thinking is what will continue to kill economic development in Northeast Ohio.

State Of The Disunion Address

Richard Longworth beat me to the punch with his speech about Rust Belt discord. President Obama's national pep talk is just a few hours away and I'm thinking about a literal "state of the union". Dominating my Google "rust belt" query is Ohio's State of the State. How does Ohio separate itself from its underperforming neighbors?

The question itself is indicative of the parochial demon Longworth exorcises. Political legacy costs are killing the Midwest and all Gov. Ted Strickland does is reinforce his state as a cul-de-sac of globalization. Ohio is surrounded with economic redevelopment:

Recently, this typical American ingenuity and entrepreneurial energy has been demonstrated in the growth of knowledge-based industries, such as Genentech and Google. Today unheralded individual communities are taking charge of their own futures through a variety of exciting initiatives that are emblematic of the spirited capacity of Americans to reinvent themselves.

Take Pittsburgh for example, where the combination of Carnegie Mellon University’s pioneering robotics program and remnants from the city’s once strong industrial base is fueling the development of the next generation of robotics, giving the city bragging rights to becoming the Silicon Valley of “droid design.”

Meanwhile, in Warsaw, Ind., local companies account for approximately one-third of the world’s orthopedic device market. In Michigan, $1 billion in federal grants are being used to accelerate the development of next-generation batteries and electric vehicles. In an effort to further fuel the green movement, Midland, Mich.-based Dow Chemical Co. is investing $500 million through its own venture fund in public health, clean technology, and water products.

San Diego witnessed this organic phenomenon with the growth of both wireless information technology and the life sciences clusters that sprang up adjacent to UC San Diego. Our region continues to grow innovative clusters in new and converging technologies such as clean technology, health care IT and biofuels. Oil giant Exxon Mobil Corp., as part of its $600 million investment in renewable energy, has teamed with the San Diego biotech firm Synthetic Genomics Inc., to research and develop next-generation biofuels produced from sunlight, water and waste carbon dioxide by photosynthetic pond scum.

But even in collaborative regions like these there is no platform that regularly brings together the four key players: the research community, which is developing the technologies that will shape the businesses and jobs of the future; the entrepreneurs and investors, who can turn a promising technology into a business; the economic developers, who focus on and use resource allocation and business policies that can assure economic prosperity, and the educators and workforce training organizations, which focus on the general and specialized skills needed in globally competitive industries and services.

Balkanization is the rule, even in the most successful regions. However, the Rust Belt is king of zero sum thinking. Mexico can only boom if Michigan busts. Brain drain Detroit informs brain gain Houston. This is the dominant economic paradigm:

Realistically, income tax response gets more elastic as the tax region gets smaller. Oregon borders two states with attractive migration possibilities. California's taxes are no bargain--but Oregon's relatively lower tax rates may have attracted wealthy individuals and businesses that will now find it not so attractive.

Zero sum scenarios follow a distance decay model, a simple way to understand the benefits of regional consolidation. Work with your neighbor and eliminate the most vexing economic tug-of-war. Cleveland is waging a death struggle with Pittsburgh, not Shenzhen.

The US Constitution isn't a drag on the TechBelt. Don't blame neoliberalism, either. The popular scapegoat is globalization.

Gross Migration Versus Net Migration

Aaron Renn (The Urbanophile) recently reposted a blog entry titled, "Migration Matters". Aaron references a number of my ideas and quotes me at length. I take issue with net migration, a statistic I don't find all that useful. A better indicator, I argued, would be inmigration. I wanted the focus to be on talent attraction, not retention.

After working on the Global Cleveland Boomerang Migration project, I've had a change of heart. I still advise against considering net migration. The better metric is gross migration. I'm interested in measuring the talent connectivity between metros.

Gross migration is the aggregate of inmigration and outmigration. Net migration is the balance between inmigration and outmigration. If the net migration is a small number (positive or negative), then you will overlook an important talent trading partner for your metro.

