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~ The New Urban System A CLASSIFICATION OF URBAN AREAS BY FUNCTION A new urban system is emerging. It is both the product and the producer of a convergence of resources, capital, labor, technology, and institutions. It requires us to think about cities and urban policies differently than we have in the past. 1 The new urban system is characterized by the growing dominance in corporate and producer services of a relatively small number of national and regional "command and control" centers. In these centers, strategic economic and political decisions are made that affect both these cities and the rest of the urban system. The centers contain high concentrations of corporate and government headquarters, producer services, and higher education and cultural resources. The remaining urban areas are more ~ In the development of this section of the report, the committee acknowledges its debt to a number of scholars whose theoretical and empirical investigations have been extensively used, in particular, Berry ( 1974), Cohen ( 1979a), Dunn ( 1980), Perloff (1981), and Pred ( 1977). The urban system described here closely follows that developed by Noyelle and Stanback ( 1983). Their work is the most extensive empirical investigation of the effect of structural changes on cities. Together with other studies by them and their colleagues at the Conservation for Human Resources Project of Columbia University, a rigorous analysis of the service economy and its consequences for cities has begun to appear. The committee is also grateful to Thomas M. Stanback, Jr., Richard V. Knight, Wilbur Thompson, and Daniel Garnick for their willingness to share their research and ideas with the committee and to participate in committee workshops to explore the issues and ideas discussed in this chapter. 38

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The New Urban System 39 specialized in their economic functions, which tend to be subordinate to the decisions made in the command and control centers, and they can be grouped by their primary orientation as consumer service centers or pro- duction centers. Figure 5 illustrates the classification on which this chapter is based. We fit the 140 largest metropolitan areas into four classes: (1) diversified service centers, (2) specialized service centers, (3) consumer- oriented centers, and (4) production centers. Each group contains sub- classes based on size and type or degree of specialization.2 Table 6 lists these 140 metropolitan areas within the four categories and gives indi- cations of their size. We have become used to thinking of urban systems as discrete physical places, such as metropolitan areas. While metropolitan areas are physical realities, they do not capture the full urban system in an advanced industrial economy. The new urban system transcends the metropolis and even the megalopolis (Gottman, 1961) of contiguous metropolitan areas.3 It is per- haps best to think of it as consisting of an increasingly interdependent group of major cities containing firms and agencies with overlapping and fluctuating spheres of influence that extend beyond their immediate met- ropolitan areas. In some cases these spheres of influence extend into other regions, in some cases to other nations. The parts of the system are linked not only by transportation and communications systems but also by cor- porate structure and business relationships. This functional interdepen- dence often conflicts with political pushes toward more sharply defined localism (Berry, 1974; Greer, 19651. One should keep in mind that few if any of the metropolitan areas listed in Table 6 are pure examples of the class in which they have been placed. Because the system has evolved from existing cities, many of which may have performed different functions in the past, it is quite possible for a city in one of the subordinate categories to house the headquarters function for a fimn or industry. No place performs only a single function. The purpose of the classification is to help us gain a better understanding of the center of gravity of the economies of different places. In urban form the most recently developed areas, such as Phoenix and Dallas, are more likely to mirror the physical impulses of the technology and business 2 The classification system was developed by calculating the " location quotient" for each standard metropolitan statistical area (SMSA). Briefly described, this technique measures the difference between the national profile of employment, by sector, and that of each SMSA. For a full explanation of the methodology and tables showing the results of the calculations for each SMSA, see Noyelle and Stanback (1983:86-106 and Appendix IV-1:346-364). 3 Gottman is also of the opinion that the new urban system cannot be neatly confined to traditional physical forms (lecture at University of Maryland, March 26, 1982).

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40 f National (e.g., New York) 1 ~ 1 Residential (e.g., Nassau ) Rethinking Urban Policy COMMAND AND CONTROL CENTERS DIVERSIFIED SERVICE CE NTE RS \ 1 | Regional | | Subregional | | Functional I (e.g., Phila- (e.g., (e.g., Detroit) delphia) Memphis) Subregional (e.g., Memphis) SUBORDINATE CENTERS CONSUMER-ORIENTED CE NTE RS R e sort - Retirement (e.g., Tampa) SPECIALIZED SE RV ICE CENTERS ~ 1 ~ ~ 1 Government- Education (e.g., Wash- ington, D.C.) PRODUCTION CENTERS ~ 1 Manufacturing (e.g., Buffalo) I ndustrial- Military (e.g., San Diego) 1 1 FIGURE 5 Classification scheme of the 140 largest metropolitan areas. \ Ed ucation - Manufacturing (a.g., New Haven ) Mining- I ndustrial (e.g., Tucson) organization of an advanced economy, much as Lowell, Massachusetts, and Wheeling, West Virginia, reflect those of the industrial eras during which they experienced their most rapid growth. This system of classification, using the metropolitan area as the unit of analysis, also does not focus on the distinction within each metropolitan area between the subeconomy of the central city and that of the suburbs or of the total urban area. Those distinctions are particularly important in addressing problems that have a jurisdictional and political basis, such as the concentration of blacks and poor people in central cities. It is important to recognize that these noneconomic facts of life often have a profound

