Dealing with Deindustrialization

Adaptive Resilience in American Midwestern Regions

Margaret Cowell

• Publisher: Routledge
• Year: 2014
• ISBN:
  9781317649083
• Edition: 1
• Topic: Politics & International Relations
• Subtopic: City Planning & Urban Development
• Index: Politics & International Relations

The late 1970s and 1980s saw a process of mass factory closures in cities and regions across the Midwest of the United States. What happened next as leaders reacted to the news of each plant closure and to the broader deindustrialization trend that emerged during this time period is the main subject of this book.

It shows how leaders in eight metropolitan areas facing deindustrialization strived for adaptive resilience by using economic development policy. The unique attributes of each region - asset bases, modes of governance, civic capacity, leadership qualities, and external factors - influenced the responses employed and the outcomes achieved. Using adaptive resilience as a lens, Margaret Cowell provides a thorough understanding of how and why regions varied in their abilities to respond to deindustrialization.

1 Deindustrialization and its discontents

Over the course of the early-to mid-twentieth century, millions of people, including many African-Americans coming from the south, migrated to cities like Detroit, Pittsburgh, and Indianapolis (Wilkerson 2010). Stable employment, union protection, and the potential for middle-class advancement drew workers and employers alike. Most employment opportunities for new arrivals and existing residents were in factories that produced steel, iron, or other related products. Tremendous gains in these industries tracked closely with the economic and population growth seen in the cities in which they were concentrated. Significant gains during the 1960s meant that the average US family took home one-third more real spendable income in 1970 than it did in 1960 (Bluestone 2003, viii). Within the Midwest, these gains were even more pronounced as manufacturers gained ground on foreign competition during the 1960s and 1970s.

All that would begin to change in the late 1970s and early 1980s, when metropolitan areas in the Midwest began to struggle with a precipitous loss of jobs and widespread outmigration to other parts of the country and the world. These changes often coincided with a shift in economic bases from manufacturing-intensive to more services-based economies. Such a transition was difficult for most Midwestern regions because it generally meant simultaneously confronting population outmigration, above average unemployment, and diminished revenue. Further difficulty stemmed from dwindling and often uncertain federal support for the very economic development initiatives that would ostensibly make this transition easier. In order to understand how and why regional responses to these challenges were developed, we must first understand the unique characteristics of this region and the challenges it faced at the end of the twentieth century. We begin first with an exploration of the Rust Belt and its introduction to the popular imagination.

The United States Rust Belt

During the early- to mid-twentieth century the industrial Midwest was known for its manufacturing prowess, higher than average wages, and plentiful employment opportunities. Within the Midwest, steel and iron production, automobile manufacturing and related supporting industries, mainly component parts and assembly, were the primary economic drivers. This strong manufacturing base brought prosperity, stability, and opportunity for metropolitan regions in the Midwest during the 1950s, 1960s, and 1970s. At its peak during the 1970s, manufacturing accounted for one-fifth to one-third of nonfarm employment in states like Michigan, Indiana, Ohio, and Wisconsin (Rosen 1984).

Today, in stark contrast, many of these same regions conjure up images of rusted machinery, padlocked gates, and abandoned industrial compounds (Safford 2009). Much of this change occurred during the 1970s and 1980s through widespread economic restructuring – often called deindustrialization – that would alter the face of regional economies the world over. Metropolitan areas of the industrial Midwest experienced devastating losses in the form of disappearing jobs, population outmigration, and dwindling tax revenue. As a whole, the region saw 23.6 percent of its manufacturing employment disappear during this time period (Kahn 1997), which is one of the main reasons that the term hollowing out is used to describe this era (Safford 2009).

The idea of a Rust Belt first emerged in 1984 when Democratic presidential candidate Walter Mondale accused President Ronald Reagan of turning the Midwest into a “Rust Bowl.” Accounts from that time period show that the press then popularized the term Rust Belt as a way to describe the Midwest and the decline that defined it. Over time, use of the term grew substantially, so that the term Rust Belt eventually became synonymous with a group of former steel- and auto-manufacturing metropolitan areas in an indefinite state of decline.

