It's Time for a New Way of Thinking: Is Northwest Indiana Ready for the Knowledge Economy?

Published March 26, 2001, The Post-Tribune

It is said that the journey of a thousand miles begins with a broken fan belt and a leaky tire.

As a shareholder of LTV Steel, I wasn't excited to see its bankruptcy. Nor was I surprised. And I wouldn't be surprised in twenty years to see the near-complete disappearance of Northwest Indiana's steel industry--much worse for the regional economy than a flat tire or broken fan belt.

Despite the hardships steel's decline will have on the families of Northwest Indiana, the federal government will not save the steel industry. It has no reason to. The US doesn't produce many plastic toys and textiles because others can do so cheaper--why should we shelter the steel industry from more efficient foreign competition?

Some tout steel to be a "vital industry." What was true in 1941 is not necessarily true in 2001. Future wars will be decided by nuclear weapons more than steel. Indeed, when J.P. Morgan formed U.S. Steel in 1901, "The Corporation" was the world's biggest; today, USX is worth about the same as Tupperware Corporation, based on market capitalization.

Northwest Indiana has reason to be scared witless. As Harvard's Edward Glaeser says, "cities cannot be about manufacturing in the future." Luckily, Northwest Indiana is better positioned than many regions to become a leader in the knowledge economy. The journey of a thousand miles begins.

Knowledge economy hubs aren't born; they are made through political and economic will. The question we now face is whether Northwest Indiana will focus its resources on saving a dying industry or on building a new industrial base.

Glaeser advises leaders to "make your cities consumer-friendly." The most successful places in the knowledge economy will be consumer cities, or places where people want to live--cities like California's Central Valley cities, Austin, and Campinas, Brazil.

The common threads of these places, according the Industry Standard magazine, include "java joints, arts and culture, bars, clubs, and parks." Also important are easy access to air transportation, a "wired infrastructure," and "favorable regulations, zoning, and tax polices."

All of these elements of the tech-oriented consumer city could be implemented here. For instance, expanding service at the Gary airport is crucial, as is properly funding the South Shore train.

Former Philadelphia mayor Ed Rendell recognized the importance of regional transportation. He fast-tracked construction of the high-speed Acela train at the same time as he developed a tech center in an economically depressed area four blocks from the train station.

Today, the 95-mile Acela from Philly to Manhattan is a shorter trip than the 46-mile South Shore commute from Chesterton to Chicago. Imagine the benefit to downtown Gary if the South Shore commute were cut to 25 minutes! A hint: Philadelphia's tech hub was recently dubbed the "best new place for tech companies to do business" by the Industry Standard.

Education is also crucial, and Indiana's approach so far has principally been the development of community colleges. But Michael Dell didn't locate Dell Computer Corp. in Austin because of a budding crop of community college grads; he located in Austin because his dorm room was in Austin--specifically, at the University of Texas.

Indeed, the record of tech success stories, which dates back to the 1950s founding of North Carolina's Research Triangle, calls for coordination of effort among internationally-renowned universities. Northwest Indiana is situated between three: the "Lakeside Triad" of Northwestern, Notre Dame, and the University of Chicago. These universities' graduates will drive the Midwest knowledge economy.

Making Northwest Indiana a "consumer city" will break Chicago's "south of Roosevelt" stigma, which includes not just "those numbered streets," but also Northwest Indiana! For instance, Zagat's, the restaurant bible, calls Clayton's "the only reason to go to Valparaiso."

The passing of big steel is emotionally difficult but easily foreseeable. If anything, we're lucky Big Steel has hung around so long. In 1950, seven of the US's eight largest cities were overrepresented in manufacturing. By 1990, six of the eight largest were underrepresented.

The biggest mistake will be if Northwest Indiana expends more energy keeping the steel industry on life support than on retooling to meet the demands of the knowledge economy. The NASDAQ's hiccups do not excuse delay. Change in thinking is necessary; we must begin the journey with single steps taken now.

Reader-columnist Adrian Jones of Valparaiso is a senior economics major at the Wharton School at the University of Pennsylvania.