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There Are No Writers Here

Tue, 04/26/2016 - 22:38

I’ve long noted that the civic identity or culture of many places seems to be a cipher. What is our identity as a city? is a question frequently asked. And one that needs to be. Cities will succeed best when they undertake policies that are true to the place. To most successfully build or rebuild a place, it’s important to articulate that civic identity and work with it, not against it.

Of course some of that happens by the very fact that the people who live in a place are steeped in its culture. But a lack of self-awareness can be a big liability. As the Greek oracle noted, the first call is to “Know Thyself.”

But this is hard to do, both for people and places. It’s hard to give a succinct description of the culture of say Cleveland, Columbus, or Cincinnati, but visitors to those cities will be instantly struck by how starkly different they are.

To unearth and understand the culture and identity of a place requires going on an anthropological or archeological mission deep into the soil of a city, with a proper balance of affection and detachment.  This takes time to do, and a lot of my own writing on various places would certainly be much better if I had time to embed in them and understand them more deeply.

One big advantage larger cities have is that they have a much larger supply of journalists and writers than smaller ones, and these are the very people who are most likely to investigate, unearth, and articulate that culture.

New York in an embarrassment of riches in this regard. Practically every day someone is writing something interesting about the city. Just today, for example, City Journal published a piece about the layers of New York history represented in Straus Park. And Urban Omnibus had one about finding New York in West Side Story.

Back when the mega-bookstore chains were still going strong, I always liked to visit one when I came to a city, and go to the “local interest” section. In too many places, the titles on offer were pathetic. A number of large cities don’t even seem to have one high quality history on offer.

The biggest cities, by contrast, had sections that were disproportionately large even relative to their larger population. There have been a massive number of great books written about Chicago, for example, and the Chicago section in the old downtown Borders was correspondingly huge.

You can learn a lot about a city just by taking a look at the local interest section in a bookstore.

Unfortunately, just when this kind of writing is greatly needed, the number of people who might be writing it have been shrinking.  Nieman Lab just published an article talking about the increasing concentration of media in New York, DC, and Los Angeles, noting, “[T]he increase in concentration is unmistakable. Journalism jobs are leaving the middle of the country and heading for the coasts.”

What reporting remains is often done by inexperienced reporters with little tie to a community. Chains like Gannett seem to deliberately practice rotating reporters and even columnists from city to city, preventing them from really getting a place. Few of them have any real knowledge of even fairly recent history.

Perhaps unsurprisingly, when you do go looking for books about smaller (but often still sizable) places, you can sometimes find books that are collections of pieces from long gone columnists.

There has been a ton of money and effort poured in supporting artists and other “creative class” type endeavors in cities, but remarkably little financing of high quality writing about cities, their past, and their culture.

By its very nature this work is often very time consuming and with limited, highly localized market appeal. It can require a ton of research. Unsurprisingly, a lot of the best of it is produced by writers who take it on as a side project while doing their “day job.”  Writers are often almost compelled to write, after all. For example, my colleague Stephen Eide typically writes studies about municipal finance, but also wrote an essay about the Lorelei fountain commemorating Heinrich Heine in the Bronx.

Cities without a large resident base of writers are at a disdvantage here. And it appears to be growing by the day, yet another example of the bifurcation of society.

This particularly local concern that is highly unlikely to be produced by the market is one local philanthropists will need to take on if they wish to fill this gap.  It is perhaps hyperbole so that that there are no more writers in these cities, but there certainly aren’t enough of them.

This piece first appeared at Urbanophile.com.

Aaron M. Renn is a senior fellow at the Manhattan Institute, a contributing editor of City Journal, and an economic development columnist for Governing magazine. He focuses on ways to help America’s cities thrive in an ever more complex, competitive, globalized, and diverse twenty-first century. During Renn’s 15-year career in management and technology consulting, he was a partner at Accenture and held several technology strategy roles and directed multimillion-dollar global technology implementations. He has contributed to The Guardian, Forbes.com, and numerous other publications. Renn holds a B.S. from Indiana University, where he coauthored an early social-networking platform in 1991.

Paris: Are the Banlieues Still Burning?

Sun, 04/24/2016 - 22:38

Press coverage of the recent European violence often draws a line from the Arab slums around Paris to the violence that has recently engulfed Brussels and Paris. According to this theory, Arab refugees from Morocco and Algeria, and, more recently, Syria, who have settled on the impoverished outskirts of Paris, are to blame for the terrorist attacks because France and Belgium have been reluctant to assimilate Arabs into their European cultures. And youth unemployment rates in the banlieues -- suburbs -- of Paris and Brussels are, indeed, more than fifty percent in some districts. Is it any wonder, the thinking goes, that disaffected Arabs have taken to fitting themselves with suicide vests, or spraying AK-47 bullets into crowded cafés?

Living on the Swiss border with France, and spending many days each year in France, I have long heard these urban-decay theories of political violence. I decided to investigate the link between unassimilated Arabs in the banlieues and the violence that has shaken Europe.

I made the trip in March with my bicycle, so that I could easily get around such notorious suburban ghettos as Clichy-sous-Bois and Le Blanc-Mesnil.

I couldn't see every street or every crumbling apartment complex in the banlieues, obviously, but I did cover a wide swath of the Paris exurbs. And I tracked a course that, at least during the 2005 riots, would have followed the smoke of burning tires.

I include the above qualifier because many friends (most, I would say, have never explored the suburbs on a bike) don’t believe my conclusions, which are that the banlieues are not nearly as desperate on the ground as they are on television reports.

Especially after a terrorist incident, local media will invariably show pictures of dilapidated high-rise apartment buildings on the edges of Paris, and action shots of the police dragging suspected terrorists from these underworlds. The causes and effects would seem clear. But my observations led to conclusions that question that French connection.

Setting out from the Chelles train station, I had expected to come across 1970s-era South Bronx-like slums, only with an Arab motif. But as I rode through many Islamic neighborhoods, what surprised me is how different the banlieues are from the violent shadows on the evening news.

In those dispatches, the suburbs might well be an Arabic Calcutta.

Instead I found the these areas to be in the midst of urban renewal. Where ten years ago there were overturned cars and burning tires, I came across rows of working class houses (most well kept) and some new strip malls. On many corners there were the outlets of national franchises—as many McDonalds as mosques.

Clearly, France has spent millions in the banlieues; think of the construction that went on in American cities after the urban riots of the 1960s. The French government has replaced some of the post-war, high-rise towers of despair with smaller scale apartment buildings, what American city planners call “scatter-site housing.” Clearly, the sociologists have come to have more sway than the civil engineers.

Not every street I went down in places like Sevran or Aulnay-sous-Bois looked like a contemporary planner's urban-renewal model. But more than I expected did.

So why has the violence moved from the halal shops in Clichy-sous-Bois to the Boulevard Voltaire in Paris?

Most articles about terrorist violence in France and Belgium make the point that Arab immigrants have yet to be integrated into local culture. Social isolation remains one of the possible causes of the new urban wars, and it is well documented in many descriptions of Arab culture in Europe.

Left out of these explanations for the Paris or Brussels violence is the extent to which an existing criminal underclass has committed itself to Islam, and not the other way around.

According to some candidates in the American presidential election, the European bombers and attackers are the kamikaze of a new religious order, taking their orders from the ISIS central command in Raqqa in the east Syrian desert.

It is true that many of the attackers have had the support of military planners, such as those from Saddam’s Baathist officer caste, who were ostracized when the US invaded Iraq.

But the aspect of the attackers that never gets on the evening news is the extent to which many of the bombers embraced Islam only after lives of petty crime, if not debauchery, in the same clubs they are now attacking.

The killers failed at school, in after-school programs, and at various low-level jobs, only to find the warm embrace of a prison imam speaking of injustices done to co-religionists on the Syrian frontier.

These rebels finally had a cause, however distant it was from their lives of street crimes. Their route to eternity, however, only passed through Raqqa by chance and convenience, not by providential design.

While I was in Paris, I made it a point to bicycle over to all of the sites that were attacked on November 13, and to the site of the earlier shootings at the magazine Charlie Hebdo.

I thought that by riding the stations of such a sad cross I might get some insight into what had motivated the killers.

The editorial offices of Charlie Hebdo have moved from the location of the attack. But on the side of the old building, a portrait of the slain editor, Stéphane Charbonnier, has been drawn. Of earlier threats he said: “I would rather die standing than live kneeling.”

The mournful side street near the center of the Paris gives no clue as to how the French rank the importance of press and religion in the hierarchy of its political freedoms. Would France feel the same about Charlie Hebdo if it had attacked Judaism as it did Islam?

Around the corner is the Bataclan nightclub, where almost 100 young French concertgoers were shot down in cold blood. Some flowers were propped against the closed doors. Otherwise, the pagoda-shaped building had the look of a failed theater, down and out in the latest economic depression.

Standing in front of the killing zone, I envisioned the Bataclan assassins less as holy warriors—jihadis on their way to martyrdom—and more as street thugs or contract hitmen.

Looking at the bullet holes in the plate glass windows of the nightclub, plus at some nearby cafés, I saw the gunmen as absent of any ideas or ideals. I thought more about Baby Face Nelson and the Dillinger gang (sometimes called the Terror Gang), with their running boards and machine guns, than I did about what candidate Ted Cruz calls “radical Islamic terrorism.”

I grant you that the killers were Muslim and that many had roots in the Paris suburbs, but I don’t think the poverty of the banlieues alone explains why anyone would attack a nightclub with automatic weapons, any more than crop failures in Sicily or Catholicism explain the violent rubouts committed by the mafia in the last 100 years.

Matthew Stevenson, a contributing editor of Harper’s Magazine, is the author, most recently, of Remembering the Twentieth Century Limited, a collection of historical travel essays, and Whistle-Stopping America. His next book is Reading the Rails. He lives in Switzerland.

Photo of the Bataclan nightclub in Paris by the author.

Where Millionaires Are Moving

Fri, 04/22/2016 - 22:38

In this oligarchic era, dominated as never before in modern history by the ultra-rich, their movements are far more than grist for gossip columns. They are critical to the health of city economies around the world.

recent study by the consultancy New World Wealth traces this movement globally, identifying the big winners and losers in millionaire migration. It defines millionaires as those with net assets of at least $1 million outside their personal residence – generally, people with sizable investment capital or their own businesses.

Among the countries that saw the largest outflows in 2015 are two where property rights are not the most secure: Russia and China. China ranks second in net outflows (-9,000) and Russia sixth (-2,000).

Another big factor: public safety. France lost an estimated 10,000 net affluents last year, many of them after the terrorist attacks, the largest outflow of any country, according to New World Wealth. Other big losers were struggling economies, including hard-hit Italy and Greece. In fourth place is India, a country that has exported its wealthy around the world for generations.

The country that was the biggest landing pad for the wealthy last year was Australia, gaining a net 8,000 millionaires. The country is popular most notably with Chinese investors as well as those from other Asian countries. In second place was the United States (7,000), followed by Canada (5,000) and, surprisingly, Israel (4,000). The United Arab Emirates (3,000) and New Zealand (2,000) round out the top six.

Favorite Cities Of The Affluent

Zooming in to the city level, the flows are a bit more surprising. The biggest winners are not the elite global cities, like New York or London, but ones that are comfortable, and boast pretty settings and world-class amenities. The leading millionaire magnets in 2015 were Sydney and Melbourne, gaining 4,000 and 3,000 millionaires, respectively, many from China. In third place is Tel Aviv, a burgeoning high-tech center which is attracting Jews fleeing Europe, notably from France.

Dubai ranks fourth, luring many Middle Easterners seeking a safer, cleaner business locale. Then comes a series of some of the most attractive cities on the planet, including Seattle (seventh) and Perth (eighth). In many cases these cities are gaining from “flight capital” from Asia and the Middle East.

London, long considered a primary haven for the mobile rich, actually lost a net 500 millionaires in 2015. Many, according to the study, are moving to other parts of the United Kingdom, often the countryside, or to other English-speaking countries.

But the biggest losers by far were declining first-world cities, many of which have never fully recovered from the 2007 financial crisis. These include Paris, which saw a net outflow of 7,000 millionaires, the most in the world. Not surprisingly, many of the exiting Parisians are Jewish, and many are headed to Israel. There are widespread reports that more of that city’s estimated 350,000 Jews may also be considering an exit. Overall migration from France to Israel rose in 2015, with 7,469 leaving for the Jewish State, up from 6,658 in 2014 and 3,263 in 2013.

Elsewhere in Europe, Rome lost 5,000 and Athens 2,000 amid poor economic conditions and perilous fiscal situations in their countries.

Chicago lost 3,000 millionaires in 2015. Although the city continues to attract top-drawer corporate headquarters and luxury housing, the city’s economy is far from thriving, and there is growing concern about a rise in crime rates and growing racial tensions. Unlike other exiting millionaires, who often change countries, most of those leaving Chicago headed to other parts of the U.S.

Why It Matters

The movement of wealthy people matters increasingly in globalized societies, which allow money and ideas to relocate with relative ease. Investors, entrepreneurs and innovators are extraordinarily mobile by nature. They also bring with them capital, connections and tax revenues that are then lost to their former host countries and cities. There is also an employment impact. New World Wealth estimates that 30% to 40% of the millionaires they have tracked are business owners.

Keeping the rich and luring more is a priority now widely embraced by many urban developers and politicians. Former New York Mayor Michael Bloomberg has suggested that today a successful city must be primarily “a luxury product,” a place that focuses on the very wealthy whose surplus can underwrite the rest of the population. “If we can find a bunch of billionaires around the world to move here, that would be a godsend,” Bloomberg, himself a multi-billionaire, said toward the end of his final term. “Because that’s where the revenue comes to take care of everybody else.”

This reliance on the rich, notes a Citigroup study, reshapes urban economies, not always for the best. Their presence creates an urban employment structure based on “plutonomy,” an economy and society driven largely by the wealthy classes’ investment and spending. A 2014 Brookings report found that virtually all the most unequal U.S. metropolitan areas – with the exception of Atlanta and Miami — areas are luxury-oriented cities including San Francisco, Boston, Washington D.C., New York, Chicago and Los Angeles. Although the number of high-wage jobs has increased in these places, much of the new employment has been in low wage service jobs. As urban studies author Stephen J.K. Walters notes, these cities tend to develop highly bifurcated economies, divided between an elite sector and large service class. “This,” he notes, “is the opposite of [Jane] Jacobs vision of cities that as places that are “constantly transforming many poor people into middle class people.’ ”

One clear effect is on housing prices, which have shot up precisely in those places now favored by the rich. Perhaps the most obvious case is Vancouver, where the inflow of predominately Chinese investors has helped make the Canadian city among the most unaffordable in the world, with median home prices breaking the million-dollar mark.

Yet if the presence of the rich creates more inequality, their departure could also have some nasty effects. The movement for example of one billionaire — hedge fund manager David Tepper — from New Jersey to Florida could leave the Garden State with a $140 million hole just from his change of address. Overall New Jersey depends for 40 percent of its revenue of income taxes, one-third of which is paid by the top 1 percent of the population.

Such movements could become more common, as affluent people look for more relaxed and less heavily taxed communities to settle in. A 2016 study by Phoenix Marketing International found that the fastest-growing millionaire populations in the country are not in big luxury cities but smaller towns like Mount Airy, N.C.; Cookeville, Tenn.; and Kalispell and Bozeman, Mont.

Despite this year’s campaign rhetoric, the influence of affluent migration is likely to become greater in the years ahead. The number of American households with assets of $1 million or more, not including their primary residence, increased 3 percent last year to 10.4 million, according to Spectrem Group, a market research and consulting firm. Meanwhile, the number of American households worth $25 million or more has grown 73 percent since 2008, compared with growth of 54 percent for millionaire households.

For communities around the world the choice is increasingly a Hobbesian one. Attract more of the wealthy to town, and see housing prices soar beyond the reach of the middle class, or push the rich away, and live with the likely loss of jobs, tax revenues and businesses. In a world dominated by oligarchy, these are the realities which countries and cities now have to confront.

