A Hidden Reason Why Cities Fall Apart

From a New York Times guest essay by Thomas B. Edsall headlined “A Hidden Reason Cities Fall Apart”:

Once-vibrant cities like St. Louis, Baltimore and Cleveland have suffered from poverty, crime, depopulation, social dysfunction and homelessness for decades — setbacks compounded by the decline of manufacturing, the nationalization of local banks and waves of corporate acquisitions.

But there is something else hurting cities besides those well-known phenomena that we don’t talk about enough: the erosion of the local establishment and the loss of civic and corporate elites.

Until the late 1970s, virtually every city in the United States had its own network of bankers, corporate executives, developers and political kingmakers who dominated their private associations, golf courses and exclusive downtown clubs.

The members were affluent white men who wielded power behind closed doors, without accountability to the citizenry. For all their multiple faults — and there were many — they had one thing in common: a shared economic interest in the health of their communities.

I asked Mark Muro, a Brookings senior fellow, about these trends, and he replied by email:

Multiple factors — industry concentration, the digitalization of big business, the desire by corporations for highly educated workers in their headquarters — have led to a pull-away effect where a short list of “superstar” metros accumulate more of the nation’s headquarters, as big firms concentrate in big metros. And this has been a self-perpetuating process in which the fortunate metros have gained the most while many places are left behind.

In effect, Muro continued, “the top echelon of big, educated cities have sucked in more of the population, tech jobs and headquarters.”

As a result, many metros have lost pieces of their leadership, and lost sources of the wherewithal, capital, know-how, and prestige so important to advancing regional initiatives, including ones to bolster local prosperity and autonomy. All in all, the loss of core corporate and other institutions erodes the capacity of the regions most in need of active work to maintain and grow their economic and social health.

Robert D. Atkinson, president of the Information Technology and Innovation Foundation, described the long-term secular trends in an email to me: “Big ‘anchor’ corporations played a key role in civic life in metro areas, not just in terms of corporate donations to nonprofits but also in bringing to bear leadership to revitalize cities. This used to happen all the time in Detroit, Cleveland, St. Louis, the Twin Cities, etc.”

These locally based firms, Atkinson continued, “played an important role of helping the various municipalities in a region work more closely together. Banks and utilities were especially critical to this, in large part because their sales base depended on a healthy regional economy.”

Aaron M. Renn, a demographer and co-founder of American Reformer, a conservative think tank based in Dallas, wrote recently in “The Need for Homegrown Urban Leaders” in Governing magazine that “changes in cities over the course of the last 30 to 40 years have greatly undermined local leadership cultures.”

In the 1970s and before, Renn continued, the banks in most cities were locally owned and were limited by law to their home markets. Their C.E.O.s were extremely powerful both in their companies and communities. And their personal professional incentives were aligned with those of their locality. The only way to grow their banks or electric utilities was to grow the community where they were based. Today, many C.E.O.s of once-local companies are branch managers of global firms. Their job is to sit on local boards and dabble in community relations, but they don’t really call the shots anymore.

The result: “Civic leadership has been bureaucratized.”

Few people have tracked the evolution of a city’s establishment with more attention to detail and consequences than Frank A. DeFilippo, a former political reporter for the now-vanished Baltimore News American, who went on to work for several Maryland television stations and publications.

In December 1967, DeFilippo published in the News American a groundbreaking two-part series on Baltimore’s then-powerful establishment, revealing the interlocking directorates of the city’s five major banks, the two top law firms, The Baltimore Sun and the city’s major corporations:

Describe them by any name — the Power Elite, the Status Seekers, the Organization Men, the Establishment — an inbred and exclusive clique of 133 businessmen and lawyers controls Baltimore, its government, its commerce, its culture, educational and social institutions.

In turn, this select corps of interlocking and overlapping corporate agents is dominated by a half-dozen men who emerge at the apex of the city’s pyramidical power structure.

More than a half-century later, DeFilippo looked back on the fate of Baltimore’s establishment in a 2019 essay for Maryland Matters, “When Powerbrokers Ruled Baltimore.”

“Today, the captains of industry and the institutions they headed are all gone,” DeFilippo wrote. “The banks, the law firms, the insurance companies and the major industries either disappeared or were subsumed by larger, out-of-state logos, or, as many of the old titans faded out, the heirs decided to cash in.”

