Back to the Renaissance? A New Perspective on America's Cities Research

Joel Kotkin

September 1997

THE RISE AND FALL OF THE INDUSTRIAL CITY

"Human happiness," observed the Greek historian Herodotus, "never continues long in one stay." By the late nineteenth century many of the great cities of Thom's "age of cities"—most notably Venice itself—had fallen into decrepitude. With the rise of North America, the colonization of Asia and Africa, and, most importantly, the industrial revolution, the focus of urban growth shifted decisively to the centers of manufacturing power.

Nowhere was the growth of industrial centers more rapid and spectacular than in the United States, whose founding fathers, such as Thomas Jefferson, feared that the "mobs of great cities" would ruin his pastoral notion of the American idyll. Like many contemporary Americans, Jefferson viewed the city itself as the bane of the Republic and the destroyer of civic virtue. Such opinions were tenable in a country where, at the dawn of the Revolution, the combined population of the five largest cities accounted for barely 100,000 out of more than 2,000,000 people living in the thirteen colonies.

The ensuing spectacular growth of American cities in the nineteenth century was driven by several factors—the development of manufacturing industries, particularly in mass production; immigration; and the overall growth of the North American consumer base. Between 1860 and 1870, for example, the manufacturing labor force expanded by over 60 percent, which was four times the rate of growth for agricultural workers. For many, particularly in the first generation, conditions were often hard, even brutal; in the swelling port of New York, the rate of infant mortality doubled between 1810 and 1870, with much of the suffering taking place in heavily Irish and German districts in places like the Lower East Side.

Yet despite the difficulties associated with these rapid changes, the growth of manufacturing helped to transform America, and especially New York City, into a major financial and cultural power. By the turn of the century, American equity markets surpassed those of Britain, and US banking resources doubled.

Rather than settle down as Jeffersonian yeoman farmers, most late nineteenth-century immigrants to America flocked to industrial centers such as New York, Pittsburgh, Cleveland, and Chicago. In 1850, there had been only six "large" cities with a population of over 100,000; together they constituted barely five percent of the population. By 1900, there were thirty-eight such cities, and they contained nearly nineteen percent of the nation's people.

In the years after the Second World War, America's cities reached their apogee, as the nation's corporations achieved almost complete dominance over the world's market economies. American cities, particularly New York and Chicago, pioneered the new high-rise architecture which would be used to house the growing corporate bureaucracies that dominated the national and global economies. Whatever problems that might still exist, suggested economist John Kenneth Galbraith, could be solved by tapping the technological and managerial expertise resident in large industrial corporations such as General Motors. "The wretched freedoms of the slums," Galbraith wrote, "are the counterpart to the individualism of the buggy-maker."

With the economic expansion of the early 1960s, America's cities embarked on a huge building boom—slums were razed, new centers of culture were developed, and massive sports complexes were erected. Between 1960 and 1972, office space expanded by 50 percent in central Chicago, while it soared a remarkable 74 percent in New York. America's great urban areas now bristled with skylines which British author Emrys Johns described as "always dramatic and sometimes awe-inspiring."

Yet by the 1960s, America's urban economy was beginning to be undermined by forces both domestic and foreign. Firms faced intensifying global competition and were forced to seek out cheaper locales, either abroad or in less expensive areas in the rural hinterland. For example, more than 250 of the Fortune 500 made New York their home in 1965; during the early ‘70s, over 30 major corporations left; and today, merely 46 remain. New York's decline was not an isolated case, however. Similar shocks would be felt not only in other eastern cities, but among the relatively young metropolitan regions of the South and West.

The urban disorders of the mid- and late 1960s, coupled with rising crime rates—up nationwide more than 250 percent between 1960 and 1973 —greatly accelerated these trends. As the middle class began to flee the urban centers in large numbers, many businesses, large and small, also deserted the historic core. Observes the Kenan Institute's John Kasarda:

Rather than fighting urban problems and paying premium costs for better housing in major metropolitan areas, they chose to exit. Their footlooseness and privileged economic position allow them to relocate to small, less problem-prone cities and towns. . . .

Much of the problem lay with the mounting concentration of poor, often dysfunctional, populations in the core urban regions. As in Imperial Rome, where as much as a third of the population depended on the government for bread, an increasing proportion of the prodigious wealth created in cities such as New York was siphoned off to maintain both its costly welfare state and its massive municipal bureaucracy. The result has been the nation's highest local tax rate, nearly twice the national average, and municipal debt five times the average for major cities.

