Why we think long-term investing is more important and timely than ever.
Over time, we’ve seen a steady economic and social decline in the cities and counties most heavily affected by the migration of manufacturing operations overseas. While major cities continued to flourish, the “forgotten” cities continued to be more and more, well, forgotten. Economic struggles have led to population declines in a downward spiral that seems increasingly difficult to stop.
But recent research by the Brookings Institution for The Wall Street Journal suggests some notable exceptions to this pattern. In particular, the study finds that approximately 50 percent of manufacturing-heavy areas that lost manufacturing jobs but have maintained steady employment growth since 2000 are home to a major research university. In other words, the study suggests that the presence of a major research university has the potential to drive economic activity in otherwise struggling towns in which more traditional, old-line manufacturing is declining.
The rationale behind this pattern is that large research universities often serve as innovation engines in otherwise declining areas. As such, they continue to provide a stable pipeline of knowledge, innovative ideas, highly skilled entrepreneurial residents and a range of other benefits. These locations are often more inclusive as well, offering opportunities to diverse citizens with different types of skills, from academic researchers to mechanics to second-career professionals. There is a sense of economic and social dynamism that offsets other factors.
Another related Wall Street Journal analysis offers a slightly different perspective. In a recent piece about small rural colleges across the United States, WSJ makes the case that these colleges are starting to invest more into their hometowns because the towns’ economic malaise is affecting the colleges themselves. In other words, these revitalization efforts are proactively pursued by the colleges as mutually beneficial.
Recent efforts by small-town colleges include a range of creative measures. Colleges are starting to admit a selected group of local high school graduates by offering generous scholarships. They are also encouraging their students to work with local organizations and businesses in efforts to gain real-world experience while supporting the local community. One college dean even moved to an off-campus office in order to establish greater connections with the local community. We think these types of revitalization efforts are timely and important.
Through our own municipal credit research and analysis, we pay close attention to these types of patterns because we believe they can have important credit implications. Our research and analysis of cities and counties and our work on universities and higher education in general suggest that these entities are, indeed, deeply intertwined. Our recently updated city/county sustainability framework prioritizes inclusiveness and emphasizes factors such as access to higher education and opportunity, among others.
While there is no question that some areas in the United States have struggled more than others due to globalization, we have reasons to be optimistic. In particular, we think that colleges and universities hold great potential in continuing to fuel social and economic well-being across the country, especially over the long term.
DISCLAIMER: The material in this document is prepared for our clients and other interested parties and contains the opinions of Breckinridge Capital Advisors. Nothing in this document should be construed or relied upon as legal or financial advice. Any specific securities or portfolio characteristics listed above are for illustrative purposes and example only. They may not reflect actual investments in a client portfolio. All investments involve risk – including loss of principal. An investor should consult with an investment professional before making any investment decisions. This document may contain material directly taken from unaffiliated third party sources, including but not limited to federal and various state & local government documents, official financial reports, academic articles, and other public materials. If third party material is included, it is believed to be accurate, and reliable. However, none of the third party information should be relied upon without independent verification. All information contained in this document is current as of the date(s) indicated, and is subject to change without notice. No assurance can be given that any forward looking statements or estimates will prove accurate or profitable.