Tuesday, December 16, 2008

Legacy Economy

Is Pittsburgh's economic glass half full or half empty? Harold Miller serves up some measured optimism in the Post-Gazette. Pittsburgh continues to out-perform many other regions during the current recession. But Joel Kotkin thinks we are bearing witness to a false positive:

In large part, Pittsburgh's "success," such as it is, has been based on what may be called a "legacy economy," essentially funded by the residues of its rich entrepreneurial past. This includes the hospitals, universities and nonprofits whose endowments have underwritten the expansion of medical services and education, which have emerged as among the region's few growth sectors.

John Morris has already pinpointed old money as the major reason for Pittsburgh's current success. And Daniel Drezner relates the bad news about the state of endowments. From this vantage point, the foundation of the regional economy looks rather shallow.

If the legacy economy is indeed underwriting the recent growth, then I would expect other endowment rich Rust Belt communities to be similarly thriving. They would also be facing the same short-term risks. Regardless, I'm still bullish on Pittsburgh. Whatever the reason for the relatively rosy numbers, Pittsburgh is doing well without the benefit of strong immigration. A concerted effort to attract more foreign born to the area will fuel more growth. The strong legacy economy can help bring this about. A major talent initiative is require and Pittsburgh has the money to do it.

1 comment:

The Urbanophile said...

There is no doubt that a huge factor in Indy's relative success is the presence of the Lilly Endowment, which at one point was the largest foundation in the world, which gives the bulk of its funds within the city and state. Their giving has been under pressure for some time now because of the large percentage of assets held in Lilly stock, which, like most pharma companies, has taken a hit.