This piece first appeared in Forbes.

Joel Kotkin is executive editor of NewGeography.com. He is the Roger Hobbs Distinguished Fellow in Urban Studies at Chapman University and executive director of the Houston-based Center for Opportunity Urbanism. His newest book, The Human City: Urbanism for the rest of us, will be published in April by Agate. He is also author of The New Class ConflictThe City: A Global History, and The Next Hundred Million: America in 2050. He lives in Orange County, CA.

Sydney photo by Christopher Schoenbohm.

Coastal California Getting Older, Not Bolder

Thu, 04/21/2016 - 22:38

For the better part of a century, Southern California has been seen as the land of surfers, hipsters and youthful innovators. Yet the land of sun and sea is becoming, like its East Coast counterpart Florida, increasingly geriatric.

This, of course, is a global and national phenomenon. From 2015-25, the number of senior-headed U.S. households, according to the Joint Center on Housing Studies at Harvard University, will grow by 10.7 million, compared with 2.5 million households headed by people ages 35-44.

After some delay, this aging process is accelerating in California. Large-scale immigration, which supplied a younger population for decades, is slowing markedly. Once considerably younger than the country, the state appears to be heading toward the national median age. Since 2000, the senior population in Southern California has grown by 24 percent compared with 18 percent nationally. Unless immigration or domestic migration pick up soon, this aging trend should accelerate.

At the same time, our analysis shows that some areas – notably along the Orange County coast – are rapidly becoming virtual retirement communities, with a diminishing number of children and young families. For those sitting in their houses in affluenza-afflicted enclaves of Southern California, this may seem good news: “aging in place” while their homes increase in value. But this trend is less a boon for younger people, particularly families, as well as for companies seeking to launch and expand here.

Read the entire piece at The Orange County Register.

Joel Kotkin is executive editor of NewGeography.com. He is the Roger Hobbs Distinguished Fellow in Urban Studies at Chapman University and executive director of the Houston-based Center for Opportunity Urbanism. His newest book, The Human City: Urbanism for the rest of us, will be published in April by Agate. He is also author of The New Class ConflictThe City: A Global History, and The Next Hundred Million: America in 2050. He lives in Orange County, CA.

Wendell Cox is principal of Demographia, an international pubilc policy and demographics firm. He is a Senior Fellow of the Center for Opportunity Urbanism (US), Senior Fellow for Housing Affordability and Municipal Policy for the Frontier Centre for Public Policy (Canada), and a member of the Board of Advisors of the Center for Demographics and Policy at Chapman University (California). He is co-author of the "Demographia International Housing Affordability Survey" and author of "Demographia World Urban Areas" and "War on the Dream: How Anti-Sprawl Policy Threatens the Quality of Life." He was appointed to three terms on the Los Angeles County Transportation Commission, where he served with the leading city and county leadership as the only non-elected member. He served as a visiting professor at the Conservatoire National des Arts et Metiers, a national university in Paris.

"Senior Citizens Crossing" photo by Flickr user auntjojo.

Would Reaganomics Work Today?

Wed, 04/20/2016 - 22:38

The key drivers that propelled the Reagan economy are now tapped out or out of favor.

The name of Ronald Reagan is frequently evoked by the current contenders to the GOP nomination. Donald Trump speaks admiringly of the 40th President of the United States and uses a truncated version of his 1980 campaign slogan “Let’s Make America Great Again”. Ted Cruz promises to implement Reagan’s solution of lower taxes, lower regulation and a stronger military. Before he bowed out recently, Marco Rubio was equal in his praise. And John Kasich stakes an even more tangible claim by reminding us that he is the only candidate who actually worked with Reagan.

But if Reagan’s economy is something we can reproduce, we should first understand the most important drivers of that economy. Arthur Laffer, the father of supply-side economics, said in 2006 that the four pillars of Reaganomics were sound money, low taxes, low regulation and free trade. In addition to these four, we add our own two which are more contextual enablers than proactive policies: demographics and innovation. It is our contention that the first four would not have succeeded without the last two.

Demographics: Reagan’s time in office coincided with powerful demographic tailwinds, namely a strong decline in the dependency ratio (DR), an accelerated rise in the American work force, and a rich demographic dividend. The dependency ratio (red line in the first chart below) is the ratio of dependents to workers, calculated as the sum of people aged less than 20 and over 64 divided by the number of people aged 20-64. When the US total fertility rate (TFR, the average number of children per woman) declined from 3.5 children per woman in 1960 to less than 2 in 1975, the dependency ratio followed with a lag, falling from 0.9 in 1970 to 0.76 in 1980, 0.70 in 1990 and 0.66 in 2010.

Under the right conditions when the dependency ratio falls, the economy can reap a demographic dividend. With fewer dependents, households are able to divert more of their income toward discretionary spending, savings and investments, helping create more innovative companies that in turn boost the incomes of households. That is more or less the dynamic that propelled the US economy during the 1980s and 1990s.

Looking at the future now, the dependency ratio bottomed in 2010 and is set to rise again from 0.66 in 2010 to 0.71 in 2020 to 0.83 in 2035. This increase is due mainly to the aging of the population and the increased number of dependents aged 65 or over. It is essentially a reversal of the powerful dynamic that benefited the economy in the 1980s and 1990s. The demographic tailwinds seen during the Reagan presidency have turned into headwinds.

In the second chart, we can see that the size of the US population aged 20-64 (red line) rose strongly from 1970 to 2015 and will level off and rise more slowly from here on. The population aged 30-59 (blue line), arguably the most productive and highest-earning and highest-spending segment, rose strongly starting in 1980 and flattened out around 2010. So here again, the two Reagan terms benefited from a rapid increase in the size of the work force. Clearly the most favorable period, the one with the highest acceleration, was from around 1983 to 2000, matching the economic boom of the Reagan to Clinton years.

Note in passing that a similar chart for Europe, America’s top trading partner, shows an even more troubling picture. Excluding eastern Europe and Russia (red line below), the population aged 20-64 will fall from a peak of 267 million in 2010 to an estimated 232 million in 2050. Including eastern Europe and Russia, it will fall from 459 million to 370 million.

(the charts above were derived by populyst from data produced by the UN Population Division).

Innovation: Reagan came to office at a time of great innovations in computer technology. Innovation was then and remains now one of the most potent drivers of the economy. We have every reason to hope that America will remain as innovative as it was in the past. But the rate of innovation will certainly suffer if skilled foreign professionals are unable or unwilling to come and work in the United States because of more restrictive visa or residency policies.

Interest Rates: Reagan started his first term with very high inflation and interest rates. Both started to decline during his presidency, helping stabilize and grow the economy and boosting the stock market. But we now face the risk of deflation. And interest rates are at rock bottom. As shown in the chart below from Goldman Sachs, the 10-year US Treasury yield was near 16% when Reagan took office and it is now at 2%, near all-time historic lows. Real rates are still negative and the Federal Reserve has few options left in its efforts to stimulate the economy through monetary policy.


(click image to enlarge)

Taxes: It is true that President Reagan enacted important tax cuts but these cuts came at a time when the marginal income tax rate was much higher than it is today. The chart below from the Tax Foundation shows that the top rate in 1980 was 70% and is now 39.6%.

The top corporate income tax rate was 46% in 1981 vs. 35% today. And the top rate for long-term capital gains was 28% vs. 20% today (plus a 3.8% Medicare tax since 2013).

Reagan’s tax cuts came at a time when spending on entitlement was relatively small compared to what it will be in the years ahead. Even at current levels of taxation, the federal budget deficit is expected to start rising again due to additional spending on old-age entitlements. The Congressional Budget Office predicts an expansion in the deficit from $439 billion in 2015 to $810 billion in 2020 and $1,226 billion in 2025. (see pages 147-149 of this CBO publication.)

And as shown in the chart below from the St. Louis Fed, the federal debt is now much higher at over 100% of GDP, vs. 31% when Reagan took office.

It seems clear therefore that there is not as much scope for cutting taxes in the current environment as there was in the early 1980s. Unless accompanied by other changes, implementation of a flat tax or general cuts in tax rates are likely to increase the debt and deficit beyond the already high projections.

Free Trade: Opening new markets and lowering trade barriers were cornerstones of US policy in the 1980s and 1990s. If today European demand is slackening and China is entering a slower period, there could be new markets for US exports in the Asian and African frontier markets that are experiencing a demographic boom. Expanding trade to these new markets would spur new demand for American goods.

But free trade is now under attack from parties who argue that too many American jobs have gone abroad to China, Mexico and others. The presidential primaries have shown so far that a non negligible segment of the American electorate has been receptive to this argument. This means that the openness of free trade could in coming years be slowed or indeed reversed.

Adding it all up, the table summarizes the scope for success of Reaganomics today vs. in 1981.

Hoping for a replay of the Reagan years through action on the same economic levers will most likely result in disappointment. Leading 2016 candidates have expressed hostility towards free trade and have called for restrictions on all forms of immigration. In addition, the underlying context is now less conducive to growth than it was in 1981.

Nonetheless, another component of the Reagan formula was a healthy dose of optimism. Economic prospects seemed insurmountable in 1981 but the ensuing boom surpassed expectations. The US economy remains flexible and innovative and will find a way to muddle through until contextual factors improve and higher growth returns.

Sami Karam is the founder and editor of populyst.net and the creator of the populyst index™. populyst is about innovation, demography and society. Before populyst, he was the founder and manager of the Seven Global funds and a fund manager at leading asset managers in Boston and New York. In addition to a finance MBA from the Wharton School, he holds a Master's in Civil Engineering from Cornell and a Bachelor of Architecture from UT Austin.

Photo by White House Photographic Office - National Archives and Records Administration

Millennial Home Ownership: Disappointment Ahead in Some Places?

Wed, 04/20/2016 - 04:38

Millennial renters overwhelmingly plan on buying their own homes, though affording them could be far more challenging than they think. This is an important conclusion from a renters’ survey by apartmentlist.com, an apartment search website (See: The Affordability Crisis: Are Millennials Destined to be Renters?). Apartmentlist.com matched results from its own survey of prospective renters that visit its site with housing market data from more than 90 metropolitan areas around the country, The most revealing finding:  Millennials intend to purchase their own homes, but that housing affordability is the greatest barrier. According to apartmentlist.com, the problem is the greatest on the West Coast, New York and Miami (See Figure “% of Millennial Renters that Can’t Afford to Buy”, from apartmentlist.com):

In nearly all the metros we looked at, affordability was the #1 reason for delaying homeownership, but millennials on the west coast struggled the most: Portland, San Diego, Seattle, Los Angeles, and San Francisco all had more than 80% of renters listing affordability as a concern. Miami and New York, expensive metros with many cost-burdened renters, were #6 and #7 on the list.

Perhaps surprisingly, two metropolitan areas that have been among the greatest beneficiaries of the housing affordability driven net domestic migration from coastal California, Portland and Seattle, scored the worst on affordability as a barrier to purchasing homes (90 percent and 89 percent respectively). These areas were once much less expensive in the past, but are rapidly catching up with California in terms of unaffordability.

The Preference for Home Ownership

The apartmentlist.com survey found that 79 percent of Millennials eventually plan to become home or apartment owners, while only six percent expect to rent for their whole lives. The balance (15 percent) are not sure. This 79 percent preference for home ownership is well above the current homeownership rate of approximately 64 percent.

The preference for home ownership was pervasive in the apartmentlist.com data. Among the 50 metropolitan areas with more than 1,000,000 population, none scored below two thirds (67 percent) in Millennial home ownership preference. This is, again, above the national home ownership rate. The lowest home ownership preference among these was in Las Vegas. The highest preference for home ownership was in Rochester, at 94 percent. Charlotte and Salt Lake City also scored a 90 percent home ownership preference.

Millennials indicated a strong preference for home ownership even in metropolitan areas that have depressed home ownership rates. In 2015, Los Angeles had the lowest home ownership rate of any major metropolitan area, at 49 percent, yet 76 percent of the area’s Millennials intend to own their own homes. In New York, with only a 50 percent homeownership rate, 74 percent of Millennials plan on buying their own homes. In San Jose, with only a 51 percent home ownership rate, 74 percent of Millennials aspire to buy their own homes. In San Diego, the home ownership rate was 52 percent, yet the interest in home ownership was half-again higher (78 percent). In San Francisco, where the home ownership rate is 56 percent, 76 percent expressed an interest in owning their own homes (home ownership rates calculated from Census Bureau quarterly data from 2015).

The story is the same in the metropolitan areas often characterized as magnets for Millennial migration. In Portland and Denver, 81 percent of Millennials anticipate owning their own homes. Boston (78 percent), Seattle (77 percent) and Minneapolis-St. Paul (77 percent) are not far behind.

Saving for Decades

This data suggests that many Millennials could need to relocate to afford their own homes. The really innovative contribution of the apartmentlist.com research is as estimate of how long it will take the average Millennial to save enough money for a down payment on a starter home, which according to Trulia, is generally defined as the lower third of the market.

Apartmentlist.com develops an estimate for each metropolitan area, using monthly savings rates, existing savings and the potential for financial assistance (for example from relatives) in obtaining enough for the down payment. In the most costly market, San Francisco, the average Millennial will need more than 28 years to build up enough funding for a down payment in San Francisco. This means that older Millennials would be old enough (62) to qualify for early retirement benefits from Social Security by the time they have enough to pay the down payment on a starter home. Sacramento is nearly as challenging, where it would take another 27 years to accumulate a down payment. Things are not that much better in Los Angeles (20 years), San Diego (19 years) and Denver (18 years).

Optimistic Expectations and Disappointment

But the most important bottom line conclusion of the research is what apartmentlist.com calls the “affordability gap.” This is the difference between the actual time required to accumulate a down payment and the time expected by survey respondents. The biggest affordability gap is in San Francisco, where respondents expected down payment requirements that would take only 11 years more to save. The reality, according to the study, is 28 years, more than 2.5 times that figure. In Sacramento, respondents expected that it would take 16 years, still far short of the more realistic 27 years. In Los Angeles, San Diego and Denver, it is likely to take from eight to ten years more to save enough for a down payment than survey respondents estimate.

Setting up for More Domestic Migration

In contrast, in a number of other metropolitan areas, such as Houston, Dallas-Fort Worth, Atlanta, Philadelphia and Kansas City, Millennials have over-estimated the size of down payments necessary to enter the housing market.

For some time, domestic migration trends in the United States has been principally about moving from more expensive metropolitan areas to less expensive metropolitan areas. The apartmentlist.com data suggests that this trend could continue. To achieve their dreams of home ownership and to avoid a life of renting, many Millennials may move to places where housing is priced more for livability.

Wendell Cox is principal of Demographia, an international pubilc policy and demographics firm. He is a Senior Fellow of the Center for Opportunity Urbanism (US), Senior Fellow for Housing Affordability and Municipal Policy for the Frontier Centre for Public Policy (Canada), and a member of the Board of Advisors of the Center for Demographics and Policy at Chapman University (California). He is co-author of the "Demographia International Housing Affordability Survey" and author of "Demographia World Urban Areas" and "War on the Dream: How Anti-Sprawl Policy Threatens the Quality of Life." He was appointed to three terms on the Los Angeles County Transportation Commission, where he served with the leading city and county leadership as the only non-elected member. He served as a visiting professor at the Conservatoire National des Arts et Metiers, a national university in Paris.

Photo by Bigstockphoto.com.

Class and the EU referendum

Mon, 04/18/2016 - 22:38

On June 23rd, voters in the UK get a say on whether to remain in the European Union (EU). The UK first joined what was then called the European Economic Community (EEC) back in 1973, and in a 1975 vote, 67% voted to stay in the EEC. The issue was fairly settled until Conservative Prime Minister David Cameron, under pressure from the right wing of his party and anti EU sentiment, promised an in/out referendum in the Party’s manifesto for last year’s General election. The stakes here are high, and no one really knows what the result of a ‘Brexit’ (a neologism for British Exit) would be.

