New Geography

Category: Small Cities

  • Dayton, Ohio: The Rise, Fall and Stagnation of a Former Industrial Juggernaut

    What Dayton can tell cities about staying competitive in the global economy

    Few people would recognize Dayton, Ohio of 2008 as the industrial powerhouse it was less than one hundred years ago. Once a beacon of manufacturing success, Dayton claimed more patents per capita than any other U.S. city in 1900. Its entrepreneurial climate nurtured innovators such Charles Kettering, inventor of the automobile self-starter and air travel pioneers Wilbur and Orville Wright. As the U.S. economy took off after World War II, Dayton was home to the largest concentration of General Motors employees outside of Michigan.

    The city also nurtured companies that would became stalwarts on the Fortune 500, including National Cash Register (NCR), Mead Paper Company, business forms companies Standard Register and Reynolds and Reynolds, Dayco and Phillips Industries. To put this in context, just 14 U.S. cities could claim six or more Fortune 500 headquarters in 2007. Not a bad performance for an urban area that peaked as the 40th largest city in the U.S. in 1940.

    These early industrialists were more than just business men. They were also visionaries. The founder of NCR, John H. Patterson, is widely credited with laying the foundation for the first modern factory system, pioneering the basic principles that still drive much of modern advertising, and redefining the relationship between labor and management.

    NCR may also have been America’s first truly global business. “The cash register,” writes Patterson biographer Samuel Crowther, “is the first American machine which can claim that on it the sun has never set.” Even as Patterson was toiling away in a little shop in Dayton, cash “registers were being sold in England and Australia.” The company’s first non-US sales office was established in England in 1885 and its first European factory was established in Germany in 1903.

    It’s difficult to underestimate Patterson’s influence on American industry. By 1930, an estimated one-sixth of all U.S. corporate executives had either been an executive at NCR or been part of Patterson’s management training programs. Among NCR’s alumni were IBM’s visionary CEO Thomas Watson as well as the presidents of Packard Motor Car Company, Toledo Scale, Delco (now Delphi) and dozens of others.

    What may separate men like Patterson to their equivalents today in places like Silicon Valley was their intense civic involvement. Patterson was one of the first business leaders to try to apply scientific management to local government, testing out his ideas in rebuilding the city after a disastrous flood ruined downtown Dayton in 1913. He also helped create the Miami Conservancy District, one of the nation’s first flood control districts that still manages a system of low-level dams and levies that keep downtown flood-free to this day. Perhaps one of Patterson’s most prescient civic innovations was bringing the city manager form of local government to the first large city in the U.S.

    As significant as Patterson was as an individual, he was not alone. The Dayton area benefited from the entrepreneurial drive and civic commitment of hundreds of businessmen that built large companies, many publicly traded. Patterson was the most iconic of the icons.

    Dayton’s Economic Descent
    Today one would not expect such vision in Dayton, and you would be unlikely to find it. Since the early 1970s, nearly 15,000 manufacturing jobs disappeared at NCR. Automobile plants cut payrolls as the economy restructured toward services, and foreign competition outsold domestic manufacturers. As late as 1990, five General Motors plants employed more than 20,000 people regionally. Now, fewer than 12,000 work in these factories and Delphi is on the cusp of closing two more plants. NCR’s world headquarters employs fewer than 3,000 people. Mead Paper Company has merged with a competitor, becoming MeadWestvaco and its corporate headquarters has moved to Richmond, Virginia.

    As the economy has tanked, the city has shrunk. After peaking at more than 260,000 people in 1960, the city is barely clinging to a core city population of less than 160,000. In the 2000 census, Dayton ranked 147th in size nationwide. Its metropolitan area is now ranked 59th.

    Meanwhile, the suburbs have grown. Nearly 74 percent of Montgomery County’s population lived in Dayton in 1930. The growth of suburban cities shrunk that proportion to less than a third by the mid 1980s. Now, less than 20 percent of the metropolitan area’s population lives in the city of Dayton.

    Lessons for Other Cities
    Dayton’s early dependence on traditional manufacturing, with a particular emphasis on assembly line work, put the region at a competitive disadvantage as growing international trade and dramatically reduced transportation costs allowed for the global dispersion of factory work.

    Yet perhaps most remarkable is not the region’s decline, but its resilience. Despite the ongoing decline of manufacturing sector, the metropolitan area still knits together a population of over one million people. What accounts for this?

    First, the regional economy has diversified. Now, as in other metropolitan areas, the growth in employment is in services. Two local major health care networks – Premier Health Partners and Kettering Medical Network – employ 15,300 in facilities that are nationally recognized for their quality of care. Wright Patterson Air Force Base is a center for scientific research and development and employs another largely civilian workforce of 21,000.

    Second, some of the large industrial companies of the past have evolved to meet the needs of an information economy. NCR, while its presence has diminished, is now a high tech company. Reynolds & Reynolds, a former business forms manufacturer, now provides software in niche markets such as auto sales. The region is also home to the legal information services provider Lexus/Nexus, now a division of Reed Elsevier but originally a division of the Mead Paper Company’s investment in data management services.

