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Twin Cities angling to become second-largest economy in the Midwest

A Commerce Department report (PDF) suggesting that Minneapolis-St. Paul is poised to overtake Detroit as the Midwest’s second-largest metro economy didn’t get much attention when it was released a year ago, perhaps because it told more about Detroit’s decline than MSP’s rise.

Still, the numbers are a reminder that we live in a “city-state” era, or as urban geographers describe it, an era of global competition between metropolitan regions, with states and nations playing supporting roles.

The increasing focus on competitive metro regions is why the Itasca Project’s new emphasis on marketing the Twin Cities to outside investors and employers makes so much sense.

Incredibly, it’s a job no one has been doing. Not the state. (It hasn’t had an out-of-state marketing budget for years.) Not the Met Council. Not the various chambers of commerce or the Minnesota Business Partnership or the various city and county economic development agencies. As the nation pulls out of a deep recession and investors begin to entertain the idea of actually investing again, there’s a crying need to change the MSP personality from introvert to extrovert.

As a related Itasca report documented last April, almost no one knows we’re here. Part of that’s because we really don’t have an identity. Increasingly, the metro region is known as “Minnesota,” which is hardly an accurate description. Coming up with a “brand” and a marketing team is something Itasca hopes to accomplish by early next year.

While speaking to the Cunningham Group’s Urban Currents forum in Minneapolis this week, Dan McElroy, the state’s commissioner of Employment and Economic Development, was asked about the Itasca effort. He offered a thoughtful and measured response. No, the state hasn’t spent money recently to advertise Minnesota or the Twin Cities as a business destination. Yes, the Itasca effort makes sense, although it runs the risk of inciting jealousies outstate. “I’m a bit concerned” about that, he said, and about the prospects for an “arms race” among the nation’s metro areas.

Afterward, he said it makes sense to market both the state and metro in coordinated fashion, with the metro acting as a kind of portal to the rest of Minnesota.

DEED commissioner’s reaction
McElroy’s presentation, “Minnesota’s Prosperity Indicators,” painted a mixed picture. The state and metro are emerging from the recession faster than the nation as a whole, with the customary gap between the nation’s unemployment rate (9.6 percent) and the state/metro rate (7 percent) still intact. But Minnesota’s biggest competitive advantage — a well-educated, productive work force — is slipping away as growing black and Hispanic populations fail to achieve the education and training needed to maintain the state’s relatively high income levels. “We still have a higher median income than the nation, but I don’t like the trend,” McElroy said, noting that the state’s household income figures actually declined during the depths of the recession, the first such decline since 1935.

Comment: “Minding the gap” on education should continue to be a top priority. But an additional way to attack the declining income specter is to actively pursue high-paying industry — which brings us full circle to the Itasca marketing effort.

MSP in nation and region
Back to the Detroit-MSP competition. The Commerce Department’s Bureau of Economic Analysis report estimated Detroit’s GDP at $200.8 billion in 2008, a decline in real terms of 1.9 percent over three years. It placed Minneapolis-St. Paul’s GDP at $193.9 billion, an increase of 1.9 percent over three years but with a trajectory likely to overtake Detroit sometime in 2010. Whether that happened won’t be known until the next report is released 2011.

If MSP passes Detroit, it would probably rank as the 13th-largest metro economy in the country. Here are the top 20 in the U.S. and in the Midwest:

NATIONAL RANK

GDP / billions $

MIDWEST RANK

GDP / billions $

l1. New York

1,264.9

1. Chicago

520.7

2. Los Angeles

717.9

2. Detroit

200.8

3. Chicago

520.7

3. Minneapolis-St Paul

193.9

4. Houston

403.2

4. St. Louis

128.4

5. Washington, D.C.

395.7

5. Cleveland

104.4

6. Dallas

379.8

6. Kansas City

101.0

7. Philadelphia

331.9

7. Cincinnati

98.7

8. San Francisco

310.8

8. Indianapolis

96

9. Boston

299.6

9. Columbus

89.8

10. Atlanta

269.8

10. Milwaukee

82.7

11. Miami

261.2

11. Omaha

44.8

12. Seattle

218.8

12. Des Moines

34.2

13. Detroit

200.8

13. Dayton

33.7

14. Minneapolis-St. Paul

193.9

14. Grand Rapids

33.1

15. Phoenix

187.4

15. Madison

33.0

16. San Diego

169.3

16. Witchita

28.5

17. Denver

150.8

17. Akron

28.0

18. San Jose

146.7

18. Toledo

26.1

19. Baltimore

133.0

19. Lansing

18.3

20. St. Louis

128.5

20. Ann Arbor

17.9

Cheer: To St. Paul for Lowertown loans
The city is offering Lowertown businesses early access to interest-free deferred loans of up to $10,000 aimed at tiding them over during light rail construction. An advance grant from the Central Corridor Funders Collaborative made the early loans possible. With construction already under way in Lowertown, businesses there are suffering the temporary effect long before the heavy equipment reaches University Avenue.