The Baltimore Sun was sold to out-of-towners, DeFilippo noted, and “the five major banks — Mercantile, Equitable, First National, Union Trust and Maryland National — were all gobbled up by out-of-state behemoths. And the city’s two largest law firms, Venable, Baetjer & Howard and Piper, Marbury, merged with even larger national law firms.”

The Baltimore establishment, like its counterparts in other cities, was shot through with conflicts of interest, self-dealing and the exercise of power by a group characterized by, in DeFilippo’s words, “a kind of hand-me-down inbreeding.”

These negative attributes were counterbalanced, at least in part, by the pluses: The accumulation of power, in those days, brought with it a certain corporate responsibility and civic obligation. The departure of corporate Baltimore, one way or another, also led to the collapse of corporate giving and the support of charitable and cultural institutions as is evidenced by the financial squeeze of the Baltimore Symphony ….

It was usually the local banks that spearheaded civic fund-raising drives, not only as a display of civic good will and corporate citizenship but because it was good business. And the trick was that they donated to each other’s pet projects, providing a steady lifeline of financial support to keep cultural institutions alive.

At the same time, DeFilippo pointed out, there was a provincial side to the do-gooder impression. Local banks stunted commercial development in the city by denying loans to outside interests that wanted to locate in Baltimore. Local money was viewed as vital to establishing a connection to the community, but the local banks were more interested in protecting their fellow Baltimoreans (and clients) from outside competition.

Baltimore’s population became majority Black in the mid-1970s, and African Americans voters became the dominant political force in the 1980s, culminating with the election of Kurt Schmoke, a Rhodes Scholar and Harvard Law School graduate, as mayor in 1987.

By then, however, the economic foundation essential to the formation of a civic establishment — locally owned banks, department stores, manufacturers — had been decimated. For Black entrepreneurs ambitious to become influential in public policy as engaged corporate leaders, the opportunities had become few and far between.

The city’s five major banks, which had provided the core of the city’s power brokers, had been, or were in the process of being, taken over by national and foreign financial institutions. One of Baltimore’s premier law firms had been merged into a national conglomerate while the other had itself become a national firm with weakened local ties as more of the firm’s lawyers were in New York than in Baltimore.

While the focus of this column is on the evisceration of civic elites, Douglas Massey, a sociologist at Princeton, raises a more encompassing issue in the decline of many cities.

Massey wrote me to say that the precarious status of many cities today has roots in the early and middle decades of the 20th century when white populations and government bureaucracies put up roadblocks to the absorption of the large number of African American migrants who headed north as agriculture in the South became mechanized, and as farm laborers were recruited by new industries in cities like Baltimore, Cleveland, St. Louis, Detroit and Chicago.

Massey made the case by email that: Being excluded from Federal Housing Administration, Veterans Administration and private lending programs by institutionalized discrimination, African Americans were barred from following whites to the suburbs while simultaneously being prevented from purchasing and owning their own homes in the ghetto, putting them in a structural position to be exploited either by absentee White landlords whose properties were declining in value and in need of repair, incentivizing them to maximize rents and minimize investments, or by unscrupulous real estate agents marketing loan installment contracts that collected high monthly payments from aspiring Black homeowners with little capital who had no claim to title until the last payment under the contract was made but were responsible for upkeep and repairs until that date.

In sum, white flight to expanding suburbs and decline and disinvestment within Black neighborhoods in central cities in the 1950s, 1960s, and 1970s were built into the political economy of metropolitan America by public policies enacted and private practices institutionalized during the 1920s, 1930s, and 1940s. Attempts to address this structurally determined outcome with urban renewal and public housing construction only amplified the negative externalities by concentrating disadvantage spatially, and help from the Civil Rights Era was too little and too late, leaving central cities to the deindustrialization, deunionization, and economic restructuring of the 1980s, when everyone became obsessed with the rise of the so-called urban underclass.

While civic establishments played a key role in guiding cities while they were still growing, their influence in the subsequent struggles to revive urban economies has been uneven and often disastrous.

