Management & Labor

The Stuttgart Solution

If you want to see how regional consolidation works when it really works, you might take a look at Stuttgart, the manufacturing capital of southwestern...
by | October 31, 2008
 

If you want to see how regional consolidation works when it really works, you might take a look at Stuttgart, the manufacturing capital of southwestern Germany, and the region that it anchors.

A few years ago, for example, Stuttgart needed a new convention center. The regional government, which has authority over economic development and land use policies, among other things, decided that the perfect location would be a big plot of land right next to the airport. The municipality that is home to the airport objected, not wanting the increased traffic and other hassles. The regional authority -- known as Verband Region Stuttgart -- refused to back down. It took the municipality to court -- and won.

It's hard to imagine that happening anywhere in America right now. Even when it's clear that a policy decision would benefit a given metro region as a whole, the broader common interest loses out to parochial concerns or jealous turf protection. The Denver area, for instance, has attracted a lot of attention with its Metro Mayors Caucus and their collaborative success in creating an eight-county taxing district to fund light rail and other transit. But even there, says Denver Deputy Mayor Guillermo Vidal, the 41 localities still find plenty to bicker about, particularly in the realm of sales-tax competition. And in terms of transportation, coordination remains tough. The number of lanes in a single road may change multiple times as it passes through various jurisdictions.

Not that there isn't some of that problem in the Stuttgart region. It's home to 179 separate municipalities, each of which harbors a few resentments over the regional government's ability to push them around in court or dun them for fees to run the commuter-rail system. This summer, the regional government -- composed of officials elected directly by voters in Stuttgart and the five surrounding counties -- lost a battle over construction of a new airport runway.

For the most part, though, local and national entities acknowledge the success Verband Region Stuttgart has had in a broad range of areas, notably in promoting manufacturing, research and exports. The region has set up formal networks to help existing companies create new products and even new industries -- translating the dominant auto sector's energy expertise, for example, into a major push toward fuel-cell technology. And it has put into place a mandatory housing plan that allows 50 percent more units to be built near existing transit lines.

"This is one region in Germany that shows how the big city and the surrounding areas can work together," says Johannes Wieczorek, an official in the German transportation ministry. "Not in every area, but in the big areas like planning and transit."

Stuttgart was the modern pioneer in German regionalism, starting its efforts in 1994. Not long after, the federal government decided to promote similar goals in five additional metropolitan areas. That effort has since been expanded since to take in a total of 11 metros across the country. The federal government is not devoting big dollars to these efforts. But it gives the regions official recognition, and does what it can to foster cooperation within them, not just between smaller political jurisdictions but among private-sector and academic entities as well. "In order to get the brand, they had to make real changes in governance structure," says Manfred Sinz, a senior planner with the federal Ministry of Transport, Building and Urban Affairs.

Globalization, Sinz insists, has actually increased the importance of regions. It's now a lot harder for even relatively large cities to compete solo. When they can collaborate with their neighbors rather than bickering with them, regions as a whole end up being a lot stronger.

A Search for Similarities

The German experience with regionalism has not gone unnoticed in this country, even at the highest political levels. "Our children will grow up competing with children in Beijing and Bangalore and Berlin," Barack Obama told the U.S. Conference of Mayors in June. "And make no mistake, their governments are doing everything they can to give their countries an edge by investing in regional growth."

Recently the Brookings Institution, along with the Alfred Herrhausen Society, which is Deutsche Bank's nonprofit international forum, sponsored a tour of Stuttgart, Hamburg and Berlin for a group of state, local, metropolitan and congressional officials from the United States. (I accompanied the group, with travel expenses paid by the Brookings Metropolitan Policy Program.)

The U.S. officials came away impressed with the level of regional coordination they saw in Germany. They also noted Germany's penchant for devising multi-year master plans in areas such as transportation -- and sticking to them. "What I'm finding is that Germany is less afraid of looking into the future and planning systematically for it, with at least an attempt at coordination across levels of government, said MarySue Barrett, president of Chicago's Metropolitan Policy Council. "One big difference is the official recognition of regions."

