A recent visit by President Obama to an Ohio steel mill underscored his promise to create 1 million manufacturing jobs. On the same day, Commerce Secretary Penny Pritzker announced her department’s commitment to exports, saying “Trade must become a bigger part of the DNA of our economy.”
These two impulses — to reinvigorate manufacturing and to emphasize exports — are, or should be, joined at the hip. The U.S. needs an export strategy led by research and development, and it needs it now. A serious federal commitment to R&D would help arrest the long-term decline in manufacturing, and return America to its preeminent and competitive positions in high tech. At the same time, increasing sales of these once-key exports abroad would improve our also-declining balance of trade.
It’s the best shot the U.S. has to energize its weak economic recovery. R&D investment in products sold in foreign markets would yield a greater contribution to economic growth than any other feasible approach today. It would raise GDP, lower unemployment, and rehabilitate production operations in ways that would reverberate worldwide.
The Obama administration is proud of the 2012 increase of 4.4 percent in overall exports over 2011. But that rise hasn’t provided a major jolt to employment and growth rates, because our net exports — that is, exports minus imports — are languishing. Significantly, the U.S. is losing ground in the job-rich arena of exported manufactured goods with high-technology content. Once the world leader, we’ve now been surpassed by Germany.
America’s economic health won’t be strong while its trade deficit stands close to a problematically high 3 percent of GDP (and widening). Up until the Reagan administration, we ran trade surpluses. Then, manufacturing and net exports began to shrink almost in tandem.
Our past performance proves that we have plenty of room to grow crucial manufacturing exports, and even eliminate the trade gap. The rehabilitation should begin with a national commitment to basic research, which in turn boosts private sector technology investment. The resulting rise in GDP would be an important counterbalance to a slightly higher federal deficit.
Just-completed Levy Economics Institute simulations measured how a change in the target of government spending could influence its effectiveness. The best outcomes came about when funds were used to stoke innovation specifically in those export-oriented industries that might yield new products or cost-saving production techniques. When a relatively small stimulus was directed towards, for example, R&D at high tech manufacturing exporters, its effects multiplied. The gains were even better than the projections for a lift to badly needed infrastructure, which was also considered.
Economists haven’t yet pinpointed a percentage figure that reflects the added value of R&D, but there’s a strong consensus that it is significant. Despite the riskiness of each research-inspired experiment, R&D overall has proven to be a safe bet. Government-supported research tends to be pure rather than applied, but, even so, when aimed to complement manufacturing advances, small doses have a good track record.
Recognition that R&D outlays bring quantifiable returns partly explains why the federal National Income and Product Accounts have recently been altered to conform with international standards. NIPA will now treat R&D spending as a form of fixed investment. This will be a powerful tool to help reliably gauge its aftermath.
Private sector-based innovation has also proved to be far more likely to occur when it is catalyzed by a high level of public finance. (For amazing examples, check out this just-released Science Coalition report.) Contractors spend more once government has kicked in; productivity rises and prices drop.
The prospect of a worldwide positive-sum game is far more realistic than the “currency wars” dynamic so often raised by the media. Overseas buyers experience lower prices and the advantages of novel products. Domestic consumers, meanwhile, enjoy higher incomes and more employment, with some of the earnings spent on imports.
An export-oriented approach faces multiple barriers. Anemic economies across the globe could spell insufficient demand. Another challenge lies in the small absolute size of the America's export sector.
But the range of strategic policy options for the U.S. is limited. A rapid increase in research-based exports is the only way we see to simultaneously comply with today’s politically imposed budget restrictions and still promote strong job and GDP growth.
Instead of stimulating tech-dependent producers, though, we’ve been allowing manufacturing to stagnate and competitiveness to erode. Public R&D spending as a percentage of GDP has dropped, and is scheduled for drastic cuts under the sequester.
Sticking with the current plan means being caught up in weak growth and low employment for years. Jobs are being created at a snail’s pace, with falling unemployment rates largely a reflection of a shrinking workforce.
For our R&D/export model, we posited a modest infusion of $160 billion per year — about 1 percent of GDP — until 2016. We saw unemployment fall to less than 5 percent by 2016, compared with CBO forecasts that unemployment will remain over 7 percent. Real GDP growth — instead of hovering around 3.5 percent, by CBO estimates, on the current path — gradually rose to near 5.5 percent by the end of the period.
We need this boost. It’s urgent that we bring down joblessness and grow the economy. A change in fiscal policy biased towards R&D shows real promise as a viable way to help rescue the recovery.
Dimitri Papadimitriou is president of the Levy Economics Institute of Bard College, a professor at Bard, and a widely published economist. His policy positions include a past vice-chairmanship of the Trade Deficit Review Commission of the U.S. Congress. This article originally appeared under the title "The U.S. Economy Needs an Exports-Led Boost," at Reuters.Com.
Photo by Lawrence Jackson: President Obama at the ArcelorMittal Steel factory in Cleveland, Ohio; November 2013.
Like many older suburbs in high priced regions, Long Island faces two great crises: a loss of younger residents and a lack of affordable housing for the local workforce, including those employed as nurses, teachers and other professionals.
Often, proposed developments on Long Island are tailored to be geared towards “luxury” or are age-restricted for residents 55 or older. These proposals serve to almost completely ignore the middle class or the region’s young professionals. While the depth of the "Brain Drain", or flight of the young from Nassau and Suffolk Counties is debatable, the fact remains that housing stock for the area’s younger families is woefully deficient. Thanks to limited job opportunities and affordable housing, Long Island isn’t the attractive bedroom to Manhattan that it once was.
Long Island’s housing woes have been in the public eye for the last few months and it’s critical for residents and policymakers alike to understand the issues. The Town of Huntington recently issued a press release announcing that applications are being accepted for 43 affordable rental apartments that are part of the 379-unit Avalon at Huntington Station development. The rents range from $932 a month for a one-bedroom to $1,148 for a two-bedroom to $1,646 for a three-bedroom.
“Affordable” vs. “Attainable”
For once, the rents being billed as “affordable” seem aligned with the term. Hypothetically, a Young Islander making $45,000 and renting the single-bedroom option would pay roughly 24.8 percent of his or her salary toward housing, far less than the 35 percent threshold that is considered by the Long Island Index as a “high housing cost burden.”
Compare these rents to the “attainable” 300- to 400-square-foot micro-unit options that were presented by a group recently, which, when rented at $1,400 a month, would account for about 37 percent of someone’s $45,000 salary (both examples are calculated without utilities, Internet, cable, etc.).
The Avalon project contains a total of 303 rentals and 76 for-sale townhouses. Forty-three apartments and 11 townhouses will be affordable, while the remaining 260 apartments and 65 townhouses will be market-rate. The project site is a 26.6-acre parcel roughly half a mile from the Huntington Long Island Rail Road station.
A drop in the bucket
The Avalon Huntington Station project has rents that seem affordable, but the total amount of units are a drop in the larger bucket when it comes to addressing the Long Island’s greater affordable housing need of 41,429 units. After Avalon is constructed, there will be 41,375 units to go. Is that progress?
Compare both projects: The microunit approach is “attainable” at $1,400 a month, while Avalon is “affordable” at $932-$1,646 a month. Both terms lack the standardization and definite boundaries necessary to legitimize them in the minds of the public. Is attainable really worth $500 more than the term affordable? Where does “workforce” fall into this ever-sliding scale?
Our patchwork approach to affordable housing needs to change. For every press release issued touting two affordable units here or 11 workforce homes shoehorned there, the elephant in the room is tackling the monumental demand in the face of our paltry, undefined supply.
Some big questions
The issue of overall demand is a very big question that our region has faced for the last 50 years and will continue to face in the immediate future. What Long Islanders must move toward is first quantifying the issue. How many truly affordable units do we have? How many can we reasonably build? What is the true market demand for housing in Nassau and Suffolk counties? Are municipalities able to successfully increase density while preserving land elsewhere?
Countless times, important planning terms like “sustainable,” “smart growth,” “walkable,” “green” and now “affordable” and “attainable” are cheapened by misuse. These terms once represented important and innovative planning techniques that were once progressive tools in crafting a better community. When the terms are misused by stakeholders and industry insiders the result is a volatile cocktail of higher density suburban sprawl and poor urban design that further leads to suburban blight, and the public’s broken faith in the system.
A democracy gets the policy it deserves. Currently, Long Islanders are disengaged with the land-use process, and have allowed it to become dominated by biased stakeholders who have much to gain by allowing those important terms to become shallow. It’s easy to sell a project as “green” or “smart” when few, if any, people know what the term means.
The beauty of it all is that a democracy also can create the policy it needs. This is why it’s so important to take the time to give these critical issues the attention they deserve, and work towards a better Long Island.
Why do we issue press releases celebrating the creation of 54 affordable units, or 0.13 percent of our regional need? It is because, at this point, not much else is or can be done to tackle this massive problem until we fully understand it.
Richard Murdocco is a digital marketing analyst for Teachers Federal Credit Union, although the views expressed in this post are Murdocco’s alone and not shared by TFCU. Follow him on Twitter @TheFoggiestIdea, visit thefoggiestidea.org or email him at Rich@TheFoggiestIdea.org.
Photo from Avalon Communities
America’s cities have been under fiscal pressure for an extended period of time. To cope with this, and better manage assets, they’ve increasingly turned to various forms of special purpose districts or entities for service delivery. Traditional independent service districts such as sewer districts or transit districts were often designed to circumvent bonding limits or to deliver services regionally, so were larger in scale. These newer service districts are much smaller in scope. They consist of two basic components:
- A private sector, usually non-profit management agency that operates a public asset or delivers services under contract to the city in a form of public-private partnership.
- Special purpose funding sources to finance this entity’s activities. These funds can include private donations, proceeds raised from Tax Increment Financing (usually for capital purposes), and taxes raised from so-called Business Improvement Districts (or BIDs, with special property taxes collected from businesses in a given area on a semi-voluntary basis, generally after a super-majority of property owners vote to agree to impose the tax).
Examples of these special service districts abound. One of the most famous is the Central Park Conservancy, which manages Central Park in New York under contract to the city. The conservancy was founded in 1980 to raise funds to restore Central Park. It received funds from the city budget, but also does significant private fundraising as well, for both capital and operating purposes.
Another well-known example in New York is the Bryant Park Corporation, which runs Bryant Park in Manhattan. Once known as “Needle Park” because it was taken over by drug users and deals, today Bryant Park is a lavish showplace right down to fresh cut flowers in its marble restrooms. Bryant Park is only 9.6 acres, but has an annual budget of $7 million. As Bryant Park Corporation CEO Dan Biederman once noted, that is more than the entire $4.3 million parks budget of the city of Pittsburgh. This cash is raised from a BID, sponsorships, and commercial concessions in the district.
A different type of entity is the Chicago Loop Alliance. As with similar groups in many cities, Chicago uses the Alliance as a downtown management agency, responsible for marketing, beautification, public art, events, etc. in downtown Chicago. It’s backed by local businesses, especially retailers, but also receives funding from a BID (known as a Special Service Area (SSA) in Chicago).
As a final example, when the city of Indianapolis built the eight mile downtown Indy Cultural Trail, a non-profit called Indianapolis Cultural Trail, Inc. was created maintain and promote it. The trail was the brainchild of Central Indiana Community Foundation President Brian Payne. To ensure that the trail would be well maintained over the long term in an era of tight budgets, he included a maintenance endowment in the original private fundraising to build it. Additionally, ICT, Inc. raises private funding to supplement this.
These four examples are different in various ways, but something they obviously all have in common is that they serve prosperous areas or are focused on showplace type amenities. While not all such districts around the country are quite so upscale, in general they tend to be most prominent and effective in central business districts or wealthier neighborhoods.
These special service districts are part of a trend towards privatized government in America. Given the state of Central and Bryant Parks when their respective organizations where formed, obviously those two have been a success. Many of these districts are very well run because they depend at least in part on private sector cash raising and because as private entities they are free from many cumbersome government rules.
On the other hand, it’s not hard to see these as perpetuating the move towards two-tier municipal services, in which wealthier areas receive higher services levels than elsewhere. In effect, techniques like BIDs enable relatively thriving areas to purchase better levels of service for themselves without having to help finance similar services elsewhere. That’s not necessarily a good thing. For example, New York City has been criticized in some quarters for a lack of investment in outer borough parks. State Senator Daniel Squadron of Brooklyn said in AM New York, “Large conservancies get millions every year from private donors. But the parks that find it hardest to get that support are the ones that need it the most.” He wants to force the Central Park Conservancy to pass long 20% of its donations to smaller parks.
However, it isn’t always bad if a central business district, clearly a unique area in a city, has different services delivered there. Its dense concentration of employment and visitors almost necessitates it. The same is true for special regional attractions. Central Park truly is unique.
In fact, the move towards privatized services in wealthier areas could be a good thing for the rest of the city if it is used to free up funds for use where there isn’t as much private capital available. In this case a city could look to move parks, street cleaning, and other items “off the books” via special service districts in areas that can afford to fund such services largely by themselves. The city would then concentrate public funds in poorer or middle class areas. The tradeoff would be that the wealthier areas might be allowed to purchase higher quality services for themselves, but that would be structured in a way that let service quality be raised for others.
On the other hand, it’s not hard to see how this could evolve as a mechanism for “strategic abandonment” as well. In this case the city would cut general service levels then allowing wealthier areas to buy them back. Critics have charged that special service districts are exactly the legal mechanism that will be used to implement planned shrinkage in Detroit.
In short, how this plays out will depend greatly on the strategic intent (or neglect) of city leaders. But regardless, in an era of financial extremis for cities, the trend towards more privatized government and special service districts is sure to continue. The key is for the public to demand that these deals be structured as win-wins that don’t just benefit the already thriving areas of the city, but enable investments in struggling areas that are often overlooked.
Aaron M. Renn is an independent writer on urban affairs and the founder of Telestrian, a data analysis and mapping tool. He writes at The Urbanophile.
Bryant Park photo by Jean-Christophe BENOIST
California Judge Michael Kenny has barred state bond funding for the California high speed rail system, finding that “the state's High-Speed Rail Authority failed to follow voter-approved requirements designed to prevent reckless spending on the $68 billion project.” These protections had been an important in securing voter approval of a $10 billion bond issue in 2008. Sacramento Bee columnist Dan Walters suggested that without the protections in Proposition 1A, the measure “probably would have failed” to obtain voter approval.
According to the court decision, the California High Speed Rail Authority (CHSRA) had failed to identify $25 billion of the funding that would be necessary to complete the first 300 mile segment. This was required by the terms of Proposition 1A as enacted by the legislature and approved by the voters. Yet, without a legally valid business plan, CHSRA was steaming ahead, at least until the court decision.
The principal longer-term significance of the ruling is that “rule of law” remains in effect in California. Elizabeth Alexis, co-founder of Californians for Responsible Rail Design (CARRD), a group opposed to the project, told the Los Angeles Times that CHSRA had been conducting itself as if it were “above the law” (Note 1).
Judge Kenny's decision means that the state of California cannot ignore its laws, even when its leadership finds them politically inexpedient. Just like the businesses from the largest companies to the smallest used car lot, the law forbids the state from making legally binding promises and then casting them aside arbitrarily.
The Court Decision
The San Diego Union-Tribune summarized the court decision as follows:
Superior Court Judge Michael Kenny ruled that the California High-Speed Rail Authority could not proceed with using billions of dollars in bond funds to begin construction because it had not credibly identified funding sources for the entire $31 billion it will take to finish the 300-mile initial segment, nor had it completed necessary environmental reviews for the segment. These requirements were among the taxpayer protections written into law by California voters in November 2008, when they voted narrowly for Proposition 1A to allow the state to issue $9.95 billion in bonds as seed money for the project. Kenny said the state must develop a plan that comports with these requirements.
The Union Tribune further reported that Judge Kenny rejected arguments by the state Attorney General that state the legislature, rather than Proposition 1A (now state law which has not been repealed) was the final authority on how the bonds are used.
The Los Angeles Daily Newsindicated that the decision left the high speed rail project without either a funding plan or the ability to borrow money. The only remaining source of construction funding is a federal grant, which requires a match of state funding.
Proposition 1A and the high speed rail project have had a difficult history.
A $10 billion high speed rail bond issue to support the project (then called Proposition 1) was scheduled for 2008, after having been postponed twice. There was concern, however, in the state legislature that Proposition 1 had insufficient fiscal, environmental and management guarantees to attract a majority vote of the electorate. As a result, legislature enacted and Gov. Arnold Schwarzenegger signed Assembly Bill 3034, which added substantial protections and recast the ballot measure as Proposition 1A. Assemblywoman Catherine Gagliani, the author, said that the legislation “establishes additional fiscal controls on the expenditure of state bond funds to ensure that they are directed to construction activities in the most cost-effective and efficient way.”
Leading high speed rail proponent and then CHSRA Chairman Quentin Kopp (Note 2), applauded Assembly Bill 3034 indicating that “Californians will now be able to vote on a high-speed train system grounded in public-private financing and guided by fiscal accountability with the guarantee of no new taxes to fund the system,"
The Promised System
In the voter ballot pamphlet, proponents told voters that the proposed system would operate from San Francisco to Los Angeles and Anaheim, as well as through the Inland Empire (Riverside-San Bernardino) to San Diego and to Sacramento. This complete system was to cost $45 billion, according to the proponents (a figure that had already risen substantially).