    Third, core parts of the traditional manufacturing base literally retooled to become globally competitive. In the early 1980s, more than 600 machine shops employed nearly 20,000 people. As the 1990s unfolded, this number had fallen by half. As the 21st century got its start, the number of tool and die shops had revived and employment was rebounding close to 15,000. The shops remain small, but they are deeply invested in global trade. Productivity is up along with incomes.

    Fourth, the region remains at a strategic logistical and demographic location in the Midwest. The city of Dayton is at the cross roads of two major interstate highways – the major east-west link I-70 and the north-south connector of I-75. Combined with access to three major airports, the Dayton region can easily benefit from and tap into economic growth in nearby metropolitan areas such as Columbus, Cincinnati, and Indianapolis. Ironically, many of the highway improvements some believed would “empty” the downtown – the interstates plus a partial beltway, I-675 – ended up tying the city and suburbs to other larger urban areas and enhanced the region’s geographic importance.

    Dayton’s economy may no longer provide the flash and glitter of 20th century economic leadership, but the region has demonstrated a remarkable robustness that holds lessons for other cities striving to remain competitive in a global economy. All cities or economic regions pass through periods of growth and decline. The real question is whether they can adapt to changing economic circumstances.

    Dayton survived by building on the secrets of its past success. Its innovative manufacturing base has become more tech-centric and service-oriented. New areas of vitality such as health services have been enhanced. The city may no longer be what it was at its peak a century ago, but its future is far from grim.

    Sam Staley, Ph.d., is director of urban and land use policy at the Reason Foundation and teaches urban economics at the University of Dayton. He is a fourth generation native and current resident of the Dayton area.

  • Ranking “Dreamtowns”

    Over half of the nation lives in metropolitan areas of more than 1 million people, but bizjournals.com suggests many may indicate another preference:

    Yet a substantial number of these residents of big cities and inner-ring suburbs don’t have their hearts in it. They would prefer to live on the suburban fringe or in small-town America, as repeatedly shown by surveys during the past decade.

    Bizjournals just released rankings of micropolitan areas. Micropolitan areas are urbanized small cities where the central city population is between 10,000 and 50,000. Like metropolitan areas, micropolitans are still defined by county and commuting geography, so many are larger than 50,000 overall.

    Because they offer self contained employment centers, these types of places may prove to be even more appealing as energy costs escalate. Recent domestic migration trends show that small and medium sized metro regions are attracting the most new residents.

    Check out the rankings list, it’s odd to note that most of the top 20 are in northern climates. Not surprisingly, small college towns dominate the rankings, offering a source of stable professional jobs and the added vitality of a new crop of 20-somethings each year.

  • The New Boom Towns

    The steep hike in gas and energy prices has created a national debate about the future of American metropolitan areas — mostly about the reputed decline of suburbs and edge cities dependent on cars. But with all this focus on the troubles of traditional suburbs, one big story is overlooked: the rapid rise of America’s energy-producing metropolitan areas.

    In many of the nation’s strongest regional economies, $5 a gallon gas is less a threat than a boon. From Houston and Midland in Texas, to a score of cities across the Great Plains, today’s energy crisis is creating new wealth and new jobs in a way not seen since, well, the energy crisis of the 1970s.

    This reflects a global trend that is turning once out-of-the-way places, like Dubai and Alma Alty, into glittering high-rise cities. Other energy- and commodity-rich places are undergoing a similar boom — from Moscow and St. Petersburg in Russia, to Calgary and Edmonton in Canada and Perth in Australia.

    What all these places have going for them is control of what Kent Briggs, former chief of staff for Utah’s late Gov. Scott Matheson, once called “the testicles of the universe.” These cities base their wealth not on clever financial technology, cultural attributes or university-honed skills but on their position as centers of the global commodities boom.

    In the process, there has been a shift in the balance of economic power away from financial and information centers like New York, Los Angeles, Boston, Chicago and San Francisco. These cities are deeply vulnerable to the national financial and mortage crises. New York, according to David Shulman, former Lehman Brothers managing director, faces upward of 30,000 to 40,000 layoffs in its financial sector. San Francisco in the last quarter gave away a Transamerica Pyramid’s worth of office space.

    In contrast, things have never looked better for cities now riding the energy and commodity boom. By far the biggest winner is Houston, whose breakneck growth has been fueled by its role as the world’s premier energy city. As with Dubai, this is less a function of the city’s proximity of actual deposits (though the Gulf of Mexico represents one of the most promising energy finds in North America), than to its premier role as the technical, trading and administrative center of the worldwide industry.

    This prominence is, in historic terms, relatively recent. As late as the 1980s “oil bust,” notes historian Joe Feagin, Houston’s energy sector remained “a colony of New York,” where many of key industry corporate and financial decision-makers still lived.