International trade is a good analogy. Some (if not most) people focus on surpluses and deficits. A surplus is good and a deficit is bad. In the United States, big trade deficits get all the headlines. We've got a China problem (Japan before that). As for total trade, you might be surprised to learn that Canada is America's most important partner.

What is the value of that partnership? The balance of trade with Canada won't jump out at anyone. But more consumption in one country will benefit producers in the other. That's reciprocity. The trading of goods isn't a zero sum game.

The same is true for migration. We obsess surpluses and deficits, "brain drain". We ignore reciprocity, or "brain circulation". Such a perspective has a huge bearing on policy.

Yet we do celebrate connectivity, a city's global network of people and businesses. Striving to be a global city is a noble goal. Geographer Peter Taylor is trying to quantify urban globalization. He maps metro trading partners, not the transaction balance. Urban networks matter.

Concerning migration, the same principle applies. Who you know plays a big role in where you go. It is a matter of trust. Canada is close and familiar. That's why the United States trades so much with the Great White North. The apple doesn't fall from the tree for both migration and trade. Proximity is key.

Dense connections between Cleveland and Pittsburgh are normal. The significant exchange of people between Cleveland and a large global city such as New York (on par with Sandusky, OH) is more surprising. Robust churn with Rochester, MN should get your full attention. What's going on here?

The net migration conversation misses all of the above. The bottom line is population, not economic development or urban revitalization. We erect barriers and everyone is poorer for it.

Cleveland talent thriving in Rochester, Minnesota or New York City spells opportunity. There is more inmigration to be had, expatriate or otherwise. You can also use these networks to grow business or encourage more entrepreneurial activity, as Brazil is doing. As much of Peter Taylor's research demonstrates, connectivity with global cities is the lifeblood of an urban economy. Better net migration numbers won't get Cleveland out of the cul-de-sac of globalization.

Robert Putnam Is Wrong About Social Capital

Too much social capital—not too little—is driving a wedge of income inequality between Americans.

Theme: Globalization and income inequality

Subject Article: "The terrible loneliness of growing up poor in Robert Putnam’s America."

Other Links: 1. "Chapter 1 (Thinking about Social Change in America) in Bowling Alone, The Collapse and Revival of American Community."
2. "‘Our Kids,’ by Robert D. Putnam."
3. "Rust Belt Landscapes and Memory."
4. "bowling with strangers: emerging patterns of desegregation foretell a vibrant economy."

Postscript: When a suburban brat leaves home to attend an elite university that lands her a job in a global city, she gains social skills that will make her rich. She learns how to connect with people from different corners of the planet, thus facilitating knowledge exchange with places very different from her hometown cul-de-sac. She thrives in a world low on social capital.

Great Divergence Within Brooklyn

Speaking of the income disparity within Brooklyn, I missed this New York Times article published last Sunday:

The city’s most populous borough remains stunningly diverse. Neighborhoods like Red Hook and Bedford-Stuyvesant mix lives side by side, though not always comfortably. But a look at some of the typical signs of gentrification, income and education shows that sections of the borough are increasingly on divergent tracks.

In the community district that embraces Park Slope and Carroll Gardens, the proportion of households earning over $100,000 rose to 43 percent in 2010 from 28 percent in 1990. In Brownsville and Ocean Hill, the number stayed flat, around 9 percent, while those earning under $25,000 rose to 46 percent from 43 percent, according to a study of household income by Susan Weber-Stoger, a Queens College sociology research associate.

In Williamsburg and Greenpoint, the proportion of residents holding graduate degrees quadrupled to 12 percent; in East New York and Starrett City, it remained 4 percent.

Emphasis added. The recent economic crisis has exacerbated the Great Divergence. I can see why there is a persistent exodus of Latinos from the city. Opportunity is elsewhere, found even in Reading, PA. You are better off in a struggling Rust Belt community than to remain in Brooklyn.

Whether Brooklyn is dying or booming depends on the neighborhood. One should also consider the time frame and emerging trends. More and more of Manhattan is spilling over into America's urban frontier in Cleveland, Pittsburgh, and Detroit. Much of Brooklyn will remain a cul-de-sac of globalization.

