A Short History of Erie's Economic Decline

In the years following up to, and through World War II, the Communist Party of the United States was very successful in organizing labor unions and its opposition to fascism, the party increased its membership through the 1930s, reaching a peak of about 75,000 members in 1940–41. The Communist Party’s involvement, along with the allegation of Organized Crime involvement, the image of labor unions was forever tainted in the eyes of the United States Government.

Armed with this prejudice, the precipitated decline in manufacturing in Erie started after the war, in 1946, when union workers struck at both Hammermill and General Electric. With the advent of McCarthyism, in a backlash, Erie in the early 1950s passed an anti-subversive ordinance and General Electric fired a number of suspected communists, including the Erie United Electrical Workers president, John Nelson. In addition to the divisive strikes and red-scare crusades Erie suffered from the loss of manufacturing, especially in metalworking, as General Electric and other major employers began shifting their operations to southern states with lower wages.

In 1958, Maurice H. Rotival & Associates prepared a Reconnaissance Study for Erie. One of the observations dealt with industrial decline in Erie County following World War II. The reported noted that Erie's port, once a major trans-shipment point for coal, iron, and grain, had suffered a rapid decline in business. The study concluded that Erie failed to develop its port to accommodate international trading, putting Erie manufacturers in the position of not being able to export their goods around-the-world in a cost efficient manner and competitive way. The report forewarn that manufacturers would eventually be lured by economic globalization to larger and more developed ports in other areas, or countries, with less regulation, cheaper labor, and costs associated with manufacturing.

Erie’s port traffic was half what it had been at its peak in 1942. Minnesota iron ore bound for Pittsburgh increasingly passed through better-equipped Ohio ports while Bethlehem came to rely on Labrador ore shipped down the Atlantic coast. The opening of the St. Lawrence Seaway in 1959 hurt the Port of Erie allowing Canadian wheat that once passed through the city to be shipped directly to Montreal and Quebec. The Erie Railroad's ore docks closed in 1960 followed by its coal docks in 1964. Hoping to revive Erie's shipbuilding industry Litton Industries opened Erie Marine in the 1960s, but built only two ships before closing — Commercial fishing also declined after sturgeon and blue pike disappeared in the 1950s.

By the 1970s, suburbanization and economic losses had devastated downtown Erie. Precipitating the collapse Mayor Arthur Gardner (1955-62), elected on a reform slate in 1954, championed urban renewal. After consulting with Pittsburgh Mayor David Lawrence, Gardner created the Erie Redevelopment Authority, which would oversee sixteen projects throughout the 1960s into the 1970s. Contributing to the redevelopment push, in 1962, Mayor Louis J. Tullio (1962-89) and the city adopted a plan that called for a revitalization of the business district with improved port facilities, industrial development, and an improved highway system.

The eight-block Peach-front-Sassafras project replaced the area’s neighborhood with the Central Mall, but the suburban Millcreek Mall, opened in 1974, soon limited its success. The Liberty-Sassafras project attempted to stabilize a twelve-block industrial area and the Downtown Erie and State Street projects demolished several nineteenth-century commercial buildings to make way for a Hilton Hotel and the pedestrian Transitway Mall, removed in 1993 to widen State Street.

As mayor, Tullio was credited with helping slow Erie's decline as a manufacturing town and preserving it as a port city and commercial center. Being a politically persuasive and popular politician, especially with the business community, he had master the art of securing State and Federal funds for the city — nearly $300 million dollars. During his long administration the city of Erie drastically lost population and was plagued by terrible urban planning decisions, which resulted the demolition of numerous downtown blocks of buildings. Among them, many of the city's most historically-significant and architecturally-notable buildings, and the entire six-block stretch of the western side of State Street, between 8th and 14th streets. While revered by some locals, Tullio is known in public policy and urban planning circles as one of the worst US mayors in terms of failed urban redevelopment programs. Tullio's redevelopment programs succeeded mainly in paving over large portions of downtown Erie for parking lots — a legacy that has resulted in Erie being a poster child in urban planning textbooks for failed urban redevelopment schemes.

The redevelopment of downtown and the pumping of State and Federal funds into the city hindered the growth of the local economy, making the city dependent on government funding for its survival. Perhaps a fair assessment will be that Tullio made the best of a bad situation, with limited options, in an economy that was making a dramatic shift away from manufacturing.

In 1970, while ignoring all the studies that forewarn of problems in Erie’s economy, most believed that Erie was standing on stable economic ground, but by the year 2000 a 21 percent loss of manufacturing jobs was realized. Yet manufacturing still accounted for a larger proportion of the region's workers than other metropolitan areas in the state, except for York. That employment, however, continued to decline. In 2001 International Paper closed the former Hammermill plant, and a year later, General Electric Transportation Systems eliminated more than 900 jobs. The decline continued as manufacturing jobs left and the city became increasingly dependent on insurance, healthcare, education, and tourism. By 2005 service jobs exceeded 30 percent of employment, compared to 20 percent for manufacturing.