In recent polls, opinion seems fairly evenly divided, with roughly 40% each for staying and going.  While a crucial 20% remain undecided, momentum seems to be with the ‘out’ side. Sentiment towards the EU cuts across party lines in the UK. Broadly speaking, the political establishment want to remain, though significant numbers of supporters, especially in the Tory Party, wish to go.  While initially hostile to the EEC, many on the left and in the trade union movement have come to embrace Europe because of its promotion of progressive labour law and working conditions directives, even though the UK has opted out of many of these.

But what about the question of class in all of this? In many ways, class is a central factor, though it is rarely mentioned in debate or in the mainstream media. The UK Independence Party (UKIP), which has been a threat to both Conservative and Labour parties, has made immigration central to its campaigns. UKIP draws much of its support from the working-class, especially those who feel marginalised by the political mainstream, and one of the biggest reasons for this is immigration. According to a recent survey, 55% of voters see immigration as the most important issue in the upcoming referendum.  Of course, the issue is being mixed up with the ongoing refugee crisis and the desire of many non-EU economic migrants to come to Britain. This is a difficult and touchy subject for all political parties and for understandable reasons. But immigration was an issue even before refugees began streaming in from the Middle East, because one of the main planks of the EU is the free movement of goods and labour. Any citizen of the EU can choose to live and work in any other member state, and millions of people have chosen to do just that. Migration within the EU, which was seriously underestimated by the previous Labour government, has had very different outcomes in different labour markets. Many eastern and southern Europeans have been attracted to Britain by the promise of relatively high wages, job vacancies, and the fact that English is widely spoken across the continent.

The biggest losers in this migration process have been the indigenous UK working class, who now have to compete with millions of semi-skilled and unskilled workers from across the EU. While there is plenty of anecdotal evidence that UK workers are being discriminated against by recruitment agencies, the best evidence of this practice comes from a high profile case in the English midlands where local people have been effectively excluded from the 3,000 jobs created at a distribution warehouse owned by sports clothing retailing firm Sports Direct.  The company apparently preferred to recruit directly from Poland. For working-class voters, the EU’s free market in labour appears to be more about big corporate profits than worker mobility.

Immigration has an impact beyond access to employment. It also affects housing, schooling, and a host of other public services. All of these factors raise questions about the long term stability and sustainability of working-class communities. In many areas in the UK, from big cities to smaller towns, working-class people bear the brunt of all of these issues, and this has turned many towards UKIP and away from Labour as their natural home. Brexit begins to look attractive for those most marginalised by the effects of the free market, who also benefit least from the more positive aspects of EU membership. This situation has been confounded for many by the ways in which, after the recession of 2007/8, the EU has liberalised its markets and toned down its hitherto strong commitment to social legislation. Most notably, this has seen the EU in secret negotiations with the US over The Transatlantic Trade and Investment Partnership or TTIP.

Nothing about the EU referendum is clear or straightforward. Whatever the result of the ballot, the motivations of voters in terms of class may not be clear. The EU had and still has the potential to improve the lives of millions of working-class citizens across Europe, but too often the interests of big business and social elites trump those of ordinary people.

This piece first appeared in Working-Class Perspectives.

Tim Strangleman, University of Kent

Photo by Xavier Häpe - http://www.flickr.com/photos/vier/192493917/, CC BY 2.0

Empire State Building Toward Wins for Trump, Hillary

Sun, 04/17/2016 - 22:38

New Yorkers like to think of themselves as ahead of the curve but, this year, they seem to be embracing the most regressive politics. The overwhelming favorite in Tuesday’s primary among Republican candidates – with more than 50 percent support, according to RealClearPolitics – is Donald Trump, the brash New Yorker whose campaign vows to “make America great again.” On the Democratic side, New Yorkers appear to prefer Hillary Clinton, their former U.S. senator and quintessential avatar of the gentry liberals, rather than feeling “the Bern.”

Some of this stems from political causes – for example, Clinton’s close ties with progressives around Mayor Bill De Blasio – or the fact that the New York primary electorate is 30 percent nonwhite compared with 17 percent in Wisconsin. For Republicans, the overall weakness of the state party, a paucity of evangelicals and Ted Cruz’s poorly chosen attack on “New York values” all favor Trump.

But the real driver of Trump’s success lies in the changing social, economic and demographic forces reshaping the Empire State. The city has enjoyed a considerable surge in employment, much of it – roughly one-third – in low-wage jobs. But the real “losers,” to use one of Trump’s favorite terms, has been the middle class, which is disappearing even faster in New York than in the rest of the country.

This distress can be seen in migration numbers. While states like Texas and Florida are gaining hundreds of thousands of new residents, the New York metropolitan area has lost 701,000 net domestic migrants the past five years, after losing more than 1.9 million in the first decade of the new millennium. Greater New York loses net migrants to virtually every big U.S. urban region, even Los Angeles, Philadelphia, Washington, D.C., and Boston, as well as to Atlanta, Dallas-Fort Worth and Houston.

Read the entire piece at The Orange County Register.

Joel Kotkin is executive editor of NewGeography.com. He is the Roger Hobbs Distinguished Fellow in Urban Studies at Chapman University and executive director of the Houston-based Center for Opportunity Urbanism. His newest book, The Human City: Urbanism for the rest of us, will be published in April by Agate. He is also author of The New Class ConflictThe City: A Global History, and The Next Hundred Million: America in 2050. He lives in Orange County, CA.

Photo by Gage Skidmore [CC BY-SA 3.0], via Wikimedia Commons

Largest Cities in the World: 2016

Fri, 04/15/2016 - 22:38

Tokyo-Yokohama continues to be the largest city in the world, with nearly 38 million residents, according to the just released Demographia World Urban Areas (12th Annual Edition). Demographia World Urban Areas (Built-Up Urban Areas or Urban Agglomerations) provides annual estimates of the population, urban land area and urban population density of all identified built-up urban areas in the world. This year's edition includes 1,022 large urban areas (with 500,000 or more residents), with a total population of 2.12 billion, representing 53 percent of the world urban population.

Demographia World Urban Areas uses base population figures, derived from official census and estimates data, to develop basic year population estimates within the confines of built-up urban areas. These figures are then adjusted to account for population change forecasts, principally from the United Nations or national statistics bureaus for a 2016 estimate.

Built-up urban areas are continuously built-up development that excludes rural lands. Built-Up urban areas are the city in its physical form, as opposed to metropolitan areas, which are the city in its economic or functional form. Metropolitan areas include rural areas and secondary built-up urban areas that are outside the primary built-up urban area. These concepts are illustrated in Figure 1, which uses the Paris built-up urban area (unité urbaine) and metropolitan area ("aire urbaine") as an example.

The Largest Cities

The world’s eight largest cities are located in Asia. Tokyo-Yokohama became the largest urban area, according to the United Nations, in 1955, more than 60 years ago. However, Japan’s capital may not old onto the top position for long. With Japan now losing population, it seems likely that Tokyo-Yokohama --- which has been about the only place in Japan gaining population --- will begin shrinking in the next decade, while facing a strong challenge from Jakarta.

Jakarta has closed the gap to about 6.4 million. This may seem like a lot, but this is the closest a number two urban area has been since 1965, when New York trailed Tokyo-Yokohama by 5.1 million. The gap between number one and number two New York amounted to 16.5 million in 1995.

Jakarta has grown very quickly, and now stands at a population of 31.3 million. Between 2000 and 2010, Jakarta added more than 7,000,000 residents, one of the largest population gains of any city in history. Should this growth continue, and the population of Tokyo-Yokohama begin to decline, the largest city in the world could be Jakarta by 2030. Jakarta is also the largest city in size in the southern hemisphere, stretching beyond its city limits, into the regencies of Tangerang, Bogor, Bekasi and Karawang to  the large independent cities of Tangerang, South Tangerang, Depok, Bekasi and Bogor.

Delhi, India’s capital, is not only the third largest city in the world, but is also the largest in India (25.7 million). That may be surprising, since Mumbai (Bombay) was the largest in India for decades and had been widely touted to become the world’s largest city. Delhi spreads from the National Capital Territory of Delhi into the states of Haryana and Uttar Pradesh. These areas include the modern edge city technology hubs of Gargaon and Noida (Figure 2).

Seoul-Incheon is the fourth largest city in the world, with 23.6 million residents, Seoul-Incheon spreads from the core municipality of Seoul into suburban Gyeonggi and the independent municipality of Incheon. The core city of Seoul has stopped growing, and approximately 60 percent of the population is in the suburbs.

Manila is the fifth largest city, with 22.9 million residents. Manila slipped from the fourth position according to recently obtained Philippine national statistics authority population projections. However, Manila continues to be one of the world's fastest growing megacities and can be expected to pass Seoul-Incheon in the next few years. Manila spreads from the National Capital Territory into the adjoining provinces of Cavite, Laguna, Rizal and Bulacan.

Sixth ranked Mumbai is a new entry to the top 10, with 22.9 million residents. The Mumbai urban area has been redefined to incorporate adjacent urban areas, which explains its larger population relative to last year. Mumbai extends from the municipality of Mumbai into the districts of Thane and Raighar.

The sixth largest city is Karachi in Pakistan's with 22.8 million residents. This population estimate is the least reliable among the largest cities. Pakistan's last population census was nearly 20 years ago, and had been scheduled for March 2016. As of publication, the census has been postponed and no new date set.

Shanghai dropped to the number eight position from sixth place last year. Shanghai's population is estimated at 22.7 million residents. Like many cities across China, population growth has dropped substantially during this decade. Recently, the Shanghai city government announced that the population had fallen slightly over the last year, ending three decades of dramatic population growth in the last three decades. The Shanghai urban area is almost completely confined to the municipality of Shanghai, but has minor extensions into the provinces of Jiangsu and Zhenjiang.

New York is the ninth largest city, with a population of 20.7 million. New York is the largest built-up urban area outside Asia and covers the largest land area of any urban area. New York extends into Long Island and the Hudson Valley in the state of New York, Connecticut and New Jersey. New York had been the world's largest city before Tokyo, a distinction that it had held since 1925, when it surpassed London (now 33rd largest).

The 10th largest city of Sao Paulo, with a population of 20.6 million. Sao Paulo is a new addition to the top 10, Latin America's largest city and the core municipality. Sao Paulo stretches from its large core city in all directions, with approximately half of the population in the suburbs.

Two cities fell out of the top 10, Beijing and Guangzhou-Foshan. Like Shanghai and some other cities of China, newer population estimates indicated a substantial decline in growth rates. Beijing is now the 11th largest city in the world, while Guangzhou-Foshan is 13th largest.

Mexico City is ranked 12th largest in the world. Mexico's capital has experienced a roller coaster ride in urban area rankings since the middle of the last century. In 1950, Mexico City ranked 17th in the world, according to United Nations estimates. By 2000, Mexico City was second in the world to only Tokyo Yokohama. During the period of its greatest growth, in the late 20th century, it was common to hear that Mexico City would eventually be the largest in the world (as was the case with Mumbai, above) but its once frenetic growth has cooled considerably.

Los Angeles has also had its ups and downs. It is substantial growth in the first half of the 20th century brought Los Angeles from virtually nowhere to 12th largest in the world by 1950. As in Mumbai and Mexico City, there were those who expected Los Angeles to become the largest city in the world. By 1965, Los Angeles was the sixth largest city, trailing only Tokyo Yokohama, New York, Paris, London and Osaka Kobe Kyoto. Now, Los Angeles has fallen to 19th position and not only is unlikely to ever be the largest city in the world or even in the United States.` The 5 million population gap compared to New York in 2016 is little different from 1990.

Distribution of Population

Much has been made of the fact that the world now has more than one half of its population living in urban areas. More than one analyst has misunderstood this as meaning that the norm for world residents looks like Fifth Avenue in New York, central London or Paris or the huge shantytowns of Mumbai or Dhaka. In fact, however, most urban residents live in nothing like such environments (See: What is a Half Urban World?).

Only 8.2 percent of the world population lives in megacities (built-up urban areas with more than 10 million population. In contrast nearly a quarter lives in cities of more than 1 million population, including the megacities. A larger 30 percent of the world population lives in urban areas under 1 million population, which includes the smallest towns. Rural areas still have nearly 46 percent of the world population (Figure 3).

Most of the large built-up urban area population lives at densities between 4,000 and 10,000 per square kilometer, or approximately 10,000 to 25,000 per square mile. These population densities are typical in parts of Asia, Africa and South America. Another one quarter of the population lives at densities of below 4,000 per square kilometer or approximately 10,000 per square mile. These densities are principally found in Europe, North America and Oceania (principally Australia and New Zealand). Slightly less than one quarter of the population lives at higher densities, above 10,000 per square kilometer or 25,000 per square mile. These densities are largely limited to certain Asian and African nations, such as Bangladesh, the Democratic Republic of the Congo and Pakistan (Figure 4).

The Future

As has been noted before, much of the population growth in the world will be in Africa over the next century. However, in the next few decades the greatest urban population growth seems likely to be in Asia, where 57 percent of the large urban area population lives. Even with declining growth rates, such as in China, many millions more  rural residents are expected to continue moving into China’s  cities .

Note on Availability

The full Demographia World Urban Areas and its components can be downloaded as follows:

Full Report:

Demographia World Urban Areas

By Component:

Demographia World Urban Areas- Index

Photograph: Cover of Demographia World Urban Areas: 12th Annual Edition

Wendell Cox is principal of Demographia, an international pubilc policy and demographics firm. He is a Senior Fellow of the Center for Opportunity Urbanism (US), Senior Fellow for Housing Affordability and Municipal Policy for the Frontier Centre for Public Policy (Canada), and a member of the Board of Advisors of the Center for Demographics and Policy at Chapman University (California). He is co-author of the "Demographia International Housing Affordability Survey" and author of "Demographia World Urban Areas" and "War on the Dream: How Anti-Sprawl Policy Threatens the Quality of Life." He was appointed to three terms on the Los Angeles County Transportation Commission, where he served with the leading city and county leadership as the only non-elected member. He served as a visiting professor at the Conservatoire National des Arts et Metiers, a national university in Paris.

America's Software And Tech Hotspots

Thu, 04/14/2016 - 22:38

Where is America’s tech and software industry thriving? In a new study conducted for the San Diego Regional Economic Development Corp., researchers took an interesting stab at that question, assessing which metro areas have the strongest concentrations of software developers, spread across a broad array of industries, as well as the best compensation and job growth, and access to venture capital funding.

What they found is a geography dominated by traditional tech centers, particularly those with strong universities. The San Jose, Calif., metro area and Seattle led the way, followed by San Francisco and Boston. The back half of the top 10 is a bit more surprising, featuring Baltimore, Atlanta and Washington, D.C.

All these metro areas have outsized concentrations of software developers compared to the national average. San Jose boasts an unparalleled concentration of talent, with 69.7 software developers per 1,000 employees, five times the average among the nation’s 50 largest metro areas. Seattle runs second with a concentration of 38.3 per 1,000 workers.

These areas tend to have different areas of expertise. Software is now critical to many industries; not just computers, but also manufacturing, finance and services. In places like Washington and Baltimore, much of the work is related to the federal government, as is also true for seventh-ranked San Diego, which has long had a major military presence. The Bay Area, of course, dominates fields such as new media, search and computer systems design. In San Diego they tend to work in scientific research much more than their counterparts elsewhere in California.

These ratings matter not so much in terms of the number of jobs — software publishers have added a net of 50,000 jobs since 2001, up 19%. Yet as software use has grown, there has been impressive growth across the board in the number of programmers: According to EMSI, the profession has added 350,000 jobs since 2003, 27 percent growth. Jobs in this category also carry a decent paycheck, with a median hourly wage of $44. In 2015, notes the San Diego report, software firms received $23.8 billion in venture capital—a 400% increase in investment since 2010.

