Since 2010, Detroit and nine other U.S. municipalities have declared bankruptcy.
In contrast, regions in the Southeast that are able to offer lower-cost environments and business-friendly policies are well-positioned for near-term economic prosperity and, in some cases, are already reaping the rewards. But near-term victories should not distract us from the long-term lessons of Detroit and other cities that have suffered economic decline.
One need only to consider Seattle in the 1970s or Pittsburgh in the 1980s to appreciate that there is no divine right to prosperity. More recently, such stories have been retold in North Carolina and elsewhere. These areas each believed they had access to long-term sources of economic security and growth. What they learned was that economic prosperity can be lost.
Detroit offers the prime example of a community that was over-reliant on a single industry, became complacent and, ultimately, ignored the seemingly obvious realities of changing markets. Business writer Micheline Maynard put it this way: “The shift did not happen overnight. It has taken place slowly but steadily … Either Detroit wasn’t paying attention or, if it did notice, the center of the automotive universe plodded on blindly in a state of denial.”
Detroit serves as a stark reminder of what is at stake in economic development and economic planning. As technology changes and the very nature of our communities and regions change, the business of business attraction and retention also will change.
Charlotte flirted with this hard lesson. The Queen City felt the economic pinch after the collapse of the financial services sector, which had become an enormous source of prosperity for this community. Although Charlotte was not entirely dependent on the financial services sector, it did represent a disproportionately large share of the local job base, growth rates, incomes and purchasing power in the region.
Taking Charlotte beyond the banks
While researching a book on economic growth and decline, I learned that Charlotte had long been diversifying its employment base, though outsiders might not have fully appreciated the fact in as much as the financial services sector had received such a disproportionate share of attention. The focus now on several primary clusters, including motor sports, defense industries, energy, the film industry and health care, as well as financial services makes for a broad and stable economic foundation.
The clear lesson from Charlotte’s experience is that economic diversification cannot wait for the decline; had Charlotte done so, the impact of the financial sector fall-out could have been far greater.
Localities that best comprehend, anticipate, and prepare for these changes will be the ones that are the most successful in courting employers and providing for the future economic stability of their communities. While that may sound droll, we are talking about the very fabric of this country – the economic stability and even the very sustainability of our communities.
Gerald L. Gordon, Ph.D., is an economist and author. Gordon is president and CEO of the Fairfax County, Va., Economic Development Authority.