Like many other large infrastructure projects, costs were soon to explode. By 2011, the cost had escalated to a range of almost $100 billion to more than $115 billion. Further, the promised extensions to Sacramento and the Inland Empire and San Diego were not included in that price (Note 3).
From High Speed Rail to “Blended” System
The political reaction to the cost escalation was negative, leading the CHSRA to radically revise the remaining San Francisco to Los Angeles and Anaheim line. CHSRA removed exclusive high-speed rail tracks in the San Francisco-San Jose and Los Angeles metropolitan areas. The cost of this "blended" system was estimated at $68 billion. CHSRA maintained its claim that the legislatively required travel time of 2:40 could be achieved without the genuine high speed rail configurations in the two metropolitan areas. Sacramento Beecolumnist Walters characterized this expectation as based on “assumptions that defy common sense.”
Former CHSRA Chair Quentin Kopp withdrew his support at this point, referring to the “blended system” as “the great train robbery.” Kopp also raised the possibility that the new plan could violate Proposition 1A, a judgment that Judge Kenny’s decision confirmed.
Kevin Drum, of Mother Jones may have provided the best summary of situation as it stands today:
Its numbers never added up, its projections were woefully rose-colored, and it was fanciful to think it would ever provide the performance necessary to compete against air and highway travel. Since then, things have only gotten worse as cost projections have gone up, ridership projections have gone down, and travel time estimates have struggled to stay under three hours.
Drum had previously characterized CHSRA claims as “jaw-droppingly shameless,”adding that “A high school sophomore who turned in work like this would get an F.”
Where From Here?
Proponents have not given up. As The Economistreported, proponents took comfort in the fact that “Judge Kenny did not cancel the project altogether.” The Economist continued “But if that is a victory, it is not clear how many more wins California high-speed rail can handle.”
The stalwart supporter San Francisco Chronicle editorialized that the court decision was a “bump” in the path for the project. Yet even the Chronicle conceded that: “The court results are a serious warning sign that the financial fundamentals need work.”
Too Big to Fail?
Columnist Columnist Dan Walters fears that to make the financial fundamentals work would require making the project “too big to fail:”
As near as I can tell, the HSR authority's plan all along has been to simply ignore the law and spend the bond money on a few initial miles of track. Once that was done, no one would ever have the guts to halt the project because it would already have $9 billion sunk into it. So one way or another, the legislature would keep it on a funding drip.
Such a strategy would force California taxpayers to fill the gargantuan funding gap, which for the entire Los Angeles to San Francisco line now stands at approximately $65 billion. With the federal funding of approximately $3 billion, the state is 95 percent short of the $68 billion it needs.
California taxpayers may not be so accommodating. Even before Judge Kenny’s decision, LA Weekly reports that a USC/Los Angeles Times poll shows statewide opposition now to have risen to 53 percent of voters, while 70 percent would like to have a new vote on Proposition 1A (see “Californians Turn Against LA to SF Bullet Train”).
Even the federal funding is being questioned. California Congressman Jeff Denham, also a former supporter of the project, joined with Congressman Tom Latham to ask (link to letter) the United States Government Accountability Office if further federal disbursements could be illegal, given the uncertainty of the state funding needed to “match” the federal grant.
Congressman Kevin McCarthy, the majority whip in the US House of Representatives has indicated that he will work with others in Congress to deny further federal funding to the project.
The San Jose Mercury-News, which like the Chronicle had been a strong supporter of Proposition 1A in 2008 has long since climbed off the train. In an editorial following Judge Kenny’s decision, the Mercury-News decried the project’s “bait and switch,” tactics and called for “an end to this fraud.”
The Winners: California Citizens
At this point, the words of legendary New York Yankees catcher Yogi Berra seem appropriate: “It ain’t over till it’s over.” However, Judge Kenny has rewarded California citizens with something that never should have been taken away from them – a government that follows its laws.
Note 1: This is not the first time that the state has run afoul of the law on the high speed rail project. According to the Sacramento Bee:
The Howard Jarvis Taxpayers Association had challenged the ballot language for Proposition 1A, arguing the Legislature used its pen to “lavish praise on its measure in language that virtually mirrored the argument in favor of the proposition.” The appeals court sided with HJTA [stating], “the Legislature cannot dictate the ballot label, title and official summary for a statewide measure unless the Legislature obtains approval of the electorate to do so prior to placement of the measure on the ballot.”
Unlike the present decision, the state suffered no consequences for its violation and Proposition 1A was not invalidated.
Note 2: Chairman Kopp is a retired judge, former state Senator and former member of the San Francisco Board of Supervisors.
Note 3: Joseph Vranich and I have authored two reports questioning the ability of the California high speed rail system to meet its objectives (financial, environmental, ridership, and operations). The first, The California High Speed Rail Proposal: A Due Diligence Report, was published by the Reason Foundation, Citizens Against Government Waste and the Howard Jarvis Taxpayers Association in 2008. The second, California High Speed Rail: An Updated Due Diligence Report, was published by the Reason Foundation in 2012.
Wendell Cox is a Visiting Professor, Conservatoire National des Arts et Metiers, Paris and the author of “War on the Dream: How Anti-Sprawl Policy Threatens the Quality of Life.
Photo: US Constitution (from National Archives)
Its image further enhanced by the recent IPO of Twitter, Silicon Valley now stands in many minds as the cutting edge of the American future. Some, on both right and left, believe that the Valley's geeks should reform the nation, and the government, in their image.
Increasingly, the basic meme out of the Valley, and its boosters, is that, as one venture capitalist put it: “We need to run the experiment, to show what a society run by Silicon Valley looks like.” The rest of the country, that venture capitalist, Chamath Palihapitiya, recently argued, needs to recognize that “it's becoming excruciatingly, obviously clear to everyone else, that where value is created is no longer in New York, it's no longer in Washington, it's no longer in L.A. It's in San Francisco and the Bay Area.”
But do we really want these people in control? Not if we care at all about privacy, social justice, upward mobility and the future of our democracy.
Let's start with the Valley's political agenda, which is increasingly enmeshed with that of the Obama-led Democratic Party. The scary thing about the Valley's political push is not its ideology, which is not particularly coherent, but its unparalleled potential to dominate the national political agenda.
Joe Green, a former roommate of Facebook founder Mark Zuckerberg and head of the Valley lobbying group FWD.us, made this clear in a memo leaked to the political site Politico. Green contended that “people in tech” can become “one of the most powerful political forces” since they increasingly “control” what he labeled “the avenues of distribution.”
Some liberals might be thrilled by the prospect of having such powerful allies, but not if they retain any concern, for example, for civil liberties. This is not merely a matter of informing people, as traditional media does, but using technology to penetrate the private lives of every individual consumer, largely for the economic gain of those “people in tech.”
There certainly seems no desire to curtail their ongoing invasion of people's privacy. Facebook, for example, recently disabled a key feature in its website to guarantee privacy. The Huffington Post has already constructed a long list of Google's more-egregious violations. No surprise, then, that Silicon Valley firms have been prominent in trying the quell bills addressing Internet privacy, in both Europe and closer to home.
Increasingly, the oligarchs see invasive technology as something of their divine right, as well as a source of unlimited profits. As Google boss Eric Schmidt put it: “We know where you are. We know where you've been. We can more or less know what you're thinking about.”
Perhaps more shocking for many liberal friends of the Valley folks is their attitude toward paying taxes. Here, the tech firms appear to have developed at least as much skill at manipulating the political system as the financial system. The New York Times recently described Apple as “a pioneer in tactics to avoid taxes,” while Facebook paid no taxes last year, despite making a profit of over $1 billion. For its part, Google avoided paying $2 billion by putting its revenue in a shell company in Bermuda.
OK, you can argue that the Valley tech types are a bit arrogant, dismissive of privacy rights and greedy. But is all that offset by their benefit to the economy? Tech industry boosters, such as UC Berkeley's Enrico Moretti, extol the virtues of the “technigentsia,” claiming they constitute the key to a growing economy. This is also the conventional wisdom in both parties, among both Left and Right and throughout the media.
Yet, over the past decade, the Valley's record on job creation is far from superlative. From 2000-12, Valley tech companies lost well over 80,000 jobs in high-tech manufacturing. Even with the current surge in hiring, Silicon Valley's employment in fields related to science, technology, engineering and mathematics has still not recovered all the earlier losses, according to estimates by Economic Modeling Specialists Inc.
You hope your kid may get a good job at Facebook or Google. Well, increasingly those being sought by Valley employers are not the sons and daughters of the American middle – much less, working – class. A recent study by the left-leaning Economic Policy Institute points out that many Valley tech firms would rather hire “guest workers” – now accounting for one-third to one half of all new IT job holders. These workers are valued partly because they will work for less, and do not mind living in crowded, overpriced apartments as much as do native-born Americans.
The Valley defends its expanding the ranks of what Indians often refer to as “technocoolies,” based on an alleged critical shortage of skilled workers in the STEM fields. But, as EPI demonstrates, this country is producing 50 percent more information-technology graduates each year than are being employed, so the preference for foreign guest workers seems more tied to finding cheaper, more-pliable workers.
Even worse, those kinds of tech jobs being created in the Valley produce opportunities only for a narrow subset of highly skilled, or well-connected, employees. As industrial jobs – the mainstay of the Valley's heavily minority working and middle classes – have cratered, most new jobs in the Valley, according to an analysis by the liberal Center for American Progress, earn less than $50,000 annually, far below what is needed to live a decent life in this ultrahigh-cost area.
Rather than a beacon for upward mobility, the Valley increasingly represents a high-tech version of a feudal society, where the vast majority of the economic gains go to a very select few. The mostly white and Asian tech types in Palo Alto or San Francisco may celebrate their IPO windfalls, but wages for the region's African American and large Latino populations, roughly on third of the total, have actually dropped, notes a recent Joint Venture Silicon Valley report, down 18 percent for blacks and 5 percent for Latinos, from 2009-11.
Meanwhile, the poverty rate in Santa Clara County since 2001 has soared from 8 percent to 14 percent; today one of four people in the San Jose area is underemployed, up from a mere 5 percent just a decade ago. The food-stamp population in Santa Clara County, meanwhile, has mushroomed from 25,000 a decade ago to almost 125,000 last year. San Jose, the Santa Clara County seat, is also home to North America's largest homeless encampment, known as “the Jungle.”
What the Valley increasingly offers America is an economic model dominated by the ultrarich, and generally well-educated, with few opportunities for working-class people, women and minorities. As Russell Hancock, president of Joint Venture Silicon Valley, recently acknowledged, “Silicon Valley is two valleys. There is a valley of haves, and a valley of have-nots.”
This is a far cry from the kind of aspirational place for middle- and working-class people that the Valley represented just a decade or so ago. Instead, the Valley, and its urban annex San Francisco, increasingly resemble a “gated” community, where those without the proper academic credentials, and without access to venture funding, live a kind of marginal existence in crowded housing, or are forced to commute to distant jobs as servants to the Valley's upper crust.
This exclusive future is being further enhanced by gentry liberal policies – as opposed to traditional social democratic policies – widely embraced by the Valley leadership. Instead of looking to spark growth in construction, logistics, manufacturing and other traditional sources of middle-class employment, the Valley's leadership generally embrace “green” policies that limit suburban homebuilding, drive up energy prices and otherwise make it impossible for businesses capable of offering better paying blue-collar, or even middle-management work.
None of this suggests that the Valley does not have a critical role to play in the recovery of the American economy. Just like Wall Street, Beverly Hills or, for that matter, Newport Beach, clusters of well-connected and well-educated people play a critical role in taking risks in investment and innovation, whether it involves technology, finance, fashion or media. Yet given their dangerous hubris, disdain for privacy rights, lower rates of tax compliance and minimal ability to create middle-class jobs, the Valley's elite should not be held up as supreme role models, much less the hegemons, of the Republic. That is, unless we have decided that we wish to live in a high-tech, 21st century version of a highly ossified, feudal society.
This story originally appeared at The Orange County Register.
Joel Kotkin is executive editor of NewGeography.com and Distinguished Presidential Fellow in Urban Futures at Chapman University, and a member of the editorial board of the Orange County Register. He is author of The City: A Global History and The Next Hundred Million: America in 2050. His most recent study, The Rise of Postfamilialism, has been widely discussed and distributed internationally. He lives in Los Angeles, CA.
The imminent departure of New York’s Mayor Michael Bloomberg, and his replacement by leftist Bill DeBlasio, represents an urban uprising against the Bloombergian “luxury city” and the growing income inequality it represents. Bloomberg epitomized an approach that sought to cater to the rich—most prominently Wall Street—as a means to both finance development growth and collect enough shekels to pay for services needed by the poor.
This approach to urbanism draws some of its inspiration from the likes of Richard Florida, whose “creative class” theories posit the brightest future for “spiky” high cost cities like New York. But even Florida now admits that what he calls “America’s new economic geography” provides “ little in the way of trickle-down benefits” to the middle and working classes.
Some other urbanists don’t even really see this as a problem. Harvard’s Ed Glaeser, a favorite of urban developers, believes De Blasio should celebrate the huge gaps between New York residents as evidence of the city’s appeal; a similar argument was made recently about California by an urban Liberal (and former Oakland Mayor) Jerry Brown, who claimed the state’s highest in the nation poverty rate reflected its “incredible attractiveness”.
Couched in progressive rhetoric, the gentry urbanists embrace an essentially neo-feudalist view that society is divided between “the creative class” and the rest of us. Liberal analyst Thomas Frank suggests that Florida’s “creative class” is numerically small, unrepresentative and self—referential; he describes them as “members of the professional-managerial class—each of whom harbors a powerful suspicion that he or she is pretty brilliant as well.”
The Voters rebel.
The revolt against this mentality surfaced first in New York perhaps because the gaps there are so extreme. Wall Streeters partied under Bloomberg, but not everyone fared so well. The once proudly egalitarian city has become the most unequal place in the country, worse even than the most racially divided, backward regions of the southeast. In New York, the top 1 percent earn roughly twice as much of the local GDP than is earned in the rest of country. The middle class in the city is rapidly becoming vestigial; according to Brookings its share of the city’s population has fallen from 25 percent in 1970s to barely sixteen percent today.
De Blasio rode this chasm between “the two cities” to Gracie Mansion, but his triumph represents just part of a growing urban lurch to the left. Voters in Seattle, for example, just elected an outright Socialist who promptly called on Boeing workers to take over their factory. More reasonably, she is also campaigning for a $15 an hour minimum wage, a reaction against the surging inequalities in that historically egalitarian Northwest city.
Similarly San Franciscans turned down a new luxury condo development along their waterfront, in large part because it was perceived as yet another intrusion of the ultra-rich. Even as the city enjoys its most recent tech bubble, resentment grows between the tech elites, including those traveling on private buses to Silicon Valley, and ordinary San Franciscans, struggling to cope with soaring housing costs.
The New Urban Demography
Bloomberg’s “luxury city” was ultimately undermined by its own demographic logic. Bloomberg’s gentry urbanist policies have undermined New York’s private sector middle class, a group that was critical to his own early rise to power and even more decisive in electing his predecessor, Rudy Giuliani. This same group of middle class voters, largely clustered in the San Fernando Valley, also drove the election of Richard Riordan in Los Angeles in 1993 and his comfortable re-election four years later. But the private sector middle class
The fading of the old middle class came with the rapid decline of industries, like manufacturing and logistics that once employed them. Since 2000, the New York metropolitan region has lost some 1.9 million net domestic migrants, the most of any in the country. $50 billion in lost revenue has bled out of the city along with the people departing. Florida alone, the largest destination has gained almost $15 billion in income. Other major cities, notably Los Angeles and Chicago, have suffered similar losses since the 1970s, notes Brookings, as middle income neighborhoods have declined while both poor and very affluent areas have grown.
Becoming the ultimate playground to the rich made things worse for most middle class New Yorkers by imposing higher costs, particularly for rents. In fact, controlling for costs the average New York paycheck (costs) is among the lowest in the nation’s 51 largest metro areas, behind not only San Jose, but Houston, Raleigh, and a host of less celebrated burgs. A big part of this is the cost of rents. According to the Center for Housing Policy and National Housing Conference , 31 percent of New York’s working families pay over 50% of their income in rent, well above the national rate of 24 percent, which itself is far from tolerable.
Conditions for those further down the economic scale, of course, are even worse. The urban poor in New York, Chicago, Los Angeles or Philadelphia , notes analyst Sam Hersh, find their meager resources strained by high prices not common in less fashionable cities like Buffalo or Dallas. “In some ways,” he notes, “ the low cost of living in “unsuccessful” legacy cities means that quality of life is in many cases better than in those cities widely regarded as a success.”
The dirty little secret here is the persistence of urban poverty. Despite the hype over gentrification, urban economies—including that of New York—still underperform their periphery. Nearly half of New York’s residents, notes the Nation are either below the poverty line or just above it. Just look at the penultimate symbol of urban renaissance, Brooklyn. The county (home to most of my family till the 1950s) suffers a median per capita income in 2009 of just under $23,000, almost $10,000 below the national average (PDF).
