Birmingham’s colonial economy

Daniel Coleman
Daniel Coleman

Today’s guest columnist is Daniel Coleman.

Since returning to Birmingham full time in late 2017, I have made a conscious effort to integrate myself into the day-to-day life of my hometown.

I joined the boards of three companies and four non-profits, worked closely with the finance department at City Hall, joined Birmingham-Southern College as an adjunct professor, and then, a year later became its 16th president.

Over the past five years, I have come to better understand our fundamental problem as a metropolitan area: We are not growing.

Nashville

In 2008, Nashville’s GDP was $ 82,386,365 and Birmingham’s was $49,698,987. For 2020, Nashville’s GDP was $136,058,470 and Birmingham’s was $62,830,706. Over this time, Nashville’s GDP grew by 65% and Birmingham’s GDP grew by 26%.

During this time, the Nashville’s metro area has grown by 400,000 people and the Birmingham metro area’s population has shrunk by 30,000 people. On a per-person basis, Nashville’s GDP is $69,373 compared to Birmingham’s $57,500. In other words, Nashville’s economy is not only 2.2 times bigger than Birmingham’s, but its GDP per person is 21% larger.

On per-person basis, Nashville has 21% more revenue to work with to solve its problems. On economy basis, Nashville has the scale to attract and create diverse economic opportunities.

Other Southern Cities

We can make similar comparisons with Atlanta, Charlotte, and Tampa. Moreover, if we look at the growth rates of the economies of Greenville, Chattanooga, and Huntsville, it is a matter of time before these metro areas have larger economies than Birmingham.

If the Greenville metro economy continues to grow over the next 10 years at the same rate as the last 10 years (4.4%), its economy will be larger than Birmingham’s economy (growing at 2.6% for the last 10 years) by 2035.

No equity without growth

Many leaders in our community talk about “growth with equity.” I think that comment misses the point. It is hard to have “equity” without growth. With little to no growth, the economy is a zero-sum game. For one person to win, another has to lose. A growing economy is not a zero-sum game.

The $12,000 per person GDP differential between Nashville and Birmingham reflects growth. It provides more revenues per person for municipal services, for philanthropy, and for private investment. In fact, growth begets growth. Zero-sum games usually create downward spirals.

To grow, we have to disrupt. We have to innovate. We cannot stay the same. One of the charming things about Birmingham is that it doesn’t seem to change, but that lack of change can also be Birmingham’s greatest problem. The price of stability is high. It leads to inertia which in turn leads to stagnation.

Impact of economic growth

Here is the impact of economic growth: The combined budgets of the City of Birmingham and Jefferson County total about $1.45 billion, or 2.28% of regional GDP. If this ratio is constant, this budget would grow to $1.65 billion after five years at the current growth rate of 2.6%.

If our growth rate were to double to 5.2%, this budget could grow to $1.87 billion after 5 years. In the second example, we would have an extra $220 million. Not only could more services be provided, but taxes could also be lowered so more money is invested back into growing the economy.

Economic growth provides additional resources for governments and philanthropic organizations. Most importantly, it produces capital and jobs. Every metropolitan area wants more jobs. Every politician promises more jobs. While jobs are critical to dealing with issues like poverty, jobs alone not are the answer to Birmingham’s problem. It is the combination of creating capital AND jobs that creates real value for a community.

Birmingham’s colonial economy

For generations, Birmingham has had a “colonial economy,” in which the jobs have been here but much of the profit has gone elsewhere. Generally speaking, decision-makers reside where the capital goes.

If you look at the top 25 employers in the Birmingham metro area, and you exclude government entities, subsidiaries, and hospitals, only three are headquartered here: Regions, EBSCO, and Blue Cross Blue Shield of Alabama.

We are still a “colonial economy.” Even as we fight to attract jobs from companies like Amazon, the profits and the decision-makers will continue to be on other side of the country.

Only when the capital is created here and stays here we will be able to take charge of our own destiny as a city. Growing our economy will enable us to break this cycle. Reinvesting capital here with decision-makers here can only happen if there are deserving opportunities here. Much of our energy needs to focus on creating these opportunities or, at the very least, not discouraging them.

To understand why we are falling short, we need to be able to answer a few questions:

  • Why is Huntsville the only Alabama metro area whose economy is growing at over 5%?
  • Do the institutions of this city and state support growth?
  • Or do they inhibit it to protect the status quo?
  • What are the seeds for economic growth? How can we cultivate them?

I want my children to want to move home after college without sacrificing their ambitions.

I want them to be able to pursue opportunities that are as exciting and competitive as opportunities around the country.

I don’t want them to wait four decades like I did. (If they do, I will be in my late 90s.)

