Once the backbone of the American steel industry, Pittsburgh has reemerged as a hub of Midwestern business.

Once the backbone of the American steel industry, Pittsburgh has reemerged as a hub of Midwestern business.

Pittsburgh may seem the last place to call the city of the future. Its population of 300,000 is less than half its peak 50 years ago. The once proud and profitable steel industry is now all but obsolete. New York has Wall Street and Broadway. Los Angeles has Hollywood. Paris has haute couture, and Rome has architecture. Even Philadelphia has the Liberty Bell. Pittsburgh’s biggest claim to fame is its football team.

There is a crisis of the Rust Belt city in this country, and nowhere is it felt more acutely than in Detroit. The 2011 Super Bowl featured a commercial for Chrysler, the struggling automobile manufacturer. Eminem is driving through the city’s streets. A church choir and the beat of “Lose Yourself” is playing in the background as the narrator says:

This isn’t New York City,

or the Windy City,

or Sin City,

and we are certainly not anyone’s Emerald City.

This is the Motor City,

and this is what we do.

Unfortunately, poetry, no matter how inspiring, can’t save a dying city. Detroit remains on the brink of bankruptcy. To the south, Chicago has witnessed an exodus of 200,000 people in the last decade alone. Baltimore is permanently associated with the urban decay of TV’s “The Wire.”

Enrico Moretti crystallizes the crisis in The New Geography of Jobs, published last year. “The most dynamic areas in this country [in the aftermath of World War II] were manufacturing meccas like Detroit, Cleveland, Akron, Gary, and Pittsburgh. These cities were the envy of the world.”

The identification of America’s prosperity with industrialization reached its height in the 1950s, when Charles Wilson, then-CEO of General Motors, famously said, “What is good for General Motors is good for the country, and vice versa.” In 1978, manufacturing employment reached its peak, with almost 20 million Americans working in factories.

Then suddenly, the engine stopped and the car went into reverse. Since 1985, the United States has shed an average of 372,000 manufacturing jobs every year. “If the current trend continues,” Moretti lamented, “there will be more laundry workers than manufacturing workers in America when my son, who is now 3 years old, enters the labor market.” It is widely acknowledged that Cleveland (population decline since 2000: 17 percent), Cincinnati (minus 10 percent), St. Louis (minus 8 percent), and other metropolises can no longer compete for manufacturing jobs with Vietnam, Bangladesh, and Thailand.

Pittsburgh bucks this trend of failing Rust Belt cities. This city in western Pennsylvania has become a paradigm for the post-manufacturing American economy.

The Austrian-American economist, Joseph Schumpeter, coined the term “creative destruction,” the way in which capitalist economic development arises out of the destruction of some prior economic order. Pittsburgh is a perfect case study in creative destruction. Out of the ashes of its moribund steel industry, a new Pittsburgh — one built on technology and research — has emerged, poised and ready to take on the 21st century.

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In the late 1970s, the U.S. steel industry was failing. Foreign competitors with lower labor costs and lower environmental standards were crowding the market. Coal and iron ore processing had become costly and inefficient. Oil prices, inflation, and interest rates soared. In 1979, the Pittsburgh-based U.S. Steel Company suffered the largest quarterly loss — $561.7 million — in American corporate history. The episode evokes the recent travails of General Motors and Chrysler, except no bailout came to the rescue. Within a few short years, 115,500 manufacturing jobs vanished in Pittsburgh. The steel industry alone accounted for nearly 50 percent of the losses. The city was being talked about the way Detroit is now: Its very survival was in question.

Pitt NightMarlee Myers, managing partner at the law firm Morgan Lewis in Pittsburgh, explained what was at stake. “This region had been dependent on the steel industry and the many jobs that it provided. We were really at a crossroads. We could have gone the direction of other failing Rust Belt cities, or we could reinvent ourselves.”

The city’s revival has been part organic and part good long-term planning. With regards to the latter, Clifford Levine, an attorney who specializes in governmental law and chairs the Public Affairs Group of Cohen & Grigsby, gives credit to public-private partnerships. “There is a long tradition of political and corporate collaboration, going back to 1945 when David Lawrence was elected mayor,” he told The Politic. At the time, Pittsburgh was considered one of the most polluted cities in America. A Catholic Democrat, Lawrence forged the now famous bipartisan alliance with Richard Mellon, a member of the WASP establishment and staunch Republican chairman of one of the largest banks in the country. Despite their political and religious differences, the partnership drove a postwar urban renewal.