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The New Urban System 41 TABLE 6 The 140 Largest Metropolitan Areas Classified by Type and Size, 1980 1980 Population Rank 1980 Population- Size Groupa 1. Command and control centers Diversified service centers National New York, N.Y. Los Angeles, Calif. Chicago, Ill. San Francisco, Calif. Regional 1 1 Philadelphia, Pa. 4 1 Boston, Mass. 6 1 Dallas, Tex. 10 1 Houston, Tex. 11 1 St. Louis, Mo. 12 1 Baltimore, Md. 14 1 Minneapolis, Minn. 15 1 Cleveland, Ohio 17 1 Atlanta, Ga. 18 2 Miami, Fla. 21 2 Denver, Colo. 22 2 Seattle, Wash. 23 2 Cincinnati, Ohio 26 2 Kansas City, Mo. 28 2 Phoenix, Ariz. 30 2 Indianapolis, Ind. 32 2 New Orleans, La. 33 2 Portland, Oreg. 34 2 Columbus, Ohio 35 2 Subregional Memphis, Tenn. 41 3 Salt Lake City, Utah 45 3 Birmingham, Ala. 46 3 Nashville, Tenn. 52 3 Oklahoma City, Okla. 53 3 Syracuse, N.Y. 58 3 Richmond, Va. 65 3 Charlotte, N.C. 66 3 Omaha, Nebr. 69 3 Mobile, Ala. 91 4 Little Rock, Ark. 101 4 Shreveport, La. 106 4 Des Moines, Iowa 110 4 Spokane, Wash. 114 4 Jackson, Miss. 120 4 Specialized service centers Functional centers Detroit, Mich. 5 1 Pittsburgh, Pa. 13 1 Newark, N.J. 16 1 Milwaukee, Wis. 24 2

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42 TABLE 6 Continued Rethinking Urban Policy 1980 Population Rank 1980 Popu l ati on - Size Groupa San Jose, Calif. 31 2 Hartford, Conn. 36 2 Rochester, N.Y. 38 3 Louisville, Ky. 40 3 Dayton, Ohio 44 3 Bridgeport, Conn. 47 3 Toledo, Ohio 50 3 Greensboro, N.C. 51 3 Akron, Ohio 57 3 Allentown, Pa. 62 3 Tulsa, Okla. 63 3 New Brunswick, N.J. 67 3 Jersey City, N.J. 70 3 Wilmington, Del. 75 3 Paterson, N.J. 78 4 Knoxville, Tenn. 86 4 Wichita, Kans. 96 4 Fort Wayne, Ind. 100 4 Peoria, Ill. 103 4 Kalamazoo, Mich. 137 4 Government-education centers Washington, D.C. 8 1 Sacramento, Calif. 39 3 Albany, N.Y. 48 3 Raleigh-Durham, N.C. 77 4 Fresno, Calif. 81 4 Austin, Tex. 82 4 Lansing, Mich. 84 4 Oxnard-Ventura, Calif. 85 4 Harrisburg, Pa. 88 4 Baton Rouge, La. 89 4 Columbia, S.C. 99 4 Utica, N.Y. 111 4 Trenton, N.J. 112 4 Madison, Wis. 113 4 Stockton, Calif. 117 4 Education-manufacturing centers New Haven, Conn. 54 3 Springfield, Mass. 64 3 Tacoma, Wash. 90 4 South Bend, Ind. 100 4 Ann Arbor, Mich. 140 4 2. Subordinate centers Consumer-oriented centers Residential centers Nassau, N.Y. 9 1 Anaheim, Calif. 19 2 Long Branch, N.J. 76 3 Resort-retirement centers Tampa, Fla. 25 2 .~

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The New Urban System TABLE 6 Continued 43 1980 Population Rank 1980 Popul ati on - Size Groupa Riverside, Calif. Ft. Lauderdale, Fla. Honolulu, Hawaii Orlando, Fla. West Palm Beach, Fla. Albuquerque, N.M. Las Vegas, Nev. Santa Barbara, Calif. Production centers 29 43 55 68 79 95 108 122 4 4 4 4 Manufacturing centers Buffalo, N.Y. 27 2 Providence, R.I. 42 3 Worcester, Mass. 59 3 Gary, Ind. 60 3 Northeast Pennsylvania 61 3 Grand Rapids, Mich. 71 3 Youngstown, Ohio 72 3 Greenville, S.C. 73 3 Flint, Mich. 74 3 New Bedford, Mass. 80 4 Canton, Ohio 92 4 Johnson City, Tenn. 93 4 Chattanooga, Tenn. 94 4 Davenport, Iowa 98 4 Beaumont, Tex. 104 4 York, Pa. 107 4 Lancaster, Pa. 109 4 Binghamton, N.Y. 115 4 Reading, Pa. 116 4 Huntington, W. Va. 119 4 Evansville, Ind. 124 4 Appleton, Wis. 125 4 Erie, Pa. 131 4 Rockford, Ill. 134 4 Lorain, Ohio 136 4 Industrial-military centers San Diego, Calif. 20 2 San Antonio, Tex. 37 3 Norfolk, Va. 49 3 E1 Paso, Tex. 87 4 Charleston, S.C. 97 4 Newport News, Va. 102 4 Lexington, Ky. 121 4 Huntsville, Ala. 123 4 Augusta, Ga. 126 4 Vallego, Calif. 127 4 Colorado Springs, Colo. 128 4 Pensacola, Fla. 132 4 Salinas, Calif. 133 4

