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  • 01/26/11--08:07: Chicago: The Cost of Clout
  • The Chicago Tribune has been running a series on the challenges facing the next mayor. One entry was about the Chicago economy. It described the sad reality of how Chicago’s economy is in the tank, and has been underperforming the nation for the last few years. I’ll highlight the part about challenges building an innovation and tech economy in Chicago:

    The region also has lagged in innovation, firm creation and growth in productivity and gross metropolitan product over the past decade, according to economic development consultant Robert Weissbourd, president of RW Ventures LLC. Daley’s two long-held dreams of Chicago emerging as a high-tech center and a global business center remain just out of reach… “We haven’t made the real global jump yet, and we have not made the tech jump either, but we are finally poised,” said Paul O’Connor, who for many years ran World Business Chicago, the city’s economic development affiliate. “We are still a major contender, but, yeah, we can blow it.” Or, as [Chicago Fed Economist William] Testa put it, “Given the poor performance of this decade, we need to rethink the challenges for Chicago.”


    “If I could wave a magic wand, I would get government to start thinking differently about … what are the levers that we need to push, away from the traditional (tax increment finance district) thinking and away from the traditional thinking of, ‘Let’s just get a big company to move here,’ and toward thinking about how to foster innovation and creativity,” Christie Hefner, former chairman and chief executive of Playboy Enterprises Inc., said at a recent economic forum.

    It has been extremely rare to see people with establishment positions ever say a discouraging word about the city. Most honest observers would have to rate Daley highly has a leader, but certainly not perfect. Yet any criticism at all of him (directly or implicitly by that of the city he runs) has been studiously avoided by most. They are terrified of being excommunicated or broken on the wheel if they deviate from the script. To have corporate executives asking tough questions is unusual, and hopefully an example of a forthcoming “Great Thaw” we need to have here in the wake of Daley’s retirement.

    Chicago’s inability to build an innovation/tech economy is pretty remarkable if you think about it. Here’s third largest city in the country, one with enormous human capital, tremendous wealth, incredible academic institutions, and above all an ability to execute that far outclasses virtually any city I know. How is it then that Chicago has been unable to execute on this?

    Believe it or not, a lot of it goes back to that bane of Chicago politics: Clout. People in Chicago tend to write off clout and political corruption in Chicago with a shrug, as a unique or even amusing local affectation, or just part of the character of purely political life of the city, but one that doesn’t fundamentally change its status as the “City That Works.” But nothing could be further from the truth. Chicago’s culture of clout is a key, perhaps the key, factor holding the city back economically.

    Chicago’s Ambition: Clout

    In Paul Graham’s essay Cities and Ambition, he writes about the subtle messages cities send about what you should try to achieve, and how that shapes their fortunes:

    “Great cities attract ambitious people. You can sense it when you walk around one. In a hundred subtle ways, the city sends you a message: you could do more; you should try harder. The surprising thing is how different these messages can be. New York tells you, above all: you should make more money. There are other messages too, of course. You should be hipper. You should be better looking. But the clearest message is that you should be richer.

    What I like about Boston (or rather Cambridge) is that the message there is: you should be smarter. You really should get around to reading all those books you’ve been meaning to. When you ask what message a city sends, you sometimes get surprising answers. As much as they respect brains in Silicon Valley, the message the Valley sends is: you should be more powerful.



    How much does it matter what message a city sends? Empirically, the answer seems to be: a lot. You might think that if you had enough strength of mind to do great things, you’d be able to transcend your environment. Where you live should make at most a couple percent difference. But if you look at the historical evidence, it seems to matter more than that.

    Chicago’s ambition, the message it sends is: “You should have more clout.” Does that matter? You bet it does.

    What Is Clout?

    Clout is a term of art in Chicago that normally refers to the ability to use connections to obtain jobs, contracts, subsidies or other favors from government. But more broadly, we can think of clout as the ability to influence organizational action within the context of a particular power structure.

    But if that’s the definition, isn’t saying you should have clout the same thing as saying you should have power like Graham said of Silicon Valley? No. Having power, like that held by Mark Zuckerberg or Larry Page and Sergey Brin, is about being autocephalous. It’s about have an independent base of authority or ability to act others are forced to respect. Clout, by contrast is all about petty privileges. Clout can be given, but it can also be taken away. That’s what makes it so corrupting. Tellingly, no one ever talks about Mayor Daley as having clout. That’s because he has real power instead. Having power is like being a king or a duke or a baron. Clout is all about being a courtier.

    To see this in action, just contrast Jesse Jackson with Al Sharpton. Both are prominent national civil rights leaders and black ministers. But Jackson rarely goes hard after anyone in Chicago, at least not anymore. Jackson has clout. One son is a congressman. Another somehow managed to acquire ownership of a lucrative beer distributorship. Jackson bought into the system in Chicago.

    By contrast, Sharpton wants to be a power player in New York, to be someone to whom even a would-be mayor has to come visit and, as they say, kiss the ring. He’s not interested in being bought off. Sure, he’ll make alliances. But he’ll never give up his independent base of power that makes him someone to be reckoned with. That’s the difference between power and clout.

    The Chicago Nexus

    John Kass likes to talk about clout in terms of the “the Combine,” or the bi-partisan system in Illinois in which the Democrats and Republicans have often proven less rivals than partners in crime, sometimes literally. But I prefer to think of “the Nexus” – a unitary social structure that pretty much everyone who’s anyone in Chicago is part of, one that goes far beyond the world of politics.

    Ramsin Canon had a good illustration of the Nexus in a piece he wrote over at Gapers Block:

    With big city economies cratering all around him, the Mayor was able to raise in the neighborhood of $70 million dollars to fund the Olympic Bid. At the same time he was able to get everybody that mattered–everybody–on board behind the push for the Olympics. Nobody, from the largest, most conservative institutions to the most active progressive advocacy group, was willing to step out against him on that issue.



    The list of big donors to the Chicago 2016 bid committee is a comprehensive list of powerful Chicago institutions. I mean, it’s exhaustive. Economy be damned, when the Mayor called, they listened. Why? What did those conversations sound like? And do we believe that the Mayor is so powerful–or that their relationship with him is so close–that they must obey him? Or–more likely–is it a mutual back-scratching club with an incentive to protect the status quo? Chicago’s political infrastructure isn’t about the Democratic Party or “the Machine” or special interest groups or labor unions. Those are elements of varying importance. It’s real power lives in the networks that tie that list together.



    Replace the man on the Fifth Floor–Bureaucracy Man, the superhero who keeps our alleys clear–and will these networks evaporate? Will they just disappear? How long would it take them to reorganize around the new personalities that moved in there?

    All cities have elite networks, but I have never seen a city that has a unitary power nexus to the extent Chicago does. I believe the Nexus resulted from the culture of clout combined with the fact that, with the exception of the interregnum between Daley pere and fils, power has been centralized on the 5th floor of city hall for decades. The Nexus may have come into being around the mayor, but now it has become a feature of civic life, one that practically longs for what Greg Hinz has labeled a “Big Daddy” style leader to sustain the system.

    Clout’s Effect on the Culture of Chicago

    The emergence of the Nexus is one of the key cultural impacts of clout in Chicago. If clout is only effective within a given power structure, then clearly the clouted want to see their power structure expand. The ultimate dream of the clout seeker is a centralized unitary state like Louis XIV’s France. In Chicago, we’ve come amazingly close to achieving it. It’s not that there’s no conflict, but it is all of the palace intrigue variety, not true conflicts between rival power centers. Without centralized political power and a tradition of clout, the Nexus would never have come into being.

    There are many other cultural impacts as well. As Douglas and Wildavsky note in Risk and Culture, “An individual who passes his life exclusively in one or another such social environment internalizes its values and bears its marks on his personality.”

    People are bought into and defend the system. They mapped these social environments along the axes of “grid” and “group” – the degree of hierarchy in the system and the degree of group cohesion. The Chicago Nexus is a high-grid, high-group structure, or collective hierarchy, with centralized decision making and a high cost of defection. Even groups that in other cities tend to be more oppositional to government will say something like, “Decisions get made in the mayor’s office here, so we have to play that game” and buy into the system. I’ve lost track of the number of times I’ve heard, “That’s just how it works here.” Of course, this means the basis of their own ability to make things happen then becomes influence – clout – within the Nexus. Thus they defend the system, because if it went away, so would their ability to make things happen because they’ve cultivated no alternative vectors for action. Also, the Council Wars period of the 1980’s still looms large in many leaders’ minds. Chicago remains heavily segregated and racially balkanized, as the recent quest for a single black mayoral candidate illustrates. There’s a lot of worry about what might happen if the current system breaks down.

    Conservatism and favoring of the establishment. Following on from that, the system fosters a sort of generalized conservatism, one dominated by a desire for institutional stability. It takes a heavy hitter to get the mayor’s attention or even access to the mayor, which reinforces establishment control, an inherently conservative model. This conservatism is even visible the realm of public design, as I’ve noted in discussion the retro-nostalgia design of the city’s streetlights and other streetscape elements. The evidence of clout-fed conservatism is literally graven in into the very streets of the city.

    Parochialism. Though fancying itself a cosmopolitan burg, I don’t see that Chicago is that much less parochial than most other Midwest cities. You see this in a thousand little ways. For example, in the way beloved long time personalities dominate the local airwaves. As the New York Times noted about turmoil at long time ratings leader WGN-AM, “Chicago tends to be unforgiving to newcomers. And with WGN pulling in the second- most radio revenue in the market behind WBBM, its moves are fraught with risk. ‘It was always difficult to bring someone in from out of town,’ said Bob Sirott, a longtime Chicago broadcaster.” (Longevity seems particularly prized here generally, as unless you are fortunately enough to be born to the right family or in the right parish, it takes time to accumulate clout). Or in the focus on local and hyper-local news in the local internet journalism community.

    Fear. As a high-group social structure, people are terrified of being kicked out of the club. Hence the unwillingness to cross the party line on almost any issue. As Tocqueville put it: “That which most vividly stirs the human heart is not the quiet possession of something precious, but rather the imperfectly satisfied desire to have it and the continual fear of losing it again.” People are even afraid of collateral damage if others near them cross the line. As Mike Doyle said, “In systems like Chicago’s, people don’t just refrain from rocking the boat, they do their best to keep anyone else from rocking it either.”

    Total Rejection of the Other. Anyone who exists outside the structure is a potential threat. Hence they are either co-opted or marginalized. The best illustration of this is the very title of that wonderful book on Chicago politics, We Don’t Want Nobody Nobody Sent. Or as Steve Rhodes said to me:

    One of the bartenders at the Beachwood says it took her awhile to figure this city out. In other cities you apply for a job with a resume, talk about your experience, etc. Here they just want to know who you know, who sent you – even at the bartender level….I’m not naive enough to believe this doesn’t happen elsewhere, but nowhere near as it does here, where it’s in the DNA. …Here, merit counts for next to nothing…In New York, everyone wants to know: “What do you do?” In Chicago, everyone wants to know: “Who do you know?”

    Why Clout Is Toxic to the Innovation Economy

    When you think about these cultural impacts of clout on Chicago, it becomes obvious why the city has failed to build an innovation economy. Innovation is fundamentally about new ideas, new ways of doing things, new players in the game, those from the outside, about merit, about dynamism. Clout is about what happened yesterday, the fruits of long years of efforts, and the same old – sometimes really old – players, about insiders, about connections, about stasis. As Jane Jacobs noted, “Economic development, no matter when or where it occurs, is profoundly subversive of the status quo.” Innovation driven economic development is fundamentally about disrupting the status quo. Clout is all about preserving it. Innovation welcomes the outsider, the clout-fueled Nexus abhors the Other. Innovation and clout are enemies.

    Think about the innovation hubs in America. They are all places that welcome the new. Not that it’s easy to make it in them. In fact, these place are often brutally competitive. And of course they have elite networks where the scions of the rich and powerful have a leg up and such. But the new is an important part of what makes them tick. In Silicon Valley, they are always looking for the tomorrow’s HP, Apple, Cisco, Google, Facebook, or Twitter, not just celebrating the past. They know that success today is ephemeral and, as Andy Grove put it, “only the paranoid survive.” DC loves its establishment, but the very nature of the place assures there will always be new players in the game. President Obama comes out of nowhere to gain the White House. But two years later it is the upstart Tea Party’s turn. Possibly because of their entertainment industry clusters, NYC and LA are always on the lookout for the fresh face and the next big thing.

    But Chicago? What do you think is going to happen when an ambitious 20-something with a great idea for a new business but no clout shows up in Chicago trying to make it happen and knocks on the door?

    I may not be 20 anymore, but at the risk of making this post sound like merely a bit of personal pique, I’ll share a true personal story to illustrate one example of how this plays out in real life in Chicago. In 2009 I received an award from the Chicagoland Chamber of Commerce for innovative thinking on public transit, winning first prize in a global competition they ran to solicit ideas for boosting public transit ridership in Chicago.

    I was thinking at the time that I might want to do something more entrepreneurial. I knew that the Chamber ran a sister organization called the Chicagoland Entrepreneurship Center chartered with boosting startups in Chicago. In the wake of my award I decided to check them out and see how they might be able to help me.

    There was just one problem: they wouldn’t return my phone calls. I made many attempts to get in touch with them by phone and email, and couldn’t even get them to give me a “No Thanks” or pawn me off on a peon. Now I’m a guy who a) had significant business experience, who b) built up one of America’s top urbanist sites from scratch, an inherently entrepreneurial act, and a successful one, if you think about it, and c) just got an award for innovation from the Chamber itself. Yet they wouldn’t even give me the time of day.

    What’s more, the Chamber mothership never showed any interest in engaging with me post-competition either. It was clearly just a PR exercise for them. Now don’t get me wrong, I’m delighted to report it was a very successful one. I got my picture on the front page of the Chicago Tribune above the fold. It exceeded my wildest expectations. I think the folks at the Chamber are nice people and I was extremely pleased with how it went. But clearly from their perspective, that’s where it ended. Actually uncovering innovators or something was not part of the agenda.

    From standpoint of the the Chicago system, this experience actually makes perfect sense, as I don’t have clout, nor can I bestow it on anyone. So why burn cycles on me?

    If you think about my profile and the treatment I got, can you imagine what a 23 year old armed with nothing but a crazy idea would get? A lot of ink has been dedicated to talking about how far Chicago and Illinois have come since they days when Mark Andreesen was actively harassed while trying to commercialize his web browser, then run out of town on a rail. But there is no doubt in my mind that if the next the next Andreesen showed up today, he’d get the exact same treatment. (I’m not familiar enough with Andrew Mason’s history to know how he was treated pre-Groupon, and pre-his association with the likes of big money Eric Lefkofsky. It would make an interesting case study to look at the history there – though he is a possible exception. I don’t know. In any case, his major local profile came after Groupon was already a huge success).

    This is what clout in Chicago hath wrought. The culture of the establishment Chicago is simply incompatible with an innovation economy. It’s not just about money or resources. It’s about respect. It’s about what this town respects, and more importantly what it doesn’t. It’s about what Chicago whispers to you about what you should aspire to achieve, what success means in this city, and the subtle – and not so subtle – messages about how you get ahead here.

    Until you’ve already made your millions or somehow wormed your way into connections or up through the hierarchy, establishment Chicago has no use for you in its economic plans, no matter what talent, ideas, or ambitions you might harbor. (Ironically, the biggest exception is Daley himself, who was famous for seeking out and rapidly promoting young talent like Ron Huberman and Richard Rodriguez. That’s another example of how he is head and shoulders above your average leader).

    By contrast, the local entrepreneurial tech community gets it, is energized, knows where the city is and where it needs to be, and is working hard to make progress with a sense of legitimate optimism backed up by recent good news. Grass roots and “by tech for tech” institutions ranging from Technori, to the Chicago Lean Startup Circle, to the folks at Groupon – which is a huge, inspirational success story, with people who get it and are committed to trying to build up Chicago’s tech scene – are hugely supportive of anyone trying to make a go at it no matter what stage they are in, and providing legitimately useful info and help along the way. Every single person in this group I’ve talked to has been more that willing to do anything to try to help me out, sometimes even more than I’d hoped or asked for – 100% of them. (Yes, this does mean I am starting an internet business myself – watch this space).

    I’ve long said Chicago isn’t going to be the next Silicon Valley and should seek only to get its “fair share” of tech. Having said that, as the third largest city in America, a fair share is still pretty big. If Chicago’s going to make it, this collaborative effort by the local tech community is what is going to get it there – not the Nexus.

    The Way Forward

    Pretty much every report out of officialdom – from Gov. Quinn’s Illinois Economic Recovery Commission Report to CMAP’s Go To 2040 Plan – suggests the public and quasi-public sectors need to do more to boost innovation. But what’s really needed is cultural change in the establishment. Until that happens, I’d suggest that what’s really needed is to take a page from the Getting Real playbook and for them to do less.

    Think about it. If Joe Investor shoots you down, you know the odds were probably long in the first place. While you might not come away feeling good about him, you probably don’t feel any worse about Chicago. But if you approach an official or quasi-official organization chartered with promoting “innovation”, “entrepreneurship”, “clusters”, “technology” or whatever in Chicago and they shoot you down, it’s not just them but your city you feel has rejected you. It’s one thing to generate a negative interaction with a private entity, but with an official entities that hurts the very thing they’re trying to promote. If an official or quasi-official organization can’t say Yes, or at least make sure that well over 50% of the people it says No to feel good about the experience, it should be shut down, because it’s doing more harm than good.