Marquee cities haven’t “cured poverty” or exported it largely to the suburbs, as is regularly claimed. Cities still suffer a poverty rate twice as high as in the suburbs. Demographer Wendell Cox notes that some 80% of the population growth over the past decade in the nation’s 51 largest cities came from the ranks of those with lower incomes, most likely the children of the entrenched poor as well as immigrants.
The resilience of poor populations has occurred even as there has been a much ballyhooed surge into some cities of younger people, primarily single, often well-educated, childless and less traditional in their values. This demographic shift has further pushed urban politics to the left as singles, particularly women, have become, next to African-Americans, the most reliable Democratic constituency.
By the time these young people get older and develop more interest in issues like schools, parks and public safety, Census data suggest they leave in cities large numbers, depriving them of a critical source of political, social and economic stability. By the age of 40, according to the most recent data, going up to 2012, more desert the core city than ever came there in the first place.
Urban Politics Left Turn
This new demography—essentially a marriage of rich, young singles and the poor—has created an urban electorate increasingly one-dimensional, and less middle class, not only in economic status, but also, perhaps more importantly, in attitude. This can be seen in the very low participation rates in de Blasio’s victory in New York, where under one quarter of the electorate voted in the election compared to some 57 percent in the 1993 Giuliani vs Dinkins race. Historically, middle class voters were the most reliable voters and their decline has led to record low participation not only in New York, but also in Los Angeles, where new Mayor Eric Garcetti was elected with the lowest turnout, barely twenty percent, in a contested election in recent memory.
The decline in voter participation occurs as cities are becoming ever more one-party constituencies. Two decades ago a large chunk of the top twelve cities were run by Republicans, but today none are. America’s cities have evolved into a political monoculture, with the Democratic share growing by 20 percent or more in most of the largest urban counties.
Under such circumstances the worst miscues by liberals are largely ignored or excused as politics and media take place in a kind of left-wing echo chamber. Even the meltdown of the healthcare law, which has hurt the president’s approval rating in national polls, seems to have not impacted his popularity in urban areas.
In New York and other cities this shift leftward, ironically, has been enabled by the successes of Bloomberg and other pro-business pragmatists whose successful policies on issues like crime have shifted the political agenda to other matters. “This election is not going to be about crime, as some previous elections were,” de Blasio told National Journal last month. “It used to be in New York you worried about getting mugged. But today’s mugging is economic. Can you afford your rent?”
With crime a less urgent issue and no sizable right or even centrist voting blocs, urban leaders can now push a set of initiatives—for example on policing—that would have been unthinkable in the New York of Rudy Giuliani or Los Angeles under Riordan. There are also likely to be fewer pushes for education reform, a critical issue for retaining the middle class, since most left-wingers, like de Blasio, largely follow the union party line.
This is not to suggest that we should long for a return to the Bloombergian “luxury city.” The gentrification-oriented policies did indeed foster the evolution of two cities, one preserved by tax increment funding and donations by wealthy and businesses and another, heavily minority city, notes analyst Aaron Renn facing budget constraints, the closing of schools, parks and other facilities
But revoking these policies alone does little to expand the middle class and diminish social inequality. A more direct step would be to boost the minimum wage in cities—as suggested by Seattle’s firebrand socialist council member and endorsed by the new Mayor— for the vast numbers of working poor who labor in hotels, fast food restaurants and other service businesses. This, to his credit, is what Richard Florida suggests as part of his proposed “creative compact” to boost the pay workers who work in service jobs for his dominant “creatives.”
This policy does address inequities but it may also have the effect of reducing overall employment as companies seek to downsize and automate their operations. Although conceived to help the working poor, it could further reduce job opportunities for those most in need of work.
Can Social Media Save New York?
The key issue is how to expand high wage jobs in cities with high rents and costs of living. One approach, embraced by many urban boosters, is to lure social media firms. Tech companies tend to concentrate in denser urban areas and are also a good fit with urban left-wing politics as they tend to be dominated by young, alternative lifestyle types.
However, this is a risky proposition, given the historic volatility of these companies. After the last bubble, Silicon Alley suffered a downward trajectory, losing 15,000 of its 50,000 information jobs in the first five years of the decade.
Although some claim, in a fit of delusion, that the city is now second to the Silicon Valley in tech this ignores the long-term trends. In fact, since, since 2001, Gotham’s overall tech industry growth has been a paltry 6% while the number of science, technology, engineering, and math related jobs has fallen 4%. This performance pales compared not only to the Bay Area, but a host of other cities ranging from Austin and Houston to Raleigh, Salt Lake and Nashville.
The chances of Gotham becoming a major tech center are further handicapped by a severe lack of engineering talent. On a per capita basis, the New York area ranks 78th out of the nation’s 85 largest metro areas, with a miniscule 6.1 engineers per 1,000 workers, one seventh the concentration in the Valley and well below that of many other regions, including both Houston and Los Angeles.
Finally for most cities, and particularly in New York, Los Angeles and Chicago, the rise of social media has been a mixed blessing. Whatever employment is gained in social media has been more than lost by declines in book publishing, videos, magazines and newspapers—all industries historically concentrated in big cities. Since 2001 newspaper publishing has lost almost 200,000 jobs nationwide, or 45% of its total, while employment at periodicals has dropped 51,000,or 30%, and book publishing, an industry overwhelmingly concentrated in New York, lost 17,000 jobs, or 20% of its total.
Restoring the Aspirational City
Instead of waiting for the social media Mr. Goodbars to save the day, or try to force up wages by edict, cities may do better to focus on preserving and even bolstering existing middle-income jobs. In New York, for example, more emphasis needs to be placed on retaining mid-tier white collar jobs, which have been fleeing the city for more affordable regions, including the much dissed suburbs.
New York’s middle class has been a primary victim of the wholesale desertion of the city by large firms. In 1960 New York City boasted one out of every four Fortune 500 firms; today it hovers around 46. And even among those keeping their headquarters in Gotham, many have shipped most of their back office operations elsewhere. Amidst a record run on Wall Street, the financial sector’s employment has fallen by 7.4 percent since 2007. The city’s big employment gains have been mostly concentrated in low-wage hospitality and retail sectors—service jobs that often don’t provide benefits and are vulnerable to fluctuations in the market.
Other potential sources of higher wage jobs include those tied to international trade, logistics and, in some areas, manufacturing. Many progressive theorists denigrate these very industries, which tend to pay higher than average wages across the board. Traditional employment sectors like these have bolstered urban economies in Houston, Oklahoma City, Dallas-Ft. Worth and Charlotte.
Equally important, cities need to shift away from the gentry urbanist fixation on the dense urban core and focus on more diverse neighborhoods. As more workers labor from home, and make their locational decisions based on factors like flexible hours and time with family, cities need to stop viewing neighborhoods as bedrooms for downtown, and begin to envision them as their own generators of wealth and value. The era of the office building has already peaked, and increasingly employment, even in cities, will become dispersed away from the cores.
Sadly, it’s doubtful the new left-wing urban leaders will embrace these ideas, in some part due to pressure from the “green” lobby. Though he was elected based on a message that assailed the city’s structural inequality, ulitimately de Blasio may end up more dependent on Wall Street than even his predecessor since his plans to fund expanded social and educational programs depend squarely on extractions from the hated “one percent.”
What our cities need is not a return to theatrical leftism or hard left redistributive policies, but a new focus on improving the long-term economic prospects of the middle and aspirational working class. Without this shift, the new leftist approach will fail our cities as much, if not more so, than the rightfully discredited gentry urbanism it seeks to supplant.
This story originally appeared at The Daily Beast.
Joel Kotkin is executive editor of NewGeography.com and Distinguished Presidential Fellow in Urban Futures at Chapman University, and a member of the editorial board of the Orange County Register. He is author of The City: A Global History and The Next Hundred Million: America in 2050. His most recent study, The Rise of Postfamilialism, has been widely discussed and distributed internationally. He lives in Los Angeles, CA.
Photo by Mike Lee
Europe's demographic dilemma is well known. Like East Asia and to a lesser degree most of the Western Hemisphere, Europe's birth rates have fallen so far that the population is becoming unable to replenish itself. At the same time, longer life spans have undermined the poulation’s ability to withstand a growing old age dependency ratio, challenging the financial ability (and perhaps even willingness) of a smaller relative workforce in the decades to come. The EU-27 (excluding Croatia) over 65 population is projected by Eurostat to increase 75 percent relative to its working age population (15-64) between 2015 and 2050, more than either the 60 percent increase the UN projects in the United States and Japan (though Japan’s current ratio is much higher than the EU or the US).
This problem could be partially addressed by international migration, which could increase the size of labor force required to support expensive social welfare commitments. Our analysis of available Eurostat data (European Commission) data indicates that international migration to the European Union (EU) is strong. Further, migration has been shifting with the changing economic fortunes of EU nations, led by strong growth in the “heart of Europe” but slowing growth along much of the periphery of the former EU-15.This suggests that strong economic growth may be the key to solving, or at least ameliorating, Europe’s looming demographic crisis.
All EU-15 Nations have Attracted Migrants
Since the 2004 enlargement of the European Union, now at 28, with the recent addition of Croatia, the former EU-15 has attracted millions of international migrants, including many from the newer entrants to the original fifteen memnbers. Eurostat data indicates that nearly 11 million people more people moved to these nations between 2005 and 2012 than moved away.
The changes are stunning. All 15 nations have had net international migration gains since 2005. The leader is Italy, which has added a net 2.8 million international migrants, the equivalent of 4.7 percent of its population. This is more than Italy’s total population gain between 1975 and 2000. Spain has added 2.6 million net international migrants, the equivalent of 5.6 percent of its population. The United Kingdom added 2.0 million international migrants, the equivalent of 3.2 percent of its population.
Deep in the Heart of Europe
Perhaps most surprising are that gains the heart of Europe, six nations that established the European Coal and Steel Community in the early 1950s, which was to become today's European Union (Belgium, France, Germany, Luxembourg, Italy, and the Netherlands) (Figure 1).
Germany and France had net international migration of 885,000 and 625,000 respectively. In both countries this was equal to one percent of the population. However, Belgium had the largest relative addition of international migrants. Its 490,000 net increase was equal to four percent of its population.
Overall, the six founding nations of the European Union attracted a net 5.0 million international migrants 2005 to 2012. This is more than the population of all urban areas in the six nations except for Paris, Milan and the Rhine-Ruhr.
Five additional economies, the United Kingdom, Austria, Sweden, Denmark and Finland added a net 2.8 million international migrants. Even Portugal, Ireland, Greece and Spain, despite their fragile economies, posted substantial gains, adding 2.8 net international migrants (Figure 2).
The PIIGS Minus Italy
Five nations have been designated the PIIGS by the international financial community, due to their financial reverses. These include Portugal, Ireland, Italy, Greece and Spain. All, except Italy, have seen their international migration rates fall precipitously. Between 2005 and 2011, these four nations combined added an average of 450,000 net international migrants. By 2012, they lost more than 275,000 net international migrants. In contrast, Italy, one of the EU founders, continued its strong trend, adding approximately 365,000 net international migrants in 2012, up from its 2005 to 2011 average of 350,000.
The six founding members picked up some of the “PIIGS minus Italy” losses. In 2012, these nations added nearly 885,000 net international migrants, which is well above their 585,000 average for 2005 to 2011. The other five nations (United Kingdom, Austria, Sweden, Denmark and Finland) fell to a 275,000 net international migration gain in 2012, compared to their 2005-2011 average of 370,000.
The new 13 members did much better than before, losing only 5,000 net international migrants in 2012. Their average from 2005 to 2011 was a 150,000 loss (Figure 3).
Ireland and Spain
Spain and Ireland illustrate the connection between declining economies and declining international migration.
The Irish Times noted in a recent article that the latest data from the European commission indicates that Ireland now has the worst net international outmigration rate in the European Union. Just six years ago, the Times reports, Ireland’s net international in migration rate was the highest in Europe. Over the past four years (Figure 4), Ireland has lost approximately 35,000 net international migrants annually (Ireland’s housing bubble and the resulting national financial crisis are described in Urban Containment and the Housing Bubble in Ireland).
Spain's decline in net international migration has been every bit as spectacular. At its peak, Spain was attracting a net international migration approaching 800,000. Last year, Spain lost 165,000 international migrants (Figure 5).
The 13 New Members
The net international migration gains in Europe’s heart have not been good news for Eastern Europe, where the newer European Union members are located. Overall, these nations lost approximately 1,050,000 international migrants between 2005 and 2012, though as noted above, the loss was minimal in 2012. This more recent improvement may be the result of weak economic conditions in many western and southern European countries.
Romania and Lithuania were the biggest losers. Romania lost nearly a net 1,000,000 international migrants, equal to nearly five percent of its population. Lithuania did even more poorly, losing 300,000 international migrants, nearly 10 percent of its population. Both nations lost overall population.
Migration and Economic Growth
Despite the resurgence of growth in the heart of Europe, the financial crisis has taken a toll. As in the United States, migration has fallen significantly, as many of the economic opportunities have dried up. By 2012, the net international migration to the EU-15 had been reduced to 900,000 from approximately 2 million in 2007. As throughout history, the demand for international migration is driven principally by the aspirations for a better quality of life. As a result, migration will tend to be greater where there is a wider gulf between the employment and economic opportunities in receiving countries than in countries that lose migrants.
Wendell Cox is a Visiting Professor, Conservatoire National des Arts et Metiers, Paris and the author of “War on the Dream: How Anti-Sprawl Policy Threatens the Quality of Life.
Photo: Genoa, Italy (by author)
When I arrived in Los Angeles almost 40 years ago, there was a palpable sense that here, for better or worse, lay the future of America, and even the world. Los Angeles dominated so many areas — film, international trade, fashion, manufacturing, aerospace — that its ascendency seemed assured. Even in terms of the urban form, L.A.’s car-dominated, multipolar configuration was being imitated almost everywhere; it was becoming, as one writer noted, “the original in the Xerox” machine.
Yet today the nation’s second-largest city seems to have fallen off the map of ascendant urban areas. Today’s dynamic cities in terms of job and population growth are the “new Los Angeleses,” such as Houston, Dallas, Phoenix or Charlotte; at the same time L.A. lags many more traditional “legacy” cities in job creation and growth, notably New York, Boston and Seattle. Worst of all, L.A. has lost its status as the dominant city on the West Coast; that title, in terms of both economic and political power, has shifted to the tech-heavy Bay Area.
With a weak economy and little media outside Hollywood, the city has lost much of its cachet. A Businessweek survey last year ranked San Francisco asAmerica’s best city to live in. Los Angeles was 50th, behind such unlikely competitors as Cleveland, Omaha, Tulsa, Indianapolis and Phoenix. In another survey that purported to identify the top 10 cities for millennials, Seattle ranked first, followed by Houston, Minneapolis, Dallas, Washington, Boston and New York. Neither L.A. nor Orange County made the cut.
L.A.’s relative decline reflects a collective inability to readjust to changing economic conditions. Some of this has to do with the end of the Cold War, but also with the loss of the headquarters of many of the area’s top defense contractors, such as Lockheed and, most recently, Northrop Grumman. In 1990, the county had 130,100 aerospace workers. A decade later, that number dropped by more than half to 52,400. By 2010, the county’s aerospace jobs numbered 39,100.
With the exception of drone technology, the region’s aerospace industry, as one analyst put it, has become “dormant,” a victim of a talent drain and a difficult business environment. This decline has weakened the metro area’s standing as an industrial center — L.A. has lost almost 20% of its manufacturing jobs since 2007. Meanwhile STEM employment in the Los Angeles-Santa Ana area is still stuck below its 2002 levels; once arguably the world’s largest agglomeration of scientists and engineers, the region has now dipped below the national average in the proportion of STEM jobs in the local economy.
In contrast to the Bay Area, whose tech community also was largely nurtured by defense contracts and NASA, L.A.’s defense and aerospace industries never pivoted into the vast civilian market. Capital, too, has played a role. The L.A. area has lots of rich people, but a relatively weak venture capital community. For example, the Bay Area was a recipient of roughly 45% of U.S. venture capital investment in the third quarter of 2013, while far more populous Los Angeles-Orange County took in under 6.5%.
The growth of VC-financed companies is one reason why L.A. has been less able to produce high wage jobs than its northern rival. According to a recent projection by Economic Modeling Specialists Inc., high-wage jobs will account for only 28% of L.A.’s job growth from 2013 through 2017 compared to 45% in the Bay Area.
Far greater problems can be seen further down the economic food chain. The state’s heavy industry — traditionally the source of higher-paid blue-collar employment — entirely missed the nation’s broad manufacturing resurgence. In the first decade of the 2000s, according to an analysis by the Praxis Strategy Group, L.A. lagged all but 10 of the nation’s 51 large metro areas in creating manufacturing jobs.
Two other once-unassailable economic niches in L.A., its port and entertainment, also are under assault. The expansion of the Panama Canal has increased the appeal of the Gulf ports, as do plans for expanded port facilities in Baja, California. These shifts threaten many of the roughly 500,000 generally well-paid blue-collar jobs in the local logistics industry.