“In the 1990s, under the leadership of Mayor Tom Murphy, the son of a steelworker, public and corporate leaders came together once again,” Levine continued. “A decade and a half after the steel industry collapsed in the early 1980s, people were still expecting the industry to return. Murphy came in and said, ‘Forget that past. We need to reclaim our city.’” More than 1,000 acres of abandoned, blighted industrial land were cleaned up. Dilapidated steel mills gave way to thriving commercial, retail, residential, and public spaces. Murphy oversaw the development of more than 25 miles of new trails alongside the river, as well as the creation of urban green space. In total, Murphy leveraged $4.8 billion in public-private partnerships.

“The support and growth of the universities can’t be underestimated either,” said Tim White, vice president of development at the Regional Industrial Development Corporation (RIDC). The city is home to a handful of institutions of higher learning: Duquesne, Robert Morris, Chatham, Carlow, Slippery Rock, Indiana University of Pennsylvania, and Washington and Jefferson. But undoubtedly, the two strongest universities are the University of Pittsburgh and Carnegie Mellon University (CMU). The University of Pittsburgh Medical Center (UPMC), now one of the top 10 hospital systems in the country, replaced U.S. Steel as the region’s largest employer. An $8 billion health care conglomerate with 50,000 employees, UPMC is now headquartered in the old U.S. Steel Tower, the city’s tallest building. Lest anyone forget how the times have changed, UPMC’s logo sits on top of it.

Heinz FieldWith the help of grant-funded research, dozens of technology companies were born in the shadows of these universities. Fore Systems, a computer network switching equipment company, was founded by four CMU professors in 1990. A few years after a very successful IPO in 1994, a London-based company acquired it for $6.4 billion, adjusted for inflation. Myers called Fore Systems “a grand slam home run for the region.” It was one of many. Freemarkets Inc., a software company, and Respironics Inc., a medical supply company, are similar success stories. More than 30 robotics companies make Pittsburgh one of America’s major centers for robotic innovation. They are the product of CMU’s Robotics Institute, the world’s only Ph.D. program in robotics.

With the turn of the century, the pace of progress accelerated. Whole Foods, Home Depot, and Trader Joe’s set up shop in the city. Then Google moved into a converted cookie factory — part of $131 million redevelopment project — just outside of the East Liberty neighborhood. East Liberty’s turnaround is Pittsburgh’s renaissance in a microcosm. This neighborhood of about 6,000 residents is wedged between some of Pittsburgh’s wealthiest and poorest areas. Crumbling office and commercial buildings have been converted into apartments, promising “urban chic” for people working at the nearby hospitals and universities. The 2011 average sale price for homes in East Liberty was about $80,000, daylight robbery by Manhattan standards. This modest sum, attractive for many young professionals, is still up more than 60 percent from a decade earlier.

The CEO of Google, Eric Schmidt, explained the search engine’s expansion into the city. “Much of computer science was invented here,” he told an audience at a Pittsburgh Technology Council event in 2009.

This was a few days before the city would play host to the world’s wealthiest nations at the G-20 Summit. White House spokesman Robert Gibbs explained the administration’s choice of city: Pittsburgh “has seen its share of economic woes in the past, but because of foresight, investment is now renewed, giving birth to renewed industries that are creating the jobs of the future.”

The event was the city’s cherry on top, the irrefutable stamp of approval that Pittsburgh had pulled off an unprecedented Rust Belt recovery. If the 2008 Olympics were China’s coming-out party, then the 2009 G-20 was Pittsburgh’s return to the world stage.

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Challenges certainly remain. Many of them are not particular to Pittsburgh. Aging infrastructure, bloated public pensions, and underperforming public schools are among its ailments. Other obstacles are unique. “Pittsburgh continues to struggle with maintaining venture capital groups. Major funding comes almost exclusively from Boston and Silicon Valley,” Levine explained.

