In 1960 more than one in three American households were dependent on manufacturing jobs, and half of a typical family paycheck went to the purchase of manufactured goods. A consequence of this was that economic activity at the local level largely followed the ebb and flow of footloose manufacturing firms.
This was a thriving time in the Midwest. Our cities were prosperous, and seemingly immune to some of the decay already impacting eastern cities. Downtown Muncie, Terre Haute, Flint, Sheboygan, Toledo and Youngstown seemed to flourish.
They weren’t perfect places, but there was surely a sense of optimism about the future. Sadly, there was already reason to suspect otherwise.
The loss of employment that plagued large eastern cities was destined for the Midwest. Many Midwestern cities hit peak manufacturing employment in the 1960s, and nearly all had done so by 1977 when manufacturing jobs were at their peak nationally. The jobs dwindled, not due to foreign trade, but because America is a great place to make things.
As testament to that, manufacturing production has continued to grow, in inflation-adjusted dollars, peaking with the last data release in 2015.
At the same time manufacturing jobs slipped away, American households spent a smaller share of earnings on goods, and more on services.
In the mid 1960s half of income went to goods; it is now below 30 percent. One result was that most jobs are now dependent upon being close to people. The footloose manufacturing economy of 1960 has been almost entirely supplanted by non-footloose jobs, which are dependent upon the size and earnings of the local population.
Economic development policy has mostly ignored these changes. Today, Indiana’s local governments squander more than $1 billion a year on attracting footloose jobs, though there are fewer of those now than in 1970.
Over the same time, the number of non-footloose jobs grew by more than 90 million. Much of that government spending has come at the expense of more fundamental investments in cities and towns. A half century of chasing smokestacks has left many Midwestern towns broken, decayed and shrinking.
Growing places in the United States have ended the costly and ineffective policies of attracting businesses, focusing instead on attracting the households. This feeds the demand for modern commerce. These polices go by many names: talent attraction, quality of place, place-based economic development, and my favorite ‘Primacy of Place.’
Understandably, many Midwestern voters are confused by these policies. They aren’t easy to define because every community has different strengths and weaknesses.
Carmel’s needs are different than Winchester’s, which are different than Jasper’s. In some places (mostly the larger and more affluent communities) these Primacy of Place efforts involve spending on expensive public amenities. More commonly, it means a renewed focus on quality schools and the mechanics of good government — clean, paved streets, crime-free neighborhoods, and responsive local government.
A focus on Primacy of Place isn’t some new economic development fad. It reflects the fundamental change that has occurred in the structure of our economy over the last half century or longer.
The policies themselves aren’t fads either. The focus on good schools, safe, clean streets, and effective local governance is what successful Midwestern cities were doing a century ago when they were the growth marvel of the world. It is well past time to return to our roots.