Then there’s the slow but steady erosion of L.A.’s dominance in its signature industry, entertainment. Motion picture employment is down 11,000 since 2001. In the same period New York has notched modest gains alongside growth in New Orleans and Toronto. New announcements of industry expansions and an uptick in production in L.A. show that Tinseltown is far from dead, but challenges continue to mount from overseas and domestic competitors.
Perhaps most shocking has been the tepid response to this relative decline among L.A.’s business and political leaders. Once local entrepreneurs imagined great things, like massive water and port systems, dominated the race for space and planned out the suburban dreamscapes of Lakewood, Valencia and the Irvine Ranch.
Arguably the signature achievement of this past decade, and the one getting the most attention in the media, has been the revival of downtown as a residential and cultural hub. Having essentially abandoned the model of a multipolar city, L.A. has poured billions in infrastructure and subsidies into a half-baked attempt to turn Los Angeles into a faux New York. This is something of a fool’s errand since barely 3% of area residents work downtown, and most cultural consumers live far away on the westside or in the San Fernando Valley.
New Mayor Eric Garcetti is also a density advocate, and is placing huge bets on the massive building of high-end high-rise housing, all this despite weak job and population growth. In his campaign he emerged as the candidate of developers who want to densify the city, including Hollywood, over sometimes fierce grassroots opposition.
Compared to his inept and economically clueless predecessor, Antonio Villaraigosa, Garcetti represents something of an upgrade. He at least knows jobs matter at least as much as development deals for contributors. Yet he remains pretty much a creature of the failed leadership culture of L.A., which is dominated by public employee unions, subsidy-seeking developers and greens, largely from the city’s affluent westside.
Can L.A. turn itself around? The essential ingredients that drove the city’s ascendency remain: its location on the Pacific, its near-perfect climate and spectacular topography. The key now is for the region to build an economic strategy that allows it to use its assets, and build around its increasingly immigrant-dominated grassroots economy. Innovation in music, fashion and food continue at the grassroots level, with much of the inspiration coming from the city’s increasingly racially diverse mestizo culture.
What L.A. needs now is not a slick media campaign, but a concerted effort to tap this neighborhood-centered energy. The city of the future needs to reinvent itself quickly, before it fades further behind its competitors on the coasts and in Texas. Successful cities such as Boston, San Francisco, Seattle and Houston all managed to find ways to nurture new industries to supplement their traditional ones. Los Angeles should be able to do the same, but only if it seizes on its fundamental assets can it again become a city with a future.
This story originally appeared at Forbes.com.
Joel Kotkin is executive editor of NewGeography.com and Distinguished Presidential Fellow in Urban Futures at Chapman University, and a member of the editorial board of the Orange County Register. He is author of The City: A Global History and The Next Hundred Million: America in 2050. His most recent study, The Rise of Postfamilialism, has been widely discussed and distributed internationally. He lives in Los Angeles, CA.
Legacy cities have legacy costs, including disinvestment from the inner city, as well as regional economic decline. The spiral has been ongoing for decades. The new white paper by consultants Richey Piiparinen and Jim Russell entitled “From Balkanized Cleveland to Global Cleveland”, funded by the Cleveland-based neighborhood non-profit Ohio City Inc., examines the systemic reasons behind legacy city decline, all the while charting a path to possible solutions.
Shrinking city theorists say the problem with the legacy city is that people leave. But urban powerhouses such as New York lose more people in a day than the Clevelands of the world do in a month. The real problem with legacy cities is an absence of newcomers, as it is this lack of “demographic dynamism”, or “churn,” which has inhibited economic evolution.
To arrest economic decline, cities commonly undertake a patchwork of strategies. These include retention strategies that supposedly “plug” the brain drain; attraction strategies that emphasize placemaking, residential density, and urban amenities; or “big ticket” developments such as convention centers and casinos. The authors take another stance, theorizing that migration is the key to economic development. Cities that lack churn need churn. Without it, legacy cities can act as echo chambers of patronage and provincial thinking.
But churn in itself is not enough. Often, the importance of inmigrants equates to filling condos or restaurant booths. Take the case of Ohio City, an inner city neighborhood bordering Cleveland’s central business district. The neighborhood, home to the iconic West Side Market, has made strides in its recovery. Investment is coming in. Condos are being built. Restaurants are opening. But this is not enough.
In fact the mistake cities make when it comes to reinvestment is to settle with the low-hanging fruit of gentrification. Here, the neighborhood is seen as a center of consumption, with trickle-down effects from increased commerce said to reach low-income residents living in gentrifying, or potentially gentrifying, neighborhoods. This does not happen.
This does not mean the reinvestment going on in neighborhoods such as Ohio City is unwelcome. It is only to say something else is needed. Ohio City needs to be made into a neighborhood that produces, not simply one that consumes.
One way to do this is to ensure that the diversity of race, class, and businesses that currently exist in the neighborhood continue in the face of increasing market demand. For instance, Ohio City is 36% Black, 20% Hispanic, and 54% White. The neighborhood’s race and class mixing has increased over the last decade. Ensuring such heterogeneity can remain in the face of market demand is the challenge of the day. To date, no city has systematically ensured a process of policies that prioritizes the long-term benefits of integrated communities over the short-term benefits of consumer-driven gentrification.
The benefits include increased economic mobility for individuals who grow up in integrated neighborhoods. For instance, a new study called “The Equality of Opportunity Project” found that Cleveland ranked 45th out of 50 metro areas in terms of upward mobility. A child in Cleveland raised in the bottom fifth of an income class only has a five percent chance of rising to the top fifth in her lifetime. The study, however, concludes that “upward mobility tended to be higher in metropolitan areas where poor families were more dispersed among mixed-income neighborhoods”.
Cleveland is at a threshold. The re-investment is coming, and the importance of this infill as a means to arrest its economic and demographic decline cannot be overstated. Yet this will only occur if re-investment is leveraged so as to develop real economic growth. In other words, simply developing “creative class” enclaves in the likes of Ohio City and Tremont will do nothing to transition Cleveland from a segregated, siloed city with high rates of poverty into a globalized, integrated city comprised of neighborhoods that produce human capacity.
Where people live informs them no less than where they work or go to school. Neighborhoods are factories of human capital. Equitable, integrated environments maximize potential. America needs to go past the gentrification model of revitalization. The cities that still have a fighting chance, like Cleveland, should lead.
Read the white paper here.
When Bill De Blasio won New York’s mayoral election a few weeks ago, it came as no surprise to anyone. His impassioned analogies to New York’s “Tale of Two Cities” and his call for a city that provided not just for the wealthiest one or two percent, but for all, appealed to the growing sense that New York is an increasingly unfair and unequal place.
The angst felt by New Yorkers is not contained only to that city. In Chicago, real estate companies have poured investment into the Loop and a handful of adjacent residential and mixed-use neighborhoods. Yet, whole swaths of the city’s south and southwest side have remained in a state that would rival war-zones and have earned the city a reputation as America’s murder and gang capital du jour. San Francisco’s recent transit strikes, and the ensuing scandal that followed a Silicon Valley tycoon’s less than empathetic statements on Facebook have highlighted that city’s class tensions.
Saskia Sassen pointed out in her 1991 book The Global City that globalization and modern technologies should push wealth and geopolitical power to a small number of globally connected and powerful metropolises. And in many ways, this thesis has born itself out as financial centers in New York and, to a lesser extent, Chicago and Boston as well as technology in San Francisco and “Eds and Meds” in Philadelphia, Pittsburgh and Boston have all “revitalized” these legacy cities that only thirty years ago would have been widely assumed to be dead. Meanwhile, smaller, less connected legacy cities have shrunk in global importance.
Left out of many people’s analysis of Sassen’s writings – an analysis that equates geopolitical power with urban success – is the simple fact that a geopolitically powerful city does not always mean a city of evenly distributed wealth or equality. The urban poor in New York, Chicago, or Philadelphia are not necessarily better off than those in Buffalo, St. Louis, or Detroit. In some ways, the low cost of living in “unsuccessful” legacy cities means that quality of life is in many cases better than in those cities widely regarded as a success.
Given our assumptions about urban success – that it should involve a thriving private sector, a critical mass of wealthy taxpayers, and a sustainable level of investment (as an aside, I know few people who would describe investment in New York as “sustainable” at this point) – it should come as no surprise that the method most commonly employed to realize these goals, economic development, would fail so spectacularly to deliver positive changes in the lives of the urban poor.
While a thriving private sector, a critical mass of wealthy taxpayers, and a sustainable level of investment certainly register among the necessary descriptions of a successful city, urban economic development too often equates better cities with attracting better people at the cost of dealing with the populations already residing within a city. While the last few decades have seen the resurgence of once decrepit metropolises through TIFs and BIDs and tax breaks aimed at capturing employers of what Richard Florida would describe as “the creative class” – engineers, lawyers, artists, and bankers – De Blasio’s win, along with political movements like Occupy Wall Street augur a shift in focus from the technocratic priorities of Giuliani or Daley to a De Blasio-style redistributive view of urban justice.
So far I have ignored a bit of nuance between Bloomberg’s market-oriented (some might say neoliberal) focus on growth in “creative class” (high skill and high pay) sectors, and his classically progressive restraints in other initiatives (smoking, trans fat) and the degree to which other mayors have followed New York’s lead in this type of leadership. While I tend to hope that a market-oriented solution to urban problems can be found, the vehicle for urban revitalization seems almost irrelevant when we consider the degree to which it has benefitted the urban wealthy at the exclusion, and occasionally cost, of the urban poor.
Obviously, inequities in quality of life have been most pronounced in New York where wealth is profligate and new construction has been tightly regulated, pushing cost of living ever upward. Yet, the De Blasio election means less for New York’s poor than it does for the country as a whole. Whether the Rahm Emanuels and Michael Nutters of America’s cities are replaced by De Blasio democrats in the next election will mean a lot for the priorities of development in our cities.
It’s easy to dismiss the De Blasio win as an event isolated to the confines of New York as the logical end to both Bloomberg’s overreaching policies and “quality of life” initiatives which arguably placed a premium on attracting and retaining the wealthy. But, we should not ignore the very real possibility that De Blasio’s win, and the disdain growing for economic development-focused politicians, may lead to a spiral of urban disinvestment wherein wealthier taxpayers leave cities, making cities ever less attractive places to live, thereby further escalating the effects repelling the middle and upper classes from urban cores. The reason we should not ignore this possibility, though it may seem inflammatory at first consideration, is simple: we are still recovering from its effects throughout the last half of the previous century.
Yet, De Blasio is probably not as leftist as right-leaning pundits have bombastically proclaimed in the wake of his election. Hopefully, De Blasio and the growing urban left can pull off a type of development that prioritizes development for all, not just for the wealthiest residents, without falling into the traps of the union-entrenched Democrat machines that oversaw the urban perdition of the last half century. The death of urban economic development may well be upon us, but hopefully if it is, something that provides for the development of the whole city will emerge.
Sam Hersh is currently a student of urban studies at Haverford College in Pennsylvania hoping to use the worlds’ cities to more effectively catalyze human opportunity when he graduates. He can be reached at email@example.com.
Photo courtesy of Bill de Blasio.
Obamacare's first set of victims was predictable: the self-employed and owners of small businesses. Since the bungled launch of the health insurance enrollment system, hundreds of thousands of self-insured people have either had their policies revoked or may find themselves in that situation in the coming months. More than 10 million self-insured people, many of them self-employed, could meet a similar fate.
Unlike large companies or labor unions, which have sought to delay or duck implementing the Affordable Care Act, what could be called the yeoman class lacks the political might to make much of a dent in Washington policies. Indeed, in the Obama era, with its emphasis on top-down solutions and Chicago-style brokering, Americans who work for themselves probably are more marginalized today than at any time in recent memory.
Virtually every major initiative of this administration – from taxation and regulation to monetary policy and Obamacare – has been promulgated with little concern for the self-employed. Many feel themselves subject to an apparent attempt to transfer middle class incomes to the poor just as ever more wealth concentrates in the “1 percent.” Not surprisingly, 60 percent of business owners surveyed by Gallup expressed opposition to the administration.
The divide between the yeoman and the political community marks a major departure from the norms of American history. After all, people came to America in large part to secure “a piece of the pie,” whether through owning a small business or a farm, goals often unattainable in Europe. Thomas Jefferson, notes historian Kenneth Jackson, “dreamed of the U.S. as a nation of small yeoman farmers who would own their own land and cultivate it.”
The rural yeoman ascendency lasted well into the late 19th century, when the populist movement fell to triumphant industrial capitalism. Yet the drive to disperse property did not end there, but resurfaced in the expansion of urban homeownership, something strongly supported by the New Deal administration. “A nation of homeowners,” President Franklin Roosevelt believed, “of people who own a real share in their land, is unconquerable.” From 1940-60, nonfarm homeownership rose from 43 percent of Americans to more than 58 percent.
Early on, some progressives, particularly among intellectuals, recoiled against the rise of a class of petty landowners. Some of them, historian Christopher Lasch observed, saw “a republic of producers” as necessarily “narrow, provincial and reactionary.” This view is echoed today by Democrats such as former Clinton administration adviser Bill Galston, who dismisses small business as “a building block of the Republican base.” Democrats, he suggests, should instead seek a reconciliation with Big Business and its powerful cadre of lobbyists.
An expanding cohort
Yet, Democrats someday may rue tossing off the yeoman class. Unlike such groups as white racists, defense hawks and social conservatives, all of whose ranks are thinning, the numbers of the self-employed are growing. Independent contractors, according to Jeffrey Eisenach, an economist at George Mason University, have increased by 1 million since 2005; one in five works in such fields as management, business services or finance, where the percentage of people working for themselves rose from 28 percent to 40 percent from 2005-10. Many others work in fields like energy, mining, real estate or construction. Altogether, there are as many as 10 million such independent workers, constituting upward of 7.6 percent of the U.S. labor force and earning more than $626 billion.
This shift to self-employment is occurring even in heavily regulated states like California. Since 2001, the number of self-employed people in the Golden State grew by 15.6 percent, versus a gain of 9.4 percent for the nation. In terms of states' share of self-employed in the workplace, California ranks in the top five; three of the others, Vermont, Maine and Oregon also are blue states.
Why is this the case? Ironically, this may be a reaction to expansive regulatory regimes that tend to both reduce corporate employment and also encourage some individuals “to take their talents” solo into the marketplace without having to deal with, for example, labor laws and environmental regulations.
At the same time, technology allows people to work in an increasingly dispersed manor. The number of telecommuters has soared by 1.7 million workers over the past decade, a 31 percent increase in market share, and now accounts for 4.3 percent of all employment.
Obamacare is only one aspect of government's assault on the yeoman class. Attempts to regulate housing and encourage denser, usually rental, units ultimately works against the interests of home-based small businesses by raising house prices. The extra bedroom that becomes the home office now can be seen as “wasteful” even if – in terms of generating greenhouse gases – working at home is far more efficient than commuting, even by mass transit.
Over time, these conflicts could threaten the interests of some groups that now reside firmly in the Obama majority coalition. This reflects the changing demographics of small enterprise; the yeomanry is slowly becoming far more diverse. From 1982-2007, for example, African American-owned businesses increased by 523 percent; Asian American-owned businesses grew by 545 percent; Hispanic American-owned businesses by 696 percent; businesses owned by whites increased by 81 percent. Today, minority-owned firms make up 21 percent of the nation's 27 million small businesses.
Immigrants, a largely Democratic-leaning constituency, constitute a growing part of the entrepreneurial landscape. The immigrant share of all new businesses, notes the Kauffman Foundation, grew from 13.4 percent in 1996 to 29.5 percent in 2010. They also constitute roughly a quarter of founders of high-tech start ups, and have done so for most of the past generation.
Women, another Obama-leaning group, have also expanded their footprint; over the past 15 years, the number of women-owned firms has grown by one and a half times the rate of other small enterprises. These companies account for almost 30 percent of all enterprises; from 1997-2012, the number of women-owned U.S. firms increased by 54 percent, versus an overall growth rate for all firms of 37 percent.
Eventually, the potential yeoman backlash may also spill over to millennials, another key Obama constituency. As a generation, their desire for homeownership and economic self-reliance runs headlong into both the tepid economic recovery and regulatory policies. Over time, as they age, their interests could diverge from the expanding welfare state, whose primary mission appears to be to transfer wealth not only from the middle class to the poor but from younger to older Americans.
As millennials age, many will seek to buy homes, start businesses and families. In contrast to their common, often-naïve embrace of the idea of bigger government, developed in their student years, experiences as potential homeowners and parents, as well as business owners, might make them skeptical of “top down” solutions imposed by largely baby boomer ideologues.
Reply from the Right?
Yet, this will be no cakewalk for conservatives. It is not enough to simply dismiss Obamacare, or other regulations, without endorsing some of the measures' positive attributes, such as assuring one's children or protecting the rights of those with “pre-existing conditions.” The yeomanry may want less-Draconian legislation, but they may not be so anxious to leave their health care utterly exposed to unfettered market forces.
Democrats, in fact, could make a run at this constituency, particularly if the Republicans continue a political approach that alienates, in particular, a more diverse yeomanry – gays, many women and ethnic minorities, immigrants and creative professionals. Here, in fact, it might be better to be more radical than less, proposing something more like a Canadian “single payer” health system that would separate employment status from health care. Democrats also could also support some form of minimum coverage designed for the growing numbers of Americans who work for themselves.
