Chicago: Still The City That Works
As a native Chicagoan, I don't mind that Chicago has missed out becoming the New Economy center of the U.S. ("Chicago Blues," Cover Story, Oct. 16). I can live without the urban sprawl, congestion, and skyrocketing costs of living in San Francisco and San Jose, which result from the technology boom in the Silicon Valley. In the meantime, Chicago benefits from being one of the most livable cities in America--with a strong infrastructure, an improving school system, and affordable housing. While my counterparts in Silicon Valley fight traffic each night on the way home, I will be barbecuing dinner on my roof deck or taking a jog along the lakefront.
Focusing on corporate headquarters as a measure of civic health and "identity" is about as out of date as eight-track tapes. Corporate headquarters have pretty much been on the decline as a source of employment since the 1970s. Indeed, it is links to one industry--heavy manufacturing--that led to Chicago's lagging performance in the past.
By contrast, Chicago's newfound diversity triggered its rise in the charts in the 1990s, and left others to being one-hit wonders. Chicago has generated more than half a million jobs since January, 1990, more than triple the pace of New York, Los Angeles, and Boston combined. Throw in San Francisco, and Chicago still beats the whole bunch by a substantial margin.
Those gains lend important context to your criticisms of the city's job and housing market. For much of the expansion, including today, Chicago's unemployment rate has been substantially below that of New York or Los Angeles. So, Chicago's recent slowdown in job growth reflects strength in the city's existing employment base, not shortcomings.
Chicago has seen more than 40% appreciation in its housing values since the start of the expansion, nearly triple that of New York, and even above that of San Francisco. Even so, Chicago real estate remains more affordable than those cities, which should continue to make it a draw for new business. (Have you tried to relocate workers to New York lately?)
Then, there is the issue of Chicago's prowess in the tourism and convention business. The Windy City is second only to Washington as a hub for associations, and Michigan Avenue has become one of the most sought-after retail destinations in the country.
Finally, it is the old-line industries of the Midwest and Chicago that will write the next hit in the e-commerce sweepstakes. The ultimate value of information technology rests almost entirely in the ability of these old-line industries to turn it to their advantage through business-to-business electronic commerce.
Blues is still music to my ears, and Chicago will win the Grammy in the next phase of this expansion.
Diane C. Swonk
Bank One Corp.
While I share your concern, particularly about the loss of corporate headquarters, you paint an inaccurate picture of the Chicago region's strength. Based on U.S. Census estimates, the Chicago population is growing far more robustly than other old cities. This is a great turnaround for Chicago, which saw population growth of only 2% per decade from 1970 to 1990.
Population growth is a more important indicator of health than growth in financial services. It reveals economic issues more fundamental than whether or not the economy is locally controlled or whether the city is the most important international financial center.
The argument about rises in housing prices is, as you recognized, two-edged. Low prices and low rates of gain are a problem in a global economy only to the extent that transferring executives cannot keep up their position in the housing market from city to city. Overall, our lower housing prices are a competitive advantage. The fact is they have been growing at or slightly above the rate of inflation consistently, reflecting a market able to sustain new construction and good resale values. Why, in a market economy, should overall prices grow faster than inflation if supply is not improperly constrained? This is evidence of a well-managed, healthy market, not of weakness.
What is going on in Chicago is far more important than can be measured simply by the number of corporate headquarters and the health of financial markets. Chicago is undergoing a transformation to become more globally competitive. The city and region are the capital of the Midwest. Young people from the surrounding states are drawn here by the dynamic economy and quality of life. Immigrants provide added entrepreneurial energy, and growth. The city itself has undergone a turnaround in housing, with permits issued for 4,800 units last year alone, the overwhelming majority of it market-rate and reaching into a wide range of neighborhoods and distinctly urban in character, building on our competitive strengths as a true city rather than simply annexing otherwise suburban territory.
Stephen B. Friedman
Leaders of Chicago's futures exchanges were forewarned as early as the 1980s of the impending doom of the open-outcry system and imminent loss of market share. Yet they repeatedly disregarded the message and banished the messenger.
The Globex (electronic trading) system was labeled a threat to the power base of the autocratic exchange governance, which quickly branded it the means of vocational ruin for the pit scalper. The slightest defiance of this dominance meant expulsion from the tightly controlled fiefdom of pit trading.
Chicago seems destined to repeat the experience it had with railroads and meat-packing. We never adjust the rearview mirror. Oh well. Next time around maybe things will be different.
Robert M. Pines
As one born and raised in the Windy City but now living in Los Angeles, I can testify that the biggest obstacle facing Chicagoans is their hypersensitivity to criticism and their self-aggrandizement, which blocks any honest assessment of their city.
A few weeks back, my father flew from New York to Chicago to attend his 50th reunion at Hyde Park High School. Impressed with the renovated neighborhoods, great restaurants, and gleaming Michigan Avenue, my dad commented on "the city's renaissance" to a lifelong Chicagoan and retired head of a bank there. The banker retorted brusquely: "Chicago never needed a renaissance, because it has always been the best!"
Andrew B. Hurvitz
Van Nuys, Calif.
You quote Robert Hamada, the dean of the University of Chicago's Business School, as saying: "Having three separate exchanges in Chicago is absolutely stupid." The estimable dean is spot on. In the early 1990s, however, when Hamada was an outside director of the Chicago Board of Trade, he advised the exchange that its mission should be "member opportunity" rather than serving the market user (a.k.a. the customer) or embracing the then-apparent advance of screen-based trading. Please tell me how the introverted "member opportunity" mission pointed towards exchange consolidation. Credentials and all, he perpetuated the myopia.
Not everyone in Chicago has been singing the blues of late. Chicago's high-tech heritage in the telecom sector is largely responsible for the structural displacement in the financial sector. Telecom is also powering the formation of the global corporations affecting Chicago's business landscape.
You're right that Chicago is seeding the nation with innovators who leave the area in search of venture financing. The region is fertile ground for high-tech innovation, and Carl Sandburg would still recognize Chicago as a modern day "tool maker for the world" when it comes to telecom.
President and CEO
Your closing paragraph made me think I should buy marshmallows and be prepared for the fall of Chicago. I suppose you can't find much fault with the economies of New York and Los Angeles. Being first doesn't always mean being best. This is the city that works. Chicago has risen to the challenges of change many times during its 100-plus year history and will continue to do so well into the future. Long after tumbleweed blows through Silicon Valley and New York files Chapter 11--again.