In our last post we reviewed the Centre for Cities report on what predicts economic success at the regional level in the United Kingdom. The report’s characterization of successful regions as reinventors and lagging regions as replicators is quite insightful and is as applicable here as in the U.K.
Reinventor regions have knowledge-based economies. Replicator regions have factory and/or commodity-based economies. The first are prospering, the later are struggling. (Except for the few that have benefited from high energy prices.) End of story!
What is encouraging about the Centre for Cities research is that regions that historically have been factory based have made the transition to a knowledge base and now are on a path to prosperity.
Don Grimes and I in our 2010 Annual Progress Report on Michigan’s Transition to a Knowledge-Based Economy featured metro Pittsburgh. We suggested it as a model for making that transition from a factory-based to a knowledge-based region. We wrote:
Many in Michigan seem to believe that the decline of the domestic auto industry and more generally the loss of so many high-wage factory jobs, means that the state will never again be prosperous. We disagree!
… The best evidence of the possibilities of making the transition to a knowledge-based economy probably comes from the experience of metropolitan Pittsburgh. Its past successes were largely the result of its dominant 20th century industry – steel. Like autos here, steel provided lots of high-paid factory jobs.
… It’s the prototypical 20th century economic success story. If you were over-concentrated in manufacturing – particularly high-wage factory work – you were more prosperous than the nation. But then steel collapsed in metro Pittsburgh. Its firms were no longer competitive.
By 1985 primary metals were only 6 percent of the region’s employment earnings – a nearly 60 percent decline in share of earnings in just eight years. And all of manufacturing had fallen to just about the national average, accounting for 24 percent of the region’s 21 employment earnings. As you would expect per capita income tumbled along with the decline in steel, from 4 percent above the national average to 3 percent below.
Primary metals and all of manufacturing continued to decline as a share of metro Pittsburgh’s employment earnings. But it didn’t consign the region to permanent low- prosperity status. … In 2008 Pittsburgh returned to its previous peak compared to the nation—104 percent of the national average. Of the 55 metropolitan areas with populations of a million or more, it ranked 16th and was more prosperous than Dallas, Raleigh/Durham, Austin, Portland and Atlanta. Figure 3
Consistent with other prosperous regions, Pittsburgh is above the national average in the proportion of adults with a four-year degree and share of wages from knowledge-based industries. …
The metro Pittsburgh story is not a fairy-tale success. It didn’t happen overnight and there was a lot of pain in the transition. It certainly took a long time for the region to regain its prosperity – more than 30 years. And obviously a lot of folks who had enjoyed a high standard of living working in the steel industry never again earned as much. The region also suffered a large population decline. Metropolitan Pittsburgh’s population fell from 2.79 million in 1977 – its peak income year in the steel heyday – to 2.45 million in 2008. That’s a decline of 340,000, or 12 percent.
But that said, it is a success story. By making the transition from a factory-based economy to a knowledge-based economy, Pittsburgh has regained its status as one of the nation’s most prosperous regions.
Since that report we have continued to use metro Pittsburgh as a comparison region for both metro Detroit and Grand Rapids. They continue to far out pace both of our big metros on per capita income: the best metric of economic well being.
Governing Magazine recently featured the city of Pittsburgh, the anchor of their regional economy. It provides a good overview of a city that is now firmly on the path to prosperity. One that is struggling with issues that come with growth rather than decline. Worth reading.
The article concludes this way: “But the most important change may be that Pittsburgh — a city that hasn’t had to deal with growth issues for decades — is now awash with newcomers and eager investors. Longtime residents had lost the habit of looking toward the future with hope. That’s something they’re just starting to regain. “I never thought, growing up here, being born and raised here, choosing to live and die here — I never thought that I would live in a city that would be a boomtown,” Peduto (Pittsburgh’s mayor) says. “I always thought it would be how well do we manage decline.” ”
Pittsburgh, using the Centre for City’s classifications, is a reinventor region. It has made the transition away from a factory-based economy to one that is knowledge based. And due to the transition has regained its prosperity.
Replicator regions, the ones that are lagging economically, the Centre for Cities describes this way: “They have replaced jobs in declining industries with lower-skilled, more routinised jobs, swapping cotton mills for call centres and dock yards for distribution sheds.”
For Michigan to be prosperous again we––particularly our big metros––need to be reinventors not replicators. Hard to make the case that we are on that path now.