Ultimately, over time, the yeoman constituency, although poorly organized and without a programmatic agenda, is one that needs to be addressed, if for no other reason than they constitute a growing portion of the workforce. The party, or movement, that successfully does this will have a great opportunity to seize the political future.
This story originally appeared at The Orange County Register.
Official White House Photo
In case it has been a while since you have ridden a bicycle around Manhattan, the Bronx, Brooklyn or Queens — as I have in recent weeks — here is a shortlist of some developments around New York City: midtown sidewalks are overflowing with tourists and too narrow for the pedestrian flow (especially around the many Elmos posing in Times Square); the South Bronx, while still very poor, has an emerging middle class; cruise ships dock in Red Hook, Brooklyn, on the same piers that were once the provenance of gangland; potholes and deteriorating asphalt are everywhere, despite Mayor Michael Bloomberg’s reputation for elevating the city’s infrastructure; and Queens is still struggling with all the Robert Moses expressways and bridges that make traffic patterns there a maze of dead ends, even on a bike.
Here are some observations from my handlebar social survey:
Uptown: The nicest neighborhood I discovered is what realtors now call South Harlem, from about 145th Street south to Central Park. The crime rates are down, the bistros are up, and the wide sidewalks and relatively quiet streets make for lovely strolling or, in my case, bike riding.
Because the scale of the neighborhood is often limited to four-story brownstones (East Harlem has more projects, but also a Target and a PetSmart), gentrification has spread like a wildfire. A mansion on Strivers Row, the once and future dream of Harlem homeowners, costs about $1.8 million. One-bedroom apartments on West 116th Street and Lennox go for about $350,000.
On the Waterfront: It's sixty years since unionism, pilferage, and mob violence killed off New York’s ports, eventually sending cargo ships and containers to Baltimore, Norfolk, Newark, and Boston. The city has now reclaimed its rotting piers and empty warehouses with waterside parks, ferry stops, exhibition centers, and cruise terminals, including the one in Brooklyn that's large enough to tie up the Queen Mary.
Especially on the West Side of Manhattan — with fewer mobsters gasping at the ice picks in their backs — the piers are part of an expanding and vibrant dockland scene, complete with picnic tables, skateboard jumps, arboretums, and restaurants, all of which have splendid views of the Hudson River.
Gridlock: One of the downsides of New York’s continuing prosperity is that it risks becoming a gridlocked city of Asian proportions. One Sunday I biked the length of Fifth Avenue, stunned at the number of cars clogging the streets and the bad quality of the pavement.
Coming into Manhattan across the East River bridges is free, and New Yorkers love their cars with a demolition-derby passion. I even saw motorcyclists popping wheelies down Fifth Avenue, to the indifference of the police, who clearly weren’t in the mood to confront biker rebels without much of a cause.
The Freedom Tower: The new One World Trade Center looks like the cookie-cutter office buildings in Shanghai and Hong Kong, or perhaps an enormous shower stall. It is long on defiance but short on urban grace.
The city would have done more for downtown if it had returned the blocks and cross streets lost to the footprint of the first World Trade Center development, improved the rail network, and allowed the Battery Park and Wall Street areas to flow together into a vibrant neighborhood.
The Freedom Tower is more a symbol than a practical city project. Four billion dollars (with myriad subsidies loaded into the budget) will be spent essentially for a large, mostly public, office building at a time when everyone prefers to work from home.
The Mayoral Race: In the November election to replace Michael Bloomberg, the Democrat Bill de Blasio (public activism) defeated the Republican Joe Lhota (Harvard MBA). Neither had a large political base before the primaries, although both have been active in city politics for the last generation.
Lhota was a disciple of former mayor Rudi Giuliani and ran the Metropolitan Transportation Authority for Bloomberg, but despite managerial competence had no chance of winning. New Yorkers want it all: neither higher crime or taxes, nor stop-and-frisk and budget cuts (“fuhgeddaboudit”).
Critics of de Blasio say his feel-good liberalism will set New York’s clock back to 1977, when television announcer Howard Cosell told America from Yankee Stadium: “Ladies and gentlemen, the Bronx is burning,” which is also the title of a book on the low water mark of New York’s urban decline. His supporters say he will bring a degree of social justice to what is otherwise a capital intensive city.
The Bronx: Also in 1977, President Jimmy Carter went to the smoldering South Bronx, to publicize the extent of New York’s decay. Ronald Reagan went during the 1980 campaign, to highlight that Carter had not done anything to haul away the rubble and fill in the vacant lots.
By the time Bill Clinton got there in 1997, the heavy slum lifting had been done (thanks to New York city and state officials), and all he could do was bask in the success. Despite or because of the presidential grandstanding, Charlotte Street, which became the South Bronx's signature photo op, is now a suburban enclave, with 89 single-family houses and graceful fenced lawns.
More than anything else, however, what brought back the Bronx was a wave of immigrants in the final decades of the 20th century. They came to wealthy New York looking for jobs, and needed affordable neighborhoods where they could raise their families.
Queens for a Day: I rode from Randall's Island, a splendid oasis in the East River, through Astoria and Flushing to College Point and Whitestone. Even with some new bike paths, Queens suffers from too many highways cutting across its underbelly. I got lost near Citi Field and rode 500 yards on the Van Wyck Expressway.
My destination was the old army base at Fort Totten, once the Gibraltar of Long Island Sound (built to keep Confederates out of New York harbor), now a forlorn park and reserve training center, although with stunning views of the water and the New York skyline.
The future of Fort Totten could be another bellwether of New York City. Should its dilapidated historic houses — from the genteel, 1930s U.S. Army base — be renovated and sold off, part of a mixed-use plan to get more families into the lovely park and historic base? The same decisions need to be made about Governors Island and parts of Ellis Island. Or should all private development in historic areas be banned, even if the parks remain shabby without enough public money for renovation?
Because I grew up in and around the New York City that for much of my life was deteriorating, I view most recent development around New York (except for the ugly destruction of Pennsylvania Station) as positive. To me, Fort Totten should be both a park and a place for families to live. Why leave a waterfront partly in ruins?
Will it happen when Bill de Blasio is mayor? Somehow I doubt it. I wouldn't think a mayor could win reelection with privatization projects in a faraway Queens park — although I never thought that the Bronx would again be thriving, South Harlem or Red Hook would be safe, or the West Side piers would become part of a stunning city revival. All of this has been accomplished with a blend of private and public money.
Conclusions? As Woody Allen said, “There is no question that there is an unseen world. The problem is, how far is it from midtown and how late is it open?”
Matthew Stevenson, a contributing editor of Harper's Magazine, is the author of Remembering the Twentieth Century Limited, a collection of historical travel essays. His new book, Whistle-Stopping America, was recently published.
Flickr photo by Charles16e: East River Bicycle with Fishing Rod Attachment
The term 'walking away from the property' usually refers to owners who leave a home when they can't make the mortgage payments. In Youngstown, Ohio, it may gain a new meaning: to describe banks that abandon a vacant property in foreclosure, and leave neighbors to cope with the blight. Now banks that walk away from their properties are being reigned in by a local community organization. This year, thanks to the efforts of the Mahoning Valley Organizing Collaborative (MVOC), Youngstown, Ohio became the first city in the nation to require banks to pay a $10,000 cash bond to the city when a house is both vacant and foreclosed.
As a result of the code's passage in January, the city now has a bond fund of over $870,000. Youngstown can use the funds for upkeep of the vacant properties.
MVOC organizer Gary Davenport has said of the code, "It's preventative and not punitive…the goal is to make banks recognize that it's their responsibility to maintain vacant properties in foreclosure." More strongly, Claudia Sturtz, a member of the Rocky Ridge Neighborhood Association commented, “I spent over 20 hours a month fighting an imminent foreclosure that boiled down to Chase being irresponsible, losing paperwork, and being inflexible. Big banks abuse foreclosure and destroy lives and communities. We need accountability and education for foreclosure.”
The innovative move by a shrinking city to help keep neighborhoods livable may end up serving as a model for industrial cities across the nation that are faced with smaller populations and high foreclosure and vacancy rates. In Ohio, nearby Warren is now following a similar path.
Because of the increased number of abandoned properties across the country, many cities are now seeing widespread demolitions. One result has been a vacant property movement by community organizations to build political pressure and stabilize neighborhoods, especially in shrinking cities.
In the deindustrialized Youngstown-Warren area, vacant and foreclosed housing is now an MVOC priority. For MVOC Executive Director Heather McMahon, this was a no-brainer. "It's almost anti-American to say our city is shrinking. But with 62,000 residents living in a city built for 250,000, a declining tax base, and approximately 5,000 blighted vacant structures in need of demolition, we were in desperate need of serious, proactive remediation that addresses vacancy before it begins. If Youngstown is going to survive as a city and not go bankrupt like Detroit, we're going to have to figure something out."
The MVOC developed a “listening campaign,” and started walking the neighborhoods to identify vacant properties. MVOC also began working with the Youngstown State University Center for Urban and Regional Studies to develop surveys and analyze and map results. The new data and new public involvement made visible how bad the situation had become. Since 2004, 5,186 properties have been foreclosed on in Youngstown.
The community group also pressured Youngstown to hire a city official to oversee the largely independent and dysfunctional municipal departments concerned with vacant properties. It pushed the city to set up plans, timelines, and commitments for implementation of new legislation through a series of “public engagements” with a new mayor.
To assure city accountability, it created a “Demolition Team” composed of local residents that demanded demolition contractors post start and stop dates at job sites. The transparency helped residents to understand demolition workflow and code enforcement more clearly. Because of these efforts, thousands of rental and vacant properties have been inspected and registered, a property maintenance appeals board has been created, and the city prosecutor has held appeal hearings.
On a state level, vacant property campaigns have pressured the Ohio Attorney General Michael DeWine to develop Moving Ohio Forward, which established a demolition grant program to remove blighted residential structures. DeWine became the only Attorney General in the country to set aside funding ($75 million) from the banks’ robo-signing settlement for needed demolition in disinvested communities.
Most recently, the MVOC is now trying to introduce statewide legislation that would protect neighbors who seek access to vacant properties without fear of trespass. It is also working with local legislators to introduce a new statewide homeowner’s Bill of Rights. Although neither of these initiatives will easily pass in the Republican-dominated Ohio legislature, they may end up providing a model for communities elsewhere.
As Joseph Schilling, Director of the Metropolitan Institute and founder of the Vacant Properties Research Network at Virginia Tech says, “Recent case study research by the VPRN shows that community based organizations, such as MVOC in Youngstown, NPI in Cleveland or PACDC in Philadelphia, are often the major catalysts in making vacant property reclamation a top policy priority for local communities.”
John Russo is a visiting research fellow at the Metropolitan Institute of Virginia Tech, a former co-director of the Center for Working-Class Studies, and professor (emeritus) in the Williamson College of Business Administration at Youngstown State University. He is a board member of the Mahoning Valley Organizing Collaborative (MVOC) (Youngstown-Warren), and the co-author, with Sherry Linkon, of Steeltown U.S.A.: Work and Memory in Youngstown.
Flickr photo by Jinjian Liang of a vacant house near Columbus, Ohio.
With the social media frenzy at a fever pitch, people may be excused for thinking that Silicon Valley is still the main engine for growth in the technology sector. But a close look at employment data over time shows that tech jobs are dispersing beyond the Valley and its much-celebrated urban annex of San Francisco.
We turned to Mark Schill, research director at Praxis Strategy Group, to analyze job creation trends in the nation’s 52 largest metropolitan areas from 2001 to 2013, a period that extends from the bust of the last tech expansion to the flowering of the current one. He looked at employment in the industries we normally associate with technology, such as software, engineering and computer programming services. He also analyzed the numbers of workers in other industries who are classified as being in STEM occupations (science, technology, engineering and mathematics-related jobs). This captures the many tech workers who are employed in businesses that at first glance may not seem to have anything to do with technology at all. For instance just 8% of the nation’s 620,000 software application developers work at software firms — the vast majority are employed in industries as disparate as manufacturing, finance, and business services.
The four metro areas that have generated tech jobs at the fastest pace over the past 12 years are far outside the Bay Area, in the southern half of the country, in places with lower costs of living and generally friendly business climates. In first place: Austin-Round Rock-San Marcos, Texas, where tech companies have expanded employment by 41% since 2001 and the number of STEM workers has risen by 17% over the same period. Looking at the near-term, 2010-13, the Austin metro area also ranks first in the nation.
The keys to Austin’s success lies largely in its affordability and high quality of life, both in its small urban core and rapidly expanding suburbs. Best known as the hometown of Dell, a host of West Coast tech titans have set up shop there in recent years, including AMD, Cisco, Hewlett-Packard, Intel and Oracle.
Much the same can be said about Austin’s East Coast doppelganger, Raleigh-Cary, N.C., which ranks second on our list. Like Austin, Raleigh-Cary is a big college metro area, and also hosts the state capital, something that tends to lessen wild swings during industry downturns. Like Austin, Raleigh is not a primary center of the social media boom, but it has registered a 54.7% increase in tech sector employment since 2001 and an impressive 24.6% rise in STEM jobs. Much of the growth comes from global companies such as IBM,GSK, Syngenta, RTI International, Credit Suisse, and Cisco.
The next two spots go to two surprising metro areas with a less than stellar degree of tech cred: Houston-Sugarland-Baytown, Texas, and Nashville-Franklin-Murfreesboro, Tenn. Not much of a role for social media here, but STEM employment has expanded 24% in Houston since 2001 thanks to boom times for the increasingly technology-intensive energy industry. The Houston metro area ranks second only to Silicon Valley in the proportion of engineers in its workforce.
In Nashville, tech employment is up 65.8%, largely due to the area’s rise as a hospital management and healthcare IT hub, with a 160% spike in jobs in computer systems design services.
The Strange Case of Silicon Valley
How about the Bay Area, the legendary center of the tech industry? There has certainly been considerable growth in the San Francisco-Oakland-Fremont MSA, which has logged a 28% expansion of tech company jobs. The region is unique as a beneficiary of the social media boom: Twitter and other tech darlings are concentrated in the area, with many others in adjacent San Mateo County. Tech employment in San Francisco plunged by nearly half between 2000 and 2004, but now appears back to the levels experienced in the first dot-com boom.
In contrast, San Jose-Sunnyvale-Santa Clara — home to roughly 40% of the nation’s venture capital— clocks in at a mediocre 25th on our list. How could this be, giving the presence of such iconic companies as Google, Intel, Facebook and Apple? After all, the area has gained 20,000 jobs in Internet publishing and web search since 2001. However that pales next to the decline in high-tech manufacturing, where the area has lost an estimated 80,000 jobs. This may be one key reason why STEM employment has dropped 12% in the San Jose area over the past 12 years despite the success of so many tech firms over that period. In San Francisco, STEM employment is up, but only a tepid 5.5%.
This disappointing trend also extends to some other historically strong tech areas, most of which have grown recently but are still struggling with losses over a decade ago. This includes Boston-Cambridge-Quincy (26th) and San Diego-Carlsbad-San Marcos (28th), both of which were early tech high-fliers. Boston-area tech companies have expanded employment by 16% since 2001, but the number of STEM jobs is down 1.6%. The San Diego area registered strong growth in tech and STEM employment in the first years of the millennium, but since 2010 gains have been few. Being first may earn a region kudos, but does not seem to guarantee continued rapid growth.
But not all of the early high-fliers are underperforming. The Seattle-Tacoma-Bellevue area has remained a consistent tech performer, ranking 7th on our list with 45.5% growth in tech company employment and a 19.5% jump in STEM jobs. One reason for this may lie in the diversity of companies in the region, from software giant Microsoft to dominate etailer Amazon as well as Boeing, a long-time massive employer of technical workers. Seattle’s success, like that of Houston and Nashville, has much to do with both manufacturing and trade as well as an associated rising demand for software services; it is often forgotten that a majority of the country’s scientists and engineers work for manufacturers, and that industrial companies account for 68% of business R&D spending, which in turn accounts for about 70% of total R&D spending.
Is Tech Moving Downtown?
Perhaps nothing has captured the imagination of the media and professional urban boosters as much as the notion that tech jobs are moving from the suburbs to the inner core. Although there is some evidence of growth in social media jobs in some central business districts, notably San Francisco, most large urban centers have not done particularly well in technology over the past decade.
In some ways, this reflects the extreme volatility of Internet-based software and marketing firms, which, unlike tech hardware or customer support services, have shown a notable tendency to concentrate in urban cores. In some places, notably New York, these sectors have grown at the expense of traditional media and advertising employment, which have fallen off dramatically in recent years. None of the three largest metro areas in the country — New York, Los Angeles and Chicago — made it into the top half of our rankings. New York, where any two nerds in a room can expect gushing media attention, clocks in at 36th. Some locals claim the city is now second to the Silicon Valley in tech, but that is widely off the mark. Since 2001, Gotham’s tech industry growth has been a paltry 6% while the number of STEM related jobs has fallen 4%.
