The Midwest: Coming Back?

Oh my name it is nothing
My age it is less
The country I come from
Is called the Midwest

–Bob Dylan, “With God on Our Side,” 1964

For nearly a half century since the Minnesota-raised Robert Zimmerman wrote those lines, the American Midwest has widely been seen as a “loser” region–a place from which talented people have fled for better opportunities. Those Midwesterners seeking greater, glitzier futures historically have headed to the great coastal cities of Miami, New York, San Diego or Seattle, leaving behind the flat expanses of the nation’s mid-section for the slower-witted, or at least less imaginative.

Today that reality may be shifting. While some parts of the heartland, particularly around Detroit, remain deeply troubled, the Midwest boasts some of the lowest unemployment rates in the country, luring back its native sons and daughters while attracting new residents from all over the country.

For example, Des Moines, Omaha, Kansas City, Columbus, Minneapolis, Milwaukee and Madison have all kept their unemployment rates lower than the national average, according to a recent Brookings survey. They are also among the regions that have been able to cut their jobless rates the most over the past three years.

This contrasts sharply with the travails of the metropolitan economies of the Southeast, Nevada, Arizona and California. Of course, other regions are doing better than the Sun Belt sad sacks. The stimulus and TARP benefited some parts of the Northeast, but even those areas haven’t performed as well as the nation’s mid-section. The only other arc of prosperity has grown around the Washington leviathan, largely a product of an expanded government paid for by the rest of the country.

In contrast, the relative prosperity in parts of the Midwest largely stems from the private sector. Take the rise in the price for agricultural commodities, global energy demand, greater home affordability and a  slow but perceptible pickup in domestic manufacturing. According to University of Iowa researcher Jacob Langenfeld, these factors suggest that it’s time to stop seeing the Heartland as a perennial loser and to start seeing it as a “[model] for effective economic development.”

The new reality is reflected in several ways.  In terms of personal-income growth last decade, several Midwest regions ranked  among the top ten in the U.S., including Milwaukee, Cleveland, Kansas City and Cincinnati.

These cities all performed better than Seattle, Denver or Portland. San Jose and San Francisco, those perennial darlings of the information age,  sat around the bottom of the list. The mid-section also boasts many of the nation’s healthiest real estate markets, according to Realtor.com. Three of the top five markets–Kansas City, Kansas, Omaha and Fargo–are located in the region

An analysis of shifting migration patterns provides even more intriguing evidence. Over the past century the Midwest’s share of the nation’s population fell from nearly 35% of the total to barely 21%. Only the Northeast, now less than a fifth of the population, has experienced a similar decline, while the West and South have registered impressive gains.

Now some of the very regions that experienced losses over the past few decades, such as St. Louis, suffer much lower rates of out-migration than a similarly sized area like San Diego. Others, such as Indianapolis, Columbus, Madison and Kansas City, have enjoyed strong rates of domestic migration. In sharp contrast, coastal giants like metropolitan Los Angeles or New York have worse domestic out-migration rates than Detroit.

The outcome of the recent midterm elections means that political changes may further propel the Midwest express. The new Congress is largely dominated by representatives of the heartland such as Speaker John Boehner of Ohio and Budget Committee Chairman Paul Ryan of Wisconsin. This marks a powerful shift from the previous Congress, controlled by iron-fisted coastal Democrats like former Speaker Nancy Pelosi of San Francisco.

We can expect the new Congress to adhere more closely to Midwestern interests on a host of issues. Energy legislation will now reflect the interests of Midwestern states, which depend heavily on coal, rather than the renewable dreams of the coastal big cities. In transportation we may see a shift in priorities from high-speed rail to such mundane things as roads and bridges.

More important still may be changes at the local level. For decades Midwestern governors and mayors tried to emulate the Northeast and West Coast. Historian John Teaford observed that the struggling Midwestern cities in the 1960s and 1970 employed “cookie cutter” redevelopment in a vain effort to replicate the great coastal cities. Ultimately the building of “international style” towers, sports stadia and cultural palaces did little to restore places whose economies had become increasingly uncompetitive.

In recent years, the most risible example of coastal aping could be found in Michigan, the nation’s most economically ravaged state. Under Gov. Jennifer Granholm Michigan focused on a strategy of promoting “cool cities” to lure the young entrepreneurial hipsters away from the coasts. Like California, Michigan placed huge bets on renewable fuels and other green industries.

By the end of Granholm’s term this winter the state suffered one the country’s highest unemployment rates, a falling population and epic out-migration. She has been replaced by a pragmatic pro-business conservative, Rick Snyder, who is focused on a practical economic-development agenda. Similar shifts have taken place in Ohio and Wisconsin.

The new brand of Midwestern realism has been embraced for years by some regions. For example, non-partisan business and civic leaders in Kalamazoo, Mich., have pushed both educational reform and economic diversification. The region, though hardly booming, has done better than the state overall and is experiencing an entrepreneurial and community renaissance.

Kalamazoo entrepreneurs tend to understand that the key to Midwestern renewal lies with the region’s core competencies and attractions. David Zimmermann, founder of Kalexsyn, a flourishing biotech company, identifies these assets:  Michigan’s resident pool of skilled labor, a low cost of living and a generally community-oriented, family-friendly atmosphere.

Zimmermann says his company, which now employs 30 workers and has revenues of $5.4 million, has surprisingly little trouble attracting younger skilled workers. The median age at the company, he notes, is only 36, and many have come to Kalamazoo from traditional coastal biotech hot spots. This includes several researchers some who originally left the Midwest in their teens and twenties.

“People are looking at the Midwest and crunching the numbers,” Zimmermann says. “Maybe you take a 20% pay cut from San Francisco but you buy a nice house for $200,000. You come out way ahead. We think this a very strong advantage.”

Such a newfound appreciation for the Midwest represents a critical element in expanding the region’s turnaround. With enhanced power in Washington and more common sense government at home, the Midwest could be poised to regain a competitive advantage that has been missing for several generations.