The United States Rust Belt has imprecise boundaries, but is generally thought to include the industrialized portions of the states that make up the Great Lakes region. When most people refer to the Rust Belt, they often include the entire states of Michigan and Ohio, northern and central Indiana, northern Illinois, southern Wisconsin, and the western portions of Pennsylvania and New York. These boundaries encompass the eight metropolitan areas included in this study.

The term Rust Belt emerged as a symbolic counterpoint to the Sunbelt – the more prosperous southern and southwestern area of the United States that stretches from Florida and Georgia to the southern portion of California. The Sunbelt, which also has imprecise boundaries, generally represented the more hopeful side of the industrial restructuring equation. For profit-driven companies, the south and southwest offered lower wages, immigrant labor, and the growing demand of retirement communities. For job seekers, the Sunbelt offered opportunities for employment in innovative technologies, oil extraction, and defense, as well as less expensive housing. As the Rust Belt bled jobs and people during the 1980s and 1990s, the Sunbelt saw exponential growth in population, housing, and employment.

More recently, the concept of a Rust Belt has gained ground in other parts of the world. European scholars and practitioners alternatively refer to their declining regions as part of a European Rust Belt or as an amalgamation of Shrinking Cities (Hospers 2004). Both refer to very similar trends at play in places like Northern England and the Ruhr Area of Germany (Kühn and Liebmann 2007). The Rust Belt term has also been applied to the northern Chinese provinces of Heilongjiang, Jilin, and Liaoning, which have similarly suffered precipitous decreases in manufacturing output and employment (Li 2004).

Deindustrialization

One of the main identifying features of the Rust Belt region is the pronounced losses that most of its metropolitan areas saw during deindustrialization, which is in and of itself a contentious term. Deindustrialization as an idea was made popular in 1982 when Bluestone and Harrison released their benchmark study, The Deindustrialization of America, but the trend was underway long beforehand. Following sustained employment growth during much of the 1970s, the three-year period between 1979 and 1982 saw employment at the national scale grind to a startling halt (Rosen 1984). In particular, two downturns during this period had profoundly negative effects on heavy manufacturing, like automobiles, steel, tires, and machinery. The first downturn, the 1979 energy crisis that followed the 1979 Islamic Revolution in Iran, exacerbated US energy woes already reeling from the earlier 1973 crisis. The second quickly followed as a formal recession that lasted from July 1981 through November 1982 (NBER 2009). Together, these two downturns severely affected key industries in the Rust Belt and helped hasten the decline of many of its metropolitan areas.

In order to understand how deindustrialization affected the eight case study regions, it is useful to first recognize the origins and complexities of the deindustrialization trend. Part of the difficulty in understanding deindustrialization stems from the fact that the term is not often used by researchers today; in the United States, deindustrialization typically refers to the changes seen in the economy and in broader society during the late 1970s and early 1980s. The term is a historical construct, meaning that it happened during a certain point in history and was a construct of larger local and global economic processes, including trade liberalization and a growing spatial division of labor (Cowie and Heathcott 2003).

The term deindustrialization is also slightly confusing because it is a misnomer. Deindustrialization in the Rust Belt in no way resulted in no industry; instead, deindustrialization was part of a major economic restructuring that would change the economic landscape and industrial composition of these regions forever. In the United States, global restructuring of the manufacturing sector often meant that many corporate headquarters positions would stay put but lower-wage jobs were outsourced to less expensive areas of the world. In places like the Rust Belt, these higher-wage headquarter positions remained an important part of the regional economy but represented a comparatively smaller portion of total regional employment.

In most Rust Belt regions, deindustrialization caused a sharp downturn in low- and medium-wage manufacturing jobs and a gradual uptick in service sector employment. In other words, industries could still be found in these regions, just not in the same proportions or magnitudes as they had been in the past. Despite these losses in employment, improved efficiencies and mechanization actually increased output for some industries. However, the main focus in this book is on jobs and not output because economic development targets are most often tied to employment.