    Yet, today, Houston’s national, even global dominance, of the energy business is palpable. With the lure of low-cost office space and housing stock, as well as myriad personal ties among executives and leading engineers, Houston managed to consolidate its position as the predominant center of the oil and gas industry. In 1960, Houston had barely one of the nation’s large energy firms, ranking well behind New York, Los Angeles and even Tulsa; today it has 16, more than all those cities combined.

    High wages offered by energy firms — annual salaries for geologists average $132,000 or more; while blue-collar workers make roughly $60,000 — have attracted a new generation of skilled executives and technicians to the region, which also enjoys a far lower cost a living than many other major cities. Areas like River Oaks, Galleria and Energy Corridor are home to well-educated, upwardly mobile workers in their late 20s and 30s. The area is growing at a time when these workers are, according to recent census numbers, leaving places like San Francisco, New York, Los Angeles and Boston.

    “People from other areas say that you guys don’t make much down there,“ said Houston executive recruiter Chris Schoettelkotte. “[But] the guys from L.A. make the same amount of money in the same field here. We pull them from Wharton, the Ivy League and Stanford and they get paid through the nose… Houston can get the talent.”

    Houston’s status as energy capital is also propelling it into the ranks of first-tier cities. Today, Houston has the third largest representation of consular offices. It ranks behind only Los Angeles and New York, and has outstripped traditional commercial centers like San Francisco and Chicago.

    It’s energy, along with the port and growing airport, that makes the Texas city a world capital. “When I go overseas people put Houston with New York and L.A.,” said Houston salvage entrepreneur Charlie Wilson. “In many cases, Houston is considered to be at the top of the world class because of oil. If you’re in China, you’re looking at Houston because of the oil.”

    But Houston is not alone in benefiting from the rising price of energy and other commodities. According to the new Inc./Newgeography.com job growth rankings other energy cities include Dallas — home of Exxon Mobil –- as well as smaller Texas burgs like Midland, Odessa and Longview.

    This is a dramatic turnaround for places like Midland. Until recently, said Midland oilman Mike Bradford, wildcatters had held back from drilling, because they feared the high oil prices would not last. Now they are convinced that the energy market has broken free of OPEC control and prices will remain high. “We think high [oil and gas] prices are for real — and we’re going nuts,” said Bradford, who also sits on the Midland County Commission.

    But you don’t have to be in Texas to be part of an energy boomtown. Bakersfield, Calif., oil capital, is also thriving, despite the hard times throughout the Golden State because of the mortgage crisis. Alaskans, who now receive more than $1,600 per capita from the state’s Permanent Fund Dividend, twice what they received in 2005, are likely to see their wealth increase. If there’s an expansion of drilling there, look for Anchorage and other Alaskan cities to enjoy even flusher times.

    Another hot spot is in the Great Plains. Energy production and high commodity prices are pacing the economies of regional centers like Des Moines; Billings, Mont.; Cheyenne, Wy., and Sioux Falls, S.D. In Bismarck, Grand Forks and Fargo, N.D., where incomes are surging, there’s a sense that these are the best of times. One sure sign: The energy boom — coal, oil, wind as well as biofuels — has produced a a billion-dollar state surplus for North Dakota.

    The energy and commodity boom is changing the face of these small cities in key ways. Fargo, the butt of sophisticated jokes with the Coen Brothers’ movie, now boasts a first-class arena, fine restaurants, a luxurious boutique hotel and a thriving arts scene.

    Grand Forks has a growing condo market. Scores of smaller cities — like Bismarck and Dickinson – are also showing signs of a new quasi-urban sophistication. After decades of demographic stagnation, some of these towns are seeing healthy population gains.

    Rising unemployment is not a problem here; a looming labor shortage is. In some markets, there are signing bonuses and $12-an-hour wages at fast-food business.

    If energy prices hold firm, and particularly if the nation begins to ramp up energy production, we can see the boomtimes extend to energy-rich Utah, Colorado, New Mexico and Louisiana. These can mean more growth in already healthy economies like Albuquerque, Salt Lake City and Denver; but also for long hard-pressed New Orleans and other Gulf Coast cities.

    Finally there’s another group of potential winners: areas that have been selected to produce the energy-efficient vehicles of the future. Even as Detroit, Flint and Ft. Wayne, Ind.,– producers of SUVs and trucks — suffer, many cities in the mid-South, like Nashville, Huntsville and Chattanooga, Tenn., seem certain to gain as Nissan, Toyota, Volkswagen and other foreign producers ramp up production.

    Perhaps the ultimate example of “world turned upside down” by energy prices may end up being Mississippi, long a perennial loser in the economic sweepstakes. But this week, Toyota announced it would start building its popular hybrid Prius in Blue Springs, Miss., in late 2010. That’s just outside Tupelo, Elvis’ birthplace.

    We may not see a reappearance of the King — but for many people this resurgence is just as stunning.

    None of this, however, suggests that San Francisco, Los Angeles or New York are about to be eclipsed by Houston — much less Fargo or Tupelo. But if the history of cities tells us anything, places well-positioned for growth industries tend to emerge as ever more serious players.