Boo: To New York subways for video ads
Starting with the 42nd Street Shuttle, the Metropolitan Transportation Authority began this week installing 10-inch video screens on subway cars. The purpose is to gin up ad revenue to help offset operating revenue losses. But is there no longer any escape from constant commercial bombardment? Not airport departure lounges. Not bars or restaurants. There’s something fundamentally inconsiderate in assuming that the default position is commercial invasion rather than to concentrate on your book or newspaper — or daydreams.

In metrospect: Three of this week’s best stories

• Vanishing upward mobility in cities

With crocodile tears, Joel Kotkin laments the decline of cities as springboards for upward mobility. Back in the good old days, New York, Chicago, Los Angeles and other big cities had solid working-class neighborhoods that propelled the owners of modest homes — and certainly their children — toward social advancement and even affluence. But now there’s almost no middle class remaining in the nation’s largest cities. They have become enclaves for elites and a warehouse for the poor. What Kotkin fails to say is that the conservative policies he advocates have played a big hand in this urban bifurcation. Giving big tax breaks to the wealthy has not produced jobs for ordinary urban citizens. And keeping gasoline prices as low as the oil companies want them has invited the middle class to continue its flight. Cities are not to blame for these widespread social ills but are just convenient whipping boys. Still, Kotkin remains an important and provocative voice in the ongoing discussion of metropolitan America, and his piece in the Journal of the American Enterprise Institute is must reading.

• Traffic lights that think for themselves
We’ve all been there, waiting, waiting and waiting at the red light from hell as no cross traffic passes by! And you wonder: Who programmed these lights? But there may be a solution at hand: traffic lights that think for themselves. German and Swiss engineers have devised a traffic flow system for Dresden that uses sensors in the pavement to allow traffic lights to react to real-time traffic demands rather than to the typical patterns now programmed into the systems. The traffic signals can constantly communicate with one another to adjust the timing. The result? A 10 to 30 percent reduction time in waiting and better auto fuel economy. Researchers call their chaotic, decentralized approach “the jungle principle” — every light for itself. Details are reported in Popular Science and Gizmag.

• Don’t dismiss the infrastructure bank
In his Citiwire column, urban analyst Neal Peirce laments the cynical reaction to President Obama’s support for an infrastructure bank to finance the nation’s daunting backlist of public works projects. Says Peirce: “It’s sad that politicians and the media have so quickly dismissed President Obama’s pitch for a national infrastructure bank as just more federal spending — or equally unattractive, a cynical political gambit to help Democrats in the November elections.” The writer refers readers to an analysis by Bill Galston of the Brookings Institution.

The analysis goes something like this: Companies aren’t hiring because they lack confidence that consumers (loaded down with housing debts) will be good customers. So, they’re investing in machines or sending jobs overseas. Infrastructure projects offer a chance to do needed work while adding jobs and putting money in consumers’ pockets.

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Comments (6)

  1. Submitted by Frank Jaskulke on 09/24/2010 - 10:51 am.

    Steve,

    You should check out http://www.biobusinessalliance.org/

    The BioBusiness Alliance is privately and publicly funded and they have gone around the world marketing Minnesota a destination for business.

    They use a regional assets approach so they promote the Twin Cities metro to certain types of businesses, communities like Willmar and Worthington for others and Duluth and surrounding cities for yet other industries.

    They are very small, but have been quite effective in their short time.

    This is building on some of the ideas that created my organization, LifeScience Alley (formerly Medical Alley). The Medical Alley region (from Rochester to MSP) is known around the world as the leader in medical device development. In the healthcare community it is as well known as Silicon Valley and has been as successful at attracting business from around the world.

    Just in the last year companies from Israel, Australia and France setup shop with no public incentive programs because of the strength of our brand (and the product behind it).

    Regards,
    Frank

  2. Submitted by Ann Spencer on 09/24/2010 - 12:31 pm.

    I’m glad Minnesota is finally beginning to understand that we are in competition with the rest of the country for business and high-skilled workers. But I would like to see a concerted effort to change a significant impediment to attracting (and keeping) talent from other states: a micro-environment in neighborhoods and workplaces that is far from welcoming to “outsiders.”

    I’ve lived here for more than 34 years but I can still recall the dawning realization that I experienced as a young bride–all those super-nice people I met at work and in my daily life weren’t really interested in being my friends. They had their friends and family here already, thank you very much, and they weren’t looking to expand their circles.