    What’s more, these organizations and leaders glom on to these hot phrases du jour and, as someone put it, “suck the oxygen out of the room.” They hog the microphone and the real stories and the real discussion that need to happen out there don’t get told in the press because big names are the default easy answer for reporters. Just look at the number of big titled civic folks and such quoted in the Tribune piece, for example. Startup blog Technori has already told me more in two months about things that matter in tech than the Tribune and the Sun-Times combined did all last year. As Mike Madison said of Pittsburgh:

    Tech-based economic development is not something that can be conjured in  meetings of mayors and CEOs.   That’s top-down, old-school, clear-the-skies, ACCD thinking.  In fact, I would guess that the more that the Downtown Duquesne Club crew gets in the middle of this process, the more the real entrepreneurs and innovators and risk-capital investors get turned off.

    Or as Paul O’Connor put it in that Tribune piece I led off with:

    “What we have now, to some extent, is a stodgy Midwest establishment, and underneath them are the kids who moved here, some of them in their 30s now,” he said. “They get it; they know how to do it. … We either give them permission and invite them to the table, which the next mayor should do and which Mayor Daley has begun to do a little bit lately, or we let them do it themselves.”

    Blowing Up the Culture of Clout

    Clout is so persistent in Chicago not just because of the people who personally benefit from it, but because there’s little perception of the ways the culture of clout affects Chicago outside the political realm. Indeed, to the extent people regard the Chicago Way at all, it’s often positively, because it enabled the city to “get things done.” It’s the same thing that causes Thomas Friedman to have his schoolgirl crush on China.

    But unfortunately for Chicago (and likely China too down the road) it doesn’t just matter if you can get things done, it matters what it is you do. And it also matters how you do it and who is involved. Until people understand the linkage between clout and other parts of the city like its economic under-performance, and care enough to change it, the non-political members of the Chicago Nexus are not going to feel the need to change the way things are done here. It’s not that these folks are corrupt by any means. Far from it. I believe they are completely sincere in their desire to better the city. But they don’t perceive the issue at the level that will collectively move them to action, or else feel the status quo is better for their institutional interests.

    Changing the culture is mission critical to Chicago realizing its ambitions as a global city and a center of the innovation economy, and a lot of other things too. The notion that you can have a centralized, top-down, clout driven Nexus infusing your civic culture but that somehow you’ll have an innovation driven economic culture – that’s just impossible. The attempt to fix and transform Chicago’s economy with a bunch of behind the scenes maneuvering and initiatives by a few heavy hitters has failed. We need to try a different way. That doesn’t mean Chicago has to become paralyzed with dysfunction of in-fighting or civic anarchy. But there need to be multiple power centers and a receptivity to everything innovation is all about. And it will be a bit messier. I think that’s a good thing. There’s no doubt Chicago is a great city with incredible assets and capabilities. There’s no reason it can’t join the ranks of the innovation elite – if it’s willing to start jettisoning the culture of clout the so hobbles its ambitions and embracing a more dynamic future for the city. What will it be, Chicago?

    Aaron M. Renn is an independent writer on urban affairs based in the Midwest. His writings appear at The Urbanophile, where this piece originally appeared.

    Photo by Bryce Edwards


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    Throughout the high income world, in this age of cities, many urban centers continue to shrink. This is particularly true in municipalities that have been unable either to expand their boundaries or to combine with another jurisdiction, subsequently running out of new developable land.

    For example, the city of Paris (as opposed to the metropolitan area or urban area, see Note) lost a quarter of its population between 1954 and 1999, while the loss in some core districts (arrondissements) was 75 percent. Copenhagen, which is often considered one of Europe's most vibrant municipalities lost more than one-third of its population between 1950 and 2000. Other core municipalities have lost more than one-half million people, such as, London, Seoul, Glasgow, Berlin, Osaka, Chicago, Detroit, Philadelphia and St. Louis.

    City of St. Louis Population Loss: Yet no city which achieved the scale of a half million residents has lost a larger percentage of its population in peacetime than St. Louis. To some extent, this is a very old problem for a city that was once the largest in the Midwest but was passed in 1880 by Chicago.

    In 1950 the city population peak at 857,000 people and ranked 8th among the nation’s municipalities. By 2009, the latest estimates, the population was 357,000 (ranked 48th in the nation), a decline of nearly 60 percent from the peak.

    Metropolitan Population Gain: But as is the case for many “shrinking cities,” the region outside the municipal boundaries has continued to grow. In1950, the population of the metropolitan region (as currently defined) was 1,940,000. By 2009, the metropolitan region had grown to 2,890,000, for a population increase of nearly 1,000,000 (more than a 50 percent increase). St. Louis is a bi-state metropolitan area, with three quarters of the population living in Missouri and the balance in Illinois, a ratio than has been largely unchanged since 1900.

    The metropolitan region (or combined statistical area) includes the city of St. Louis, (a county equivalent jurisdiction), 8 counties in Missouri and 8 counties in Illinois. The St. Louis metropolitan region covers approximately 9,100 square miles (Figure 1), of which the principal urban area (area of continuous urbanization) covered 829 square miles (9 percent of the metropolitan region).

    As in the case of virtually all large high-income world metropolitan areas, population growth has principally occurred on the suburban fringe. For example, from 1965 to 2000, 110 percent of the growth in major metropolitan areas of Western Europe was in the suburbs, more than in the United States (90 percent since 1950).

    Distribution of Population: Even by these standards, St. Louis may be an extreme case. In 1950, 44% of the region's population was in the city of St. Louis. The inner ring the counties of St. Louis, St. Clair (Illinois) and Madison (Illinois), accounted for another 41% of the population. Thus 85% of the metropolitan region's population lived in the city or the inner ring counties. The other 15% lived in middle ring and outer ring counties.

    By 2009 the population of the city and the inner ring counties had fallen to 65% of the region. The city and county of St. Louis (which were combined until 1876), reached a combined population peak in 1970 and has lost 225,000 people since that time, falling below the 1960 census total.

    The middle ring counties represented 29% of the population while the outer ring counties had 6% of the population (Figure 2) in 2009. During the 2000s, the middle ring counties added more than 130,000 residents, while the city added 10,000.

    Consistent with the trend since the late 1950s, nearly all of the metropolitan region growth occurred outside the city and the inner ring between 2000 and 2009. The city is estimated to have accounted for 7% of the region's growth. The inner ring counties actually shrank while the middle ring counties accounted for 76% and the outer ring counties 22% of the growth (Table 1 and Figure 3) for the region.





    Table 1
    St. Louis Metropolitan Region: Population Trend
    1900-2009
    Sector
    1900
    1950
    2000
    2009
     METROPOLITAN REGION (CA) 
    1,039,543
    1,942,848
    2,757,377
    2,892,874
     HISTORIC CORE 
    575,238
    856,796
    346,904
    356,587
     City of St. Louis 
    575,238
    856,796
    346,904
    356,587
     INNER RING 
    201,419
    794,651
    1,531,692
    1,524,482
     St. Louis Co. 
    50,040
    406,349
    1,016,364
    992,408
     Madison Co. (IL) 
    64,694
    182,307
    259,120
    268,457
     St. Clair Co. (IL) 
    86,685
    205,995
    256,208
    263,617
     MIDDLE RING 
    187,384
    213,394
    730,563
    833,706
     Franklin Co. (MO) 
    30,581
    36,046
    94,059
    101,263
     Jefferson Co. (MO) 
    25,712
    38,007
    198,740
    219,046
     St. Charles Co. (MO) 
    24,474
    29,834
    286,171
    355,367
     Bond Co. (IL) 
    16,078
    14,157
    17,650
    18,103
     Clinton Co. (IL) 
    19,824
    22,594
    35,536
    36,368
     Jersey Co. (IL) 
    14,612
    15,264
    21,655
    22,549
     Macoupin Co. (IL) 
    42,256
    44,210
    48,989
    47,774
     Monroe Co. (IL) 
    13,847
    13,282
    27,763
    33,236
     OUTER RING 
    75,502
    78,007
    148,218
    178,099
     Lincoln Co. (MO) 
    18,352
    13,478
    39,254
    53,311
     St. Francois Co. (MO) 
    24,051
    35,276
    55,743
    63,884
     Warren Co. (MO) 
    9,919
    7,666
    24,721
    31,485
     Washington Co. (MO) 
    14,263
    14,689
    23,410
    24,400
     Calhoun Co. (IL) 
    8,917
    6,898
    5,090
    5,019
     Metropolitan Region: Combined Statistical Area (2009 Definition) 




    Despite often well-orchestrated impressions to the contrary, the continuing dominance of suburban population growth in the St. Louis metropolitan region mirrors the experience in other major metropolitan areas across the nation.. This growth has not been, as is often supposed, at the expense of the city. Over the past sixty years suburban growth was actually three times the total net loss suffered by the city. Increasingly when people move to St. Louis, they actually mean that they are coming to the suburban periphery.

    Domestic Migration: Overall in the past decade, the St. Louis metropolitan region experienced only a modest domestic migration loss – far less than many other regions . Approximately 1.3 percent of the 2000 population, or 35,000 people moved from St. Louis to other parts of the nation. By comparison, in similar sized and sunny San Diego, the domestic migration loss was 127,000, with a percentage loss more than three times that of St. Louis. Who could have imagined that in a decade, Los Angeles would lose 1.3 million more domestic migrants than St. Louis and New York 2 million more (granted, from much larger bases).

    During the 2000s, the domestic migration trends within the St. Louis metropolitan region reflected the national trend of migration from core areas to the suburbs. According to US Census Bureau estimates, the 2000 to 2009 in domestic migration loss in the St. Louis metropolitan region was distributed as follows (Figure 4):

    • The city of St. Louis has lost a net 63,000 domestic migrants (18.0 percent of its 2000 population)
    • The inner ring counties have lost a net 59,000 domestic migrants(4.0 percent of the 2000 population), 57,000 of which were lost in St. Louis County
    • The middle ring counties gained a net 64,000 domestic migrants with a gain of 45,000 in St. Charles County (8.7 percent of the 2000 population).
    • The outer ring counties gained a net 24,000 domestic migrants (16.4 percent of the 2000 population) with nearly one half of the gain (11,000) in Lincoln County.

    Net international in-migration was the one bright spot for the city and inner suburbs, which gained the bulk of the 30,000 immigrants who came to region over the past decade (Table 2). But this was not nearly enough to balance the losses from domestic migration.

    Ultimately the St. Louis story reflects the deeper reality seen across the high-income (and even in some low and lower income world metropolitan areas, as future installments will indicate), albeit somewhat more exaggerated. Many core cities continue to stagnate or even shrink, but their regions remain vibrant, expressing a form of urbanism that, while often unappreciated, remains vital and expansive.

    --------

    Note: Metropolitan areas are composed (outside New England) of complete counties or county equivalent jurisdictions. They include substantial rural expanses, which are economically tied to the principal urban area (the largest urban area in the metropolitan area). An urban area is an expanse of continuous urbanization, and contains no rural territory.

    Photo: St. Louis skyline (by author)

    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


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  • 01/29/11--01:38: Pimp My Stripmall, Please!
  • If anything characterizes the face of Florida’s landscape, it is the proliferation of shopping malls of all types. Generation by generation, as population swelled, country roads widened into highways and each intersection seemed to blossom into four parking lots framed by strip centers decorated with small, freestanding stores and restaurants. These malls represented the prosperity of the American middle class. Now that consumerism has slowed and been rechanneled online, new malls aren't being built and the existing ones are looking a bit dog-eared, with shuttered stores, empty parking lots, and aging facades. Repurposing the American mall is a huge opportunity waiting for the right moment, and represents an opportunity to heal much of Florida’s economic stagnation.

    As the car culture rose after World War II, malls – convenient places that fit our newly prosperous lifestyle — rose as well. Thinkers, sentimental about the hard work that went into an organic, localized Main Street were largely horrified at its replacement by strip shopping centers and regional shopping malls. Yet this growth continued unabated, and while the debate over the mall’s moral stance raged, the building type continued to be a popular investment vehicle. It became codified and regulated into a more and more complex, layered experience, dominated by traffic and parking, manipulated by industrial psychologists, and fine-tuned by mall managers so that the best possible presentation of goods was made to the consumer.

    The consumer was unsentimental about the architectural debris that was left in the wake of the flight to the suburbs. As old village streets saw local businesses shuttered, cries of “Too hard to find parking” and “Why are your prices so high?” echoed on their sidewalks. Purposeless old Main Street: The lucky ones became tourist destinations, filled with chocolate shops and art galleries. Here in Central Florida, the lucky ones include Mount Dora, Sanford, and Ybor City, where parking lots and garages have been surgically inserted into the back alleys, a rigorous code enforces the form, and hand built architectural details from America’s Victorian era still surprise and delight.

    The consumer will continue to be a strong component of the American middle class, and no doubt many malls will continue to thrive. Florida’s oversupply has attracted tremendous attention, and repurposing raw space could become a creative new way that cities will grow. Winter Park Village, a 1960s indoor regional shopping mall, was cut open and now features a mixed-use shopping, dining, entertainment, and residential space barely resembling its former self. Metro Church in Winter Springs occupies a former Belk-Lindsey department store, with church-related functions occupying what was once a general lease area. Full Sail University in Winter Park is largely housed in converted strip centers as well. These conversions are not unique to Central Florida, and will likely continue into the future.

    The biggest opportunity, however, seems untried as of yet in America: manufacturing in a mall. Production, much more than consumption, creates jobs, and the raw open space of old retail sites can be easily converted into industrial uses. Geography is in their favor. Malls were typically built if at least 3,000 surrounding households could be found to support them; today these households could provide labor, instead of cash, to the right investor looking to onshore a product.

    Aligning industry with opportunity seems difficult on the surface. Manufacturing investment abounds in relatively unregulated India, but with the huge sunk costs that American industry already has, startups and expansions seem to be nonexistent. Turning this around would require a fundamental shift in American culture, allowing us to think of ourselves as producers once again. American know-how hasn’t vanished; rather, it lies dormant underneath the heavy regulatory burden, and under the high barriers to entry that our manufacturers created in their quest to be the largest and to shut out competition.

    New products are being created every day… overseas. If investment isn’t coming from within America, perhaps the right NGO sponsoring microloans could be tapped to consider the broken, declining landscape of suburban America to reinvigorate our natural American creativity and give small scale capital access to startups. Selecting the industries that we want to have, re-onshoring them, and producing things people need would once again provide jobs, diversify the local economy, and create the kind of upward mobility we once counted on for the American Dream.

    And the physical plant – one of the biggest investments that a producer makes – is already there. The regulatory burden of redevelopment, shouldered by the initial developer, should be minor at best, depending on the quality of the infrastructure, which would speed a conversion into reality. At a time in Florida when growth is on pause, the redevelopment of existing assets is likely the most favored way to provide economic expansion and pull Florida out of its nosedive.

    Mall redevelopment would please the environmental movement, as well. Huge swaths were cut into the Florida wilderness to make way for retail, with nary a peep from environmentalists in the eighties and nineties. One of the tenets of sustainable development is to confine construction to areas that are already strongly modified by human activities, and repurposing abandoned space fits this mandate to a tee.

    Florida, with its abundance of unused retail space, has an opportunity to become a leader if it can attract the right kind of investor. India, with all its problems including ethnic strife and the lingering caste system, is certainly not waiting for opportunity to create its own future. China, with its authoritarian regime, has surged ahead in terms of entrepreneurial spirit that seems sorely lacking in America at the present moment. Seeing gold in a dead strip mall may seem farfetched, but out of opportunities like this we can reinvent our own future and fuel a renaissance of the American dream, one mall at a time.

    Richard Reep is an Architect and artist living in Winter Park, Florida. His practice has centered around hospitality-driven mixed use, and has contributed in various capacities to urban mixed-use projects, both nationally and internationally, for the last 25 years.

    Photo by Clinton Steeds: Phoenix Village Mall, Ft. Smith - Bench at Back Entrance. The photographer writes that it was the first mall in Arkansas when it opened in 1970, adding, "It has so far failed to live up to the "Phoenix" part of its name".


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    American politics is consumed by a bitter, at times violent, debate about the overall role of government and specific governmental programs.

    Pundits often frame this divide in terms of geography (red states versus blue states), ethnicity (Hispanics and blacks versus whites), class (rich versus poor), or age and gender. Those factors matter, but seeing polarization only in terms of group versus group misses an important paradox about Americans: Most of us have both deep conservative instincts and liberal instincts.

    This personal inner conflict need not calcify our national divide. Instead, it could form the basis for a new and unifying consensus or civic ethos. To do this, though, our political leaders must build on the quintessentially American politics of today's Millennials (those born between 1982 and 2003), who prize individual initiative at the local level to achieve national goals.

    Why we look left and right at the same time
    American political opinion looks in two directions – both left and right, or liberal and conservative – at the same time. Social scientists Lloyd A. Free and Hadley Cantril were the first to use survey research to describe and analyze this paradox of public opinion that has always shaped US politics.