    It worked for industrial cities like Chicago, which emerged from obscurity in the late 19th Century; or later for high-tech centers like San Jose, Austin and Boston. If energy and commodity prices stay high for another decade, we may have to get used to a shift in the power of places across the American landscape.

    Joel Kotkin is a presidential fellow in urban futures at Chapman University and the author of “The City: A Global History.” He is executive editor of the website newgeography.com. This article first appeared at The Washington Independent.

  • Where Are the Best Cities to Do Business?

    Our comprehensive annual guide to which places are thriving — even in an economy many consider in recession.

    By Joel Kotkin and Michael Shires

    What a difference a year and a deflated housing bubble makes. Inc.com’s 2008 list of the Best Cities for Doing Business, created in conjunction with Newgeography.com, uncovered some of the most dramatic changes since we started this ranking back in 2004. Five major trends were immediately revealed; trends that are shaping the business environment right now across the country and will continue to over the next several years.

    The list focuses on short- and long-term job growth. It tells us precisely not just where jobs are being created — a sure sign of economic vitality — but where the momentum is shifting. For entrepreneurs, this suggests what may be the best places to locate or expand your business.

    The Bubble and the Fall of the Sunshine Boys

    Since the list’s inception, Florida has been the standout state in each of our size-based categories — small, midsize, and large. But not this year. Now, Florida is the state that fell back to earth. Stung by plummeting construction employment and the mortgage finance crisis, many of our former highfliers across the state are hurting. Ft. Lauderdale, last year’s No. 3 among the large metros, dropped 24 places. West Palm Beach, No. 6 last year, dropped to No. 41. And Jacksonville, No. 12 in the large category, fell seven places.

    The fall, however, was much more devastating for the smaller communities, such as Ft. Myers-Cape Coral. The area ranked No. 1 last year in the midsize category but plummeted 42 places this year. Lakeland-Winter Haven, down 45 places, Deltona-Daytona Beach, down 49, Palm Bay-Melbourne, down 53, and Bradentown, down 65, fared even worse. In even smaller towns, the scenario was bleaker. Ft. Walton Beach dropped 85 places and Naples-San Marco Island, No. 4 last year, plummeted 105 places, the most of any metro in our survey.

    “We’re the foreclosure capital of America,” admits Bill Valenti, founder and CEO of Florida Gulf Bank, founded in 2001 in Fort Myers on the once booming west coast of the Sunshine State. Many of the people that moved into the area bought relatively expensive homes expecting continued asset appreciation to make up for the fact that many jobs in the area pay modest or low wages. Now the area has seen median house prices drop from $320,000 to $223,000 in two years. “Something had to give and it did.”

    Although Florida’s fall was by far the biggest, the housing collapse has also humbled high fliers in other states as well. Last year’s No. 1 among the large metros, Las Vegas, dropped seven places while No. 2, Phoenix, dropped 12; the other big Arizona city, Tucson, No. 12 last year among the midsize category, fell 34 places. Midsize Reno, No. 8 last year and previously No. 1, dropped 21 places.

    Outside Florida, the sharpest pain was felt in California. Property-driven economies in Oakland, Santa Ana-Anaheim, Sacramento, and Riverside-San Bernardino all dropped by around 20 places or more. The big enchilada, Los Angeles, fell another eight places from its already mediocre 48th ranking last year. Almost every city below LA on the list is either a Rustbelt disaster or a perennially underperforming Northeastern big city.

    If this trend continues to play out, California’s problems could be worse than those in Florida. When the bubble corrects, Florida still can boast relatively low costs, no income taxes, and a favorable business climate in addition to warm weather. By contrast, California’s land use laws, high taxes, and massive $20 billion state deficit don’t bode well for the future of the state, suggests Bill Watkins, executive director of the University of California at Santa Barbara’s Economic Forecast Project. “There’s a lot of uncertainty,” he says. “If you are expanding or starting a business, there’s not a lot of reason now to come to California.”

    The Texas Ascendancy Continues

    While California is struggling, says Los Angeles-based architect David Hidalgo, Texas is thriving. Hidalgo just completed a large Latino-themed shopping center in Ft. Worth and sees more of his business coming from the Lone Star State. “That’s where the opportunities are,” he says. “Its costs, regulation, and infrastructure drive you to Texas.”

    Our rankings certainly bear out Hidalgo’s assertion. In many ways Texas has become the new Florida, dominating the top of the list. Among the largest metro areas, a remarkable five of the top 12 best places to do business are from the Lone Star State, ranging from Austin (No. 2) and Houston (No. 4) to Ft. Worth (No. 9) and Dallas (No. 12). Among the small cities, Midland, now ranks No. 1, up 10 places from last year. Odessa and Longview, both big gainers, round out the Texas stronghold on the top portion of the list.

