In recent decades, some cities with a strong history of manufacturing have been able to make the switch to a strong knowledge economy, and thus have maintained a relative level of economic prosperity in the current economic climate. In the wake of the city of Detroit’s filing for bankruptcy, Saskia Sassen looks at how a city that was once economically very similar – Chicago – has made that successful transition. She argues that the gearing of Chicago’s agro-industrial economy, and its associated financial and legal support services, towards international markets have allowed it to succeed in its transition to a knowledge economy. Detroit, on the other hand, has been historically dominated by the automotive industry, and has not been able to redeploy its knowledge and practices in the same way

Sassen, Saskia

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blo gs.lse.ac.uk http://blogs.lse.ac.uk/usappblog/2013/09/02/detro it-chicago-economy/Unlike Detroit, Chicago’s diversified industrial base hashelped it to successfully switch from a material to aknowledge economy.In recent decades, some cities with a strong history of manufacturing havebeen able to make the switch to a strong knowledge economy, and thus havemaintained a relative level of economic prosperity in the current economicclimate. In the wake of the city of Detroit’s filing for bankruptcy, SaskiaSassen looks at how a city that was once economically very similar – Chicago– has made that successful transition. She argues that the gearing ofChicago’s agro-industrial economy, and its associated financial and legalsupport services, towards international markets have allowed it to succeed inits transition to a knowledge economy. Detroit, on the other hand, has beenhistorically dominated by the automotive industry, and has not been able to redeploy itsknowledge and practices in the same way.Chicago and Detroit share a heavy manuf acturing past. So why did Chicago rise as aspecialized f inancial and advanced corporate service economy while the f ormer ‘Motor City’has recently applied f or bankruptcy? Looking at the two cit ies raises a question about howa city or a region becomes a knowledge economy. Chicago helps illustrate a particular case:an economy based on heavy manuf acturing, industrial scale agriculture, and continentallevel transport capacity.It is common to see Chicago as a latecomer to the knowledge economy (and thus to global city status).Why did it happen so late – almost f if teen years later than in New York and London? Typically the answer isthat Chicago had to overcome its agro- industrial past, that its economic history put it at a disadvantagecompared to old trading and f inancial centers such as New York and London.But in my research I f ound that its past was not a disadvantage. In f act, it was one key source of  itscompetit ive advantage. The particular specialized corporate services that had to be developed to handlethe needs of  its agro- industrial regional economy gave Chicago a key component of  its current specializedadvantage in the global economy. While this is most visible and f amiliar in the f act of  its pre-eminence as af utures market built on pork bellies, so to speak, it also underlies other highly specialized components in itsglobal city f unctions. Let me add promptly, that becoming a global city is not necessarily good f or all itsresidents, as I show in my research on the subject –there are social costs.Extracting Knowledge from an Industrial EconomyWhen I arrived at the University of  Chicago in the Fall of  1998, the mood downtown was that of  a sense ofloss –corporations and banks were leaving, and the general sense was that Chicago’s past as a heavymanuf acturing center was to blame. But in f act, once one lef t the corporate heights it was clear that therewas a lively economic and cultural scene of  small enterprises, networked economies, old lof ts transf ormedinto beautif ul restaurants catering to a whole new type of  high- income worker—hip, excited, alive. Yes,there was a new vibrant economy of  small specialized f irms, sof tware developers and experimental culturalspaces. The center of  the city was gaining population even as the city at large was losing population (thebest source f or readable data on the population and economy of  the city, is Chicago Crain’s long-termcontributor Craig Hinz).I knew I had a new research project.The complexity, scale and international character of  Chicago’s historical agro- industrial complex requiredCre d it: EH-De sig n (Cre ative  Co mmo ns CC NC SA 3.0)highly specialized f inancial, accounting, and legal expertise, quite dif f erent f rom the expertise required tohandle the sectors New York specialized in –service exports, f inance on trade, and f inance on f inance.Today there are other sectors that are, clearly, also crit ical to Chicago’s advanced service economy, notablythe conventions and entertainment sector and cultural industries. But the point here is that Chicago’s pastas a massive agro- industrial complex gave the city some of  its core and distinctive knowledge economycomponents. Over the last decade Chicago has been ranked in the top ten of  all major worldwidecomparisons of  global cit ies.However, f or this specializedadvantage to materialize, it isnecessary f or that past knowledge tobe repositioned in a dif f erent set ofeconomic circuits. It entails, then, dis-embedding that expertise f rom anagro- industrial economy and re-embedding it into a “knowledge”economy –that is to say, an economywhere expertise can increasingly becommodif ied, f unction as a key input,and, thereby constitute a new type ofintermediate economy.Having a past as a major agro-industrial complex makes that switchmore dif f icult than a past as a tradingand f inancial center. This explainspartly Chicago’s “lateness” in bringing that switch about. But that switch is not simply a matter ofovercoming that past. It requires a new organizing logic, one that I have discussed elsewhere, that canrevalue the capabilit ies developed in an earlier era. It took making to execute the switch.Switching takes makingThrough its particular type of  past, Chicago illuminates aspects of  the f ormation and the specif ics ofknowledge economies that are f ar less legible in cit ies such as New York and London. The latter weredominated by trading and banking. A f irst issue then is that Chicago’s emergence as a major global cityshows us that it is a mistake to assume that it is only trading and banking centers that can evolve intotoday’s global cit ies. In other words, New York and London are but one kind of  prototype.A second issue raised by the Chicago case is why do