How did Phoenix get in this mess? A mess where the economy is in an outright depression after outperforming much of the nation, by some measures, for decades. A mess where its grades in quality economic circumstances are among the worst in America, and where it may be America's fifth most populous city and 13th largest metropolitan area but underperforms its peers by an embarrassing gap.
It took a lot of work.
When I was growing up, people talked about the Four Cs of Arizona's economy: Copper, cotton, cattle and citrus. The fifth C of climate — I don't recall that, and it may have been added later to justify the machinations of the Growth Machine, although to be sure, "health" and tourism were Phoenix selling points for most of the 20th century.
For much of the territory and state's history, climate was a decided negative. In any event, even the "Cs" was an over-simplification, leaving out railroads, a wider array of mineral extraction, other agricultural sectors and the condition of the state. Arizona was a frontier state, isolated, with an unforgiving landscape and sparse population. Even in 1950, the population of the entire state was 750,000. In today's language, its carrying costs were low, its sustainability high. But as an economic player, it was dwarfed by most other states.
By the late 1950s, Flagstaff had timber and the Santa Fe Railway. Globe and the mining districts lived off copper, where Arizona was a world-class supplier. The copper industry paid 22 percent of the state tax load and provided thousands of good jobs, albeit with the downside of control by eastern capitalists. Other minerals hubs were mostly played out, often leaving ghost towns. One exception was Prescott, the onetime state capital, which was a division point on the railroad. Tucson was a major rail center on the Southern Pacific and a military base. Cattle ranches proliferated; this industry was valued at $200 million in 1962 (about $1.4 billion in today's dollars). But most of the state was wilderness. The exception, mid-century, was Phoenix.
Phoenix benefited from the post-World War II boom, but it already had good economic bones. Thanks to the engineering miracles of federal reclamation and federal investment, this fertile valley from pre-history was growing a bounty of crops that would have astonished the innovative Hohokam.
Instead of the social engineering envisioned by the Newlands Act, a quilt of Jefferson yeoman farmers, this was a place where agriculture had become big business. Hundreds of thousands of acres were under cultivation growing a wide variety of crops. Long trains of refrigerator cars left Phoenix for points east. Head lettuce — not a C — was the biggest produce crop. One of the nation's biggest cattle feedlots was located here, as well as slaughterhouses. Dairies were big around the valley.
Phoenix was never a big distribution point for mining, as Denver had been. Phoenix was about agriculture. In addition, it had a variety of support businesses for the industry, including suppliers, cotton seed outfits, produce jobbers and wholesalers. Also, locally owned stores, banks, insurers, etc., and some manufacturing (such as the hulking Reynolds Metals plant) built during the war.
Like all "hydrological" civilizations in history, power was highly concentrated, especially with the Salt River Project, Arizona Public Service, Valley National Bank, First National Bank of Arizona, The Arizona Bank — and the federal government. Even so, the city developed a strong cohort of stewards who loved it passionately, personally, and wanted it to succeed.
Air conditioning, starting in the 1920s, indeed added the appeal of climate for Phoenix beyond being a boutique magnet for dude ranches and respiratory patients. Remember, too, the summers were not as long or severe then. But by the late 1940s, Phoenix's leaders knew the city must attract new industries or it couldn't sustain its growing population. Stewards such as Frank Snell made aggressive efforts to attract "clean industry."
These efforts paid off with AiResearch, Hughes Aircraft, Sperry Rand, General Electric and especially Motorola. Makers of automobiles and tractors were lured to establish proving grounds to test under desert conditions. (Between the mines, railroads and construction, membership was very high statewide in trade unions).
In other words, as Phoenix emerged as a populous city in the 1960s, it had an strikingly dynamic and diverse economy, with well-paying jobs — especially for a place so isolated and relatively new. Of course real estate and construction were big (along with tourism). Maryvale and Sun City were new. The groves of Arcadia were being turned into subdivisions. Land fraud was rampant — I remember vividly one man who defrauded my grandmother, a real estate agent, being sent to prison; the Arizona Republic's martyred reporter Don Bolles earned his chops on exposing such schemes. But real estate was a consequence of the real economy. Real estate wasn't the economy.
