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John Austin at the Michigan Economic Center is a long time commentator on Midwest economic issues, going back to at least his 2006 Brookings Institute report “The Vital Center.”
Austin is back with a new report, which could perhaps be seen as an update of sorts, called “A Vital Midwest: The Path to a New Prosperity,” released by the Chicago Council on Global Affairs.
In a region with a lot of naysayers, Austin has been a consistently optimistic voice about the future of the region. This report continues in that tradition. I think he always does a great job of identifying and highlighting the assets that are present in the region.
Some highlights:
A lot has changed since the Midwest served as the birthing ground of the great industries—processed food, retail commerce, aviation, cars, chemicals, steel, electronics, machinery, consumer
durables, and many more—that powered 20th-century America.Much has also changed since a generation ago, when globalization and new industrial rivals diminished the region’s economic primacy, shuttered hometown employers’ doors, and left many communities struggling. This collective transition earned the region its “Rust Belt” moniker.
Over recent years, the forces of technological disruption, new lifestyle and work preferences of young and mobile talent, changing demographics, and media in an increasingly wired world have continued to alter the dynamics of the global marketplace, the shape of communities, and the economic position and possibilities for the residents of the region.
Today the Midwest is neither an economic monolith nor, despite lingering popular misconceptions, a “Rust Belt.” Many Midwest communities, large and small, have successfully evolved from their industrial and farming roots and are winning in today’s globalized, tech-based, and knowledge-driven economy. Most of the region’s major metros—from the Twin Cities in the west to Indianapolis at the nation’s crossroads to Pittsburgh in the east—are diverse, thriving hothouses of knowledge work.
What’s more, all of the communities anchored by one of the region’s numerous top-flight research universities (such as Iowa City, Ann Arbor, and State College) are thriving in an economic era in which talent and innovation dominate.
Many other Midwest communities that are neither major metros nor home to top research universities have also found paths to new success by embracing the forces of economic change and building on their particular assets to create a new era of economic vitality.
These include cities such as Columbus, Indiana; Midland, Michigan; and Rochester, Minnesota—cities that are thriving as their anchor employers stay on the cutting edge of innovation in emerging sectors.
Click over to read the whole thing.
This article is an important model for how to take on the issue of “inclusiveness” and “left behinds” at the national level. The question is a “communities in transition” program could avoid wasting money on me-too programs and “shovel ready” infrastructure projects. There’ needs to be some base level philosophy of what the money goes to, and not to.
I’m glad we can see this region as other than the Rust Belt writ large. Those regions to the south of the Rust Belt developed in separate and parallel ways to the Rust Belt while those to the west of the Rust Belt fed raw materials to it but did not become entirely enmeshed in it. Those were disadvantages in the Rust Belt’s peak, but are advantages now. Every dog has it’s day if you wait around long enough.
Overall, this is an interesting report, that is useful both in presenting a more positive and balanced view
of the Midwest, as well as many good policy ideas. But I feel like something is still lacking in the
narrative that is presented regarding the fate of the old industrial centers that were the engines for the
old Midwest economy.
Globalization transformed manufacturing in the Midwest, but the transformation has been far more
complex and interesting than the standard narratives. Globalization was a challenge, but it was only
one in a series of challenges that included various business fads of the 1960s through 1980s (the forming
of conglomerates, and the purchase of companies by unrelated businesses to achieve the goal of
escaping the business cycle; the intentional disinvestment in northern manufacturing facilities to
facilitate closure of factories and shift of jobs to southern non-union states). The “financialization of the
economy” and the focus on manufacturing profits through financial instruments nearly destroyed GE. A
corporate raider destroyed Pabst (or at least it’s original iteration). In my opinion, globalization
provided the path forward for many manufacturing firms, shifting the focus of leaders from the various
ultimately destructive business practices, to adopting and embracing a new globalized model, forward
thinking labor practices, and heavy investments in information technology, design, marketing, and
innovation. The impact of these companies and their leaders extends far beyond their roles as key local
employers. At least that’s the story for hundreds of companies in my corner of the Midwest.