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44 TABLE 6 Continued Rethinking Urban Policy 1980 Population Rank 1980 Population- Size Groupa Mining-industrial centers Tucson, Aria. Bakersfield, Calif. Corpus Christi, Tex. Lakeland, Fla. Johnstown, Pa. Duluth, Minn. Charleston, W.Va. 83 105 118 129 135 138 139 4 4 4 4 4 4 4 al980 population size group: (1) more than 2 million (17 SMSAs), (2) 1-2 million (19 SMSAs), (3) 0.5-1 million (39 SMSAs), (4) 0.25-0.5 million (65 SMSAs). The 126 SMSAs of less than 0.25 million are not included in this table. Most of these smaller SMSAs would fall into the subordinate classes, although a few could be considered as specialized service centers because of concentrations of government and education functions. SOURCE: Adapted from Noyelle and Stanback (1983). influence on such economic decisions as where to invest in an urban area. Our purpose in using the metropolitan area as the basis for classification is not to obscure this harsh reality but rather to focus on the central economic characteristics of urban areas as a basis for both national and urban strategies that may provide more leverage for overcoming some of the historic difficulties in fashioning urban economic development policy. The classification system describes the most prominent economic role of each metropolitan area in 1980, the year it was calculated. No area is permanently or necessarily consigned to a particular class. An area can undergo transformation over time from being one type of place to being another type. This transformation has already happened in many places, and there are signs of its being in progress in others. The process can be slow or rapid, depending on the circumstances. There are some strong indications, for example, that Houston may soon join the national centers (New York, Chicago, San Francisco, and Los Angeles) as its international banking and other producer services expand. Miami may be moving in the same direction, having already gone through a transformation from a residential and resort center to a regional center. Boston's role as a regional center has become more pronounced in recent years as its role as a pro- duction center has diminished. Cities like Akron have recently strength- ened their roles as specialized centers as their production roles have declined, and places like Pittsburgh and Cleveland are undergoing obvious trans- formations from specialized service centers to diversified regional centers.

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The New Urban System 45 There seems to be a tendency for cities in the producer-oriented and consumer-oriented classes to increase their degree of specialization (al- though there is also some tendency for diversification in the large con- sumer-oriented areas). This reflects the growing tendency of business organizations to restrict the different phases and functions of producing goods or providing services to specialized centers. Insurance companies, for example, are increasingly relocating their records maintenance func- tions in smaller metropolitan areas and nonmetropolitan areas that may be some distance from the home office. COMMAND AND CONTROL CENTERS The metropolises we have called command and control centers include two basically different types of places: diversified service centers and specialized service centers. Each category can be divided further by size and function. Diversified Service Centers The 39 metropolitan areas identified by Noyelle and Stanback (1983) as diversified service centers include three subgroups: national, regional, and subregional centers. In some respects they perform a hierarchy of service functions, the largest national centers providing the greatest ag- glomerations of corporate complexes and the most sophisticated producer services. They hold a virtual monopoly in some services, such as inter- national banking and mass communications. The regional centers tend to have smaller corporate complexes, although many of them have been growing rapidly. They do not, as a group, offer as large or as sophisticated an array of producer services as the national centers, but along with the subregional centers they are growing in relative importance as distribution centers and as locations for branch and division an. ~ . Offices of mayor corporations. Almost all the diversified service centers are served by large airports. The national and regional centers have 1 1 of the 13 largest international airports in the United States (Honolulu and Washington, D.C., are the others; Newark's airport is part of the greater New York region's trans- portation complex) and account for over 85 percent of all international passenger air traffic in the nation (Noyelle and Stanback, 1983~. National Centers The most distinguishing characteristic of the national centers (New York, Chicago, Los Angeles, San Francisco) is the increasing concentra-