Still, some of the American visitors came away skeptical about the chances for duplicating the results back home. There are broad differences between Germany and the United States when it comes to levels of taxation and respect for private property rights, and there are obviously divergent historical traditions, as well. Germany became a nation only in 1871, when a group of principalities, independent states and free cities were unified by Bismarck. In a sense, Germany had been practicing regionalism for centuries before it was even a country.

But in terms of governance, there are similarities, too. Following the Second World War, Germany was forced to adopt something resembling the American federalist system, with state, local and federal levels of government created to diffuse power and authority. And Germany's metro areas have had to face the same challenges that promoters of regionalism here typically run up against. As in the U.S., for instance, German suburbs are fond of using tax policies and corporate giveaways to poach employers and residents from the center cities.

Verband Region Stuttgart, however, has become a model throughout the European Union -- and for at least one slice of America. For the past decade, the Stuttgart region and the Northern Virginia Regional Commission have had a "sister region" relationship. Ideas imported from Stuttgart have altered Northern Virginia's approach to questions of energy and air quality, as well as smaller concerns such as bike paths, speed bumps and green roofs. "We're finding better ways to look at how we're planning our communities," says Mark Gibb, NVRC's executive director. "We're now doing things differently than we were 10 years ago, when we started this partnership with Stuttgart."

"Planning Got Sexy"

In the United States, discussions of regionalism tend to spring up in areas that are struggling. So it was in Stuttgart, where the threat of decline led to the creation of the regional government in 1994. Stuttgart is home to Mercedes-Benz, Daimler and Porsche, among other industrial giants, so when Germany saw its manufacturing and export sectors hit hard during the early 1990s, Stuttgart alone shed 100,000 jobs. (The city now has just under 600,000 residents, while the region totals 2.7 million.) "Most new things come out of crisis," says Veit Haug, director of the Stuttgart Region Economic Development Corp.

The German federal government, however, approaches regionalism from the opposite point of view. Its goal is not to salvage struggling areas, but to help its strongest regions compete on the European and global stages. The underlying hope for its metropolitan project is that each of the major regions will build on existing strengths -- manufacturing in Stuttgart, high tech in Munich, finance in Frankfurt, logistics at the great port in Hamburg -- to develop a specific profile as a business location and ensure that Germany can continue to compete with anyone. In order to make such a national "division of labor" work well, the national transportation master plan is being revised to see that these metros are better connected with each other. "We do not want Berlin to be the only global city again," says Sinz. "We want four or five cities playing in the European championship leagues."

While viewing the national framework as useful, Germany's regions do not intend to stop competing with each other. In a rough parallel to the economic development faddism of the United States, regions in Germany dream of becoming the next Silicon Valley, or biomeds capital, or whatever the latest panacea may be. There's nothing the federal government can do about that. But the feds do offer guidance and technical assistance about what works. The national government also lays out incentives and rules that promote smarter land-use decisions, as well as cross-jurisdictional cooperation in areas such as energy conservation, transportation and marketing.

As a result of Germany's regional policy, says J?rgen Ludwig, who just left Verband Region Stuttgart, "planning got sexy." Every region of any size wanted to enter the competition to win the federal metro designation and show up on the relevant national planning maps. "It has been a lucky circumstance for us to have this discussion," says Sinz, the German ministry planner. "Everyone felt, if you do not enter the train, you will be left off."

In the Rhine-Neckar area, north of Stuttgart, local officials and business leaders successfully demanded that the three states covering the area pass legislation that allows them to engage in activity with Stuttgart as an official region. Elsewhere, as is often the case, forward movement on regionalism has depended to a large extent on building relationships and trust. Nuremberg Mayor Ulrich Maly had to convince his neighbors that cooperation would be mutually beneficial and that the big city would not dominate any regional structure. His effort worked, leading to an expansion of public transit and joint efforts to promote local food production and brewing. And in Mannheim, the new regional structure helped block plans by Deutsche Bahn, the national railway, to close its train station -- something Mannheim would not have been able to stave off on its own.