Greater Concentration Or Decentralization?

Clearly metro areas like San Diego have good reason to sell themselves as software hotspots; the industry has grown three times faster in employment than the overall economy and expects 18.1 percent growth this year.

But not all hotspots are equal, which is also true of tech in general. Indeed, according to EMSI data, the share of high-tech employment in the Silicon Valley/San Jose area’s economy  is more than six times the national average. Others that rank more than twice the national average include Washington D.C., San Francisco, Seattle, Boston, Raleigh and Austin, who are also our leaders in software. Others on the software list, such as San Diego, are above the national average, but only slightly – San Diego’s overall share of tech jobs relative to the national average has actually declined since 2001.

Clearly metro areas that have had long-established tech communities do well, but perhaps this may prove not so much the wave of the future but the resonance of the past. In fact, if we look at which areas are having the most tech growth, many are not what would be widely considered tech hubs. Indianapolis, for example, has seen a 102 percent growth since 2001 in tech jobs while Las Vegas, Jacksonville and Nashville have seen strong growth of over 80 percent or more, and each has boosted its share of jobs in tech dramatically.

But perhaps the most critical advantage is to those areas which have both high concentrations of tech jobs and also rapid growth. These areas would seem best positioned to advance in the coming years and include some of the study’s software superstars. Austin for example has expanded tech employment since 2001 by 89% and boosted its location quotient (the ratio of local share to national share of jobs in a sector) for tech employment from 2.14 to 2.32. Raleigh, San Francisco and Seattle have also expanded both in relative and absolute tech employment.

Essentially we may be witnessing two parallel, and notionally conflicting developments, notes analyst Mark Schill of the Praxis Strategy Group. There are clearly a series of regions, as identified by the report, that have achieved critical mass in software and across many other tech fields. Yet at the same time, the most rapid growth is taking place largely in non-traditional tech hubs, including places like Salt Lake City, San Antonio, and Phoenix, all seeing rapid growth in tech jobs as well as a growing concentration.

Big City Tech Bust

The software study also reveals something that might not please many advocates for an urban-centered tech world. Despite their strident efforts to promote themselves as tech and software centers, our three largest cities — New York, Los Angeles and Chicago — have not fared terribly well. The one dense urban center that has seen rapid growth in terms of tech jobs and share has been the San Francisco-Oakland area, which has the advantage of being located next to Silicon Valley and the dominant centers of venture capital. The region also includes parts of the Peninsula, like San Mateo, that have emerged as important suburban tech hubs.

In Los Angeles, the decline of the aerospace industry has stripped away its primary tech anchor. L.A., Chicago and NYC have posted average tech growth. If all the hype ascribed to “Silicon Alley” or “Silicon Beach” were matched by their performance, the numbers would look very different.

This can be seen by comparing growth in software jobs, an area where dense urban areas are widely held to have big advantages. Between 2010 and 2014 software employment expanded only 13.6 percent in New York, and 11.7 percent in Los Angeles, compared to the median growth of 13.4 percent.

This parallels their less than spectacular performance in our analysis of EMSI tech employment. Despite the almost endless discussion of Gotham as tech job hub, New York’s tech growth since 2001 has been a below average 27% while its tech locational quotient has dropped from 1.15 to 1.06, roughly the national average. Chicago did even worse, growing just 24% and actually seeing its locational quotient drop to 0.98, below the national average. But the big loser has been Los Angeles, once a premier tech hub, but clearly losing its edge. Since 2001 L.A. has managed only 9 percent tech growth and its relative concentration in tech jobs has fallen to 0.74, well below the national average.

Looking Ahead

The San Diego study, as well as our own analysis, suggests a diverse future for software and other tech related fields. First, there are the clear winners — places like San Francisco, Silicon Valley, Raleigh, Seattle, Austin — which continue to add both new jobs and boost their share of tech and software employment. Areas like these enjoy both momentum and critical mass, which all but guarantees a prosperous future for these metro areas as software comes to dominate more of our lives, and other industries.

The second group, which includes key players like San Diego and Boston, will be fighting to hold onto their positions. They have experienced some growth, but their share of tech jobs has been falling and they may not have the momentum to make up for other disadvantages such as high housing prices and taxes. Such things may not slow superstar cities like San Francisco, but they seem to take some of the wind out of the sales of these less dynamic tech centers.

Third, and most troubling, will be those places like New York and Los Angeles where the tech economy is often hailed as a savior, but does not seem, in relative terms, to be living up to the feverish advertising. Here high housing prices may be exacting a strong toll on the workforce. NYC and L.A. are both among the bottom six in terms new jobs in STEM (science, technology, engineering and mathematics-related positions); both actually have lost such workers since 2001, and now have workforces considerably less skilled in tech fields than the national average.

Finally, and this is not something widely acknowledged, has been the strong gains of less expensive, less heralded cities. They do not always have above average concentrations of tech and software workers, but are experiencing impressive gains. Take Phoenix, where tech employment has expanded 78 percent since 2000, while software employment has grown 28.8 percent since 2010. Phoenix’s tech location index is, remarkably, now higher than that of Los Angeles. Other, not widely appreciated big gainers in software include Nashville (43.5 percent gain), Atlanta (48.6 percent) and Charlotte (up 42 percent).

Given the ability of software firms to locate where they wish due to the intrinsic nature of their industry, we should expect not just consolidation to continue in certain markets, but also a simultaneous rapid dispersion of tech jobs. Yet neither the agglomeration nor the dispersion is likely to be evenly distributed. Among the nation’s 53 largest metropolitan areas, just 20 saw their relative concentrations of high-tech employment increase since 2001. Mapping the future of tech and software employment will need to consider both factors and those regions which fit neither the low-cost model or that of the hyper-concentrated area may need to sit and reconsider how they can get back into the digital game.

This piece first appeared in Forbes.

Full List: America’s Top 10 Software Hotspots (Forbes slideshow)

Joel Kotkin is executive editor of NewGeography.com. He is the Roger Hobbs Distinguished Fellow in Urban Studies at Chapman University and executive director of the Houston-based Center for Opportunity Urbanism. His newest book, The Human City: Urbanism for the rest of us, will be published in April by Agate. He is also author of The New Class ConflictThe City: A Global History, and The Next Hundred Million: America in 2050. He lives in Orange County, CA.

Geography and the Minimum Wage

Wed, 04/13/2016 - 22:38

Most commentary on California’s decision to increase the state minimum wage to $15 over time is either along the lines of it being a boon to minimum-wage workers and their families or a disaster for California’s economy.  Neither is accurate.  Different regions sill see different outcomes.  Central California, the great valley that runs from Bakersfield to Redding, once again, will bear a disproportionate burden. 

Some workers’ income will increase, but hardly enough to afford a standard of living that most readers would find acceptable.  At 40 hours a week and working 52 weeks a year, the minimum-wage worker will earn $31,200 a year before taxes.  Try living on that in San Francisco or Santa Barbara.

Then, there are the workers who will lose their job, or never get one in the first place.

A $15 an hour wage would devastate some economies, but California is different.  Individuals and families may be devastated.  Regions may be devastated.  Coastal California, with the possible exception of Los Angeles and the far northern counties, will do just fine.  You will probably not be able to see an effect in their data.

Central California is another story.

California is in transition from a tradable goods and services producing economy to a consumption and non-tradable services producing economy.  Tradable goods and services are goods and services that can be consumed far from where they are produced.  Manufacturing is the classic example of tradable products, but thanks to the internet, services are also increasingly tradable. 

These days, many services that were once non-tradable are tradable.  Tax preparation, legal research, accounting, and term-paper writing are examples of tradable services that were once non-tradable.  As a friend of mine says, anything done at a computer can be done anywhere in the world.

Non-tradable services are those that must be consumed where they are produced.  Lawn care, haircuts, and home maintenance are some examples.

The distinction is important because a minimum wage increase affects each differently.

The initial impact of a minimum wage increase is to increase the cost of the goods or services, tradable or non-tradable.  It’s what happens after the increase in cost that makes the difference.

Consider a minimum wage increase on one side of a street and not the other side.  You might consider walking across the street for a burrito, cup of coffee, or haircut, if the price is cheaper there.  This is the substitution effect.  It will be almost non-existent for non-tradable services with a statewide minimum wage increase.  No one will drive to Arizona for a haircut or cup of coffee. 

Non-tradable services are left with only a price effect, to be discussed in a bit.

Tradable producers, though, face a formidable substitution effect.  They are competing with producers worldwide.  If they raise their prices, it is likely that enough customers will switch to other producers that tradable producers will be forced to relocate for lower-wage workers of go out of business.  If they lack monopoly power, they are unlikely to be able to absorb the cost increase.

One impact of California’s minimum-wage increase, then, will be an acceleration of California’s transformation to non-tradable services production and the permanent loss of tradable sector jobs, outside of fields like software.

It is fundamental to economics that the higher the cost of any good or service, the less that will be consumed.  This is the price effect, and it affects tradable producers differently than non-tradable producers.

Unless they have monopoly power, tradable producers will not see a price effect.  The world price will remain the same.  Total world consumption will stay the same.  The distribution of sellers, however, will change.  Agriculture is an excellent example of competitive world markets.  California will likely provide a smaller share of the world’s agricultural output.

If the tradable producer has monopoly power, the price effect may be large or small.  If it is small, they will see a small decline in sales.  If it is large, they may have to absorb the increase, sacrificing some of their monopoly profits.

Non-tradable producers will face a price effect.  How big that price effect is depends on the wealth of their customers and how essential the service is to the consumer.  A wealthy person will probably not change their behavior because of, say, a ten percent increase in the cost of haircuts.  A poor person may reduce the frequency of haircuts.

Tradable sector and non-tradable sector businesses will attempt to minimize the cost increase of a minimum wage hike.  This is most easily achieved by replacing some labor with capital.  This is the production function effect.  Assembly line workers may be replaced with robots.  Waiters may be replaced with tablets at the table, as we’ve already seen in some restaurants.

Some would argue that there is another effect, an income effect.  The idea is that the increased income, and spending of minimum-wage workers will more than offset the price and substitution effects.  This violates another fundamental economic principle, the one that asserts that there are no free lunches.  The minimum wage earner’s new income is not new wealth miraculously provided by the minimum-wage fairy.  For every new dollar the minimum-wage worker has to spend, someone else has one less dollar to spend. In fact, due to inefficiencies (distortions in product mix and markets resulting from non-market prices) created by the transfer, someone else must forego more than one dollar in order to create the dollar provided by wage increase.

Analysis of price and substitution effects implies that different California regions will be affected differently by the minimum wage increase.

Because wages are generally lower in Central California than in Coastal California, the minimum wage increase will be more impactful in Central California, amplifying both price and substitution effects relative to Coastal California.  Central California’s economy is also more dependent on tradable-goods production than is Coastal California, it will, therefore, be hurt more by the decline in tradable-goods producers.  Similarly, because Central California’s income is less than Coastal California’s, it will also see a greater price effect on its non-tradable producers.

Central California is seemingly in perpetual recession.  Even in good times, many Central California counties see double-digit unemployment.  Colusa County’s unemployment rate was over 20 percent in the most recent data release.  The region also sees disparate impacts from California’s high energy costs, water policies, and regulatory infrastructure, all of which hit them much harder.

Coastal Californians underestimate the economic differences between California’s regions.  They are huge.  California simultaneously has some of America’s wealthiest communities and some of its poorest.  It’s important that we remember that California, with about 12 percent of America’s population, has 35 percent of the nation’s welfare recipients.

Most of California’s wealthy coastal citizens never see California’s poor inland communities.  Yet, wealthy Coastal Californians --- particularly from San Francisco --- dominate state policy.  They implement policy as if the entire state were as wealthy as the communities they live in.  The minimum wage increase is just the latest example.

Decency would seem to require that California find ways to accommodate the circumstances and needs of our least advantaged citizens and regions.  We don’t though.  Instead we create policy that hurts our least advantaged and makes their challenging lives even more so.

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.

Unemployed woman photo by BigStockPhoto.com.

Liberals — Except When it Comes Home

Tue, 04/12/2016 - 22:38

My old boss, Bruce Brugmann, who ran the Bay Guardian, told me early on in my career that you could tell the real politics of a big-city newspaper by the person they endorse for mayor.

Nice liberal outfits like the New York Times support Democrats for president and (typically) governor and US Senate. The SF Chronicle doesn’t endorse many Republicans any more. But when it comes to the local stuff, the decisions on who should run the city where they live and operate and connect with the power structure, the truth comes out.

The Times loved Ed Koch and backed Michael Bloomberg. The paper didn’t endorse Bill DeBlasio in the Democratic primary. The Chron backed Dianne Feinstein, John Molinari, Willie Brown, Gavin Newsom, and Ed Lee.

There’s a perception that cities like SF, because they tend to vote overwhelmingly for Democrats, and send Democrats to the state Legislature and Congress, are by nature progressive communities. And that all breaks down when it comes to local issues, particularly when they involve real estate.

The biggest Democratic Party donors in SF in the 1980 and 1990s were the members of the Shorenstein family, who hosted Bill Clinton at their home. They were also big downtown developers who spent that same Democratic money blocking any attempts to development limits.

Our Democratic member of Congress, Nancy Pelosi, is either missing or on the wrong side on pretty much every land-use and development issue back at home.

Gavin Newsom, who wants to be the next governor of California, got his start in local politics attacking homeless people.

In other words, the gentrification and displacement in San Francisco is happening despite, and I could argue with the concurrence of, some of those “liberal” Democrats who, from a distance, seem much more progressive than they are when you look at their records right here at home.

So we get what I call the David Chiu phenomenon – a person who pushed and promoted legislation backed by and in part written by Airbnb, which has driven thousands of housing units off the market, gets seen as a San Francisco progressive when he’s away in Sacramento.

You can tell what a newspaper really thinks by its endorsement for mayor. And you can tell what a politician really thinks by what they do on the local issues that pit the power structure (in this case, tech, real estate, and the mayor) against the rest of the community.

Which brings me, more or less, to Paul Krugman, the great liberal economist of the New York Times.

Krugman is great on a lot of big national economic issues. He’s terrible when it comes to cities.

The guy famously came out against rent control years ago, when any urban economist with any sense knows that rent control is one of the most powerful tools agaist displacement. It’s what makes an urban middle class possible in a city like San Francisco.

And now he’s saying that cities need to reduce zoning rules and allow more housing, or any height, pretty much anywhere. He praises the idea that NY Mayor DeBlasio is pushing, which is similar to what SF Mayor Lee is pushing, which in essence cedes to the private market the responsibility to provide affordable housing and assumes that some modest percentage of “affordable” units in luxury towers that are geared to the same crooks and despots now in the news will be a real solution to the urban housing crisis.

I shouldn’t have to keep saying this, but I will: You need to build at least 30 percent affordable housing in every luxury project just to stay even, and not make things worse. Which means if you want to add to the stock of affordable housing, you have to force developers to build 40, 50, 60 percent of the units for people of more modest means.

That’s not even on the agenda in SF or NYC.

If we took Krugman’s national approach – the rich ought to pay more taxes to pay for investment in the nation’s service and infrastructure – and applied it to cities, you’d get a very different approach. Urban developer profits have created great fortunes (Shorenstein, Trump); to a great extent, local governments have failed to tax those profits at a level that’s necessary to mitigate the impacts of their projects.

Krugman ought to know that the middle class in an American city is not a natural consequence of capitalism. It requires strict regulations and controls. It means, sometimes, slowing down the booms that make a few rich so that the rest of us have a chance, too.

That’s perfect liberalism, in the old school. Except that these great scholars and writers (and politicians) don’t seem to want to bring those policies back home.

Author Tim Redmond, the former longtime editor of the San Francisco Bay Guardian, edits the online San Francisco publication 48 hills.

This piece originally appeared at 48hills.org.