This is the 2nd of a 5 part series by guest columnist Daniel Coleman on fundamental issues that make Birmingham different and how our zero sum game mentality is killing us.

Column #1:  Man wakes from 35 year cryogenic freeze to find a new Birmingham

Daniel Coleman, a Birmingham native with more than three decades of experience in finance, is Birmingham-Southern’s16th president. Coleman, who was CEO of the global financial services firm KCG Holdings until its 2017 sale, earned his B.A. in English at Yale University and his M.B.A. from the University of Chicago.

David Sher is the founder and publisher of ComebackTown.  He’s past Chairman of the Birmingham Regional Chamber of Commerce (BBA), Operation New Birmingham (REV Birmingham), and the City Action Partnership (CAP).

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Invite David to speak for free to your group about how we can have a more prosperous metro Birmingham. dsher@amsher.com.

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17 thoughts on “Birmingham’s colonial economy”

  1. While I agree with a lot you say, I’m not sure Huntsville is a good basis for comparison. For example, in 2021, the Birmingham MSA added 23,800 jobs while the Huntsville MSA added 8,300. Further

    Second, a very large proportion of Huntsville’s job growth is due to the military and its array of defense suppliers. In fact, roughly 50% of the Huntsville economy is directly tied to Federal spending. So, yeah, while there are big defense budgets, Huntsville prospers. But Huntsville’s economy is even more a colony than Birmingham’s.

  2. Surely when the kind of information considered here is more broadly understood by the leaders something will change for the better. Numbers count, but what people do is fundamental. What seems to be the problem is the lack of effectiveness while over relaxing in the present. Never think of copying any other city as that will not work. Aim to have your own special-exceptional quality, and making that better and more useful with vigor. It should be a lot more fun than lying around like a sloth!
    Thank you for your contribution, Daniel Cole. Pay attention people!

  3. There is certainly an advantage to having corporations whose headquarters are here. Here’s an example. Squash, the racquet sport (which will be at this summer’s World Games), has a very active base in Atlanta thanks to its large inflow of people from the north and abroad. A few years back a group of people decided to develop a community squash program that engages children in afterschool academic help and squash training and competition. They raised a couple of million dollars by going first to the heads of the local corporations and then to individuals. As most people here know, Atlanta is home to Coca Cola, Delta, Home Depot, and other significant corporations. Atlanta Community Squash is flourishing in a terrific facility with courts and classrooms, and it owes that success to the vision and determination of the founders, and the presence of the profits from those corporations.

  4. No no no, this cannot be true because I just read here a couple of weeks ago that Conde Nast said Birmingham was one of the best places in the world to visit and the world is about to see that Birmingham truly is the Magic City. (https://comebacktown.com/2022/02/08/birmingham-haters-eat-your-hearts-out-2/)

    I agree with your analysis though. My parents are begging me to move back to which I respond with the lack of opportunities. I basically tell them, “if you want your kids/grandkids to stay near you, put yourself somewhere they want to be and can flourish.” They hate when I say that. I was educated at a prestigious Birmingham university and most people in my class moved away for a reason and have found no reason to move back.

    Birmingham used to have 9 Fortune 500 companies, today it has one and it could up and leave at any time. That’s very little motivation for someone looking for future career options.

    Does Birmingham have jobs? Yes. Could I do ok there? Probably. Could I do better elsewhere with many more options? Yes!

    Also, if I were to move back to Birmingham, I have little confidence that my children will not move away; leaving me in the same “what happened” situation that my parents are facing now.

    Growth follows equity and the jobs that have been created in Birmingham are very low equity so it’s dishonest to look at simple new jobs numbers.

    1. Brett, would you consider writing a guest column for ComebackTown? Working title could be something like “What it would take to get me to move back to Birmingham.” If interested, please e-mail me at dsher@amsher.com. You would be doing a good deed for your home town.

  5. Nashville here. (Actually, the last six years in Music City after 49 years in Alabama, 28 of which were in metro Birmingham.) Is there a secret sauce to the economic growth here that the Magic City can sprinkle all over its economy? Not really, at least not one individual ingredient. It’s more like a potpourri of influences. Nashville became the so-called “IT City” as a result of historical factors that largely predate the City of Birmingham itself: (1) its commercial history, dating back to the establishment of trading posts on the Cumberland River in the 18th century; (2) its role as state capital; (3) its occupation by Union Troops in the Civil War and its relatively peaceful experience of the Civil Rights movement – both of which saved the city from major setbacks; (4) perhaps most importantly, the presence of numerous colleges and universities that gave it the 19th century nickname “Athens of the South.” Pro sports? Country music? Honky tonk tourism? Those are notable but hardly major influences on Nashville’s long standing economic success. Okay, Birmingham can’t exactly roll back the calendar and change history. But let me add two other more recent factors that Birmingham can emulate: First, Nashville operates under a Metro form of government encompassing almost all of Davidson County. Fire, police, waste disposal, zoning and planning, and other government services enjoy greater efficiency by avoiding expensive duplication. This also makes recruiting major corporations such as Amazon, Oracle, and Bridgestone much easier. While all the municipalities in Jefferson County will likely never merge into a single government, all of them should make cooperation a top priority in their long range planning and daily management. Second, Nashville and its people have never been afraid of change. Perhaps that culture of innovation and entrepreneurship derives from the other factors I’ve listed above. But there’s nothing stopping Birmingham or any other city from adopting that attitude. There’s plenty of evidence that’s happening in Birmingham right now, especially among young people. Use your imagination and stretch it even further.