No to the Needy?

There's not much federal money involved in the German metropolitan region project -- just $500 million in grants to cover the entire nation. Still, the idea that the federal government might direct resources to the strongest areas meets with resistance in the rest of the country -- particularly from Germany's strong rural lobby. Since World War II, national economic development efforts -- from direct federal aid to the location of universities -- have been aimed largely at helping rural and poor metro areas that suffer high unemployment. About 35 percent of the former West Germany met the federal government's criteria at one time or another -- and 100 percent of the former East Germany still does. Changing the "help the neediest" mindset is not easy, even within the federal bureaucracies. "The willingness to talk openly on a national level about areas that are more strategic to invest in than other areas was, to me, just amazing," says Michael Townes, chair of the American Public Transportation Association, who participated in the fact-finding trip.

But there's increasing recognition that a new approach is necessary, due to several factors -- demographic challenges, evolving European trade rules and pressures brought by globalization, which in Germany is more than a buzzword. The nation shares borders with nine other countries. Because of its central position in Europe, its autobahns are crowded with Dutch and Polish trucks, while the port at Hamburg is the main connection point for Chinese containers making their way from the sea to markets in Eastern Europe and the Baltics.

So far, Germany has been a winner under globalization. It has thrived not just as a continental trading center but also as a top-end producer of pharmaceuticals, electronics, and automobiles. It doesn't attempt to compete on price, focusing instead on producing quality products. Stuttgart not only offers the world Mercedes and Porsche but -- for those who find those brands too down-market -- it's also home to Maybach, whose cheapest 2008 model retails for $339,000.

Manufacturing still accounts for 40 percent of employment in Stuttgart -- a remarkable statistic for any rich country. The region devotes an unusually high percentage of its total economy to research and development -- about 6 percent. Increasingly, the regional government is coordinating that effort. The regional government holds a majority stake in the economic development corporation, but requires that all its initiatives win private-sector funding so that there's evidence of demand for its ideas in the marketplace.

Stuttgart has a long history of leveraging expertise in certain areas -- not just car making but medical technology, telecom, textiles and others -- into new and profitable pursuits. That's how economic clustering is supposed to work -- and why Germany is prodding its leading regions to figure out what they're good at and building from there.

What Could Work Here

In his speech to the U.S. mayors, Obama paid tribute to this strategy of economic clustering. "Other governments are aggressively pursuing strategies to unlock the potential of their metro areas," he said. "To compete and win in our global economy, we have to show the same kind of leadership." Obama has since explored the idea of setting up a White House Office of Metropolitan Policy should he win the presidency.

The rare efforts Washington already has made to help U.S. regions integrate -- the Department of Labor's WIRED grant program, for example -- try to do the same thing. WIRED applications have to come from governors, who must present a regional plan that includes the participation of government, private-sector and academic actors in figuring out where a region's collective strengths may lie and fostering cooperative efforts in those areas.

As with the German effort, WIRED is small potatoes financially. (The feds have dispensed $250 million over the past three years to 39 different regions.) But, as in Germany, the program's most important effect has been as a catalyst on the ground, forcing local players to talk with each other.

Getting local officials to recognize what they have in common -- and what problems they might be able to solve by working together -- remains an essential, even if an elusive, goal of regionalism in the United States. MarySue Barrett notes that her former boss, Chicago Mayor Richard Daley, used to have more opportunities to talk with mayors from the East Coast through the U.S. Conference of Mayors than to talk with neighboring Chicago area officials. That's changed over the past decade, with the creation of the Metropolitan Mayors Caucus, which provides a forum for mayors to hash out issues ranging from affordable housing to freight rail modernization.

"We've had a decade of having the conversation about why we're interdependent," Barrett says. "We have moved beyond 'why regionalism' to asking how regionalism can benefit us." Going to Stuttgart, it turns out, was a good way to learn.

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