By Prolineserver (Own work) [GFDL 1.2], via Wikimedia Commons

A Commentary on the Notion of Extreme Commutes

Mon, 04/11/2016 - 22:38

A recent piece by Joe Cortright in the City Observatory touched on the often discussed issue of extreme commutes, a favored topic among reporters complaining about sprawl and traffic congestion. The notion of extreme commutes is obviously a fun topic. But it is one that is ripe for analysis based on  travel time data that has been available through the Census since 1980 .

Reporters like to focus on the longest commutes, generally anything more than an hour.  In early census data many of the travel time tabulations presented an upper limit category of “45 minutes or more”.   The 1980 census showed an average travel time of 21.7 minutes, rising to 22.4 minutes in 1990, a rather trivial increase of about 40 seconds in a decade in which we added 22 million commuters driving alone.  Not surprisingly such consumption of our road capacity couldn’t continue and in 2000 average travel times rose by more than three minutes despite an increase on the order of only 13 million solo drivers.  

In my early work in Commuting in America I realized that averages are dangerous things, especially when the subject is speeds and travel times, so I began tracking the percentage of commuters who got to work in under 20 minutes and more than 60 minutes.  Twenty minutes is used because if you got to work in under 20 minutes you had absolutely nothing to complain about; and if you were over an hour then maybe some sympathy was in order.  As the data got better and the travel times got worse the Census Bureau introduced the notion of a 90 minute or greater commute which they labeled an “extreme commute”. 

What’s behind it all? Is it as catastrophic as the average reporter will try to make it?  (They always manage to find someone who gets up at 4 am and travels three hours on a bus from Pennsylvania to Manhattan).  Examining the current trends reintroduced the substantial concern that all analysts must recognize – you have to keep asking: “is this a new trend I am seeing or just another part of the long, slow recovery from an extreme economic event?”  The passage of time suggests the latter, often to the disappointment of those who saw a new dawn of the behaviors they tend to endorse. The figure below shows that between 2000 and 2012 travel times were effectively constant at 25.5 minutes. After that, as employment began to improve travel times inched forward to 26 minutes in the 2014 ACS data. 

Looking at the longer term patterns, back in 1990 just about half of the workers in America got to work in under 20 minutes.  That dropped to 45% in 2000 and now is trending further down to about 43% in 2014.   Much of the Midwest is still in that range, and if you add in the dramatic increases in those who work at home then we are still in the 50% range in much of America. 

In comparaison the over 60 minutes category  is remarkably small. In 1990 we were at about 6% and at 8% in 2000. It has been rising slowly and at the present rate of change we still won’t reach 9% in this decade.  Having said that, we must recognize that we are now talking about over 11 million workers in the 60 minute plus category.

Looking in greater detail at the disaggregate patterns we see that the trend in 60 to 89 minutes continued to rise, while the over 90 minute element dropped off.  What happened is that both categories rose through 2008 or so and then with the recession dropped off and now have gone through a slow resumption of expansion in the new decade.  

Some of the trends that define travel

One would expect that when jobs are scarce, as during the recent recession and long limited recovery, the average distance people would be willing to travel to find work would increase.   Not finding a  job in a preferred 30 minute travel time labor market shed around one’s home makes expansion to 45 minutes or an hour more feasible after being unemployed for months.  I am sure much of that happened, but the broad statistics tell a varying story.  The share of commuters over 90 minutes dropped; two important factors were in play that overwhelmed the statistics:

#1 there’s nothing like 10% unemployment to improve congestion. When the number of workers declined road speeds improved, or at least didn’t continue to get worse.  So a previous 90+ minute trip might have improved to 85 minutes.   When your travel mate lost his job your solo commute got to be shorter.

#2  The more important factor was that the kinds of jobs lost in the recession were exactly those that tended to be long distance.  A large share of the job losses were in construction and factory work.  Home construction, of course, mostly occurs at the edges of the region where workers often arrive by carpool.  And large factories today are often located in rural areas for logistical purposes – with workers traveling immense distances – for example  the car plants and refineries of the south. Note also that there were parallel very severe declines in carpooling in the period.  This was at least one of the many factors in that decline.  As the economy slowly improved we have seen the return to greater travel times as construction, manufacturing and other activities return and roads congest again. 

The significant long term factors we need to recognize in our assessments of future prospects are these:

The key driver of future commuting will be the need to find replacements for the retiring baby-boomers, particularly skilled workers.  In general that suggests large metro areas where the access to a variety of workers will be greatest. The larger areas have the best answer to the question “how many people with the skills I need can I reach in a half hour’s travel commuter shed from this location?” 

One of the fundamental patterns of American commuting today is massive flows between counties.   In 1960 a bit more than nine million workers left their residence county to work, today it is over 37 million and the share of work travel is over 27% almost double the 60’s percentage.

Planners have a dream of better “balance” in jobs and workers in communities that will promote walking/biking to work.  Some of that will happen as both suburban and central city Job/Worker ratios approach 1.0  from opposite directions. But  the realities of work travel are sharply different.  First of all about two-thirds of workers live in a household with other workers – whose job will they live near?  Workers, particularly the young, change jobs often. Will they move, incurring costs and further disruption in their lives every time they change jobs?  Not likely! 

My own county of Fairfax County, Virginia illustrates the national pattern.  In 1980 it was a standard bedroom suburb with roughly 400,000 workers and 300,000 jobs for those workers, a J/W ratio of .73, the very definition of a suburb .  Flash forward to 2010 and the J/W ratio was at balance, .99, so that if all the workers who could, stayed in the county to work only 8,000 would have to leave to reach available jobs. But, in fact the county exported 280,000 workers and imported 272,000 with an overall flow of over 550,000 crossing its borders every day rather than 8,000. That’s what commuting is really all about.  Today, Fairfax County fits the definition of a central city with more jobs than workers yet still  the border crossings have reached over 570,000 every day.  The key point is that having a numeric balance in jobs and workers has little value, it is the match in the skills needed by employers and the skills possessed by resident workers that is crucial.

Some closing thoughts

These changes in a long term trend of people traveling significant distances to work with an interruption brought on by national employment trends.  The current penchant of rail transit proposals to reach farther and farther into the hinterlands to support the central city does not address the dynamic of ever more dispersed employment.  Transit has its highest share in trips over 60 minute and are a very significant part of intercounty and interstate travel.  The fact that they are a great deal slower than alternatives adds to the shares over 60 minutes. Many of our “metro” systems are closer to being commuter rail lines than city subways, BART, for example, the new Silver line in DC, for another, are excellent example.  Think if the entire subway investment in the Washington area had occurred inside the District borders, or at least inside the Beltway, there would have been a very real difference in being inside or not. 

We can expect to see longer distance travel as more specialized skills are demanded by employers.  I recall in the eighties in China where the workers at the number one bicycle factory lived in apartments across the road and walked across the street every day to work.  Even where the government owned the factories, the housing, and the people that still didn’t work. When we are hiring systems engineers or any other highly skilled workforce element it will be even more impossible.     

The dominant flow today is circumferential from suburb to suburb from far lower density housing to smaller work places than the number one plant in Shanghai. We don’t live outside the factory gate anymore. About 5% of those who move are seeking a better commute.  Most moving focuses on a better place with the amenities the household’s prefer and their commute is often the residual. As hard as we might try, minimizing the commute will not define people’s housing or job patterns in the future. Did I hear someone say autonomous vehicles.

Alan E. Pisarski is the author of the long running Commuting in America series. A consultant in travel behavior issues and public policy, he frequently testifies before the Houses of the Congress and advises States on their investment and policy requirements.

Photo by Nathan Harper, Bottleleaf

California Leaders Double Down on Dry

Sun, 04/10/2016 - 22:38

“What do we do with this worthless area, the region of savages and wild beasts, of shifting sands and whirlwinds of dust, of cactus and prairie dogs? To what use could we ever hope to put these great deserts and these endless mountain ranges?”

– U.S. Secretary of State Daniel Webster, on the American West, 1852

The drought, if somewhat ameliorated by a passably wet winter in Northern California, reminds us that aridity defines the West. Our vulnerability is particularly marked here in Southern California, where the local rivers and springs could barely support a few hundred thousand residents, as opposed to the 20 million or so who live here. Bay Area, we’re talking about you, too, since about two-thirds of your drinking water is imported.

The prospect of continued water shortfalls – perhaps made worse by climate change – poses something of an existential question for this state. In the past, California met the challenge of persistent dryness much as the Romans did in their heyday, by constructing massive waterworks that connected mountain runoff with the thirsty urban masses. Everything that made California the harbinger of the future, from rich farmland to semiconductors and our great cities, was predicated on water transfer.

Now there is a sense that California’s expansion, its ability to create new communities and industries – outside of a few fields, like media and software – faces insurmountable constraints on water and other resources. This perspective has been favored by greens, anti-development NIMBYs and those who seek to corral all California growth into ever-denser, family-unfriendly environments.

This mindset has been predominant over the past decade, as the state has invested little in new water storage or delivery systems, essentially doing nothing since the late 1970s, when the population was 16 million less. Like the Roman Empire in its dotage, we seem to have decided to live off the blessings of the past, a sure way, it seems, to guarantee a diminished future.

Read the entire piece at The Orange County Register.

Joel Kotkin is executive editor of NewGeography.com. He is the Roger Hobbs Distinguished Fellow in Urban Studies at Chapman University and executive director of the Houston-based Center for Opportunity Urbanism. His newest book, The Human City: Urbanism for the rest of us, will be published in April by Agate. He is also author of The New Class ConflictThe City: A Global History, and The Next Hundred Million: America in 2050. He lives in Orange County, CA.

Photo of Lake Palmdale California Water Project by Kfasimpaur (Own work) [Public domain],via Wikimedia Commons

Evolving California High Speed Rail Now Degraded To Only A Commuter Train

Sat, 04/09/2016 - 03:38

When voters passed in the November 2008 election, Prop 1A, they approved partially funding a 800 mile High Speed Rail project, that was to run from San Francisco to San Diego. The project was to be constructed quickly and be up and running by 2020.

Approved Business plans in 2012 and 2014, then projected construction to start from the Central Valley, near Fresno, and proceeding south through the Tehachapi Mountains to Los Angeles Union Station.

Now we see the High Speed Rail Authority is promoting a draft 2016 Business plan that abandons building south and instead promotes building north from near Bakersfield, but only to San Jose. The reason for this dramatic shift is lack of funding to complete the previously proposed segment to Southern California.

The Authority claims they have the funding to complete an Initial Operating Segment (IOS), which would run from about 20 miles north of Bakersfield to San Jose Diridon Station.  From Diridon Station, riders could use Caltrain to proceed further north to other destinations. The IOS segment is expected to be completed and usable around 2025.

The projected funding for this IOS, would come from Prop 1A bonds, Cap and Trade projected  pay as you go revenues as well as bonded revenues (thru 2050), and Federal funds that have been already allocated.  Constructing this segment would consume all currently available funds.

The key foundation for promoting this new plan, is that ridership will be greatly enhanced with commuters using this High Speed Rail section to commute from the Central Valley to Silicon Valley. The Authority and others are promoting this projection as a major improvement to the jobs / housing imbalance that currently prevails in Silicon Valley. The claim is cheap housing in Fresno or Bakersfield will induce workers from Silicon Valley to buy or rent in the Central Valley.  They promote a quite reasonable trip time of only 40 minutes on the train, making such a commute attractive.

But further scrutiny belies these assertions. The trip time on HSR will indeed be around 40 minutes, but that takes the commuter only to San Jose Diridon Station.  Diridon station is not where these commuters will work.  Indeed they will have to then transfer to another service at least once to get to their employers.  Analysis of the true trip time doubles the real commute time to around 80 minutes.  This was amplified by Palo Alto Mayor, Pat Burt at the recent Local Policy Makers group meeting March 24th.

The premise that workers will be enticed to move to the Central Valley because the cost of housing is much lower also needs examination.  Here one has to consider in this equation, the cost of commuting.

HSR transportation is a premium service.  By law the HSR trains must operate without a subsidy, a restriction which BART or Caltrain do not have to meet.  The projected HSR fare from Fresno or Bakersfield is $68 each way. For a daily commuter that is $136 per day, or about $34000 per year to pay for the HSR train ride. This does not include other charges like parking or transportation from Diridon to a final working destination.

Also working against the myth that the bottom line is cheaper for a commuter to live in the Central Valley, yet work in Silicon Valley, is the treatment of expenses on ones tax return. Home mortgage interest is a tax deductible expense on ones tax return.  Commuting train fares, are not a tax deductible item on a tax return.

All and all it just doesn’t add up that it is cheaper for a commuter to live in the Central Valley, and take HSR to Silicon Valley. There will be, despite Authority claims otherwise, very few commuters living in the Central Valley and commuting to Silicon Valley.

Finally, residents in Southern California are really being excluded by this new plan.  They will be paying in taxes to service the Prop 1A bond service.  They will be paying in higher gasoline costs to support Cap and Trade revenues. For Southern California residents, there is no benefit. They are simply being left out.

There is a shortfall in funding to later complete Phase I of the HSR project, that is the corridor from San Francisco to Anaheim; this short fall in funding is over $40 billion.  Such funding is nowhere to be found.  The un-certainty in even funding this new IOS is huge.  View the input from the Legislative Analyst’s report just presented at an oversight hearing on March 28th.

https://youtu.be/lEzkSGTkQgs

Let’s quit fooling ourselves. Former State Senator Joe Simitian in 2012 had it right when he stated on the Senate floor:

“This is the wrong plan in the wrong place in the wrong time,”.

Now is the right time to stop the project.

This piece first appeared at Fox and Hounds Daily.

Moving to the Middle: Domestic Migration by Metropolitan Area Size

Thu, 04/07/2016 - 22:38

Americans are moving to middle-sized metropolitan areas, according to the latest Census Bureau population estimates. Between 2010 and 2015, all of the domestic migration gain was in a broadly defined middle of metropolitan areas between 250,000 and 5,000,000. Both above and below that range there were huge domestic migration losses.

Middle Sized Metropolitan Areas (250,000 to 5,000,000 Population)

Between 2010 and 2015, more than 1.4 million people moved to the metropolitan areas that had between 250,000 and 5,000,000 population in 2010. These movers came from larger metropolitan areas, as well as smaller metropolitan areas, micropolitan areas and areas that are not within these core-based statistical areas (Note). The larger metropolitan areas lost nearly 800,000 domestic migrants, while the smaller areas lost more than 600,000.

Moreover, the trend is getting stronger. In each year since 2010, the middle sized metropolitan areas have increased their net domestic migration. In 2011, the middle sized metropolitan areas gained 184,000 net domestic migrants. This has gradually moved up to the 2015 figure of 341,000 net domestic migrants (Figure 1). In percentage terms, the middle sized metropolitan areas strongly increased their net domestic migration growth as a percentage of their population, from 0.12 percent to 0.21 percent (Figure 2).

Larger Metropolitan Areas (5,000,000 Population and Over)

At the same time, the nine larger metropolitan areas with over 5,000,000 residents and more have lost net domestic migrants in every year. In 2011, the loss was 80,000. It has increased every year since, to 228,000 in 2015. The percentage losses have grown dramatically. In 2011, the larger metropolitan areas lost 0.10 percent of their population to net domestic migration. By 2015, this had nearly tripled, to a loss of 0.28 percent.

Over time, the position of our largest metropolitan regions has deteriorated, even in comparison with smaller areas. In 2011, the largest metropolitan areas, though losing, did better than the smaller areas (those with under 250,000 residents). The smaller areas lost 105,000 net domestic migrants in 2011, compared to the smaller loss of 80,000 net domestic migrants in the larger metropolitan areas.

The largest metropolitan areas continued to do better than the smaller areas in 2012, as the gap was about the same. All of that changed in 2013, as the larger metropolitan areas began to sustain larger domestic migration losses than the smaller areas. By 2014, the losses in the smaller areas were less than one-half that of the metropolitan areas with more than 5 million residents. The smaller areas, including those outside the metropolitan areas, lost 113,000 net domestic migrants in 2015, while the larger metropolitan areas lost 228,000.