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46 Rethinking Urban Policy tion of banking and financial services there. Of the nation's 50 largest commercial banks, 20 (including all but 3 of the top 20) have their head- quarters in these 4 places, and 25 of the 50 largest diversified financial companies are also there (Fortune, July 12, 1982:134, 1381. These in- stitutions are the most prominent providers of banking services, including both business and consumer credit. Their influence in the regional centers has grown in the last decade through the use of loan production offices. They are in strong positions to develop branches as banking is deregulated. They virtually control the market in municipal securities and have spear- headed the development of foreign banking in the United States. This heavy concentration of banking services in the national centers means that there are almost no other places in the country to which one can go for large-scale financial services. These cities contain the insti- tutions with the money and the other highly specialized expert services needed to put financial deals together. The largest and most highly spe- cialized law firms, the headquarters of the largest accounting firms, and the largest array of other consulting services in management, advertising, economics, and public relations are located there. They also are almost exclusively the U. S. headquarters for transnational corporations and banks with North American branches (Cohen, 1979a; Conservation of Human Resources, 19771. Because of their concentration of services, even major corporations that have their headquarters offices in other cities often main- tain offices in the national centers to improve their access to the services that are provided there. Regional Centers The 19 regional centers are not as sophisticated as the national centers in the range of producer services they provide, but they are both more highly diversified and more specialized than other cities in the system. Many of these areas contain important service firms and headquarters of national corporations. They contain 13 of the 50 largest diversified fi- nancial firms in the country, 21 of the 50 largest commercial banks, 16 of the 50 largest insurance companies, and 12 of the 50 largest diversified financial companies (Fortune, July 12, 1982:132, 134, 136, 1384. A number of them, such as Philadelphia, Boston, Atlanta, Miami, and Hous- ton, have aggressive commercial banks that increasingly are operating on a national and international scale. As some of these places increase the scale and sophistication of the producer and banking services they offer, they may move into the ranks of the national centers. Regional centers serve as headquarters for 22 of the 50 largest utility companies (Fortune, July 12, 1982:146~. With the national centers, they

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The New Urban System 47 serve as the major distribution centers for the rest of the urban system.4 These centers are characterized by large concentrations of regional sales headquarters of large corporations. They are often headquarters for less internationalized firms than those found in the national centers but are closely tied to large-scale consumer markets. Thus, large food products firms (Minneapolis, Atlanta, Dallas), retail sales firms (Cincinnati, St. Louis, Minneapolis, Dallas), transportation firms (Seattle, Kansas City, Houston, Denver, Dallas-Fort Worth), and utilities firms (Atlanta, Co- lumbus, New Orleans, Portland, Phoenix, Baltimore) locate their head- quarters in the regional centers. Some of these cities are also strong research, education, and health care centers and centers of management control for specific lines of industry (Noyelle and Stanback, 19831. Subregional Centers The 13 subregional centers are less diversified in producer services than the regional centers but are strongly involved in distributive services. Noyelle and Stanback (1983) found that many remain closely tied to agricultural markets. While many have been attempting to become more diversified, they have had less success than the regional centers, apparently because they are smaller and they start from a narrower base of functions in the urban system. It has been harder, therefore, to develop strong education and research institutions or headquarters offices of major firms. Transformation in the Diversified Service Centers One of the problems in developing a clearer understanding of the current and future roles of any part of the urban system has been the persistence of the belief that population growth as well as growth of manufacturing jobs is essential for the economic health of a metropolitan area. This has been a special problem in dealing with the economies of the diversified service centers. The growth rates of the areas in this class vary consid- erably. Some of them have lost population in absolute terms. Most of them, at least those outside the Sunbelt, have experienced a loss of man- ufacturing jobs, particularly from the central cities. Except in the newest places, such as Houston and Phoenix, shares of population and jobs have been lost by the central cities to the suburbs and nearby nonmetropolitan 4 Of the 50 largest transportation companies, 15 are located in regional centers, along with 10 of the 50 top retailing firms. The role of the regional centers vis-a-vis the national centers in distributive services is increasing (Noyelle and Stanback, 1983).

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48 Rethinking Urban Policy areas.5 Concentration on these indices, or on such things as the movement of the number of headquarters or firms into or out of a central city or metropolitan area, often does not reveal how a place has been transformed or its new or changed role in the urban system (Conservation of Human Resources, 19771. The diversified service centers have retained strong and growing service economies. New York, for example, netted 135,000 new private sector service jobs during the mid-1970s. All but 13,200 of these jobs were located in Manhattan; only two other boroughs showed any net gains in jobs, and those gains were very small. At the same time there was a sharp decline in manufacturing and retail employment and a decline in the growth of personal services and tourism. The greatest growth was in producer services, such as advertising, management, consulting, computer data services, and research and development. Such service jobs now make up almost 10 percent of all jobs in New York City, and 87 percent of them are concentrated in Manhattan (New York Times, October 16, 1981; March 13, 19821. At the same time producer services were growing and increasing their centralization in Manhattan, many corporations were shifting their routine clerical operations to the suburbs or to distant smaller cities as rising Manhattan rents made moves desirable and technology made it feasible (New York Times, November 21, 1981~. New York is of course unique among the nation's cities in its scale and its international functions. The same processes, however, are at work in most of the national and regional centers. Although some of them, such as Houston, Dallas, Denver, and Atlanta, are continuing to increase the number of manufacturing jobs, even these cities are experiencing a faster rate of growth in producer services. Older regional centers, such as Cleve- land, St. Louis, Boston, and Cincinnati, lost manufacturing jobs but gained more than an offsetting number of service jobs in the last decade (Bureau of Economic Analysis, 19811. Most of these metropolitan areas are de- centralizing manufacturing, distributive services, and personal services but increasing the concentration of producer services, either in a single center or in a few centers of activity. Particularly in the national and regional centers, the firms headquartered there have a high degree of autonomy in making decisions that are of great consequence for their own metropolitan areas as well as others. The national headquarters group usually has no higher authority to consult within the company when considering whether to move the headquarters 5 Some of these places would also show losses of population and jobs but for their ability to annex adjacent areas.

