Monday, September 29, 2008

Urban Frontier Hypothesis

Sean Safford wonders if New York City is heading down the same road as Youngstown, OH. Actually, Mr. Safford sees two possible Rust Belt paths for the Big Apple to take in the midst of the credit crunch gouging the financial industry:

The question is whether it will go the road of a Youngstown (i.e., struggling, still, to recast its identity in what is now a globalized, knowledge driven world) or whether it will be more like an Akron, Pittsburgh or Allentown; places that aren't exactly thriving but have adapted and are doing ok.

I've reread that post more than a few times and my reactions are all different. This past weekend, I settled on a foil, Charlotte, NC:

But there's no longer anything trifling about Charlotte. With $2 trillion in assets being managed from the glossy bank towers of Tryon Street, the city is now the nation's No. 2 financial center behind New York City. In early September, Bank of America, the behemoth of North Tryon and the largest U.S. bank, swallowed the beleaguered investment firm Merrill Lynch, while Wachovia, its competitor on South Tryon, considered a merger with Morgan Stanley. And while the rest of the country is sinking, Charlotte is soaring, with 28 construction cranes downtown. It's got the nation's least-battered metropolitan-housing market, lowest office-vacancy rates and fastest-growing airport. It hosts the NBA's Charlotte Bobcats and the NFL's Carolina Panthers. Its center-city population has doubled since 2000, and its light-rail system, just a year old, is already approaching its ridership goal for 2025. Meanwhile, ribbon-cuttings are scheduled for the NASCAR Hall of Fame, three museums, a theater and an African-American cultural center by 2010.

If whither NYC, then whither Charlotte? Charlotte is a frontier boomtown, not a mature alpha world city like London. Power brokers, such as those in Pittsburgh, won't let the global urban elite decay as Youngstown has done. In this era of globalization, that would seem to be a bad idea. Look at the geographic variance in the economic success of Chinese cities:

What explains these differences? Being near the coast is a help in China, because of access to external ideas and because coastal areas were permitted to experiment with reform first. An intriguing pattern is that governance is best in coastal cities that had very little industry when reform began in 1978. Shenzhen now has the highest per capita GDP in China. The same holds in Jiangmen, Dongguan, Suzhou--all were industrial backwaters in 1978, and responded to China's opening by creating good environments for private investment and learning from outsiders. Cities that already had industry tended to protect what they had and reform less aggressively.

Using the above model, I would expect Charlotte to better weather the storm. But I would also expect Youngstown to be in a better position "to recast its identity in what is now a globalized, knowledge driven world." On the other hand, Pittsburgh's future doesn't look as bright because there was something left to protect when big steel collapsed. The sitaution in Cleveland seems to be even worse than it is in Pittsburgh. Neither pole of Cleveburgh is well known for political reform. As a booster of Pittsburgh, I look to Youngstown.

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