On June 28, the Brookings Metropolitan Policy Program hosted the first in a series of forums to highlight ways the federal government can help bolster the economic assets of the Great Lakes Region. Rep. Vernon Ehlers (R-Mich.), a longtime proponent of revitalizing the region, provided opening remarks.

This two-panel discussion also included experts from the communities, universities, foundations and associations in the Great Lakes region. Panelists discussed the innovative efforts currently underway to boost the economic competitiveness of the region, such as technology, innovation, and environmental stewardship; and offered federal policy recommendations designed to foster the Great Lake Region’s continued growth as a vital economic engine for the nation in the years ahead.

      

 

 

Editor’s Note: Jennifer Bradley, fellow and co-director of the Great Lakes Economic Initiative, and Bruce Katz, vice president and director, are the lead contributors from the Metropolitan Policy Program at Brookings.

Why has Michigan enjoyed the second-strongest post-recession recovery among the 50 states? Because the state and its metropolitan areas are rich in the assets that will drive the next economy in the U.S. and around the globe.

• The recovery has been powered by manufacturing, and Michigan’s metropolitan areas are where innovation prowess meets manufacturing experience. Ninety percent of the state’s high-tech industry employment and 80 percent of its advanced manufacturing jobs are in metropolitan areas. Six Michigan metropolitan areas had a higher number of patents per 1,000 workers from 2001 to 2010 than the average U.S. metropolitan area.
   




• Exports have moved the US economy forward, as our manufactured goods have met ready markets abroad. Michigan’s metropolitan areas are also exceptional at producing goods and providing services that are in demand abroad. Of the 100 largest metropolitan areas in the United States, Detroit is 12th in terms of export intensity (the share of its output that is exported), and Grand Rapids ranks 8th. Thirteen of Michigan’s 14 metro areas are more export-intense than the U.S. average.
   




• U.S. manufactured goods and exports are competitive to the extent that they are innovative. Michigan’s metropolitan areas are home to strong and emerging industry clusters and powerful anchor institutions like universities, medical centers, and research institutes that invent and commercialize new technologies and services.

For the past year, Business Leaders for Michigan, Public Sector Consultants, and The Brookings Institution Metropolitan Policy Program have been analyzing Michigan’s metropolitan areas to determine how state policy can best prepare the state’s metros, its economic engines, for the next economy.

We recommend that Michigan leaders:

1. Strengthen the link between innovation and manufacturing to increase regional exports and attract global investments.

• Reorient the 21st Century Jobs Fund to include manufacturing and innovation, particularly among small manufacturers.
• Create a strong foreign direct investment (FDI) strategy to attract innovative firms that fill gaps in key manufacturing clusters.
• Help small manufacturers and service businesses increase exports through robust export assistance, promotion, and financing.

2. Support strong regional systems to train existing workers and welcome new ones to fuel economic growth.

• Use existing workforce dollars to drive regional workforce strategies that match cluster strengths.
• Seize the opportunity to demand changes in federal workforce laws.
• Help highly educated immigrants gain Michigan professional certifications.

3. Make targeted investments that leverage distinct assets in urban and metropolitan areas to transform regional economies.

• Support a small number of urban and metropolitan industry clusters with grants tailored to the specific needs of emerging, existing, or advanced clusters.
• Designate one to three new “urban innovation districts” that connect innovation-generating anchor institutions with infrastructure, housing, and amenities, and support them with a 21st Century Places Fund.

      

 

 

On February 22, Jennifer Bradley answered your questions on the economic health of the states during a live web chat with POLITICO.

12:30 Vivyan Tran: Welcome everyone, let’s get started!

12:30 Jennifer Bradley: State innovation is part of the genius of our federalist system. Health care reform was law in Massachusetts years before the recent passage of federal legislation. During the 1980s, governors from both parties experimented with welfare and healthcare reforms, paving the way for federal advances in the next decade. Throughout the 1950s, public university systems, established by states like California and North Carolina, set the stage for the federal technology investments of the 1960s and 1970s. And before he was president, New York Gov. Franklin D. Roosevelt experimented with interventions that foreshadowed the New Deal.