Yes Yo Can

A big problem facing the Rust Belt is each city spending a lot of resources fighting with other shrinking cities for the economic spoils leftover in this cul-de-sac of globalization. We hear too much about jobs going China and brains moving to the Sun Belt. Missing is all the action going on within the region. Consider this story about an alternative energy business located in Michigan:

The state's rejection led [Mariah Power founder and CEO Mike Hess] to consider other manufacturing options, including what he said was a $1.8 million zero-interest loan commitment from Youngstown, Ohio, officials. But he wants to keep the project in Manistee.

"I really like the community. (It) has impressed me to no end," he said. "But in the end, I still have to make the best economic choice for the company."

I speculate that Youngstown is ready to take a risk that Michigan is unwilling or unable to embrace. Mr. Hess may be trying to squeeze a better deal out of Michigan and I don't blame him for trying. But he's appealing to a state-centric jingoism that is counterproductive.

Cities within the region that are ready to take on certain risks should win the business. Corporations needn't pick up and move to another country or another region. There is enough geographic variation within the Rust Belt to support just about any economic niche. Right now, Youngstown has its ducks in a row and is ready to help you grow your own company.

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.

Chi-Pitts Globalization

I send thanks to Brendan Crain, the blogger behind Where, for agreeing to engage in a blog duel over Chicago-Pittsburgh urban connectivity. Our third and last installment attempts to draw some conclusions from our exchange. What have I learned about the linkages between the two cities?

Our dependency controversy is a conceit for a better understanding of contemporary inter-urban relationships. Richard Florida picked up Brendan's description of the connectivity geography in play, sounding a warning about Chicago's dependency on its megaregional hinterland:

But, as Brendan adds, the real question is that competition is growing throughout the global city-system. In other words, the same kind of dynamics that have confronted Pittsburgh and Detroit in the past several decades may some day come home to roost for Chicago. My team's analysis suggests that Chicago may have some real vulnerabilities. In contrast to New York, LA and San Francisco, which have real locational advantages in key economic sectors, our analysis of occupational clusters suggests that Chicago has few if any, other than those associated with O'Hare and air transport. For the time being, it has found a reasonably comfortable niche, providing regional services to its mega-region and serving as a regional talent magnet. But the laws of motion of global capitalism leave little doubt that sooner or later the ante on both of these fronts will be upped.

Pittsburgh's bet on Chicago might be a bad one. The network economy springing from the migration of human capital could result in a cul-de-sac for global connectivity. The Rust Belt club is only good for so long. You might think of each city on its own, making the best of whatever talent opportunities are available. In other words, place dependency is bad policy.

Public intellectuals are fond of polemics and we shouldn't overreact to suggested vulnerabilities. The ties between Chicago and Pittsburgh still represent considerable opportunity. To further the conceit, both cities should seek to diversify their connectivity portfolios. No city is a standalone cash cow. Chicago is not a world onto Pittsburgh, nor should it be.

Triangle Of Demographic Doom

Youngstown, Pittsburgh, and Buffalo. Persistent demographic decline has dogged these three Rust Belt cities for the last three decades. They stand out as uniquely shrinking, infamous. General US population trends do not apply:

Metropolitan growth during this century’s first decade seemed poised for a continued upward trajectory. The booming 1990s heralded the greatest growth the nation’s large metropolitan areas had seen since the 1960s. During the 1970s, deindustrialization and something of a rural renaissance sharply reduced metropolitan growth, especially in the industrial Midwest. A small-but-mixed metropolitan growth revival occurred during the 1980s. But it was in the 1990s, when the nation’s population growth swelled with active immigration and the rise of the millennials, that metropolitan growth showed a rebound, especially in new parts of the Sun Belt and in areas with diversifying economies. This revival was echoed in suburbs and large cities, where some urban centers showed gains after decades of population loss. Thus, the groundwork was laid for continued and pervasive metropolitan growth in the 2000s.