    In their book, "The Political Beliefs of Americans" (1967), they maintained that Americans consistently demonstrate a conflict between their general attitudes toward "the proper role and sphere of government," (which drove the big GOP gains last November) and their attitudes toward specific governmental programs (which helps explain broad American support for "big government" programs like Medicare).

    According to Mr. Free and Mr. Cantril, most Americans have conservative attitudes concerning the size of government, and liberal beliefs in support of programs to protect themselves economically. This leads majorities to favor smaller government, individual initiative, and local control while endorsing major governmental programs ranging from Social Security to student grants and loans.

    Tensions go back to our founding
    This tension has always been a part of American politics. The US Constitution was itself the product of fierce debate in the wake of the failed Articles of Confederation. The ingenious solution the Founders gave us was both a strong central government and equally powerful guarantees of individual liberty embodied in the Bill of Rights. Notably, that solution was largely the product of that era's young adults, the so-called Republican Generation.

    Still, the Constitution didn't settle the question of the government's role in the economy and personal welfare. That wasn't resolved, at least temporarily, until the Great Depression, when Americans gave their strong support to FDR's New Deal programs. Again, it was that period's young adults – the "greatest generation" – that led the new consensus.

    Small government, big programs
    Such consensus, of course, doesn't erase our conflicting convictions. Even in the depths of the Great Depression, Gallup revealed this conflict between the public's programmatic liberalism and conservative ideology. On the one hand, large majorities believed that the government should provide free medical care to the poor (76 percent), extend long-term, low-interest loans to farmers (73 percent), and implement the newly created Social Security program (64 percent). By contrast, only a minority wanted the government to take over railroads (29 percent) and banks (42 percent), or limit private fortunes (42 percent).

    In 1964, as President Johnson was announcing his Great Society initiatives, Free and Cantril, using the results of commissioned Gallup polls, determined that within the electorate, ideological conservatives outnumbered liberals by more than 3 to 1 (50 percent to 16 percent). But in those very same surveys, support for liberal government programs exceeded conservative opposition by a ratio of 4.6 to 1 (65 percent to 14 percent).

    Using data from four of the Political Values and Core Attitudes surveys conducted by the Pew Research Center over the past two decades, we confirmed their research. Across four Pew surveys, from 1987 to 2009, ideological conservatives outnumbered liberals by a ratio of 3.5 to 1, but liberal supporters of specific programs outnumbered conservative opponents by a 2.2 to 1 margin.

    In every Pew survey, there were always more conservatives than liberals regarding the overall role of government and a greater number of liberals than conservatives in support of programs designed to promote equality and economic well-being. In effect, the United States is neither a center-right nor a center-left nation; it is, and always has been, both at the same time.

    Not surprisingly, voters who identify as Republicans have tended toward the conservative side of these two tendencies. And Democratic identifiers have leaned toward the liberal side. Although the gap between the identifiers of the two parties has widened recently, during most of the time since Free and Cantril first published their findings, the greatest number of both Democratic and Republican identifiers, as well as independents, has been ideologically conservative and programmatically liberal.

    Moderates driven out
    Today, driven by more liberal attitudes among the Democrats' young Millennial Generation and minority supporters, and the more conservative beliefs of the Republicans' older, white base, the leadership of the two parties is more polarized than at any time since the Great Depression.

    For the first time ever, among Democrats in the House of Representatives, the liberal Congressional Progressive Caucus contains more members than the moderate New Democrats and conservative Blue Dogs combined.

    Across the aisle, few congressional Republicans are willing to call themselves moderates, and liberals, once a meaningful bloc in the GOP, have entirely disappeared.

    Despite these divisions, the leaders of each party must find a way to work together to synthesize both strands of America's political DNA – a belief in the importance of a strong national community and equality of opportunity as well as a strong desire to limit government's encroachment on individual liberty – into a new civic ethos that is broadly acceptable to most Americans.

    Millennials can foster a new consensus
    The belief of America's youngest adult generation, Millennials, in the efficacy of individual initiative at the local level to achieve national goals provides a basis for just such a solution. To once again bind the wounds of internal discord, our political leaders should adopt this approach and successfully appeal to the ideological conservatism and programmatic liberalism of the American people.

    This piece originally appeared at the Christian Science Monitor.

    Morley Winograd and Michael D. Hais are fellows of the New Democrat Network and the New Policy Institute and co-authors of Millennial Makeover: MySpace, YouTube, and the Future of American Politics (Rutgers University Press: 2008), named one of the 10 favorite books by the New York Times in 2008.

    Photo by Zach Stern


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    International travelers and expatriates have long known that currency exchange rates are not reliable indicators of purchasing power. For example, a traveler to France or Germany will notice that the dollar equivalent in Euros cannot buy as much as at home. Conversely, the traveler to China will note that the dollar equivalent in Yuan will buy more.

    Economists have attempted to solve this problem by developing "purchasing power parities," which are used to estimate currency conversion rates that equalize values based upon prices (Note 1). This helps establish the real value of money in a particular place.

    When people move from one region of the United States to another they can encounter a similar phenomenon. For example, a dollar is not worth as much in San Jose as it is in St. Louis. Research by the US Department of Commerce Bureau of Economic Analysis (BEA), for example, found that in 2006 a dollar purchased roughly 35 cents less in San Jose than in St. Louis. BEA researchers estimated "regional price parities" for states and the District of Columbia and for all of the nation's metropolitan areas (Note 2). Regional price parities can be thought of as the equivalent of regional (state or metropolitan area) exchange rates. This research was covered in previous newgeography.com articles by Eamon Moynihan and this author.

    This article uses Department of Labor, Bureau of Labor Statistics metropolitan area consumer price indexes to estimate the 2009 cost of living and per capita personal income adjusted for the cost of living.

    Cost of Living: At the regional level (See Census Region Map, Figure 1), there are substantial differences in the cost of living (Figure 2). The lowest cost of living is in the Midwest, at 4.8 percent below the nation. The South has the second lowest cost of living at 3.9 percent above the national level. The West is the most expensive area, 13.5 percent above the national cost-of-living, while the Northeast’s cost-of-living stands 11.3 percent above the national rate.

    The cost of living in the South may seem higher than expected. But if the higher cost metropolitan areas of Washington, Baltimore and Miami are excluded, the cost of living in the South falls to 1.5 percent below the national rate. If the California metropolitan areas are excluded from the West, the cost of living still remains 4.0 percent above the national rate.

    Per Capita Income: The highest unadjusted per capita incomes are in the Northeast, followed by the West, the South and the Midwest. Yet when metropolitan area exchange rates are taken into consideration, the order changes significantly. The Northeast remains the most affluent, and the Midwest moves from last place to second place. The South is in third place, the same as its income rating, while the West falls from second place to fourth place (Figure 3).

    Cost of Living: Variations in the cost of living, which is reflected by the metropolitan area exchange rates, remains similar in 2009 to the 2006 rankings.

    The Top Ten: The lowest costs of living were in (Table 1):

    1. St. Louis, where $0.891 purchased $1.00 in value at the national average.
    2. Kansas City, where $0.903 purchased $1.00 in value at the national average.
    3. Cleveland, where $0.921 purchased $1.00 in value at the national average.
    4. Pittsburgh, where $0.941 purchased $1.00 in value at the national average.
    5. Cincinnati, where $0.944 purchased $1.00 in value at the national average.

    Rounding out the most affordable 10 are two metropolitan areas in the South (Atlanta and Dallas-Fort Worth), two in the Midwest (Detroit and Milwaukee) and one in the West (Denver). No Northeastern metropolitan area was ranked in the top 10.




    Table 1
    Estimated Cost of Living: 2009
    Metropolitan Areas over 1,000,000 with Local CPIs
    Rank Metropolitan Area
    Metropolitan Exchange Rate: to Purchase $1.00 at National Average
    Compared to Lowest Cost of Living
    1
    St. Louis, MO-IL
    $0.891
    0%
    2
    Kansas City, MO-KS
    $0.903
    1%
    3
    Cleveland, OH
    $0.921
    3%
    4
    Pittsburgh. PA
    $0.941
    6%
    5
    Cincinnati, OH-KY-IN
    $0.944
    6%
    6
    Atlanta. GA
    $0.958
    8%
    7
    Detroit. MI
    $0.959
    8%
    8
    Milwaukee. WI
    $0.959
    8%
    9
    Dallas-Fort Worth, TX
    $0.976
    10%
    10
    Denver, CO
    $0.996
    12%
    11
    Minneapolis-St. Paul, MN-WI
    $1.000
    12%
    12
    Houston, TX
    $1.000
    12%
    13
    Tampa-St. Petersburg, FL
    $1.006
    13%
    14
    Phoenix, AZ
    $1.011
    14%
    15
    Portland, OR-WA
    $1.034
    16%
    16
    Chicago, IL-IN-WI
    $1.041
    17%
    17
    Philadelphia, PA-NJ-DE-MD
    $1.054
    18%
    18
    Baltimore, MD
    $1.068
    20%
    19
    Riverside-San Bernardino, CA
    $1.078
    21%
    20
    Miami-West Palm Beach, FL
    $1.085
    22%
    21
    Seattle, WA
    $1.120
    26%
    22
    San Diego, CA
    $1.151
    29%
    23
    Boston, MA
    $1.175
    32%
    24
    Washington, DC-VA-MD-WV
    $1.181
    33%
    25
    Los Angeles, CA
    $1.222
    37%
    26
    San Francisco-Oakland, CA
    $1.258
    41%
    27
    New York, NY-NJ-PA
    $1.281
    44%
    28
    San Jose, CA
    $1.343
    51%
    Estimated from BEA 2006 data, adjusted by local Consumer Price Index for 2006-2009

     

    The Bottom Ten: The most expensive metropolitan areas were:

    28. San Jose, where $1.343 purchased $1.00 in value at the national average.
    27. New York, where $1.281 purchased $1.00 in value at the national average.
    26. San Francisco, where $1.268 purchased $1.00 in value at the national average.
    25. Los Angeles, where $1.222 purchased $1.00 in value at the national average.
    24. Washington, where $1.181 purchased $1.00 in value at the national average.

    The bottom ten also included three metropolitan areas in the West (Riverside-San Bernardino, San Diego and Seattle), one in the Northeast (Boston) and one in the South (Miami). There were no Midwestern metropolitan areas in the bottom 10.

    Per Capita Income: Per capita income in 2009 was then adjusted for the cost of living.

    Top Ten:Washington has the highest per capita income, adjusted for the cost of living, at $47,800. San Francisco placed second at $47,500. Denver ranked third at $46,200, while the cost-of-living adjusted income in Minneapolis-St. Paul was $45,800 and $45,700 in Boston. The top 10 also included two Midwestern metropolitan areas (St. Louis and Kansas City), two from the Northeast (Baltimore and Pittsburgh) and one from the West (Seattle).

    Bottom Ten: The least affluent metropolitan area was Riverside-San Bernardino, with a per capita income of $27,800. Phoenix was second least affluent at $33,900 while Los Angeles was third least affluent at $35,000. The fourth least affluent metropolitan area was Tampa-St. Petersburg at $36,600 and the fifth least affluent metropolitan area was Portland at $37,400. The bottom 10 also included two metropolitan areas from the South (Atlanta and Miami), two from the Midwest (Cincinnati and Detroit) and one from the West (San Diego).

    The cost of living adjusted income data includes surprises. New York, commonly considered a particularly affluent metropolitan area, ranked 17th in cost-of-living adjusted income, and below such seemingly unlikely metropolitan areas as Pittsburgh, Kansas City, Cleveland, St. Louis and Milwaukee. These metropolitan areas also ranked above San Jose, which ranked first in unadjusted income in 2000, but now ranks 16th in cost of living adjusted income (Table 2).





    Table 2
    Personal Income Per Capita Adjusted for  the Cost of Liviing
    Metropolitan Areas over 1,000,000 with Local CPIs
    Rank (Cost of Living Adjusted)
    Rank (Unadjusted Income)
    Metropolitan Area
    Per Capita Income 2009: Adjusted for Cost of Living
    Per Capita Income 2009: Unadjusted
    1
    2
    Washington, DC-VA-MD-WV
    $47,780
    $56,442
    2
    1
    San Francisco-Oakland, CA
    $47,462
    $59,696
    3
    8
    Denver, CO
    $46,172
    $45,982
    4
    9
    Minneapolis-St. Paul, MN-WI
    $45,772
    $45,750
    5
    4
    Boston, MA
    $45,707
    $53,713
    6
    18
    St. Louis, MO-IL
    $45,288
    $40,342
    7
    7
    Baltimore, MD
    $44,908
    $47,962
    8
    15
    Pittsburgh. PA
    $44,848
    $42,216
    9
    19
    Kansas City, MO-KS
    $43,862
    $39,619
    10
    6
    Seattle, WA
    $43,730
    $48,976
    11
    13
    Houston, TX
    $43,581
    $43,568
    12
    16
    Milwaukee. WI
    $43,477
    $41,696
    13
    11
    Philadelphia, PA-NJ-DE-MD
    $43,247
    $45,565
    14
    21
    Cleveland, OH
    $42,734
    $39,348
    15
    12
    Chicago, IL-IN-WI
    $41,990
    $43,727
    16
    3
    San Jose, CA
    $41,255
    $55,404
    17
    5
    New York, NY-NJ-PA
    $40,893
    $52,375
    18
    20
    Dallas-Fort Worth, TX
    $40,494
    $39,514
    19
    23
    Cincinnati, OH-KY-IN
    $40,437
    $38,168
    20
    10
    San Diego, CA
    $39,647
    $45,630
    21
    24
    Detroit. MI
    $39,147
    $37,541
    22
    17
    Miami-West Palm Beach, FL
    $38,124
    $41,352
    23
    26
    Atlanta. GA
    $38,081
    $36,482
    24
    22
    Portland, OR-WA
    $37,446
    $38,728
    25
    25
    Tampa-St. Petersburg, FL
    $36,561
    $36,780
    26
    14
    Los Angeles, CA
    $35,045
    $42,818
    27
    27
    Phoenix, AZ
    $33,897
    $34,282
    28
    28
    Riverside-San Bernardino, CA
    $27,767
    $29,930
    Estimated from BEA 2009 income data and 2006 regional price parity data, adjusted by local Consumer Price Index for 2006-2009

     

    Some expensive metropolitan areas such as Washington, San Francisco and Boston ranked at or near the top, but their cost-of-living adjusted incomes were considerably less than the unadjusted incomes. On average, it took $1.20 to purchase $1.00 of value at national rates in these three metropolitan areas. Washington's unadjusted per capita income was 40 percent ($16,100) higher than that of St. Louis, however when the cost of living is factored in, Washington's advantage drops to 6 percent ($2,500).

    Caveats: The analysis above does not consider cost-of-living differentials within metropolitan areas. For example, data from the ACCRA cost of living index indicates generally higher prices in the cores of the largest metropolitan areas, such as New York (especially Manhattan), Chicago and San Francisco. Further, these data make no adjustment for relative levels of taxation. A cost of living analysis using disposable income would produce different results, dropping higher taxed metropolitan areas to lower rankings and raising lower taxed metropolitan areas higher.

    Cost of Living Differences: Will They Continue? The spread in cost-of-living between metropolitan areas have been driven wider over the last decade by the relative escalation of house prices in some metropolitan areas in the West, Florida and the Northeast. Whether these shifts in cost of living will be reflected in migration patterns will be one of the things to look for in the new Census.

    ---------

    Note 1: Purchasing power parity data is published by the World Bank, the International Monetary Fund (IMF) and the Organization for Economic Cooperation and Development (OECD).

    Note 2: The BEA research applied regional price parity factors only to employee compensation and excluded other income. It is possible that, had the analysis been expanded to these other forms of income, the differences in cost of living would have been greater.

    Photo: Rosslyn, VA business district, Washington (by author)

    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


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  • 02/01/11--08:09: The Midwest: Coming Back?
  • Oh my name it is nothing
    My age it is less
    The country I come from
    Is called the Midwest

    –Bob Dylan, “With God on Our Side,” 1964

    For nearly a half century since the Minnesota-raised Robert Zimmerman wrote those lines, the American Midwest has widely been seen as a “loser” region–a place from which talented people have fled for better opportunities. Those Midwesterners seeking greater, glitzier futures historically have headed to the great coastal cities of Miami, New York, San Diego or Seattle, leaving behind the flat expanses of the nation’s mid-section for the slower-witted, or at least less imaginative.

    Today that reality may be shifting. While some parts of the heartland, particularly around Detroit, remain deeply troubled, the Midwest boasts some of the lowest unemployment rates in the country, luring back its native sons and daughters while attracting new residents from all over the country.

    For example, Des Moines, Omaha, Kansas City, Columbus, Minneapolis, Milwaukee and Madison have all kept their unemployment rates lower than the national average, according to a recent Brookings survey. They are also among the regions that have been able to cut their jobless rates the most over the past three years.

    This contrasts sharply with the travails of the metropolitan economies of the Southeast, Nevada, Arizona and California. Of course, other regions are doing better than the Sun Belt sad sacks. The stimulus and TARP benefited some parts of the Northeast, but even those areas haven’t performed as well as the nation’s mid-section. The only other arc of prosperity has grown around the Washington leviathan, largely a product of an expanded government paid for by the rest of the country.