    Texas’ boom reflects solid growth in a variety of industries, from energy and agriculture to manufacturing and trade. “The big difference for Texas is we did not rely on the real estate bubble,” suggests Bill Gilmer, a Houston-based economist for the Federal Reserve. “Our gains are based on jobs elsewhere and that has insulated us pretty well.”

    Here Come the Carolinas

    The other big winners this year are concentrated in the Carolinas. Like Texas, these two states are being fed by varied economies. Certainly, technology companies have been a factor here, many of them in Raleigh-Cary, N.C., which ranked No. 1, up six places, on our list of largest metro areas. Finance has played a large part, too, with Charlotte (No. 5), up 18 places, emerging as the big but low-cost, family-friendly alternative to the New York financial center.

    Demographics are a big part of the story here. Our analysis from Praxis Strategy Group shows that Raleigh and Charlotte, are among the biggest magnets for young, educated workers, particularly those in their late 20s and early 30s.

    “People are coming here for basic reasons and taking their families with them,” observes Sociologist John D. Kasarda, director of the Kenan Institute at the University of North Carolina at Chapel Hill. “They are coming for jobs, particularly from the Northeast, and an affordable quality of life.”

    To some extent, Kasarda adds, Raleigh and Charlotte are well-known success stories, but he points to wider, less documented successes in the region. Driven by gains in tourism, logistics, manufacturing, and technology, more and more midsize Carolina cities are joining the party. These emerging players include Charleston, S.C. (No. 6); Asheville, N.C. (No. 7); Durham, N.C. (No. 11); Greenville, S.C. (No. 18); and Columbia, S.C. (No. 19). These cities made considerable gains over last year and should be seriously considered for new business opportunities.

    The Pacific Northwest-Intermountain West Surge Continues

    Like last year, the northwestern quarter of the country did very well. Three of the top 11 big metro areas in the region between the foggy West Coast and the high mountains, including Salt Lake City (No. 3), Seattle (No. 10) and Portland, Ore. (No. 11), all gained ground. This ascendancy was even more evident at the midsize level, with the success of cities such as Provo-Orem, Utah (No. 1); Tacoma, Wash. (No. 2); Ogden, Utah (No. 8); Boise, Idaho (No. 12); and Spokane, Wash. (No. 14). Small cities, including St. George, Utah (No. 2), Coeur d’Alene, Idaho (No. 3), Bend, Ore. (No. 7) and Grand Junction, Colo. (No. 9), also saw gains.

    In many ways, the gains here parallel those in the Carolinas. Places like Salt Lake City, Seattle, and Portland, according to the Praxis Strategy Group analysis, all continue to gain educated residents from other parts of the country. The lure, in many cases, lies with strong and diverse job growth and low housing prices compared to coastal California and the Northeast.

    Seattle continued its strong growth, notes economist Paul Sommers, due largely to the success of two companies — Microsoft and Boeing. These companies have been expanding, providing high-wage jobs, and attracting skilled talent to the area. Another key advantage in this high energy cost environment: the Northwest’s prodigious supplies of cheap and clean hydroelectric power. This helps everyone, from people building airplane parts to dot-com firms sucking copious amounts of electricity to run their servers.

    Some of the other areas in this vast region benefit from what might be called “grey power.” Older, often more educated and affluent, baby boomers are flocking to the smaller towns and cities in this region, bringing capital and, in some cases, entrepreneurial know-how. Like the Carolinas, the area between the foggy Pacific Coast and the Rockies seems poised for sustained growth.

    Revenge of the Superstars?

    Perhaps the most surprising shift in the 2008 rankings, and in some ways the most subtle, has been the improvement in a host of very expensive, highly regulated urban regions that Wharton economist Joe Gyourko calls “superstar cities.” For many years these cities — New York, San Francisco, San Jose, Boston — have clustered at the bottom of our growth-oriented list, all suffering big losses from the 2000-2001 dot-com bust.

    This year has seen the revenge of the “superstars.” Although not surpassing Texas, the Carolinas or the Northwest, these elite cities have made a strong showing. In just one year, New York (No. 22) propelled itself 21 places while San Francisco (No. 29) and San Jose (No. 33) gained at least 25 places, and Boston (No. 40) went up 19 places.

    The main reason for this modest, but significant turnaround, suggests David Shulman, former managing director of Lehman Brothers, is simple: the powerful financial sector expansion of the past few years. These are all cities where big money plays a big role, either financing new dot-com start-ups or simply serving as the places where multimillion-dollar bonuses are spent on a host of high-priced services.

    Yet, Shulman notes, these gains may be short lived. The impact of the subprime and mortgage meltdown hit first in places like California and Florida, and is only beginning to affect the major financial centers. Spurred by the credit crisis, Shulman fears new regulations will limit financial innovation and wipe out whole sections of industries like mortgage-backed securities and some derivatives.

    “A lot of these gains are going to rewind,” suggests Shulman. “New York is losing jobs as we speak. Anyplace with exposure to financial services is going to suffer over the next two years.”

