Chicago, other elite cities attracting companies away from downstate, economic columnist says
Large manufacturing companies no longer require general prosperity in the domestic market to succeed, a reality that is exacerbating Illinois' already dire economic situation, a Manhattan Institute senior fellow said during a recent radio talk show in Chicago.
"That's one of the things that's really changed in America," Aaron Renn, who also works as a contributing editor at City Journal and as an economic development columnist for Governing magazine, said during a recent edition of "Illinois Rising." "Back in the '50s, there was the world-famous statement, 'What's good for General Motors is good for America, what's good for America is good for the General Motors.' It used to be that the fortunes of big cities, small cities were all linked. Big corporations needed to have general prosperity so people could buy their products. Today, that's less true. Elite cities — like New York, like San Francisco, like downtown Chicago — these places can thrive while other parts of the country fail."
That isn't good news in a state that hasn't had a budget in two years. The proposed tax increases of the so-called "grand bargain" budget compromise in Springfield come in the midst of the state having lost 11,000 manufacturing jobs in 2016 alone, leaving it with the weakest regional jobs growth for the year, just like the past four years.
Illinois is the only state in the Great Lakes region where government workers outnumber manufacturing employees. Manufacturing job growth in Illinois has for years remained at a slower pace than in the surrounding states.
All of that has hit downstate Illinois particularly hard, especially in communities already in recession. One of those communities, Peoria, is reeling from Caterpillar's announcement in January that it will move from Peoria to Chicago.
"It's obviously policy driven," Illinois Opportunity Project Co-Founder Pat Hughes said during the same edition of "Illinois Rising." "Companies move their manufacturing operations overseas. It's a big national issue: [President Donald] Trump talks about this all the time and you can argue about what that means back and forth, but it's very easy to move them right next door. If you can move them overseas, you can move them to Indiana or you can move them into Wisconsin. These states are manufacturing friendly, they're employer friendly, they're right-to-work. And all of those policy initiatives, lower workers' comp, lower property taxes, frozen property taxes are more attractive to businesses. And that's why they're gone. And we have to do the same thing or we're going to be gone."
Caterpillar's move underscores major divides in the American economy, Renn wrote in a recent article. During his "Illinois Rising" appearance, he said companies like Caterpillar don't necessarily need a strong domestic market to succeed.
"They're not as dependent on the U.S. market as they used to be," Renn said. "So, in a sense, Chicago can succeed even while much of the rest of the state fails. And that creates a rather toxic political dynamic in the country, as you see with these big divisions that we have in our country."
While Chicago may benefit from losses downstate, it also suffers its own internal divisions, according to Renn.
"We also see, within the city of Chicago, the South and West sides have really been struggling," he said. "The lesser-educated people and the minorities in the city have not participated in the boon to the extent that the highly educated classes of downtown and the north side have. Yet what did we just see? Caterpillar moved here anyway, despite some of the big challenges."