    In contrast, the relative prosperity in parts of the Midwest largely stems from the private sector. Take the rise in the price for agricultural commodities, global energy demand, greater home affordability and a  slow but perceptible pickup in domestic manufacturing. According to University of Iowa researcher Jacob Langenfeld, these factors suggest that it’s time to stop seeing the Heartland as a perennial loser and to start seeing it as a “[model] for effective economic development.”

    The new reality is reflected in several ways.  In terms of personal-income growth last decade, several Midwest regions ranked  among the top ten in the U.S., including Milwaukee, Cleveland, Kansas City and Cincinnati.

    These cities all performed better than Seattle, Denver or Portland. San Jose and San Francisco, those perennial darlings of the information age,  sat around the bottom of the list. The mid-section also boasts many of the nation’s healthiest real estate markets, according to Realtor.com. Three of the top five markets–Kansas City, Kansas, Omaha and Fargo–are located in the region

    An analysis of shifting migration patterns provides even more intriguing evidence. Over the past century the Midwest’s share of the nation’s population fell from nearly 35% of the total to barely 21%. Only the Northeast, now less than a fifth of the population, has experienced a similar decline, while the West and South have registered impressive gains.

    Now some of the very regions that experienced losses over the past few decades, such as St. Louis, suffer much lower rates of out-migration than a similarly sized area like San Diego. Others, such as Indianapolis, Columbus, Madison and Kansas City, have enjoyed strong rates of domestic migration. In sharp contrast, coastal giants like metropolitan Los Angeles or New York have worse domestic out-migration rates than Detroit.

    The outcome of the recent midterm elections means that political changes may further propel the Midwest express. The new Congress is largely dominated by representatives of the heartland such as Speaker John Boehner of Ohio and Budget Committee Chairman Paul Ryan of Wisconsin. This marks a powerful shift from the previous Congress, controlled by iron-fisted coastal Democrats like former Speaker Nancy Pelosi of San Francisco.

    We can expect the new Congress to adhere more closely to Midwestern interests on a host of issues. Energy legislation will now reflect the interests of Midwestern states, which depend heavily on coal, rather than the renewable dreams of the coastal big cities. In transportation we may see a shift in priorities from high-speed rail to such mundane things as roads and bridges.

    More important still may be changes at the local level. For decades Midwestern governors and mayors tried to emulate the Northeast and West Coast. Historian John Teaford observed that the struggling Midwestern cities in the 1960s and 1970 employed “cookie cutter” redevelopment in a vain effort to replicate the great coastal cities. Ultimately the building of “international style” towers, sports stadia and cultural palaces did little to restore places whose economies had become increasingly uncompetitive.

    In recent years, the most risible example of coastal aping could be found in Michigan, the nation’s most economically ravaged state. Under Gov. Jennifer Granholm Michigan focused on a strategy of promoting “cool cities” to lure the young entrepreneurial hipsters away from the coasts. Like California, Michigan placed huge bets on renewable fuels and other green industries.

    By the end of Granholm’s term this winter the state suffered one the country’s highest unemployment rates, a falling population and epic out-migration. She has been replaced by a pragmatic pro-business conservative, Rick Snyder, who is focused on a practical economic-development agenda. Similar shifts have taken place in Ohio and Wisconsin.

    The new brand of Midwestern realism has been embraced for years by some regions. For example, non-partisan business and civic leaders in Kalamazoo, Mich., have pushed both educational reform and economic diversification. The region, though hardly booming, has done better than the state overall and is experiencing an entrepreneurial and community renaissance.

    Kalamazoo entrepreneurs tend to understand that the key to Midwestern renewal lies with the region’s core competencies and attractions. David Zimmermann, founder of Kalexsyn, a flourishing biotech company, identifies these assets:  Michigan’s resident pool of skilled labor, a low cost of living and a generally community-oriented, family-friendly atmosphere.

    Zimmermann says his company, which now employs 30 workers and has revenues of $5.4 million, has surprisingly little trouble attracting younger skilled workers. The median age at the company, he notes, is only 36, and many have come to Kalamazoo from traditional coastal biotech hot spots. This includes several researchers some who originally left the Midwest in their teens and twenties.

    “People are looking at the Midwest and crunching the numbers,” Zimmermann says. “Maybe you take a 20% pay cut from San Francisco but you buy a nice house for $200,000. You come out way ahead. We think this a very strong advantage.”

    Such a newfound appreciation for the Midwest represents a critical element in expanding the region’s turnaround. With enhanced power in Washington and more common sense government at home, the Midwest could be poised to regain a competitive advantage that has been missing for several generations.

    This piece originally appeared in Forbes.

    Joel Kotkin is executive editor of NewGeography.com and is a distinguished presidential fellow in urban futures at Chapman University, and an adjunct fellow of the Legatum Institute in London. He is author of The City: A Global History. His newest book is The Next Hundred Million: America in 2050, released in February, 2010.

    Photo by Paladin27


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  • 02/02/11--13:55: The Death of Earmarks
  • Record deficit spending in Washington has many faces: Defense, Medicare, Social Security. But none has received more criticism in recent months than the infamous and notorious earmark. Conjuring up images of “Bridges to Nowhere” or “Teapot Museums”, earmarks, or Congressionally Directed Funding, have become the poster child for irresponsible, out of control, big government spending. But is the earmarking practice by Congressional representatives really pushing our country to the brink of bankruptcy? That is what many critics would have the public believe. By playing on the public’s disgust with overspending and sensationalizing it with examples of wasteful projects that abuse the system, earmarks have been turned into a proverbial whipping boy for all forms of government spending.

    Sources of criticism are not limited to the media or political newcomers trying to make a name by misdirecting supporters from the true causes of our spending crisis. President Obama has recently come out in strong opposition to the earmarking process. During the State of the Union speech, he called for a ban of all earmarks and has threatened to veto any bill that contains them.

    Senator Daniel Inouye (HI), Chairman of the Senate Appropriations Committee, issued a statement on February 1 announcing the Committee will place a moratorium on earmarks for the current session of Congress. Yet he does not concede and end the war on earmarks, later committing to revisiting the issue once “the consequences of the decision are fully understood”. I think that what Senator Inouye is trying to say is be careful what you wish for because you just might get it.

    Certainly, I am not suggesting that the current level of our federal expenditures is acceptable. But it seems a bit disingenuous to target a spending practice that makes up three tenths of one percent of our federal budget. By comparison, Social Security and Defense spending make up 21 and 20 percent of the federal budget, respectively. Much of the political grandstanding to abolish earmarks is merely distraction from the real cause of damage.

    Eliminating earmarks does not actually curb spending at all. It merely moves the decision of which projects get funded from Congressional members to the administrators of federal agencies. By the time earmarking occurs through the appropriations process, the budgets of the federal agencies have already been authorized. Earmarks merely provide legislators the ability to further divvy up a very small portion of those budgets to meet local needs of those they represent.

    The good projects that benefit our nation and local communities are often overshadowed by the abuses and frivolous projects of a few. But for every “Bridge to Nowhere” there are examples of projects and program that fulfill a specific national interest and uplift local economies. Unfortunately, the examples of money well spent do not garner as much attention as the more rare occasions when taxpayer dollars are frivolously wasted on pet projects.

    Forget about funding directed for regions in need of important flood control projects or high tech vaccine research and development to create life-saving Staph vaccines (the number one killer of wounded soldiers in the battlefield) for the military. These things are not important as long as an abomination like the “Bridge to Nowhere” has been perpetrated upon the taxpaying public. Small businesses and startup companies capable of producing high tech products that the government wants will now suffer as large corporate interests with unfair advantages deploy extensive resources to access fresh funding that now flows through federal agencies located far from Middle America.

    It’s terrible timing for small business. Whispers in the U.S. House of Representatives of the impending doom of the federal Small Business Innovation Research Program could be a double gut punch for small research and manufacturing companies. Small companies get only 4.3% of federal research dollars, but produce five times as many patents per dollar as large companies and 20 times as many as universities.

    What does this mean for local community leaders? Communities and small businesses must become more competitive. With the departure of earmarking, much of this funding will be redirected through agency grant programs. Unfortunately, the pool of recipients is often smaller and is more concentrated in large east and west coast interests. How do small interests compete? Companies may need to invest more time and money into pursuing procurement and contracting opportunities with the federal government. They may need to consider hiring experts to write grants, monitor agency program funding, or hire consultants to broker connections with program directors, contract managers, and decision makers within federal agencies. Often times, half the battle can be won by conveying your message to the proper audience.

    If beauty is in the eye of the beholder, then I would suggest that wasteful spending is in the eye of those not receiving it. It has been my experience that the same people denouncing earmarks and government spending are the first ones with their hands out when they catch the slightest whiff of federal funding that may benefit their own interests. “It is not wasteful spending until it goes to someone who isn’t me”.

    The future of earmarks remains an uncertain one. What is certain, however, is that the debate will rage on and good projects, small business and high tech startups will bear the consequences of tired rhetoric and political showmanship.

    Ryan Aasheim is an Associate with Praxis Strategy Group where he works extensively with the Red River Valley Research Corridor technology-based economic development initiative. He was formerly Economic Development Director for U.S. Senator Byron Dorgan.

    Photo by Nick Ares


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    Is success in social networking measured by the number of “Friends” you have on Facebook, or “Followers” you have on Twitter, or “Connections” you make on LinkedIn? 

    The jury is still out on how social media and social networking will ultimately play out, but new research shows real benefits are being realized from it.

    A Harris Poll conducted December 6-10, 2010 found, “Social media has opened the door, or more accurately, many doors, to increasingly numerous ways for people to interact with others, customize their online experiences and receive positive, enriching benefits from their activity therein.  In fact, two in five Americans say that they have received a good suggestion for something to try as a result of their use of social media (40%).”

    A generation gap remains, but the mere fact that “Matures” are involved in social media constitutes news.  The Harris study reports, “A majority of Echo Boomers (those 18-33) say they have received a positive suggestion for something to try from their activity on social media (59%), compared to 44% of Gen Xers (those 34-45), one third of Baby Boomers (those 46-64) (34%), and just one in five Matures (those 65 and older) (19%).”

    Pew Research Center’s Internet & American Life Project found that social media’s benefits to groups are now widely recognized by both Internet users and non-users.  The study, The Social Side of the Internet, was released on January 18, 2011 and can be found at PewInternet.org.  The general findings state, “The internet is now deeply embedded in group and organizational life in America.

    Pew studied groups and found in part:

    • 68% of all Americans (internet users and non-users alike) said the internet has had a major impact on the ability of groups to communicate with members. Some 75% of internet users said that.
    • 62% of all Americans said the internet has had a major impact on the ability of groups to draw attention to an issue. Some 68% of internet users said that.
    • 60% of all Americans said the internet has had a major impact on the ability of groups to connect with other groups. Some 67% of internet users said that.
    • 59% of all Americans said the internet has had a major impact on the ability of groups to impact society at large. Some 64% of internet users said that.
    • 59% of all Americans said the internet has had a major impact on the ability of groups to organize activities. Some 65% of internet users said that.
    • 52% of all Americans said the internet has had a major impact on the ability of groups to raise money. Some 55% of internet users said that.
    • 51% of all Americans said the internet has had a major impact on the ability of groups to recruit new members. Some 55% of internet users said that.

    Does all this suggest that a shift in communications is now upon us?  I believe the answer is an unqualified yes.  Many experts predict that by 2014 the whole concept of the “new media” and the “social net” will have lost their novelty status as they become fixtures of American business, communications and life.

    Many forward thinking companies are moving aggressively to position themselves for this shift.  They are beginning to purpose their content for real-time, anytime, two-way dialogue. They are building communities around their own content.   American Express is doing a great job at OpenForum using content to build community and establish thought leadership within the small business community.

    Why?  The “social net” represents a paradigm shift for an organization.  It is not as much about the technology as it is about integrating a new way of assembling and distributing information in   more open and accessible way.  This shift needs to be incorporated into an organization’s DNA.  This takes time and a total commitment from the organization.

    When the communications shift happens, those organizations that have staged early will realize tremendous benefits.  Those organizations that have not will face a very difficult and time-consuming process of not only integrating new technologies into their organizations, but also assimilating the cultural changes that are needed to make this process successful.

    The social internet is not a mercurial event, but rather a game changer that will impact every aspect of our lives – something already evident but likely to become more obvious.

    Dennis M. Powell is the founder of Massey Powell which provided content logistics services that help organizations ready their content and leverage it into the social media environment.  He invites all New Geography readers to visit http://socialmedianewslink.com to learn more about social media.

    Illustration by Matt Hamm


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    Scenes from Egypt, Tunisia and other places in the Middle East provide a stark reminder of the chaos that can consume entire nations. The scene on Bolsa Avenue in Little Saigon last week offered evidence that chaos can be overcome.

    Don’t get me wrong—chaos had a place along Bolsa as streams of drivers sought rare parking spaces, crowds gathered around impromptu fireworks displays on the streets, and shoppers elbowed their way among dozens of flower merchants who set up shop in parking lots.

    The buzz came in advance of Tet, the Vietnamese New Year celebration. Flowers are a big part of the tradition, and peddlers offered their best orchids and other selections.
    Restaurants and ad hoc vendors of various goods also aimed for some business, with everything from silk fabrics to baked goods on sale.

    The jumble of commerce, tradition and celebration that made parking so hard in Little Saigon was a relatively nice sort of problem for all involved. It was certainly nicer than the American experience in the Vietnam War, which ended in utter chaos.

    Many historians say the end started with the Tet Offensive in 1968. Vietcong forces picked the New Year holiday to unleash a campaign of attacks that sowed chaos throughout South Vietnam.

    The Tet Offensive failed to score any military victories by standard measures. Yet it succeeded in fostering a perception of chaos that struck a significant blow against the South Vietnamese government, which stumbled along with U.S. aid for another seven years.

    The chaos that started with the Tet Offensive and ended with crammed refugee boats fleeing Vietnam also led to the creation of Little Saigon. It’s a sprawling district that takes in parts of five cities in Orange County, just south of Los Angeles.

    Little Saigon is now home to the largest concentration of ethnic Vietnamese outside of Vietnam itself. It’s where refugees staked a claim to something more than—better than—the chaos they faced as their native country crumbled.

    What better place to rebrand Tet by reclaiming the celebratory sense of a new year and laying to rest darker images tied to yesteryear’s misfortunes? There are no doubt many who continue think of the Vietnam War when they hear the word Tet.

    Little Saigon’s recent hustle and bustle built around flower peddlers indicates another view, though. It shows that many others have remembered that the holiday existed before war and survived combat. They do not ignore history by considering Tet’s traditional meaning. They allow room for a larger view and an eye on the future.

    Jim Schlusemeyer, owner of Tuyet’s Orchid, is a good example. He sells his flowers to retailers and the general public, working the weekly swap meet at the Orange County Fairgrounds in Costa Mesa.

    Schlusemeyer was born in Vietnam and came here as a refugee, eventually taking the last name of his stepfather. He’s a competitive businessman who needs unique product, so he breeds his own orchids. Land in Orange County is either too expensive to make commercial flower growing worthwhile or too far inland to provide the cooler atmosphere that orchids require. So he breeds small lots of hybrids here and leases space at growing operations in Northern California for commercial production.

    Schlusemeyer enjoyed the big crowd in Little Saigon in the days leading up to Tet. His business has taken hits along with most others the past few years. The holiday and its call for flowers is a nice spike.

    Schlusemeyer says Tet sales get helped along each year by growing numbers of whites and Latinos who come to Little Saigon. Word has gotten around that the Tet holiday brings out the best orchids. There still aren’t a lot of shoppers from outside the local Vietnamese community, but the numbers are rising and appreciated.

    Not bad for a holiday that bears a name once firmly associated with one of the most frustrating and fractious periods in American history.

    Rather impressive for a community of refugees who only recently carved a new life for themselves as Americans.

    Any doubts about the rebranding of Tet were answered by a small booth set up amid the flower peddlers on Bolsa. It was sponsored by Sam’s Club—a division of retail giant Wal-Mart Stores Inc. A salesperson pitched the crowd on home improvements looking to sell everything from patio covers to vinyl fencing.

    You’d be hard-pressed to come up with a better example of putting the hyphen in Vietnamese-American. Keep those hyphens handy considering events in the Middle East. There’s a neighborhood known as Little Arabia just a few miles away from Little Saigon.

    Jerry Sullivan is a contributing editor to New Geography and managing editor of the Orange County Business Journal.


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    I am raining on the big parade by equating the Super Bowl with trade deficits, budget shortfalls, state bonds on the edge of default, and unemployment close to ten percent. But if thirty-second ads that cost $2.7 million or The Black Eyed Peas at halftime can’t lift the economy out of its doldrums, how can we expect the same miracles from Troy Polamalu or Aaron Rodgers?

    From the perch of anyone staring at a TV or looking down from a skybox, what industry could be more bullish for America than the National Football League? Revenue for this year will top out between eight and nine billion dollars, which is roughly shared among the thirty-two professional teams. Does it not speak of economic recovery when even the fan-owned Green Bay Packers, with their retro stadium and rust-belt market, are given a market valuation in Forbes Magazine at more than $1 billion?

    How can it be fourth-and-long for America if, at the Super Bowl, tickets on the thirty yard line cost $10,366? Or if half of a sky box is fetching $384,993 at the Dallas stadium, which itself cost $1.5 billion to build?

