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Lessons for the G-20
Western Pa. shows the resilience of a diverse economy
Monday, September 21, 2009

The leaders of the world's largest economies meet in Pittsburgh Sept. 24 and 25 for their third summit since the beginning of the global economic crisis.


Bruce Stokes covers international economics for National Journal.

Selection of America's rust belt capital as the site for the gathering has evoked smirks from global sophisticates accustomed to communing in Davos and other international watering holes. But Western Pennsylvania is an inspired choice.

As the first green shoots of recovery emerge from the rubble of the Great Recession, it is time for government leaders to begin talking about how to fix their broken economies. There is no better place than Pittsburgh to learn about economic recovery.

The region, a casualty of industrial hollowing out in the 1980s, had no choice but to reinvent itself. Its experience demonstrates that a balanced local economy, one that preserves a manufacturing base, complimented by an expanding service sector and an infusion of foreign investment, may offer the best prospects for a more prosperous future.

The G-20 leaders will waste their sojourn in Pittsburgh if they end up just talking to each other about reforming the international economic system. As the Atlantic Council, a Washington-based think tank, argues in a new study: "to be a continuously relevant body, the G-20 needs to broaden its agenda beyond the narrow task of financial regulatory reform. The task is how to foster new sources of growth that will flourish in the 21st-century economy." And that will best be accomplished by some nuts and bolts discussions with Western Pennsylvania officials.

In 1983 unemployment peaked in Pittsburgh at 14.7 percent, the highest level since the Depression. With most steel production having moved overseas or into mini-mills in other parts of the country, Steel City needed a new economic engine. Home to Carnegie Mellon University, a center of computer research, and the University of Pittsburgh, known for its medical innovation, city leaders looked to a future based on high-tech and medical services.

The strategy has paid dividends. The community has suffered less from the current recession than have much of the former rust belt and the nation. Local unemployment is only 7 percent at a time when the national jobless figure is over 9 percent.

But turning an industrial sow's ear into a high-tech silk purse has not proved easy. The engineers who founded Sun Microsystems Inc., for example, are Carnegie Mellon graduates. But the firm is now headquartered in Silicon Valley, where the engineers and managers would prefer to live. Ensuring that Pittsburgh is a city that not only develops talent, but also keeps it, is an ongoing struggle.

Experience in Butler County underscores the value of maintaining local economic diversity. Unemployment is only 7.5 percent in Butler, second only to Pittsburgh in Western Pennsylvania. This is a far cry from 1982, when local joblessness peaked at 17.1 percent.

The steel works in Butler has far fewer workers today than it did three decades ago, but it produces more steel. It survived by focusing on the production of specialty products, much of it for foreign markets. Preservation of this industrial hub safeguarded employment in small and medium-sized enterprises that supply the mill. The continued existence of these firms has sustained a technical work force that has encouraged other industries to arise. As a result, there are nearly as many manufacturing jobs in Butler today as there were when the local mill was in its heyday.

The maintenance of a manufacturing base provided a solid foundation for an expanding service sector. The local hospital is now the largest private employer in town. And the locality has not been shy about seeking out foreign investment. Westinghouse, which is owned by Toshiba, is building its global nuclear energy headquarters in the county, bringing with it 3,000 new, well-paying jobs.

"The task facing the G-20," concludes the Atlantic Council report, "is how to foster new sources of growth that will flourish in the 21st-century economy." To that end, global leaders have much to learn from Western Pennsylvania's experience. No locality can be vaccinated against the kind of downturn the world has recently experienced. But a diverse economy that does not let manufacturing die, that fosters services-based employment and is open to foreign investment may provide the greatest resilience in hard times. It's a lesson the G-20 can take away from the Pittsburgh summit that might actually prove useful.

First published on September 21, 2009 at 12:00 am