These factors—taxes and crime, as well as a host of regulatory concerns—made cities inhospitable for job creators. Despite billions spent on federal programs to revitalize cities, from 1973 to 1983 suburban areas gained 1.7 million jobs while core cities lost over 500,000, with most of the losses concentrated in the Northeast and Midwest. Particularly hard-hit was the industrial sector. Between 1970 and 1978, metropolitan regions lost more than 500,000 manufacturing jobs while non-metropolitan areas, once industrial backwaters, gained over 600,000.

These changes were felt powerfully even in New York, the greatest American city. As recently as 1960, New York's manufacturing industries employed over 900,000 workers. Since 1974 that number has dropped from 610,000 to less than 280,000-a 54 percent drop that has affected business sectors ranging from the garment and furniture industries to computer equipment manufacturers and food-processing.

Some prescient observers, like historian Fernand Braudel, saw in the steady erosion of New York's small businesses a lethal threat to the city's long term economic health:

Over the twenty years or so before the crisis of the 1970s, New York—at that time the leading industrial city in the world—saw the decline one after another of the little firms, sometimes employing less than thirty people, which made up its commercial and industrial substance—the huge clothing sector, hundreds of small printers, many food industries, and small builders whose little units were both in competition with, yet dependent on each other. The disorganization of New York was the result of the squeezing out of these thousands of businesses which in the past made it a city where consumers could find anything they wanted, produced, stored, and sold on the spot.

Throughout the 1980s, as today, city leaders—particularly in established financial centers such as New York, Chicago, San Francisco, and Boston—have largely ignored the decline of smaller firms, particularly in the industrial sector. Enraptured by the vision of a fully post-industrial economy, it became fashionable to imagine an urban "renaissance" based almost entirely on the expansion of financial and other services operating out of high-rise offices in Chicago's Loop, downtown Boston, or lower Manhattan.

Yet the economic results proved far less sanguine. As is obvious today, the jobs gained in the Wall Street "boom" of the 1980s did not make up for the erosion of the manufacturing and distribution jobs which, in particular, devastated the more working-class boroughs of The Bronx, Brooklyn, and Queens. Despite endless attempts by the media and political elites throughout the past decade to proclaim New York's recovery, the reality remains that the city's job creation rate was and continues to be among the lowest in the nation. Today New York continues to suffer from an unemployment rate of close to 10 percent, nearly twice the national average.

Economic performance has lagged even more in largely industrial cities such as Newark, Detroit, Cleveland, and St. Louis that lacked the kind of elite global business service base enjoyed by Manhattan. From 1985 to 1996, for example, the total employment base in St. Louis dropped by 28,000-nearly a 10 percent reduction-even as surrounding areas enjoyed a 20 percent employment growth. The gaps between suburbs and urban cores was also greatest in these kinds of older manufacturing centers: the average incomes in cities such as Newark, Detroit, Cleveland, Buffalo, and St. Louis are now roughly half those of surrounding suburbs. By 1990, Detroit had a poverty rate of 30 percent, compared with only 6.2 percent in its affluent, growing suburban ring.

More recently, the plight of the cities has been intensified by a dramatic erosion of its other major pillar, the mass bureaucratic office economy. Over the past decade Fortune 500 firms, the bulwark of traditional downtowns, have vacated a remarkable 250 million square feet of office space, the equivalent of 250 Chrysler buildings. Suburban and edge-city office space surpassed that available in downtown areas in the 1980s and has continued gaining, forever changing the composition of the office workforce.

These patterns are clearest in newer cities such as Dallas, whose downtown district suffers from one of the highest vacancy rates in the nation, even while surrounding suburban real estate remains at a premium, with a vacancy rate less than one-fifth as high. Similarly in Los Angeles, many large corporations linked to the city's rise—Lockheed, Northrop, Security Pacific, Carter-Hawley Hale, and First Interstate—have merged, moved, or disappeared, leaving downtown Los Angeles with high vacancy rates and low rental prices even amidst a robust recovery elsewhere in the region.

But this is not only a western phenomenon: older historic downtowns such as Baltimore and Atlanta suffer vacancy rates almost three times those in the suburban areas. Even amidst an enormous boom on Wall Street, the once "impregnable" office market of lower Manhattan now suffers from historically high vacancy rates. The old New York downtown, as well as other central business districts around the country, warns Barron's, are in danger of becoming "ghost towns of boarded up Art Deco towers, [the] victims of asbestos problems, high operating costs, and technological obsolescence."