Books, the first form of information technology for the masses, did not hurt cities. Over two centuries, books helped generate revolutionary changes in religion and politics that made the world more connected, more commercial, and ultimately more urban. There is every reason to think that globalization and modern changes in technology will have the same effect.
Cities—Bangalore, San Francisco, Singapore—are the nodes that connect our increasingly globalized world. Urban areas, like Athens and Baghdad, have always played this role, but as the world becomes ever more tightly knit, cities are becoming even more important. Silicon Valley brings together native-born engineers and brilliant immigrants, including the founders of both Yahoo! and Google, then links them to other hubs of engineering excellence, like Bangalore. As America continues to represent an ever smaller share of the global market, it will rely more heavily on its urban connectors to the growing economies of India, China, and elsewhere, where the spread of knowledge makes the difference between promise and poverty.
Some places will, however, be left behind. Not every city will succeed, because not every city has been adept at adapting to the age of information, in which ideas are the ultimate creator of wealth. While some historic metropolises specialized in connections and commerce, which continue to be sources of success, other urban areas rose as vast centers for the mass production of goods. These places had their roots in the brilliant ideas of urban entrepreneurs, but they evolved into places that thrived by keeping costs down through the economies of specialization and scale. The unusual era of the industrial city is over, at least in the West, and we are left with the problems of former manufacturing giants that have been unable to reinvent themselves in the new era.
CHAPTER 2
Why Do Cities Decline?
The corner of Elmhurst Street and Rosa Parks Boulevard in Detroit feels as far from New York’s Fifth Avenue as urban space can get in America. Though this intersection lies in the heart of Detroit, much of the nearby land is empty. Grass now grows where apartment buildings and stores once stood. The Bible Community Baptist Church is the only building at the intersection; its boarded-up windows and nonworking phone number suggest that it doesn’t attract many worshippers.
If you walk down Elmhurst, you’ll see eleven low-rise homes; four of them are vacant. There are also two apartment buildings—one is less than a third occupied, the other is empty. There are also another ten or so vacant lots and a parking lot, blank spaces that once held homes and apartment buildings. Despite its ruinous condition, the area feels perfectly safe because there isn’t enough humanity to create a threat. The open spaces give this neighborhood the feel of a ghost town, where the spirits of Detroit’s past bemoan the plight of what was once America’s fourth-largest city.
Between 1950 and 2008, Detroit lost over a million people—58 percent of its population. Today one third of its citizens live in poverty. Detroit’s median family income is $33,000, about half the U.S. average. In 2009, the city’s unemployment rate was 25 percent, which was 9 percentage points more than any other large city and more than 2.5 times the national average. In 2008, Detroit had one of the highest murder rates in America, more than ten times higher than New York City’s. Many American cities endured a collapse in housing prices between 2006 and 2008. But Detroit was unique in both missing the boom early in the decade and suffering a 25 percent price drop since the bust.
Detroit’s decline is extreme, but it’s hardly unique. Eight of the ten largest U.S. cities in 1950 have lost at least a sixth of their population since then. Six of the sixteen largest cities in 1950—Buffalo, Cleveland, Detroit, New Orleans, Pittsburgh, and St. Louis—have lost more than half their population since that year. In Europe, cities like Liverpool, Glasgow, Rotterdam, Bremen, and Vilnius are all much smaller than they once were. The age of the industrial city is over, at least in the West, and it will never return. Some erstwhile manufacturing towns have managed to evolve from making goods to making ideas, but most continue their slow, inexorable declines.
But we shouldn’t see the exodus from the Rust Belt as an indictment of urban living; the manufacturing cities fell because they had abandoned the most vital features of city life. The old commercial towns, like Birmingham and New York, specialized in skills, small enterprises, and strong connections with the outside world. Those attributes, which also create urban prosperity today, made cities successful long before a single bolt of cloth left a textile mill in Manchester or a single car rolled off an assembly line in Detroit. The industrial town was unlike either those old commercial cities or the modern capitals of the information age. Its vast factories employed hundreds of thousands of relatively unskilled workers. Those factories were self-sufficient and isolated from the world outside, except that they were providing the planet with vast quantities of cheap, identical products.
That model served the West extremely well for about a century. Detroit’s car factories provided good wages to hundreds of thousands of people, but over the past fifty years, areas with abundant small firms have grown more quickly than places dominated by enormous enterprises. Skilled cities have been more successful than less educated places, and only 11 percent of Detroit’s adults have college degrees. People and firms have moved to warmer areas and away from the chilly Midwest, whose waterways first nurtured the cities that now comprise the Rust Belt. Industrial diversity has been more conducive to growth than manufacturing monocultures, and Detroit practically defined the one-industry town.
While it would be wrong to attribute too much of these places’ problems to politics, political mismanagement was often a feature of Rust Belt decline. Perhaps the most common error was thinking that these cities could build their way back to success with housing projects, grandiose office towers, or fanciful high-tech transit systems. Those mistakes came out of the all-toocommon error of confusing a city, which is really a mass of connected humanity, with its structures.
