A Road Map for Reviving the Midwest

(Bloomberg View) -- John Austin is a man with a mission: to revive the Rust Belt. The former president of the Michigan State Board of Education, he is also a researcher at the Brookings Institution and has been the director of multiple nonprofit organizations and government commissions. In 2006 he produced a plan for Rust Belt regional revitalization. Now, in a series of blog posts for Brookings, Austin has been evaluating which local development strategies have worked, and which have failed. 

Austin believes that there are “two Rust Belts.” Rather than comparing states, he looks at the urban level, contrasting successful towns that have retooled themselves for the new economy, and languishing ones that have failed to find a strategy that works for them. He identifies two main types of success stories -- large, economically diversified metropolises, and college towns. The former include Minneapolis, Pittsburgh, Indianapolis, Milwaukee and Columbus, while the latter include the likes of Ann Arbor, Michigan.

Beyond these two main types, Austin identifies a number of smaller cities that have found success through industrial policy. Examples include Kalamazoo, Michigan, which specializes in biotech; Warsaw, Indiana, which focuses on medical-device manufacturing; and Jasper, Indiana, which does a lot of advanced manufacturing.

Austin also sees social, racial and political divergence between the successful towns and the lagging ones. Declining Midwestern areas are often white enclaves, which were once destinations for white flight from inner cities; now, these counties often tend to have fewer immigrants, more stagnant economies and higher levels of support for the angry, nostalgia-tinged campaign of President Donald Trump. But more ethnically diverse regions have flourished economically, and these have tended to vote for the Democrats.

There are two obvious reasons for this divergence -- two trends that both improve a town’s economy, and tend to make it more ethnically diverse and tolerant. Those are universities and immigration. Therefore, two of Austin’s main suggestions for the Rust Belt include directing more resources to universities and being more welcoming to immigrants.

Both of these recommendations are supported by economic theory and evidence. As the U.S. has shifted into high-value-added knowledge-intensive industries, the benefit of having a cluster of educated, smart workers has increased. Economics research confirms that the local benefit of colleges isn’t a coincidence -- regions where the government granted land to universities more than 150 years ago are now flourishing.

As for immigration, it’s important for maintaining the tax base -- as the children of locals move away to Texas or Nevada or New York, immigrants stabilize a town’s population, making sure that suburban housing developments, roads and shopping centers don’t turn into abandoned, deteriorating assets.

Education and immigration are important for Texas, Florida and California, too. But they hold special relevance for the upper Midwest, simply because there are so many other forces working against the region. One of these headwinds is simply the weather; in the age of air conditioning, most people find it more pleasant to live in warmer climates.

Another factor is economic geography -- as Europe declines in importance and Asia rises, the East Coast of the U.S. is at a structural disadvantage relative to the West Coast. This is exacerbated by the U.S. job market’s overall shift away from manufacturing.

Finally, existing development patterns also work against the Great Lakes. Sprawling Sun Belt suburbs are cheaper and more attractive for families, while except for Chicago, the upper Midwest lacks the kind of fun, exciting metropolises that draw young talented people to the coasts.

With all these headwinds, it’s no surprise that people have been moving away from the region:

A Road Map for Reviving the Midwest

Those numbers include both immigration and domestic migration. Without immigration, things would be much more grim for the Rust Belt.

So with the Rust Belt’s traditional sources of strength having mostly deserted it, and with the Sun Belt and the coastal cities looking so attractive, higher education and immigration look like the only realistic lifelines for the region to grab onto. John Austin’s program for regional revival isn’t a pie-in-the-sky dream for how a wealthy region could become even more successful -- it’s a lone ray of hope for a struggling region otherwise headed for continued decline.

Unfortunately, this ray of hope itself is clouded by threats from government policy and reactionary social attitudes. Austin notes that Midwestern states, battered by the Great Recession, have been cutting back on spending on public universities. That could be exacerbated by the increasing suspicion of universities prevailing within the Republican Party. Meanwhile, Austin worries that the region’s history of segregation will cause it to react to the needed influx of immigrants by supporting xenophobic politicians.

So the states of the Great Lakes region appear to be faced with a stark choice. It can embrace John Austin’s program and harness the modernizing forces of universities and immigration, setting itself up for revival. Or it can give in to the seductive impulses of nativism and hostility to higher education, and settle in for more decades of bitter, grinding decline.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Noah Smith is a Bloomberg View columnist. He was an assistant professor of finance at Stony Brook University, and he blogs at Noahpinion.

To contact the author of this story: Noah Smith at nsmith150@bloomberg.net.

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