Guest post by Kevin Brekke, Editor, Casey Research
The title of this article borrows from that old adage about politics uttered by former U.S. Speaker of the House Tip O’Neill, and refers to a recent study out of The Brookings Institution that shows that all economic recoveries as well as politics are local.
Prepared by the Metropolitan Policy Program at Brookings, the study examines 150 of the world’s largest metropolitan economies in 53 countries from 1993 to 2010. As expected, the 150 metro areas profiled are highly diverse, with per-capita measures of Gross Value Added (roughly the equivalent of per-capita GDP) ranging from under $1,000 in Hyderabad and Kolkata, India, to $70,000 in San Jose, U.S.A., and Zurich, Switzerland.
The cities were ranked based on two measures – economic output [as approximated by GDP] and employment – and during three economic time periods the study defines as: pre-recession 1993-2007; recession year of minimum growth 2007-2010; and recovery 2009-2010.
As many of you are probably already thinking, the measures of economic output and employment are somewhat co-dependent. In that regard, the authors are careful to point out an important distinction, noting that:
"Although the ranking indicators [economic output and employment] depend to some degree on one another, they do not always move in unison. On the one hand, some metros that appear quite good on income growth may not generate new jobs, reflecting increased productivity but not necessarily growing employment opportunities. On the other hand, metros can grow employment, but not the type of employment that boosts incomes and standards of living for the broader population."
The full report draws some very interesting conclusions about growth opportunities in the years ahead, and I highly recommend you give it a read. For those time-stressed readers amongst us – and who isn’t these days with so much to read and so little time – I suggest you start with the executive summary and then a quick review of the report’s charts and tables that will give you a good idea of the main points made in the report. You can access the report via the link above.
The report’s conclusion is what I want to briefly focus on here. Let’s start by looking at the 30 metro areas that have done best during the recovery years as defined in the report:
Only three cities within what might be termed “Western economies” made the list: Austin, Montreal, and Melbourne. Of the next 30 cities, 14 are from Western economies. And some of the U.S. cities that made the top 60 might surprise you, like St. Louis and Detroit.
It also becomes clear that a good showing in the pre-recession period did not necessarily ensure that a city would undergo a quick recovery. A good counter-example of this is Istanbul. Ranked #1 during the recovery, Istanbul was #143 in the recession and #44 pre-recession.
The concluding remarks in the report are important for no other reason than that they underscore a point we have been making for some time. That is that the economies in Asia and Latin America will continue as increasingly formidable opponents in the quest to grab a larger share of world growth. Quoting from the report:
“The real story, however, was the continued rise of lower-income metros outside the U.S. and Europe relative to others.A look at the first year of the worldwide recovery from the metro perspective reveals a highly uneven landscape, but one in which lower income regions are clearly leading the way even more than before as centers of global economic growth.”
And,
“The past two decades have seen lower-income metro areas in the global East [Asia] and South [Latin America] “close the gap” with higher-income metros in Europe and the United States, and the worldwide economic upheaval has only accelerated the shift in growth toward metros in those rising regions of the world.”
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