Reviving these cities requires shedding the old industrial model completely, like a snake sloughing off its skin. When a city reinvents itself successfully, the metamorphosis is often so complete that we forget that the place was once an industrial powerhouse. As late as the 1950s, New York’s garment industry was the nation’s largest manufacturing cluster. It employed 50 percent more workers than the auto industry did in Detroit. America’s Industrial Revolution practically began in greater Boston, but now nobody associates smokestacks with that city. These places have reinvented themselves by returning to their old, preindustrial roots of commerce, skills, and entrepreneurial innovation.
If Detroit and places like it are ever going to come back, they will do so by embracing the virtues of the great pre- and postindustrial cities: competition, connection, and human capital. The Rust Belt will be reborn only if it can break from its recent past, which has left it with a vast housing stock for which there is little demand, a single major industry that is dominated by a few major players, and problematic local politics. Beneath these cities’ recent history lies an instructive older story of connection and creativity, which provide the basis for reinvention. To understand Detroit’s predicament and its potential, we must compare the city’s great and tragic history with the story of other cities, like New York, that have successfully weathered industrial decline.
How the Rust Belt Rose
Detroit is French for strait, and like New York and Chicago, it began as a hub of waterborne commerce. In 1900, all twenty of America’s largest cities were on major waterways. Water reduces resistance, and for millennia, this meant that boats were the best means of moving goods from place to place. New York’s entire existence had once depended on a gift of nature: a superb port connected to a deep, long river, near the center of the Eastern seaboard. Detroit was founded as a French fort, on high ground overlooking the narrowest part of the river connecting Lake Erie to the western Great Lakes. That narrowness enabled the guns of the French commander, Antoine Cadillac, to control river traffic, and it would later make Detr
oit an ideal spot to cross the water barrier between Canada and the United States, perhaps with a shipment of bootleg whiskey in tow.
Nineteenth-century advances in waterborne commerce—the globalization of that era—sped the growth of cities like Detroit, New York, and Chicago. In 1816, it cost as much to ship goods thirty miles overland as it did for those goods to cross the Atlantic. Because moving thirty miles away from the water would double the cost of getting goods to and from the Old World, America’s population perched on the Eastern seaboard, clustered around ports from Boston to Savannah. In the eighteenth century, the Atlantic Ocean was America’s highway, the lifeline through which we traded with the markets of Europe and the Caribbean.
America’s founders understood that it could become a cohesive nation only if people and goods could easily move around its interior, from one state to another. Before he became the president of the United States, George Washington was president of the Potowmack Canal Company. He dreamed of connecting the Potomac and Ohio rivers even before the battles of Lexington and Concord. Unfortunately, in the eighteenth century, no private entrepreneur in the United States had access to enough capital to fund such a large, long-term, risky endeavor as building a vast waterway, and Washington proved more successful with cannons than with canals. The great liquid highway—the Erie Canal—would be built farther north by New Yorkers, and it would connect the Hudson River to the Great Lakes. New York’s victory reflected both its geographical advantages and the willingness of its government to bet vast sums of public money on a canal. They were right to bet; the canal turned a profit almost immediately because of the huge demand for east-west transport.
Cities soon sprang up along the Erie Canal’s path, creating the trading network that would make it possible for farmers to move west. Syracuse initially specialized in shipping nearby salt. Rochester became America’s flour city, milling wheat produced by nearby farmers and sending it down the canal. Buffalo was the waterway’s western terminus, where goods were transferred between the larger boats that traversed the Great Lakes and the flatboats that plied the canal. American cities like Buffalo and Chicago, and New York itself, grew on spots where goods had to be shifted from one form of transportation to another. The need to lift all that grain led one Buffalo merchant to start using elevators, a technology that would later transform cities.
A second waterway, the Illinois and Michigan Canal, completed a great arc that ran all the way from New Orleans to New York by way of St. Louis, Chicago, Detroit, and Buffalo. From 1850 until 1970, at least five of the ten largest American cities were along that route. Chicago’s speculators realized that the Illinois and Michigan Canal would make their city the keystone of the arc—the spot where the canal boats coming along the Chicago River hit the Great Lakes—and the city’s land market exploded in the 1830s while the canal was being built. Between 1850 and 1900, Chicago experienced a fiftyfold population increase, from fewer than thirty thousand to more than 1.5 million inhabitants, as trains followed waterways.
The cities that grew up as nodes along America’s nineteenth-century transport network enabled vast numbers of people to access the wealth of the U.S. hinterland. Then, as now, Iowa’s rich, dark soil made it a farmer’s dream. In 1889, Iowa corn yields were 50 percent higher than the yields in older areas such as Kentucky. Corn may have been easier to grow out west, but its low value per ton made it relatively expensive to ship. Canal boats and railcars played their part in moving calories westward, but so did cities, which helped make produce easier to ship.
Before the Ohio and Erie canals, the high cost of moving grain led farmers to transform it into whiskey, which is durable and contains more than twice as many calories per ounce as raw corn, making it lighter, and some might say tastier, on a per-calorie basis. As transport costs fell with canals and railroads, it became cost-effective to ship corn in porcine form, because ham lies between corn and whiskey in both calories per ounce and durability. Cities like America’s Porkopolis, Cincinnati, and Chicago, specialized in slaughtering and salting the animals that were brought there by nearby farmers. Chicago’s stockyards switched from pigs to beef when Gustavus Swift introduced a refrigerated railcar that could keep slaughtered beef from spoiling in transit. Like many important innovations, Swift’s great idea now seems blindingly obvious. He put the ice on top, instead of on the bottom, so it melted down onto the sides of beef and kept them cool.