With Washington mired in gridlock, states have no choice but to innovate. Smart governors are working with partners in metropolitan areas, which concentrate people, jobs, GDP, and innovation potential and are critical for job creation, revenue generation, and economic growth.

12:30 Comment From Tim: What are a few examples of innovation at the state level that have helped local economies get back on their feet again?

12:32 Jennifer Bradley: States like Nevada, Tennessee, and New York are organizing their economic development strategies around the needs of local and metro economies. They are focusing on aligning resources metros need, rather than sticking with the same old state agency stovepipes.

12:32 Comment From Katie: I see that you’re with Brookings’s Great Lakes Initiative. It seems as though Detroit and the whole region is experiencing a resurgence at the moment. What do you attribute this success to?

12:35 Jennifer Bradley: Manufacturing turns out to be a source of strength in the recovery (and will likely continue to be a source of economic strength, since it’s so closely tied to innovation, which is the engine of economic growth). Places that have hung on to their manufacturing, particularly in sectors in which the U.S. as a whole is strong—like autos and transportation, and chemicals—have gained as those sectors have rebounded.

12:35 Comment From Sam: How successful have states in the “rust belt” been in revitalizing their economies following the recession?

12:38 Jennifer Bradley: This is a nice follow up to the previous question. States in the Midwest/Northeast that have done well have done so by really focusing on innovation and linking that to their manufacturing sector. Ohio has done this through its Third Frontier innovation program; Michigan has done this through its 21st Century Jobs fund to some extent. Focusing on exports also has been critical, because the recovery is also export-driven—all those manufactured goods are finding eager purchasers abroad.

12:38 Comment From Tony: Which states are close to fully recovered and which are still lagging behind?

12:40 Jennifer Bradley: The states with the strongest recovery, as of the end of last year, are North Dakota, Michigan, Louisiana, Wyoming, West Virginia, Utah, Indiana, Massachusetts, Alaska, and Oregon.

You see there a mix of natural resources economies, and manufacturing and exports economies (Intel, for example, is a big exporter in the Portland, OR, metro).

12:40 Comment From Beth T: Many politicos see manufacturing as a way for states to emerge from the recession and begin to provide high-paying jobs for their citizens. Given the cheap cost of manufacturing in places like China, is this realistic?

12:43 Jennifer Bradley: My colleagues at Brookings just devoted several hours to this very question at an event this morning! Chinese labor costs are rising, and there are a lot of other factors that make U.S. manufacturing competitive. Job loss in manufacturing is not inevitable. Smart governors understand that manufacturing may not employ as many people as it used it, but it is an important driver of innovation in their states, so they are working to link up university research and manufacturing needs.

12:43 Comment From Abigail: Are there any state programs right now that could and should be scaled up to the federal level?

12:48 Jennifer Bradley: Michigan’s governor has proposed a new approach to transportation investments, driven by data—which projects are going to deliver the most bang for the buck, and how do transportation investments support goals beyond just getting from point A to point B (goals like more exports, or supporting logistics hubs)? The federal government could certainly benefit from a more strategic approach to transportation as well.

The larger point though is not necessarily that the Feds should scale-up state interventions willy-nilly, but that they should be taking the same approach, asking “Where are the market failures, and how can we deploy our resources to solve those failures? What needs to be done, and how can we bring a unique solution?”

12:48 Comment From Donna: For a while in the 90s, every state was hoping to have the “next Silicon Valley.” What types of industries/sectors are states trying to cultivate today?

12:51 Jennifer Bradley: One promising thing that my colleagues and I see is that states are no longer trying to be “the next” anything—they are trying to be the best versions of themselves and build on strengths that they have. Jed Kolko has done research indicating that 95% of new jobs come from existing firms—that’s where smart states are starting, with what they already do well. For some states that’s advanced energy, for some it’s helping auto supply companies pivot to supplying parts for wind turbines.

12:52 Comment From Fran I: I’ve heard a lot recently about regional economic development as a tool states are using to support growth. Could you explain a bit more about what these are?