    For the partners in what Theodore Roosevelt might have called “the football trust,” the economics of the game puts every NFL team owner in the Super Bowl. That the Buffalo Bills chose to pocket their subsidies instead of investing in a quarterback who didn’t graduate from Harvard is their business, and a good one at that. In 2009, they earned $28 million while the New York Giants, fresh from a Super Bowl win, only made $2 million.

    A closer look at football economics, however, makes the touchdown business a perfect metaphor for an industry—not unlike the nation—that talks up competition, “good conduct”, fair play, and free enterprise, but then goes to the subprime bank with hand-offs from sweetheart contracts, congressional subsidies, tax breaks, restrictive labor agreements, and underwater municipal bonds.

    Twenty-eight of the thirty-two NFL stadiums were financed with some public money, and eleven were built entirely on the dole. The NFL has enjoyed something like $10 billion in stadium subsidies in recent years. I wonder how many depleted state and city governments (Cincinnati gave the Bengals $450 million for their stadium) wish that a financial booth review could challenge the ruling on the field. As China built steel mills and high-speed rail, American cities went with skyboxes and entertainment venues that are used on about twelve days a year.

    The MVP of subsidies for the NFL is its antitrust exemption, which limits the number of teams at the professional level. Were free enterprise to govern the sport, instead of a medieval guild, anyone could put together a club.

    The NFL would simply be the best thirty-two teams in any given year. Teams that were improving would move up; bad teams, like the Browns, would be relegated to lesser leagues. Golf is played by this principle. Every town and city in America could compete.

    With Congress stuffing the competition at the line, the NFL enjoys a football monopoly, which allows it to dictate the prices of everything from official jerseys to cable subscriptions. “You want the NFL?....Go to the NFL...with about ten grand for an upper deck seat.”

    To be sure, the NFL has an engaging product and, if you can sit through the hours of time-outs and commercials, even some exciting games. But given that football is staged to sell things, what trots out on the field at the Super Bowl has more in common with billboards or beach banners than with sport.

    The advertisers at this year’s Super Bowl, paying $90,000 a second, include Volkswagen, Bud Light, Cars.com, Mars, Pepsi, Pizza Hut, CareerBuilder, Coca-Cola, and no doubt the knowing leer of the Viagra man, looking over his wife as if she were a Dallas Cowboys cheerleader.

    Their products will be seen in forty-eight million homes and by almost 100 million Americans. Fifty million Americans, myself among them, watched the first Super Bowl in 1967, in which a hung-over Max McGee twice took it to the house against the Kansas City Chiefs. The networks thought so little of the spectacle that no videotape of the game remains.

    The Super Bowl is a windfall for caterers, pizza joints that deliver, beer distributors, and guacamole middle men, not to mention the Dallas escorts who are charging $24,000 for a week of bump-and-run. But does it not also suggest a spectator nation, day dreaming about cars, sex, and getting a job?

    Under the current NFL contract, which expires March 3, the salary cap for each team is between 56 and 60 percent of the league’s revenues. The fans are told that the cap is to insure parity in the league, so that on any give Sunday the Panthers might not lose by more than twenty points. The salary cap also keeps the word "free" out of the enterprise, and fixes the game to insure a profit for every team owner (except maybe the Lions).

    Few NFL player contracts have much in the way of long-term financial guarantees, and teams can cut veterans, even those who have sustained serious injuries, to clear “space” from their cap.

    Very much in the spirit of earlier monopolists, NFL owners are not content with their billion dollar team valuations, subsidized stadiums, cozy TV contracts, and parking lot rebates.

    Now owners are asking the players' association to accept an 18 percent pay cut in the next Collective Bargaining Agreement. Among the owners’ negotiating demands are a reduction in player salaries, especially for rookies, and an addition of two more games to the schedule.

    Owners are threatening to lockout the players (as if they were Pullman workers) and suspend football for next year. Or the games could be played with scabs, as happened in 1987. Shutdown losses would run into the billions.

    Fans can only hope that Taft-Hartley would be invoked to keep the Oakland Raiders on the field, or that President Obama would pass a Football Recovery and Mall Consumption Act to rush stimulus money into the red zone.

    After such a diatribe, will I be watching Super Bowl XLV? Of course I will. From the first Super Bowl (which was really an exhibition game at which tickets were $12) onward, I have seen some or all of the other forty-three games. Along with cheering McGee, I have seen the Packers’ Donny Anderson knock out the Chiefs’ Fred Williamson (aka “The Hammer”), the reigns of Terry Bradshaw and Joe Montana, and even those four terrible Super Bowls that the Buffalo Bills lost in a row.

    As a fan of the New York Jets, I remember Super Bowl III more clearly than some others. (As Joe Namath said, “I never drink at halftime.”) But I know where I was when the “Refrigerator” (William Perry) scored in Super Bowl XX, and I cannot read anything about Armenia without thinking about Miami Dolphin kicker Garo Yepremian and that absurd pass.

    Despite my institutional memory for the Super Bowl, I wonder whether it makes sense to elevate a sporting event into a national consumer revival meeting (“brought to you by Cialis...when shopping isn’t enough”). Nor do I think that the hoopla fulfills Vince Lombardi’s dreams, unless they involved Janet Jackson.

    Although he wasn’t speaking about economic competitiveness, former Washington Redskin and current TV announcer Joe Theismann revealed a truth about the big game when he said, “Nobody in football should be called a genius. A genius is a guy like Norman Einstein.”

    Photo by americanistadechiapas

    Matthew Stevenson is the author of Remembering the Twentieth Century Limited, a collection of historical essays. He is also editor of Rules of the Game: The Best Sports Writing from Harper's Magazine.


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    I admit it. I had low expectations for Jerry Brown’s third term as governor. After seeing his budget proposal, I’m ready to reconsider my expectations. I think it is a great effort, and it deserves the support of all of us tired of seeing our state reduced to laughing stock.

    Being an economist, I first went to the Economic Outlook section of the Proposed Budget Summary. This is where governors put in rosy expectations and forecasts, thus enabling a multitude of fiscal sins. I was shocked to find a realistic and sober economic analysis. In fact the U.S. and California GDP projections were lower than ours, and we are among the least optimistic forecasters in America. There is no smoke here. There are no mirrors. It is apparent to me that if Brown is to be surprised, he only wants good ones.

    This may be the most honest forecast accompanying a proposed budget that Californian’s have seen in decades.

    The realistic economic forecast leads, reasonably, to lower budget revenue assumptions, lower by billions of dollars. With more realistic revenue assumptions, Brown forecasts a larger budget problem than did his more easily deluded predecessor.

    Then, Brown demonstrates that he’s learned some things over his lifetime in politics. He splits the budget problem in half, proposing cuts for half of the problem and proposing extending temporary taxes for the other half. Predictably, the dinosaurs in both parties howled.

    The howling was all for show.

    The Democrats can’t possibly believe that they can solve California’s budget problems by raising taxes. California is already one of the United States most difficult places to establish and maintain a business, burdened as it is by an expensive soup consisting of delay, uncertainty, regulation, and among the nation’s highest marginal tax rates. Increasing taxes to solve the deficit would only further weaken California’s already ailing economy, ultimately resulting in lower state revenues and new budget shortfalls. It would be a self-reinforcing death spiral.

    The Republicans are, if anything, even more disingenuous. After telling us for months, on a national level, that allowing temporary tax cuts to expire is a tax increase, they now want us to believe that extending a temporary tax is a tax increase. I have news for them. People aren’t that stupid. If allowing temporary tax cuts to expire is a tax increase, allowing temporary taxes to expire is a tax cut. Extending the temporary taxes is simply not cutting taxes. Calling it a tax increase insults our intelligence. Reducing revenues when the budget is so imbalanced would be irresponsible.

    Then, there is the composition of the cuts. Deciding where to cut government spending is extremely difficult. Cutting any spending is going to hurt someone, which means that every nickel has a constituency. Here again, Brown showed his savvy by exempting K-12 education, placing himself in the calculated intersection of economic virtue and political expediency.

    If I was going to prioritize government spending by its impact on future government budgets, I would prioritize those spending items that prevented future costs and increased future revenues. Given the high social and government costs associated with failed educational outcomes--teen pregnancies, high crime, low productivity--there is a strong practical incentive to improve educational outcomes. To the extent that K-12 educational spending improves outcomes, preserving that spending makes strong economic sense, though the research is far from conclusive that spending does improve educational outcomes.

    Politically, preserving K-12 spending is probably necessary if Brown is to have a successful governorship. Schwarzenegger provides the counter example. His governorship was doomed after the 2005 special election. Each of Schwarzenegger's 2005 proposals had merit, but by bringing all of them to the voters at one time, he committed the tactical error that destroyed his governorship. He allowed the enemies of each proposal to band together, and they mugged him.

    When the dust settled, Schwarzenegger was as badly beaten as any of his action-film opponents. The Terminator became Arnold, and Arnold didn't look very tough. He abandoned any real effort to deal with California's budget issues, searching instead for a legacy built on imposing a green wish list of environmental regulation.

    In contrast, Brown showed his street smarts and sidestepped the problem of fighting too many constituencies. Like an aging martial artist, he channeled their energy to his benefit. Instead of fighting the powerful K-12 education lobby, he can count on them helping him convince California voters to extend the temporary taxes. They know what a failure to extend the temporary tax means for them- and their children.

    I do have one problem with Brown's proposal. I see the cuts as a down payment on California's budget issue, and the expiration of the temporary taxes as the due date for the balance. I would have preferred to have the due date come in Brown's term, say in three years instead of five. As it is, if the temporary taxes are extended, Brown has put the budget problem behind him, and he has no incentive to finish the job. That will be up to the next governor.

    But by putting the budget behind him, Brown will be free to deal with California's other big problem, its economy. California, with all its natural advantages and former economic glory, has managed to become one of the Unites States basket cases, with extraordinary unemployment, decimated real estate markets, and an accelerating stream of businesses and individuals leaving the state. If Brown can deal as adroitly with the economy as he has with the budget, he can go down as one of California's great governors --- with a legacy more akin to his father Pat Brown than the one Jerry accumulated in his first two terms.

    Bill Watkins is a professor at California Lutheran University and runs the Center for Economic Research and Forecasting, which can be found at clucerf.org.

    Photo by Troy Holden


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    I am Singaporean, with a half-Indian, half-Eurasian father; a half-Pakistani, half-Malay mother. Dad converted to Islam from Roman Catholicism; each year my brothers and I celebrate Eid ful Fitr, Eid ul Adha and Christmas with different parts of our family. Cousins, aunts and uncles have married outside their ethnicity and faith – to Chinese Christians and Indian Hindus – so the Lunar New Year and Deepavali, the South Indian “Festival of Lights”, are also bustling times.

    This interstitial existence, both within and among different ethnic, religious and linguistic communities, has given me more than my fair share of diversity-related stories. Once, I ordered drinks from an Indian stall owner at Newton Circus, a popular food centre in Singapore. I asked in Malay for “tek dua, bandung satu” [two teas and one bandung, a local drink mixing syrup and condensed milk]. The stall owner replied in Tamil. When I said I didn’t speak it, he asked: “Apa macam punya Mama, tak tahu cakap …” [What kind of Indian cannot speak Tamil?], with a look of total disdain. The expectation that people of Indian ethnicity in Singapore speak Tamil is common, given that most Singaporean Indians are Tamil.

    On another occasion, I was the Master of Ceremonies at an awards ceremony and was faced with the challenge of pronouncing the sometimes complex names of Tamil recipients. Thankfully, a very patient staff member was willing to walk me through the intricacies of what, in a poem I later wrote about the experience, I described as “rolling l’s and lolling r’s”.

    We often hear exhortations to find “unity in diversity”, to manage our differences so they do not become sources of conflict. This is particularly critical in modern cities like multi-religious, multi-ethnic Singapore, which increasingly attract a globally cosmopolitan class of multiple backgrounds, heritages and cultures, all densely-packed into an area slightly smaller than New York City.  

    My personal history has often prompted me to wonder how such diversity can be more than managed, but also celebrated and optimized. I suggest some tentative thoughts on three principles that can help individuals and urban societies navigate their respective diversities, encapsulated in the idea that we must all strive to form a new sort of tribe, comprising “reasonable persons of goodwill”.

    Reason and Rationality

    To succeed, diverse societies, need to be peopled by reasonable individuals who apply logic and vigorous scientific thinking rather than isms and ologies which, unfettered, can precipitate conflict. My family background has made me instinctively aware of this idea since as a child, I knew but could not always articulate how they were at the same time both similar and distinct from my brothers and me.

    I first encountered the idea of a reasonable person when, as a first-year undergraduate at Oxford, I listened to Amartya Sen deliver a lecture about the need to apply “Reason before Identity” in making assessments and decisions - similar to what the philosopher Rene Descartes called shining “the natural light of Reason” to situations.

    I’ve realised now that being reasonable provides three critical insights. First, each of us, while individual, is also plural, with many interacting identities.

    This may seem counterintuitive, given that the term “diversity” is usually applied to mark particular groups from others. Such conceptions of “Us vs Them” can be based on a range of markers: gender, ethnicity, race, religion, language, nation, professional affiliation, tribe, educational background, among others.

    However, a less frequently used, but equally resonant, definition of diversity applies within individuals – those like me, with mixed parentage and “hyphenated identities”, or who balance the different aspects of their professional, personal and other identities in a dynamic equilibrium.

    Second, an individual’s different identities matter more or less at different times.

    Being at work underscores my professional affiliations as a civil servant; going to the mosque on Fridays is a spiritual experience; visiting my paternal grandmother for Christmas is about spending time with family. I recall dressing up as Santa Claus in 2009, because many of my younger nieces and nephews were old enough to appreciate getting presents on Christmas Eve. Was it ironic that a Muslim adopted the garb of a traditional Christmas icon? Perhaps, but it made perfect sense in my head after I reasoned that this was in the spirit of fun, festivity and family.

    Identities, like our ethnicity or faith, define us in profound ways, but   their salience varies with situations. Even as our identities interact, Reason helps us keep them conceptually distinct. A similar argument is made in Amartya Sen’s Identity and Violence (2006); its telling subtitle suggests that primordial identities like race and religion create “The Illusion of Destiny”, whereas logic tells us that no part of our identity should be tyrannical over all others, no matter how resonant and powerful it may be.

    Third, Reason helps us realise that each aspect of our multiple identities generates connections between us and many, if not all, other people.

    I feel this particularly strongly when interacting with family on my father’s side. Growing up, my paternal grandmother told me stories from the Old Testament, emphasizing how both the Christian and Muslim segments of our family  celebrate the lives of Abraham, Moses, David and Jesus. Recently, when one of Dad’s Catholic aunts passed away, I was reminded of a further similarity, in different faiths’ prayers for the dead. Muslims, many Christians and some of the Hindus in our family hold prayers on the first three days after a funeral, then on the seventh, 40th and 100th days. There is a lattice of shared cultural links between groups of ostensibly different backgrounds, even if our rituals differ.

    The Importance of Persons

    Applied alone, Reason can come across as cold and clinical. It is therefore useful to temper it by recognising and valuing the person-hood in each individual. This is critical in making us “reasonable persons”, rather than mere automatons applying a Reason-imitating algorithm.

    Belief in person-hood is not a new idea. Across a range of belief systems, we find an emphasis on the core of humanity, resident in any individual.  The liberal humanist tradition is one source of this approach, but it can also be justified spiritually in the belief that there is an element of the divine in all of us, like the Christian idea of being made “in the image of God” or the Muslim concept of each person occupying a special position in Creation as God’s vicegerent on Earth.

    Belief in individual person-hood is a prerequisite for meaningful reciprocity among people, where one obeys the Golden Rule and “does unto others”. I find an emphasis on person-hood a wonderful antidote to simplistic thinking about people who are ostensibly “different” from us. It would be easy to see some of my non-Indian friends as utterly distinct, or some of my non-Muslim family as irrevocably different. But once I start remembering that they are each unique individuals, not just abstract “Others”, it is easier to embrace fully the many connections we share.

    Goodwill and Good Will

    Goodwill is also critical for moving beyond toleration to celebrating diversity.  Generally, people reluctantly put up with differences.  Goodwill allows us a richer appreciation of those distinctions. There are different conceptions of such an expanded diversity – America’s “melting pot”, from which the many become one; or the non-assimilationist ‘unity in diversity’ of Singapore and other countries. All rely on a fundamental bedrock of goodwill among peoples, with three important consequences.

    First, we learn together what we cannot know alone. This was brought home to me very powerfully, when one participant at a conference asked a Hindu if he worshipped “one or many Gods”. The answer was zen-like in its simple complexity: it does not matter whether is one or are many Gods. What matters is that there is “Only God”. This reminded me that human ideas often pale in comparison to life’s larger truths. Sometimes, deeper understanding of our own beliefs can be suggested by traditions outside our own.

    Second, goodwill reminds us to give others the benefit of the doubt.  Others have obligations not to cause offence in speech and action, but each of us also has the prerogative not to take offence. After all, offensive remarks often stem from ignorance rather than malice. We can reply to such ignorance with   information, rather than indignation. Like all ethnic and religious minorities, I have experienced a fair number of awkward situations – being served pork, or invited to drink alcohol, or to eat during daytime during the fasting month of Ramadhan. Not taking take offence is not always easy, but does serve to maintain friendships and creates sometimes risible memories.

