Nashville And Memphis: An Economic Growth Disparity

One metro is among America's fastest-growing, while the other is effectively stagnant. What are the reasons?

Scott Beyer | May 6, 2018 | |
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Memphis and Nashville are viewed as the two prominent cities of Tennessee. But their realities, both at street level and in statistics, are very different. Since the 1970s, Memphis has had minimal GDP and population growth, remaining an Old South backwater. Nashville has stormed past its in-state rival in both metrics, and is now a New South boomtown. This extends beyond the city proper, with metro Memphis and Nashville, respectively, taking far different trajectories. For those who are looking to invest in either area (or who take a general interest in the rise or decline of cities) the relevant question is why? The possible answers are numerous and not completely straightforward.

To view the dichotomy firsthand, I found that it was helpful, during my recent visits to each city, to start from outside their urban cores. The best way to understand Memphis is by driving north into it from Highway 61. This has long been a migration route that poor rural blacks took into the city, and still today, the Mississippi portion is dominated by small, sleepy towns. Once crossing the Mississippi-Tennessee border, I realized that Memphis is just a bigger version of the same thing – a quintessential “big small town.” The neighborhoods are slow-paced, low-density and a bit decrepit. This is even the case downtown, which is known as much for persistent panhandling as actual street life. Memphis demographically is still dominated by the offspring of those early rural migrants, with a population that is 63 percent black.

Nashville, meanwhile, is best understood by the growth of its peripheries. The 14-county metro, more than just being a receiving grounds for rural migrants, attracts people from around the nation and world, with a foreign-born population percentage that’s over twice that of Memphis. Several fast-growing boomtowns—such as Franklin and Murfreesboro—are within 30 miles of Nashville. Much of the land in-between is consumed by suburban tract housing. Within the city, the downtown has packed streets and is dominated by skyscrapers, with construction cranes showing the promise of more to come. Several surrounding neighborhoods are anchored by universities that generate walkable, mixed-use urbanism. In total, this gives Nashville a far more dynamic feel than Memphis.

The stats also tell the story. Since 1970, Memphis’ population has effectively stagnated, with the population rising from 623,988 to 652,717. Nashville’s population went in that period from 448,003 to 684,410. Since 2010, metro Nashville grew by 232,000, or nearly 14 percent; metro Memphis grew by 23,000, or less than two percent. Shelby County, which includes Memphis and its prosperous eastern suburbs, has actually lost population the last four years. Between 2010 and 2015, net GDP growth was $9 billion in metro Memphis and $29 billion in metro Nashville. The unemployment rate is 4.3 percent in Memphis but only 2.7 percent in Nashville – the nation’s lowest. While Memphis is known for a few anchor corporations, like FedEx and AutoZone, Nashville has fostered entire niche industries, suggesting a far more complex economy. These include country music, Christian publishing and elite private research universities. Nashville is even among the 20 finalists for Amazon’s HQ2. It’s hard to imagine that Memphis ever came close to making that list.

So what caused this multi-decade discrepancy? The answers are complicated.

One common explanation for why societies grow or not is their economic freedom levels. This is a metric that calculates tax rates, regulatory burden, government size, legal structure and other determinants of economic liberalization. Tennessee, thanks to no state income tax, ranked #6 in the Cato Institute’s most recent economic freedom rankings for the 50 states. When comparing economic freedom between Nashville and Memphis, the differences are apparent, if not blatant. According to a 2013 Florida Gulf Coast University study, which quantified economic freedom for all 384 U.S. metros, Nashville is the freest in Tennessee, and 14th freest in the nation. Memphis is the second to last freest metro in Tennessee, but still the 84th freest in the nation. In similar metrics to economic freedom—such as fiscal solvency—Memphis actually does better.

Another factor might be location. Although in the same state, Memphis and Nashville are associated with separate regions. The states that Memphis is directly adjacent to—Arkansas and Mississippi—continue to be poor, agrarian economies with minimal development. In this sense, the metro is culturally identifiable with the Old South. Nashville sits in a fast-growing region with cities like Atlanta, Raleigh and Charlotte, making it part of a professional-class, urbanizing New South.

A third factor, says Matt Harris, a professor for the Boyd Center at the University of Tennessee, could be demographics. Memphis has many poor blacks—with an overall poverty rate of 27 percent—and thus many of the associated problems, including high crime and poorly-performing schools. These numbers on paper don’t necessarily reflect the reality on grounds; plenty of Memphis neighborhoods are safe and livable. But such characteristics can create a stigma that fends off inbound transplants. Nashville doesn’t carry these stigmas, which may explain why 72 percent of its population growth is people moving in from the outside.

But the main reason Nashville is growing, continued Harris, might be its lifestyle offerings. The city has nice weather, proximity to mountains and good amenities, such as pro sports and a great music scene. It provides all this without the crippling traffic that can be found, say, in Atlanta or the bigger coastal cities. This combination has attracted growth, and the growth has fed upon itself, creating agglomerations that become scalable enough for yet more economic activity.

“As more people move to Nashville,” said Harris, “the kinds of people who employers want are available, and there’s reasons for more businesses to move there.”

It appears that these differences in trajectory will continue into the future. According to growth projections from the University of Tennessee, Shelby County is expected to grow by 30,000 by 2030; that figure for Davidson County, which surrounds Nashville, is expected at 67,000. This would just be a continuation of the history that has already separated these two Tennessee metros.

[This article was originally published on HousingOnline.com]

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