Like Chicago, Detroit grew as a node of the great rail and water network long before Henry Ford made his first Model T. Between 1850 and 1890, the city’s population increased tenfold, from 21,000 to 206,000 people. Detroit’s growth was again intimately tied to its waterway, the Detroit River, which was part of the path from Iowa’s farmland to New York’s tables. By 1907, 67 million tons of goods were moving along the Detroit River, more than three times as much as the total amount going through the ports of New York or London.
In Europe, as well, industrial cities sprang up along waterways. The industrial heartland of Germany, the Ruhr, is named after the river that gave access to that coal-mining region. The great English industrial cities of Liverpool and Manchester were tied together by the river Mersey and by canals built in the eighteenth century. Canal building during the Georgian era likewise connected Birmingham with the port of Bristol. In the 1830s, rail would complement waterways and ensure that these industrial areas had even easier access to each other and to global markets.
In New York and Chicago and Detroit, entrepreneurs came, eager for access to harbors, other manufacturers, and urban consumers. The money that industries save on transport costs when they locate near each other and their customers is an example of agglomeration economies—the benefits that come from clustering in cities. The growing city’s large home market and its waterborne access to other customers also enabled industrialists to take advantage of what economists call returns to scale, a term for the fact that per unit costs are cheaper in bigger plants that produce more units, like large sugar refineries or car factories.
Detroit Before Cars
Some of Detroit’s largest and most successful businesses, like Detroit Dry Dock, catered directly to the vast numbers of boats floating by the city. Detroit Dry Dock was incorporated in 1872, and over the next thirty years, its engine works would become one of the most important shipbuilders on the Great Lakes. Henry Ford came to Detroit Dry Dock in 1880. Ford had already worked as a machinist, at a smaller firm that had, according to Ford’s biographer Allan Nevins, “probably offered better opportunities for a comprehensive training than most of the larger plants,” but the Dry Dock was Ford’s first major exposure to technologically sophisticated engine production. Detroit had ready access to wood and iron ore, and its shipyards were at the center of the Great Lakes system. It was natural for this city to specialize in building ship engines, and its expertise in building and repairing engines would make Detroit a natural place to build cars.
The car was a new idea that combined two old ideas: the carriage and the engine. Both carriages and engines had long been made in Detroit. The engines were being built and serviced for the ships on the Great Lakes; the carriages were made from the plentiful wood of Michigan’s forests. Henry Ford got his start in the engine business, while Billy Durant, the entrepreneur behind General Motors, began making horse-drawn carriages in nearby Flint.
At the end of the nineteenth century, Detroit looked a lot like Silicon Valley in the 1960s and 1970s. The Motor City thrived as a hotbed of small innovators, many of whom focused on the new new thing, the automobile. The basic science of the automobile had been worked out in Germany in the 1880s, but the German innovators had no patent protection in the United States. As a result, Americans were competing furiously to figure out how to produce good cars on a mass scale. In general, there’s a strong correlation between the presence of small firms and the later growth of a region. Competition, the “racing men” phenomenon, seems to create economic success.
After Ford left Detroit Dry Dock
in 1882, he returned to his family farm and kept experimenting with engines. He got more experience operating a neighbor’s Westinghouse threshing machine and used his expertise to get a job at Westinghouse working on their engines, while experimenting in his free time with steam engines, even building a proto-tractor. In 1891 he jumped ship and joined Westinghouse’s archrival, the Edison Illuminating Company. In 1893, he was promoted to chief engineer in the Detroit plant and when Ford explained his ideas about cars to Edison, the great inventor supposedly replied, “Young man, that’s the thing!”
Ford used the experience and know-how he got at Edison to start tinkering with motor vehicles. In 1896, after toiling for two years in a workshop behind his home, he produced the Ford Quadricycle. The Quadricycle was a simple vehicle that ran on bicycle tires, but its 20-miles-per-hour top speed was fast enough to impress a lumber baron who bankrolled Ford’s first car company in 1899. Ford’s early cars were expensive and of low quality, not a winning combination, and he had left the firm he had founded by 1901. The lumber baron didn’t give up so easily; he brought in another engineer and renamed his company after Detroit’s founder: Cadillac.
New York City actually had a larger share of the nation’s automobile producers than Detroit in 1900, but there was an explosion in automotive entrepreneurship in Detroit in the early 1900s. Detroit seemed to have had a budding automotive genius on every street corner. Ford, Ransom Olds, the Dodge brothers, David Dunbar Buick, and the Fisher brothers all worked in the Motor City. Some of these men made cars, but Detroit also had plenty of independent suppliers, like the Fisher Brothers, who could cater to start-ups. Ford was able to open a new company with backing from the Dodge brothers, who were making engine and chassis components. They supplied Ford with both financing and parts.
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