12:55 Jennifer Bradley: It varies from state to state. In New York, for example, Governor Cuomo established 10 regional development councils and asked them to develop strategic plans for their regions. These plans were evaluated by a panel of experts and the top four regions got $100 million in state funding. Colorado’s Governor Hickenlooper used a different model. He told each county to create an economic development plan, constructed regional plans from those, and then used that as the state’s economic development plan. Tennessee used something called “jobs base camps” to identify key clusters to support.

12:56 Comment From Karen K: How can the federal government encourage states to experiment in these sort of ways?

12:58 Jennifer Bradley: The federal government can listen to the states when they ask for flexibility. For example, governors like Michigan’s Gov. Snyder has asked for a different, more flexible approach to spending federal workforce dollars.

Ironically, the federal government is spurring a lot of state innovation right now because it’s paralyzed and gridlocked. The states (and metro areas, too) have no choice but to innovate, whether the federal policy environment is conducive to it or not. I certainly don’t advocate continued paralysis at the federal level, but it shows that states simply have to get stuff done—they have to balance the budget, they have to respond to unemployment numbers, they have to bridge the gaps.

12:59 Vivyan Tran: Thanks for the questions everyone, see you next week!

      

 

 

Overall Performance: Recession and Recovery
Great Lakes metropolitan areas reliant on education and government have performed better than most large metropolitan areas in the United States over the course of recession and recovery. Five Great Lakes metropolitan areas were among the nation’s overall strongest performing metropolitan areas; two are educational centers (Pittsburgh and Syracuse), and one is a state capital (Madison, also home to a large university). These three metropolitan areas have also gained government jobs since their prior total employment peaks.

The Great Lakes metropolitan areas in general are enjoying a strong recovery – but auto producing metropolitan areas still have not made up the ground they lost in the Great Recession. Akron, Grand Rapids, Toledo, and Youngstown are among the 20 best-performing metropolitan areas in terms of recovery performance; Detroit’s recovery has been stronger than that of most other U.S. metropolitan areas.

The Recent Pace of Recovery
The second quarter presents a mixed recovery picture in the Great Lakes region. While auto-producing metropolitan areas in the Great Lakes region are, as noted above, generally enjoying a strong recovery, in the second quarter of 2011, Cleveland, Columbus, Dayton, Detroit and Toledo saw both output and employment decline. This was not necessarily due to a loss in manufacturing jobs in this quarter; Columbus and Dayton lost manufacturing jobs during this time, but Cleveland, Detroit, and Toledo gained them. Both employment and output grew in the second quarter in Buffalo, Grand Rapids, Louisville, Milwaukee, Minneapolis, Pittsburgh, Rochester and Syracuse.

Employment
Every Great Lakes metropolitan area but one has added jobs since their recession employment trough, but none has made a complete jobs recovery. Des Moines is the only large Great Lakes metro that hadn’t begun its employment recovery by the second quarter of 2011. (Des Moines hit its lowest employment in this quarter, so has seen no increase).Madison and Rochester are within one percent of their pre-recession employment peaks. Milwaukee, Grand Rapids, Youngstown and Rochester were among the strongest metros in terms of employment gains since their recession troughs. Grand Rapids has seen employment rise 4.3 percent since its low point in the third quarter of 2009. Within the region, Des Moines and Indianapolis have seen the smallest percentage increases in employment since their trough quarters.

Unemployment
The average unemployment rate among large Great Lakes metropolitan areas in June 2011 was 9.1 percent, lower than the seasonally unadjusted national rate that month of 9.3 percent. Unemployment was above the June 2011 national average in six Great Lakes metropolitan areas, Chicago, Dayton, Detroit, Louisville, Toledo, and Youngstown. The lowest unemployment rates in the region were found in Des Moines, Madison, Minneapolis, Pittsburgh, and Rochester.

Output
Output growth in the Great Lakes metropolitan areas lagged other large metropolitan areas and the nation as a whole during the second quarter. Only nine Great Lakes metropolitan areas saw gains in output in the second quarter of 2011: Buffalo, Des Moines, Grand Rapids, Indianapolis, Louisville, Milwaukee, Minneapolis, Rochester, and Syracuse.

