Are We Headed Toward a De-Clustering of America?

Contrarians are good because they make us think outside the box. Joel Kotkin's August 15, 2002 editorial in the Wall Street Journal does that in a way. Kotkin suggests that the heightened concern about security following 9/11, changing demographics, the growing social and economic impacts of new information and communications technology and the continuing erosion of the quality of life in many of America's major cities could deal a deathly blow to recent efforts to strengthen local and state economies through industry cluster development strategies.

Clustering has its intellectual roots in agglomeration economic theory and a variety of recent off-shoot theories that emphasize the spatial concentration of industries, firms, human talent and other economic resources. Cluster-based economic development strategies have been embraced by a wide array of urban areas, states, provinces and even many rural regions across the world. Urbanists like clustering because it suggests that businesses, jobs and people may continue to "hang around" big cities. States emphasizing regional economic development approaches like cluster strategies because clusters provide a strategic focus for economic development and they transcend the constant local political bickering and discord arising from inter-jurisdictional tax base rivalry.

Is Kotkin right? His point that industry cluster strategies will not save cities with a poor quality of life and those that fail to see the broad and pervasive influence of IT on the future location of people and jobs is correct. While many wonderful things have happened in our cities in the past two decades, most U.S. cities continue to suffer from long-term structural economic and social problems. Educational quality is still lagging at a time when it should be leading. Crime is still a very big problem. Rising costs and shrinking payrolls are now even much larger problems given the current state of our economy. Finally, the quality of political leadership--in big and small cities alike--has continued to slip. Yes, these problems are enough to drive out people and jobs.

I'm not so sure about Kotkin's point that security concerns, including terrorist threats, will lead to greater geographic de-centralization of business facilities. The truth is that de-centralization of industries and people has been afoot in the U.S. and many other nations since the 1950s. Find me a "completely safe" place anywhere in the world. The security issue has been debated heavily in circles like CoreNet (the old IDRC) and by other business site selection and economic development groups. The current view seems to be that all businesses have stepped up security measures to some degree, but this issue alone will not spark a mass exodus of businesses out of the big cities. Most businesses are where they are for a reason. For one, they locate facilities within easy reach of their customers and other resources essential to competitiveness.

A more important issue raised in the Kotkin article concerns the influence of information technology (IT) on the location of firms, jobs and people. I am inclined to think that economic developers may be under-estimating the extent to which all this bandwidth being installed will contribute to the further loss of economic value in local places. Yes, it adds value to local businesses and citizens by providing them with connectivity and interactivity that they did not have before. At the same time, IT makes it easier to spend your money and your "attention" anywhere in the world today.

People want more and better options and choices in their life. That's pretty clear. Technology enables choice. That makes IT very powerful when it comes to figuring out where you want to live and work. As a child growing up in the 1950s in a small overprotected community, television, even more so than the local schoolhouse, taught me that the world was a much bigger place than I had ever imagined. The Internet is having that same effect on all of us today. While the physical place we call "community" is vitally important, community in a social and cultural sense, are becoming much more important. The Internet allows us to quickly form "communities of interest" (and yes these are markets too) that span geography. Kotkin and others have wisely reminded all of us to pay closer attention to how technology shapes our lives.

Is de-clustering the next direction for economic development? I think not. Will people, businesses and jobs continue to be geographically mobile in the future? I think we can count on that. The answer in my book is to keep a steady in-flow of new people and businesses all the time to offset your losses from those who want to pack up their tent and pitch it elsewhere. Loyalty to place has its limits. Cities and metro areas that continue to attract new businesses and people will be the winners. And yes, we must do a better job of taking care of what we already have to prevent them from becoming fleet-footed.