some cit ies with heavy manuf acturing origins makethe switch and others not. Chicago, Sao Paulo, Tokyo, Seoul, and Shanghai are among today’s major globalcity regions with particularly strong histories in heavy manuf acturing.But most once important manuf acturing cit ies, notably Detroit and the English manuf acturing cit ies, havenot undergone that type of  switch. What the available evidence shows is that they were mostly dominatedby a single or a f ew industries and shaped up more like mono-cultures. This points to the importance ofdiversity in a region’s manuf acturing past. Chicago secured the components of  a knowledge economybecause it had a highly diversif ied industrial base—f rom steel and the production of  machines to industrialscale agriculture and continental-scale transport logistics.Detroit also had a diverse manuf acturing base—making a car takes many dif f erent types of  manuf acturing.A car is one of  the most complex manuf acturing products. In my current project on “Urbanizing Technology”,supported by AUDI, my starting point is that both the car and the city are complex assemblages of  highlydiverse components; it in that enormous diversity that lies their capacity to survive massivetransf ormations in a way that so many other products of  modern history have not.If  it  is not the product with its diverse components, what is it that happened in Detroit? The weak point wasthat all the diversity of  components were mostly manuf actured via subcontracts f rom the corporate carcompanies. The latter dominated and dictated. This made Detroit more akin to a plantation economy, nomatter how complex a cof f ee bean it produced.Chicago, in contrast, had multiple organizing logics. It was, in some sense, more networked, as we mightsay today. The knowledge embedded in those very diverse industrial sectors was eventually extracted andtransf ormed/commodif ied into specialized servicing capabilit ies. It took work to dislodge that knowledgef rom certain types of  organizational logic (heavy manuf acturing, industrial agriculture, and continental leveltransport logistics) and insert it into a dif f erent type of  organizational logic: that of  today’s so-calledknowledge economy.Chicago’s specialized differenceBy the late 1990s Chicago had secured a specialized global advantage in producing certain types off inancial, legal and accounting instruments. Partly this was a development that originated in a domesticstage:  f inancial, legal, and accounting experts in Chicago had to address in good part the needs of  theagro- industrial complex; they had to deal with steel and with cattle produced f or regional, national andinternational markets. From being mostly national it evolved to become international.It is this kind of  specialized knowledge that matters f or Chicago’s competit ive situation in the global market.Thus when Boeing, the airplane manuf acturer, decided to enter the global knowledge economy, it did noteven consider locating in New York: its top choices were Chicago, Austin, and the industrial triangle in NorthCarolina. It chose Chicago. Chicago, Sao Paulo, Shanghai, Tokyo, and Seoul, are now among the leadingproducers of  these types of  corporate services specialized in heavy manuf acturing and large-scaleagriculture. And they are so not in spite of  their economic past as major heavy industry centers, butbecause of  it.This type of  analysis also shows that it never is “the” national economy that articulates a country within theinternational division of  f unctions. It is specialized regions and cit ies. Today this pattern is even strongerbecause the global economy consists of  a vast number of  particular circuits connecting particularcomponents of  cit ies and regions across borders. It is at this level of  disaggregation that it is best tounderstand how cit ies and regions are globally articulated.What if  Detroit ’s economic history before car-making was rich in diverse forms of manufacturing?The economic trajectory and switching illustrated by the Chicago case contests the common thesis thattoday’s advanced economic sectors are all the same across the world; incidentally, this is also a thesis thatleads many to argue that all cit ies are competing with each other.The Chicago case shows that becoming part of  a knowledge economy is not simply a question of  droppinga manuf acturing and agro- industrial past, and then proceeding to converge/homogenize on theheadquarters-services-cultural sector axis. A crit ical component is the extracting of  knowledge embedded inthose material practices and its reinsertion into a f ar greater diversity of  service economies.The deep economic history of  a place matters f ar more than the currently dominant discussion ofknowledge economies allows us to see. As someone who has worked on Chicago but not on Detroit, myquestion is what knowledge was embedded in Detroit ’s deep economic history bef ore the large carmanuf acturers sucked it up f or their purposes? It might well be the case that the car manuf acturers exerteda sort of  gravitational pull that neutralized the diversity of  Detroit ’s histories of  knowledge making. What ifbef ore that car phase, Detroit had a diversity of  knowledges that could today contribute to a diversif iedeconomic base, ranging f rom specialized machine craf ting to the making of  materials?This article is based on the author ’s research; see for example “Cities in Today’s Global Age” SAIS Review(2009) Special Issue on “Cities”, SAIS Review, 29(1); “Cities Today: A New Frontier for Major Developments” InSpecial Issue on “The Shape of the New American City”, The Annals of the American Academy of Political andSocial Science , 626(1); more generally see Cities in a World Economy (4th fully updated edition) ThousandOaks, CA: Sage/Pine Forge 2012).Please read our comments policy before commenting.Note:  This article gives the views of the author, and not the position of USApp– American Politics and Policy,nor of the London School of Economics.Shortened URL for this post: http://bit .ly/17rERRw _________________________________About the authorSaskia Sassen – Columbia UniversitySaskia Sassen is Prof essor, Columbia University and co-chairs its Committee on GlobalThought. Her f orthcoming book is Expulsions: Brutality and Complexity in the GlobalEconomy (Harvard University Press 2014). She has received multiple honors, most recentlythe 2013 Principe de Asturias Prize f or the Social Sciences.CC BY-NC-ND 3.0 2014 LSE USAPP

Unlike Detroit, Chicago’s diversified industrial base has helped it to successfully switch from a material to a knowledge economy

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