The chances of Gotham becoming a major tech center are handicapped not only by high costs and taxes, but a distinct lack of engineering talent. On a per capita basis, the New York area ranks 78th out of the nation’s 85 largest metro areas, with a miniscule 6.1 engineers per 1,000 workers, one seventh the concentration in the Valley.
This means that tech growth is likely to be limited largely to areas like new media, which will be hard-pressed to replace jobs lost in more traditional information industries. Since 2001 newspaper publishing has lost almost 200,000 jobs nationwide, or 45% of its total, while employment at periodicals has dropped 51,000,or 30%, and book publishing, an industry overwhelmingly concentrated in New York, has lost 17,000 jobs, or 20% of its total.
The prospects for Los Angeles-Long Beach-Santa Ana (38th) and Chicago-Joliet-Naperville (42nd) seem no better. Due in large part to the continuing shrinkage of its aerospace sector, the number of STEM jobs in the L.A. area is down 6.3% since 2001though tech industry employment has grown a modest 12%. For its part, Chicago has experience significant decline in both tech employment and STEM jobs over the past 12 years.
On the positive side of the ledger, L.A. at least still boasts the largest number of engineers in the country. Chicago, in comparison, has barely half as many engineers per capita as L.A. This suggests that Los Angeles may prove better positioned in terms of developing tech-related jobs than its Midwestern rival.
Look To The Hinterland
Where should we look for future tech growth? Certainly long-term you can’t count out Silicon Valley and its enormous, and uniquely deep reservoir of engineering expertise. Seattle also seems a safe bet, in part due to its lower energy and housing costs, at least compared to San Francisco and the Valley.
But perhaps the biggest trend over time will be dispersion. After the top five on our list come a series of less-celebrated metro areas, including Salt Lake City, Indianapolis, Baltimore, Jacksonville, Kansas City and Denver. These areas are generally less expensive than the trendier cities, and could attract more tech investment once the current bubble conditions die down.
The future of tech may be best represented not by the fresh-faced 20something social media CEOs lionized by the media but by the huge tech corridor along I-15 between Salt Lake and Provo, now filling up with offices of such tech titans as Intel, Adobe and eBay. In recent years the University of Utah has led all universities in fostering startups; it may not have the cachet of Stanford yet, but the trend lines are encouraging. A critical factor here may be the cost of living, particularly for over-30 engineers who can never really hope to buy a house in San Francisco or Silicon Valley but can find housing prices 50% or less than what they would pay on the coast.
Further out expect other, often smaller communities to emerge as tech hot spots. One recent report from the Progressive Policy Institute spotlighted fast high-tech growth in such places as Madison County, Ala., exurbs like Virginia’s Loudon County, as well as resurgent Orleans parish, Louisiana. Another study, this one by the Bay Area Council, found that of the 10 fastest-growing tech centers in America, seven have populations around or under 150,000.
This suggests that, contrary to the conventional wisdom, tech employment is likely not to grow fastest in our biggest and most expensive urban cores, but spread out across an ever-widening geography. None will likely rival Silicon Valley, with its enormous resources and powerful inertia, but they will make themselves heard in the marketplace.
Tech-STEM Metropolitan Growth Rankings, 2001-2013 Rank Score Tech Industry 2001-2013 growth Tech Industry 2010-2013 Growth STEM Occupation 2001-2013 growth STEM Occupation 2010-2013 Growth Austin-Round Rock-San Marcos, TX 1 82.8 41.4% 24.1% 17.1% 15.7% Raleigh-Cary, NC 2 82.3 54.7% 18.5% 24.6% 12.3% Houston-Sugar Land-Baytown, TX 3 74.0 18.6% 15.2% 24.1% 14.4% Nashville-Davidson--Murfreesboro--Franklin, TN 4 72.4 65.8% 20.5% 12.3% 8.0% San Francisco-Oakland-Fremont, CA 5 70.1 28.0% 25.0% 5.5% 13.8% Salt Lake City, UT 6 69.7 38.0% 15.0% 19.2% 10.4% Seattle-Tacoma-Bellevue, WA 7 69.0 45.5% 11.2% 19.5% 10.1% San Antonio-New Braunfels, TX 8 67.4 45.1% 12.7% 21.9% 7.4% Indianapolis-Carmel, IN 9 67.2 50.4% 21.3% 10.6% 7.5% Baltimore-Towson, MD 10 64.1 50.7% 9.8% 19.6% 6.4% Jacksonville, FL 11 63.7 83.5% 6.4% 14.3% 4.4% Dallas-Fort Worth-Arlington, TX 12 63.5 20.5% 19.6% 8.3% 11.7% Kansas City, MO-KS 13 60.1 30.0% 18.5% 7.1% 8.8% Phoenix-Mesa-Glendale, AZ 14 56.6 29.7% 17.4% 4.8% 7.9% Denver-Aurora-Broomfield, CO 15 54.8 5.7% 17.6% 5.7% 10.2% Pittsburgh, PA 16 52.5 14.8% 14.0% 8.2% 7.6% Detroit-Warren-Livonia, MI 17 52.2 -3.5% 21.5% -13.8% 16.8% Las Vegas-Paradise, NV 18 51.9 34.3% 3.3% 19.0% 4.0% Oklahoma City, OK 19 49.8 22.9% 4.3% 8.4% 8.6% Riverside-San Bernardino-Ontario, CA 20 49.2 31.5% 8.5% 16.8% 1.3% Grand Rapids-Wyoming, MI 21 48.2 -5.1% 6.8% 0.9% 14.4% Charlotte-Gastonia-Rock Hill, NC-SC 22 48.2 13.4% 7.7% 6.4% 8.5% Portland-Vancouver-Hillsboro, OR-WA 23 47.6 14.4% 9.5% 4.4% 7.9% Cincinnati-Middletown, OH-KY-IN 24 47.5 14.1% 14.7% 2.6% 6.5% San Jose-Sunnyvale-Santa Clara, CA 25 47.2 18.0% 17.0% -11.9% 10.9% Boston-Cambridge-Quincy, MA-NH 26 45.4 16.2% 13.3% -1.6% 7.1% Sacramento--Arden-Arcade--Roseville, CA 27 44.4 40.8% 3.6% 7.8% 2.4% San Diego-Carlsbad-San Marcos, CA 28 43.6 30.2% 1.5% 11.3% 3.0% Atlanta-Sandy Springs-Marietta, GA 29 43.5 3.3% 13.0% -0.9% 7.8% Washington-Arlington-Alexandria, DC-VA-MD-WV 30 43.3 18.1% 1.3% 17.6% 2.2% Orlando-Kissimmee-Sanford, FL 31 41.7 22.4% 1.5% 11.7% 2.9% Louisville/Jefferson County, KY-IN 32 41.2 -17.0% 13.1% 1.5% 8.6% Minneapolis-St. Paul-Bloomington, MN-WI 33 40.5 -0.6% 9.0% 2.4% 6.7% Milwaukee-Waukesha-West Allis, WI 34 39.9 -3.1% 14.4% -3.8% 7.0% Tampa-St. Petersburg-Clearwater, FL 35 39.6 19.8% 10.9% -4.5% 4.8% New York-Northern New Jersey-Long Island, NY-NJ-PA 36 36.7 5.9% 12.2% -4.1% 4.3% Virginia Beach-Norfolk-Newport News, VA-NC 37 36.3 15.8% 0.7% 6.2% 3.0% Los Angeles-Long Beach-Santa Ana, CA 38 33.1 12.0% 6.9% -6.3% 4.1% Richmond, VA 39 33.0 25.7% -1.0% 1.4% 1.9% St. Louis, MO-IL 40 33.0 22.9% 5.1% -4.1% 2.0% Providence-New Bedford-Fall River, RI-MA 41 32.3 23.7% 2.7% -2.1% 1.6% Chicago-Joliet-Naperville, IL-IN-WI 42 31.6 -7.5% 12.1% -9.3% 5.5% Buffalo-Niagara Falls, NY 43 29.3 17.8% 0.3% -0.1% 0.8% Cleveland-Elyria-Mentor, OH 44 28.3 3.7% 6.4% -9.1% 3.7% Rochester, NY 45 28.2 -7.5% 17.5% -13.6% 2.6% Memphis, TN-MS-AR 46 27.6 -9.7% 5.1% -4.3% 4.0% Philadelphia-Camden-Wilmington, PA-NJ-DE-MD 47 26.4 5.1% 2.8% -3.5% 1.3% Birmingham-Hoover, AL 48 25.1 -15.3% 7.1% -6.5% 3.3% Hartford-West Hartford-East Hartford, CT 49 23.9 6.9% 2.6% -5.8% 0.4% Miami-Fort Lauderdale-Pompano Beach, FL 50 20.9 2.6% 0.5% -7.3% 0.6% New Orleans-Metairie-Kenner, LA 51 20.9 12.6% 5.9% -14.7% -0.3% Analysis by Mark Schill, Praxis Strategy Group, firstname.lastname@example.org Data Source: EMSI Class of Worker, 2013.4 - QCEW, Non-QCEW, and self-employed Note: The Columbus MSA is excluded from this analysis because tech job shifts in that region appear to be due to firms changing industrial classifications.
This story originally appeared at Forbes.
“We believed then as we do now, that the sharing economy can democratize access to goods, services, and capital – in fact all the essentials that make for vibrant markets, commons, and neighborhoods. It’s an epoch shaping opportunity for sustainable urban development that can complement the legacy economy. Resource sharing, peer production, and the free market can empower people to self-provision locally much of what they need to thrive. Yet we’ve learned that current U.S. policies often block resource sharing and peer production. – From the report “Policies for Shareable Cities”
“Digital information technology contributes to the world by making it easier to copy and modify information. Computers promise to make this easier for all of us. Not everyone wants it to be easier.” – Richard Stallman, “Why Software Should Not Have Owners”
Not long ago there were pretty clear boundaries between the personal sphere and the commercial one, as well as more clear boundaries between public and private space. What’s more, most things, both personal and commercial, were heavily based on a model of exclusive use. Today these lines are increasingly dissolving in ways that upset current business models and lifestyles. It portends a present and a future in which property is increasingly shared, not exclusive, and where there are a mixture of public, private, personal, and commercial entities intersecting in the same spaces. The key driver of this is technology, which has reduced barriers and transaction costs in a way that enables things like car sharing that would have been impossible not long ago. However, our legal frameworks have often not kept up with this. Some people who benefit from the current models would like to keep it that way. But if we let the marketplace evolve, then institute good rules to fit this new reality, it promises to hold huge benefits to the public.
First an example that’s by now old hat. In an age before cell phones and personal computers, there was a more rigorous separation of work and personal life. People need to be physically co-located in a office. They commuted there every day, worked in a dedicated personal office or cubicle, then went home where work as a rule did not intrude. Today’s workers are checking email every waking hour (and even being interrupted during the night), while also spending much more time on personal things (online banking, fantasy football, or random web surfing) while in the office. The internet has enabled distributed work environments, in which teams collaborate from offices, airports, and homes around the world. Companies increasingly have turned to “hoteling” or other shared space concepts in the office on the assumption employees no longer need dedicated space. Many people have flexible work arrangements or otherwise telecommute. In the latter case, home and office have literally merged.
This has had huge benefits across the board. Companies love it because they can access cheap labor pools overseas, effectively recruit people with a need for workplace flexibility, and reduce their office space needs. Joel Kotkin has said the latter trend may mean America has hit “peak office.” Workers get the flexibility they like, can save on commuting costs, access geographically remote clients, etc. The environment benefits from reduced commuting. The ultimate green commute is one you don’t have to make. I would say that the balance of the benefits here has accrued to business, while workers have sometimes had arrangements they don’t like forced on them. Still, on the whole this shows great promise of being a win, win, win.
The “hoteling” concept and “just in time” delivery aren’t limited to corporate uses. Things like car share are bringing them to the household market. The average personal car is supposedly idle 90% of the time. When you factor in all the additional infrastructure costs needed to support a one person, one car model (e.g., parking), the deadweight loss from all that idle capacity is stunning. Imagine factories that sat idle 90% of the time doing nothing. If a corporate manager had this low a rate of asset utilization, he’d be in deep trouble.
When you sign up for Zipcar or another service, you avoid some of this deadweight loss. By effectively sharing a fleet of vehicles with others, a relatively small number of cars can serve a large number of people, greatly improving asset utilization rates and delivering big value to consumers, even when they are paying a business to manage the fleet for them. It’s a huge form of productivity gain. This also has the effect of converting transportation from a largely fixed cost to a mostly variable one, with signficiant impacts on the decision making process for everything that involves transportation (mostly positive, I believe).
Though having a limited addressable market at present, obviously car sharing in the Zipcar style poses a threat to the entire US car industry, arguably one of the most important employers in the country and one President Obama himself personally intervened to save during the meltdown. Clearly the highest levels of politics in America will defend the car industry, though to date there’s been very little complaint from them about car sharing.
Things have been different when it’s transport service providers who are threatened. Public transit agencies have long been unrelentingly hostile to jitney services. Today car service booking tool Uber and ride sharing company Lyft have experienced an all out regulatory assault from entrenched interests. Lyft is a particularly interesting case. It’s a peer to peer ride sharing platform. Just as 90% of the time a private car is unused, when it is used, 80% of the available seat capacity goes vacant. Again, this is a massive deadweight loss. (The amount of theoretically wasted capacity in the world of private cars is stunning). Imagine an airline trying to make a business out of 20% load factors. It just doesn’t work, yet we as individuals run a “business” like that every time we drive our cars solo. Lyft helps fill up those empty seats, and even get some money – “donations” – in the process.
In other words, Lyft is a business that effectively turns your personal vehicle into a pseudo-livery vehicle. I’ve long argued that we should have “every car a jitney” by legalizing it and having personal auto polices cover ancillary commercial use as a matter of course. Lyft is trying to solve that problem and make it happen. Obviously the traditional “commercial” sector (e.g., taxis), which is highly regulated and subject to many taxes and fees hates this. They feel, rightly to some extent, that there’s a double standard. This is the type of conflict and legal uncertainty are spurred when the boundaries between personal and business, and between exclusive and shared use, start breaking down.
The big kahuna in provoking outrage of late has been AirBnB, an application that lets people rent out rooms in their homes as de facto hotel spaces. Again, the same principle applies. An empty bedroom is deadweight loss just like an empty office or an idle factory. It makes sense to put those spaces to work where feasible. This had been done previously in the form of house swaps and couch surfing. But the rise of commercially oriented AirBnB has raised hackles, especially in governments that have strict rules and high taxes on hotels. There have been a number of media articles of late taking note of or weighing in on the controversy. For example, in the New York Times piece, “The Airbnb Economy in New York: Lucrative but Often Illegal.”
Again, the benefits are clear in the improved utilization of space which is a pure efficiency gain. What’s more, AirBnB was even used by the government during Hurricane Sandy to find temporary free housing for those displaced by the storm. Peter Hirshberg noted that this type of distributed app might be the real killer app for smart cities, and will play an increasingly important role in urban resiliency. But it legitimately does create a set of parallel environments and rule sets, and exposes a world in which ancillary commercial activity at a residence is something that doesn’t really fit into our existing categories.
The list of situations like this are endless. Many zoning laws don’t appropriately allow home based businesses. Fund raising bake sales have been banned because it’s not legal to sell products prepared at home. In some places there have been issues with selling vegetables from home gardens.
Then there’s the disputes arising from the increasing use of public space for commercial purposes, whether that be curb side intercity bus service or food trucks. Pushcart style food vendors, often ethnic, are also often technically illegal (e.g., rogue elotes stands).
In short, traditional barriers are falling and boundaries are dissolving, especially when it comes to those key dimensions of personal-commercial, exclusive-shared, and public-private.
I don’t want to suggest all of the complaints about these are unfounded, though many of them are pure rent seeking. From the standpoint of someone running a fully commercial operation, who complies with massive amounts of costly red tape, it certainly seems unfair that others are allowed to operate what are basically businesses under a lighter tough regulatory scheme. The status quo isn’t necessarily where we need to be.
But let’s take a step back and look at the big picture. Our economy is in huge need of a massive injection of dynamism and new value creation. Many observers have said we need a completely new economic model. Walter Russell Mead has called this “beyond blue”. Richard Florida styles it the “great reset”. But clearly the old ways of doing things aren’t working and we need change.
This new style “shareable” economy based on peer to peer production in a distributed, small scale form is one that promises to provide at least part of the answer. It also renders addressable a huge amount of previously trapped value. Companies reaped huge amounts of gains by eschewing vertical integration in favor of more networked relationships. That’s corporate-speak for peer to peer sourcing. Similarly, things like hoteling, just in time delivery, etc. have let to much greater and more effective asset utilization. The amount of under-utilized assets in the household sector is stunning. This is about bringing to that household sector the same types of efficiency boosting and value creating techniques previously employed only by traditional businesses.
But beyond the sheer efficiency gains, I think it’s under appreciated in developed countries how economic informality can create economic dynamism. Peruvian economist Hernando de Soto noted that lack of property titles and difficulties of the formal economy perpetuated poverty because people in developing countries couldn’t access the system for credit to fuel business, etc. In the developed world we’ve got a similar problem brewing. Our economy has been largely entirely formalized to the point where we are choking in red tape that has produced an economic system that has failed too many of its residents and leading to the creation of these informal economies as a safety valve. And our societies are very ill equipped to deal with that as we’ve become excessively formalized.
