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An Economic History of Cleveland (and the "Rust Belt")

In Cleveland, once the fifth largest city in the United States, remnants of past wealth persist. Beautiful museums housing priceless works of art and the imposing bulk of city hall act as reminders of the days when the city was a playground for Rockefeller, powerful bankers, and manufacturing titans. Over the decades, Cleveland has suffered economic devastation and reconstruction multiple times; first through the boom and collapse of natural resources, then through the rise and fall of the manufacturing industry, and finally through the financial crisis. Today, Cleveland is rebuilding once again, and the city has embarked on the long and painful process of reinventing itself for a new economy. Its population has fallen to 390,113, from its manufacturing heyday of 914,808 in 1950. Like other rustbelt cities, it has suffered from a decline in traditional industries leading to a decaying urban core coupled with lingering socioeconomic divides. Crime rates are much higher than the US average, and the median income is $26,556, under the rest of Ohio at $48,246, and under the rest of the US at $30,932. The reinvention is not yet complete, but there are positive signs that the old wealth and swagger will eventually return to the city’s streets.

Some of the most impressive investments in Cleveland’s future have come from the Federal, State, and Municipal governments. Faced with plummeting home prices, crumbling infrastructure, and a divided school system, political powers tried a number of unique solutions. In 1995 Cleveland’s school system was failing so abysmally that a judge ordered the state take over. In 1996, to shake up the rapidly failing school system, Ohio’s legislature implemented a system of scholarships that enabled students of any economic background to attend any school in the city (public or private). For those who received a scholarship this lead to a surge in educational success. Averages rose, students stayed in classes, and more private schools were founded to keep up with the demand. Public transportation has also seen a great deal of government investment. The system of busses and light rail that resulted was named one of the best transportation networks in North America in 2007.

Cleveland’s public institutions, operating on a combination of government support and private dollars, have played their own role in its renaissance. The city boasts one of the original “big five” American orchestras and a vibrant arts and cultural scene. Multiple universities grace the city centre and NASA hosts a research centre. Cleveland is home to the Rock and Roll hall of fame, famous museums, and numerous athletics facilities.

Once considered the best city in the United States to do businesses in, the combination of government programs and public institutions is once again creating a framework for businesses to launch from. The Cleveland Clinic Foundation operates a huge hospital network, stretching from Cleveland to Canada to the United Arab Emirates, out of downtown Cleveland. The Foundation is the cornerstone of a vibrant health market growing from a city with a rapidly aging population. Incubators for bio-tech businesses and research centres have sprung up around the city’s world class hospitals, and huge investments in internet infrastructure have paid off with a rapidly growing technology industry. Cleveland has won awards for its internet innovation, and a rapidly growing sector of tech startups are transforming the city into a mini silicon valley. Small business in other industries are also popping up quickly and thriving.

These successes have not been without roadblocks. The Scholarship program ran into constitutional challenges brought forward by the powerful teacher’s union. They feared that if more parents decided education was better at private schools, the public institutions where the unions held sway would see funding cuts and job losses. Indeed, shortly after the program was implemented, the public school system set higher standards and began to reassign under-preforming teachers and administrators. Unfortunately today, while 99.6% of students who use the vouchers to attend private school graduate, only 30% of those who attend public school do. The other secular private schools that were initially founded in response to overwhelming demand for the voucher program folded into the public system as charter schools due to lack of funding, leaving Catholic schools as the only alternative. This opened the way for a court case brought forward by the unions based on the separation of church and state. The case dragged on until 2002 when the Supreme Court ruled in favour of the voucher program. Cleveland’s economic and educational reforms were stalled when the United States economy fell into recession. Much of the massive 3 billion dollars in research spending that the universities and hospitals do each year leaves the city, and a rapidly changing job market have left many without relevant skills.

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