Center Spotlight | A Look Behind Dallas-Fort Worth’s Economic Success

For this month’s Center Spotlight we talked with Tower Center Fellow Cullum Clark, director of the Bush Institute-SMU Economic Growth Initiative, about his and the new initiative’s latest work.

The mission of the economic initiative is to advance policies that promote economic growth and strengthen our competitiveness in the global economy. “At the end of the day we’re trying to influence the public and to influence policymakers,” Clark said. “It’s a long term game, it’s not easy, and yet it builds on the missions of both institutions.

TC: What are the most pressing economic issues facing our time?

Cullum Clark speaks at the SMU Tower Center March 1.

CC: I would say there are three issues facing the United States that are equally important.

  1. We need to work harder at sustaining the underlying foundational health of the American economy—of our whole system. Developing human and physical capital, innovation, entrepreneurship, value creation. The underlying engine has some aspects that are pretty healthy, and some others that are not. Areas that are not include all too much of our education system, and the fact that the rate of startups has gone down. There’s clearly plenty of innovation in some sectors, but others are arguably lacking. There’s a lot of work we can do to sustain that. Really just getting the fundamentals right, and that starts with education. Do we fundamentally have our house in order?
  2. There is severe dysfunction in our national economic policy and in the working of the U.S. government. One major manifestation of the dysfunction is rapidly rising federal deficits. They are projected to be extremely large as a percentage of the economy essentially forever, according to forecasts from the federal government. Over time, the national debt will seriously undermine the prosperity of our country. We have got to get a hold on that, and right now there’s no political will to do that.
  3. On the externally facing front, we must maintain U.S. leadership in the world economy and the international order we created in the decades after World War II. The globalized, interconnected world has been a giant success for America – a huge driver of growth and economic progress in our country. It’s true that growing globalization brings economic change, and there are difficult consequences for different sectors and individuals. We have to think about these issues seriously. But right now, what we’re seeing is that the world is turning protectionist and nationalist. It’s profoundly dangerous and utterly misguided. The most recent manifestation of that is our trade policies on every front—our trade policies toward China, walking away from the TPP, and growing trade disputes even with Europe, Canada, and Mexico. This is very damaging.

At the Bush Institute-SMU Economic Growth Initiative, we’re working on each of these challenges.

You have looked closely into the Dallas economy and at what has gone right for the region. What has made Dallas so successful?

The stars have aligned beautifully for Dallas over last few decades. All kinds of things have gone right at once and not many have gone wrong.

One of the biggest things that has caused Dallas to grow so much is that we’ve kept life and particularly housing more affordable than most other big cities.

This is critically important because it means that a labor force can actually come here and thrive. So, we’ve had a giant influx of people from other parts of the country and the world, while a lot of the country’s biggest cities, our competitors, have seen an outflux of people.

There are a lot of things that have come together to keep the place affordable. Probably most important has been a more benign attitude towards real estate development and home building than most other big cities currently have. We’ve mostly been able to keep up with this rising demand for housing and as a result we’ve kept it affordable and kept the middle class American dream somewhat more within reach here than any of the big cities on the West coast or in the Northeast.

A second big factor has been that the major employers that drive the DFW metro area have had two things going for them. One is that they’ve been the right industries, in that almost across the board the things that we specialize in have grown faster than the economy– I’m thinking sectors like IT, financial services, and even national defense on the Fort Worth side. So we’ve had a lot of the right sectors and not the wrong ones, which hurt other cities. But we’ve also had a very diverse mix of industries and that’s turned out to be been really important economically.

Two more points: One, there has generally been a positive oil price environment. We are probably the second most important center for the energy industry in North America after Houston.

And, not just Dallas but Texas as a whole has benefited disproportionately from the growth in international trade. Texas is by far the biggest exporting state in the country, considerably bigger even than California and New York. In Dallas, we have a major logistics hub and countless companies that have in some way or another benefited from growing economic integration with other countries.

That said, there is an underside and that is that our core city of Dallas, the southern sector and a lot of other neighborhoods, are really struggling. While the metro area has been largely successful, we are at the same time one of the most economically segregated cities in the United States. Clearly there is a very significant part of the city that has not participated in our city’s prosperity. We have a lot of work to do on that front, and that’s something we are working on at the Bush Institute-SMU Economic Growth Initiative.

What lessons can other cities learn from Dallas’ success? Or did Dallas just get lucky?

Clearly, having the right industry mix, the oil price, and trade – these advantages lean much more towards getting lucky than getting smart. The single biggest thing we’ve done that was smart, that the big cities on the coast should learn from, is avoiding excessively restrictive land use rules. They exist to some degree in every city, but they are absolutely out of control in the major West coast and Northeast cities.

Excessive land use restrictions have contributed to enormous increases in housing crises in a great many cities and have essentially created extreme housing shortages.

And that is increasingly causing a major challenge to the economy in some of these places. That’s a major factor why, for example, Amazon is searching for a new city to have a second headquarters. Most of Amazon’s employees can’t begin to afford to live in Seattle, a city, which by the way, saw an enormous increase in its homeless population, notwithstanding that it’s the home of Amazon and Microsoft and on paper looks really prosperous. Dallas hasn’t always gotten it right by any stretch of the imagination, but on the housing and development front, we’ve gotten a lot more right than most of our peer cities.

What can we do to help the population of the city that hasn’t participated in the economic success of the metro area?

We’re a microcosm of the whole U.S. economy, and in the U.S. economy we see a growing bifurcation into haves and have nots. How we deal with this challenge is one of the defining issues of our time. At the level of what the city can do, there are two important things that are controlled locally: housing and education. If you look at those two things, there’s an enormous amount we can do.

On the housing and land use side, although we’re doing better than a lot of cities, we could do enormously better in creating much faster growth in high-quality, affordable housing supply in all parts of the city, but particularly in the southern sector of the city. We could have better incentives for either landlords or for homeowners to rehab their homes. If it’s done at sufficient scale, this can lead to revitalization of whole neighborhoods, as we’ve seen in Old East Dallas. We can re-purpose a whole lot of land that’s being used badly. For example, one thing that’s been discussed for years, and maybe we’re close to doing, is to demolish the elevated I-345 segment of highway that comes through the southeast corner of downtown. It utterly obliterated a minority neighborhood several decades ago. If that was turned into a street-level boulevard, it could lead to enormous new investment, and become a great opportunity for people who need to be close to downtown. We have a lot of dying or deeply underused real estate. A fair bit of Downtown Dallas is filled with dilapidated, dying office space that could be demolished and converted to much better uses. So there’s a lot we can do on that front.

Switching to education, I personally think the most powerful engine people have tried in recent times is choice and competition. In Dallas the most powerful driver of progress for lower income kids has been a huge rise in high quality charter schools. But it’s not only about charter schools, it’s also about the fact that the rise in charter schools produced a very encouraging response within the Dallas Independent School District. We’ve seen a flowering of choice schools in DISD. These are schools kids aren’t just ordered to go to because they happen to live on a particular block, but  are instead schools that the parents apply to, that have all kinds of specialized curricula. There are a lot of success stories on that front, like Solar Preparatory School for Girls and the Barack Obama Male Leadership Academy.

One thing my colleagues on the Education Reform team at the Bush Center are doing is a major initiative focused on helping school districts find, support and retain effective principals. A central focus at the Bush Center is helping good leaders to become better leaders, and this program is a good example of this focus.