America's Most Important Cities: 1978 vs. 2010

In many ways, the contemporary history of America's economy is really a story about cities. Metro areas rise and fall with each generation, buoyed or sunk by the industries and trends that support them.

The chart below, from the McKinsey Global Institute, does a beautiful job telling that story. On the left, we have the top 30 U.S. metro areas ranked by real GDP as of 1978. On the right, the top 30 for 2010. That cross-hatch of red and blue lines shows just how much churn there has been in the economy. But I think there are three main trends to take away from this.

First, there's the fall of the Rust Belt and the rise of the Sun Belt. As the country's economy eased away from manufacturing, which tends to be clustered in discrete regions, and towards services, which can be almost anywhere, people moved away from the old, frigid, and declining industrial centers towards states with cheap real estate and warm weather. Population growth ultimately means economic growth. And so you see the emergence of places like Riverside, Phoenix, Orlando, and Tampa.

Second, there's the dominance of finance. If New York had the same GDP today that did in 1978, it would still have the second largest economy of any American metro region. Instead, it nearly doubled. Same for Chicago. Not coincidentally, both of those cities consistently top lists of the world's financial centers. This has allowed them to overcome their slow population growth by generating more economic activity per resident. These are still massively populated metro areas. But they're also cities of bankers or commodity traders instead of retirees.

Finally, there's the shift West. As McKinsey notes, the locus of world trade moved from the Atlantic to the Pacific during this time period, which benefited cities in California and its neighbors. The tech sectors helped bolster San Francisco, San Jose, and Seattle.

There are other stories inside this chart, such as the expansion of government that lifted Washington, DC, or the oil boom that built Dallas. But that's the broad sweep.