A city re-invented by universities | KPMG | NZ

A city re-invented by universities

A city re-invented by universities

It's easy to say Pittsburgh, a fading steel town, was rescued by its universities. But that downplays the part played by strong civic and political leaders, a major physical re-shaping of the city and an influx of smart young people driving a new boom.

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For past generations, Pittsburgh was the heart of the US steel industry and the home of artist Andy Warhol. Now it is home to a new economy and a generation of young people who are artists of a different kind - forming businesses based on advances in artificial intelligence, medical robotics, 3D printing and big data.

Simon Hunter, KPMG Partner, says Pittsburgh is of real interest to Auckland because of the speed of change and way economic growth allowed the city to invest in its future. If there's one word Auckland should take from the Pittsburgh story, it is courage - to make things happen.

It's all a far cry from the days when Pittsburgh seemed headed for the same pauper's grave as Detroit. Now the city is growing at roughly double the average national growth rate in the US, springing largely from its new economy advances.Caroline Haynes, KPMG's author of the Magnet Cities study - naming Pittsburgh as one of nine global cities which have managed to change their polarity from "repel" to "attract" - says part of Pittsburgh's success was it had to change or die.

"The federal government chose to support the ailing automobile industry in Detroit through subsidies and handouts," she says. "The same support was not given to Pittsburgh; many argue this is the reason for its success today - it had no choice but to re-invent itself."

The decline

By 1910, Pittsburgh was producing 60 per cent of the US's steel and had become wealthy, forming the platform for the establishment of large corporations like Westinghouse, Heinz and many more. By the early 1980s, the cost of Pittsburgh steel was becoming unsustainable.Overnight, Pittsburgh's steel companies began to fall when General Motors announced they would stop buying US steel if prices didn't drop. Pittsburgh's economy crashed. Westinghouse filed for bankruptcy; Chevron and Rockwell International moved out of the city. In one year alone, 50,000 people left the region; unemployment climbed to 18 per cent.

The fightback

City Hall led the way in 1983 with then mayor Richard Caliguiri heading moves to re-fashion Pittsburgh's bleak downtown. He commissioned a new convention centre and a light rail line. He declared specific buildings to be blighted and sold the plots to developers, sparking some of Pittsburgh's biggest high-rise buildings.He also addressed the gaping hole in Pittsburgh's social entertainment and culture. A new cultural area used historic buildings to form a performing arts centre, art galleries and theatres, drawing residents downtown for the first time in years.

The key

Meanwhile two previously bitter rivals - the University of Pittsburgh and Carnegie Mellon University - were setting aside their differences and agreeing to drive the city's economic revival.

UoP, long a leading medical research institution, pioneered polio vaccine in the 1950s and, in 1986, brought all city hospitals, teaching hospitals and research facilities under one roof, with all revenues re-invested into research and clinical support.

Pittsburgh quickly became known as a medical research hub. UoP acquired the services of Thomas Starz, one of the pioneers of organ transplant, who performed the world's first simultaneous heart and liver transplant. Soon hospitals and research centres across the US were asking to join what became known as the University of Pittsburgh Medical Centre, now a US$10 billion not-for-profit health conglomerate employing over 62,000 people in 22 hospitals - more than ever worked for the steel industry, even in its pomp.

Carnegie Mellon (CMU) lured Herbert Simon, a world leader in artificial intelligence, from Stanford University, establishing the Robotics Institute. It won global attention during the Three Mile Island nuclear reactor meltdown when one of its robots penetrated the reactor to gather information.

CMU also moved into the field of computer science, forming a new school which attracted the likes of Apple founder Steve Jobs and Microsoft's Bill Gates. Google recently opened a big office there. The universities had set in place the magnets which were attracting new ideas, new people, new directions and new economies.

The result

As the city teemed with new students, researchers, R&D employees and others fuelling the new economy, Pittsburgh realised its quality of life would have to be improved.

Mayor Tom Murphy masterminded a scheme to allow residents to access the two rivers running through downtown Pittsburgh - previously denied by large corporations' towers close to the shoreline. Murphy persuaded them to move or make room for a 150-mile passage along the riverfront, with parks plus a mixture of residential and commercial buildings along the riverfronts.

He asked residents to pay a $52 yearly tax to help build new stadiums for the NFL's Pittsburgh Steelers football team and the Pittsburgh Pirates baseball team. That was voted down in a referendum but Murphy simply applied a one per cent sales tax; the stadiums were built, proving hugely popular and beneficial to the local economy.

Today, Pittsburgh is filled with busy young people, two major universities, an array of restaurants and bars. The downtown sits neatly between the confluence of the rivers and is a maze of bridges and distinct neighbourhoods on either side of the riverbanks.

Lessons for Auckland

Simon Hunter says Pittsburgh provides a blueprint for Auckland thinking: "There's courage and focus on a specific group of young technical wealth creators; there's a massive contribution from the universities working together and from commercial entities - and there's urban renewal leveraging the rivers."

* Originally published in NZ Herald.

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