Tuesday, March 28, 2006

why the garden club couldn't save youngstown (part II)

The first blog about Safford’s research showed that the Youngstown region and the Allentown region have taken two very different paths since the demise of the steel industry. But why is this the case?

Safford argues that there is two shared critical moments in both of these regions’ histories that may help to describe their diverging paths. The first one is the response in the 1950s to the realization that their inland locations made their cost of production higher, and thus less competitive. The second one is the response to the dramatic plant closings and mass layoffs that commenced in 1977 throughout the local steel industries.

Safford's paper does a very interesting job of digging into history. Here are some excerpts:

page 4

. . . economic leaders in both cities commissioned consultants to outline a course of action. In both cases, the reports that resulted had very similar recommendations. However, the historical record makes it clear that very different kinds of collective action emerged in response. Key actors in Allentown came to support the consultants’ conclusions and took action to implement them. In Youngstown, on the other hand, outside consultants’ reports were largely ignored. Instead, political leaders pursued a set of policies which they assumed to be in the best interest of the city’s core economic elite, but ultimately failed to win the support of those actors when it came to implementation.

page 16
An academic paper on Youngstown’s economy published in 1952 is illustrative of their conclusions. Noting that Youngstown production costs were approximately 55% higher than in Cleveland 70 miles to the northwest and 19% more than Pittsburgh, the report offered the following: In large measure, the future of [Youngstown] may be determined by forces beyond their own control because local operations are only a small part of the total capacity of the major companies operating in this area. On the other hand, local interests have it within their own power to initiate actions which may be the deciding factors in the continued industrial development of the region. There are at least three possible solutions for the problems faced… The first is to increase the size of the local market by the encouragement of steel fabrication in the Valley. The second is industrial diversification. This could be accomplished by encouraging the development of a variety of new industries in the region to take advantage of its latent possibilities. Finally, the third solution and one which is largely beyond the control of the Valley itself is a reduction in steel production costs.

page 17
The massive steel industry strikes of 1956 and 1959 catalyzed local action in response on concerns about the viability of the steel industry in both places. In Youngstown, despite the mounting and apparent need for change, diversification-oriented elements of the consultants’ reports went unheeded(Walker 1981). Instead, with the backing of the region’s banks, steel companies and labor unions, Youngstown’s Congressional delegation—led by the city’s long-time U.S. Congressman, Michael Kirwan—sought federal funding to build a canal linking Lake Erie to the Ohio River Valley through Youngstown. The proposal came up for approval in the U.S. Congress in 1961 and received initial support. But it was ultimately quashed by the intervention of rail roads interests which feared competition as well as by politicians in bordering states who questioned the benefits of the massively expensive proposal.

In Allentown, the strike catalyzed a very different set of actions on the part of the community’s leadership. The first was a decision on the part of Bethlehem Steel to construct a new research facility on South Mountain overlooking both the main steel plant and Lehigh University. This facility, the Homer Research Labs, was the first of what would become a large contingent of corporate research and development laboratories located in the city. The stated goals of the company in doing so was to shift into higher value added production.

page 18
As the economic crisis in Youngstown worsened over the next several years, these various proposals—and their backers—battled for attention and funds at the state and federal level. Strikingly absent from the deliberations, however, were the leaders of region’s remaining major employers. In exception of the construction of a light industrial park at one the closed steel mills, none of the four proposals were ever fully or effectively implemented(Buss and Vaughn, 1987).

Page 19
The second proposal concerned a new initiative then being developed by the State of Pennsylvania known as the Ben Franklin Technology Partnership, which was meant to generate endogenous growth through partnerships between industry and research universities. Local business leaders, including Dealtrey, spoke with Walter Plosila, the State’s Secretary of Commerce at the time. Plosila was a vocal advocate of endogenous growth, an approach which contrasted with the more popular strategy of creating investment incentives designed to attract large employers which Plosila, among others, derided as “smokestack chasing.” The idea was to create public-private partnerships that would build on the state’s higher education infrastructure to support existing companies seeking to engage new technologies as well as to generate new ones. Initially, the Ben Franklin program’s creators planned on establishing three centers, one in Philadelphia, another in Pittsburgh and a third covering the rest of the state to be located at State College near Pennsylvania State University. The local group in Allentown, however, succeeded in advocating for a fourth located near Lehigh University. In addition to creating links between university researchers and the business community, the plan in Allentown called for a private venture capital fund which would be run in conjunction with the Ben Franklin center. The fund drew investments from several of the community’s companies and several wealthy individuals.

Page 25
Second, the political processes which emerged around at two key historical moments differed dramatically with the responses in Allentown coalescing around a relatively unified set of community-oriented actions and Youngstown’s Balkanizing along the narrow interests of a powerful faction. Thus, despite having access to the same information and ideas, the implementation of those ideas into policy and strategic action was very

Do you agree with his assessment of history?

It seems that decisions made in the 1950s in Allentown are now bearing fruit. Is it too late, or can Youngstown get onto a similar path?

While you are thinking about this, an interesting story on some possible paths is available here. Maybe it is time to our leaders to request heavy participation in the Third Frontier, like Allentown did all those years ago in their state.

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