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The New Urban System 49 itself, decentralize some operations, or expand in place. But the national centers are not wholly at the mercy of firms because there are relatively few places in the nation that contain the agglomeration of other services on which these large national and international corporations depend to function effectively. Thus, the national and regional centers also have a source of autonomy and power in dealing with their economic futures. Developments in corporate structure are important to such places. To the extent that multinational conglomerates are able to internalize the producer services they need through headquarters staffing and aquisition of service firms, they increase their independence from the city itself. The subregional centers generally enjoy less autonomy, either in the power of branch offices or in collective economic action. Distribution firms and sales offices are also limited in the choices that are available to them. What is lacking in many of these places is a sufficient concen- tration of producer services to provide long-term stability and to cushion the effect of the loss of a single large firm or office. Specialized Service Centers The 44 specialized service centers identified by Noyelle and Stanback share command and control functions in the urban system with the di- versified service centers. They differ primarily in the degree to which the services they deliver tend to be specialized in major economic activities- a particular industrial group or sector, education, and government. Be- cause of their higher degree of specialization, firms located in these places tend to rely on the national and regional centers for the most highly specialized services, such as international banking and advertising. There are three subgroups of specialized service centers: functional centers, government-education centers, and education-manufacturing centers. These subgroups have some obvious differences, but they share two important common characteristics. They all specialize in delivering relatively high- level services to either the private or the public sectors, and they all contain strong educational and research complexes (Noyelle and Stanback, 1983~. Functional Centers The 24 functional centers house national and international corporate complexes in one or more industries. These places are comparable in size to the national and regional centers and contain central management, research, and production groups from the core industry and subsidiary or related industries. Their service sectors accordingly tend to be large but more narrowly specialized than those found in the diversified service

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so Rethinking Urban Policy centers, and they are rooted in a long-standing industrial tradition that is reflected in the composition of the work force, the housing stock, and the physical form of the metropolis. The older functional centers, such as Pittsburgh, Detroit, Rochester, and Wilmington, were built around their particular leading industries, and the form of each city reflects the way in which those basic industries related to their urban environments. Central business districts tend to be weaker than in comparably sized diversified service centers, often because the headquarters of the leading corporations were initially located with the production facilities outside the central business district, and com- petitors put some distance between themselves. Each corporate complex often generates a competing center of urban activity. Housing for a large blue-collar work force tends toward lower densities, reflecting the high wage levels of unionized labor. The same multinuclear structure tends to be even more pronounced in the newer functional centers, such as San Jose, Wichita, and Tulsa, because their economies are based on newer or expanding industries and technologies and because they have developed in the automobile age. The functional centers may also serve as distribution centers on a na- tional or international scale, but, unlike the regional and subregional cen- ters, they tend not to be closely linked to their regional markets. Because many were established in the period of manufacturing expansion in the United States, they are burdened with a high ratio of obsolete manufac- turing plants that suffer from both domestic and foreign competition. The heavy investment in these areas by their major industries, however, gives them considerable staying power. Absent a merger into a corporation headquartered elsewhere, there is often relatively little inclination to move the central administrative offices. Where it is feasible, management may be willing to modernize some old plants or convert them to new uses and even build some new facilities in the area. This also allows the industry to take advantage of a local skilled labor force in which it has a major investment. While modernizing existing facilities and closing the most unproductive old plants have resulted in the displacement of large numbers of blue- collar workers, there has often been considerable growth in the admin- istrative and research components of the industries. Even during a period of substantial reduction in production employment in the functional cen- ters, there was an increase in jobs in headquarters-related and producer services (Noyelle and Stanback, 1983~. Thus, while it appears that pro- duction will probably remain an important part of the economies of the functional centers (Gurwitz and Kingsley, 1982), its role is diminishing

