There’s been a lot written about the diverging fortunes of cities, some building towards greater success, some falling further behind.
Sometimes people suggest a hoovering effect that has successful places contributing to the decline of the failing ones.
But what if some causality goes the other direction? What if it was first the collapse that fueled the rise?
Consider Chicago. The Chicago Loop has seen more relocations from the suburbs than any other city I can think of. It’s also ground zero for the “tale of two cities” narrative.
Are these linked? Consider a recent Greg Hinz column in Crain’s Chicago.
At a time when Chicago’s job growth is markedly lagging both the nation’s and most other big metros, a trade publication is reporting that metropolitan Chicago once again is leading the nation in luring new or expanded corporate facilities.
How can both be true?…A fair number of the corporate moves are within the metropolitan region, with no net gain in jobs or even a loss as firms like Kraft Heinz and Motorola Mobility shed jobs in the trek from the burbs to the Loop.
It’s worth pondering whether the weakness of the rest of the metro economy is part of what’s driving the move to the successful portion of it in the Loop.
In other words, there may be push as well as pull factors involved.
It’s the same with Chicago’s talent attraction. Young, educated people from around the Midwest have been pouring into Chicago. This is usually presented as Chicago sucking out all the talent.
But it isn’t hard to see that the conditions and opportunities (or lack thereof) in these communities drove people to Chicago.
Again, there’s push, not just pull.
I see the same with Indianapolis. I don’t believe it’s any accident that Indianapolis started to outperform when deindustrialization started to hollow out large numbers of Indiana communities.
In fact, 83% of the net migration into metro Indianapolis comes from the rest of the state of Indiana.
Again, push to the islands of success, not just pull.
In effect, places like Chicago and Indianapolis are upscale refugee camps for people fleeing struggling Rust Belt burgs.
I believe similar effects contribute to the success of zones like Champaign-Urbana and Columbus, Indiana. They are the best houses on bad blocks. A similar effect appears to be underway in Grand Rapids.
I haven’t read the report in question, but I’m told Bill Gilmer at the Dallas Fed argues is was actually the late 80s energy bust that made Houston the center of the energy industry.
When the energy business started failing, it reconsolidated into its home base.
Remember that in the late 1970s it was Dallas that was chosen as the site of the TV show about the oil business.
The same thing happened after the dotcom crash. All the Silicon Alleys and Silicon Prairies got wiped out, and the stage was set for the original Silicon Valley to dominate the next phase of technology once again.
Boom and bust cycles probably reinforce industry clusters. Is there any research that studies the link between cyclicality and clustering?
This is not to deny the importance of pull effects. The Loop has a legitimate draw, as do Indy, Houston, etc. But there effect was magnified by collapse elsewhere.
This cycle produces positive reinforcement effects that propel it forward.
At some point divergence will end. One can argue it’s already starting to as former failures like Pittsburgh have started to rebound and become attraction zones in their own right.
Also there is the demographic effect that as people flee these declining cities, future generations are smaller, which means fewer people leaving, which will start drying up the inflows at some point. But that’s a topic for another post.