I mentioned a few example companies in a comment on the “More on Columbus, Indiana” post.
Perhaps it’s useful to share a few more local examples, as few urbanists appears to show much interest in
manufacturing companies – in particular, those not based in their local area. Generac – founded in
1959, was sold by its founder (Robert Kern) to a private equity firm in 2006. It has since been taken
public, seen its revenue grow to over $2B in sales, and was the highest performing stock for a Wisconsin-
based company last year. It has been extremely successful building emergency power generators, and
it’s focus for growth over the next decade appears to be in developing the home energy storage
systems. While the company has continued to thrive, it’s founder (Robert Kern) who received nearly
$1B from selling the company, gave nearly all of this to a foundation that has supported three primary
initiatives: (a) transforming the science of health care delivery (with $100M in donations to the Mayo
Clinic to establish the Kern Center for the Science of Health Care Delivery), (b) transforming medical
education (with a $38M donation to the Medical College of Wisconsin in Milwaukee to fund a
collaborative effort with the Mayo Clinic and six medical school), and (c) transforming science education
in the US, through the creation of Project Lead the Way which developed and promotes a science based curriculum now used in 6,500 schools throughout the US. To me, it’s a great example of the on-going
and multi-faceted legacy of manufacturing companies as they exist today – with a globalized model,
rapid growth, and local manufacturing employment, while the company founder deploys his wealth,
drive, and ingenuity to addressing social challenges of far greater significance.
The focus of these manufacturing leaders on transforming education and health care is not unique to
Generac. I mentioned in my previous comment the example of Husco International, another local,
Milwaukee-based manufacturing company led by a Hispanic entrepreneur (Gus Ramirez), who since
retiring (and turning the company’s leadership to his son), has dedicated himself to the challenges of
educating disadvantaged students. His major local project has been the establishment and construction
of a private charter school (St. Augustine Preparatory Academy) on Milwaukee’s south side, which he
supported with $70M in donations. Plans for the school were developed from insights gained by Gus
Rameriz through personal visits to more than 20 top performing private schools throughout the US
(applying the same type of disciplined approach and planning that was necessary to develop a successful
global manufacturing business). When the current expansion is complete, the school will serve nearly
2,000 students.
Quad Graphics, a printing company founded in the Milwaukee area in 1971, and now at $5B in revenue,
is functioning as the consolidator in the global printing industry, as well as focused on the
transformation of the industry into multi-channel (print and digital) marketing. But they received a lot
of press locally for their approach to dealing with out of control medical expenses by developing a
healthcare division with 800 employees that serves not only their own company, but other companies.
These would all be nice stories but they’re not exceptions – they are more the rule. I mentioned a few
other example companies in my previous comment (Johnsonville, Milwaukee Tools), but I could provide
at least a 100 local examples of manufacturing firms that are thriving locally in the global era, with
compelling stories, and visionary leaders whose impact is not limited to just their own businesses, but
which is also being applied to transforming education, medicine, the challenges of poverty in inner-city
Milwaukee, etc. This includes companies that are of all sizes, that in some cases were founded 150 or
more years ago, or in others were born in the midst of globalization and designed from the beginning to
thrive.
Others have thrived in the industries most challenged by globalization or the digital economy (Quad
Graphics in print; Ashley Furniture in furniture; Charter Steel in steel). Ashley (which had $12 M in sales
when it moved its headquarters from Chicago to Arcadia, WI [population 3,000] in 1982) may be the
most remarkable, having by 2005 become the largest furniture manufacturer in the world, and the
largest furniture retailer in the US by 2007. They recently opened their 1,000 th retail store, and have
outmaneuvered Amazon in that they control not only the their distribution channel but also make every
product they sell.
