Richard Longworth at the ICAD Annual Meeting

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Richard C. Longworth, Senior Fellow, Chicago Council on Global Affairs, gave the keynote speech during the 2010 Annual Meeting of the Iowa City Area Development Group on September 15, 2010.  He graciously provided the text of his remarks, in which he highlights why innovation and collaboration are the keys to regional success in the global economy.  Chuck Peters added the emphasis on October 20, 2010 in this post.  Richard’s recent reflections on regionalism can be found at his blog.

It’s a real pleasure for me to be here today in Iowa City, a homecoming of sorts. Both my parents were Iowa-U grads. In fact, they met here during their college days, so it’s safe to say that I owe my existence to the romantic vibes of Iowa City. My parents wanted me to come here to school. Many of my high school friends from Boone did come here. But growing up in central Iowa, my one boyhood ambition was to get out of central Iowa. When the time came, I emerged with so much momentum that I was halfway across Siberia before I slowed up and began to find my way back.

Well, I am back now, back to the Midwest, and trying to apply to my old home turf some of what I learned in a lifetime of studying other people’s countries. Basically, I learned that economies change, have always changed, and when they change, our lives do, too. Economies determine not only how we work but really, how we live and think — our values and our dreams. We belong not only to an economy but to the civilization that is supported by that economy. So when we’re caught in economic change, it’s tough, it’s hard to accept, because what’s changing is not just how we earn our livings but who we are.

Well, my theme today is change — specifically change here in the Midwest, this swatch of the United States where we all live and work and make our homes, and how this region is being turned upside down by this thing called globalization.

The problem is that we don’t also always handle change very well. We Midwesterners like the eternal verities, the steady turning of the seasons. When something comes along to upset this rhythm, it throws us off our stride.

Everybody knows — I think everybody in eastern Iowa knows — that the Midwest has been changing for decades, through the Rust Belt years and the Japanese challenge, with industry moving south and west, with jobs going away and too many of our best young people going away, too. But for a long time, this was such a long slow slide downhill, that we could kid ourselves that it was all temporary, that the good old days would come back.

But now, suddenly, change is global and seems to be on steroids. It’s turning our economy inside out, turning our towns and cities upside down, transforming not just the way we work and earn our livings but the very way we live, with no likelihood that things will calm down any time soon.

This is what I’d like to discuss today — not only the change but how we can harness it. Not only the bad news of a vanishing economy but the good news of all the ideas floating around on how we can reinvent that economy — and reinvent our Midwestern civilization while we’re at it.

Iowa City and its region have the university, the brainpower, the corporations, to cope with this. From what I understand, you’re having some success, especially compared to the rest of Iowa and much of the Midwest, and I applaud you. But this is to say, so far, so good. I don’t hear you claiming that you’ve solved all your problems or have a lock on the future. Rather I gather that you’re asking the right questions and coming up with some answers.

Well, you’ve got a lot of company around the Midwest today. The theme of my book is that globalization is challenging the Midwest — its towns and cities and states and, yes, its universities, too — and that too much of the Midwest is flunking this challenge. When it came out,  I found that all I did was to say out loud what many people were already thinking. But they’re doing this thinking in isolation. In this new age, we need to think together, to cooperate across city lines and county lines and state lines, looking beyond old rivalries to find common cause in a regional answer to the challenge of globalization.

That’s also what I want to talk about today — a new regionalism to expand our critical mass in this big new globalizing world. I’ll be talking about this in the overall Midwestern context. But I’ve also been talking with people, not so far from here. A lot of these people want to work with you and I’m going to encourage you to work with them.

But let me talk a bit first about what I’ve seen and learned while putting 40,000 miles on the speedometer driving around the Midwest.  What I found in this traveling and reporting was a region in the heart of America that seems to have lost its way.

Once upon a time, about a century ago, we were the Silicon Valley of our time, the wellspring of all the good ideas and innovations that drove the American economy in the 19th and 20th centuries. From Ohio through Iowa, we gave birth to all those tinkerers and entrepreneurs who pretty much created the 20th century. They were all Midwesterners and what they created made us rich.

But that was in another era, the Industrial Age, the era of big industry and small farms, a self-contained time when what happened on the other side of the world didn’t dictate the course of our lives. If you drive around the Midwest today as I did, or if you live in the Midwest as you all do, you know that we’re rich no longer. Today, too much of this region that we call home seems to lie on the wrong side of the American tracks.

