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Political Physics: Can the Obama Administration Afford Another Bail Out? – Part II


a blogumn by Monique King-Viehland

1972 Pittsburgh -- before the 'Burgh cleaned up its act

Last week I posed a question, can the Obama Administration afford another bail out?

This week I’m thinking that perhaps I asked the wrong question.

In the 1970s and early 1980s, the steel industry in Pittsburgh collapsed – ripping the economic heart out of the city.  Almost 40% of the local economy and 10% of the jobs disappeared overnight.  What followed was swift population decline, significant decreases in property values, etc.  From 1974, a peak year for steel employment, to 2002, the industry hemorrhaged more than 75,000 jobs and the city shrank to 334,000 residents, from 520,000.

It was devastating.

Fast forward, nearly three decades later.

According to the New York Times, “de-industrialization in Pittsburgh was a protracted and painful experience.  Yet it set the stage for an economy that is the envy of many recession-plagued communities, particularly those where the automobile industry is struggling for its life.”

In the 1980’s, nearly 15% of the workers in the Pittsburgh region were steelworkers.  Today, less than 1% of the workforce today is employed in that industry.  And Pittsburgh’s steelmaking capacity now accounts for less than 4% of the country’s total capacity compared with nearly 12% in 1980’s (TradingMarkets.Com).

Pittsburgh has reinvented itself, shifting from an industrial economy to one based on technology, healthcare, education, and finance.

According to Pittsburgh Future, “the retail and tourism sectors are also strong.  The largest employer in the region is The University of Pittsburgh Medical Center with approximately 27,000 employees.  Some of the fastest growth in the Pittsburgh Region has been in high-paying, technology-oriented jobs – science, engineering, and health occupations increased by over 12% in the Pittsburgh Region between 1999 and 2004, nearly 70% faster than the 7% growth in the U.S. as a whole, and faster than in Boston, Charlotte, Minneapolis, and Silicon Valley.  And these jobs pay 50% more than the average wage in the region.”

I have no doubt that the Obama Administration will “bail out” the auto industry.  Frankly, I’m not sure that politically they have a choice.  Even though surveys indicate that 61% of Americans believe that the auto industry should not receive additional bail out funds, I do not think the Obama Administration can ignore the roughly 14 million jobs could evaporate if the Detroit Three are allowed to fail.  There will be lots of caveats, attempts to make the industry “greener,” greater government control, etc.

But again, I think that may be the wrong question.

Will a bail out matter?  Can the auto industry evolve?  Can it retool to become more competitive in the growing economy?  Can Detroit diversify its economy so that it is not so heavily dependent on the auto industry?  I think these are more important questions. 

There is a lot of disagreement about whether Pittsburgh has truly “reinvented” itself and whether it should be a model for Detroit.

But one thing is undisputable.  Nearly 30 years ago, Pittsburgh (like Detroit today) was a city built on an industry that was beaten by competition, suffered from financial mismanagement and on the brink of bankruptcy.  And today not only did it survive the “death” of that industry, but it has a growing economy. 

I think Anderson Cooper said it best on his blog, “Detroit should take notice. There may be a life-saving lesson here,” even if Pittsburgh isn’t perfect.

But no matter what happens, the auto industry in Detroit will never be the same. 

And although it may not seem like it today, perhaps it is a good thing for the long-term sustainability of Detroit’s economy.