It’s literally companies from A to Z – as I was thinking about this in response to the post on Columbus,
IN) and did an exercise to see if I could come up with a thriving local manufacturing firm for every letter
of the alphabet (I could – with up to 8 companies for some letters). This was something that irritated
me about Lost in the Middle by Richard Longworth, who seemed to present every successful city in the
Midwest as an exception to the rule (whereas I could take a drive from downtown Chicago to Minneapolis St Paul and pass through nothing but “exceptions.”) The same dismissive attitude seems to apply to successful Midwest manufacturing firms – they are acknowledged to exist but are viewed as exceptions.
The narrative presented in study is one where only Chicago and Pittsburgh are the former major
Midwest industrial cities that have successfully transformed their economy. The manufacturing
companies are noted to still exist and be highly productive, but aren’t really seen as centers of
innovation, or keys for transitioning to the globalized world and the knowledge economy. I think the
narrative is missing what is the most interesting part of the Midwest transformation, which isn’t the
relative prosperity of cities like Columbus, Madison, Des Moines, etc. – but areas where manufacturing
is still playing a vital essential role, has successfully adopted to ever challenge in the globalized era, and
is intimately linked to innovation, design, IT, etc. (such as the local example of Milwaukee Tool which has
held job fairs at MIT). I think this is a missing piece of the global cities discussion as well. The
Milwaukee area has hundreds of manufacturing companies with manufacturing facilities or distribution
channels spread across the globe, and they have been on the front lines of the globalization challenges
for 4 decades or more. But this type of global connection does not appear to have been even
considered in the metrics used for the global cities discussions.
Sorry about the formatting on my post above (I’m a little out of practing and posting on a borrowed computer).
Overall, this is an interesting report, that is useful both in presenting a more positive and balanced view of the Midwest, as well as many good policy ideas. But I feel like something is still lacking in the narrative that is presented regarding the fate of the old industrial centers that were the engines for the old Midwest economy.
Globalization transformed manufacturing in the Midwest, but the transformation has been far more complex and interesting than the standard narratives. Globalization was a challenge, but it was only one in a series of challenges that included various business fads of the 1960s through 1980s (the forming of conglomerates, and the purchase of companies by unrelated businesses to achieve the goal of escaping the business cycle; the intentional disinvestment in northern manufacturing facilities to facilitate closure of factories and shift of jobs to southern non-union states). The “financialization of the economy” and the focus on manufacturing profits through financial instruments nearly destroyed GE. A corporate raider destroyed Pabst (or at least it’s original iteration). In my opinion, globalization provided the path forward for many manufacturing firms, shifting the focus of leaders from the various ultimately destructive business practices, to adopting and embracing a new globalized model, forward thinking labor practices, and heavy investments in information technology, design, marketing, and innovation. The impact of these companies and their leaders extends far beyond their roles as key local employers. At least that’s the story for hundreds of companies in my corner of the Midwest.
I mentioned a few example companies in a comment on the “More on Columbus, Indiana” post. Perhaps it’s useful to share a few more examples, as few urbanists appears to show much interest in manufacturing companies – in particular, those not based in their local area. Generac – founded in 1959, was sold by its founder (Robert Kern) to a private equity firm in 2006. It has since been taken public, seen its revenue grow to over $2B in sales, and was the highest performing stock for a Wisconsin-based company last year. It has been extremely successful building emergency power generators, and it’s focus for growth over the next decade appears to be in developing the home energy storage systems. While the company has continued to thrive, it’s founder (Robert Kern) who received nearly $1B from selling the company, gave nearly all of this to a foundation that has supported three primary initiatives: (a) transforming the science of health care delivery (with $100M in donations to the Mayo Clinic to establish the Kern Center for the Science of Health Care Delivery), (b) transforming medical education (with a $38M donation to the Medical College of Wisconsin in Milwaukee to fund a collaborative effort with the Mayo Clinic and six medical school), and (c) transforming science education in the US, through the creation of Project Lead the Way which developed and promotes a science based curriculum now used in 6,500 schools throughout the US. To me, it’s a great example of the on-going and multi-faceted legacy of manufacturing companies as they exist today – with a globalized model, rapid growth, and local manufacturing employment, while the company founder deploys his wealth, drive, and ingenuity to addressing social challenges of far greater significance.