    The third benefit of goodwill lies in helping build   trust and accommodating differences. Land-scarce Singapore has a quaint practice where the street-level floors of the apartments provided by our Housing and Development Board (HDB) – called void decks – can be leased by residents. They are frequently used for Malay weddings and Chinese funerals – and uncomfortable double-bookings do arise. Often, these have been defused with a little reasoned give-and-take.

    Balancing Ideals & Pragmatism

    Being reasonable persons of goodwill helps us navigate the choppy and sometimes uncharted waters of diversity. But Reason is neither uniformly nor universally distributed in most societies, so it must be carefully nurtured through education and exposure, rather than left to chance. Even where it is widespread, Reason also has limits, at which points powerful emotions start to come into play.

    Rising above these challenges requires not just vision, but healthy realism. Rather than a final destination, it is better to view the navigation of diversity as a journey – where we are all, in the words of a friend who is a Catholic priest, “fellow pilgrims” and part of a tribe with common values, even if we don’t all wear the same outer markings.

    Aaron Maniam is a Singaporean Muslim from a large and diverse family. He volunteers with Singapore’s National Youth Council and groups of young leaders in Singapore’s Muslim and Indian communities. He was identified by the Asia Society as an Asia 21 Young Leader in 2006 and a “Next Generation Policy Leader” in 2010.

    Photo by AndyLeo@Photography


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    There is mounting concern in Australia about the nature and extent of country’s housing affordability crisis. Expressions of distress are not limited to the middle income households who are locked out of the Great Australian Dream of home ownership. There is heightened interest from advocates of low income households and an opposition political party. Moreover, Australia's overvalued housing is receiving renewed attention in international circles.

    Part of this attention is attributable to the 7th Annual Demographia International Housing Affordability Survey, which was released in late January. The Demographia Survey, which I co-author with Hugh Pavletich of Performance Urban Planning in Christchurch (New Zealand) covered 325 Metropolitan markets in seven nations (United States, United Kingdom, Canada, Australia, Ireland, New Zealand and Hong Kong, in China). The Survey assesses housing affordability using the United Nations and World Bank recommended measure of median house price divided by median household income (the Median Multiple). The data shows housing to be severely unaffordable in Australia, which was the most unaffordable nation included in the survey.

    In response, Michael Perusco of Melbourne's Sacred Heart Mission and chairman of the Council to Homeless Persons called the affordability statistics "alarming.“ He added he was not surprised by the housing affordability data, noting the stress on the people he serves caused by inflated prices.

    Kirsten Moore recently reported in these pages on the statement by the Australian Green party. Senator Scott Ludlam, the party's shadow minister (spokesperson) for housing called Australia's housing affordability a "world-class outrage." He went on to say "When a family or an individual has to spend so much of their income on paying their mortgage, it has a seriously adverse affect on their education and training opportunities, on their investment opportunities and on their ability to pay for services like health care and child care."

    The real estate industry also expressed concern. David Airey, president of the Real Estate Industry Association of Australia issued a statement in response to the Demographia Survey, saying that: "for the majority of Australian families the difference between household income and loan payments is narrowing quickly."

    Various measures indicate that households with mortgage payments equaling 30 to 35 percent or more of their gross annual income on mortgage suffer from “mortgage stress." Mortgage stress has been spreading around Australia like invasive species. Last year's Demographia Survey showed that the median income household in Sydney would pay 57 percent of its income for a mortgage if it bought a median priced house in the current market. In Adelaide, the figure would have been 47 percent. Over the last year things have only gotten worse.

    This is not merely a response to growth, or economic vitality. The median income household in the vibrant Dallas-Fort Worth region, for example, (larger than Sydney) would pay approximately 17 percent of their incomes for a mortgage on the median priced house. This is despite the fact that population growth and the demand for housing has been much greater in Dallas-Fort Worth than in Sydney (Figure 1).

     

    In Indianapolis, similarly sized to Adelaide and growing faster, the median income household would pay 14 percent of their income for a mortgage on the median priced house. House prices have risen more than 130 percent relative to incomes over the last three decades in Australia's major metropolitan areas (Figure 2). By comparison, the increase has been only one-eighth as much (16 percent) in the United States.

    The extent of the house price increases is starkly illustrated by comparing the value of the own housing stock to the gross domestic products of Australia and the United States since 1988 (the first year for which Australian house value data is readily available).

    According to data from the United States Federal Reserve Board, the value of the US stock of owned housing in 2010 was approximately the same in relation to the Gross Domestic Product as it was in 1990. On the other hand data from the Reserve Bank of Australia indicates that the value of the own housing stock in Australia was 85 percent higher relative to the Gross Domestic Product than in 1990. Thus, the value of the owned housing stock in Australia is today at least $1.9 trillion greater than it would have been if the 1990 ratio had been retained (Figure 3).

    Of course, part, although far from all of the United States experienced a severe housing bubble that burst in 2007. Even so, the increase in gross house values relative to the gross domestic product in the United States  never approached the massive increase in valuation that has occurred in Australia.

    The Green Party statement rightly blamed "Government's actions that provide incentives designed to benefit investors and speculators and to keep house prices going up." The price rises have been principally the result of state government policies banning most development on the urban fringe and created a severe shortage of competitively priced land for development. It is an established economic fact of life that, all things being equal, the prices of goods and services tend to rise where there are serious limitations on supply, whether land, petroleum or bananas (as in the case of Typhoon Larry in Queensland in 2006).

    The effects of such policies is to telegraph to investors both in Australia and around the world the potential for speculative gain in a housing market.   The biggest losers come largely from the ranks of younger middle income Australians, including many immigrants, who would like to own their own homes. It is astounding that in egalitarian Australia, which has an enviable historic record of concern for lower and middle income households, is being transformed into a country where   inheritance or access to foreign capital will be a prerequisite for home ownership for middle income people.   

    The Organization for Economic Cooperation and Development (OECD) has raised concerns about the role of restrictive land use regulations in Australia (as well as the United Kingdom, which is also covered in the Demographia Survey).  OECD has recommended that Australia ease land supply constraints by streamlining planning and zoning regulations.

    The experience of Australia, along with a number of other markets covered in the Demographia Survey demonstrates that severe restrictions on the supply of land for development remain fundamentally incompatible with both housing affordability and the aspirations of lower and middle income citizens.

    Photograph: New "detached" housing in Perth (by author).

    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


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    In a technical sense, the economy has been in recovery since June of 2009. A year and a half into the rebound though, a general cloud of economic malaise continues to cover the nation. Fears of a diminished America are perpetuated from our political and punditry classes. We are told that our collective lack of preparation, education, innovation, industry, and of infrastructure are all setting us up to fall further. Economic indicators may reflect a bounce-back, but structurally, America is waning. It is China that is increasingly emerging as the world’s bright spot in terms of development. With its 10% annual growth rate, an economy poised to become the world’s largest, and a strategic smart-growth development plan, resplendent in renewable energy splendor and high-speed rail, the nascent superpower is aimed ever upwards.

    This tidy narrative that the doom-chatterers both envy and fear is being dented by a number of recent stories concerning Chinese rail initiatives. As Tsinghua University's Economics Professor Patrick Choavec writes, China’s high-speed rail is "expensive both to build and to operate, requiring high ticket prices to break even. The bulk of the long-distance passenger traffic, especially during the peak holiday periods, is migrant workers for whom the opportunity cost of time is relatively low. Even if they could afford a high-speed train ticket — which is doubtful given their limited incomes — they would probably prefer to conserve their cash and take a slower, cheaper train. If that proves true, the new high-speed lines will only incur losses while providing little or no relief to the existing transportation network.”

    Similarly, individual Chinese municipalities are eagerly developing subway systems, but as Chinese political scientist Zhang Ming wrote in China Daily, "geographical conditions in many cities are not conducive to building and/or maintaining subways. The landscape and hydrological conditions of a city determine whether it can have a subway... medium-sized cities may not have enough commuters to sustain a metro. Even in many large cities, which have enough commuters, subways are running at a loss because of the very high cost of operation and maintenance.” Historically, drive and a true demand have never run into a topographic problem it couldn’t solve, but these examples do raise questions about the efficacy of blanket government policies that ordain massive, heavily subsidized projects. Could such ventures produce results that are opposite of their intended outcome?

    China can find the answer right here in the States. The Italian sociologist Marco d’Eramo has related how the Home Owners’ Loan Corporation in 1933 and the Federal Housing Authority in 1934, created in part to stem the mass wave of Great Depression-related foreclosures, did “more than any other measure… to contribute to turning America into a nation of unconquerable homeowners.” To increase homeownership for all, both agencies devised classification systems that assigned values to neighborhoods and homes that they then sought to rehabilitate through loans to potential buyers. The resulting standardized divisions largely enforced segregation in the name of stability, only further depressing segments of the housing market.

    Recent lessons from the Great Recession’s continued housing fallout show us how government policy can produce the opposite effect of its initial intention, as well. The still-reeling property values of neighborhoods nationwide, and the huge tracts of unused housing at the periphery of metro edges were created with the encouragement of government bodies just like the HOLC and FHA’. These policies expanded the cause of homeownership without taking into consideration the actual demand and cost. Subsidizing trains that very few can ride is quite similar to encouraging the building of houses in which very few can live.

    At least initially, it is easy to see why such investments look good to government entities. They promote job growth, increase demand for supplies and resources, and contribute to overall GDP. Where something wasn’t, something now is. But they are unsustainable projects in the long run. Without continued government subsidies—or of higher wages for Chinese workers to afford train tickets, or of an endless supply of cheap credit to US potential homebuyers—they tend to eat off of themselves. The eventual decline in Chinese trade ridership and in US home purchases shows the peril when government policies create incentives for development without real, inherent demand .

    With this in mind it is important to view President Obama’s high-speed rail proposals in the context of each location. High-speed rail is an important, necessary step to upgrade America’s infrastructure in certain locales, but it is not an across-the-board panacea. Chicago, for example, the rail capital of the nation, beset with both passenger and freight rail congestion, is a logical beneficiary of dedicated high-speed rail funds to develop a system capable of handling its latent demand and to untangle its gridlock. With Chicago's large economic presence over its neighbors, it makes little sense, then, that freshly minted Wisconsin Governor Scott Walker remains adamantly opposed to a project that would benefit Milwaukee and Madison.

    Other places, though, have valid qualms. Cost concerns in Florida, for example, are legitimate. The 90 mph top speed on the Southeast High Speed Rail Corridor between Charlotte and Raleigh doesn’t sound too, well, high-speed. Cities like Denver, which supports a dense enough population to represent a demographic demand for light rail, can encourage its development as its roads reach capacity. In states like South Dakota and Iowa, it may mean going back to dirt.

    The new head of the House Committee on Transportation and Infrastructure, Rep. John Mica (R-FL), made sense when he said, “I am a strong advocate of high-speed rail, but it has to be where it makes sense”. There is a difference between creating infrastructure for which there's an inherent demand and nudging people to utilize it, and developing large-scale infrastructure projects for their own sake.

    Knowing the limitations of past attempts and failures, America has a chance to outgrow its mistakes and render the supposed competition with China irrelevant, as that aspiring nation fumbles in its own policy prescriptions. Harnessing the lasting lessons of the Great Recession means understanding that success isn’t measured in the size of a home, or in the length of a high-speed rail system. It's measured in the effectiveness and efficiency of a place. If the U.S. holds this to heart, no one could be better primed to compete, as China’s empty trains swiftly rattle onwards.

    Photo by Ivan Walsh, High Speed Bullet Train, Beijing to Tianjing, China

    Ben Schulman is a Chicago-based writer on urban affairs. One of the proprietors behind independent record label Contraphonic, Inc., Schulman also heads the Contraphonic Chicago Sound Series.


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    For a decade now U.S. city planners have obsessively pursued college graduates, adopting policies to make their cities more like dense hot spots such as New York, to which the "brains" allegedly flock.

    But in the past 10 years "hip and cool" places like New York have suffered high levels of domestic outmigration. Some boosters rationalize this by saying the U.S. is undergoing a "bipolar migration"--an argument recently laid out by Derek Thompson in The Atlantic. On the one hand the smart "brains" head for cool, coastal cities like New York and Boston, while "families" and "feet"--a term that seems to apply to the less cognitively gifted--trudge to the the nation's southern tier--a.k.a. the Sun Belt--for cheap prices and warm weather. "College graduates with bachelor's degrees or higher," Thompson notes, "have been moving to the coasts, like salmon swimming against the southwesterly current."

    However, this analysis--no matter how widely accepted in the media--is grossly oversimplified, perhaps even misleading. Indeed, college graduates, for the most part, are heading not to the big cities on the coasts, but to smaller, less dense and quite often Sun Belt cities.

    To come up with our list of the country's biggest brain magnets, we took the 52 largest metropolitan areas (all those over 1 million population) and ranked them by gains in people with college educations compared to the population over 25 years of age between 2007 and 2009, using the latest data from the American Community Survey provided by demographer Wendell Cox. It turns out that none of the top 10 gainers were large Northeastern cities, but largely Southern or Midwestern. New Orleans; Raleigh, N.C.; Austin, Texas; Nashville; Birmingham, Ala.; Kansas City, Mo.-Kan.; and Columbus, Ohio, all scored high marks. Only one California city, San Diego, made the top 10. Perennial "brain gainers" Denver, Colo., and Seattle round out the top 10.

    Among those metropolitan statistical areas with populations over 5 million, the best ranking went to the Philadelphia region (No. 12 overall), arguably the least glitzy and most affordable of the large northeast cities. The San Francisco metropolitan area, long a leader in its percentage of college-educated adults, held the next spot at No. 13. On the other hand, supposed "brain" magnets Boston and Chicago managed middling rankings, right behind Charlotte, N.C., and just ahead of San Antonio, Texas. Both fell well behind such overlooked "brain gain" areas as Jacksonville, Fla.; St. Louis, Mo.-Ill.; and Indianapolis. New York, the nation's intellectual capital, ranked a mediocre 29th and Los Angeles an even worse 37th. To put in perspective, Nashville's rate of college educated migration growth was 3.7%, compared with 1.4% for New York and a measly 0.7% for Los Angeles.

    Rather than following a clear path to the world of the "hip and cool," college graduates appear influenced by a more nuanced and complex series of factors in terms of their location. New Orleans' No. 1 ranking, for example, is likely product of the continuing recovery of its shrunken population, where the central city appears to be somewhat more attractive to professionals than before Katrina while the suburban populations have recovered more quickly from the disaster. The strong showing of Birmingham may likely be traced not to changes in the core city itself, but to the rapid growth in its surrounding suburban counties and the rapid expansion of the region's medical complex.

    This reflects something not often mentioned: the spreading out of intelligence. Conventional theory suggests that the new generation of college graduates will go to the largest, densest places, eschewing, as The Wall Street Journal put it snidely, their parent's McMansions for small abodes in the inner city. Yet the ACS numbers indicate that, overall, college migrants tend to choose less dense places. In the two years we covered, the growth rate in urban areas with lower urban area densities (2,500 per square mile) boasted a 5% increase in college-educated residents, compared with roughly 3.5% for areas twice as dense.

    This can be seen in the pattern of migration toward relatively low-density metropolitan areas like Nashville, Columbus, Raleigh or Kansas City as opposed to more packed regions like New York, Los Angeles or San Francisco. And wherever these college graduates migrate, they are at least as likely to settle outside the urban core. Another overlooked fact: Most places with the highest percentages of college-educated people are in suburbs. Only two of the 20 most-educated counties in the country are located in the urban core: New York (Manhattan) and San Francisco. Virtually all the rest are suburban.

    Another somewhat surprising statistic revolves around affordability and job growth. The college-educated, particularly in this tepid economy, are not immune to reality. They may want to go one place--for example, ever-alluring New York or sunny Los Angeles--but may soon find they can find neither a good job there nor an affordable place to live in order to stay there. Overall our analysis shows that many end up in places with lower housing prices. Areas with the highest price housing experienced college-educated growth at a rate only 60% of those with more affordable real estate. This is one thing that makes an Austin or Raleigh, even a Columbus or Kansas City, more attractive than a Boston, New York or Los Angeles

    Finally we have to consider employment trends. For the most part college graduates, like most folks, preferred cities with lower unemployment and more job growth. Some top gainers, such as Raleigh, Columbus and Kansas City, all boast lower than average unemployment and appear to be recovering from the recession. But this is not always the case: Some relatively poor performers on the job front, like Portland, Ore., and San Diego, have managed to maintain their appeal--for now.

    As the economy recovers these patterns are likely to accelerate, although they could also shift a bit as regions gain or lose employment momentum. Meanwhile, the best strategy for attracting graduates lies in creating jobs, as well as in offering both affordable housing and a range of housing options, including both reasonably priced urban and lower-density living. Generally speaking an area that is economically vital as well as physically or culturally appealing will do best. In the next decade advantages will also fall to family-friendly regions, particularly as the current crop of millennial-generation graduates starts entering en masse their family-forming years. These factors, more than hipness or dense urbanity, may well be more influential in determining which regions do best in the ongoing war for talent.

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    No. 1: New Orleans-Metairie-Kenner, La.

