Why Are Some Cities Doing Better Than Others

From Wall Street Journal:

by David Wessel

Some cities have grown in the past several decades. Some have shrunk. The spread of air conditioning helped sunnier spots such as Las Vegas. Waves of immigrants kept the population rising in cities such as Miami.

But why is Boston doing so much better than Philadelphia? Minneapolis better than Milwaukee? Columbus, Ohio, better than Cleveland? In Scotland, why is Edinburgh doing better than Glasgow, which has lost nearly half its population since 1960?

Blending a rich sense of history with clever number-crunching, economist Edward Glaeser finds that what's often true for people is true for cities: If you aren't born lucky or popular, be smart.

American cities outside the Sunbelt that have particularly skilled and well-educated populations prosper. "High-skill areas have been getting more populous, better-paid and more expensive," as in higher housing prices, he finds. Mr. Glaeser, 36 years old, who grew up on Manhattan's Upper East Side, suggests these cities do better at adapting when the economic winds shift.

Boston, across the Charles River from Mr. Glaeser's Harvard University office, well illustrates his point. "Boston's history is not a story of steady success," Mr. Glaeser wrote in a recent academic paper, "but rather a series of crises and restructurings."

Initially the largest city in the American colonies and a hub for trans-Atlantic trade, Boston stagnated in the late 1700s as New York and Philadelphia, with better ports and locations closer to the South, rose. But Boston prospered, again, in the early 1800s because it had the people who crewed, captained and owned sailing ships important to that era's maritime economy. With the advent of the steamship, which required fewer skilled workers, Boston suffered.

The city was left with one byproduct of its sailing supremacy: Irish immigrants fleeing the potato famine of 1845 to 1850. (A decade later, Mr. Glaeser says, and it would have been cheaper for the Irish to take steamships to New York.) The combination of Yankee money and ingenuity and cheap Irish labor turned Boston into a successful factory town.

Yet Boston peaked about 1920, and it began losing people around 1950. Boston was cold, and warmer cities thrived. Boston was a factory town, and all factory towns suffered. The age of the automobile arrived, and downtown Boston's narrow streets were bad for driving. Boston taxes were high and regulation heavy, and business looked elsewhere. By 1980, three-quarters of Boston's houses were valued at less than the cost of building them. "There was little reason ... to suspect that Boston would be any more successful than Rochester or Pittsburgh or St. Louis over the next few years," Mr. Glaeser has written.

But Boston boomed as a center of finance and technology. Its population has been rising since about 1980. Its skilled people, both home-grown and recruited, are key. "Boston has been specializing in skills for almost 400 years," Mr. Glaeser says. Among the 200 or so U.S. cities with more than 160,000 people, only four (Boulder, Colo.; Stamford, Conn.; Madison, Wis.; and San Jose, Calif.) have a higher fraction of residents over age 25 with college degrees.

Cities with bigger educated populations have more success than others at arresting urban decay, Mr. Glaeser's number-crunching finds. Skilled, educated workers may react more quickly when the economy changes, reinventing the cities in which they live, he speculates.

One lesson is that luring and keeping smart, educated people is crucial. Access to raw materials or major transportation arteries is no longer sufficient for urban success, and tax breaks to attract companies aren't always the right recipe.

"Boston's ability to regenerate itself hinged upon its ability to attract residents, not just firms," Mr. Glaeser says.

That means maintaining city services, amenities and public schools that appeal to educated workers without raising taxes so high that the mobile go elsewhere. Federal or state governments should shoulder the burden of aiding the urban poor. Mr. Glaeser, who studied at the University of Chicago, a bastion of free markets, advocates vouchers for private school, but he'd settle for any alternative "that makes people come to your city and not have to pay $22,000 private-school tuitions."

Another lesson is to avoid excessive planning. "Get the smart folks," he says, "and let them figure out what the industries of the future are. Don't micromanage."

When the Berlin Wall fell, and Germany cut subsidies that had kept the city's factories alive, urban planners hoped to lure big-company headquarters. They failed. But because Berlin became a cool place to live, it drew hip Web-site designers, software writers, fashion designers and musicians, and they are reinventing its economy.

The dot-com bust hurt, of course. But because Berlin is increasingly where the trendy people are, Viacom's MTV and Vivendi's Universal Music Group recently moved their German headquarters to Berlin, from Munich and Hamburg, respectively, and the city recently had its first Fashion Week.

Posted by Admin at March 9, 2004 04:56 PM