Much changed from when I left in 1978 and returned in 2000. By that point, the Phoenix economy, while still containing the remnants of the old chip makers plus Intel, had degenerated into a massive real-estate Ponzi scheme plus some call centers. Everything depended on adding 100,000 more people a year. Aside from this, the metro economy couldn't match up to the diversity, quality, dynamism or incomes of its peers. Arizona, after tracking the national average in per-capita income as late as the 1980s, consistently lost ground, a trend that continued during the 2000s "boom." The three great hopes of the city and state were all paid by the taxpayers: Michael Crow, Phil Gordon and Janet Napolitano. What happened?
1. The great restructuring and consolidation of the American economy clear-cut vital local companies around the country. It hit Phoenix especially hard; the metro area, for all its people, had the business infrastructure of a much smaller place. So losing Valley National Bank, Dial and a few other stalwarts did disproportionate damage.
2. Phoenix never perfected the art of reinvention. Karl Eller built an empire that died too soon. The moves that lured the Greyhound headquarters in the 1960s weren't sustained. The metro area and state were shocked by the 1990-91 recession after the S&L swindles; they established ambitious goals for clusters and the Greater Phoenix Economic Council. These efforts faltered through the decade. And with the 2001 dot-com meltdown, hundreds of promising small tech outfits were killed.
3. Diversification slipped away. Agriculture on the level of the early 1960s might not have been sustainable forever, but a large ag sector provided jobs, economic diversity, local food and cooling in the summer. Almost all of it is gone now, plowed over for subdivisions. The aerospace and electronics foundations begun in the late 1940s and 1950s were largely allowed to wither. Motorola is next to nothing now. The tech sector is a much smaller part of the overall economy now than at any time in decades — more appropriate to a city the size of, say, Tulsa, than Phoenix.
4. Right-wing ideology helped keep the state from adopting the aggressive economic development efforts needed to stay competitive. "Sunshine is all that's needed," the saying went. Well...not for luring major capital investment. This ideology also helped blind Arizonans to their heavy dependence on the federal government — something not shared by conservatives in Texas and Alaska, for example. So after the CAP, a new generation in the congressional delegation refused "pork." The consequences have been devastating, especially with the advanced federal labs, administrative centers and university research funding that went to other states. It also subscribed to a "no new taxes" and budget-cutting religion that starved education and infrastructure.
5. The old stewards died off and few new ones appeared. It was telling that sharpies such as Charles H Keating Jr. showed up in the 1980s, with no ties to the place, only wanting to make a fast buck and totally hooked on sprawl housing development. (John F. Long, by contrast, was a Phoenix city councilman, philanthropist and built contiguous to the existing urban footprint). Only Jerry Colangelo was left, and he was savaged for his efforts — now he's working West Valley real estate.
6. Population growth rapidly outgrew infrastructure — everything from transportation to universities — and the gap was never closed. Meanwhile, the old economic assets were fading, not to be replaced. Only professional sports teams seemed to keep up. Government leaders of the rare temperament to take on these challenges were always backfilling even as new sinkholes erupted. Sprawl pitted suburbs against city for a limited pie, with all being net losers. The Kookocracy did its best to prevent cities from gaining economic-development tools such as tax-increment financing. State and city were inward-looking as globalization became the game. Thus, Phoenix held certain high ranks based on population, and it had big-city problems and high carrying costs. But it lacked big-city economic assets — aside from construction permits — and big-city solutions.
7. The Growth Machine, protected to the death by the Real Estate Industrial Complex, seemed to work. Many people made fortunes. It always came back. Phoenix topped charts on population growth and housing starts. Jobs were abundant. Other things could be ignored, such as under-par incomes, lack of high-paid jobs, lack of venture capital, low scores on almost any measure of social well-being and the ominous growth of an underclass. So what if Phoenix was reduced to one-and-a-half economic engines — they work. Or so went the conventional growthgasm wisdom.
Timing is everything. Phoenix seemed to dodge the worst of the dot-com crash and crowed about the pain in places such as the Bay Area and Seattle (even though, in reality, Phoenix was hurt by that downturn). Then came the collapse of the greatest speculative bubble in history and Phoenix, Arizona, was ground zero.
Coming back won't be easy, particularly because the remaining elites can see no alternative but hope for a resumption of good old days that will never return.
Read more from the Phoenix 101 archive.