  6. Blount Co Boy. Family still lives in Blount Co. I Live in Atlanta Metro. Job transfer 30 years ago. I love Birmingham and all of Bama. Come back monthly. To draw better jobs to BHM, we need to follow Tulsa and other medium cities, Pay high tech and other business owners to relocate to Alabama/ Birmingham. These cities offer contracts and help with relocation. Movers sign contracts to live and work for 10 years +. Local banks offer low interest rate loans. Auto dealers offer arrivals discounts . A big tent draws many people. I have never met any Birmingham resident flying in or out of BHM that relocated from Atlanta to Birmingham who wanted to move back to Atlanta. They all say people are so friendly, thinks cost less, traffic is so great compared to Atlanta’s nightmare. Small town is so easy to get around in. UAB is a tremendous facility as well as employer. Sometimes SMALLER is much better than BIGGER. All we gotta do is step out of the box and think big. I just had some N Atlanta and Marietta friends call me last weekend wanting me to take them to Avondale Brewery as well as the other new restaurants and breweries. Some friend visited and told them how great it was! Now they want to come to the Birmingham scene. I am glad to serve as the ambassador for The city. “We are a proud people”Now let’s show it and sell it to others. We welcome them with open arms. If you don’t love Birmingham and Alabama, then move out. We got others we want to replace you with!

  7. Informative posts Robert and James. May I say a couple of things though? Robert, circa 1990s has little to do with where the cities are today. No one moves to Nashville because of what happened in the Civil War. Their secret sauce was the Country Music industry which created a very entertaining environment for young folks. It made people want to live there and businesses have no problem finding talent there. Today, when someone graduates from a good school, moving to Nashville is normally on their short list. Birmingham is not.

    James, I agree that smaller can be better and there’s a charm about the slower way of life that Birmingham offers. But the people who appreciate that are boomers or near-retirees. That crowd doesn’t drive innovation or make a city more attractive to influential young folks who make waves big enough to turn the tide. You may could argue Bill Smith is kinda that.. But that’s one guy. There are 50 Bill Smiths in Nashville, and hundreds even more influential than he.

    You have to think about what the next generation appreciates. Birmingham might not want to be that but it seems like Birminghamians have an obsession with being in the conversation with Nashville, Austin, Charlotte, but they’re just not – and if the trajectory stays the same, they won’t ever be.

    So your anecdotes about your friends enjoying Avondale Brewery are great, but are they moving to Bham? Doubtful.

    Wrangler Jeans might be the best jeans money can buy, but if Harry Styles ain’t wearing them, then it doesn’t matter how good they are.

    Again, there’s zero that Birmingham offers that isn’t readily offered in abundance other places. But there’s tons that other cities offer that Birmingham either lost or doesn’t have – like corporate jobs.

    IMO there’s one potential secret sauce that Birmingham could hit the jackpot on, if it were to happen, then Hellooo Bham. Elon Musk who is known to do outlandish things, recognizes the small tech presence and decides to plant something in the area (more would follow). As “premier” cities become more and more “red taped” (something he despises), he very well might up and move operations to Birmingham. Long shot I know, but that’s about the only potential needle-moving secret sauce I can think of.

  8. As an older millennial working in tech at Regions, my career is stagnated here in BHM. I have to agree with all of Brett’s points. Currently looking at jobs outside of the state. I moved here nearly 15 years ago after college hoping this would be my forever home, but I underestimated the growth opportunities that would be available over time.

  9. My daughter (born 1977) left Bham for the Research Triangle (Cary, NC) 15 years ago for work in the video games animation industry. My son-in-law followed her and they moved to Durham for his software engineering job. Bear with me…They then moved outside Greensboro, NC for his job, my daughter quit her career and blessed me with three grandchildren.

    Now they desperately want to move back to grandparents in the Bham metro, but he cannot find work that touches what he makes in Greensboro in either income or benefits.

    That, for me, tells the story of what’s missing in Bham.

