Buttigieg’s campaign has appealed to voters for many reasons. But many see his work as mayor during the economic revitalization of South Bend, Ind., as the main selling point — or even a solution to the Rust Belt’s decline and the antidote to Trump’s appeal in the region. In his campaign announcement, Buttigieg used this theme when he said, “South Bend is back. ... We’ve changed our trajectory and shown a path forward for communities like ours.”
But can effective municipal leaders really save struggling U.S. cities? That’s not so clear, as I will explain.
Here’s how I did my research
I spent several years studying city politics and economic development in two Rust Belt communities — one with a relatively strong economy like South Bend’s and one that remained economically stagnant. Effective leaders can make a difference, but they also face a collective action problem that defies local solutions.
Here’s the problem in brief: Declining cities need new jobs, but municipal leaders can do little to create them. This locks cities into a zero-sum conflict with one another, trying to lure employers through various investments and incentives. Declining cities often pay the highest price in that competition. They adopt the same measures as success stories like South Bend — just to keep existing firms from leaving.
To keep this story from being one of winners and losers, with some parts of a region thriving and others suffering, would require state or federal policies that spread the wealth more evenly and prevent cities from entering bidding wars for employers.
Why Rust Belt cities need saving
For a century, the U.S. story saw economic convergence between rich and poor regions. Increasingly, people from Hartford, Conn., to El Paso lived in areas with similar economic opportunities.
But beginning in the 1980s, regional fortunes began to diverge. One in three Americans now lives in a metropolitan area where median income is 20 percent higher or lower than the national average — a three-fold increase since the 1970s.
With few exceptions, cities and towns with a higher proportion of educated residents have pulled ahead. Major metropolitan areas around cities like Boston and San Francisco, which house major universities and attract young talent, have grown richer. Smaller cities have declined. This includes most Rust Belt cities — except large metros like Chicago and college towns like Ann Arbor, Iowa City and South Bend, home to the University of Notre Dame.
That’s because homegrown employers in many midsized cities were acquired by bigger firms during the during the 1980s corporate mergers. Large firms grew larger; these are headquartered in just a handful of large metros. These firms usually invest in already thriving regions — leaving others to wither.
Federal policy changes have also made cities more dependent on corporate investment decisions. Programs like Great Society urban initiatives and Nixon’s revenue-sharing once received bipartisan support. These programs lowered regional differences by apportioning federal dollars to cities based on population or sent funds disproportionately to poorer places.
But in the 1980s, Republicans and Democrats alike soured on urban policy. Federal funding for cities declined. Much of what’s left is offered through competitive grants — which favor rich cities that can employ skilled grant writers.
The typical tools for the job: Quality-of-life amenities and economic incentives
In this context, Rust Belt politicians are singularly focused on attracting corporate employers and outside funding for local ventures. Their ability to do anything else depends on it.
One popular strategy is developing quality-of-life amenities like walkable downtowns, diverse restaurants, waterfront museums, hotels and promenades. As one official explained, such amenities show visitors that “we’re not just a bunch of hicks in the sticks” and encourage educated professionals to move there, bringing the companies that employ them. In South Bend, for example, revitalization has focused on downtown, including taxpayer subsidies to build condos and amenities like a ballpark, casino and laser light show over the river.
Municipal leaders also woo corporate employers or encourage them to expand operations with incentives that can total many thousands of dollars per job created. Just last month, for example, South Bend gave $7.6 million in tax breaks and incentives to several companies that created 62 jobs, for a total of $123,000 per job.
Municipal leaders say these only work when they create partnerships among civic groups, universities, developers and other employers, creating a vibrant business climate. But even the best development strategy works only if a city has some advantage — like South Bend, where Notre Dame has invested heavily in downtown innovation districts.
Municipal leaders in stagnant or declining cities adopt all the same measures just to keep the employers they already have. From Dayton, Ohio, to Decatur, Ill., politicians devote their limited energies and resources to flashy downtown projects to prevent capital flight rather than bring new jobs. An official in a declining city told me that 90 percent of tax breaks go toward keeping existing employers from leaving, adding that they “ask how much will you give me to come … how much more to stay?”
State and federal policy solutions
Cities in regions like the Rust Belt face a collective action problem; they'd be better off if they worked together than if they competed. But politicians are responsible primarily to their own cities.
That means states and the federal government are in a better position to help regions thrive.
Consider California’s experience. The Golden State’s municipalities once diverted billions in property taxes from schools to developments designed to attract employers, including high-end projects like luxury golf courses — so much that the state repeatedly back-filled school budgets to maintain adequate funding. In 2011, the state legislature eliminated all municipal redevelopment agencies, preventing towns and cities from creating many incentive packages. That left more funds for everyday functions and had few negative consequences.
Many nations like Canada and Australia counteract regional inequities with equalization grants that target declining regions. The United States once pursued similar policies, allowing municipal leaders in struggling regions to fund basic services without chasing outside investment.
Here and there, an individual town or city might be able to engineer a turnaround that bucks the trend. But overall, municipal leaders are ill-equipped to change a game that locks them into a costly, zero-sum conflict with one another.
Josh Pacewicz is an assistant professor of sociology and urban studies at Brown University and author of Partisans and Partners: The Politics of the Post-Keynesian Society (University of Chicago Press, 2016).