Housing
House prices fell for the third consecutive quarter in all Great Lakes metropolitan areas, and fell at a faster rate in the second quarter than the previous two quarters. House prices hit new lows in all of the 100 largest metropolitan areas of the United States in the second quarter, including those in the Great Lakes region. Home prices fell fastest in Minneapolis, Cleveland, and Chicago from the first quarter to the second, declining by at least 4.7 percent in each. In all, house prices dropped more than the national average of 4.1 percent in five Great Lakes metropolitan areas. House prices in Buffalo, Pittsburgh and Rochester dropped less than 3 percent. Nationwide, housing prices were down 26.7 percent since their peak. Six Great Lakes metropolitan areas have had larger declines: Chicago, Cleveland, Detroit, Grand Rapids, Minneapolis, and Toledo.

      

 

 

That was the conclusion of over 250 public and private leaders from both the United States and Canada recently brought together by Brookings and the University of Toronto Mowat Centre in Detroit-Windsor.

The tone was set by Bruce Katz’s keynote–where he pressed for international metro action to expand exports and encouraged the industrial Great Lakes to seize and lead the low-carbon, clean-tech economy.

Overall, two topics dominated discussion by delegates as ripe for international teamwork. 

One was building the 21^st century transportation infrastructure the region needs as a platform for enhanced exports–and in particular building a state-of-the-art span connecting Detroit and Windsor, the world’s highest dollar international trade crossing point. Michigan Senate Majority Leader Randy Richardville, and Canada’s Consul General Roy Norton were pitching hard for the Michigan Legislature to follow Governor Rick Snyder’s call, and vote final approval for the new bridge.

The New International Trade Crossing has been 10 years in the planning, and is strongly backed by business leaders and governments on both sides of the border. It seemed a done-deal when Gov. Snyder announced that Ontario would pay cash-strapped Michigan’s share of the project, and in turn the U.S. Department of Transportation would let the Canadian dollars stand-in as Michigan’s match for federally-funded highway projects across Michigan.

The project keeps being sabotaged by the aging billionaire Mattie Maroun (born 1927), owner of the equally aging Ambassador Bridge (built 1929), fighting hard to keep a monopoly on toll traffic.

Maroun has contributed hundreds of thousands of dollars to Michigan State legislators, and bankrolled groups that are behind dirty tricks that would make Donald Segretti blush, including fake eviction notices at the doors of homeowners near the proposed bridge and patently false TV spots claiming Michigan taxpayers will foot the bill.

Meanwhile the whole $250 billion economic relationship with Canada is at risk, as the tightly wound manufacturing, agricultural, and commerce supply chains are bottlenecked–just at a moment they are poised to grow.

Another area for Great Lakes international teamwork is converting the region’s prodigious innovation, technology-base, and manufacturing talent to support new jobs and leadership in the clean-technology market. Recent Brookings research shows Michigan already 12^th in the nation in share of clean-tech jobs and confirmed the jobs potential of clean-tech growth.

Grand Rapids Mayor George Heartwell made the point, “I can think of nothing more important than a more robust, and better harmonized Great Lakes renewable energy portfolio standard to drive job creation in the clean energy sector.”

Heartwell was articulating the market opportunities seen by business leaders in West Michigan, who feel well positioned to grow product lines and new jobs developing and manufacturing clean-energy and clean water solutions. When Gov. Snyder showed up in West Michigan to give his first “Reinvent Michigan Award” to Energetx, a wind turbine and electric vehicle parts supplier, the former venture capitalist was also petitioned by a 40-member delegation of clean energy business buddies, asking him to better support these emerging markets with more aggressive public policy. 


As the Brookings study shows, clean-tech is one emerging arena in which to repurpose the engineering and manufacturing competencies of the Great Lakes to replace jobs lost in auto and other sectors–if state and metro leaders provide the supportive policy platform.