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The New Urban System 51 relative to nonproduction activities.6 As a result, the character of what they export to the rest of the economy has been transformed.7 Instead of exporting as high a percentage of the world's tires as in the past, for example, Akron now exports expertise as the major international center for management and research in the rubber industry (Schr~ber, 19821. The linkage between these activities and local manufacturing within an industry is also important in that it provides a base for stability that is not present, as we shall see, in the places that are more narrowly specialized in the production phases of an industry. Thus, although there have been and will probably continue to be substantial losses of blue-collar employ- ment in the functional centers due to technological changes and the de- centralization of manufacturing activities to other areas and to foreign countries, there is likely to be greater long-term stability for blue-collar workers once the major transition has occurred (Stanback et al., 1981:101~. This strength, of course, depends on the continued strength of an area's industrial specialty in the national economy. There is also an additional factor that seems important in assessing the future of the functional centers. The presence of the home offices of major industrial corporations has meant, for many of these places, a historically strong commitment of the corporate leadership to the community and its nonprofit sector. This has produced a wide array of educational, health- related, and cultural institutions, which in themselves have become im- portant assets of the metropolitan economy. There is evidence that such institutions benefit from the economics of agglomeration. Not only are they important factors in attracting and supporting the development of a service economy, but they also may develop into significant exports or export substitutes for the local economy.8 Education institutions are an important part of this nonprofit complex. They provide an export substi- tute, since they bring money from nonresidents into the local economy. 6 While Gurwitz and Kingsley deal with a particular regional center, many of their observations on the continued role of manufacturing apply to functional centers. 7 For all functional centers, manufacturing employment's share of their economies fell from 39.0 percent in 1969 to 33.6 percent in 1978. During the same period, however, finance, insurance, and real estate services rose from 4.4 to 5.1 percent, and services rose from 16.9 to 20.0 percent (special tabulation from OBERS-BEA Regional Projections, prepared for the Committee on National Urban Policy by the Bureau of Economic Analysis, U.S. Department of Commerce; hereafter referred to as OBERS-BEA special tabulation). ~ Noyelle and Stanback (1983) show that employment in nonprofit organizations is one of the fastest growing sectors in the functional centers. For additional insights into the economic significance of nonprofit firms to urban areasalthough the study does not deal with functional centers see Reiner and Wolpert (1981) and Wolpert and Reiner (1982).

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52 Rethinking Urban Policy They are important to the functional centers not only as employers but also because they have an important nexus with the administrative and particularly the research components of the industrial group headquartered in these centers. Where the universities have strong research and devel- opment capabilities, as in the San Jose, Detroit, and Pittsburgh areas, they can become a part of the process of invention and innovation that seems crucial to the long-term capacity of an area to adjust to changes in the industry that it houses (Science, August 6, 1982~.9 Other Specialized Service Centers the 2() metropolitan areas included in the government-education and education-manufacturing centers include Washington, D.C., and the cap- itals of 12 states. Others are university towns. All contain large private or public universities, often the state university or a branch of it. Some house a complex of several universities. Employment in these places is concentrated in the government and nonprofit sectors. While both sectors grew rapidly in the past two decades, they have slowed in recent years. State government can be expected to maintain a fairly steady, if slower, rate of growth in most states, particularly if its role increases in relation to the domestic functions of the federal government. In states with high growth rates, such as Texas, a considerable increase in government em- ployment seems likely, especially if the state has previously maintained a relatively modest level of public services. One factor that is hard to forecast is the impact of new office technology on the growth of public employment, since a large proportion of govern- ment employees are clerical workers. The concentration of government offices, however, also tends to attract government-related businesses and nonprofit activities. Much of the growth of the Washington, D.C., econ- omy in the past decade has come from these sources rather than from any expansion of government employment. It is quite possible that expansion of the government-related private sector will become more important in state capitals as well. This possibility may be lower in states in which the bulk of state offices are in the state's major metropolitan centers rather than in the capital city. 9 Carnegie-Mellon University, for example, is engaged in a major research and development program in robotics with Pittsburgh-based industries. A similar program is under way at the University of Michigan with Detroit's automobile companies. The fruitful relationship between research programs at Stanford University and Silicon Valley electronics and computer firms has been an important factor in the economic growth of the San Jose area.

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The New Urban System 53 Although the growth of a more knowledge-based economy would seem to demand an expansion of higher education, such a necessity is offset by the decline in the size of the college-age population in the years ahead. Some university systems overextended to meet the demands of the baby boom cohort and now must reduce their work forces. In addition, cutbacks in public support of research and development activities affect universities. In the education-manufacturing centers the relationship between university research and product or service development may be an important factor in the economic future of the area. The presence of government and universities tends to build a metropolitan labor force that is concentrated in professional and administrative occupations, making it an attractive market for some service industries. Such factors as these suggest a mild increase in diversification of these centers without overwhelming their primary specialization.~ SUBORDINATE CENTERS Consumer-Oriented Centers Only 12 of the 140 largest metropolitan areas are primarily consumer- oriented centers. A few smaller areas, such as Reno, would also fit this description. The three residential centers shown in Table 6 are linked economically to the New York and Los Angeles SMSAs. The remaining resort-retirement centers are built around rising consumption of mass- marketed recreation, such as theme parks, and growing retirement incomes and benefits. The economic mix of such places is not broad. They tend toward concentration in consumer services and government. Some have attracted various light industries, some the headquarters of large firms, and some decentralized office facilities, building on a base of community amenities, good education and health systems, recreation facilities, and a professional labor force. They do not, however, have a large low- and middle-income work force, which seems to be a necessary complement to the professional work force (Frankena, 1981~. In some cases, as in Orlando, the sheer rate of growth has helped produce demand for a wide range of economic activities that cannot be served by other metropolitan areas in the general region. Most of these areas do not seem to be good prospects for the development of a strong corporate complex or a producer services base. ~ Noyelle and Stanback (1983) anticipate slower growth than in the last two decades.

