“Chicago sunrise 1” by Daniel Schwen – Own work. Licensed under CC BY-SA 4.0
The Wall Street Journal had an interesting article about how Chicago’s downtown office boom is being fueled by old line industries like food and consumer goods.
Like many other major U.S. cities, Chicago is enjoying a boom as big employers opt for downtowns over suburban office parks that are being shunned by young workers. More than $20 billion worth of residential, office, cultural and retail projects are in development or on the drawing board, according to the city Planning and Development Department.
But Chicago’s growth engine is different from those benefiting booming cities on this country’s East and West Coasts. Unlike cities such as San Francisco and Boston, where the technology sector is fueling economic development, Chicago lately has been relying heavily on growth of food and consumer-products companies.
While most of these companies are decades old, they also are recognizing the need to attract a young and urban workforce as they add new products, technology and services in response to shifting consumer preferences. McDonald’s executive workforce, for example, has launched a mobile app, added self-order kiosks and added healthier items to its menu.
The fact that Chicago has attracted a lot of businesses related its agro-industrial past is something that I’ve commented on before.
Saskia Sassen has written before, using Chicago as her example, that the industrial past of a city shapes the kind of global city future that it has. In her essay on Cities in a Global Age, she wrote:
There is an interesting discovery that comes out of recognising the value of the specialised differences of cities in today’s global economy. It is that the deep economic history of a place matters for the type of knowledge economy a city or a city–region winds up developing. This goes against the common view that globalisation homogenises economies. How much this deep economic history matters varies, partly depending on the particulars of a city’s or a region’s economy. But it matters more than is commonly assumed, and it matters in ways that are not generally recognised. Globalisation homogenises standards and management models. But it needs diverse specialised economic capabilities.
Establishing how a city–region becomes a knowledge economy requires highly detailed research. I will use a case I researched, Chicago, to illustrate some of the issues.
Chicago is usually seen as a latecomer to the knowledge economy— almost fifteen years later than New York and London. Typically the answer is that Chicago had to overcome its heavy agro–industrial past: its economic history is usually seen as a disadvantage compared to old trading and financial centres such as New York and London. But I found that its past has not been a disadvantage. It is one key source of its competitive advantage in the global knowledge economy. This is most visible in the fact of its preeminence as a futures market built on pork bellies. The complexity, scale and international character of Chicago’s historical agro–industrial economy required highly specialised financial, accounting, legal expertise. But these were/are quite different from the expertise required to handle the sectors New York specialised in—service exports, finance, and trade.
It was Chicago’s past as a massive agro–industrial complex that gave it some of its core and distinctive knowledge economy components and has made it the leading global futures financial centre and global provider of specialised services (accounting, legal, insurance, etc) for handling heavy industry, heavy transport, and agribusiness. Chicago, São Paulo, Shanghai, Tokyo, and Seoul are among the leading producers of these types of specialised corporate services, not in spite of their economic past as major heavy industry centres, but because of it.
Chicago’s agro-industrial past is a negative in some sense. It is struggling more than some other cities with the overhang of his Rust Belt heritage, both in its internal functioning and from the fact that it is the business services center for a declining region.
But this past is also the city’s best competitive weapon in carving out its own niche without directly competing with the coasts.
ADM, Con Agra, Mead Johnson Nutrionals, Oscar Mayer, Hickory Farms, Caterpiller, Miller-Coors. These are all brand name companies that relocated from out of town to set up shop in Chicago. (That’s important because firms like McDonald’s are simply relocations within a region). They are all related to its agro-industrial past.
Other cities may not be able to tap into this effect to the same degree. But then again, they were never as big as Chicago in the agro-industrial age either. Cities should look at what they have expertise in doing and in their historic industries to find areas where they can potentially grow in the future. You can’t hang your hat entirely on the past, but to some extent that is the raw material out of which your future is constructed.
What’s interesting about most of the move-ins you mention is that they are corporate headquarters with very limited staff. Their attraction to Chicago, in large part, was because it’s still a city desirable by educated talent, and in perhaps larger part, that they can get anywhere in the world from O’Hare. (Interestingly, Caterpillar decided to locate in Deerfield rather than go downtown like everywhere else.) Chicago’s location and access to transportation is still a plus, long after railroads were the draw.
Those Midwestern metros with the ‘least’ history, Columbus, Indy, and Minneapolis, are doing better than those with deep roots like Cincinnati, St. Louis, and Pittsburgh. Aaron has suggested that Midwestern metros are unaware of what other Midwestern metros are doing, but maybe that’s a good thing. It gets them to focus on what they are doing internally. Those internal dynamics are what give them a comparative advantage.
I see some of the same knowledge assets in Milwaukee, as well as additional assets that may be linked to Milwaukee’s industrial history – in areas such as environmental management and restoration, economic integration with China, automation, and water technology. These are tied to the deep economic history of Milwaukee, and have resulted in significant advantages that seem relevant to competing in the global economy.
Having hundreds of industrial companies discharging contamination into the local rivers and ultimately to the City’s water supply in Lake Michigan, forced Milwaukee to tackle a wide array of environmental challenges (drinking water treatment, management of sewerage waste, mitigating CSOs, use of green stormwater infrastructure, revitalization of urban rivers, brownfields remediation, etc.). My impression is that Milwaukee is now among the leading cities in North America in each of these environmental specialties.
Milwaukee’s economy seems to have adapted in remarkable ways to the rise of China. Several years ago I read there were over 400 firms in SE Wisconsin with business operations in China. The City has one of the best EB5 investment centers in the US. Companies like Milwaukee Tool have experienced their greatest success under Chinese ownership. Foxconn is proposing to build a $10 B factory in this area that would have a huge economic impact on the region. It would make sense for a manufacturing center to be forced to address the threats/opportunities of low cost manufacturing in China to a greater extent than other types of cities, and that would lead to distinctive knowledge components relevant to both competing with China and leveraging the opportunities presented by its continued economic growth.
It’s hard to prove or quantify most of these advantages because there has been so little study of them (I suspect because many researchers may assume that none exist and don’t bother to look).