We don’t need to establish property titles as we already have them, but we do need regulatory systems that enable entrepreneurship and new business models like peer to peer to thrive. What’s more, I think enabling some level of an informal sector to flourish is actually a good thing, as it’s a de facto “incubator” for new ideas that can later be developed into a more officialized system. Without a toleration of informality, these would never get off the ground. I’ve highlighted how this worked with regards to uncertain property titles on abandoned buildings in Berlin that helped launch the creative scene there. I also highlighted similar trends in Detroit. Those again were born of desperation, but we’re starting to get there in our economy more broadly.
It seems hypocritical to me for businesses to suggest that consumers be prohibited from doing exactly what business does every single day to improve productivity and generate more value. (It would hardly be the first time though. Business love globalization – for themselves. They can buy raw materials in Brazil, manufacture in China, do their IT in India, etc. But you try applying “consumer direct globalization” by purchasing your drugs from Canada or buying an out of region DVD and see how far you get. It’s a completely two tier system designed to free corporations while trapping the consumer in hyper-segregated markets).
This would seem to be one area where the left and right could agree. Free marketers should love light-touch regulation and lower taxes in the new peer to peer economy. The left should like the way it frees consumers from dependency on big business/neoliberalism, sustainability, etc.
Adjusting our rules to make this happen is an imperative. A non-profit called Shareable and the Sustainable Economies Law Center recently issued a report called “Policies for Shareable Cities” that talk about what a lot of places have been doing to make this happen. For example, they explained how Portland updated its zoning code to allow “food distribution” an accessory use in all zones in order to facilitate the development of the Community Supported Agriculture Model. Similarly, Marcus Westbury has talked about the need to update the software of cities in order to help redevelopment, as he helped with in the Renew Newcastle project.
But beyond new rules, maybe we should just go along with no rules for a while, and let this sector develop. After all, that’s what we did with tech. The government took a hands off approach and the feds even prohibited levying taxes. This helped the United States build a massive industry off internet technology, one that has continued to thrive even with the rise of offshoring. We should do the same here to see if we can replicate that success with peer to peer shared production in the household/personal sector.
Aaron M. Renn is an independent writer on urban affairs and the founder of Telestrian, a data analysis and mapping tool. He writes at The Urbanophile, where this piece originally appeared.
Tapei bike share photo by Richard Masoner.
Economist Colm McCarthy says that urban containment policy played a major role in the formation of the housing bubble. In a commentary in the Sunday Independent, Ireland’s leading weekend newspaper, McCarthy relates how urban planning regulations led to higher house prices in the Dublin area (Note 1).
“Ireland passed its first major piece of land-use planning legislation in 1963, modelled on the UK's Town and Country Planning Act of 1947. The intentions were laudable, to restrict the construction of unwelcome developments and to empower local authorities to take a more active role in shaping the built environment. There was no desire to screw up the residential housing market, but that is eventually what happened.”
The Great Financial Crisis in Ireland
The bursting of the housing bubble led to an economic decline in Ireland that was among the most devastating of any nation during the Great Financial Crisis. Household incomes dropped, unemployment rose to above 15 percent and Ireland was eventually forced into a bailout loan of €67.5 billion (approximately $90 billion) from the European Union and the International Monetary Fund. Ireland’s economy (gross domestic product) declined nine percent, nearly four times the decline suffered by the United States, according to World Bank data.
This is a sharp contrast to Ireland’s image as the “Celtic tiger”. In 1980, Ireland’s gross domestic product per capita (purchasing power adjusted) trailed those of the United Kingdom and the four strong new world economies (United States, Canada, Australia and New Zealand) by approximately 25 percent to 50 percent. By its 2007 peak, Ireland had passed all but the United States, which it nearly caught. By 2012, however, Ireland’s GDP per capita had fallen behind that of Australia (Figure 1).
Migration trends reflect the result of this decline. Net in-migration reached 105,000 in 2007, when the economy peaked when, a notable number for a nation with only 4.5 million residents with a long history of sending its denizens out to the rest of the world (Note 2). In the less robust economy of the last four years, a net 125,000 migrants have left Ireland (Figure 2).
McCarthy, of University College, Dublin and one of the nation’s most respected economists was called in by the government to lead the “Special Group on Public Service Numbers and Expenditure Programs,” which published the McCarthy Report, detailing recommendations for public expenditure reductions to help Ireland “weather” the financial storm.
The Housing Bubble in the Dublin Area
As in the United States, a housing price bubble (centered in the Dublin area) precipitated an economic downturn, which was the greatest since the Great Depression. Our annual Demographia International Housing Affordability Surveys had shown house prices in the Dublin area to peak at a “severely unaffordable” median multiple (median house price divided by median household income) of 6.0, well above the normal 3.0 relationship between prices and incomes. Paying more for housing reduces household discretionary incomes and lowers the standard of living.
After peaking in 2007, Dublin house prices plummeted. Single family house prices fell 53 percent from 2007 to 2012, while apartment prices dropped 61 percent, according to the Central Statistics Office property price index (Figure 3). This year, finally, prices have begun to trend upward.
Decoupling from the Fundamentals
Like in Dublin, this decoupling of housing from the fundamentals occurred not only in Dublin, but also in both vibrant other markets such as Sydney, Vancouver, and the San Francisco Bay area, as well as severely depressed markets like Liverpool, Glasgow. In each case, the decoupling has been accompanied by strictly enforced enforcement urban containment policies that prohibit development on considerable suburban and exurban land, through the use of such devices as urban growth boundaries and the priority growth areas (a euphemism for the only places that development is permitted). As is commonly the case, with these strategies upset the balance between the demand and supply for land, forcing house costs up substantially, just as oil embargoes lead to higher prices at the gas pump.
McCarthy places the blame squarely on urban containment policies.
“…there was and still is no shortage of land in the greater Dublin area, one of the lowest-density urban areas in Europe. There is, however, a shortage of planning permission – an entirely man-made creature of the planning legislation and its restrictive implementation by the Dublin-area councillors and planning officials.”
He describes how artificial scarcity raises prices (other things being equal), a process anyone who listened in Economics 101 would understand. McCarthy says:
“Before land-use zoning came along, house-builders extended the city by buying up farms on the city's edge and building at whatever densities the market would support. But as more and more lands were withdrawn from the buildable stock by the planners, prices began to rise and the house-builders moved further away from the city proper.”
With new house building consents so rigidly controlled, a Dublin area house prices escalated well beyond incomes and prices in the rest of the nation. As McCarthy puts it:
“In the principal residential suburbs of Dublin an artificial scarcity (of planning permission, not of buildable land) was allowed to develop and prices rose, from the mid-Seventies onwards, to a 50 per cent or 60 per cent premium over comparable homes outside Dublin.”
In addition to the houses for commuters that were further from Dublin, a government encouraged rural building boom led to over-building in more remote areas (Note 3).
Economics and Urban Containment
The consequences of urban containment policy have been known for a long time. More than four decades ago, Sir Peter Hall and his colleagues documented the extent to which house prices have been driven upward in England as a result of the land-use policies that have been copied in Ireland and elsewhere (See: The Costs of Smart Growth: A 40-Year Perspective).
More recently, Brian N. Jansen and urban economist Edwin S. Mills (Northwestern University) took the argument further (See: The Consequences of Urban Containment) and tied the Great Recession directly at the foot of smart growth policies. They noted that “…. it is difficult to imagine another plausible cause of the 2008–2009 financial crisis,” and concluded: “In the absence of excessive controls, housing construction would quickly deflate a speculative housing price bubble.”
My analysis of metropolitan markets for the National Center for Policy Analysis showed that 73 percent of the house price value losses from the peak of the US housing bubble to the housing bust precipitated Lehman Brothers bankruptcy occurred in just 11 markets in California, Florida, Arizona and Nevada, all of them with severe land restrictions (see The Housing Crash and Smart Growth). Had those losses been smaller (as they would have been if prices had not risen so high), the Great Financial Crisis might have been less severe or even avoided.
More recently, there is good news out of Ireland. The government has announced that it will no longer need the EU/IMF line of credit and will exit the bailout program. The 2012 gross domestic product nudged above the 2007 peak. But that does not mean that those who suffered economic losses during the downturn were made whole. Economic downturns massively redistribute wealth, and there is good reason to not repeat history on this score.
McCarthy comments that: “It is quite remarkable that the contribution of restrictive zoning to the house price bubble has been so little acknowledged.” He stresses the importance of avoiding “Bubble Mark II,” and urges planning system reform:
“The key policy measure required is the zoning for residential development of the very large volume of derelict and undeveloped land in the Dublin area.”
Failing that, a another shock to the standard of living could face the Irish, who have already suffered one, at least partly due to urban containment policy. It could be time, again, for the government to follow Colm McCarthy’s advice. The only housing bubble that cannot burst is one that never forms.
Wendell Cox is a Visiting Professor, Conservatoire National des Arts et Metiers, Paris and the author of “War on the Dream: How Anti-Sprawl Policy Threatens the Quality of Life.
Dublin Bay photo by Colm MacCárthaigh.
Note 2: President John F. Kennedy referred to people as Ireland’s only export as people, on an Irish visit in 1963. The 1961 census had shown a population of 2.8 million, down from an 1841 6.5 million in the present area of the Republic of Ireland (before the pre-potato famine). This loss of 57 percent may be unprecedented in recent world history.
Note 3: This was due to the combination of “easy money” for building from the financial sector and generous central government tax credits for building in remote Ireland (since repealed). Nearly all of this vacant housing is beyond commuting distance from Dublin, according to the 2011 census (much of it in the northwest and in the counties the west coast). This also fed into the Irish financial reversals.
The public stock offering by Twitter reflects not only the current bubble in social media stocks, but also the continuing shift in both economic and political power away from Southern California to the San Francisco Bay Area, home to less than one in five state residents. Not since the late 19th century, when San Francisco and its environs dominated the state, has influence been so lopsidedly concentrated in just one region.
The implications of this shift are profound not only for the ascendant northerners, but also for the increasingly powerless, rudderless regions that are home to the vast majority of Californians. With some 16 million residents by far the state's largest region, Southern California long dominated both state politics and the economy. Today it, along with virtually all interior parts of the state, is effectively ruled by the Bay Area's admixture of venture capitalists, tech moguls, political and environmental activists.
This is very bad news, not just for conservatives and Republicans, a species close to extinction in the Bay Area, but for many working and middle-class Democrats. The Bay Area ideological grip – fiercely green and politically correct to a fault – has separated California from its historic commitment to economic diversity and into a one-size-fits-all approach.
The current shift of political power has been building for the last decade, and has put to an end a Southern California ascendency that ran from the days of Richard Nixon and Ronald Reagan to Pete Wilson, Gray Davis and Arnold Schwarzenegger. Today, there is not one Southland politician with any true state-wide influence. Indeed, the only politicians of any influence from Southern California have been a steady procession of union-influenced politicians: Fabian Nunez, Herb Wesson, Karen Bass and John Perez – all who have served as State Assembly speakers. And all of them will eventually fade into well-deserved obscurity.
In contrast, notes long-time analyst Dan Walters, the Bay Area has established a “near-hegemony in California politics.” Home to both of the state's U.S. Senators, San Francisco's Dianne Feinstein and Marin's Barbara Boxer, it also domiciles the state's most important House leader, Nancy Pelosi, again of San Francisco. But the real domination is at the state-wide level where Bay Area residents control virtually every key political office, including Lt. Gov. Gavin Newsom, former mayor of San Francisco and Attorney Gen. Kamala Harris, San Francisco's former district attorney.
Astute observers of state politics, such as Joe Matthews, note that the “machine” nature of Bay Area politics, most epitomized by former San Francisco Congressman Phil Burton and his brother, John, has shaped a political class with sharper elbows. Urban San Francisco, in particular, he suggests, has a rough-and-tumble aspect missing from Southern California's more dispersed and largely indifferent variety.
This bizarrely lopsided configuration could prove a temporary and random phenomena, but the long-term economic and demographic trends favor a growing Bay Area ascendency. The current boom in Silicon Valley is minting billions in new riches for denizens of high-tech companies and their financiers at a time when office parks across most of the state, including Los Angeles and Orange Counties, are suffering significant vacancies. In contrast, those in Palo Alto and San Francisco are filling up even at ever-rising prices.
This reflects in large part the secular decline of Southern California, which has never fully recovered from the loss of its landmark aerospace industry as well as the Los Angeles riots. The area's dependence on manufacturing, where it remains the nation's largest center, has suffered huge damage – down 18 percent just since 2007. Some of this can be terraced to the very regulatory policies backed by Bay Area politicos and pundits.
Race is a factor here, too. For its part, the Bay Area's population is increasingly dominated by well-educated Anglos and Asians – while historically underperforming African Americans and Latinos, largely immigrants, are concentrated in southern California. San Francisco, for example, is only 22 percent black or Hispanic; in Los Angeles, this percentage approaches 60 percent.
There is also a vast chasm which has developed in terms of both job creation and unemployment rates. Over the past six years San Francisco and Silicon Valley, after losing many jobs in the 2000-2001 tech bust, have created 44,000 new jobs and now have recovered their losses from 2007. In contrast, Los Angeles and Orange counties, even after some recent growth, are stuck almost 300,000 below their 2007 levels. Not surprisingly unemployment in Santa Clara county sits around 7 percent while San Francisco county and San Mateo county unemployment numbers are under 6 percent. In contrast Los Angeles, the state's largest county, stays at roughly 10.8 percent.
Even worse off are places like the Central Valley and the Inland Empire, that have large numbers of under-educated people, and have long depended on such basic industries as construction, agriculture, manufacturing and logistics. Riverside-San Bernardino counties and Sacramento county together are still almost 200,000 jobs below their 2007 levels. Some of the rural counties in the Central Valley still suffer double-digit unemployment rates and staggering levels of poverty even as mid-twenties Bay Area nerds – often heads of companies with no history of profit – engage millions, and even billions, in IPO wealth.
The confluence of Bay Area political and economic power is not coincidental. Increasingly the Silicon Valley oligarchs are rapidly replacing Hollywood as the primary source of cash for Democratic politicians.
Energy provides the clearest example of the Bay Area's ability to determine policy. Many major tech firms and venture capitalists have made millions backing renewable energy ventures made profitable by state mandates and subsidies. With the high energy-consuming industrial part of the Silicon Valley increasingly eclipsed by social media and software segments, high-priced electricity matters less and less to tech oligarchs who can easily place their servers in lower-cost states. Opposition to oil and gas development, which could resuscitate some of the state's hard-hit quarters, is predictably strongest in the Bay Area.
Similarly, strict controls over water use, although expensive for the Bay Area, hit agricultural and industrial users mostly located in the interior the hardest. These, measures do not much impact the ultra-rich buyers in places like Palo Alto, much less in lawn-less San Francisco.
Is this reconfiguration a permanent one? Certainly the Bay Area's swagger will decline once the current tech bubble, as is inevitable, implodes, likely within a year or two. The “tech glitz” around concentrations of start-up companies is a movie we have seen before. Back in the early years of the decade, similar firms fell victim to flawed business models and rapid industry consolidation. In San Francisco, for example, tech employment crashed from a high of 34,000 in 2000 to barely 18,000 four years later.
But even if the Bay Area's economic edge recedes, its political influence is unlikely to be challenged in the near future given the dearth of talented politicians. Indeed the only possible governor candidate from south of San Jose, Antonio Villaraigosa, is lightly regarded for his less-than-successful term as mayor of Los Angeles; his only hope in a primary lies in bloc voting by his fellow Latinos.
Instead, most likely, our next governor will be either Gavin Newsom or state Attorney General Kamala Harris, progressives from San Francisco. Until Southern California can develop new leaders to replace today's mediocrities, and starts to push an agenda appropriate to our poorer and more diverse population, we better get used to living in what has become the Great State of San Francisco.
This story originally appeared at The Orange County Register.
Silicon Valley has been well recognized as the nation’s hub of technology, having easily surpassed both Southern California and Massachusetts, but it’s now Seattle that may emerge as its greatest rival. Home to tech giants such as Microsoft and Amazon, Seattle has attracted creative and entrepreneurial talent, which has been the foundation to its low unemployment rate of 5.9% and continuous economic growth. Many former employees from Microsoft and Amazon have founded startups and small businesses in Seattle.
The primary reason for Seattle’s continuous expansion: the metro beats Silicon Valley in affordability on many different avenues. For instance, one of Silicon Valley’s major turnoffs for up and coming entrepreneurs has been its unaffordable housing.
Increasing wages in Silicon Valley have been matched with skyrocketing housing prices in the Bay area, which has become one of the most expensive places to live in the nation. Due to the low number of homes available, bidding wars have become a common problem when buying a home in the area. As a result, San Francisco has witnessed 20+% increases in median home prices over the past year. In May, San Francisco’s median home price was $1 million, a 32% jump from the previous year. Average listing prices in cities such as Los Gatos, San Francisco, Cupertino, Redwood City, San Mateo, and Sunnyvale are anywhere between $1.1 and $1.4 million. To illustrate what this means to a young entrepreneur or skilled technologist looking for a home, the median price to buy a 2-bedroom home in San Francisco would cost $880,000, whereas in Seattle it would cost $385,000.