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54 Rethinking Urban Policy It should be remembered, however, that because the economies of the resort centers are specialized in consumer services, they perform more as export sectors than as local sectors. Production Centers The final broad category of places in the new urban system is the production centers almost a third of the 140 largest metropolitan areas. In addition, there are a large number of smaller areas with economies dominated by manufacturing or mining. Nearly all of the large manufac- turing centers are in the old industrial heartland of the Frostbelt, but only two of the industr~al-military centers and mining industrial centers are outside the Sunbelt. The 25 manufacturing centers in Table 6 are different from the functional centers in several significant respects. They generally are smaller; most have fewer than a half million people. They are less likely to contain major corporate headquarters, and the producer services sector is relatively small. Instead they are often the sites for specialized branch plants of manufacturing industries. Their losses in manufacturing employment have not been offset, for the most part, by increases in headquarters employment and producer services (Noyelle and Stanback, 19834. The labor force in these areas is largely composed of lower-skilled blue- collar workers. Plant managers in such places have relatively little auton- omy in determining policies within their own plants, let alone in making major decisions about such things as closing, expansion, modernization, and relocation. These metropolitan areas are the most vulnerable of all parts of the urban system to the structural changes we have described. Because the plants located there are often among the oldest in the industry, they are the first to shut and the last to reopen in response to business cycles. They generally are the least productive and are therefore subject to permanent closing. There is little other strength in the economy to attract alternative employers. ~ ~ Buffalo stands apart from the rest of this group, due to its size and the strength of its financial institutions. It contains only one major corporate headquarters, however, and its economy is based in two troubled industries: automobiles and chemicals. It has had great difficulty in diversifying its economy and developing a strong service sector. Its distributive services sector has also been in decline (see Stanback and Noyelle, 1982:101-102). |2 Their finance, insurance, and real estate category of industries, for example, provides a smaller proportion of total employment than does any other class of cities (from an unpublished 1982 OBERS-BEA special tabulation).

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The New Urban System 55 Because these places tend to depend on regional centers for major financial services, there is often a weak pool of local capital available for reinvestment in the community. Very few have strong public or nonprofit sectors.~3 They have greater susceptibility than other cities to "self-ag- gravating processes in city decline" (Bradbury et al., 1980, 1982) as one economic weakness triggers another. The industrial-military centers developed rapidly from World War II into the early 1960s. Except for San Diego and more recently San Antonio, they have been heavily dependent on the flow of military funds and have not, as a group, experienced much diversification of their economies. This narrow base makes them highly vulnerable to budgetary decisions made in Washington. The mining-industrial centers have grown substantially in the last decade in the wake of the energy crisis, but like the military centers, their firms tend to be subject to external economic control (Noyelle and Stanback, 19831. They are also highly susceptible to fluctuations in world commodity markets. Because the production costs of fuels and minerals are higher in the United States than in many other countries, a slackening of demand tends to shut down American capacity first. IMPLICATIONS OF THE NEW URBAN SYSTEM The urban system we have described is characterized by an increasing polarization of the command and control centers and the subordinate cen- ters (Noyelle and Stanback, 19831. The tendency of the most vital services sector corporate complex and producer services to concentrate in the command and control centers is well established. The result is to give these centers a high degree of economic autonomy and to place them in the mainstream of urban economic development. While many of these places, especially the functional centers, can expect to retain a substantial presence of manufacturing industries, the role of manufacturing in their overall economies is being displaced by producer services. In addition, within the manufacturing industries located in these places, the occupa- tional profile is shifting from production to nonprodution occupations. The size of the command and control centers, the diversity of their labor forces, the existence of strong educational institutions, and the pres- ence of sophisticated political and civic leadership and local governments |3 Flint, Michigan, is an exception. There the Mott Foundation has a well-supported and active program in community economic development. It is limited, however, by the lack of strong political institutions and the concentration of employment in a single industry, automobile man- ufacturing (G. Clark, 1983).