      

 

 

For the United States and Canada, this means transitioning to a “next economy” that is driven by exports, powered by low carbon energy sources and fueled by innovation. The Great Lakes region has everything it needs to be the engine of the next economy of the U.S. and Canada.

The two Canadian provinces and eight U.S. states in this region are home to over 105 million people. As a whole, the region generated $4.6 trillion in economic output in 2009, making it one of the largest economies in the world. More than $2 billion worth of goods and services cross the U.S.-Canada border every day, with $356 million traversing the Windsor-Detroit crossing alone. Despite the decline in North American manufacturing, the Great Lakes region produces nearly 75% of total Canadian manufacturing and 33% of total U.S. manufacturing.

The Great Lakes also possess significant innovation assets. Twenty of the top 100 research universities in the world are located in the region. Paired with corporate research labs located throughout the region, the Great Lakes could lead new technology development in emerging sectors.

The Great Lakes themselves provide a huge advantage, given the world’s insatiable demand for innovation in the supply and delivery of clean water.

So what must happen for this cross-border zone to realize its potential in the next economy?

Metropolitan leaders must be purposeful about their economies. Business, political and civic leaders in northeast Ohio are coming together to craft a smart business plan for their region with ideas to retool manufacturing firms and retrain industrial workers. All cities need to develop such plans.

Cities also need to be collaborative. As they develop plans, they should look to neighboring cities to see whether there are ways to seize common opportunities with potential partners on the other side of the border.

Federal, state and provincial leaders must also orient their investments and policies toward metropolitan area visions. Toronto and Chicago are transitioning to a green economy with robust, market-shaping renewable energy and sustainability policies and incentives. Milwaukee, Grand Rapids and Windsor have targeted water and clean energy technology sectors for investment and growth. Provincial, state and federal governments need to get behind the innovation strategies of their cities. Both countries need to support this kind of bottom-up federalism in a fiercely competitive world.

Finally, federal leaders must rebalance security and economic concerns. The U.S. and Canadian governments have to maintain a secure border, while also harmonizing regulations and investing in 21st-century infrastructure at the border.

The next economy could be a bright one for the communities in the Great Lakes region, but it will not just happen on its own. Both countries need to act with purpose. Creating the next economy will begin at home, in the metropolitan areas that drive our prosperity.

      

 

 

For the nation as a whole, that seems reasonable. Suppose the labor force grows at the same rate it has over the last decade, an average of 0.07 percent per month. Suppose that the number of employed people (as measured in the Labor Department’s household survey, which is what’s used to figure the unemployment rate) increases by 297,000 every month, as it did in December. Then the nation’s unemployment rate will be just below 4 percent—a rate last achieved in 2000 and one that federal law sets as a target for full employment—in September 2014. Of course, if employment grows more slowly, then it will take longer for the nation to reach full employment.

But what will happen in metropolitan areas with unemployment rates far above the national average? Metropolitan Detroit, for example, had an unemployment rate of 13.5 percent in November (the most recent month for which metro unemployment rates are available). To many people in Detroit, full employment seems like a distant, perhaps unattainable dream. Even if Detroit’s unemployment rate falls as rapidly as the national rate, it will take until at least mid-2016 for its unemployment rate to reach 4 percent.

Surprisingly, though, Detroit’s unemployment rate will probably fall faster than that. The reason is that, faced with continued poor job prospects, many people will leave. That will reduce the size of Detroit’s labor force and lower its unemployment rate, even if job creation remains sluggish. In contrast, relatively few people leave the United States even during the worst economic times, and not very many drop out of the labor force because they can’t find work. (Since the beginning of the Great Recession in December 2007, the U.S. labor force fell by an average of only 0.008 percent per month.)

What’s likely to happen in Detroit? The metro area’s labor force has fallen by an average of 0.07 percent per month since the beginning of 2000, largely because the metro area’s population has declined. (The labor force fell at a slightly slower rate since the beginning of the Great Recession, perhaps because people who would otherwise have left the region couldn’t sell their houses.) Suppose that rate of labor force decline continues, and that the metro area’s employment rises by 2,164 every month, as it did in November. (That’s a slower job growth rate than the one I assumed for the nation as a whole.) Then the metro area’s unemployment rate will be just under 4 percent in July 2015–about a year sooner than it would reach that target if it fell in proportion to the national rate.

