The Story Behind the Conclusion: Lack of Regulation Leads to Plant Closings and Economic Loss
I grew up in Cleveland in the 1950s. For the past century, Cleveland had been a high-tech industrial powerhouse. But it was already visibly in decline, and this blog explains some of what went wrong and how we can avoid these mistakes in the future.
When I was about 4, I noticed the thick black smoke pouring out of the industrial smokestacks I saw on the tram ride downtown, and wondered: where did all that black smoke go? Assurances that it “dissipated” (or whatever the 4-year-old word was) were uncompelling even to a small child. All that particulate matter (or the 4-year-old word for it) had to go somewhere.
Well, one of the places it evidently went was onto any flat surface. I learned to help my mom dust surfaces like interior windowsills, and every day we could see tiny flakes of deep black crud accumulate on all of them, even if we dusted just the day before. I also remember my mother vacuuming frequently—much more than the once every week or two that I do today. And we were over 5 miles from the nearest smokestack.
It also accumulated on buildings. All of the big downtown buildings were sooty black, whether they were built of beige stone or red brick.
Another thing I noticed was in fact something I didn’t notice: views. We lived 7 miles from the tallest building between New York and Chicago—a 48-story tower that marked the center of downtown and served as the main passenger railroad terminal. It is, as I have subsequently seen, right at the end of the wide street that ran right by our house. But I never saw it from there: not once in 18 years. The skies were far too polluted for that.
Usually we couldn’t even see views of Lake Erie from 4 miles away.
We took trains to Chicago twice or so a year to visit my mother’s family, and there were two competing train services operated by different railroads. One company offered 4 daily trips and the other offered two or three. You had a choice of departures in the morning, around midday, and late afternoon, and I think an overnight train. The journey took 7 hours as I recall, the cars were spacious and elegant, and the trains were reliably on time. You could get to New York on all of those trains as well; you could also go to central and southern Ohio.
Cleveland was prosperous at the time: it provided the eight-largest industrial job market in America, and offered well-paid factory employment in the steel, machine tools, petroleum refining, and automobile production industries, and had a Great Lakes port as well as an extensive system of freight railroads.
But even as a child, one got the foreboding sense that the end of this prosperity was near. Steel mills and other heavy industrial buildings looked like something out of a horror movie: dirty buildings on lots overgrown by weeds, with crumbling parking lots and decaying railroad loading docks. And the mills as well as the auto plants constantly threatened to close, usually as an explicit threat to avoid clean air regulation. They finally did beginning in the 70s. The jobs mainly went to Japan; later to Korea and the South.
Government Policies Can Create and Retain Good Jobs
The connection is this: the plants were so dirty and so economically marginal because their owners had not invested in them for decades. They had steadily fallen behind the state of the art in productivity as well as in controlling emissions. The overseas plants that replaced them were fully modern, and less polluting. Japanese industry is still able to thrive domestically in the current decade when assembly line workers often are paid from about $35,000 to $50,000 a year, and plants are expanding. We sort of knew this at the time: people joked that it is too bad that America did not get bombed in the war, because Japan and Germany rebuilt their old factories with new technology while we were still mired in the 1920s.
So the Rust Belt went to rust for the same reasons that iron railings rust: lack of maintenance and renovation. The reason Cleveland was so polluted was that the lack of environmental regulation allowed the plant owners to milk the fully depreciated plants for that last year of production before shutting down, rather than investing and modernizing for cleanliness and productivity.
The bottom line was, and is, that environmental regulation promoted innovation and profitability, and could have retained the lost industrial base. One area of production that was not lost from the region was home appliances. But appliances became subject to environmental regulation (in this case for energy efficiency beginning with a law passed in 1975). The largest appliance plant in northern Ohio continues to operate, and produces many products that meet Energy Star specifications for efficiency.
But for most industries, the overall approach that was favored was to depart from the world-class innovation that had made Cleveland the center of technology in the 19th Century. (Cleveland had the first electric street lights in the world, using a locally-invented technology, two years before Edison invented the incandescent lamp.) This departure seems not to have been noticed in real time, but it allowed other countries or regions to overtake Cleveland gradually over time. Government did not try to intervene with policies to promote innovation, and little of it happened. The city declined steadily: population dropped from 914,000 in 1950 to 574,000 in 1980 and 388,000 today.
Transportation Policies that Decrease Service and Raise Emissions
A similar problem led to the decay of railroad service: a lack of government policy support. Beginning in the 50s, the state and federal governments built major Interstate highways, most of which were offered to drivers and truckers for free; meanwhile the railroads were responsible for the costs of trackbed. Oil production was encouraged and subsidized, while railroads had to make money solely on fares. Railroads were regulated for safety and pricing but not for quality of service or productivity. (The Chicago train had a one-hour stopover halfway there for no discernible reason. In retrospect, it seems clear that the schedule was developed for coal fired locomotives that needed time to take on water and fuel, but the stopover did not go away after the changeover to diesel locomotives made it unnecessary.)
At the same time, government money developed airports to further compete with trains. Passenger trains were not very profitable, and railroad companies were keen to cut costs even at the expense of ticket sales. So former train passengers decided to drive their cars on new government-built highways or take airplanes that relied on government-provided airports, air traffic control, and other safety systems.
Meanwhile in Europe and Japan and other parts of East Asia, railroads were operated by governments and service not only was maintained but improved. This increased convenience for travelers and reduced costs as well as emissions. But in Cleveland, we now are served by only two Amtrak trains a day, which are both scheduled during the wee hours of the morning and are unreliable as to on-time performance. There is no north-south service. Business travel requires airplanes or long drives, putting Cleveland at a disadvantage as a productive business location.
The takeaway is this: a lack of regulation led to the loss of industry and its high-paying jobs, losing the plants to areas whose stronger regulation encouraged technology innovation. These other countries did not go through the same cycle a generation later, but instead are still productive in the heavy manufacturing sectors.
I recently traveled through Germany on the train, and I saw lots of still-functioning industrial plants that were relatively clean, well-maintained, and free of graffiti. This stands in stark contrast to the graveyard-like trackside experience in America of seeing decaying, dirty brick facades punctured by holes that once contained windows, covered with graffiti, and separated by overgrown empty lots. The government supports trains in our big economic competitors—Germany, Japan, Korea…and as a result there is convenient, reliable passenger train service that can compete with air in terms of higher reliability, short travel times city to city, and low pollution impacts.
So the current Administration’s policies to cut environmental regulation and decrease support for rail travel seems all the more tragic to me: it repeats all of the errors of the 1950s, in which suffering from pollution is compounded with the suffering that soon after comes from plant closures due to industry’s failing to innovate.