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56 Rethinking Urban Policy increase their resilience in adjusting to changes in economic structure. Although structural unemployment among manufacturing employees is a serious problem in a number of them (especially the functional centers), in those metropolitan areas with concentrations of old-line industries, such as steel, automobiles, rubber, and heavy machinery, it is more likely to be a transitional problem rather than a permanent one. While some of these areas are growing very slowly, as measured by net population in- crease, most are evolving quite rapidly toward a strong economic base. The long-run prognosis for their economic health is encouraging. Particular attention may need to be paid, however, to the health of their central cities or other older jurisdictions within the metropolitan area. While the command and control centers are characterized by a high degree of economic and political autonomy, a smaller proportion of the remaining centers are as fully in control of their own destinies. A few, however, show signs of building strong, independent service economies to substitute for the erosion of blue-collar manufacturing jobs. Some are even attracting more blue-collar jobs. Others, such as Orlando, are ex- panding their basic service activities and are also succeeding in developing a more diversified economy. As a result, as the mix of industries and occupations changes, such cities are likely to join the command and control centers. As a group, the subordinate centers have not experienced an absolute loss of jobs, but their new service jobs tend to be consumer- oriented rather than in producer services. The capacity of a metropolitan area to adjust to structural changes is heavily influenced by the mix of industries and occupations that it has built up over the course of its history. The size and the diversity of the command and control centers contribute to their resilience. By contrast, the production centers and the consumer-oriented centers tend to lack readily adaptable labor forces or a sufficient contingent of professionally and technically trained workers to attract industries that require a highly trained work force. In such places, structural change is not just a transi- tional problem but a long-term one. The industrial units located here often have little autonomy of their own and therefore have much less stability in the face of major changes in markets and technologies (A~mington and Odle, 1982; Cohen, 19811. An area's physical conditions both natural and man-made and its cultural heritage are also important factors in its adaptability to economic changes. An advanced industrial economy does not use urban space in the same way that the old economy did (Breckenfield, 1977; Hicks, 1982; Perloff, 19811. The redevelopment of older urban areas need not follow the traditional concentric patterns of the past. Where simultaneous aban- donment, gentrification, and redevelopment are under way, there are op-

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The New Urban System 57 portunities for new forms, improved urban design, and physical relationships that were not feasible during the first generation of urbanization (Berry, 1982; Thompson, 19771. Given their economic history, the functional centers are likely to follow a more polycentric pattern of redevelopment than the national and regional centers, in part because the former have historically weaker central business districts than the latter (Thompson, 1969:28-3 1). Newer urban areas that are just now experiencing their most rapid growth have (at least theoretically) more flexibility in meeting the physical requirements of growth industries than the older metropolitan areas. Trans- portation, land use, and housing patterns are more fluid and capable of being adjusted in the early stages of growth. There is less old capital stock to work around. In some cases, as in Charlotte and Dallas, it may be possible to capture an early comparative advantage, such as an airport that serves as the hub of a regional air service network or as an international airport and headquarters or corporate service center for transportation industries. Because the opportunities for such activities are limited in number, the centers that capture them tend to preempt that function for a fairly large region. Institutional factors are easily overlooked in economic analyses of urban areas. They can be critical factors in interarea competition and in local economic development strategies that seek to promote local adaptation. Where political boundaries limit the ability of a central city to tax important metropolitan assets, as in the case of most older northern cities, the rev- enues needed to support the infrastructure and services essential to ad- aptation are severely limited. Governmental and fiscal autonomy may be almost as important as the economic autonomy of the firms located in an area. On the other side of the institutional ledger, the existence of high- quality educational, health, cultural, and recreational resources in an area may give it a strong competitive advantage in retaining or attracting firms that employ high-level white-collar workers. The quality of civic and political leadership can determine whether an area even recognizes its problems and takes advantage of its opportunities (Committee for Eco- nomic Development, 19821. The powerful forces shaping the urban system and the urban landscape will not be easy to alter, but they are not unalterable. Studies of the behavior of corporate headquarters functions and of producer and other services, as well as the mounting evidence of continuing and wider dis- persion of manufacturing, strongly suggest that the command and control centers will continue to enjoy a strong attraction for the management functions of the economy. Of the components of the urban system, they alone offer easy access to the entire array of services that the modern

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58 Rethinking Urban Policy corporate complex needs to perform its management functions. They also provide advantages in transportation, communications, and cultural re- sources. While some traditional headquarters activities, such as records centers, can and will be relocated in the suburbs or in subordinate centers, management functions are becoming more heavily concentrated in the major national, regional, and functional centers (Cohen, 1977; Noyelle and Stanback, 19831. Not many more national and regional centers are likely to arise in the near future, especially if the nation continues to approach zero population growth. But there are still opportunities for a new generation of cities to develop, as Dallas, Orlando, Phoenix, and Denver have in the past two decades. Some regional and subregional centers could gradually expand their spheres of influence and move into the next higher rank of areas. A few places may be able to capitalize on unique advantages and transform themselves into regional rather than subregional centers, particularly in areas of substantial population growth, such as central Florida. Others, such as San Diego or San Antonio, may evolve from industrial-military centers to regional centers (Noyelle and Stanback, 19831. The future for other parts of the urban system seems to lie in some degree of specialization and in establishing economic ties to the larger and more diversified centers. For some it may involve conversion from one kind of production to another. Some may have potential as centers for innovation, building on linkages among local firms and with firms and markets in other centers (Rees, 19831. There may also be opportunities in some centers, such as those that have specialized in heavy machinery and machine tools, to become centers for manufacturing the "smart" hardware required in more knowledge-intensive jobs. The manufacture of industrial robots requires a skilled work force for their production. For other subordinate areas, back office support services, distributive services, and provision of attractive residential communities or recreational services may fill needed niches in the urban system.