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Even if employment grows more slowly than I’ve assumed (so that full employment takes longer to achieve), the moral of the story is clear. As economists Olivier Blanchard and Larry Katz pointed out almost 20 years ago, unemployment rates even out more quickly at the regional level than at the national level. People leave economically depressed regions and move to ones that are adding jobs rapidly. That lowers the unemployment rate in the depressed regions and raises it in the more vibrant ones. So it could take metro Detroit less than a year longer than the nation as a whole to return to something like full employment, even though its unemployment rate is now much higher than the nation’s.

      

 

 

The Great Lakes region, too long tagged with the misleading nickname, The Rust Belt, could show the rest of the country the way forward to the next economy.  Although battered by decades of declining economic health, and particularly by the recession, the nation’s heartland still has many of the fundamental resources—top-ranked universities, companies with deep experience in global trade, and emerging centers of clean energy research to name just a few—necessary to create a better, more sustainable, economic model.

This is not to disregard the region’s challenges.  Its major metros have neither the economic development strategies nor the transportation infrastructure in place to fully take advantage of their export generating capacity.  Many have inefficient physical development patterns, hollowed out urban neighborhoods, and concentrations of energy-intensive industries, and thus remain the epicenters of the nation’s fossil fuel-reliant economy.  They lack the early-stage capital and other supports needed to strengthen existing firms and encourage start-up enterprises.  And many suffer from deep, entrenched poverty, and have low educational attainment levels compared with their peers nationwide. 

With both the strengths and challenges clearly in mind, this report provides a roadmap to economic recovery and transformation in the Great Lakes region, powered by its metropolitan areas.  It describes how federal, state, and local stakeholders can leverage the region’s substantial assets to create a more productive, sustainable, and inclusive economic future.

The report finds:

First—The Great Lakes region, particularly its metropolitan areas, has significant resources essential to creating the next economy:

• Global Trade Networks —These networks, developed in large part by the auto industry, are critical to an export economy.  Seven Great Lakes metros—Dayton, Detroit, Grand Rapids, Indianapolis, Milwaukee, Toledo, and Youngstown—are already among the country’s top 20 metro areas in terms of the share of their metro output that is exported.  In particular, Great Lakes metros can capitalize on the growth potential of knowledge exports, as they have a concentration of top universities and associated medical complexes.

• Clean Energy/Low Carbon Capacity — Industries and universities in Great Lakes metros have created the research capacity and manufacturing prowess needed to build a clean energy, low-carbon economy.  They have an outsized ability to lead on wind and solar renewable component manufacturing, and to capitalize on the “green-blue” potential of the Great Lakes and their waterways.  The region’s research and innovation infrastructure is already spurring the development of new products and processes: Michigan, Ohio, and Illinois are among the top states in terms of green tech patenting, focused on new technologies in battery power, hybrid systems, and fuel cells.

• Innovation Infrastructure — Great Lakes metros have the industrial and institutional infrastructure necessary to power an innovation economy.  The 21 largest Great Lakes metros alone are home to 32 major public and private research universities, which attract substantial federal research investment.  The region produces approximately 36 percent of America’s science and engineering degrees each year.   Between 2001 and 2007, an average of nearly one-third of the country’s patents each year were awarded to the Great Lakes states.

• Opportunities — Like innovation, opportunities grow in the presence of a robust educational network, such as the one that exists in the Great Lakes region.  In addition to its public and land grant universities—the latter created in the 19^th century to promote agriculture, science, and engineering—the region is also dotted with community colleges, which help the region’s workers develop skills and credentials necessary to secure jobs in the region’s industries, and in so doing maintain a pool of skilled employees to attract and support them.