    Joel Kotkin is a presidential fellow at Chapman University and executive editor of Newgeography.com

    Michael Shires, Ph.D. is a professor at Pepperdine University School of Public Policy

  • Why Small Cities Rock

    Forget New York and San Francisco. With beautiful scenery, skilled workers, and affordable housing, smaller cities are luring companies in droves.

    They may not make a big splash nationally, but small metro areas continue to dominate the top ranks of Inc.com’s Best Cities rankings. This year, for example, 18 of the top 25 cities are small metros.

    We decided to take a look at what makes these places tick by focusing on one of them. St. George, Utah, has a lock on first or second place for the third year in a row. St. George is the bustling population and commercial center of Utah’s Dixie, a nickname given to the area when Brigham Young persuaded Mormon pioneers to grow cotton and wine grapes and harvest silk for export to the Civil War-torn northern states.

    The cotton plants, grapevines and mulberry bushes largely are gone, but the area overall is thriving. Nestled near Zion and Bryce National Parks, St. George has been attracting visitors and retirees for decades. But increasingly, the new houses lining the red-bluffed valleys are not occupied by those at the end of their productive lives; they are being snatched up by younger people and families anxious to take advantage of economic opportunities in a lovely setting. The population has doubled every decade in the last three.

    But it’s not just scenery that attracts. This is a community with a strong sense of pride and connection with its past. And unlike many attractive communities, this one still wants to grow — and has done so by appealing to companies from giant Wal-Mart (which has a distribution center here) and Skywest to entrepreneurial firms who are filling the spacious, orderly industrial parks in the region.

    St. George also is taking advantage of its location. With easy access to I-15, between Salt Lake City and Las Vegas, notes Scott Hirschi, director of the Washington County Economic Development Council, it’s within a day’s semi-truck ride from almost the entire West Coast. At its current pace, Washington County is expected to grow to between 600,000 or 700,000 people by 2050.

    In some small metros, as shown by the dominance of Texas cities in the overall rankings, the resurgence is due to the fact that the pillars of the economy — food, energy, and manufacturing — are in high demand in the global economy. For others it’s the presence of a university or college, the beautiful scenery and abundance of recreation activities, the proximity to a large metro area, or the position within a multi-polar urban complex. In places like Bend, Ore., or Bellingham, Wash., a combination of factors — beautiful settings, movement of skilled workers and entrepreneurs — has come together to create a robust crucible for attracting new talent and new businesses.

    Affordability is also a critical factor. St. George is joined this year near the top of the rankings by its intermountain neighbors Salt Lake City and Provo. So, it seems that Utah’s strong and diverse job growth and low housing prices — at least compared to California — continue as a draw for people seeking more affordable communities ideal for raising families and growing businesses.

    “St. George is the last small, snow-free community as you travel east from California’s Pacific Coast,” says the town’s development director, Scott Hirschi. “And, we have no gambling here which appeals to people that are looking for a family-friendly community.”

    Delore Zimmerman is president and CEO of Praxis Strategy Group and publisher of Newgeography.com

  • Is Manufacturing Weighing Down the U.S. Economy?

    The answer may surprise you.

    Ever since we started ranking the Best Cities for Doing Business in 2004, the bottom rung of the rankings has been largely dominated by older industrial cities where factories have long been abandoned and once booming economies have dried up. The 2008 list bears this sobering fact; among the largest regions surveyed, Detroit sits on the bottom at No. 66, with Warren Troy-Farmington Hills, Mich., Cleveland, Providence, R.I., Philadelphia, and the New York twins — Rochester and Buffalo — doing only slightly better.

    The same pattern can be seen on the lists of midsize and small cities, where the bottom rankings consist largely of former industrial towns along the Great Lakes belt, including Ohio, Michigan, and Indiana. Dayton, Ohio, falls last at No. 96, lying at the bottom of the midsize list of cities. Among the small metros, Battle Creek, Mich., languishes at No. 173, with Michigan cities Saginaw and Flint doing only slightly better.

    So given this persistent underperformance, is manufacturing weighing down the U.S. economy? The answer may surprise you. Even though the industrial towns dominated by what used to be called the Big Three automakers (General Motors, Ford, and Chrysler) and their suppliers have been devastated by slumping sales, a host of other manufacturing regions have emerged as strong performers. For the most part, the largest beneficiaries of these changes are located either in the Intermountain West — the region between the Rocky Mountains and the Sierra Nevada, and the Sun Belt region stretching across the southern bottom of the country. Here, U.S. car makers are not well represented and smaller communities with a host of specialized industrial companies have expanded in the face of tough times.

    For example, large metros, such as Las Vegas (No. 8), Houston (No. 3) and Salt Lake City (No. 4), have attracted specialized industrial companies from high-cost, high-regulation locales like California, including aerospace, electronics, and industrial equipment. All these areas have experienced industrial job growth since 2000; Las Vegas alone has seen its number of manufacturing jobs grow by more than 30 percent.

