As I mentioned in my last post, my son and I watch “Life After People” on The History Channel. In the last episode, “Outbreak,” the show used the abandoned buildings of the downtown of a major American city as real-world examples of how quickly abandoned buildings fall into decay.
No, the abandoned buildings were not in Detroit, they were in downtown Gary, Indiana.
How many of these abandoned areas are there in the Great Lakes region? Most people point the finger at the auto industry to explain the fall of Detroit, but what explains the fall of Gary?
Steel. Gary was founded in 1907 by U.S. Steel as a company town. U.S. Steel built Gary because it was a great place to make steel in 1907. Gary grew because for the next 60 years it was a great place to make steel. Then suddenly Gary stopped being a competitive place to make steel. Why?
More importantly, why don’t all regions that lose a major industry suffer the same decay?
Part of the fall of Gary results from a natural and universal processes of the evolution of technology. Even if Gary still produced the same percentage of American steel that it did in its heyday, it would have seen an economic decline.
However, that’s not the main story. A lot of regions have faced the collapse of their primary industry and not only survived but thrived. The end of the “energy crisis” in the mid-’80s came with a massive collapse of oil prices that devastated the economies of Texas and the other oil-field states. The states entered a five year recession so severe that some economists classified it as an actual depression.
The region was even more proportionately dependent on gas and oil than either Detroit or Gary were on their principle industries. Yet the oil field states, especially Texas, not only recovered but created new industries and boomed. Why could the cities of Texas reinvent themselves while the cities of the Great Lakes still cannot?
I think the answer lies in the differences in political culture between the two regions. We Texans still think of ourselves as rugged, independent, frontier people even if we’re standing in line at Starbucks for a latte. This self-conception in turn leads to a political culture in which people do not default to government coercion to solve economic problems. We prefer to think of ourselves as people who individually create our own solutions.
The end of Gary began in 1959 with a six-month-long nationwide steel strike. The Union’s primary goal in the strike was to prevent the steel industry from modernizing plants built during the ’30s and WWII. Like all modernizations, the new steel-making technology would allow the companies to make more steel with less manpower. In order for the steel industry to adapt and remain competitive, it had to make do with a smaller workforce. The unions, interested in nothing but controlling the maximum number of workers, said no. In the end, they got new contracts blocking modernization.
The six-month-long strike caused all major consumers of steel to start buying steel outside America for the first time, even though foreign steel cost more and was of inferior quality. Steel consumers knew that expensive inferior steel was better than no steel at all, and the unions had made it very clear that they were willing to put everyone else out of job to keep their privileged economic position.
Most people who blame foreign competition for the decline of American steel blame the low labor cost of developing countries for foreign producers’ competitive advantage. But low labor costs were ultimately a minor component of the foreign advantage. The real advantage came from modern factories. While unions trapped American producers with 1940s-era plants, foreign competitors could build plants with 1960-1970s-era technology. Even if labor costs had been perfectly equal, the union-driven technological stasis doomed American steel.
Gary was ultimately destroyed by unions and the penumbra of political policies accompanying the political culture that creates unions. Worse, that same political culture kept Gary from attracting or generating new industries.
When oil failed in Texas, the state’s political culture did not impede the development of new industries. In the Great Lakes region, business people are treated like criminals who steal from working people. In Texas, they’re treated like heros who create jobs and wealth. Texas culture allowed new industries to arise to take the place of oil. Well-paying jobs in the oil fields were replaced by well-paying jobs in manufacturing, high tech, finance and a plethora of small businesses. Gary’s political culture prevented a similar adaptive change.
Frankly, I don’t see any hope for major change in Gary or similar communities in the Great Lakes region. Fish are not aware of water and the people of the Great Lakes region do not seem to be aware of the destructive effects of the political culture they are immersed in. High taxes, invasive regulation and runaway unions are simply so common that people think of them as the natural, default condition and therefore not conceivably responsible for any negative change.
The eerie abandoned buildings of Gary are towering moments to statist political culture. Gary failed because people couldn’t accept the inevitability of change and embrace it for the opportunities it offered. The city and region will never recover until they do.