Moon Pie Dreams and Start-Up Wishes

Chattanooga looks to shed its Rust Belt past by diversifying its economy beyond manufacturing.

Moon Pies, a tasty local favorite, are produced by Chattanooga Bakery, one of the many businesses that make up the city's diverse economic base.
National Journal
Nancy Cook
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Nancy Cook
Aug. 22, 2013, 10:25 a.m.

This art­icle is part of a weeklong Amer­ica 360 series on Chat­tanooga.

CHAT­TANOOGA, Tenn. — Bent­ley Cook, 24, nev­er would have con­sidered set­tling in Chat­tanooga a dec­ade ago, and it’s not just be­cause the lean, sandy-haired col­lege gradu­ate grew up here.

Down­town Chat­tanooga used to feel empty, he says, es­pe­cially after 5 p.m. when cor­por­ate of­fice work­ers left for the sub­urbs. The city lost res­id­ents throughout the 1970s and 1980s, after its man­u­fac­tur­ing base began to de­cline, and Chat­tanooga did not have a great repu­ta­tion na­tion­ally. In the late 1960s, the fed­er­al gov­ern­ment deemed it the dirti­est place in the coun­try for air pol­lu­tion, thanks to its dom­in­ant man­u­fac­tur­ing base. Smog grew so thick that res­id­ents drove with their head­lights on, re­gard­less of the time of day.

Years later, huge swaths of the city now seem like cat­nip for the cre­at­ive class. You can’t walk a mile down­town without hit­ting an ar­tis­an­al deviled egg, hip­ster cof­fee shop, or high-end boutique selling $400 leath­er jack­ets. “Chat­tanooga is on a wave that is about to crash,” Cook says dur­ing a daylong event in Au­gust cel­eb­rat­ing the city’s nas­cent start-up cul­ture. “I nev­er foresaw my­self spend­ing my life here, but there are tons of small busi­nesses and a boom­ing res­id­en­tial com­munity.” Even Pres­id­ent Obama got in­to the Chat­tanooga pub­lic re­la­tions act; he vis­ited a loc­al Amazon ware­house in late Ju­ly as part of a na­tion­al push to talk about pre­serving the middle class.

Giv­en all this hype, it’s easy to as­sume that Chat­tanooga has writ­ten the play­book for re­vamp­ing loc­al eco­nom­ies in postin­dus­tri­al cit­ies. Just mix high-tech start-ups with man­u­fac­tur­ing, tour­ism, and some hearty blue-chip com­pan­ies, right? Chat­tanooga’s loc­al mu­ni­cip­al power com­pany also in­stalled an ul­tra­fast broad­band net­work, giv­ing the city some of the fast­est In­ter­net speeds in the coun­try. Volk­swa­gen chose the city in 2008 as the place to open an auto plant, a move that cre­ated about 2,400 new jobs. And the city of­fers in­cub­at­ors for small-tech busi­nesses, two uni­versit­ies, and an act­ive loc­al cham­ber of com­merce that doubles as the city’s best cheer­lead­er.

But Chat­tanooga still faces chal­lenges, es­pe­cially when it comes to find­ing de­cent jobs for its less-skilled work­ers. The city’s poverty rate re­mains high­er than the statewide av­er­age, and those without col­lege de­grees say they feel left be­hind by ef­forts to be­come a tech hub or re­vital­ize down­town. Even the city’s bur­geon­ing tech sec­tor re­mains more of a ral­ly­ing cry than an ac­tu­al way that loc­al com­pan­ies or large num­bers of work­ers earn money. “Chat­tanooga is still down in man­u­fac­tur­ing jobs and still down in its total jobs,” says Dav­id Penn, an as­so­ci­ate pro­fess­or of eco­nom­ics at Middle Ten­ness­ee State Uni­versity. “It is pulling it­self out of the re­ces­sion trough, but not as fast as some oth­er places in Ten­ness­ee, like Nashville or Knoxville.”

These prac­tic­al bench­marks are not enough to dampen the en­thu­si­asm among the city’s well-edu­cated or well-heeled res­id­ents, and that may be the biggest force push­ing for­ward the Chat­tanooga eco­nomy — people’s at­ti­tudes. Cook turned down a full schol­ar­ship for an M.B.A. pro­gram to re­main in Chat­tanooga and work on the busi­ness plan for his fledgling com­pany, called Sen­severy, which mon­it­ors seni­or cit­izens’ health vi­tals from afar. One of the Obama cam­paign’s top web de­velopers, Daniel Ry­an, con­siders Chat­tanooga home and bought a place here in 2006. “Any­one with a pas­sion can get in­volved and make things hap­pen here,” Ry­an says. “Chat­tanooga is a close-knit com­munity of people pro­pelling the city for­ward.”

This op­tim­ist­ic ap­proach is what helped lure oth­er young twenty- and thirtyso­methings to the area. It’s the big-fish, small-pond lo­gic that an am­bi­tious per­son can have a siz­able im­pact quickly in a small place. This makes Chat­tanooga feel like a quirky col­lege town where people feel com­fort­able dream­ing big. “The more suc­cess we have [in the tech arena], the more we will see ourselves as a con­nec­ted city,” May­or Andy Berke says.

If you spend a couple of days here, the city’s eco­nom­ic cheer­lead­ing calms down and a more real­ist­ic plan comes in­to fo­cus. Loc­al in­vestors and high-skilled work­ers want to cre­ate a know­ledge-based eco­nomy, yet few be­lieve that Chat­tanooga will be home to the next In­s­tagram, Google, or con­sumer-fa­cing Web com­pany. “Is the next Face­book go­ing to launch in Chat­tanooga? Prob­ably not,” says Shel­don Grizzle, founder of the Com­pany Lab, a non­profit that ad­vises en­tre­pren­eurs. “The goal is to have a pipeline of small com­pan­ies grow­ing here that can help sus­tain the loc­al eco­nomy.”

One niche for Chat­tanooga would be to fig­ure out a way to make man­u­fac­tur­ing more in­nov­at­ive, says Ry­an, the Web de­veloper. That would build on the city’s eco­nom­ic his­tory and its man­u­fac­tur­ing base, which still com­prom­ises about 20 per­cent of the loc­al busi­nesses. “Fig­ur­ing out how to do that cleanly and bring­ing man­u­fac­tur­ing in­to the 21st cen­tury could be a good area,” he says.

Chat­tanooga also does not lean solely on its bur­geon­ing tech sec­tor for jobs and that di­versity helps it. A num­ber of tra­di­tion­al com­pan­ies are based here, such as Un­um, a dis­ab­il­ity in­surer, and Chat­tanooga Bakery, man­u­fac­turer of the fam­ous Moon Pies. Oth­er ma­jor em­ploy­ers in­clude the loc­al gov­ern­ment, the school sys­tems, and the tour­ism in­dustry. These are not ne­ces­sar­ily sexy ele­ments of the loc­al eco­nomy or items to list on the loc­al busi­ness-as­so­ci­ation bro­chure, but they of­fer an eco­nom­ic back­bone for a city in trans­ition.

At this junc­ture, Chat­tanooga func­tions best na­tion­ally as a petri dish, an on­go­ing ex­per­i­ment for small ex-Rust Belt cit­ies that want to re­cast them­selves. Already, Chat­tanooga and its res­id­ents lured new busi­nesses to town such as Amazon, Volk­swa­gen, and a hand­ful of call cen­ters. The city re­made its down­town river­front area over the last few dec­ades. Now, it’s turn­ing its at­ten­tion to­ward the tech sec­tor, with the hope of gain­ing some piece of the na­tion­al tech­no­logy boom, even if that seems like a gamble.

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