Emphasis added. The millennial migration in particular skipped over the troubled threesome. This part of America is truly the last of the urban frontier. (Sorry, Detroit.) A few waves of migration have failed to reach this lonely corner of the earth, another cul de sac of globalization.

Youngstown, Pittsburgh, and Buffalo are stuck in time, place. They comprise the cradle of Rust Belt Chic. The troubled threesome represent what millennials most want out of an urban experience. (Sorry, Portland.) What you can find in the Triangle of Demographic Doom, you can't find anywhere else.

Benefiting From Brain Drain

My fellow co-founder of the Pittsburgh Expatriate Network, Alex Pazuchanics, wrote an opinion piece that appeared in the Sunday Pittsburgh Post-Gazette. Alex and I agree that the lament over brain drain is unfortunate. Pittsburgh would be better off trying to take advantage of the outmigration patterns:

Our region's growth will come not from trying to keep people in Pittsburgh, but from capitalizing on a highly mobile culture. Pittsburgh should be the physical epicenter of a much larger reality: people moving freely, bringing with them their ideas and experiences, allowing for new developments to occur.

We are heavily invested in retaining the talent produced within the region. We do nothing to derive benefits from the graduates who will surely leave. We comfort ourselves with the fact that few will return, insisting that plugging the brain drain is the only policy worth pursuing. This perspective limits the prospects of economic development.

Both Alex and I are on firm footing with our proposal that Pittsburgh do away with the Border Guard Bob mentality. However, I read an article this morning that suggests the upside of limiting geographic mobility:

"If you can't sell your house, you can't move," said Joseph Seneca, a Rutgers economist who co-authored the report, "Post-Recession America: A New Economic Geography?" ...

... The decline in mobility has the biggest impact on young people, who are historically most likely to move out of state for work, said William Frey, a demographer with the Brookings Institution in Washington.

"They're putting their lives on hold," Frey said. "They're standing still when they really want to be moving."

While lower mobility may be tough on individuals, it can be good for a region — like the Northeast — that would otherwise lose population, Frey said.

"If you're keeping young people, that's a good thing," he said. "It adds a lot of vitality to the community and helps to beef up the workforce."

Talent that would normally leave New Jersey during a downturn is stuck. I disagree with William Frey. Keeping young people as a result of the current circumstances is a bad thing. The inability to relocate for better opportunities is obviously a disadvantage for young people. Not so obvious is the drag on the regional economy. The lack of geographic mobility hurts the community.

Unemployment is higher than it needs to be. Wages are depressed given the glut of workers. Innovation is retarded while inmigration collapses. The town is increasingly isolated, a cul-de-sac of globalization. The local economy is unable to respond to the global restructuring.

Increasing educational attainment and geographic mobility is a better outcome for dealing with a serious recession:

If more Sebastian County high school students graduated, a $113 million total improvement in annual income performance could result.

That was one of the findings from "Education, Infrastructure and Regional Income Performance in Arkansas," a study by Tom Fullerton, Enedina Licerio and Phuntsho Wangmo, presented Wednesday at the first Advances in Business Research Symposium hosted by the University of Arkansas at Fort Smith College of Business. ...

... "Brain drain" - the outward migration of a more highly educated work force - may occur in the short term after improvement in educational attainment begins but not in the long term.

"Usually what happens when you improve work force performance, you will potentially have more people moving out of the county," Fullerton said. "As you improve educational attainment, you increase productivity levels. Two other things also happen: Businesses begin to develop in that county and the survival rate of those businesses increases. The people in them are better trained. Outside investors are attracted to those regions as well with improving educational attainment."

Brain drain is a signal that the regional economy is restructuring, for the better. The problem is that we lack the infrastructure to tap into that outmigration and speed up the positive returns from the gains in educational attainment and geographic mobility. The Pittsburgh Expatriate Network will address that oversight and catalyze growth in Southwestern Pennsylvania. The region will be the first in the United States to actively seek a dividend from the export of talent, aligning itself with an international trend (e.g. brain circulation).

If you are in Pittsburgh this coming Wednesday, come to the New Hazlett Theater (6:30pm) and learn more about our plans.