The focus of these manufacturing leaders on transforming education and health care is not unique to Generac. I mentioned in my previous comment the example of Husco International, another local, Milwaukee-based manufacturing company led by a Hispanic entrepreneur (Gus Ramirez), who since retiring (and turning the company’s leadership to his son), has dedicated himself to the challenges of educating disadvantaged students. His major local project has been the establishment and construction of a private charter school (St. Augustine Preparatory Academy) on Milwaukee’s south side, which he supported with $70M in donations. Plans for the school were developed from insights gained by Gus Rameriz through personal visits to more than 20 top performing private schools throughout the US (applying the same type of disciplined approach and planning that was necessary to develop a successful global manufacturing business). When the current expansion is complete, the school will serve nearly 2,000 students.
Quad Graphics, a printing company founded in the Milwaukee area in 1971, and now at $5B in revenue, is functioning as the consolidator in the global printing industry, as well as focused on the transformation of the industry into multi-channel (print and digital) marketing. But they received a lot of press locally for their approach to dealing with out of control medical expenses by developing a healthcare division with 800 employees that serves not only their own company, but other companies.
These would all be nice stories but they’re not exceptions – they are more the rule. I mentioned a few other example companies in my previous comment (Johnsonville, Milwaukee Tools), but I could provide at least a 100 local examples of manufacturing firms that are thriving locally in the global era, with compelling stories, and visionary leaders whose impact is not limited to just their own businesses, but which is also being applied to transforming education, medicine, the challenges of poverty in inner-city Milwaukee, etc. This includes companies that are of all sizes, that in some cases were founded 150 or more years ago, or in others were born in the midst of globalization and designed from the beginning to thrive.
Others have thrived in the industries most challenged by globalization or the digital economy (Quad Graphics in print; Ashley Furniture in furniture; Charter Steel in steel). Ashley (which had $12 M in sales when it moved its headquarters from Chicago to Arcadia, WI [population 3,000] in 1982) may be the most remarkable, having by 2005 become the largest furniture manufacturer in the world, and the largest furniture retailer in the US by 2007. They recently opened their 1,000th retail store, and have outmaneuvered Amazon in that they control not only the their distribution channel but also make every product they sell.
It’s literally companies from A to Z – as I was thinking about this in response to the post on Columbus, IN) and did an exercise to see if I could come up with a thriving local manufacturing firm for every letter of the alphabet (I could – with up to 8 companies for some letters). This was something that irritated me about Lost in the Middle by Richard Longworth, who seemed to present every successful city in the Midwest as an exception to the rule (whereas I could take a drive from downtown Chicago to Minneapolis St Paul and pass through nothing but “exceptions.”). The same dismissive attitude seems to be applied to successful Midwest manufacturing firms – they are acknowledged to exist but are viewed as exceptions.
The narrative presented in study is one where only Chicago and Pittsburgh are the former major Midwest industrial cities that have successfully transformed their economy. The manufacturing companies are noted to still exist and be highly productive, but aren’t really seen as centers of innovation, or keys for transitioning to the globalized world and the knowledge economy. I think the narrative is missing what is the most interesting part of the Midwest transformation, which isn’t the relative prosperity of cities like Columbus, Madison, Des Moines, etc. – but areas where manufacturing is still playing a vital essential role, has successfully adopted to ever challenge in the globalized era, and is intimately linked to innovation, design, IT, etc. (such as the local example of Milwaukee Tool which has held job fairs at MIT). I think this is a missing piece of the global cities discussion as well. The Milwaukee area has hundreds of manufacturing companies with manufacturing facilities or distribution channels spread across the globe, and they have been on the front lines of the globalization challenges for 4 decades or more. But this type of global connectedness does not appear to have been even considered in the metrics used for the global cities discussions.