Moon Pie Dreams and Start-Up Wishes

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

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.