    But much of the action is in smaller areas. Many of them, like Midland, Texas, (No. 1); Longview, Texas, (No. 11); and Morgantown, W.Va., (No. 15), are tied to energy production. Such places have experienced 15 percent or more industrial job growth since 2000.

    Another hot spot is in the Great Plains. Many cities in the region have attracted sophisticated manufacturing firms in technology, farm machinery, and electronics as well as an expanding number of energy-based companies ranging from oil, gas, and coal to wind power. Grand Forks and Fargo, N.D., No. 56 and No. 28 respectively, have experienced a quiet industrial boom, increasing their manufacturing jobs by more than 14 percent since 2000.

    Already home to numerous agricultural implement firms, the largest manufacturer in Grand Forks is LM Glasfiber, a Danish manufacturer of propeller blades for windmills. Since the North Dakota office opened in 1999, it has expanded from 20 to 900 employees. Plant Manager Ralph Sperrazza says he appreciates the loyalty and dedication of the employee base, many of whom are returnees from larger metropolitan areas such as Minneapolis.

    One effect of LM, local economic development officials reveal, has been a notable tightening of the labor market and an increase in wages in Grand Forks. The same result, notes North Dakota State Economist Larry Leistritz, is occurring elsewhere in the region as other core industries, ranging from energy and office furniture to farm equipment, have enjoyed rapid growth.

    “These are the best times we’ve seen in many decades,” Leistritz beams. “And it is being felt broadly across the entire society.”

  • The Three Geographies

    By Joel Kotkin and Mark Schill

    Officials in both Presidential campaigns, as well as analysts like Michael Barone, tell us that it is time to “throw out the map”. Yet if we are about the jettison the broad “red” and “blue” markers, perhaps we should explore a very different geographic matrix for this election.

    We believe Americans’ political perspective — if not the final voting behavior — is largely shaped not so much by their state but by the type of place, they reside in. These define much about an area, such as how many people are homeowners, take transit, have children living at home, the preponderance of middle class households, and the extent economic and racial diversity.

    Although not uniform across the country, we believe the most effective breakdown of how Americans live can be seen in three basic geographic forms — the urban, suburban and what we call “small town/rural”. These geographies show significant differences in almost all major characteristics, including in voting behavior. And even when voting for the same party, they often do so with different motivations.

    Democrats in the small cities and towns of the Great Plains, for example, closely follow issues related to agricultural and infrastructure policies that help expand economic opportunities, including energy development. In contrast, urban politics in places like New York, Chicago, or San Francisco tend to have a far greener tinge and concern with social issues such as gay marriage.

    Over the next three months, we plan to break down the country by these three geographies and posit how they live may affect their vote. First thing to do is estimate the size of these three geographies. Examining the census, we believe that urban centers — that is core cities of our nation’s large metropolitan areas — represent roughly 32% percent of the total population. The rural/small town component, in many ways the opposite of the urban core, represents roughly 17 percent.

    By far the largest percentage of Americans lives in the third geography, the suburbs. Located between the rural edges and the urban cores, this is where Americans have been migrating with remarkable consistency for over a half century. Despite varied attempts to proclaim a “back to the land” or “back to the city” movements, through oil price rises and declines, suburbs have shown no long-term sign of secular shrinking. In fact, during the last six years, roughly 90% of all growth in metropolitan areas has taken place there

    If suburbs, with roughly 51% percent of the population, represent the largest geography, they also, not surprisingly, are most representative of the nation as a whole. Once overwhelmingly white, they now have a racial breakdown far closer to the national norm than either cities, which are much more heavily minority, or rural/small towns, which are considerably less so.

    Perhaps more importantly, suburbs tend to have higher concentration of middle class voters than the other geographies. This may explain in part why the suburbs, particularly the outer ring, bore the initial brunt of the mortgage crisis — suburban households are fifty percent more likely to be owner-occupied but also generally endure higher prices than rural/small town residents. Although their commutes, particularly on the fringes, are not markedly longer than those of urbanities are, they are more dependent on their cars than those who live in such transit oriented cities as New York, Chicago and Boston.

    Higher gas prices and the problems with suburban mortgages have some representatives of urban America convinced that their return to national preeminence is imminent. In the last energy crisis during the 1970s, pundits also predicted a similar “back to the city” parade but this did not occur. Actually, over time companies moved their facilities to the suburbs where their workers already had migrated. People also changed their driving habits, most conspicuously by tossing out their gas-guzzlers for more economic models, largely produced by Japanese firms.

    Other factors should temper urban enthusiasm as well. For one thing, despite the much-ballyhooed revival of central cities, urban areas remain home to most of the highest concentrations of poverty in the nation. What characterizes urban areas, even relatively successful ones such as Chicago, New York and San Francisco, has been their growing bifurcation between extremes of rich and poor. Some , less fabled cities, such as Pittsburgh, even are suffering the ultimate demographic indignity: more people are dying than being born.

