Thursday, November 1, 2012

The Triumph of SF Over Detroit

The San Francisco Giants (my team) swept past the Detroit Tigers to win the World Series for the second time in three years (remarkably with an almost completely different line-up and without their superstar Melky Cabrera and with only minor contributions from their ace Tim Lincecum).  Ed Glaeser, the urban economist, sees a metaphor for the fate of the two cities in an article that makes fascinating reading.

It seems almost funny to think about a city that is now the capital of the high tech, information technology world as a blue-collar industrial place, but that is exactly what it was in the post WWII era.  The San Francisco bay was ringed by giant shipyards, oil refineries, military bases and factories.  The renaissance started in the 1970s, right about the beginning of the decline of Detroit, also a blue collar, industrial .  So why has San Francisco prospered and Detroit suffered in the intervening years?  Glaeser provides some insight:
But vast factories, such as Ford’s River Rouge, are kingdoms unto themselves. They don’t need the cities that surround them, and when economic conditions change, factories are relocated to lower-cost areas, such as the right-to-work states of the South and the developing world.

San Francisco’s manufacturing base, including its once- mighty shipyard at Hunter’s Point, also declined after World War II. But the city, unlike Detroit, was able to rebuild itself, because it had skills and entrepreneurship.

Detroit in its heyday was marvelously productive, but it was never education-intensive. In 1950, only 5 percent of the Detroit area’s adults had college degrees and that number had only increased to 9 percent by 1970. Wages were so good in the factories, why would anyone waste time in college? Nine percent of the San Francisco area’s adults had college degrees in 1950, and that number had doubled by 1970.

From 1940 to 2000, those places that started with slightly more education typically experienced far faster growth in human capital. By 2000, 44 percent of greater San Francisco had a bachelor’s degree, as opposed to 23 percent of adults in greater Detroit.

Informal skills, learned on the job and at the breakfast table, such as the talent and inclination to be an entrepreneur can be even more important for urban success. Detroit taught plenty of informal skills, especially around the assembly line, but its big companies didn’t inculcate entrepreneurship.

The middle managers of General Motors may have been superb cogs in a corporate machine, but they were not trained to start an electronic greeting company if things went wrong for GM. San Francisco had fewer dominant companies and consequently more entrepreneurs per capita. Entrepreneurs, such as Donald Fisher, who founded San Francisco’s the Gap, always play an outsize role in urban rebirth.

Skills enabled San Francisco to specialize in creating ideas, while Detroit remained a center of goods production. Measures of skill, such as the share of the population with a college degree, do a good job explaining the relative success of U.S. cities. Measures of entrepreneurship, such as having a lot of small companies, also predict employment growth.
Glaeser then goes on to talk about weather. Places with better weather have fared better in the post WWII era. One reason is that entrepreneurship has become more mobile as it becomes more service oriented and less capital intensive (or at least where the capital intensive activities are easier to do at an arms length) and so people are more apt to move to a place they enjoy living.

But I think there is another factor, one that I think about a lot as a development economist. At the heyday of Detroit's auto industry and the power of the unions, you could have a very good middle class life as an auto worker. Because there were very good careers available for high school educated individuals, the incentives to go and get a college degree were lessened and, not surprisingly, few people did. I think the double whammy of this being less true for SF workers (supposition - I don't know this to be true) and the rise of both the UC and CSU systems (and the rise to prominence of Stanford University) created an environment with very different incentives.

Anyway, I was rooting heartily for the Giants, but did feel a little bad. I was hoping Detroit could take a game or two in Detroit to make the fans happy. I also feel a little guilty: I had only to wait half my life (I hope) to see the Giants win while my father, a Bostonian, had to wait most of his to see his beloved Red Sox win.

And, as an aside, my diverse sporting allegiances are explained by my formative years having been spent (in almost equal measure) in San Francisco, Madison, Wisconsin, and Portland while being raised by a London-born mother. In my earlier SF years, I was taken to many Giants games at Candlestick, then later after being transplanted to the midwest, the Badgers and Packers became central, and later the Blazers of the later 80s and early 90s were my passion.  Finally, as a graduate student in a department almost completely made up of foreign students from Italy, Argentina, Brazil, Turkey, Chile and so on, I learned the true passion of the soccer fan and my allegiance to Arsenal was cemented.

So recent years have been very good: the rise of the Badgers from perennial dormat to regular top 25 team in both basketball and Football, the Super Bowls of the Packers, the World Series of the Giants, the success of the Blazers has been good - but we need an NBA championship - and the Arsenal (save for the most recent few years) have played attractive and successful soccer.

Is it any wonder then that Portland, Madison Wisconsin and SF have all prospered relatively in those years as well?  There is one common denominator - me.  Clearly there is a causal link between my presence and success.   After all, OSU hired me and promptly won two national championships in baseball.  I rest my case.

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