These losses are all the more remarkable given that some large metros, notably   Houston and Dallas-Fort Worth have been gaining net migrants, up 255,000 and 241,000 respectively. Two other metropolitan areas in the above 5,000,000 category also gained. Atlanta added 116,000 domestic migrants, albeit at a much slower rate than during the 2000s. Miami also gained, but only modestly (3,000).

The shift away from the largest metropolitan area group was driven by huge losses in the largest of the metropolitan areas in that category.  New York  lost 701,000 domestic migrants during the decade. Chicago lost 319,000 and Los Angeles was close behind at 280,000. Philadelphia lost 100,000, while Washington lost 13,000.

Smaller Areas (Under 250,000 Population)

Among the smaller areas, the peak loss was reached in 2012, at 136,000 net domestic migrants. Since that time, the smaller areas have improved on their net domestic migration losses modestly each year, dropping to the 113,000 in 2015. The annual domestic migration rates have been more constant in the smaller areas, starting at a loss of 0.14 percent in 2011 and fluctuating up and down to a maximum of 0.18 percent and a minimum of 0.15 percent in 2015.

More Detailed Analysis

Figures 3 and 4 show the domestic migration trends in more detailed population categories. By far the largest losses have been sustained by the megacities, New York and Los Angeles, with more than 10,000,000 residents. The metropolitan areas with between 5,000,000 and 10,000,000 population had done relatively well in the early part of the decade, but have dropped substantially. If the same trend continues to next year, net domestic migration losses would occur across this category.

By far the strongest gains were in the 1,000,000 to 2,500,000 category, where net domestic migration more than doubled from 2011 to 2015. There was also strong growth in the 500,000 to 1,000,000 category and in the 250,000 to 500,000 category. There was a more mixed record among the metropolitan areas with between 2,500,000 and 5,000,000 population, with a rise to 2014, but a reduction in 2015.

The smallest categories, from 50,000 to 250,000 population and under 50,000 population lost in each year, though there were not large fluctuations.

A Trend?

The trend that favors the migration from the largest and smallest areas to the broad middle of metropolitan areas may be an aberration. But we may see an even larger share of future domestic migration to middle-sized metropolitan areas, together with two or three larger areas (Houston, Dallas-Fort Worth and maybe Atlanta).

Note: Core based statistical area is a term that includes metropolitan areas and micropolitan areas, which are larger and smaller labor market areas, with slightly different definitions. Additional information can be obtained from the Office of Management and Budget.

Wendell Cox is principal of Demographia, an international pubilc policy and demographics firm. He is a Senior Fellow of the Center for Opportunity Urbanism (US), Senior Fellow for Housing Affordability and Municipal Policy for the Frontier Centre for Public Policy (Canada), and a member of the Board of Advisors of the Center for Demographics and Policy at Chapman University (California). He is co-author of the "Demographia International Housing Affordability Survey" and author of "Demographia World Urban Areas" and "War on the Dream: How Anti-Sprawl Policy Threatens the Quality of Life." He was appointed to three terms on the Los Angeles County Transportation Commission, where he served with the leading city and county leadership as the only non-elected member. He served as a visiting professor at the Conservatoire National des Arts et Metiers, a national university in Paris.

A $15 Minimum Wage Is A Booby Prize For American Workers

Wed, 04/06/2016 - 22:38

In principle, there is solid moral ground for the recent drive to boost the minimum wage to $15, with California and New York State taking dramatic steps Monday toward that goal. Low-wage workers have been losing ground for decades, as stagnant incomes have been eroded by higher living costs.

This has been particularly tragic for workers in high-priced cities like San Francisco, Seattle, Los Angeles and New York, where the movement has achieved irresistible momentum. If the Democrats manage to win a sweeping victory in the fall, the $15 minimum could also be imposed nationwide, with huge impacts on “laggard” regions like the South.

Yet if the campaign to boost the minimum wage reflects progressive ideals, the underlying rationale also exposes the failure of these high-priced cities to serve as launching pads for upward mobility for the vast majority of their residents. In effect, the fight for $15 is a by-product of giving up – capitulating on the idea that better opportunities can be created than the menial service jobs that increasingly are the only opportunities for the urban poor. Higher wages will make these jobs moderately more tolerable, while further cementing the wide gulf between the haves and have knots.

It is not a coincidence that inequality — the issue most closely tied to the minimum wage drive — is consistently worst in larger, denser, deep blue cities such as New York, Los Angeles, San Francisco. Manhattan, the densest and most influential urban area in North America, exhibits the most profound level of inequality and bifurcated class structure in the United States. If it were a country, New York City would rank 15th worst out of 134 nations, according to James Parrott of the Fiscal Policy Institute, landing between Chile and Honduras.

New York, San Francisco, L.A. and Seattle are at the forefront of a new urban economy, based on industries such as finance, technology and media, that generally creates jobs for the highly educated only. Virtually every region at the cutting edge of the minimum wage movement has seen a rapid decline in traditional blue-collar jobs — notably in manufacturing — which often paid well above the minimum wage, and offered potential for further individual advancement.

In these and other core cities, we are seeing something reminiscent of the Victorian era, where a larger proportion of workers are earning their living serving the wealthy and their needs as nannies, restaurant workers, dog-walkers and the like. In New York City, as of 2012, over a third of workers were employed in low-wage service jobs, a percentage that rose through the recovery from the Great Recession, according to a study by the Center for an Urban Future. The largest growth in new jobs in NYC between 2009 and 2014 came primarily in low-wage fields. Of the 401,800 net jobs the city gained over that span, 76,400 were in food services and drinking establishments, with an average annual wage of $26,200. The sector that added the second largest number of jobs: ambulatory health care, at 55,400, with an average wage of $46,200. Meanwhile at the high-wage end of the spectrum, Wall Street employment was flat, and the glitzy fields of information services and movies and sound recording added 26,000 jobs.

Given shrinking opportunities for middle and working class people, it’s not surprising that many seek a more direct redress from the government. If the odds of working your way up are limited, and a working-class job cannot pay for your basic necessities, people have to resort to political solutions, much as occurred in the early decades of the last century. If you have been relegated to the expanding precariat –those essentially living check to check — raising the wage floor might seem very appealing.

Essentially the minimum wage campaign rests on the notion that traditional middle class uplift cannot be achieved. The problem is, a $15 an hour income represents hardly enough to pay the rent for a small apartment anywhere near the blue cities where the new minimum will hit first. It does allow, however, a way of allowing the dominant wealthy wings of the Democratic Party — financial, real estate, media and tech interests — to hand out a convenient sop to their erstwhile labor allies.

In some places, the hike may not have an immediate discernible economic impact. Higher wages and prices can likely be absorbed in high-cost areas with lots of wealth, such as Seattle, Manhattan and San Francisco. Some recent research shows that Seattle, which was the first big city to pass a wide-scale, phased in increase, with some wages now hitting $13 an hour, has seen slower growth in restaurant employment than its periphery. However, its economy has hardly collapsed.

The impacts may be less positive in places like the Bronx and ungentrified Brooklyn. It is in these areas where the likely shrinking of lower-wage opportunities in response to higher salaries may be felt the strongest; the flow of jobs that can move to lower-wage states will likely accelerate.

The  impact in California will, if anything be larger, as the wage hike will be imposed in a wider fashion on a hugely diverse state. Some 25 percent of workers would get a raise through the kindness of Sacramento. By 2022, by some estimates, the California minimum wage would represent 69 percent of the median hourly wage in the state, assuming 2.2 percent annual growth from the current median of roughly $19 per hour. This compares with a current federal minimum that is 38 percent of the median. Economic modeling suggests the precipitous rise on such a mass scale will slow the state’s employment growth, particularly at the lower end.

To be sure, higher wages could be a blip in wealthy and thoroughly de-industrialized places like San Francisco – if higher labor costs boost the price of beet-filled ravioli, it doesn’t undermine the market in a place where hipsters and elite workers still have dollars to spend. But it could mean the loss of employment in the lower ends of construction, manufacturing and logistics, and a broader impact in the state’s interior and more heavily minority cities, where much of the state’s poverty is concentrated. The $15 dollar minimum represents only 40 percent of median wages in San Jose/Silicon Valley and 44 percent in San Francisco, but 61 percent for Los Angeles and 74 percent in Fresno.

Ultimately local workers in poorer areas may see higher wages, but less opportunity. One possible harbinger may be the decision by Wal-Mart to leave Oakland.

Who Wins: Reviving the Blue Model

Of course, not all jobs can be moved — but they can be automated. This is already occurring in parts of the restaurant industry, where chains have been introducing touch screen devices to take orders in lieu of waiters and waitresses. The mass automation of industries such as fast food will accelerate, eliminating all but necessary jobs. Some of this would occur naturally; it’s interesting that some of the most cutting-edge developments in the low-labor content restaurant model have occurred in high cost, progressive San Francisco, where the new restaurant Eatsa has almost entirely automated service, and the startup Momentum Machines is developing a mechanized system to cook and assemble burgers, and other meals. Those who will find their way to a new minimum will sing its praises, and rightly so, but many others –notably entry level workers and teenagers — may find themselves forced out of the labor market, or joining the growing ranks of contingent workers.

Perhaps the greatest beneficiaries of the minimum wage hike will not be the bulk of lower wage workers in blue states, but the people who increasingly dominate their economies. For one thing, a higher minimum removes the stigma of extreme inequality that gives a bad reputation to an economic system that has little need for broad categories of workers. They can feel better about themselves, and avoid the kind of redistribution promised by the likes of Bernie Sanders.

And as the American Interest recently predicted, those most likely to benefit down the line from the higher wages will be the tech companies that will come up with the software and automated systems that replace the service jobs now made less economically competitive by the wage hikes. It’s not a loony fringe concept: the President’s Council of Economic Advisers recently estimated that lower-wage service jobs have an 80% probability of being automated.

So in the end, a $15 minimum wage, set in the low growth economy of our times, may end up boosting the very class-based hierarchies that are already increasingly evident. Ultimately it may represent a case of a well-intentioned measure that, while sounding radical, only accelerates our road back to feudalism: a society dominated by the few where many depend on the generosity of their betters and the middle class, already shrinking, fades into the dustbin of history.

This piece originally appeared at Forbes.

Joel Kotkin is executive editor of NewGeography.com. He is the Roger Hobbs Distinguished Fellow in Urban Studies at Chapman University and executive director of the Houston-based Center for Opportunity Urbanism. His newest book, The Human City: Urbanism for the rest of us, will be published in April by Agate. He is also author of The New Class ConflictThe City: A Global History, and The Next Hundred Million: America in 2050. He lives in Orange County, CA.

Unemployed woman photo by BigStockPhoto.com.

Future of Suburbia: Report from Cambridge

Tue, 04/05/2016 - 22:38

In the United States, over 69 percent of all residents live in suburban areas. Across the globe many other developed countries are primarily suburban, while developing countries are increasingly suburbanizing. By 2050, an additional 2.7 billion people are anticipated to live in metropolitan regions around the world, and suburbs are a significant portion of this urban expansion. Over the past two years, 150 experts from numerous, diverse disciplines contributed research that explores this contemporary global phenomenon – and on April 1st their work was showcased at the MIT Media Lab for the Future of Suburbia conference.

The “Future of Suburbia” was chosen as MIT’s Center for Advanced Urbanism biennial theme in order to shed light on the growing role suburbs play in our lives and how they may be improved for the future.   Suburbia is an often polarizing issue that should no longer be ignored by the fields of Planning and Design.

The conference is just one of three products the Center for Advanced Urbanism created for its biennial research theme. An exhibition, located on the ground floor of the MIT Media Lab included infographic mappings, a 22ft x 8ft dynamic model of a 3 million population polycentric region in the year 2100, and aerial footage of global suburbs. The third product, a publication entitled Infinite Suburbia (Fall 2017), brings together 50+ authors and about 700 references, providing groundbreaking research on our low-density future.

Each of MIT’s five schools were represented at the conference, spanning twelve key fields. Attendees also included students from Harvard and Chapman University, and speakers in demographics, entrepreneurship, history, urban design and media production. The findings were presented within four design frameworks, including heterogeneous, productive, autonomous and experimental, which were explored through a variety of fields; including design, architecture, urban planning, history and demographics, policy, energy, mobility, health, environment, economics, and applied and future technologies.

The conference centered on the question, how might suburbia be upgraded to better suit our needs? Can new suburban models be created for developed, but also developing, countries? What challenges will suburbs face in the future? Despite such a large and complex topic, enlightening data, opinions and predictions were given regarding suburbs and their role in a sustainable future.

Forgetting the Urban-Suburban Divide

The urban-suburban dichotomy is highly debated (in fact, urbanists and planners themselves use 200 different terms to describe suburbia), but the Future of Suburbia conference tried to stay above the fray, instead describing the two camps as one evolving continuum. Throughout the day points were made that the suburb and urban can and should learn from one another. Traditionally, we have failed to recognize just how important suburbia is in this country and globally. By polarizing the suburb and the city we ignore how the making of peripheries can greatly contribute to urban centers, and vice-versa. However, this conference did not focus on trying to define suburbia, but on how we should think of urbanization’s holistic impact.

Historian Robert Bruegmann kicked off the conference by outlining its history and persistence worldwide despite economic and political differences. Bruegmann finished his introduction by advocating that we be “more modest in what we think we know and what we plan for our future.”

The Suburbs as a Heterogeneous and Productive Form

The conference’s first panel of the day, on heterogeneity, dealt largely with numbers and trends. One statistic that stood out – 90 percent of Americans live in suburban areas, while only 10 percent live in urban cores. Also, 80 percent of Americans wish to live in a detached home. As millennials get older, more will be married and begin having children, making suburban living all the more desirable. In the United States, the denser the community, the fewer children there are. Just take a look at San Francisco, where there are more dogs than children and families are increasingly moving out of the city, or Manhattan, which has the lowest percentage of children in the country.

It is also the highly educated and majority white that are moving to city centers, while two thirds of millennials do not have college degrees. It seems that what people truly want in their hearts, is being mixed up with costs, in both the city and suburbs. Economist Jed Kolko described the process as circular – where do people want to go, what is the economic situation, and where are the externalities. Kolko admitted it’s hard to quantify how much demand for suburbia is an impact of policy, or consumers’ hearts.  

Ali Modarres, director of Urban Studies at University of Washington Tacoma, presented on the suburbanization of immigrants, stating, “Immigration is redefining and complicating the word suburb”. He explained, “…suburbs, old and new, are more likely to become super diverse.” Why are immigrants moving increasing to suburbs and not city centers? Because suburbs are home to a growing working class population, seeking affordable housing close to emerging job centers. For example, Orange County and northern LA County have seen significant foreign born population growth. And David Rudlin, winner of the prestigious Wolfson Prize, has high hopes for the future of the polycentric city. He emphasized the importance of a strong economy in suburban settings, asserting, “If you don’t have the economic driver of a city, you end up with a dormitory.” He called for the open sourced suburb as a way for creating a bio-system that allows diversity to develop.

How can we design suburbs in a more productive, environmentally friendly way? The next panel explored this question beginning with Susannah Hagan, professor of Architecture at the University of Westminster, who emphasized that the suburban and urban are different, but should not be thought of as separate entities. The suburb can benefit the city, while the city, in turn, can benefit the suburb. Hagan also discussed strategies for post-industrial cities, to “manage degraded industrial spaces.” She talked about different types of seeds – actual plant seeds, investment seeds, and the concept of idea seeds for regenerating cities and suburbs.

Joan Nassauer, professor of Landscape Architecture in the School of Natural Resources and Environment at the University of Michigan, showed that suburbs can be environmentally productive places, making the point that by area, as much carbon is stored in Michigan’s southeast exurban residential landscapes as in the managed forests of North Country.