Seattle’s lower office rent and expanding office space development also have made Seattle become an appealing alternative to Silicon Valley. Jones Lang LaSalle reported this year that Seattle’s average office rental rate is $20.86 with a 0.2% annual rent growth, as opposed to San Francisco’s average office rental rate, which is $25.80, with a 0.9% annual rent growth rate. The Seattle-Bellevue area also has the second highest number of office leases in the country, behind Houston. This is one reason why so many tech companies have moved or expanded its office space in Seattle. For example, Facebook recently doubled its current rental space and Zynga, an online gaming company, rented space in downtown Seattle as well. Google also has created two centers in Seattle and its suburbs, bringing in a total of over 900 employees.
Washington also bests California in tax incentives, a large factor in attracting tech companies and keeping existing ones at home. California has the second highest individual capital gains tax in the nation, while Washington has none. Recently, a judge ruled California's Qualified Small Business tax bill to be unconstitutional; the policy used to give tech companies a deduction that reduced the state’s capital gains tax rate from 9% to 4.5%. The state’s tax board is estimated to retroactively collect about $128 million from 2,500 entrepreneurs (amounting to about $50,000 per person).
Washington also has no income tax and offers a plethora of tax incentives to high tech companies. The state gives a good number of sales tax deferrals, waivers, and business tax credits to the high tech sector, particularly for research and development spending. The business and occupation tax credit also saved $50 million to almost 1,700 high tech-firms in 2010. Computer software companies accounted for the $12 million property-tax break in the same year. Tech companies, especially Microsoft, have been able to avoid sales tax on construction costs, materials, and new equipment because Washington gives deferrals for the construction of buildings for high-tech projects dedicated to research and development. Evidently, the growth in the tech sector has contributed to Seattle’s expansion in office space development.
This year, there is a developing 36-acre office and apartment development and a grocery distribution center one mile from Bellevue’s downtown area that is slated to be converted into a $2.3 billion district of stores, apartments, and office buildings, two of which will have 490,000 square feet. Expansions of Microsoft and Amazon are expected to fill the office space. Research firm Reis Inc. estimates about 30 million square feet of office buildings, apartments, and stores will be completed in 2013, according to the Wall Street Journal.
But perhaps most of all, Seattle could be highly appealing for tech companies and individual entrepreneurs simply because the cost of living is cheaper. Providing much of the high tech environment of Silicon Valley Seattle also gives a greater bang for your buck than San Francisco. The Department of Housing and Urban Development estimates that San Francisco County’s median income is $99,400 and King County’s median income is $85,600. However, $100,000 salary in San Francisco is comparable to living on roughly a $70,000 salary in Seattle, according to CNN’s Cost of Living Calculator. Keeping these comparisons in mind, housing costs about 53% less in Seattle and groceries costs about 13% less. Utilities, transportation, and health care costs are roughly the same.
In addition, Washington also has the fourth lowest electricity prices in the nation, another major incentive for tech companies. This reflects the region’s huge hydroelectric generating capacity. In contrast California’s electricity prices --- driven up by mandates for renewable energy sources like solar and wind --- are now almost double that of Washington.
One final notable difference is that unlike Silicon Valley, Seattle’s economy also rests on a healthy composition of many different established industries. The strong mix of the tech, retail, and manufacturing have been the key factor in Seattle’s staggering job growth, which has grown four times faster than the rest of the country; retail and manufacturing jobs have increased twice as fast. Boat building companies such as Kvichak Marine Industries, retail companies such as Nordstrom, Nike, and Costco, and travel companies like Expedia Inc., Boeing, and Alaska Airlines create Seattle’s diverse portfolio.
Despite its well-recognized reputation and sophisticated style, Silicon Valley ultimately may lose its edge largely on this issue of affordability. When it comes down to it, a sustainable and cost-friendly environment is what makes a desirable destination for tech companies and entrepreneurs. Lower housing prices, lower office rent, numerous tax incentives, and lower costs of living could very well be the pivotal determinants in taking Silicon Valley’s place as the next tech capital.
Tina Kim is an undergraduate at UCLA majoring in Communications and minoring in Urban Planning.
Photo by Wendell Cox.
Getting meat and potatoes from the farm to the table depends upon a smooth, even flow. The smaller farmers' markets are mostly absent in the city these days, with a few vestigial exceptions: Reading Market in Philadelphia, Pike Place in Seattle, and Greenmarket in Manhattan, to name a few. Now, East End Market on Corrine Drive in Orlando has taken its place alongside these venerable exchanges. Owner John Rife hopes this new access to locally grown food will meet the rising demand for an alternative to the large corporate stores and the markets that dot the city’s parking lots and green parks on the weekends.
“We are blessed with many alternatives already,” Rife said to me in a recent interview, “with several large-scale supermarket choices nearby. East End Market fits into a niche that is not served by these chains, and offers a vibrant food culture to the community.” Rife gutted and re-opened an old, two-story private school building in the suburbs, bringing in multiple vendors offering meat, produce, seafood, bread, cheese and a variety of other food that is ready-to-eat, in addition to ready-to-cook offerings. And between the building and the street, Rife converted a large, suburban-sized front yard into a raised-bed planter community garden.
The new East End Market will be open 6 days a week, staying closed on Mondays so as not to compete with a nearby Monday evening market that has already gained a loyal following. Rife is delicately fitting into an ongoing local neighborhood scene, something rare in today’s cutthroat retail world.
The accent is on quality, not quantity, and for some Orlandoans, it smacks of elitism. “A food court for yuppie hipsters,” sniffed one blogger. In an uncertain economy and a struggling job market, the focus on quality seems counterintuitive. Couple this with the backlash against those urban hipsters too smug for their own good, and there could be trouble down the road.
Orlando’s rural and agricultural areas are surprisingly far from the center of the city; one must travel at least a half hour from East End to see the first farm fields come into view in nearby Chuluota or Oveido. Central Florida’s farmers have little to do with this city, so the notion of a “transect,” where food production crosses progressively denser zones to feed hungry urbanites, is largely a myth. In the commercial food stores, Orlandoans find strawberries from California, Mexican mangos, and seafood from South Africa. Urbanites sacrifice freshness and seasonality for the benefit of a broad range and large quantity, and are reassured by the popular press that this is a favorable tradeoff.
Instead, Rife and his vendors seek to re-establish links with local farmers and ranchers, in a move that is more populist than elitist. Saturday markets make a gesture towards this, but do not suit many hyperactive schedules. The notion of East End is simply to bring food into the city from local regional producers. It is not intended, said Rife, to displace the other stores.
Rife is doing something more subtle, as well. His vendors are local entrepreneurs. Many of them built their own booths, or hired local craftsmen to do it. Entrepreneurs that have a small foothold in the marketplace are likely to innovate and stay flexible, adapting to the changing needs of consumers. They have a vested interest in making their ideas work, and while they may sacrifice income in the short term, they're seeking a long-term return. The energy and motivation are thus slightly different than what one typically finds in a commercial supermarket. East End is a visible experiment in the rising trend towards social businesses, where the capitalist driving force is coupled with social improvement.
It's sometimes said that the sidewalks of a city are about the people. Rife is placing people on the sidewalks that are not the hourly, minimum-wage clerks that our cities are used to. A real estate developer and manager, as well as an entrepreneur, Rife has noted that he could have “set up East End, leased it to big chains, sat back, and let the rents roll in.” The employees would have had no stakes in the outcome, no ties to the neighborhood, and no motivation to make an active sidewalk scene out of the marketplace. Instead, East End is a very management-intensive operation, where employees often have a stake in the business. This changes the game of the city. People here are involved.
In the community around East End Market, many of the faces are already tied into the neighborhood somehow: friends, relatives, colleagues and co-workers. There aren't any name brands between the customer and the sidewalk. In the rising millennial generation name brand loyalty is fading, anyway. Many people prefer to swap real time information on Facebook and tweet about their dining and shopping experiences, rather than to rely on a billboard or television ad. For those comforted by big brands, East End probably won’t be a sell, but for those exhausted by the relentless presentation of logos in every new commercial construction, whether urban or rural, the hand-crafted quality of this effort is a welcome relief.
East End Market isn't creating much wealth for people outside of Central Florida, for the rent is not going to a third-party investor, all too rare in a state where outside forces have typically acted for their own benefit first, using Florida as a vehicle for profit. Beachfront and theme park real estate has created great wealth, but in Florida it has largely resulted in a service class without much upward mobility. This food market, and the producers who supply it, are regional, and represent a shift in the economy towards local job creation.
Rife could have chosen anywhere to do East End, but chose this specific building because, like any savvy real estate developer, he was looking for traffic counts, ample parking, and a demographic that would range from moderate income to upper-income households. “And,” he adds, “the building was already there. It was cheap, had good bones, and was straightforward to convert.”
Rife and others like him are creating a recovery with their own vehicles. East End Market takes an existing niche, a once-a-week farmer’s market, and develops around it to fill the other six days. The incremental costs are that of converting a building, but the incremental benefits are potentially great, as neighbors find it easy to stop in, entrepreneurs hone business skills, and profits stay in town for a change.
East End Market builds upon an existing destination, rather than creating one from scratch. The farmers' market is an old idea, and here it is used as a vehicle to rejoin the links between producer and consumer that have been stressed by globalism. This kind of microscale, grassroots capitalism is not limited to tomatoes and cheese. It's one way to counter the erosion of middle-class jobs, and the rise of class divisions. It's a bet on the new localism.
Photo by the author: East End Market
Richard Reep is an architect and artist who lives in Winter Park, Florida. His practice has centered around hospitality-driven mixed use, and he has contributed in various capacities to urban mixed-use projects, both nationally and internationally, for the last 25 years.
Three decades ago, the Texas Transportation Institute (TTI) at Texas A&M University began a ground-breaking project to quantify traffic congestion levels in the larger urban areas of the United States. The Urban Mobility Report project was begun under Tim Lomax and David Shrank, who have led the project over the first 30 annual editions. Perhaps the most important contribution of this work to the state of transportation knowledge is TTI’s "travel time index," which measures the extent to which peak period traffic congestion as to travel times.
Of Highway Expansion and Maternity Wards
The TTI data has been invaluable. One important contribution has exposed a fallacious interpretation of the “induced traffic” effect, which holds that there is no point in expanding roadways because they will only be filled up by new traffic. As if more maternity wards would increase the birth rate, the argument goes that we “can’t build our way out of congestion.” In fact the TTI data, which measures at the comprehensive urban area level (and the only reliable level), says we can.
I recall a 1980s City Hall meeting with a Portland Commissioner, who admiringly cited Phoenix for not having built a Los Angeles style freeway system. I remarked that if there was anything worse than Los Angeles with its freeways, it would be Los Angeles without its freeways. Then, Phoenix was the 35th largest urban area in the nation, yet had the 10th worst traffic congestion. The situation soon was improved, after Phoenix voters authorized funding for the largest recent freeway expansion program and now Phoenix ranks 37th in traffic congestion, despite having more than doubled in population (now the 12th largest urban area).
The lesson repeated itself in traffic clogged Houston, which led Los Angeles in traffic congestion in three of the first four years of the Annual Mobility Report. Under the leadership of visionary Mayor Robert Lanier, freeway and arterial expansions were built, and Houston dropped to rank 10th in traffic congestion despite having since added more residents than live in Portland. Meanwhile, Portland, with its densification and anti-automobile policies has been vaulted from the 47th worst traffic congestion in 1985 to 6th worst in 2012, which is notable for the an urban area ranking on only 23rd in population.
Houston’s roadway expansions cleared the way for a Los Angeles run of 26 straight years as the nation’s most congested urban area, with little prospect of improvement.
The Travel Time Index Goes International
TTI’s traffic congestion ratings were adopted internationally. INRIX, a Seattle based automobile navigation services company was first, providing virtually the same measure for urban areas in North America and Western Europe. More recently, Tom Tom, an Amsterdam based automobile navigation services company issued its own Tom Tom Traffic Index, providing by far the most comprehensive international coverage, adding Australia, South Africa and New Zealand.
Tom Tom has just produced its results for the second quarter of 2013. Looking globally, Los Angeles does not look so bad; it didn't even make the top 10 most congested, outpaced (or perhaps better underpaced) by urban areas in Western Europe and Canada.
Higher Income World Urban Areas
Tom Tom produced data for 122 urban areas in the higher income United States, Western Europe, Canada, Australia and New Zealand. This included nearly all urban areas with more than 1,000,000 population, and some smaller. It might be expected that the “sprawl” of US urban areas, and their virtual universality of automobile ownership, as well as the paucity of transit ridership in most metropolitan areas would set the US to to the nether world of worst traffic congestion. This is not so, and not by a long shot.
1. New Zealand: The trophy goes to, of all places, New Zealand (Figure 1). The average excess time spent in traffic in the three urban areas of New Zealand rated by Tom Tom was 31.3%. This means that the average trip that would take 30 minutes without congestion would take, on average, approximately 40 minutes in the three urban areas of New Zealand. This is stunning. New Zealand's urban areas are very small. The largest, Auckland, has a population of approximately 1.3 million, which would rank it no higher than 25th in Western Europe, 35th in the United States and 4th in Canada and Australia. Christchurch and Wellington are among the smallest urban areas (less than 500,000 population) covered in the Tom Tom Traffic Index, but manage to rank among the 20 most congested (Figure 2). Christchurch and Wellington have little in freeway lengths.
2. Australia: Second place is claimed by Australia. The average trip takes 27.5 percent longer in Australia because of traffic congestion. All five of Australia’s metropolitan areas with more than 1,000,000 population are among the 20 most congested urban areas in the higher income world. In the case of four urban areas (Sydney, Brisbane, Perth and Adelaide), every larger US urban area has less traffic congestion. Melbourne is the exception, but is still “punching well above its weight,” with worse traffic congestion than larger Chicago, Dallas-Fort Worth, Houston, Toronto, Philadelphia, Miami, Atlanta, Washington, Riverside-San Bernardino and Boston.
3. Canada: Canada is the third most congested, with an excess travel time of 24.8 percent. Vancouver ranks as the third most congested urban area (36 percent excess travel time) in the higher income world, and has displaced Los Angeles as suffering the worst traffic congestion in North America. This is a notable accomplishment, since Los Angeles has more than five times the population, is more dense and only one-third as many of its commuters use transit to get to work. None of the other five largest urban areas in Canada (Toronto, Montréal, Ottawa, Edmonton and Calgary) is rated among the 20 most congested in the higher income world (Figure 3). Toronto is tied for 6th worst in North America with Washington (DC-VA-MD) and San Jose (Figure 4).
4. Western Europe: Fourth position in the congestion sweepstakes is occupied by Western Europe, where the excess travel time averages 22.2 percent. Marseille (France) and Palermo (Italy) are tied with the worst traffic congestion in the higher income world, with excess travel times of 40 percent. Excluding Christchurch and Wellington, Marseille and Palermo are among the smallest urban areas among the most congested 20, though their large and dense historic cores complicate travel patterns. Rome, Paris, Stockholm and Rome, all with strong transit commute shares, are tied with Vancouver for the third worst traffic congestion (36 percent excess travel time). Other Western European entries to the most congested 20 rankings are London, Nice and Lyon in France and Stuttgart, Hamburg and Berlin in Germany. Western Europe contributes only 11 of its 54 rated urban areas to the most congested 20 list (the most 20 most congested list includes 24 urban areas because of a five way tie for 19th).
Unlike New Zealand, Australia and Canada, Western Europe has representation in the 20 least congested urban areas (Figure 5), taking seven of the 22 positions (A three way tie at the top places increases the total to 22). The least congested urban area in Zaragoza in Spain (seven percent excess travel time), itself a small urban area of approximately 700,000, while similarly small Bern in Switzerland, Malaga in Spain and Malmo in Sweden are tied with four US urban areas in the second least congested position (10 percent excess travel time).
5. United States: The United States is the least congested in these rankings with an excess travel time of 18.3 percent. Even after losing its top North American ranking to Vancouver, Los Angeles continues to be the most congested urban area in the United States, with an excess travel time of 35 percent. San Francisco (32 percent), Seattle, and much smaller Honolulu (tied at 28 percent) are also in the most congested 20. Only four of the 53 rated US urban areas is in the most congested 20.
The US dominates the least congested 20 list, with 15 urban areas. Richmond, Kansas City, Cleveland and Indianapolis share the second least congested position with three Western European urban areas (10 percent excess travel time). Phoenix, which was formerly one of the most congested in the US, is also on the list, ranking as the 12th least congested in the higher income world and the 5th least congested urban area in North America.
Less Traffic Congestion: Lower Densities and Less Employment Concentration
The Tom Tom traffic congestion rankings are further indication of the association between higher population densities and more intense traffic congestion. But there is more to the story. Residents of the United States also benefit because employment is more dispersed, which tends to result in less urban core related traffic congestion. Lower density and employment dispersion are instrumental in the more modest traffic congestion of the United States, including such large urban areas as Dallas-Fort Worth (the fastest growing high income world metropolitan area with more than 5,000,000 population), Houston, Miami and even roadway deficient Atlanta.
Photo: Freeway in Marseille (by author)