In September 2011, President Obama stood in front of General Motor’s headquarters in downtown Detroit and declared the federal bailout of the auto industry was a rousing success.
“We stood by the auto industry and made some tough choices and now the Big Three are turning a profit and hiring new workers,” Obama said, referring to the largest three U.S. carmakers. “Right here in Detroit, right here in the Midwest, right here in the United States of America."
Just two years later, Detroit, unable to pay $18 billion in liabilities, has declared bankruptcy. It’s the largest city to go belly up in the history of the United States.
The bankruptcy sheds light on a well-trafficked myth perpetuated in popular culture: the health of Detroit as a city was tied to the health of the auto industry. But in truth, the two have no had much to do with one another for years.
The reason for this is the way the car business currently works. General Motors might be headquartered in Detroit, but it has long shuttered the plants that made the Motor City the center of the auto world in favor of cheaper manufacturing elsewhere. According to Aaron Renn, a widely cited urban analyst based in Rhode Island, the exodus of workers left an unattractive suburban housing infrastructure that could not support a population necessary to revive Detroit.
“Detroit and many of the Midwest cities get by building massive amounts of single-family suburban homes that are far from the city center," he told The Fiscal Times Tuesday. "With these houses empty you have an older, decaying housing stock."
Now, many are suggesting that Detroit and other similar Midwest cities follow the example of Pittsburgh, the one Rust Belt city that has managed to reverse its fortunes. But a closer examination of how Pittsburgh turned around shows that its success is not easily replicated. It also shows that there is no silver bullet to solving chronic Rust Belt problems.
ONE INDUSTRY TOWNS
Rust Belt cities each grew on a particular industry. Detroit had cars; Pittsburgh had steel; Toledo had glass; and Cincinnati had manufacturing. As each of these industries declined, the city declined with it.
But in recent years, Pittsburgh has been revitalized. According to a 2012 Brookings Institute report, Pittsburgh is one of only three American cities that have bounced back from the Great Recession.
The reasons for this turnaround are clear. Since the steel industry left in the 1980s, causing a mass exodus of people (680,000 lived in Pittsburgh in 1950 compared with 330,000 in 2000) city leaders have made a series of strategic decisions to attract new business.
They offered subsidies to health care and technology firms to come to the city. This bolstered the already-strong University of Pittsburgh hospital system. Tech companies like Google, attracted by high-skilled workers graduating from Carnegie Mellon, soon followed.
At the same time, Carnegie Mellon was able to use government grants to build on its reputation as a tech powerhouse. The University of Pittsburgh similarly used profits from its medical empire to improve the quality of education at the school.
The financial services industry has also grown. In recent years, PNC has grown from a regional bank to a national power. Federated Investors, an under-the-radar investment firm based there, now manages $337 billion with offices in New York and Germany.
Pittsburgh also has a deep philanthropic legacy it was able to draw on. Nearly every cultural institution has the Carnegie or Mellon name on it. There are art, history, science and natural history museums. The Andy Warhol Museum, named for the Pittsburgh native, and the Mattress Factory showcase modern art.
All of this combined with cheap housing, a dense urban core and its reputation as a family-friendly, livable city made Pittsburgh an American success story. But it’s not one that can be easily repeated in Detroit.
THE PITTSBURGH LEGACY
Pittsburgh’s success has managed to hide many problems that still exist. The small steel towns that suffered in the 1980s have not shared in the city’s recent successes. And net population increases have been modest: the Pittsburgh region added less than 1,000 people in 2012, according to the Census Bureau.
Aside from its current problems, the circumstances that surrounded Pittsburgh’s recovery can’t be replicated in Detroit. The Motor City lacks similar philanthropic resources, has not taken steps to grow and diversify the local economy, and does not have a university infrastructure in place. Its sprawling decaying housing is an unwelcome sign to potential investors.
According to Renn, the makeup of each city’s population makes it difficult to replicate success. Pittsburgh is the whitest region in the country. Detroit, on the other hand, has a population that’s more than 80 percent black. Renn said that long-unsolved problems in the black community put Detroit at a disadvantage when businesses and investors make decisions based on metrics like education and income level.
“The racial composition is important because we know in America that black people have been historically disadvantaged,” he said. “Cities that are all white are just going to look better statistically because white people have the best statistics. That’s why Pittsburgh, Portland and Seattle look so good.”