Ben Armstrong, executive director of M.I.T.’s Industrial Performance Center, argues in a 2021 article, “Industrial Policy and Local Economic Transformation: Evidence From the U.S. Rust Belt,” that the parochialism and inbreeding of local corporate elites has often proved detrimental to local efforts to rebuild economies to meet the needs of the 21st century.

Armstrong studied the largely successful economic revival in the Pittsburgh region and compared it with the parallel but less successful effort to inject new corporate innovation in Cleveland.

Armstrong argues that a major factor in Pittsburgh’s success was the fact that the city’s legacy of old-line corporations was effectively displaced by experts at Carnegie Mellon and the University of Pittsburgh, who were free both from conflicts of interest and from ties to declining industries.

That was not the case in Cleveland, according to Armstrong, where old-line companies had a much stronger voice in the planning process and were unwilling to propose the kind of radical innovation that challenged incumbent businesses.

“Industrial policies in Pittsburgh, which empowered research universities as local economic leaders,” Armstrong writes, “contributed to the transformation of the local economy. In Cleveland, by contrast, state industrial policies invested in making incremental improvements, particularly in legacy sectors.”

The Pennsylvania government “made a political choice to empower Pittsburgh’s universities as part of state industrial policy,” Armstrong writes, noting that “the universities’ role as an engine of local economic development in Pittsburgh was the culmination of a state industrial policy in the 1980s that gave them new authority to cultivate economic development strategy and helped them realize that their institutional priorities could align with the state’s priorities for industrial policy.”

Unlike Pittsburgh, Armstrong writes, “Cleveland relied on pre-existing private-sector leadership that invested in downtown redevelopment and in the metro area’s legacy industries.” The result, he continues, was that instead of pursuing innovative economic proposals, the policies adopted “reinforced the status quo.”

“Between the 1940s and 1980s,” Armstrong wrote in an email elaborating on his paper, “many large cities operated in a version of ‘regime politics,’ where there is a consistent set of powerful actors in a city (typically business and nonprofit leaders) who shape who gets elected and where resources are distributed.

“For cities like Cleveland, Baltimore and St. Louis (you could also look to Detroit, Rochester and elsewhere), losing their core industries meant the eventual fragmentation of the regime. But the problem was that the regime often crowded out new economic leaders and activities from emerging.”

In recent years, these adverse trends have been compounded by geographic patterns of urban growth and decline.

Cullum Clark, director of the Bush Institute-Southern Methodist University Economic Growth Initiative, described these developments in an article in April, “America Keeps Moving to High Opportunity Cities.” A close examination of 2021 and 2022 census dates, Clark writes, “shows two key demographic trends remain intact: migration from large coastal and Midwest metros to the Sun Belt and movement from core urban areas to suburbs.”

The top 10 destinations for absolute population growth over the last year, Chillum pointed out, are all Sun Belt metros. Four are in Texas: Dallas-Fort Worth (#1), Houston (#2), Austin (#6), and San Antonio (#9). Three are in Florida: Orlando (#5), Tampa (#7), and Jacksonville (#10). Third-ranked Atlanta, Georgia; fourth-ranked Phoenix, Arizona; and eighth-ranked Charlotte, North Carolina, round out the list.

At the same time, Chillum continued, the 10 metros that lost the most people over the past year are all places where population stagnated between 2010 and 2020. These include five on the coasts: New York City, which saw by far the largest decline; Los Angeles; San Francisco; San Jose; and Philadelphia. This group also includes Chicago, Detroit, Pittsburgh, St. Louis and New Orleans.

The same geographic patterns, Chillum writes, emerge in the case of suburban growth and decline, revealing “a sharp divide between suburban counties in booming Sun Belt metros and those in slow-growing coastal and Midwest metros”: All of the top 25 counties over 50,000 people for net domestic in-migration rates last year are suburban or small-metro counties in the Sun Belt. Ten of these are suburban counties in the Texas Triangle metros of Dallas-Fort Worth, Houston, San Antonio, and Austin. Roughly half of the 25 top-ranking destination counties saw faster in-migration last year than they experienced between 2010 and 2020.

Conversely, Chillum notes, “10 of the counties seeing the largest net out-migration rates are suburban counties in the New York, Washington, San Francisco, and New Orleans metros. Seven are core counties of slow-growing or shrinking metros.”

The population shifts Chillum describes have been powerfully reinforced by the changing location of Fortune 500 corporate headquarters.