Second — To realize the promise of the next economy, federal, state, and metropolitan leaders should join with the private and philanthropic sector to:

• Invest in the assets that matter: innovation, infrastructure, and human capital

• Devise new public-private institutions that are market-oriented and performance-driven.
• Reimagine metros’ form and governance structures to set the right conditions for economic growth

Voices from the Region

As part of this project, a number of scholars, practitioners, and policy experts from Great Lakes metros, and beyond, contributed their recommendations for how the federal government could support the region’s transition to the next economy.  These recommendations, discussed in a series of briefs, focus on a range of issues including workforce policy, manufacturing, higher education, transportation, and water policy.

The Federal Role in Helping Incumbent and Dislocated Workers Adjust to the New Economy » (PDF)
Randall Eberts and George Erickcek

Strengthening American Manufacturing:  A New Federal Approach » (PDF)
Susan Helper and Howard Wial

The Federal Role in Leveraging America’s Community Colleges » (PDF)
James Jacobs

The Federal Role in Supporting Auto Sector Innovation » (PDF)
Thomas Klier and Christopher Sands

The Federal Role in Supporting Public Universities’ Global Missions » (PDF)
Lou Anna K. Simon, Richard M. Foster, and John C. Austin

Developing a National Strategy for Goods Movement » (PDF)
Robert Puentes

Leveraging the Great Lakes Region’s Water Assets for Economic Growth » (PDF))
G. Allen Burton, Don Scavia, Samuel N. Luoma, Nancy G. Love and John C. Austin

Additional Resources
Hubs of Transformation: Leveraging the Great Lakes Research Complex for Energy Innovation »
James J. Duderstadt, Mark Muro, and Sarah Rahman

Turning Up the Heat: How Venture Capital Can Help Fuel the Economic Transformation of the Great Lakes Region » 
Frank Samuel

Facing the Urban Challenge: Reimagining Land Use in America’s Distressed Older Cities—The Federal Policy Role »

Alan Mallach

      

 

 

Doubling exports, whether or not it happens in the next five years, would be a huge boon to most of the Great Lakes region’s largest metropolitan areas, bringing them thousands of good jobs and building on their existing strengths in the world economy. This report focuses attention on the benefits of exporting, and highlights the existing and emerging strengths, and some weaknesses, of Great Lakes metros in global trade.

Using newly developed information from the Brookings report “Export Nation,” this analysis of export activity in the 21 largest metros of the Great Lakes region for the years 2003 to 2008 reveals that:

• Exports support 1.95 million jobs in the largest metropolitan areas in the Great Lakes. Even after decades of decline in manufacturing employment, export industries (primarily manufacturing) still employ millions of people in the region, ranging from 398,000 in Chicago, to 240,000 in Detroit, to 20,000 in Des Moines, as of 2008.

• Great Lakes metros have some of the highest dollar volumes of exports and the greatest reliance on exports of any of the large metropolitan areas in the nation. Chicago and Detroit rank third and ninth, respectively, in total dollar export volume among top 100 metropolitan areas, and Minneapolis, St. Louis, and Indianapolis all rank in the top 20. Great Lakes metros also tend to export a greater proportion of their economic output than most large metropolitan areas.

• In general, Great Lakes metros with the highest levels of manufacturing employment are less innovative than their manufacturing oriented or export intensive peers. Nationally, metros that are manufacturing oriented or export intensive (or both) tend to create patents at much higher rates than other metros. But most Great Lakes metros underperform on innovation compared to their national peers, despite high levels of manufacturing employment and generally high export intensity. Only three of the 15 most manufacturing-intensive metros in the region, Detroit, Minneapolis, and Rochester, post above average patenting rates.

• The region’s metros lag the nation’s other large metros in terms of service exports and service export growth. Only Chicago and Minneapolis export more services as a share of total output than do the nation’s top 100 metros as a whole, and only four Great Lakes metros (Syracuse, Buffalo, Des Moines, and Columbus) outpaced other large metros in the growth of their service exports. Despite this lackluster growth performance relative to other metros, inflation-adjusted service exports grew faster than output in 20 of the 21 Great Lakes metros from 2003 to 2008 (Pittsburgh was the only exception).