    Grad Gain: 36,666

    Gain as a Share of Total 25+ 2007 Population: 5.42%

    New Orleans' No. 1 ranking is likely due to former exiles returning after Hurricane Katrina. A recent report from the Census Bureau estimates that area's population in the past decade has shrunk 29%. Recovery in the urban core has remained patchy, but suburban populations have recovered more quickly from the disaster.

    No. 2: Raleigh-Cary, N.C.

    Grad gain: 28,748

    Gain as a Share of Total 25+ 2007 Population: 4.27%

    Even in hard times Raleigh-Durham--the fastest-growing metro area in the country--has repeatedly performed well on Forbes' list of the best cities for jobs. The area is a magnet for technology companies fleeing the more expensive, congested and highly regulated northeast corridor. Affordable housing and short commute times are no doubt highly attractive to millennials seeking to start a family. Indeed, a 2010 Portfolio.com/bizjournals survey ranked the city the third-best for young adults.

    No. 3: Austin-Round Rock, Texas

    Grad gain: 42,117

    Gain as a Share of Total 25+ 2007 Population: 4.23%

    Brains are flocking to Austin for good reason. Forbes ranked it the best large urban area for jobs in 2010. Along with Raleigh-Durham, Austin is emerging as the next Silicon Valley, luring lots of brains who would have previously headed toward the West Coast. Austin owes much both to its public-sector institutions (the state government and the main campus of the University of Texas) and its expanding ranks of private companies--including foreign ones--swarming into the city's surrounding suburban belt. Its vibrant cultural scene certainly helps in attracting college-educated millennials.

    No. 4: Nashville-Davidson-Murfreesboro-Franklin, Tenn.

    Grad gain: 36,975

    Gain as a Share of Total 25+ 2007 Population: 3.68%

    A high quality of life, a vibrant cultural and music scene and a diverse population make Nashville a desirable place to live. Low housing costs drive down the cost of living, which is even lower than in other affordable cities like Raleigh, Austin or Indianapolis. Nashville is also home to a growing health care industry: More than 250 health care companies have operations in Nashville, and 56 are headquartered there.

    No. 5: Kansas City, Mo./Kan.

    Grad gain: 38,398

    Gain as a Share of Total 25+ 2007 Population: 2.96%

    The two-state Kansas City region boasts strong population growth and net in-migration-- and for good reason. The city has one of the lowest costs of living, one of the highest personal-income growth rates and one of the healthiest real estate markets in the country. Short commute times also add to the attractiveness of the city for families. The city is the second-largest rail hub in the U.S. and is actively growing its life science and technology sectors.

    No. 6: Birmingham-Hoover, Ala.

    Grad gain: 21,111

    Gain as a Share of Total 25+ 2007 Population: 2.86%

    Birmingham's strong showing on this list is likely due to the rapid growth in its surrounding suburban counties. One big development sure to lure brains: the rapid expansion of the University of Alabama's medical center and surrounding private medical industry.

    No. 7: San Diego-Carlsbad-San Marcos, Calif.

    Grad gain: 51,151

    Gain as a Share of Total 25+ 2007 Population: 2.71%

    The only MSA from the "hip and cool" state of California to make the top 10, despite high levels of out-migration and a relatively poor performance in the job front. For now, at least, the area's beautiful beaches and idyllic weather manage to attract plenty of college graduates, but it will need to get out of its slump in order to retain them.

    No. 8: Denver-Aurora-Broomfield, Colo.

    Grad gain: 43,853

    Gain as a Share of Total 25+ 2007 Population: 2.69%

    A perennial magnet for college graduates, and one of the "hip and cool" cities to make the top of our list, Denver was one of the darlings of the information age, and its suburbs have long incubated tech companies. Its technology sector is still strong, but higher prices and greater regulation have driven companies to regions like Austin and Raleigh, which are more business-friendly and cheaper.

    No. 9: Columbus, Ohio

    Grad gain: 29,515

    Gain as a Share of Total 25+ 2007 Population: 2.6%

    While the recession has taken a huge toll on the rest of Ohio, Columbus has been thriving, thanks to being home of the state capital, a booming startup culture and the largest college campus in the country--Ohio State University, a major employer and information center. Forbes named the Columbus metropolitan area--home to 1.8 million residents-- one of America's best housing markets, as well as one of the best places for businesses and careers. The city enjoys below-average unemployment and a strong tech presence that includes Battelle Memorial Institute, which oversees laboratories for several federal agencies.

    No. 10: Seattle-Tacoma-Bellevue, Wash.

    Grad gain: 53,869

    Gain as a Share of Total 25+ 2007 Population: 2.39%

    Seattle has long been one of the big winners in the brain battle as well. It has some of the country's most important cutting-edge firms--Microsoft, Costco, Amazon, Starbucks--one of the country's best arrays of urban and suburban neighborhoods. Housing is no longer cheap, but remains far less expensive than its main rival, the San Francisco Bay Area.

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    Photo by Jeanette Runyon

    This piece originally appeared in Forbes.

    Joel Kotkin is executive editor of NewGeography.com and is a distinguished presidential fellow in urban futures at Chapman University, and an adjunct fellow of the Legatum Institute in London. He is author of The City: A Global History. His newest book is The Next Hundred Million: America in 2050, released in February, 2010.


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    One of the news stories circling lately is an interview with Andres Duany where he asserts that public participation requirements are too onerous to enable great work to be done.   Early in my career I worked as a public historian and historic preservation specialist, so rather than launch immediately into my opinion, let me tell you a true story.

    In the 1950s, business owners in downtowns across the country became agitated over the fact that their central business districts were facing a double challenge: increasing amounts of traffic congestion and increasing competition from new suburban shopping centers.  One of the towns feeling these challenges was Green Bay, Wisconsin, which had a very energetic and forward-thinking business leadership circle. 

    The good men of Green Bay did what most forward-thinking leaders do when faced with a fearful challenge on the horizon: they hired a consultant.  The consultant they chose was Victor Gruen, an architect who had recently gained fame designing the nation’s first enclosed shopping mall, in Edina, Minnesota.  In the couple of years that had lapsed since the Southland Mall plans hit the streets, Gruen had become a celebrity – the Andres Duany of his day. 

    In a 2006 article for the New Yorker, Malcolm Gladwell described Gruen as “short, stout, and unstoppable, with a wild head of hair and eyebrows like unpruned hedgerows.” Gladwell summed up Gruen’s impact pretty succinctly:

    Victor Gruen didn’t design a building; he designed an archetype. For a decade, he gave speeches about it and wrote books and met with one developer after another and waved his hands in the air excitedly, and over the past half century that archetype has been reproduced so faithfully on so many thousands of occasions that today virtually every suburban American goes shopping or wanders around or hangs out in a Southdale facsimile at least once or twice a month. Victor Gruen may well have been the most influential architect of the twentieth century. He invented the mall.

    Gruen asserted in Green Bay, as he did in dozens of other cities in the 1950s and 1960s, that the key to solving downtown’s competition challenge was to completely separate vehicular traffic from pedestrians.  By massively widening Main Street at the north end of the commercial district and completely enclosing the core of the existing commercial district, all of downtown’s problems would be solved.  All the plan required was money and a willingness to be unsentimental and practical.

    You don’t have to be Duany to understand what happened.  It took 20 years for Gruen’s vision to become some form of reality, and during that time the City’s business and political leadership –and its planning staff – stuck to Gruen’s plan as diligently as the real world constraints of financing and private development would allow.  

    By the time it opened in 1977, the new Port Plaza Mall and associated parking lots and garages had obliterated acres of downtown buildings, dislocated a hundred residents.  It sent dozens of businesses to liquidation or to the far edges of the newly-sprawling city where many of them are located today.  If Gruen considered the collateral damage of grand ideas at all, I wager he simply viewed them as the price of progress. 

    All of this might be tolerable from a strict economic standpoint if Gruen’s grand plan had worked.  It didn’t.  Port Plaza Mall was a money-loser from virtually day one.  By the early 1980s, Port Plaza was doing so poorly that the City took the advice of another consultant and bulldozed another full block of buildings to add the magic third anchor, which they were assured was the way to fix the mall’s ails.  By the early 2000s, that anchor was gone. 

    Green Bay, like many other cities that drank the downtown mall Kool-Aid, continues to struggle with a downtown that is dominated by a windowless, dispiriting, too-vacant hulk where its heart should be.  Meanwhile, the region’s former skid row, right across the Fox River within eyesight of the mall, has become the hottest urban neighborhood in the region, and the winner of a Great American Main Street Award. 

    This isn’t simply a story about the virtues of historic preservation.  Gruen’s idea didn’t fail because Green Bay wanted old buildings or because the people who lived and worked in those old downtown buildings did something to undermine the plan.  Like most people of that era, the majority of the City’s leadership and residents placed their faith in the expert and in the concept of progress.  Any gut misgivings they may have had were pushed aside.  The plan was made by a national expert, right?

    Gruen’s mall failed because he envisioned and sold an ideal solution without giving any attention to economic realities, and without consideration of the myriad of unforeseen factors and unintended consequences that could, and did, develop.  Gruen stood at the beginning of an era, and there was no way anyone could anticipate how the world would change in a few short decades.

    The greatest failure of Gruen’s plan was that he did not recognize or acknowledge that his Grand Vision could very well turn out all wrong.     

    We should have learned by now that our Grand Visionary Designers are not infallible. Our landscapes are littered with Grand Visionary Architecture that was supposed to fix something, or create Something Big. And so few of those grand visions ever came out the way they were promised, or managed not to create a new set of problems.  Never heard of Port Plaza?  That’s because there are Port Plazas of one flavor or another in virtually every city in the country.  Some are malls, some are stadiums, some are brutalistic, forsaken parks.  You can pick them out easily by their Grand Design ambitions and their total lack of life. 

    Our failure to learn this lesson is a blot on architecture and planning.

    This history is exactly why Duany is wrong about the importance of public participation.  Public participation is important not just to try to get people to go along with our vision, to give us a chance to yell loud enough to drown them out, or to allow us to demonstrate the superiority of our Grand Vision over their piddling little concerns.  When residents resist a new development  – even when they supposedly “don’t like change” – it doesn’t take many questions or much effort to develop a real understanding of their concerns and their point of view.   

    We fail consistently to realize that the locals are there every day and we are not. Local residents have a level of detail and a critical perspective that can make the difference between whether a proposed project supports the health of the community or creates a new burden.   Much of the time, the real concerns of the residents of an area have to do with nuts and bolts issues that can be fixed with relatively little effort or accommodation.  It’s possible that local resistors might have good reasons why the proposed change is a bad idea.  If we don’t enable and empower them to speak, we have made the same mistake as Gruen and we are likely to create a similar legacy.

    Understanding the real reasons why people oppose a project requires the willingness to do so, the humility to listen, and the internal fortitude and self-assurance to admit that possibly, oh just possibly, we don’t know everything that there is to know.   That is the real mark of wisdom.

    Duany and other marquee designer types have the privilege of maintaining a distance from the dirty work of making a project functional in real life. Don’t overlook the work of the nameless landscape architects and architects who are hired by the developers after the big name architects are paid, have gathered their glory, taken their big checks and left.  It is those highly competent, highly talented professionals who deal with the Grand Architect’s ignored steep slope under that proposed building or those planting beds that will block other drivers’ vision of the charming landscaped driveway emptying out onto a major intersection.  

    Ah, little stuff. Who cares?

    If the people who live around a proposed development oppose a development, chances are those people know something that is important to the health of their neighborhood and the larger community. If we think that we know more than to have to listen to them, then we are no better than little Napoleons in big capes, creating monuments to our hubris that our children and grandchildren will have to clean up. The lessons of the damage caused by our ignorance are all around us.


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    Given that no one likes Switzerland’s banks, coo-coo clocks, high prices, smugness, dull cities, cheesy foods, or yodeling, I realize that it is too early to speak politically about “the Swiss Model.” But it needs to be pointed out that while the European Union evaporates and Homeland America goes for broke, the world’s second oldest democracy (1291) has trade and budget surpluses, a multi-lingual population, a green network of trains and buses to every village, excellent public schools, and a federal-style government that is closer to Thomas Jefferson’s America than the bureaucratic monarchy that gives the king’s speeches in Washington.

    Yes, the Swiss recently voted against the construction of minarets (NIMCP or “not in my cow pasture”) and for the eviction of immigrants convicted of serious crimes. (Would you vote “for” protecting the immigration rights of the rapist next door?) But a quarter of the students in Geneva’s public schools are foreign, and—in the age of focus groups and slick pollsters—the democracy remains in the hands of its citizenry, for better or for worse, which every two months votes on the referendums of the critical issues. On this month’s ballot is gun control.

    A mythical Swiss story involves a man on a morning bus, chatting with someone standing near him, exchanging pleasantries about work and the weather, and discovering that his commuting friend is also the president of the Swiss confederation.

    I had a similar experience. I had arrived at the Geneva Press Club on my bike, and discovered that the woman sitting near me was also the president, Micheline Calmy-Rey. To be clear, she was at the front of the room, and I was in the audience. But her unassuming manner was that of a bus commuter, and had she walked into the room unescorted, I would not have marked her as the leader of the country.

    In a way, she is not. To be president of Switzerland is to be the head of a seven person federal council, whose members are apportioned according to the political parties in the parliament. Real power in the country remains vested in the villages and in the twenty-six cantons. Think of the Swiss president as the unlucky committee person who has to keep the minutes.

    After the European revolutions of 1848, Switzerland adopted a federal constitution, in part modeled on the American system, although instead of the imperial presidency (which Jefferson called “a bad edition" of the Polish king), the Swiss went for an executive council. Benjamin Franklin had the same idea earlier for the U.S., but lost out to the more presidential Adams and Madison.

    Each year, the members of Switzerland's federal council draw straws for the presidency and the other executive offices, such as the portfolios for justice, sport, and economics. Technically, the chief executive is composed of the entire collective.

    Recent presidents include Hans-Rudolph Merz and Doris Leuthard (often the Swiss president is a woman). The Merz administration, however, proved the limits of a referendum democracy in the fast-paced, somewhat dictatorial age of globalization.

    From the German-speaking part of the country, and regarded by his critics as a small town politician, Merz had the misfortune to horse trade with Libya’s Muammar el-Qaddafi. The diplomatic row began when Hannibal, the son of the Libyan president, was arrested in a Geneva hotel for having mistreated his servants.

    No one in Geneva doubts that Hannibal Qaddafi’s servants were treated little better than Arab slaves. The staff at the posh hotel reluctantly called the police to intervene. Warming to the Ali Baba-like themes of the crime, the local press published Hannibal’s mug shot, and the crisis was off to the camel races.

    After picking up two Swiss businessmen in Tripoli with expired visas, Father Muammar — Qaddafi, that is — threw them into solitary confinement and vowed to release them only if the Swiss punished the Geneva police, apologized to Hannibal, and groveled inside the colonel’s tent.

    Agreeing to Qaddafi’s terms, because the great Swiss trait is accommodation, Merz flew to Tripoli, thinking he had a Clintonian deal to return triumphantly to Bern with the Swiss hostages.

    Instead, the colonel-for-life lectured Merz on the finer points of visa legislation, and the Swiss president flew back to Bern with only the hostages’ luggage, which had been loaded onto the presidential executive jet. The hostages had to serve humiliating prison terms, and a grateful nation watched Merz retire at the end of 2009. A government of “sapeur pompiers” (volunteer firemen) is not without its comic charms.

    As she was then minister of foreign affairs, Calmy-Rey was not blameless in what the press calls the “Affaire Qaddafi,” but that didn’t prevent her from becoming president this year, her second time in the position.

    At a press conference, she admitted, in so many words, that a rotating federal council perhaps wasn’t the best way to deal with erratic strongmen. Her actual words were much more diplomatic; she suggested that the council had lacked the “resources” to manage the crisis.

    In person, I liked Calmy-Rey much more than I expected. Her image in the press is as a glad-hander, someone unwilling to tell Swiss detractors to stick it. She wore a head scarf to meet Iranian president Mahmoud Ahmadinejad.

    In person she’s thoughtful, well spoken, conversationally direct, up on the details of government, ever-so-slightly humorous, and modest, as if she were mayor of a small commune, which is another way to understand Switzerland.

    I have been in Washington press conferences, and they are like a Versailles levée compared with a Swiss question-and-answer session. Calmy-Rey shared the modest dais with two officials and the head of the press club, as if they were panelists at a Rotary meeting.

    Her formal remarks were confined to a budgetary review of the pluses and minuses of supporting “international Geneva,” the sprawling network of UN-related organizations that have come to roost in the city. At the cost of billions, laid on in office infrastructure and tram lines, the hope is that peace becomes part of the Swiss brand.

    Everyone in the room who wanted to ask a question did, and Calmy-Rey stayed as long as it took to recite the liturgy on Brazilian floods, Middle East protest riots, banking secrecy, bilateral relations with the European Union, Kosovo’s future, nuclear Iran, building plans at the United Nations, Armenia and Turkey, the surplus of the federal budget, and more, until the room felt like a class eager for the break.

    The conference hardly made the daily papers. The only sound bite was her answer to a question about whether the Swiss were prepared to give asylum to the WikiLeaks founder and publisher, Julian Assange. Calmy-Rey gave a broad, politically evasive smile, and said, in somewhat fractured English, “We cannot give what we have not been asked to give.”