The age of globalization is here and I have to tell you that the Midwest isn’t coping very well. Somewhere along the line, we lost that knack of innovation. We stopped having good world-changing ideas. We got so comfortable with an old economy that supported us so well for so long that we forgot the old rule that nothing lasts forever — that economies, and towns and cities, too, need reinventing. Those that don’t won’t disappear exactly but they’ll become backwaters. Not the sort of place where you’d go to invest your money. Or the sort of place, if you grow up there, where you’d stay to find a good job.

Now, I want to say right now that I’m not going to give any anti-globalization tirade. Globalization is here and it’s not going to go away. Saying globalization is bad or good is like saying the last big economic wave – which was the industrial age – was bad or good. It was bad for some people and good for others and, once we figured it out, it was really good for the Midwest. That era created Midwestern industry and Midwestern farming and Midwestern cities and Midwestern education. Through all its ups and downs, the Industrial Age was very very good for the Midwest.

And now it’s over. The age of globalization is here and, if you think the Industrial Age changed the way we live, you haven’t seen anything yet. What I’m saying is that the thing we got good at, which is running heavy industry in a protected national market, has gone away. This is more than just an Iowa problem. It’s a Midwestern problem, a region problem. We have new challenges from places and people that we never paid attention to before.

Basically, globalization means that we’re in a global competition —  not just with the south or California any more, or even with Europe and Japan, but with the entire world — with factory workers in China and office workers in India and, yes, with farmers in Brazil. If the Midwest’s long slow economic decline has been going on for decades, globalization itself is really new. China, Russia and the other former communist countries have joined our economy in the past 20 years or so. India’s been a major player for a decade. All the technology that makes this possible — the Internet and Web and Netscape and fiber optics — almost all of this is younger than today’s Iowa freshmen. Something like three billion new workers have joined our economy in the past two decades and they compete with us every day. Since most of them come from poor countries, they didn’t bring much new money with them. This means we have about three times as many workers competing for roughly the same amount of money. No wonder the squeeze is on wages and costs and doing things as cheaply as possible.

What then does this mean for the Midwest? I’ll try to summarize the effects before getting on to what we can do about it.

First, I found that my view from Chicago was deceptive. My city is almost unique in having made the transition from industrial behemoth to global city. Some others cities — like Minneapolis or, yes, Des Moines —  which had less of an industrial legacy to overcome, are also doing well. So are a few small cities and university towns and some big global companies like Cargill and Caterpillar.

But these are the exceptions. Let’s talk about the overall pattern.

First, big cities. If Chicago is doing well, most other big Midwestern cities look like they’re dying. Places like Detroit and Cleveland and St. Louis are strange, empty, echoing places, less than half as big as they once were, with the highest poverty rates and the highest drop-out rates in the nation. These cities have lost – they’re still losing — industry and private-sector jobs. Most have huge impoverished inner-city populations. In Milwaukee, the unemployment rate for African-American males is no less than 70 per cent, which is distress any way you cut it.

The same is true of smaller industrial cities and towns. The Industrial Age scattered these smaller factory towns across the Midwestern landscape. These were places like Waterloo and Ottumwa, or like the Quad Cities and Rockford and Kokomo and Akron. It’s a hard fact, but the new global era may have no place for some of these tired old towns.

I went to Dayton, Ohio, which claims more patents per capita than any other American city, not only for the airplane, but especially, for the electric ignition for cars, which led to the founding of Delphi, the big auto parts firm. Delphi once employed 30,000 workers in five plants in the Dayton region. Now four of those five plants have closed and the firm’s employment there is down to a couple hundred. This was OK for a while, because Dayton still had NCR — National Cash Register — until last fall, when NCR moved away.

Across the river in Illinois is Galesburg, Carl Sandburg’s home town, which lost 7,000 jobs in seven years. Or there’s Muncie, Indiana, which once was such a typical small Midwestern city that sociologists called it “Middletown.” The Ball company supported Muncie, but both the company and the Ball family are gone now. The big employers in Muncie, and in most of these old towns, are the local hospital and the schools — government, not private industry. In most of these places, the biggest private employer is Wal-Mart.

I was up in Greenville, Michigan to interview Electrolux workers on the day their plant closed, and I asked them what they planned to do. They said they planned “to put on the blue jacket,” which means stocking shelves at Wal-Mart.

The same, as you know, is true of farming. Farms have been getting bigger and the rural population smaller for decades. But globalization is speeding up the process, by putting farmers, too, into global competition and forcing them to be ever bigger, ever more efficient, ever more tied to the giant corporations, like Cargill and ADM, which dominate the food industry. Not that these corporations own the farms. They don’t. But they operate through megafarmers, farmers with huge operations of land and livestock. I talked with Iowa farmers who farm 10,000 or 20,000 acres. I visited a dairy farm in Indiana with 30,000 cows and a lot of mechanized milking.