    However, in one way urban areas are clearly ascendant: politics. Cities by their nature tend to create coherent, high articulate political, media and economic voices. In contrast, suburban governance generally rests with highly decentralized legislative bodies or in the hands of bland professional managers. Urban America boasts very effective lobbyists and cheerleaders, through both media-savvy Mayors like Michael Bloomberg in New York; well-endowed think tanks, tapping old money sources and developers, serve to promote urban interests. Suburbs, in contrast, generally lack any sense of self-awareness and lack the institutional support to promote their cause.

    A Barack Obama presidency could provide a shot of adrenalin to the urban lobby. Senator Obama illustrates some of the most attractive parts of urbanism such as ethnic diversity, sophistication and a well-articulated commitment to social justice. He also epitomizes some the most turpitudinous, reflected by his ties to the sleazy Chicago machine and links to rent-seeking real estate interests who increasingly, along with public employee unions, dominate urban politics.

    Senator Obama’s dominance of the urban geography was complete throughout the primaries and is likely to consolidate even further during the general election. More than any time in the last half-century, Republicans, and even moderate Democrats, are becoming a rare, even endangered species in the big city.

    This is bad news for John McCain. He’s the kind of Republican who might have once been thought at least mildly saleable in urban areas. In many ways he suggests the pragmatism of past Republican Mayors such as New York’s Rudy Giuliani, Brent Schundler in Jersey City, Indianapolis’ Stephen Goldsmith and Richard Riordan in Los Angeles. However, in today’s urban political climate, defined by ultra-green and leftist cultural politics, the niche for even these kinds of Republicans seems to have all but evaporated.

    Perhaps the most intriguing, and least understood geography can found among the small towns and rural areas. Although they too have become more diverse, overall such communities tend to be poorer, less educated and more homogeneous (in most of the country white) than suburban areas. Yet there are now growing pockets of affluence in parts of this geography, aided by the boom in energy, food, manufacturing and, to some extent, technology related industries.

    In the recent past, the Republicans have owned this demographic. Senator Obama, after initial successes in Iowa and Wisconsin, generally did not do well in less prosperous rural/ small town areas in non-caucus states. In contrast, Hillary Clinton, who morphed into more of a populist late in the campaign, clearly touched a nerve in struggling small towns from Nevada to Pennsylvania. Any candidate who speaks about stimulating economic growth and opportunity could appeal to such areas.

    There is perhaps a greater opportunity for Senator Obama in those many parts of rural/small town America that are doing well. Although all rural and small town Americans may seem “bitter” — to use Obama’s unfortunate phrase — to the urban elites, considerable numbers of small towns are doing better than any time in decades. Plugged into the global economy, internet and their satellites, they are no longer the isolated, bigoted rubes of city imaginings. A forward-looking pro-growth agenda could be surprisingly successful in such places.

    Yet in the end, we believe the election will be decided largely in the suburbs, the largest if least self-defined of the geographies. Throughout the primaries, Senator Obama battled Ms. Clinton to a rough draw in the suburbs. He generally did best in the higher end, closer in suburban communities as well as those with large minority population, much as John Kerry did against George Bush in 2002. Now the question is whether he can expand that suburban base to the often less affluent, newer and somewhat more exurban counties.

    Senator McCain, from sprawling Phoenix, needs to rally the hard-pressed homeowners and commuters of the suburbs. Recent polls suggest he now holds as much as a ten point lead among suburban voters. To consolidate that advantage, and even expand it, he must offer a vision that promises a future under the next Republican President better than the present one. In contrast, given his lock on the cities, Obama simply needs to split the suburban geography and make a respectable showing in the rural/small towns’ constituency to reach the top of the greasy pole.

    Mark Schill contributed to this report, also appearing at Politico.com.

    Joel Kotkin is a Presidential Fellow in Urban Futures at Chapman University and executive editor of NewGeography.com. Mark Schill, an associate at Praxis Strategy Group, is the site’s managing editor.

  • Heartland Development Strategy

    From its inception as a nation, America’s great advantage over its global rivals has stemmed largely from the successful development of its vast interior. The Heartland has been both the incubator of national identity and an outlet for the entrepreneurial energies of both immigrants and those living in dense urban areas.

    The term “Heartland” is commonly used to describe the region west of the Mississippi River and east of the Rocky Mountains. This region constitutes the primary focus of this report, although we believe our policy prescriptions also apply to other parts of the country that are culturally similar to the Great Plains and the Midwest, including the inland valleys of the Pacific Northwest and California, as well as parts of central Florida and Pennsylvania.

    Historically, and with some exceptions — notably the South — the Heartland was dominated by capitalist principles and shaped by the forces of innovation, competition, and a continuous search for maximum economic return. The Heartland contributed significantly to America’s development as a global economic power. Over the past century, however, the role of the Heartland declined, as the United States evolved from a primarily agricultural to an industrial and finally an information-based economy. With the move toward manufactured goods and high-end services, the focus of economic development shifted from the agricultural interior toward the great metropolitan regions.

    Download “Rebuilding America’s Productive Economy: A Heartland Development Strategy” Report commissioned by the New America Foundation.