    Talk to any transplants to Minnesota and in moments of candor they will tell you the same thing: this is a wonderful place to live in almost every way, but it’s devilish hard for a newcomer to make friends here. In part, this reflects a stable population where both partners in a marriage grew up here, accruing friends along the way, and both have extended family here. They may sincerly feel there’s no room in their lives for other people. Minnesota exceptionalism–the belief that if you’re “not from here”, well, you’ll just never understand what being a true Minnesotan is all about—also plays a role, as does good old-fashioned prejudice. (I wish I had a dollar for every time I’ve heard this gem: “You’re from the EAST??? But you’re so nice!”)

    My purpose is not to whine but to point out the implications of this attitude for any campaign to lure business and individual workers here. No matter the glories of our parks, our arts, our schools, our clean government, if employees and their families feel excluded and isolated at work and at home, they won’t stay. It’s as simple as that.

    I hereby offer my own modest beginning, a grassroots effort that requires no organized program and no government or corporate expenditure: The Invite a Newcomer to Thanksgiving Dinner Initiative. The holidays, now looming on the horizon, can be particularly lonely for non-natives, as they stand in their front windows watching their neighbors’ driveways fill up with cars. Certainly most of us can name new Minnesotans in our neighborhoods or workplaces. Invite them to the feast. It’s a start!

  3. Submitted by Ray Schoch on 09/24/2010 - 01:02 pm.

    In this culture, with a few narrow exceptions – Frank Jaskulke mentions one above – what doesn’t get advertised is basically unknown. It doesn’t exist.

    I came here from Colorado, and while I don’t know the dollar amount, I do know that the state of Colorado employs several people, and spends millions of dollars every year, to promote Colorado’s climate, scenery, and well-educated workforce around the country and the world. Not only do skiers and other tourists bring millions of dollars to Denver and the state, so do the businesses that move to Colorado to take advantage of the same climate and scenery, and promote them as amenities for their own workforce, whether that workforce is local or imported with them from somewhere else. The populations, median incomes and other factors are similar enough between the two states that I’m very surprised that Minnesota businesses – those interested in growth and profitability, anyway – have not clamored for a MUCH more public presence for the Twin Cities area and Minnesota generally on the national and international stage.

    Given the Twin Cities’ place on the list of largest urban area economies, it simply doesn’t make sense NOT to advertise, and advertise heavily, the positives that Minnesota and the Twin Cities have to offer. With global competition, capital that can move seamlessly and virtually instantly from one market to another, and at least a desire to maintain an educated populace and public infrastructure, even with the current political climate, Minnesota is in a good position to attract new businesses and new jobs – but it won’t happen if the “people of money” don’t know we’re here.

    It’s a testament to the shortsightedness and low horizon of too many area businesses that this sort of marketing effort has not been happening, and area business leaders – you know who you are – should do something about it right NOW.

  4. Submitted by Brian Simon on 09/24/2010 - 01:08 pm.

    Frank Jaskulke writes
    “The Medical Alley region (from Rochester to MSP) is known around the world as the leader in medical device development. In the healthcare community it is as well known as Silicon Valley and has been as successful at attracting business from around the world.”

    That’s an interesting point; I was just going to report, anecdotally, the opposite: that when I talk with friends (outside the region) about the regions that are up-and-coming, creating new jobs in new technologies, I hear about Austin (TX), Research Triangle (NC), Silicon Valley (CA) & Seattle (WA). They don’t seem to think of MSP, or MSP-Rochester as fitting that profile – but they should.

  5. Submitted by Dan Landherr on 09/24/2010 - 01:58 pm.

    “I’m very surprised that Minnesota businesses – those interested in growth and profitability, anyway – have not clamored for a MUCH more public presence”

    MN business collectively seems to be much more interested in making sure they don’t have to pay state taxes. I would have to disagree that the State of MN needs to play a role in promoting the state for business. That doesn’t seem to fit with the current outcry to limit government services. I also don’t trust the state government to market effectively; marketing isn’t exactly their core competency. It is surprising to see the various chambers of commerce failing to promote the state for business investment. Business trade groups like Medical Alley would appear to be the ideal promoters.

  6. Submitted by Steve Rose on 09/24/2010 - 02:39 pm.

    Ann (#2):

    I too experienced what you referred to as “a significant impediment to attracting (and keeping) talent from other states”.

    My wife and I both grew up in Minneapolis and graduated from Minnesota colleges, but left to pursue careers for ten years. Following stops in Detroit and Dallas, we returned to Minneapolis to the experience of meeting people who already had a full complement of friends, and were not taking any new applications. It was tough to break in.

    Living in Dallas in the 1980s, meeting native Texans was the exception. People came to Dallas from all over the country, and everyone needed to make friends. We got together for holidays, and when anyone needed help, they had new friends to call that were willing to lend a hand. It gives life a very different feel when you are not working for years to make social connections.

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