EconTalk: Glaeser on Detroit and the lifecycle of cities
If you look back 120 years ago or so, Detroit looked like one of the most entrepreneurial places on the planet. It seemed as if there was an automotive genius on every street corner. If you look back 60 years ago, Detroit was among the most productive places on the planet, with the companies that were formed by those automotive geniuses coming to fruition and producing cars that were the technological wonder of the world. So, Detroit’s decline is of more recent heritage, of the past 50 years. […] And it tells us a great deal about the way that cities work and the way that local economies function. […] If we go back to those small-scale entrepreneurs of 120 years ago–it’s not just Henry Ford; it’s the Dodge brothers, the Fisher brothers, David Dunbar Buick, Billy Durant nearby Flint–all of these men were trying to figure out how to solve this technological problem, making the automobile cost effective, produce cheap, solid cars for ordinary people to run in the world. They managed to do that, Ford above all, by taking advantage of each other’s ideas, each other supplies, financing that was collaboratively arranged. And together they were able to achieve this remarkable technological feat. The problem was the big idea was a vast, vertically integrated factory. And that’s a great recipe for short run productivity, but a really bad recipe for long run reinvention. And a bad recipe for urban areas more generally, because once you’ve got a River Rouge plant, once you’ve got this mass vertically integrated factory, it doesn’t need the city; it doesn’t give to the city. It’s very, very productive but you could move it outside the city, as indeed Ford did when he moved his plant from the central city of Detroit to River Rouge. And then of course once you are at this stage of the technology of an industry, you can move those plants to wherever it is that cost minimization dictates you should go. And that’s of course exactly what happens. Jobs first suburbanized, then moved to lower cost areas. The work of Tom Holmes at the U. of Minnesota shows how remarkable the difference is in state policies towards unions, labor, how powerful those policies were in explaining industrial growth after 1947. And of course it globalizes. It leaves cities altogether. […] It was precisely because Detroit had these incredibly productive machines that they squeezed out all other sources of invention–rather than having lots of small entrepreneurs you had middle managers for General Motors (GM) and Ford. […] Are you suggesting then that Silicon Valley is prone to this kind of change at some point?