Obviously, this isn’t anybody’s idea of a typical Midwestern family farm. Neither are the small rural towns. These towns were founded about 150 years ago to serve the farm families in the region, to be places where the farmers could shop or go to church or have a drink or see their doctor or send their kids to school. This worked when each farm was 160 acres. Now the average farm is 10 times that big, or more. That means 10 times fewer farmers. And that means 10 times fewer customers for those small town shops, ten times fewer worshippers at the church, 10 times fewer patients for the town doctor, 10 times fewer students in the school.

The upshot is that some of these small rural towns, the ones too far from cities to be bedroom suburbs, are literally dying. I bet you all know places like this — probably not far from here.

I have to admit that a lot of this is pretty grim. I met a professor in Indiana and he said, “I read your book. Got a lot out of it. But it sure helped to have a bottle of Scotch nearby.”

But then I think about all the good people I’ve met and their plans to reinvent this Midwest, to help us thrive in the global age as we did in the industrial age.

Let’s talk now about some of these plans and how we can get there.

Let’s face it, much of the old industry is going or gone. Assembly line jobs once held by high school grads or high school dropouts are going now to some other country, to people who work as hard as we do, for a lot less money. This kind of industry isn’t coming back.

But we still know how to make things here in the Midwest. It’s what we’ve always done. It’s what we’re good at. There are new industries out there just waiting to be exploited. We’ve got a comparative advantage in some of these industries and we need a piece of this action.

These new industries include bio-science and biotech. This is plant and animal science, and if there’s anybody who knows plants and animals, it’s the Midwest. Much of the Midwest has a toehold in this new bio industry. But the fact is that the biggest bio companies, the biggest bio employers, are on the coasts, not here.

Or there’s nano-technology — the manipulation of sub-atomic particles to produce new and better materials. Again, materials is what we’ve always worked with. So this means doing what we’ve always done, what we’re good at, but doing it better, doing it smarter.

Or there’s green technology, which has gone in a very short time from being an obsession of tree-huggers to being a real force in the economy. This is renewable power derived from wind and sun and water, all of which we’ve got in abundance. Or there’s water itself. Twenty years from now, if you want to work or live or invest in a place with a reliable source of fresh water, it’s here, in the Midwest. We’ve got the Great Lakes and we’ve got all those terrific rivers,  which are good for more than just flooding, and it’s time we made some use of this.

All this builds on what we know. More to the point, some of it is already happening. Newton may have lost Maytag but it’s landed new jobs making wind turbine parts. Greenville, Michigan, the Electrolux town, has a new factory making solar panels.  Up in Milwaukee, they’re setting up a freshwater institute, sort of a Midwestern version of Scripps Oceanographic, to promote industries that need or use fresh water. A new report from Brookings calls for the federal government to set up a half dozen high-intensity research centers in the Midwest, collaborative centers bringing together universities, labs, business, all of our scientific and engineering talent, to invent the new age of sustainable energy. Right here you’ve got a great research university and you’ve got companies in all these industries, and I know you’re looking for more.

So it’s not exactly a lost cause. But there are some big things we have to do to prepare for all this, to make it happen. The first is education. We’re going to need college grads to invent and run this economy. And we’re going to need smart, skilled people to work in it — people with at least two years of post-secondary education, people who know math and science and have the reading and writing skills to communicate this knowledge.

This means maximum support for big research universities in places like Iowa City, a crucial role for colleges and universities like Coe and Grinnell, and a big place at the table for community colleges like Kirkwood. Not every kid has to get a four-year degree. But in this new economy, folks with only a high school diploma need not apply.

But this begs the next question. Once you educate all these smart kids, how do you keep them here? Brains, like hearts, go where they’re wanted. All over the Midwest, there’s a terrific brain drain of smart, skilled kids who are heading for the city, for Chicago or New York or California, because that’s where the jobs are. You may have seen a report by the Generation Iowa Commission which said that Iowa is one of the top five states drawing in college students from around the nation and the world — and the fourth worst state in the departure of educated young people. What this shows is that Iowa’s great schools are educating these wonderful young people, who then put their education to use somewhere else. Put it another way. Your schools are really contributing to economic development — but not here.

This is the big issue — jobs. Our kids will only stay in the Midwest and other people’s kids will only come here if there are jobs that let them use their brains. But how do we get these jobs? How do we make them grow? It’s easy to say that we have to go after the 21st century jobs in bio and nano and energy. But actually getting them is something else. There’s a lot of talk about this and you’ve heard most of it. So let me focus on just two areas — innovation and regionalism.

