Pittsburgh Laughs Last
Forbes has listed Pittsburgh, Pennsylvania, at the top of its list of affordable cities in which to buy a home. And the publication notes in passing that the city “never experienced the dramatic run-up in prices that characterized the national housing bubble — so it was spared the subsequent bust.”
True, and there is a dramatic story here that reveals how impossible it is for legislation to ever win out over the price system. Politicians, regulators, bankers, unions, and the press can scream and yell, punch and kick, and sign all the laws they can print, but the market presses on to achieve its own results.
In this case, Pittsburgh is the winner. There is really no sign of recession in Pittsburgh. It is a beautiful, bustling city with surprisingly clean air, low unemployment, and happy people everywhere. There are construction projects on every corner, students pouring in and out of universities, technology companies starting and building, and new people moving in just to enjoy the amenities. Its low prices are not a bane but a key attraction.
There is no sign of the misery that was the same city starting from 1980s when the steel industry in the U.S. was in inexorable decline. The city was built by steel in both a physical and economic sense. Garet Garrett’s book The Cinder Buggy tells the story of how steel transformed the iron city and how, before that, this city had been the beneficiary of the 19th-century boom in commerce owing to its famed three rivers.
The source of Pittsburgh’s suffering in the last twenty-five years of the 20th century was not the macroeconomic business cycle but rather a dramatic shift in the global division of labor that had a profound local impact. It turned out that America, broadly speaking, was not a very viable competitor in the production and distribution of steel. Other nations, others firms located in other places, could do it more efficiently and effectively.
All these years later, this might seem like a forgone conclusion. Pittsburgh moved on and transformed itself. But at the time, it was not obvious at all. People said that without steel, there could be no Pittsburgh and without Pittsburgh there could be no vibrant economy in the United States. Pundits screamed and cried about the gutting of America’s industrial strength, and thousands of televisions special appeared about the plight of the workers in the industry.
The city itself went through a long period of wrenching transition in which housing prices and real-estate prices fell through the floor. Businesses shut down. Tax revenue plummeted. Its residents were scattered to the winds. Even the symbol of its skyline, which once seemed glorious, now looked like the very image of the last days. Not even the vaunted steel union could do anything about it.
It all seems like ancient history today. Steel is gone. The evidence its its past is everywhere — and indelible mark on the physical surroundings and the culture of the city — but there is no living reality. But what has taken its place has made up the difference. So while the rest of the country went through a real-estate boom and bust, Pittsburgh stayed on its long course forward to recovery, having been spared the ups and downs. The curse was a blessing after all.
The lesson here is that it is pointless to stand against the mighty winds of market change and scream stop. All the efforts to save the steel industry were useless and wasteful. The tariffs, the antidumping rules, and the subsidies failed to stop the inexorable trend.
But it was not the end of the world after all. The move of steel from home to abroad freed up the city’s magnificent resources for other uses, and recovery came in time, generated by the market.
It will be the same with real estate around the country. Prices will not be stopped. But then markets will adjust. The dawn will come.