At its most basic level, deindustrialization is generally defined as the relative decline of the manufacturing sector (Bluestone and Harrison 1982). Providing an expansion of this fundamental definition, researchers have offered a variety of increasingly complex definitions with varying degrees of specialization. Kutscher and Personick (1986) describe deindustrialization as a lack of investment in basic production that, when combined with plant closings and layoffs, results in a large negative merchandise trade balance. A more relativist definition is provided by Pieper (1999), who defines the trend as a relative loss – with respect to the rest of the economy – of the industrial sector’s contribution to overall labor productivity growth.¹

Looking at deindustrialization as it pertains to actual places, the Federal Reserve Bank of New York released a report in the spring of 2006 on the state of manufacturing in the United States, primarily focusing on the upper Midwestern states, a region that is basically one and the same with the Rust Belt. Its research concluded that much of this area had seen widespread and persistent decline in the manufacturing sector from the 1980s forward. Though not all Rust Belt regions have been affected similarly, the analysts presented evidence that the United States overall has lost more than 5 million manufacturing jobs in the last three decades and that the share of the US labor force employed in this sector has dropped from 20 percent in 1979 to less than 11 percent in 2006 (Deitz and Orr 2006). The authors predict that these losses – many of which stem from a shedding of lower-skilled workers in a move towards higher-skilled and less labor-intensive production – will likely continue in the long term and continue to plague the Rust Belt region.

That structural change has occurred in the Rust Belt is generally accepted by economists today; looking back, however, to the time when this trend first began to unfold, we see that such an assertion was not always accepted. During the early 1980s, economists grappled with the issue of whether changes in industrial composition could best be described as cyclical or structural in nature. In 1982, Robert Lawrence and his colleagues at Brookings Institution argued that most employment losses related to plant closings at that time were only cyclical in nature and not permanent. He was not alone in thinking that deindustrialization was a myth and that cyclical change, rather than structural change, better described the industrial shifts happening in the late 1970s and 1980s (Branson 1983).

Alternative views citing a more structural type of change were given by Thurow (1980), Bluestone and Harrison (1982), and Magaziner and Reich (1983), among others. Thurow, who was the first to coin the term “sunrise industries”, argued that structural changes in the economy had paralyzed government’s ability to assist in economic recovery. He advocated for focused government investment in sunrise industries, including high technology production and service activities. Bluestone and Harrison (1982), who provided empirical evidence of structural change in the United States, argued that deindustrialization resulted from the increased mobility of capital and a systematic shift in resources to low-cost locations. Bluestone followed with a 1984 article, “Is Deindustrialization a Myth? Capital Mobility versus Absorptive Capacity in the U.S. Economy”, which found that notable job losses transpired in many basic industries throughout the Midwest. Primarily in agreement with Bluestone and Harrison, Magaziner and Reich (1983) proposed a series of policies and plans to improve the relationship between industry and government as a way of combating the structural change seen as a result of deindustrialization. In the end, those who supported structural change seemingly won out, as it is commonly believed today that the industrial structure of regions within the Rust Belt underwent permanent and often irreversible changes as evidenced by the substantial permanent job losses seen in key basic industries (Varaiya and Wiseman 1981).

Within the structural change camp, further hypothesizing about the causes of deindustrialization also occurred. From this discourse emerged two main theories: the concept of post-industrial society seen through the lens of product cycle theory and the concept of capital mobility seen through the lens of industrial relations theory. Although both theories contribute to our understanding of deindustrialization, they differ widely in their discussion of global and local forces.

Product cycle theorists generally believe that long-term patterns of international trade are influenced by product innovation and subsequent diffusion. The product cycle theory draws upon Ricardo’s (1821) model of comparative advantage, which posited that diffusion is the natural process whereby businesses move toward places where their inputs can be obtained less expensively. Thus, the international diffusion of manufacturing during the late 1970s and 1980s may have been inevitable, as it is a necessar...

Table of contents

• Cover
• Half Title
• Title Page
• Copyright Page
• Dedication
• Table of Contents
• List of figures
• List of tables
• Preface
• Introduction
• 1 Deindustrialization and its discontents
• 2 A glimmer of resilience
• 3 Enter the economic developers
• 4 Eight regions changing
• 5 The ‘Basic Betters’: Detroit, Milwaukee, Cleveland, and Buffalo
• 6 ‘Bowing Out’: Cincinnati, Pittsburgh, Indianapolis, and Columbus
• 7 Conclusion: the art of adaptive resilience
• Index