Mitchell Joachim, co-founder of Terreform ONE and associate professor at NYU, proposed that agriculture should be brought back into the suburbs which would create a “new kind of nature” that can shrink our ecological footprint. Innovative ecological designs such as living houses, urban farm pods, and cricket shelters were explored. The question then becomes, are suburban residents ready to break the model?



An Autonomous and Experimental Future

The main challenges of autonomy in the suburbs are regulatory, technical, and complicated by the user experience. But with the right tools, autonomy has the ability to transform the way people live and travel outside the city. Joseph Coughlin, professor and Director of the MIT Age Lab moderated the panel that included Knut Sauer of Hyperloop Technologies, Eran Ben-Joseph of MIT’s Urban Studies and Planning department, and Nick Roy of the Department of Aeronautics & Astronautics at MIT.

New technologies will change our lives, allowing us to travel from LA to San Francisco in 25 minutes, or purchase something in the middle of the night and have it delivered by drone within the hour. The ideas presented look promising – in just a couple years the Hyperloop will be a reality for human passengers. But the innovations may still need tweaking, since people tend to reach out to drones and dangerously interfere with their motors.

If these weren’t experimental enough, the next panel consisted of conceptual housing models and the creation of an entire city dedicated to testing. The experimental panel was moderated by ex-suburbanite and writer for the New York Times, Allison Arieff, who explained how she wanted to see cities and suburbs learn from each other rather than fight.

Paul Fieler laid out upcoming plans for CITE City, a New Mexico based model city that will be built to test, evaluate, and certify new urban technologies. The development will look and function as a real city, and thousands of people will move into the houses and apartments to conduct real-life experiments. David Neustein of Other Architects proposed another urban concept for Australia, the most suburbanized nation in the world. As the population ages and preferences shift towards sustainability, Neustein’s model would facilitate the downsizing of Australia’s many “McMansions” so that the elderly could rent out their second stories. It would also boost Australia’s housing stock and redesign facades to become more integrated into nature.

Meanwhile, Bob Geolas of the Research Triangle Foundation in North Carolina cities must understand what to embrace in terms of their brand, culture, and urban form. He outlined how the Research Triangle is overcoming its outdated research park form and building upon its values and strengths to become relevant in the economy and contribute to a sustainable future. Physical and programmatic collaboration, unique and relevant design, events and programs, and public spaces will all be key components for making the Triangle an attractive place to work in the suburbs.

Takeaways

Topics included innovation in cities, and economic and cultural trends, including immigration, demographics and lifestyle preferences, and how these forces interact in the urban, or suburban milieu. As population grows and technology improves, the researchers predict that the urban-suburban divide will disintegrate, resulting in a continuum of urbanity, one that takes form as a poly-nodal fabric of different hubs of innovation, living and sustainability.

Also, we learned how important it is for urban designers to collaborate with business leaders, economists, and city officials, and the community residents themselves to design and implement the most appropriate and beneficial suburban structures. These fields traditionally function in silos, but the future requires that these disciplines co-mingle in the creation of sustainable, productive, and creative places to live. If we focus less on the semantics of the urban-suburban divide, and channel our energies on creating better places to live for all types of people, more will benefit.

Alicia Kurimska is a researcher at the Chapman University Center for Demographics and Policy. She is a first generation American with a Slovakian background who graduated from Chapman University with a degree in history, writing her thesis on Czech President Edvard Benes’s struggle to preserve the Czechoslovak nation, inspired by her year-long studies at the Anglo-American University in Prague.

Charlie Stephens is a researcher at the Chapman University Center for Demographics and Policy, and an MBA candidate at the Argyros School of Business and Economics at Chapman University. He is also a regular contributor to the creative business site PSFK.com and the founder of substrand.com, a hub for sharing and discussing the creative, intellectual and emotional aspects of cities.

Photos by Justin Knight.

Aristocracy of Talent: Social Mobility Is the Silver Lining to America’s Inequality Crisis

Mon, 04/04/2016 - 06:42

Yes, wealth concentration is insane. But the ways in which wealth is shifting are surprising—and give reason for a little optimism.

In an age of oligarchy, one should try to know one’s overlords—how they made their money, and where they want to take the country. By looking at the progress of the super-rich --- in contrast with most of us --- one can see the emerging and changing dynamics of American wealth.

To get a sense of these trends, researcher Alicia Kurimska and I  tapped varying analyses from the Forbes 400 list of richest Americans. No list, of course, captures all the relevant data, but the Forbes list (I am a regular contributor to that magazine’s website) allows us to look not only at who has money now, but how the dynamics of wealth have changed over the past decade or more.

The bad news here is that our oligarchs are getting richer, and, unlike in the decades following World War II, they are primarily not taking us on the ride. Indeed at a time when middle-class earnings have stagnated for at least a decade and a half,   the oligarch class is making out like bandits. This, of course, extends to much of the infamous “top 1 percent.” The share of income of the top 1 percent of households in the US increased from 10 percent in 1979 to upwards of 20 percent in 2010, as famously found by economist Thomas Piketty and Emmanuel Saez. 

But if the highly affluent are thriving, the super-rich are enjoying one of the brightest epochs since the days of the robber barons. These people , according toa study by economists Steven N. Kaplan and Joshua D. Rauh, the top 0.0001 percent of 311.5 million US individuals. In constant 2011 dollars, their wealth has grown seven-fold since 1992 --- from $214 billion in 1982 to $1.525 trillion in 2011. This at a time when most Americans have endured little or no real income growth.

 What we are talking about is a concentration of wealth and power unprecedented since the turn of the last century. According to an analysis by the left-leaning Institute for Policy studies, America’s 20 wealthiest people own more wealth than the entire bottom half of the population—152 million people in 57 million households. The top 100 own as much wealth as the entire 44.5 million-strong African-American population  (there are only two African Americans on the list), and the top 200 have more than the entire 55 million-strong Latino population (there are 15 Latinos on the list). To make an international comparison, the 400 have more wealth than the GDP of India, arguably the most up and coming big economy on the planet. 

The Rise of the self-made

Not all the news is bad, however. The proportion of the 400 who inherited their money has been steadily decreasing. There are more self-made billionaires than existed in the 1980s. Kaplan and Rauh report that since the 1980s the share who grew up wealthy fell from 60 percent to 32 percent. 

This does not mean so much the return of Horatio Alger --- the share who grew up poor remained constant at 20 percent --- but that most super-wealthy came from affluent but not rich families, which gave them some head start, notably in education.They did not hand the keys to the kingdom to their offspring. Rather than country clubbers clipping coupons, the rich since the 1980s have become largely, if not entirely, self-made.  

But origins are not the only thing that has changed in this era of oligarchy. So too have the industries that create the wealth --- largely represented by the shift toward technology and finance --- and, not surprisingly, where that wealth tends to concentrate. These shifts are already changing not only our economy, but also the outlines of political power, as industries friendlier to Democrats, notably tech and finance, supplant those, notably energy, that have long been associated, particulary in the last decade,  with the Republicans.

The shift in the fortunes of the super-rich reflect changes in our industrial structure over the past third of a century. The big winners have been in scalable businesses  where capital is king and rapid accumulation possible. Rauh and Kaplan, for example, report that the big winners have emerged  not only in tech, but also include owners of retail and restaurant chains, tech firms and private finance, including hedge funds  Over the period between 1982 and 2012, finance’s share grew the most, followed by technology and mass-retailing.

Who’s losing ground? The big losers are a bit counter-intuitive. Despite all the attacks on “big oil,” energy has actually suffered the biggest decline in terms of presence on the Forbes list. Energy, for example, used to account for about 21 percent of the 400,  but that has shrunk to about 11 percent. Equally puzzling, amidst a high-end building boom (not so much for the hoi polloi), real estate’s share has dropped about as much. Perhaps less surprising are the losses among non-tech based consumer industrial companies. 

Since 2012, the year the Rauh study was completed, the tech billionaires have, if anything, expanded their presence, while it’s likely that, with the drop in energy prices, the oil barons will slip even further. On the 2014 list, for example, in terms of dollar gains, five of the top six were from the tech sector, led by Mark Zuckerberg, whose fortunes increased by a remarkable $15 billion (Warren Buffett was the lone exception). Mark Zuckerberg’s gains were larger than the $12 billion increase between Charles and David Koch, even at the peak of the energy boom.

Fully half of the top 10 on the list came from the tech community, with the balance made up of Wall Street/finance people (Buffett and Michael Bloomberg) along with the Kochs and David Walton, the youngest son of Wal-Mart founder Sam Walton.

The New Geography of Wealth

Perhaps more surprising has been the shift in the location of the rich. Despite the rise of the tech oligarchs, the biggest gainers over the past decade have not occurred in California but in New York, Florida and Texas. This reflects not only the power of Wall Street and the investment class (some of whom have decamped to Florida), but the growing diversification of the Texas economy. 

Oil, of course, still plays a critical role among the Texas rich, but it’s much more than that now. The richest people in the Lone Star Stateinclude Alice Walton, the Ft. Worth-based heir to the retail fortune, but also Austin tech mogul Michael Dell, Dallas financier Andy Beal, and San Antonio supermarket mogul Charles Butt. The first energy billionaire, pipeline entrepreneur Richard Kinder, clocks in as fifth richest Texan. Even if energy remains weak for the next decade, Texas seems likely to keep producing gushers of billionaires.

If we break the rich list by region, it’s no surprise that New York, long the nation’s premier financial center, would rank first, with 82 billionaires. In second place is the San Francisco area, with 54 billionaires, most of them tied to technology. The Bay Area, with about one-third of the population, surpasses third-place Los Angeles, with 34. Miami ranks fourth with 27, Dallas fifth with 19; each is ahead of the traditional second business capital, Chicago, which ranks sixth with 15, just a few paces ahead of  Houston with 12.

The Future of Oligarchy  

What is the future trajectory of wealth in America? One thing seems certain: the twin tech capitals of Bay Area and Seattle, now home to nine of the 400, are likely to expand their reach. One clear piece of evidence is age; people generally do not get richer when they retire. In contrast, virtually all self-made billionaires under 40 are techies

Of course, the biggest growth can be expected in the Bay Area, particularly as tech people think of new ways to “disrupt” our lives – for our own good, of course. Whole industries such as music, movies, taxis, real estate are increasingly controlled from the Valley; as these companies wax, many of the old fortunes made in these fields will begin to wane. This is also true across the board in retail, where Seattle’s Jeff Bezos now looms as a colossus greater than any individual chain of traditional stores.

Ultimately what will make “the sovereigns of cyberspace,” to quote author Rebecca MacKinnon, so dominant is precisely what made John D. Rockefeller so rich: control of markets. Google, for example, accounts for over 60 per cent of Internet searches. It and Apple control almost 90 percent of the operating systems for smartphones. Similarly, over half of American and Canadian computer users use Facebook, making it easily the world’s dominant social-media site. 

And soon, they, like the old Wall Street elites or the energy barons, may be able to regard the government as yet another subsidiary. They will benefit greatly from the likely electoral victory of the Democrats, who are increasingly dependent on tech contributions, while the old economy oligarchs already in retreat, in energy, manufacturing and real estate, fade before them. 

The prognosis for the future of American wealth, then, is for an ever-expanding role for both tech and private investors, and a gradual shift away from basic industries that are geared to our diminishing middle class. This may not be good for America but will be wondrous indeed for the ever more powerful, and outrageously wealthy, new ruling class.

This piece originally appeared at The Daily Beast.

Joel Kotkin is executive editor of NewGeography.com. He is the Roger Hobbs Distinguished Fellow in Urban Studies at Chapman University and executive director of the Houston-based Center for Opportunity Urbanism. His newest book, The Human City: Urbanism for the rest of us, will be published in April by Agate. He is also author of The New Class ConflictThe City: A Global History, and The Next Hundred Million: America in 2050. He lives in Orange County, CA.

Singapore’s Midlife Crisis

Fri, 04/01/2016 - 22:38

Lee Kwan Yew, one of the great political architects of our time, died a year ago, but the regime he established in Singapore remains entrenched in power. In fact, the parliamentary elections last year—to the surprise and consternation of Lee’s critics—enlarged his People’s Action Party (PAP) majority in Parliament from a record low of 60 percent to close to 70 percent. Despite talk of a “new normal” defined by more competitive politics, the city-state’s norms remain very much as they have been for the better part of a half century. Voters have their reasons for remaining in thrall to the PAP. The party’s cadre of well-educated civil servants has turned the Republic of Singapore into arguably the best-run city on the planet, a place of almost surreal efficiency. Thanks to its reputation for cleanliness, safety, and prosperity, Singapore is attracting growing numbers of immigrants from around the world. In 2013, the International Monetary Fund estimated Singapore’s per-capita GDP to be $78,000, making the average Singaporean wealthier than the average American.

Yet, despite clear support for the regime among the electorate, many thoughtful Singaporeans look to the future with foreboding. One major worry is that the city-state has reached maximum capacity, with 5.3 million people crammed onto a flood-prone island of just 225 square miles. The newcomers have driven up home prices and displaced natives. Talk among the city’s planning and business elites about luring even more immigrants—raising Singapore’s population to roughly 7 million by 2030—has generated a growing sense of unease among the usually well-behaved local residents in this most orderly of places. Even amid their prosperity, Singaporeans are now among the most pessimistic people in the world, alongside the understandably dour residents of Greece, Cyprus, Slovenia, and Haiti. Some have voted with their feet—almost one in ten Singapore citizens now lives abroad, and according to a recent survey, half of Singaporeans would leave if they could.

Since the city broke off from its short-lived federal union with Malaysia in 1965, the PAP has exercised an iron grip on Singaporeans’ political loyalties, but there are growing concerns—including high up in the ranks of business, government, and academia—that this prosperous nation faces a new and more uncertain era, one for which the government’s top-down planning model may no longer be well suited.

At the time of its independence from Great Britain in 1959, Singapore was a poor, isolated, and overcrowded Asian metropolis, with high levels of unemployment and illiteracy. Western observers questioned whether the city could survive on its own—the Times of London, for example, predicted that the Singaporean economy “might collapse” without the presence of the British military. The 1963 union with Malaysia fell apart over racial and ideological tensions. China is the mother country of most Singaporeans; ethnic Chinese form 74 percent of Singapore’s population, with Malays constituting just 13 percent and Indians most of the rest.

In 1965, the quasi-socialist PAP, led by 41-year-old Cambridge-educated lawyer Lee Kuan Yew, took power and sought to diversify the Singaporean economy. A scion of an old Hakka Chinese trading family, Lee created an “authoritarian constitutional democracy,” as British historian C. M. Turnbull described it. Determined to avoid both the corruption afflicting most of Asia’s nonaligned countries and the crushing rigidities of Communism, Lee served in effect as an elected dictator. In a 1980 biography, author Alex Josey compared Lee’s leadership of the PAP with Mao Tse-tung’s role in the Chinese Communist Party. But Lee played things very differently. As much a product of British political ideology as of Chinese culture, Lee came to Fabian socialism directly from the source: he was, as Josey put it, “a patient revolutionary,” and the PAP’s philosophy of governance was rooted in the British socialist tradition of gradual reform. Speaking in 1965 at an Asian socialist conference in India, Lee embraced the notion that “the socialist has got to be realistic and practical in his approach.” Under Lee, the PAP nurtured the economy much like greenhouse agronomists nurture crops, implementing policies only after intense study and input from experts, local and global.

Bustling street in Singapore, 1962. (Photo by John Pratt/Keystone Features/Getty Images)

In his bid to modernize Singapore—celebrated last year in the production there of The LKY Musical—Lee embraced a commitment to trade and the rule of law. During the 1970s, due largely to new investments and better use of personnel, productivity in Singapore’s trade sector grew by roughly 40 percent. Under Lee, the PAP invested heavily in the island’s great natural advantage: the 16-kilometer-wide Singapore Strait, connecting East Asia with the Indian Ocean. One of the party’s early accomplishments was a labor deal with the port’s labor unions, allowing for relaxed work rules and an updating of the facility. By 1980, the majority of Singaporeans worked in the trade sector, which led much of the city’s productivity growth.