• Considerable growth in global customers for products and services produced in the Great Lakes metros will come from the large emerging markets of Brazil, India, and China. Most Great Lakes metropolitan areas (12 out of 21) send 8.6 percent or more of their export value to Brazil, India, and China (the BIC countries), meaning that they meet or exceed the average large metro export share going to the BIC nations. Some Great Lakes metros, such as Youngstown, Des Moines, and Columbus, have seen huge jumps in the value of their exports to BIC countries over the last five years.

A legacy of success in exports does not guarantee future dominance, a lesson that Great Lakes metros should have learned through rough experience. But raising exports holds out the promise of creating thousands of new jobs in Great Lakes metros that desperately need them. For that reason, metropolitan leaders and their federal, state, and private sector partners must be aggressive and creative in determining what new or re-imagined goods and services the world demands from them, and equally dedicated to expanding their global reach.

      

 

 

This being an election year, the manure being spread by seven Republican and Democratic Michigan gubernatorial hopefuls, along with visiting keynoter and maybe presidential candidate Newt Gingrich, rivaled the piles left by Mackinac’s famous horse-drawn taxis.

An unprecedented (and unlikely to be repeated) bi-partisan gubernatorial debate hosted by the Detroit Regional Chamber of Commerce saw seven Michigan candidates to replace term-limited (and sand-blasted by Michigan’s auto and economic collapse) Governor Jennifer Granholm deal with a host of hot-button topics.

None was more interesting, given the BP moment, than the question posed by moderator Tim Skupick: “If the Canadians were to start drilling for oil in the Great Lakes, would you try to stop it, and if so, how?” 

The question was not a wild hypothetical. Canadian provinces have been considering exploiting more of the significant gas and oil deposits under the Great Lakes. Drilling has been done on land for years. Drilling in the Lakes has been episodically proposed by various states, and most recently, Canadian provinces. Michigan’s legislature was moved in 2002 to ban Great Lakes drilling, and pushed a federal law in 2005, as proposals for “slant drilling”—getting at oil and gas under Michigan proper—from “out at sea” in the Great Lakes were seriously being pursued.

Michigan straddles almost 4,000 of the 10,000 miles of Great Lakes frontage; but eight other states and two Canadian provinces—including leading metros like Chicago, Milwaukee, Buffalo, Cleveland, and Toronto to smaller Duluth, Green Bay, and Traverse City—share the same waterfront real estate.

Given the Gulf-induced drilling backlash—all the candidates—Republicans and Democrats—groped to outdo each other in demonstrating their zeal to prevent such a thing with varying degrees of credibility given Canada is a sovereign nation and a lack of clarity concerning what, if anything, a governor could do.

Some of the answers: “I’d fly to Ottawa; I’d phone the premier of Quebec; I’d lobby the Obama administration to stop it; a governor can’t do anything, but I’d try.”

At a moment when the nation is just beginning to pour serious dollars into cleaning the Great Lakes, repairing damage done by the prior carbon-fueled industrial era’s water abuse; and prompted in no small part by our work demonstrating the huge economic importance of clean Great Lakes to the long-term economic revitalization of these industrial metros, there have been some ironic recent twists in the political winds.

Prior to the Gulf BP disaster, not only was Great Lakes drilling once again sneaking up as a real and potentially “needed” economic opportunity (albeit with Canadians as the stalking horse), but Michigan just gained an unprecedented windfall to maintain its once crown jewel state parks system from the latest round of oil and gas leases that are routinely auctioned. Michigan’s park system, like a lot of Michigan, has been decimated by 10 years of economic and state budget collapse, leading to deferred maintenance and park budget cuts. The recent round of land-based oil and gas exploration leases earned a surprise $178 million for the parks trust fund—almost as much as the $190 million total netted since the program began in 1929.

Making a choice in the Great Lakes devil’s bargain between long-term economic gain by capitalizing on its spectacular freshwater coast as a place-defining, people attracting magnet or exploiting the rich resources that lie below the Great Lakes, and maybe wrecking the place again, will be held at bay due to the BP moment. But the underlying tensions and Faustian political choice remains.