In a June 9 Fortune article, “The Big City Winners and Losers of the Fortune 500: Why Houston, Atlanta and Dallas Are (Almost) Beating New York and Chicago,” Chloe Berger describes the shift: New York City, which once dominated, is still the king, but sits on an ever-smaller throne. The northeast in general has been dethroned, as New York, Chicago, Detroit, Pittsburgh and Cleveland accounted for nearly half of the Fortune 500 in 1957. While it’s true the earliest form of the index only tracked industrials, the landscape is vastly different today, and the south is, well, hot.

While New York City had 44 headquarters in 2023, down from 136 in 1957, Texas, when all the state’s cities are combined, is now home to 55, “the greatest number of Fortune 500 companies of any state for the second year in a row,” Berger writes. Those Texas-based corporations, she adds, account for $2.6 trillion in revenue and $226.5 billion in profit.

From 1957 to 2023, according to Fortune, “Pittsburgh, with 22 headquarters 66 years ago, Detroit (18) and Cleveland (16) all fell out of the top five in 2023. Pittsburgh ranked 7th this year, but the city’s number of Fortune 500 companies has shrunk by more than 60 percent,” from 22 to 9.

While the globalization of the economy drove the abandonment of manufacturing in many cities, the process was accelerated by the adoption of certain government policies in the last three decades of the 20th century. Those policies, in turn, undercut civic and corporate local leaders, economically undermining local establishments.

In 2016, Brian S. Feldman, then a researcher-reporter with the Open Markets program at New America, wrote a biting critique of the role both Democrats and Republicans played in the decline of St. Louis and similar cities, “The Real Reason Middle America Should Be Angry”:

“In 1978, Jimmy Carter signed the Airline Deregulation Act, which swept away the Civil Aeronautics Board and paved the way for massive industry restructuring,” Feldman wrote. Thirteen years later, St. Louis felt the repercussions when “American purchased TWA” — with St. Louis its domestic hub — “in 2001 and later moved much of its operations to Chicago O’Hare.”

By 2014, Feldman writes, “only five hundred aircraft took off and landed daily at St. Louis International Airport Lambert Field, a fraction of the all-time high of 1,400 in 1997. Moreover, the airport serviced only 1,176 international flights, down from 3,826 in 2002.”

Meanwhile, Feldman continues, under the Reagan administration, the federal government fundamentally changed course on antitrust enforcement. The Reagan Justice Department wrote new guidelines that rejected regional equity or local control as considerations in deciding whether to block mergers or prosecute monopolies. Enforcers were instructed to wave through mergers and tolerate consolidation, as long as there was no active collusion and consumers didn’t immediately suffer higher prices.

In the wake of those antitrust policy shifts, “Between 1980 and 1985, sixty-two Fortune 500 companies were subject to corporate takeovers, and the single greatest increase in corporate acquisitions in U.S. history took place between 1984 and 1985.”

Along similar lines, according to Feldman’s narrative, in 1994 President Bill Clinton signed into law the Riegle-Neal Interstate Banking and Branching Efficiency Act. The result? From 1984 to 2011, “the number of independent banks has fallen by more than half, from 15,663 to 6,799.”

Feldman concludes: The relative decline of St. Louis — along with that of other similarly endowed heartland cities — is therefore not simply, or even primarily, a story of deindustrialization. The larger explanation involves how presidents and lawmakers in both parties, influenced by a handful of economists and legal scholars, quietly altered federal competition policies, antitrust laws, and enforcement measures over a period of thirty years. These changes, which enabled the same kind of predatory corporate behavior that took the Rams away from St. Louis, also robbed the metro area of a vibrant economy, and of hundreds of locally based companies.

Feldman in all likelihood places too much emphasis on political decisions and too little on overwhelming economic developments, but whatever the balance between the two, the genie is out of the bottle.

For those who would attempt to revive the establishment of old, perhaps the best advice comes from Vilfredo Pareto, the Italian economist and sociologist who died 100 years ago and who succinctly described the decline and fall of elites:

“History is a graveyard of aristocracies.”

Thomas B. Edsall has been a contributor to the Times Opinion section since 2011. His column on strategic and demographic trends in American politics appears every Wednesday. He previously covered politics for The Washington Post.

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