The PAP administrators weren’t content to see Singapore become a mere trading post, however. In contrast to other developing Asian economies, which emphasized local entrepreneurship and state-owned or -directed companies, Lee’s planners set about enticing American, European, and Japanese multinationals to relocate by touting Singapore’s English-speaking workforce, low-tax environment, and by-now first-class infrastructure. The country’s big break, Lee later suggested, came in 1968, when Texas Instruments—then one of the world’s largest manufacturers of semiconductors—opened a factory employing 1,000 people at the Kallang Basin industrial estate. “We had to create a new kind of economy, try new methods and schemes never tried before anywhere else in the world, because there was no other country like Singapore,” Lee reminisced in his 2000 memoir, From Third World to First.

Continuing to look ahead, Lee and his mandarins understood that Singapore couldn’t thrive solely as a manufacturing hub, either. They correctly anticipated the evolution of an economy more reliant on technology and high-end services—for which education would be crucial. “Education must serve a purpose,” the PAP declared in 1965, and schooling was tailored to meet development goals, including instruction in English. It worked: Singaporean students do far better on tests than either their American counterparts or the average of OECD countries, and the Center on International Education Benchmarking describes Singapore’s workforce as “among the most technically competent in the world.” The national educational formula—especially the Singaporean approach toteaching math, based on intensive instruction and a focus on problem solving—has been widely adopted, including in the United States and Canada.

Singapore’s development model also influenced its neighbors, especially China. Deng Xiaoping visited in 1978, and the famously pragmatic Communist autocrat saw an ideal formula for lifting his country out of poverty. Yet as China moved forward, Singapore ascended even higher.

In a recent study that I conducted with the Manhattan Institute’s Aaron Renn and demographer Wendell Cox for Chapman University and the Singapore Civil Service College, we ranked global cities on factors including connectivity to the world economy, demographic diversity, cultural influence, technical workforce, foreign investment, and financial power. Singapore placed fourth, just behind London, New York, and Paris, but ahead of Tokyo and Hong Kong, and far ahead of much larger Beijing or Shanghai. Singapore has earned similar scores in other studies: ninth in the A. T. Kearney 2014 Global Cities index and fifth in the London-based Globalization and World Cities Network. These rankings are remarkable, considering that Singapore is much smaller than its prime competitors. Thirteen cities in China alone have larger populations.

Lee Kwan Yew in 2013. (Photo by Chris McGrath/Getty Images)

But Singapore’s appeal to foreign investors and migrants is easy to understand. The city has developed arguably the world’s best urban infrastructure, and its streets are rarely congested. Subways and buses, though crowded, are clean and generally well-functioning. The PAP regime’s intelligent planning also extended to housing. Before the PAP came to power, Singapore’s housing stock was dominated by run-down slums. By establishing the Housing Development Board, the state created decent, if small, residences for its citizens. This helped keep housing prices well below those in other Asian cities. Wendell Coxestimates that the city’s housing costs relative to income are roughly one-third to one-half those in Hong Kong, Shenzen, Beijing, and Shanghai. Its homeownership rates are well above those in the United States.

Singapore also offers a stable legal and business climate. Like Hong Kong, the city-state benefits from a tradition of British governance and law. According to the World Justice Project’s ranking of civil justice systems—assessing the ability of ordinary citizens “to resolve their grievances and obtain remedies through formal institutions of justice”—Singapore ranks sixth, behind Norway, the Netherlands, Germany, Denmark, and Sweden, but ahead of Canada (13th) and the U.S. (27th). By comparison, China ranks 79th. Along with Hong Kong, Singapore also appears regularly at the top of global rankings for business climate. A combination of legal norms and transparency has lifted Singapore to become the world’s fourth global financial center, behind only New York, London, and Hong Kong. Singapore is home to twice as many regional headquarters for multinationals as much larger Tokyo. A 2011 Roland Berger study named Singapore the leading location for European companies to establish headquarters in the Asia-Pacific.

To the extent that Singapore has a current economic weakness, it is tied to the PAP’s top-down planning model: key economic decisions are made not by entrepreneurs but by government-led agencies and large conglomerates like Singapore Airlines, GIC, and Temasek Holdings. In Hong Kong, Taiwan, and South Korea, by contrast, privately owned firms generate wealth while also wielding power. Singapore has no equivalents of Hong Kong’s Li Ka Shing, whose net worth is estimated by Forbes at over $30 billion; his Cheung Ho conglomerate employs 280,000 people in 52 countries. Nor does the city-state boast any companies like Taiwan’s Foxcomm, a dominant global power in manufacturing; South Korea’s Samsung, among the world’s leading tech and telecommunications firms; or even China’s Ali Baba, a start-up that has grown into one of the world’s top Internet firms.

Singapore has avoided a common trap for governments throughout Asia: corruption. Lee and the PAP kept Singapore’s government clean by paying top bureaucrats high salaries. Freed from temptation, these bureaucrats, as one history of the civil service put it, could focus on ways “to mould people’s behaviors.” If Singaporeans did as they were told, they would benefit: this was the PAP’s essential promise.

For a long time, it seemed to work. Most Singaporeans continued to back the PAP, in large part because the party delivered the material goods. “In Singapore, we’ve been very looked after. The social contract was if we vote for you, we the government will look after you,” says Singapore-born entrepreneur Calvin Soh. This “patriarchal system of governing,” as he calls it, was ideally suited for a manufacturing economy, where people were “efficient, obedient, and followers.” The bureaucracy carefully built the city’s economy, expanding opportunity for the city’s middle and working classes. Unemployment, 14 percent at the time of independence, became rare, and it remains so today, at around 2 percent.

But “moulding people’s behaviors” has proved more difficult than building new transit lines or improving port facilities. Even in the early days, the PAP’s approach prompted some opposition and grumbling about the regime’s authoritarian bent. David Marshall, a former Singaporean ambassador to France, suggested in 1994 that the PAP was possessed of “a computer brain and a plastic heart.” He chastised the ruling party’s “suffocation of dissent,” which many observers believe continues, though to a lesser degree than in the past.

Today’s Singaporeans, notes Soh, have less faith in the PAP than their forefathers did, partly because of economic factors. As recently as 2011, annual GDP growth chugged along at 6 percent, but last year it grew by just 2 percent, a rate similar to that of the United States and other high-income countries. Meanwhile, mirroring another problem in the affluent world, real wages for ordinary Singaporeans have stagnated. From 1998 to 2008, the income of the bottom 20 percent of households dropped an average of 2.7 percent, while the salaries of the richest 20 percent rose by more than half. Singapore’s educated population also faces growing competition from China and India, which are as hungry for success as Singapore was a half-century ago. “We went from wild animals forging a new country to tamed, well-fed animals in a zoo,” Soh jokes. “We kind of got contented and lost that hunger, that desperation, that edge for the hunt. We are a victim of our success.”

Once, the bureaucracy thought that it could “create” a new culture. But many young Singaporeans don’t want their culture manufactured for them any more. Singaporeans, notes graduate student Arthur Chia, are “proud of what we have built, but many Singaporeans are also concerned with what we may be losing.”

In a sense, there are two Singapores: one seen by multinationals and business travelers; and the other serving the local population. A trip down Orchard Road, the city’s historic shopping boulevard, reminds one of Hong Kong’s Causeway Bay, New York’s Fifth Avenue, or London’s Regent Street. Much of this Singapore—so anxious to appeal to the global rich and corporations—has become uniform and predictable. A once-unique urban environment has been transformed into what architect Rem Koolhaus calls “the generic city,” “a city without qualities,” and a “Potemkin metropolis.”

The young are drawn to the other Singapore. In areas such as Geylang, restaurants, bars, and ill-disguised houses of prostitution coexist with a heavy concentration of Buddhist temples and Islamic mosques. Also popular is Tiong Bahru, an old art-deco district of open-air restaurants, hip bars, and charming apartments. But even here, independent restaurants and shops, which once proliferated, struggle with high rents, as they do in other prosperous global cities.

These districts satisfy native Singaporeans’ nostalgia for an earlier version of the city, imagined as more romantic and less relentlessly hygienic. Eager to rediscover what they see as a grittier and more human past, younger Singaporeans have pushed to save what’s left of Singapore’s architectural heritage. They express a desire to return to the values of community they associate, interestingly enough, not with old China but with communal Malay culture. This “kampong spirit” reflects a deep disconnect between the goals of the bureaucracy and those of many citizens. “The starting point for the government is not values, and that’s part of the problem,” notes Alfred Wu, a professor at the Singapore Management University. “It’s all about utilitarianism. The government sets the path and people are not that involved. This makes it hard to change.”

Singapore's Orchard Road (Photo by wikubaskoro)

The movement of foreign capital and workers into Singapore has intensified the feeling of cultural drift and worries about the future. As the labor supply has dwindled, partly because of a plunging birthrate and consistent out-migration, the city-state has become ever more dependent on foreign labor. As recently as 1980, over 90 percent of residents were Singaporean citizens. Today, that number has fallen to 63 percent; by 2030, if the government plans hold up, foreigners will actually outnumber the natives.

Many Singaporeans feel that the foreign influx is making them strangers in their own land. Most students at the Civil Service College are of Chinese descent. Yet even they view the city’s Chinatown district, now largely populated by people from mainland China, as foreign territory. “We don’t relate to it. We don’t see it as Singaporean,” one student confided to me. These tensions can be seen in other global cities, of course, such as New York, London, and Toronto, but these are large, sprawling metropolitan regions. The impact of population growth and immigration is more intensely felt in space-constrained Singapore.

Like other successful global cities, Singapore is also becoming an abode of the rich; its millionaire households now number 188,000. As in other global cities, rising levels of real-estate investment from China, the Indian diaspora, and the Middle East have driven up prices, particularly in the private housing market. Many see the influx of foreign wealth as undermining the egalitarian nature of traditional Singaporean society. Some Singaporeans of Chinese descent take a particularly dim view of newly arrived Indians, whether professionals or lower-wage workers. Local playwright Alfian Sa’at’s 2013 play, Cook a Pot of Curry, was inspired by a well-publicized incident involving a Chinese migrant family’s objections to the pungent aroma coming from a neighboring Indian family’s kitchen. The play touched off a heated media debate about the purpose of immigration, the need for assimilation, and the preservation of national identity. Some government officials were troubled by the controversy, which undermined their vision of engineered social harmony.

The presence of so many skilled foreign workers from China and India is unquestionably threatening social cohesion. Increased competition for low-wage jobs has stoked tension among the city’s south Indian and Sri Lankan immigrants, who occupy much of the lower employment tier. Last year, for the first time since 1969, a riot took place in the city—in Little India, after police rousted some inebriated workers. These disturbances have led the government to tighten its immigration policies.

Photo by Peter Kirkeskov Rasmussen

Singapore’s challenges go beyond its changing population. A diminishing portion of Singaporeans say that they are interested in marriage. Singapore’s birthrate is now one of the world’s lowest. Since 1990, the number of births to Singapore residents has dropped from almost 50,000 annually to barely 37,000. The government has sought to reverse this pattern with well-funded incentives to encourage families—such as subsidies for housing—but the fertility rate still stands at 1.3 per woman, well below replacement level.

“Demographically, there’s really no way out, no way to stop the decline,” suggests longtime University of Singapore demographer Gavin Jones, over a dim-sum lunch in Holland Village, an old Singaporean neighborhood popular with expats. “The government has tried to address this with incentives, but it doesn’t work. The culture of not having children is now very much internalized. It is seen as something that limits your options.” To some extent, this view reflects trends throughout East Asia, where family bonds are weakening. The low-birth pattern is also evident in Singapore’s competitors, notably Hong Kong, where nearly half of young couples believe that they can’t afford to have children. Shanghai, notes Jones, now has one of the lowest peacetime fertility rates ever recorded.

Young Singaporeans say that the decision not to have children is pragmatic. “Having kids was important to our parents,” noted one thirtyish civil servant, “but now we tend to have a cost and benefit analysis about family. The cost is tangible, but the benefits are not knowable or tangible.” Many Singaporeans suspect that, however good things may be now, they won’t be better for the next generation.

“Delivering babies is not such a good business now,” suggests Fong Yoke Fai, a prominent local gynecologist. “There’s a change in perception. Personal goals are more important than social or religious ones. People don’t think they can afford the housing for children, so they opt not to have them.”

Singaporean planners, who in the 1960s and 1970s fretted about overpopulation, now must confront what their Japanese peers face—an aging population that can only be sustained by immigration. By 2030, Singapore could have many more people over 65 than under 25. If this trend continues, the main question facing the city-state may not be how to remake itself but how to get rich enough, fast enough, to support millions of elderly citizens.

Going forward, it seems clear that Singapore must change its model, and perhaps jettison the idea of mold making entirely. The city-state needs less planning and more spontaneity. Government attempts to promote creativity or start new cutting-edge industries are bound to fail in a society where bloggers can lose their jobs or get arrested for offending the sensibilities of the bureaucratic elite. Singaporean authorities have also banned films, such as local director Ken Kweck’s 2012 feature, Sex.Violence.FamilyValues, which they found racially controversial. “Even Chinese citizens who take up Singapore citizenship wouldn’t want [censorship],” suggests Soh, whose new company produces archival photos of various locations in the city, many of which have long since been destroyed. “They didn’t leave China to be in China.”

Singapore’s planners will be tempted to meet the new challenges by doing what they do best—designing, implementing, and managing vast new projects, especially physical infrastructure, that promise to keep the city competitive. In recent years, these efforts have included a remarkable “greening” of the city, with many small parks and a network of nature trails as well as Gardens by the Bay, a large indoor collection of trees, recently completed near the central core. The Gardens represent a broader effort to grow Singapore’s service and tourism sectors, notably through the construction of a massive casino—a remarkable development, as gambling was long considered a curse in Chinese culture. Lee Kwan Yew promised that casinos would appear in his country only “over my dead body,” but even before his death, gambling had become big business: Singapore has vaulted ahead of Las Vegas to boast the world’s second-largest casino revenue. Only Macau takes in more.

But turning Singapore into an Asian Las Vegas won’t solve the city’s fundamental problems. The real crisis is not in how Singapore is regarded in New York and London, or even in Beijing and Shanghai, but how it meets the needs and aspirations of its own people. Singapore’s leaders must revamp their approach to governance, becoming more responsive to local needs and less focused on defined goals.

“No amount of analysis and forward planning,” says longtime government advisor Peter Ho, “will eliminate volatility and uncertainty in a complex world.” The old managerial model, he concedes, has become outdated. To thrive in the future, Singapore will have to find its way without a predrawn map. As Asia modernizes and develops a modern infrastructure, Singaporeans cannot remain competitive merely by being more efficient or better educated. The city-state will have to rediscover the boldness of its founding generation, even while discarding many of its methods. “We will have to be pioneers again,” notes Calvin Soh, “and recognize that we don’t have the same strategic advantages that we used to have. We have to start planning for the next ten years from that viewpoint. And that plan has to come from the grassroots, not from above.”

Singapore's Gardens by the Bay (Photo by M!cka)

This piece originally appeared in The City Journal.

Joel Kotkin is executive editor of NewGeography.com. He is the Roger Hobbs Distinguished Fellow in Urban Studies at Chapman University and executive director of the Houston-based Center for Opportunity Urbanism. His newest book, The Human City: Urbanism for the rest of us, will be published in April by Agate. He is also author of The New Class ConflictThe City: A Global History, and The Next Hundred Million: America in 2050. He lives in Orange County, CA.

Singapore skyline photo by Bigstockphoto.com.

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Kotkin has a striking ability to envision how global forces will shape daily family life, and his conclusions can be thought-provoking as well as counterintuitive. It's amazing there isn't more public discussion about the enormous changes ahead, and reassuring to have this talented thinker on the case. — Jennifer Ludden, NPR national desk correspondent

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