  10. Mr. Coleman asks some very important questions, the answers to which could fill books. I think that any conversation about how to cultivate economic growth in a city should involve the work of Jane Jacobs on cities and economies. A very simplistic principle of hers is that cities must create exports, and earn imports, and need a diverse and dynamic economy to do so in a sustainable way.

    In order for people to facilitate that, citizens should walk a “middle path” of not doing too little or too much, as solutions will always beget further problems to solve. (E.g. Slum clearing and public housing in the middle 20th century, or Horse-powered transport created problems of feeding and manure-removal, which were solved by automobiles, but which in turn create their own problems of pollution, congestion, etc.)

    The comparison to Huntsville has a simple answer, the federal government pours billions of dollars into its economy every year. Essentially they are given free imports, in Jacobs’s urban development lexicon. Although given the high-tech, high-skill nature of the federal contracts there, I believe that Huntsville’s economy does a good job of utilizing the free resources its given to create a positive feedback loop of economic development in the region.

    Hopefully I am not putting words into his mouth, but it seems that Mr. Coleman’s criticism of Birmingham’s “colonial” economy highlights the import/export dichotomy, proposing that a solution would be to retain more capital (value produced from exports) within the city (retaining capital to in turn buy more imports, or produce more exports). This criticism similarly seems to follow a mindset that Birmingham in order to be a great or good city must have as many Fortune 500 companies as possible.

    I think the emphasis on large, flagship employers and corporations is misguided. A diverse, dynamic economy needs large and small companies. It needs many small businesses, and entrepreneurs, looking to try new things and innovate new exports. Like David Sher’s own Amsher which began as a retail store, and evolved into a financial firm. Or EBSCO which began when its founder started selling magazines door to door, and now is a large multi-enterprise conglomerate. Those corporate evolutions cannot be planned by boosters or city government.

    I would speculate that, in part, what holds Birmingham back also holds back the rest of the country, no nationally subsidized healthcare/job-tied health insurance, massive student loan debt, and rising home prices/rents. These are issues which effect large swathes of the population and prevent individuals from being able to take risks to start businesses.

    I think one must look at the development of human capital at the individual level to try and figure out how to facilitate a diverse and dynamic economy at the city level. How do Birmingham’s public schools compare to the cities Mr. Coleman brings up? Are they training students to compete in a high-tech and highly competitive future? Is Birmingham setting up future generations to be able to take risks and innovate new export work?

    Alabama’s institutions (i.e. state government) tends to prefer large, photo-op economic development strategies. I think of the Golden Dragon Copper Tubing plant. There was a Washington Post piece on it a few years ago. It’s a massive capital investment from abroad, looking to exploit cheap Alabama labor and tax incentives. Like Mercedes and Hyundai, it provides windfall incentives for large scale operations. These projects cannot be expected to facilitate the growth that small business and individual entrepreneurs are able to.

    1. “The comparison to Huntsville has a simple answer, the federal government pours billions of dollars into its economy every year. Essentially they are given free imports, in Jacobs’s urban development lexicon. Although given the high-tech, high-skill nature of the federal contracts there, I believe that Huntsville’s economy does a good job of utilizing the free resources its given to create a positive feedback loop of economic development in the region. ”

      Very good point. Huntsville’s “non-Alabama” vibe, federal presence, and highly educated white-collar workforce has been present since the end of WWII. I know folks there who don’t say they’re from Alabama, but from the “Tennessee Valley.”

  11. @AMC. I am probably close to your age. I started my career in Accounting at a Big 4 firm. They only offered two paths, tax or audit (snoozer). Atlanta’s office was about 10x larger and offered much more opportunities to do something interesting like Investment Banking, Valuation, etc. Then I started working for private companies in Birmingham and they all got bought and moved the Corporate HQ’s to larger cities. That messed my resume up pretty bad and I had no choice but to move. I wasn’t going to take a chance on another small Birmingham company where you BETTER love it because there aren’t alot of other options.

    Eventually, I found myself in Dallas (because my Bham company moved here) and I realized that here, you have choices – lots of them – making it harder for the employer to screw you because good employees go somewhere else fast. Whereas in Birmingham, I had to take the abuse from the company/boss because I didn’t have other good options.

    That’s a depressing and scary place to find yourself and I refuse to put myself in that position again. I don’t care about 4 member tech startups, those don’t employ people.

    Now, every time I go back to Birmingham to visit family I notice that Birmingham is more of a town, not a city. There’s some charm but mostly it’s a big medium posh suburb. it’s not very well take care of. Very few side walks, not that well manicured. Just look at the 459/280 interchange, no landscaping. Strip malls everywhere – spare the Summit obviously. Galleria is a no-go now, Brookwood is closed basically. It’s changing, but not growing and gives very little incentive to move back.

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