First, innovation. The Midwest, as I mentioned, was built by innovation and it’s going to be revived by innovation. Right now, almost every town and city in the Midwest is out there trying to recruit industry, trying to throw money at established companies to get them to move in and bring a couple of hundred jobs with them. Sometimes this works. Mostly it doesn’t.

The alternative is to grow your own, support innovation at home, plant your economic seeds right here and help them grow into mighty trees. This means teaching entrepreneurialism in schools. It means working with high schools and community colleges to tap the good idea of kids who really want to stay here. It means training your lawyers and bankers and accountants to provide business services to new, risky, start-up companies. It means incubators. It means especially coming up with the venture capital to get these businesses off the ground.

Most startups fail. But some will take root. They’ll grow — slowly. It’s going to take time. There’s no magic bullet here. But it took us a long time to build that industrial era, too. And now we’ve got to do it all over again.

But in this global economy, smaller cities like Iowa City, even states like Iowa, can get lost in the global competition. Iowa does have 3 million people — but there are no less than 30 cities in China each with 3 million people. In this world, we’ve got to be big to compete.

In short, it’s time to go regional, to abandon some of our Midwestern independence and start using all our assets. But again, that begs a question: what’s a region? In the Midwest, this can mean thinking big, with much more cooperation between our big research universities, with a joint Midwestern office in places like Shanghai, with a lot of interstate cooperation on things like water, especially with a true high-speed rail network that would really tie this region together.

But there are regions and regions. Chuck Peters has defined regions as places “nested in natural economies,” and I like that definition. The Midwest is loaded with these smaller regions — cities and counties and geographical regions with much in common, but which are so crippled by traditional rivalries that they wouldn’t dream of cooperating. Chicago, for instance, has everything in common with Milwaukee and northern Indiana and western Michigan. But all these units are so divided by artificial state lines and petty jurisdictions that we don’t cooperate at all, and so are much less than the sum of our parts. You can say the same thing about the Quad Cities, actually five cities, divided not only by the Mississippi but by a legacy of suspicion, so they’re not the economic center they could be.

What needs to be done — more collaboration — is pretty clear. Doing it will be tough. This Midwest is a terribly balkanized place, with mindless competition between states, between neighboring towns, between counties, between schools, all of whom have the same problems but are too ornery, in our Midwestern way, to work them out together.

The lead in this has to come not from governments but from other players who can see beyond artificial political boundaries. This includes economic development leaders. It includes community colleges, which are used to working with broader communities. It includes businesses, who understand globalization and its demands. Government has to be at the table but it can’t take the lead — and shouldn’t be asked to.

I know you’re working hard on the corridor with Cedar Rapids and beginning work on a seven-county region. This is great — but there’s more. Iowa City strikes me as the hub on two natural corridors, along I-80 and up I-380 all the way to Waterloo and Cedar Falls, an industrial and intellectual corridor with regent universities at each end.

Let’s look even broader. Over in the Quad Cities, they’re talking about a new bi-state region, a sort of an oval stretching from Waterloo and Cedar Falls in the north, down through Iowa City and the Quad Cities and running east to Peoria, Decatur and Champaign. There’s a lot of sense in this. It’s a region already united by a traditional base in bio and in heavy machinery manufacturing. It embraces two big state universities and many other first-rate community colleges, colleges and universities. It’s an area that rose together in the past, has been struggling together in the present, and may only truly recover its vitality if it acts together in the future.

We’re not talking about erasing state or county lines here but getting counties and cities with so much in common to plan together and work together for their common good.

Because let’s face it, we’re all in this together. Iowa City and Cedar Rapids are doing a lot of things right. You’re talking regional. You’re helping smart industries, knowledge-era companies. You’re doing better than most. But can you really thrive as an isolated island of vitality, surrounded by a broader region, by a Midwest, that is trapped in decline, that is caught, like my Chicago Cubs, in a bad century?

All over the world, regions are taking shape — in Europe and China and India — to compete in this new global economy. The fact is that we need to really leverage all our assets now, to make use of everything within reach. These assets — universities and corporations and research institutions — all lie within arm’s length, and I hope you use them.

As I said, times have changed. We’re in a global competition now. Once we could afford splendid isolation — from the rest of the world and from our neighbors. But that time is past.  Globalization itself may be inevitable, but what we make of it is up to us.

The good news is that globalization itself is still so new. The bad news is that so much of the Midwest is already behind.

Thank you.

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