    Meaning: Neither Assange personally, nor any government, had approached the Swiss to grant him asylum. If I had to guess, I would say the Swiss would pass on granting asylum to Assange, just to avoid more aggravation with the Americans, who routinely use the Swiss as punching bags on banking secrecy and their nonaligned status in world affairs. In another context Calmy-Rey said, “We know we’re alone,” and that was a weakness in dealing with Qaddafi.

    I found Calmy-Rey realistic and self-effacing on Switzerland’s diplomatic nether world. The country has to straddle “international Geneva” and its many world agencies with another Swiss impulse, which, in the words of George Washington, is to avoid “foreign entanglements.”

    Switzerland has come through the recent economic horrors with its budget in surplus ($3 billion), and without any of the Euro debts that followed the long weekends in Ireland and Greece. Power remains in the cantons and the communes, which decide what to teach in the schools, how much tax to collect, and who lives in the villages.

    Refreshing, as well, is that the Swiss president can travel in a motorcade of one (I noticed that her driver is a woman), if not on the bus. When Calmy-Rey was in her first term as president, my daughter Laura was in high school. One night at dinner she described shopping after school in a discount department store. In the checkout line she stood next to Calmy-Rey, who, by herself, was buying a blouse.

    Photo by Juerg Vollmer; Micheline Calmy-Rey, Zuerich, 2009

    Matthew Stevenson is the author of Remembering the Twentieth Century Limited, a collection of historical essays. He is also editor of Rules of the Game: The Best Sports Writing from Harper's Magazine. He lives in Switzerland.


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    The sensationalist reporting of rising China tends to celebrate the country’s ascent. But there is one area where both economists and casual observers see a potential disaster: the real estate market.  Media reports of skyrocketing housing prices in first tier cities like Beijing and Shanghai and photo essays of Chinese ‘ghost cities’ inject sober skepticism into the otherwise bewildering reality of rapid growth.

    The claims about real estate, however, are as exaggerated as the breathless accounts of the country’s path towards world economic domination. It is absurd to argue that all it will take for China to fall would be a bust in the housing market. In reality, the country has too many economic fundamentals working for this one sector to wreak too much havoc.   

    Above everything, China remains a manufacturing powerhouse, providing the developed world with everything from children’s toys and athletic shoes to iPads and other electronic devices. Yes, the Great Recession did have a negative impact on China’s export business; this is why the Central Government took steps to direct massive amounts stimulus money towards infrastructure and real estate development.

    Far from being limited by exports, China is just beginning to unleash the power of its domestic consumer market. Imported goods (in reality, foreign brands, even if they are manufactured within China) are highly taxed, encouraging Chinese consumers to spend money on cheaper, local brands, thus keeping the money supply circulating through the domestic market.

    Yet this does leave China somewhat subject to real estate speculation. With   limited channels for investment, a risky domestic stock market, and little-to-no interest accrued by holding money in Chinese bank savings accounts, there is, for many individuals, nowhere else to spend their money but in the housing market.

    There are a few other forces at work here as well. Since the Chinese government still technically owns all of the land in the country, real estate developers are given the right to develop land based on a bidding process, with the rights going to the highest bidder. Auctioning of land for development typically happens at the municipal level. Once a developer is awarded the right to develop a piece of land, there is a time limit (usually no more than a few years) before it returns to the hands of the government.

    The purpose of this is two-fold: one is to manage the urban influx of new migrants and also to discourage land speculation by developers. As you can imagine, savvy developers often wait until the last minute to build a project to get the maximum profits from their projects.

    Since income taxes are low by international standards (and easily evaded through the preponderance of ‘grey money’ or hidden income) and property taxes are virtually nonexistent (up until recently at least), land auctioning is by far the largest source of income for local governments. This becomes the main way these governments fund infrastructure and public works projects.

    This same process is happening in cities across China. Why? Quite simply, the demand is there. The booming housing market is a revolution of sorts. This is really the reflection of the emergence of a true Chinese middle-class. The U.S. media, on the other hand, tends to remain focused on a massive China real estate bubble, perhaps as a projection of America’s own recent experience of real estate exuberance.

    Yet there are some major differences. For example, few Chinese purchase homes with little or no money down. Banks are not lending ‘creative mortgages’ such as ARMs to homebuyers. Government measures seek to discourage speculation.

    For instance, Chinese home buyers are limited to purchasing 2 homes and must put at least 30% down for the first home and 60% down for the second home. Investment by foreigners into the real estate market is strictly regulated in order to reduce the amount of ‘hot money’ coming into the country. Non-Chinese citizens are limited to purchase one home only and must hold onto it for 5 years before being allowed to resell it.

    Due to the massive size of China’s population, the majority of homes being purchased are flats in newly-built residential high-rise compounds. The size of these units might be a little too cozy for Americans or even Europeans, but to young Chinese homebuyers (of which most are first-time buyers), it represents an aspiration unimaginable only a few years ago.

    Take 26 year old Mei Li for example: late last year she, an administrative assistant at a construction company, and her husband, an IT professional, bought a home in the fast growing western district of Chengdu, between the 2nd and 3rd Ring Roads. The young couple put a 30% down payment on a 2-bedroom, 80 m² (860 ft²) flat on the 23rd floor of a tower that is part of a brand new residential development.

    At RMB 7,500/m², the total cost of their flat was RMB 600,000 (about $91,000 USD). As required, and with some help from their parents, Ms. Li and her husband put a down payment of 30%, or RMB 180,000, and qualified for a 30-year, 6% fixed-interest home loan from Bank of China. With a combined income ranging from about RMB 8,000-10,000 ($1,200 USD – $1,500 USD) per month, their monthly mortgage payment of RMB 2,500 ($380 USD) is easily manageable.

    Ms. Li and her husband are glad they got in when they did. Even though their new unit won’t be ready for move-in until the end of this year, they have already seen the value of their investment increase by 10%. Located adjacent to a planned stop for an underground metro line currently under construction, the value of their investment is bound to further increase due to its convenient access to public transportation. In the future, taking the subway will be just one of their transportation options as Ms. Li and her husband plan to buy their first car by the end of this year.

    Multiply Mei Li and her husband’s story by the millions and you have a better idea of what is really behind the China housing boom. To be sure, speculation certainly exists, but predominately it is middle-class aspiration that is fueling urbanization.

    In Chinese, the word for ‘family’ and ‘home’ are the same: jia (家). The family is the critical unit of Chinese culture, making ownership of a home a critical priority. For the world, middle-class home-ownership also promotes peace and stability in China, providing the basis for the evolution of a more consumer oriented, less predatory Chinese economy.

    Adam Nathaniel Mayer is an American architectural design professional currently living in China. In addition to his job designing buildings he writes the China Urban Development Blog.


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    Throughout much of history, cities have served as incubators for upward mobility. A great city, wrote René Descartes in the 17th century, was “an inventory of the possible,” a place where people could lift their families out of poverty and create new futures. In his time, Amsterdam was that city, not just for ambitious Dutch peasants and artisans but for people from all over Europe. Today, many of the world’s largest cities, in both the developed and the developing world, are failing to serve this aspirational function.

    Though leading urban theorists love to celebrate the most rarified parts of the city economy—Saskia Sassen refers to “urban glamour zones” that thrive in what New York Mayor Michael Bloomberg proudly calls the “luxury city”—they tend to forget about working- and middle-class residents. Unfortunately, these urban ideas appear to be contagious, as they’re being applied to the expanding cities of Asia and other developing regions. A recent World Bank report argued that large urban concentrations—the denser, the better—are the most prodigious creators of opportunity and wealth. “To spread out economic growth,” the report claimed, is to discourage it.

    A closer look, however, suggests a more nuanced reality. Cities in the developing world are growing, but largely because they’re the only alternative to poverty and even starvation in the countryside. These cities are not only failing to provide opportunities for upward mobility; they’re producing the class inequalities found in “luxury cities” such as London and New York.

    Once rigidly egalitarian, China now has some of the world’s highest rates of income inequality. The central cores of Beijing and Shanghai employ legions of well-paid European and American architects and planners, but few concern themselves with the camps inhabited by poor, often temporary workers, who constitute roughly one-fifth of the population and live in conditions more reminiscent of a Brazilian favela than an “urban glamour zone.”

    This same stratification is also happening in India. Mumbai, one of the fastest-growing cities, is creating wealth at the top of the economic spectrum but leaving millions of others scrambling for mere subsistence. The New York–based author Suketu Mehta has described his hometown of Mumbai (formerly known as Bombay) as “an urban catastrophe,” an example of the mounting woes of rapidly expanding cities in the developing world. “Bombay is the future of urban civilization on the planet,” he wrote. “God help us.”

    A majority of Mumbai’s population now lives in slums, up from one-sixth in 1971—a statistic that reflects a lack of decent affordable housing, even for those gainfully employed. Congested, overcrowded, and polluted, Mumbai has become a difficult place to live. The life expectancy of a Mumbaikar is now seven years shorter than an average Indian’s, a remarkable statistic in a country still populated by poor villagers with little or no access to health care.

    In spite of World Bank proclamations, the most rapid urban growth in India is actually occurring in smaller, less dense cities, such as Bangalore and Ahmedabad, places with lower living costs and more business friendly governments. This mirrors a trend occurring in the United States. In the last decade, middle-income people have been moving out of our megacities. Between 2000 and 2008, according to the demographer Wendell Cox, regions of more than ten million people suffered a 10 percent rate of net domestic out-migration. (Often the only reason for population growth in these cities was immigration.) The big gainers were cities between 100,000 and 2.5 million residents: the business-friendly Texas cities Dallas, Houston, and San Antonio; Raleigh and Durham, North Carolina, which now form the fastest-growing metro area in the nation; and the heartland cities of Columbus, Indianapolis, Des Moines, Omaha, Sioux Falls, and Fargo.

    One reason for this movement has been the shift of jobs away from the coasts to lower-cost, less dense cities. The fastest growth in middle-income jobs has been concentrated in many of the places listed above: Houston, Dallas, Austin, Raleigh-Durham, and Salt Lake City. This pattern also includes high-tech, science-oriented employment. In contrast, those jobs have been stagnant or shrinking in such cities as New York, Los Angeles, San Francisco, and Chicago.

    As a result, America’s largest cities are increasingly divided into three classes: the affluent, the poor, and the nomadic class of young people who generally come to the city for a relatively brief period and then leave. New York, the aspirational city of my grandparents, now has the smallest share of middle-income families in the nation, according to a recent Brookings Institution study, with Los Angeles and San Francisco not far behind. In 1980 Manhattan, New York’s wealthiest borough, ranked 17th among U.S. counties for social inequality; by 2007 Bloomberg’s “luxury city” was first, with the top fifth earning 52 times the income of the lowest fifth, a disparity roughly comparable to that of Namibia.

    Similar patterns can be found in Europe, despite its countries’ more developed welfare states. The U.K. has witnessed a relentless centralization of urban functions in London, as once proud cities such as Manchester, Liverpool, Glasgow, and Birmingham have continued their long slide into obscurity and irrelevance. The bulk of London’s growth, however, has not taken place in the central core but in what the historian James Heartfield calls “the greater southeast.” This vast “conurbation” stretches from west of Heathrow Airport to the booming coastal city of Brighton, roughly an hour’s train ride from the“ city center.

    As the middle class has decamped, central London has become more stratified. Residents and workers there and in the West End account for some of the most concentrated wealth on the planet. At the same time, prospects for London’s middle class have weakened, with many fleeing to the suburbs or even leaving the country. (Britain remains a large exporter of educated workers to the rest of the world.) The major issue here is the high cost of housing. Even in its poorest neighborhoods, London now ranks as one of the most unaffordable places for middle-income people to buy a home.

    Still, life is much tougher for the city’s poor, many of whom live less than an hour’s walk from the wealthiest neighborhoods. Take a stroll just a mile or two from the Thames and you enter a very different London. It is here where you’ll see why the financial capital of the European Union also has the highest incidence of child poverty in Great Britain (more even than in the beleaguered North East). Thirty-six percent of children in London live in poverty, a figure that rises to more than one-half when the city’s housing costs are factored in.

    The same split has emerged in other countries considered far more open than class stratified Britain. A recent University of Toronto study found that between 1970 and 2001, the portion of middle-income neighborhoods in the city had dropped from two-thirds to one-third; poor districts had more than doubled to 40 percent. By 2020, middle-class neighborhoods could fall to less than 10 percent, with the balance made up of poor and affluent residents.

    Much the same can be seen in continental Europe, a trend greatly exacerbated by the growth of immigration. Unlike Amsterdam in Descartes’s time, Europe’s great cities are failing in their historic mission of incorporating newcomers, as German Chancellor Angela Merkel recently conceded. In Berlin, one fourth of the workforce earns less than 900 euros a month, while 36 percent of children are poor. The city once known as “Red Berlin” has emerged as “the capital of poverty and the ‘working poor’ in Germany,” Emma Bode, a left-wing journalist, wrote in 2008.

    Given these global realities, it might be time for our urban boosters to curb their enthusiasm for the “luxury city” and refocus on how to meet the aspirations of their middle- and working-class residents. If they don’t, lack of opportunity will drive more and more of this crucial aspirational class farther and farther away, mostly to smaller cities and suburbs that still offer “an inventory of the possible.”

    This piece originally appeared in Metropolis Magazine.

    Joel Kotkin is executive editor of NewGeography.com and is a distinguished presidential fellow in urban futures at Chapman University, and an adjunct fellow of the Legatum Institute in London. He is author of The City: A Global History. His newest book is The Next Hundred Million: America in 2050, released in February, 2010.

    Photo by Premshree Pillai


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    The White House remedies for the mortgage meltdown were presented on Friday. Congress will debate the life extension, death, or rebirth of federal mortgage entities Fannie Mae and Freddie Mac during the coming weeks.

    When the noise has died down, don't expect substantial change. But those who hope for genuine financial reform should, nonetheless, listen carefully not only to what Washington says, but to whom it says it. Will the new guidelines call on traditional home-loan bankers to make traditional loans? Or will we hear a shout-out to the investment bankers/mortgage traders who designed the mess?

    In any new financial structure for home loans, the single most important issue will be the ratio of debt to assets that the government will expect lenders to show.

    During the real estate boom, lenders were willing — and able — to provide mortgage brokers with financing for 100 percent or more of the value of a property with the expectation that real estate prices would rise. We witnessed the triumph of the trader over the banker: Profit relied on the sale or refinancing of the asset. For a mortgage originator or securitizer with no plans to hold on to the mortgage, what really matters has been the ability to place it, not the depth of the underwriting or the long-term financial prospects of the home resident.

    A traditional banker, on the other hand, might feel safe with a capital leverage ratio of twelve to one, with careful underwriting to ensure that the borrower would be able to make payments. With equity at risk, something close to that level of underwriting would be essential.

    The trader-think model virtually eliminated mortgage underwriting. What we saw instead has been succinctly described by L. Randall Wray in a Levy Institute Brief: "Property valuation by assessors who were paid to overvalue real estate, credit ratings agencies who were paid to overrate securities, accountants who were paid to ignore problems, and monoline insurers whose promises were not backed by sufficient loss reserves…" Much of the activity didn't even appear on the balance sheets. Mortgage brokers arranged for finance, investment banks packaged the securities, and the shadow banks — the managed money — held the securities.

    The debt to assets ratios for mortgages climbed. Investment bankers consolidated their liabilities into a single financial market that could have been called the Mortgages & More Shoppe. Mortgage-backed securities were included with commercial banking, and with other financial services where acceptable capital leverage ratios are much higher than for traditional home loans. (For money managers, capital leverage ratios can be 30 to 1 and up to several hundred, with even higher unknown and unquantifiable risk exposures.)

    Income flows took a backseat. Except for the home resident, that is. Because ultimately, all of these financial instruments came to rest on the shoulders of some homeowner trying to service her mortgage out of annual income flows which boiled down to, on average, five dollars worth of debt and only one dollar of income to service it.

    "In an ideal world," Wray added, "A lot of the debts will cancel, the homeowner will not lose her job, and the FIRE (finance, insurance, and real estate) sector can continue to force 40 percent of… profits in its direction. But that is not the world in which we live. In our little slice of the blue planet, the homeowner missed some payments, the securities issued against her mortgage got downgraded, the monoline insurers went bust, the credit default swaps went bad when AIG failed, the economy slowed, the homeowner lost her job and then her house, real estate prices collapsed, and, in spite of its best efforts to save [the system], the federal government has not yet found a way out of the morass."

    Whatever the fate of Fannie Mae and Freddie Mac, the coming federal recommendations need to lift underwriting standards up from that morass and back onto solid ground. According to January's Financial Crisis Inquiry Commission report, about 13 million US homes have already or will soon face foreclosure. The investment bank traders who securitized those mortgages, with a few notable exceptions, have overwhelmingly escaped such suffering. Financial reform should change that equation by demanding a traditional, appropriate ratio of assets to debts in the real estate markets.

    Dimitri B. Papadimitriou is President of The Levy Economics Institute of Bard College. He recently co-edited, with L. Randall Wray, The Elgar Companion to Hyman Minsky. He blogs at Multiplier Effect.

    Photo by Foxtongue


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