Scott Stern ’15, a Pittsburgh native whose family has lived in the region for seven generations, pointed to the city’s dynastic politics. Luke Ravenstahl, the current 32-year-old mayor, is a third-generation local elected official. “If politicians are winning elections because of their last names and not their ideas, you’re not going to be electing the best people,” Stern said.

The population of foreign-born professionals is also very low for a large American city. According to the U.S. Census Bureau’s American Community Survey for 2006 to 2010, only 7 percent of Pittsburgh’s total population is foreign-born. Compare this with New York City: 3 million of its 8.2 million residents are immigrants.

The city also struggles to retain its youth demographic. Eric Levine ’14 is moving to New York City next year rather than returning home to Pittsburgh’s Squirrel Hill neighborhood: “There is no question that New York is the best city to be in when you’re young.” Levine has siblings in New York City, Baltimore, and Washington, D.C. Will he return home one day? “Pittsburgh is a great city. There is a feeling of unity and pride.” But he is unsure, as is Josh Kalla ’14. “Eventually, I’d love to raise a family in Pittsburgh,” Kalla said. “I enjoyed growing up there. For now, though, I want to go to a Ph.D. program in political science, and there aren’t any good options in Pittsburgh.”

Malia Spencer, a technology and manufacturing correspondent for the Pittsburgh Business Times, has a message for young people out there. “When I arrived here from Silicon Valley, I was surprised to see everything that’s going on. I had no idea about Pittsburgh — I was born and raised in California. I didn’t know what to expect; I thought it was going to be like Detroit. I got here, and it’s beautiful. There are forests everywhere. People are setting up co-working stations, incubators, startup weekends. It’s a small community, but you can definitely be hooked in pretty quickly.”

Pitt posterizedSpencer captures the moment well. Yale “Yinzers” (slang for Pittsburgher) notwithstanding, according to U.S. Internal Revenue Service data, 1,430 more people moved into the Pittsburgh Metropolitan Statistical Area (MSA) than packed up and left between 2009 and 2010. This is welcome news for a region with one of the largest elderly populations in the nation.

Can this success be duplicated? What can other Rust Belt cities learn from Pittsburgh?

“The key is to understand your assets and build on them,” Tim White from the RIDC offered. “It is a matter of leadership and focus. It is about marketing your city to attract capital and talent. If Pittsburgh can escape from the clutches of misery, I am confident Detroit and Cleveland will bounce back.”

Success for the former Rust Belt cities also lies in the diversification of their economies. Finance 101: Don’t put all your eggs in one basket. Pittsburgh had too many of its eggs in the steel basket. Detroit remains too dependent on the success of its automobile industry. While Pittsburgh is still heavily invested in manufacturing, steel production has transitioned into an industry of specialty metals and sophisticated alloys. Over 300 metals technology firms in the area provide production equipment, engineering services, parts, and supplies.

Pittsburgh has more to offer than just specialized steel, booming technology and healthcare industries. It is working to groom its revitalized film industry (part of “The Dark Knight” was shot in Pittsburgh) and music scene to produce more artists like Wiz Khalifa and Mac Miller, prominent Pittsburgh-based rappers. Corporate money in the area, from firms such as Heinz and PNC, has allowed the arts to flourish.

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“What is good for General Motors is good for the country, and vice versa” is a slogan as antiquated as the typewriter. American prosperity is no longer identified with its manufacturing. And yet, too many of America’s cities are still struggling to grapple with the new economic realities. Yale students, as residents of New Haven, can appreciate this. A 10-minute walk from campus leads to the abandoned Winchester ammunitions factory, once the employer of thousands. A few miles south on the Metro-North is Bridgeport, “the Detroit of Connecticut,” a Third World city in the richest state in the richest country in the world.

The coldhearted consultant would recommend that these cities cut their losses and fold to the change of tides. Cleveland’s loss is Phoenix’s gain. Why not close the chapter on the Rust Belt era to make way for the Sun Belt? Investing in Bridgeport is analogous to investing in.

Should mayors and their municipalities choose not to surrender, they need not look to China. Should they choose to reverse their dwindling numbers and invest in new industries that will attract talent and capital, they need not look to Germany. They need only look to Pittsburgh.

 

Josef Goodman is a junior in Morse College