Death of a City and a Region

In the comments to James’ post, Rufus writes about the city of my birth to suggest that perceptions on the death of American manufacturing writ large are at least partially the result of regional declines:

I wonder how it varies according to region. I lived for a while in Buffalo and, understandably, there were lotsof people there who really believed that American manufacturing has come to an end. But their image was understandably skewed. Manufacturing didn’t even come to an end in Buffalo; it was just that Bethlehem Steel was such a big employer in the region that the removal of that one domino felt like the others were collapsing too.

In a follow up, Rufus writes:

I think it has a lot to do with where you live. I should also mention that I hope my comment didn’t sound glib- Bethlehem Steel employed something like 200,000 people, so when it left, that profoundly altered Buffalo. If I’m not mistaken, the population there has halved since 1983 when the plant closed. But, again, there are probably places in the country that have a very different opinion of the healty of US manufacturing from that held in Buffalo.

There are a few things in Rufus’ comments that I want to correct, but I also want to take a look at the tragedy that has been unfolding in Buffalo and Western New York for the last several decades, and may well only accelerate.  I think ultimately the case of Western New York (and really upstate New York more generally) also presents a failure of democracy.

First a few corrections to Rufus:
1.  Buffalo’s population has halved since 1950, not since the 1980s – the city was in a long state of decline even before Bethlehem Steel shut down.  Since the 80s, it’s lost about 20-25% of that population, which is horrifying in and of itself.

2.  Bethlehem Steel employed 20,000 in the Buffalo area, not 200,000, and at the time its demise began in the 60s, Buffalo was one of the 15 largest cities in the country.  So closing Bethlehem Steel was terrible for the city, but it was just one of many.

3.  In fact, in Buffalo, there are virtually no manufacturing jobs left.  Not a single manufacturer is listed amongst the 10 largest private employers in Western New York – you’re basically left with the health care industry (largely a function of WNY’s aging population – most people who are young and well-educated leave), supermarkets, the Niagara casino, and HSBC.  And HSBC may be close to leaving town, or at the very least abandoning the city’s tallest building.  It’s not a pretty picture.

So you have a situation where the majority of the population is only qualified for manufacturing jobs or retail.  There are ample universities in WNY and CNY, but local kids are largely priced out and the schools wind up being heavily populated by students from NJ and downstate NY, and to a lesser extent the Boston, Philly, and Pittsburgh suburbs.  The local kids who are able to afford college come out and find that they’re overqualified for the jobs that are around, and thanks to the state’s overregulation and taxation combined with 40 years of frequently corrupt mismanagement of the city, there’s no hope of any employers with good jobs moving to the city.  I’ve got no idea where they’ll be able to turn if HSBC goes away.  Most likely many of them will just join the Rust Belt migration to places like Charlotte, which has become a city of educated Rust Belt refugees.

What is saddest of all is what will happen – and is happening – to those who remain.  The college educated remaining primarily work for the local, state, or federal government.  Those without a college education on the other hand largely either work as health care providers for the elderly or in retail, and they lack the resources to obtain qualifications to do much more since there’s no manufacturing sector jobs.  The elderly lifelong residents are dying rapidly and most of the Baby Boom generation with means already left the city, so the number of elderly to care for will probably not increase, and may well decline.  Retail may not be a good career, but it’s better than nothing – but even that depends heavily on having a good number of folks in the area with decent amounts of disposable income.  In other words, the future of even retail in Central and Western New York will have a limited shelf-life if the region’s population decline continues to draw disproportionately from the college-educated.  True, the retail sector can and will continue to look to the prosperous regions of Ontario just across Niagara Falls, but there has been a desperate need for another bridge for decades to facilitate that, and the increasing security theater at the border isn’t exactly helping things either.
The good news for Buffalo is that its long-term decline has been so severe that it was largely unscathed by the recession, and actually spent the recession with a lower unemployment rate than most of the country.  There’s even some voices who claim that the city is poised to see its banking industry undergo an unprecedented take off in the restructured economy (there are also people who actually believe that a new bridge to Canada will be built someday; then there are the people who live in the real world).  Despite this, and underscoring the extent to which the economy of the city and region remain in a death spiral independent from the global economy, Buffalo is one of only two American cities that are “still in decline.”

On one hand, the tale of how upstate New York got to this point is a tale of the downside of Progress.  Much of the region’s (and especially Buffalo’s) economy was once based on its location on the Erie Canal.  The opening of the St. Lawrence Seaway, combined with the efficiency of the Eisenhower Interstate System, made that geography largely obsolete.

But on the other hand, it’s a failure of democracy, and not only because of the corruption that upstate New Yorkers have faced all too often.  The region sits in a state that is consistently ranked amongst the least friendly to business in the country due to its taxation and heavy regulation.  While this fact may not have caused the problem, it has certainly made it extremely difficult to fix the problem.  This isn’t going to be a rant about overregulation and taxation of business though; it is in fact entirely possible that the regulation and taxation make quite a bit of sense for the state government as a whole, and some may have even made a certain amount of sense for upstate NY when they were first enacted.

The fact is that most of the state’s revenue has always come from the downstate region around New York City.  And that region has factors at play that have made it desirable for businesses for centuries, no matter how much they are taxed or regulated.  That region has been the most populous in the country ever since our nation was founded.  It has a cachet that is unique not only in the country, but in the entire world.  Educated elites have always and will always move to New York City because that’s where they can make a name for themselves, while poor immigrants have always and will always seek out New York City because it is the very symbol of economic opportunity.  There are few places in the world where businesses can find that kind of a labor pool, to say nothing of the independent marketing cachet of a New York address.

So the State can do virtually whatever it wants, and it will still be able to live off its Gothamite bread and butter.  There may have even been a time, back when the Erie Canal or its successor canal system was still an important waterway, when the State could do whatever it wanted and have relatively little effect on upstate such that those taxes and regulations were even beneficial to upstate.

But now, the price is that upstate’s vitality withers away on the vine as its local governments are unable to create conditions for sustainable economic growth.  Occasionally, the politicians in Albany see these effects on upstate and throw money at the problem.   This money may even help lessen the problem’s effects, creating reasonably secure government jobs or a relatively strong social safety net.  There may even be times when upstate politicians legitimately find it in their constituents’ best interests to support new regulations and taxes, provided that upstate sees more money.

Thus results the failure of democracy and democratic compromise.  The interests of the government and the interests of its constituents are often not the same thing.  Even where they have some similarities, they can be short-sighted, with one interest group’s representatives all too willing to sacrifice long-term health for short-term help.  And yet the more that long-term health is sacrificed, the more important it becomes to strengthen those short-term measure intended to help matters.   Eventually, the affected region may become too dependent on those assistance measures to take the steps necessary to reverse the course in the long run.  If cutting a tax that is onerous for upstate’s ability to attract business will nonetheless at least temporarily pull the last threads of rug out from under upstate because it  is on net profitable for the state and thus generates revenue for upstate, then it will be tough to justify cutting that tax.

One is ultimately left wondering if perhaps the only real solution to this problem is divorce, splitting the state at the Hudson River.  Regardless, the tragedy of upstate New York should be an allegory for the potential pitfalls of large-scale political action over constituents with extraordinarily inapposite interests.