Cleveland is demonized because it deindustrialized, largely through no fault of its own. You can add Detroit, Milwaukee, St. Louis, and Pittsburgh to that list. Given that America is a country with fat eyes that looks for big things, the Rust Belt — with its stagnant population and limping job growth — is a blind spot to others when it comes to what’s next. Hell, given Cleveland et al’s proclivity towards self-flagellation, it’s a blind spot to itself. There’s just a dearth of believers. This lends itself toward a city-building strategy to be something else, such as “the next Silicon Valley”.
Silicon Valley is lionized for a number of reasons. It’s the most prosperous large metro in the nation, and the most productive. It’s where the venture capital is, and where the talent goes to accrue that capital to start firms. Moreover, what happens in Silicon Valley doesn’t stay in Silicon Valley. The innovations arising from there reach the four corners of the world, influencing not only how we live, but also how we feel: our well-being. To that end, the techno-capitalistic mantra of “move fast and break things” has come with costs. While a core logic of innovation is to make what was harder easier — or to create efficiencies in the marketplace — these economic gains don’t always translate into social gains. That’s because the “god” of the private is not necessarily the “god” of the public, as you can put a price on only so many things: the human spirit and human dignity being immune to such placarding.
In 2011, the economic advisor to then-Vice President Joe Biden, Jared Bernstein, wrote a blog post called “The Challenge of Long Term Job Growth”. He noted there had been a “great decoupling” between productivity and employment. Simply, while economic growth was happening, it was doing so with less workers, thanks to technological advance. Think robots in car plants, or driverless semis. The ramifications were that workers weren’t sharing in the bounty of economic growth, and it was a finding later echoed by MIT’s Erik Brynjolfsson and Andrew McAfee in a New York Times piece entitled “Jobs, Productivity and the Great Decoupling”. In it, they write:
“[W]e need to start preparing for a technology-fueled economy that’s ever-more productive, but that just might not need a great deal of human labor. Designing a healthy society to go along with such an economy will be the great challenge, and the great opportunity, of the next generation.”
This decoupling is readily apparent in the graphs below. They come from a study I co-authored called “The Future of Growth”. The first graph looks at Santa Clara County, the county seat of Silicon Valley. It shows that the Gross Domestic Product (GDP), or economic output, arising from Santa Clara’s information technology IT) sector grew by a factor of 5 since 2001. Impressive. Yet employment for techies barely budged during that time, i.e., more output, less workers. This is decoupling in a nutshell.
Let’s unpack these job numbers a bit, particularly via the lens of economic development strategy. This isn’t job stagnation for manufacturing workers in the Rust Belt. This is job stagnation for the hottest sector (i.e., tech) in the “sexiest” place (i.e., Silicon Valley). These figures, though, are in line with a study out of Oxford University that found that while technology start- ups can create a lot of productivity and wealth, they are not good at creating many jobs. “What I think the Oxford study is saying is that you’re not getting the kind of job growth from these kind of high-tech, high-growth, high-profitability startups that you had in the past,” said economist Jim Pethokoukis.
While Cleveland’s Cuyahoga County’s tech scene is not as nearly as big as Santa Clara’s, the decoupling dynamics are not dissimilar. The graph below shows that while the county’s IT sector grew in terms of economic output, tech jobs actually decreased. This dynamic will only hasten as technological advance continues, particularly via the maturation of artificial intelligence.
As for the societal effects, the gist of the matter is relatively self-explanatory. “The spread of computers and the Internet will put jobs in two categories,” explains venture capitalist Marc Andreessen, “people who tell computers what to do, and people who are told by computers what to do. Only one of these two job categories will be well paid.” The dynamic is a driver of the growing inequality problem that is plaguing the nation, a problem evidenced by the graphs below. The first graph shows that the salary and wages of all workers as a percent of GDP is down to 43.2%, after peaking at 51.7% in 1969. Again, labor isn’t sharing in the market’s bounty. Meanwhile, the top 1% of earners take home 20.5% of the national income, levels not seen since the Great Depression. Both figures are emblematic to the liabilities of techno capitalism. Consider the trends lesions in the body politic, in effect stoking a fanaticism that gives rise to coy dolts that take advantage of people’s pain for personal power.
While one solution to the issue is a redistributive one via taxation policy, there are structural issues that are arguably more pressing. “We are in a chronic state of shortage of good jobs,” explained Harvard economist Dani Rodrick to the Financial Times recently. The issue, notes Rodrick, is that economic dislocation due to technological advance has not come with upward mobility pathways for those economically displaced. It is in an issue that has plagued Cleveland for decades due to the still-breathing effects of deindustrialization. Just how vital was manufacturing in the lining of pockets of Rust Belt workers? Very, as nearly 55% of all Ohioans earnings were from the Manufacturing sector in 1969. That figure was 51% for Cuyahoga County. Now, only 23.9% of Ohio’s earnings are derived from Manufacturing. In Cuyahoga County that figure dropped to 15.5%.
This doesn’t mean Cleveland hasn’t economically evolved. It has done its “economic restructuring”, a term used to describe a city’s evolution from a labor- to knowledge-intensive economy. In fact, the percent of jobs in Cuyahoga County that are in knowledge-based services (think healthcare, finance, management, the arts) is 39.3%, ranking 7th out of all big-city counties, just behind the county seat of Pittsburgh and ahead of Minneapolis.
Driving Cleveland’s evolution is what has been described as its “healing economy”. Simply, Cleveland is a global exporter of healthcare services, which is driving local job growth. The industry has helped soften the blow brought by deindustrialization’s impact,, as noted in the job trends below.
But progress can equal pain. MIT’s David Autor recently showed that much of the working class didn’t “graduate” into knowledge economy work, but instead became subsistent on lower-wage service work. A “barbelling” of the labor market thus ensued, with knowledge workers on one end and service workers on the other. The father of term “knowledge economy”, Peter Drucker, envisioned such a scenario. “Knowledge workers and service workers are not ‘classes’ in the traditional sense,” Peter Drucker wrote in 1992. “But there is a danger that … society will become a class society unless service workers attain both income and dignity.”
That’s what happened. America is a class society, and Cleveland and the rest of the Rust Belt are on the fault line of that split. As the region begins to plot a strategy going forward with the creation of an innovation district via coffers from the State of Ohio, the main questions to be put forward include: “Innovation for who?” “Innovation for what?”
Cleveland needs to get some answers quick, and it needs to do so by shaking off its self-flagellating ways and looking in the mirror, because the answers to tomorrow’s questions won’t be found on the coasts. In fact, COVID-19 didn’t dampen the bifurcating labor market trends as much as light them on fire, largely due to the techno-capitalist consumer tech movement that’s brought the grocery store to the house, not to mention the restaurant, the movie theatre, the book store etc. Specifically, employment for low-wage Cuyahoga County residents cratered since the pandemic’s outset (-14.4%), , while it increased for high-wage workers (2.3%). This, despite the fact it was the former group that was out and about as cashiers, waiters, etc. risking infection, in effect tending to a capitalism that hasn’t been tending to them.