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Many observers of philadelphia view the city as failing. The 1990s marked the fifth consecutive decade of population decline, and the 1,517,550 people counted in the 2000 census left the city 2 percent below its 1910 level. With population the lowest in almost a century and a median house price of $59,700 (also from the 2000 census) well below replacement cost, it is not unreasonable to conclude that something has gone awry. However, changes that challenge the foundations of a city's prosperity are not uncommon, and some cities never fully recover from them. For example, Philadelphia is one of eight of the largest fifteen cities in 1950 that have lost population in each of the five ensuing decades, as manufacturing left heavily urbanized areas. Some cities have been more successful in responding to similar shocks. One recent economic history of Boston shows that city's current rejuvenation represents the third time it has had to reinvent itself.1 And, New York [End Page 1] City recovered from a loss of more than 800,000 people in the 1970s to achieve its highest population ever in 2000, along with skyrocketing house prices.2 This paper investigates the changing economic conditions that have buffeted Philadelphia over its long history and analyzes how and why it responded to those shocks in the ways it did. While heavily influenced in its focus by urban economics, this paper is a historical analysis at its core. Besides the disadvantage of an author who is an urban economist, not a historian of the economic or more traditional kind, focusing on the urban history of one place has the drawback of not supplying data that readily allow comparison across different cities to test some model of growth or decline. While standard statistical analysis cannot be done in this context, a detailed investigation of a single city does have its advantages. For example, it affords the opportunity to evaluate the actions of certain groups (such as political leadership) or the adoption of certain policies (such as the local wage tax) that usually are not possible in the standard statistical investigation. By providing a richer picture of the underlying context in which certain people operated or policies were adopted, a deeper understanding of their roles hopefully can be achieved. Philadelphia's history shows that it became a great urban center because it was twice able to reinvent itself following shocks to its fundamental economic underpinnings. The first occurred at the end of the eighteenth century, when New York supplanted Philadelphia as the nation's trading and financial capital. The other soon followed, early in the nineteenth century, when the westward expansion of the country and rise of railroads facilitated the proliferation of [End Page 2] competing regional production centers in a much larger nation in which Philadelphia no longer was the keystone connecting the states. Despite these challenges, Philadelphia was to thrive as a manufacturing center and remain the country's second city until Chicago supplanted it in 1890. During this time, the city rapidly diversified its industrial base, and its history is consistent with the proposition that cities benefit from economic diversity.3 A series of shocks throughout the twentieth century, including the deurbanization of manufacturing, the rise of household and firm mobility that allowed both suburbanization and the spread south and west to warmer climates, and racial problems and white flight, set the city on a path of long-term decline that has not been reversed to this day. The modern decline of Philadelphia appears to have begun by 1920, with most subsequent growth associated with temporary factors, such as war production during the 1940s. This paper not only provides the historical detail behind the two instances of urban regeneration and more recent case of continued decline, but presents a template of factors that help account...
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