New Geography

Author: Aaron M. Renn

  • Why Small, Struggling Cities Don’t Need “Talent”

    I recently recorded a podcast with my colleague Steve Eide in which he argued against the idea that attracting high talented people into government is what was needed for smaller, post-industrial cities.

    I enjoy jousting with Steve on a variety of topics. He favors more aggressive state oversight of cities. As a rule I’m less sanguine about that. Because we come at the world from different perspectives, I’m often challenged by his provocative contrarian ideas.

    To wit, he took his “against talent” thesis and wrote it up for the American Conservative. Some of this is standard conservative takes on things like public sector unions, but there are a number of ideas sure to get people arguing:

    Any unbiased observer of our cities can see that mediocrity is the salient characteristic of the typical local American politician. Another important problem in small and mid-sized cities is that they are poor and in need of revitalization, especially in Rust Belt areas. A natural conclusion to draw from the coincidence of inept leadership and socioeconomic decay is that better leaders are needed. But in the poorest, most troubled cities, talented leadership is not much of an asset, and it can be a liability. Talent does real harm by raising false expectations of a revival—distracting from mundane yet essential operational matters, and forestalling state intervention at critical junctures.

    ….

    When public-spirited reformers call for better leadership for cities, they typically have in mind a collection of qualities that are more likely to be possessed by an outsider. They are not sounding the call for everyone to get behind this or that city councilmember, someone who got his start as a campaign worker to some local hack and has patiently waited his turn. Instead, they want someone with experience and/or education that most of the local crowd does not have, derived perhaps from service in the private sector or government at the federal or state level. This is likely to be someone who did not come up through the ranks and can thus apply a novel approach to longstanding challenges; who admires innovation; who can envision a solution to every problem, instead of a problem with every solution.

    ….

    But there’s no such thing as a right to revitalization. City reformers call for inspired leadership because they see it as a condition of revitalization, but what if that’s impossible? Our conception of urban renaissance is unduly influenced by the experience of a small handful of large cities. If you look past New York, San Francisco and Boston, and survey their dozens of small and mid-sized Rust Belt peers, it is very difficult to find an example of true revitalization. In a forthcoming research report, I survey 96 major poor cities in the Rust Belt and find that every single one has seen its poverty rate increase since 1970.

    ….

    Perhaps the biggest problem with the talented-outsider mayor is that he is apt to get ideas. He may be more educated than the local doofuses, but that does not mean he is fully enlightened. It’s a case where a little knowledge can become a dangerous thing. State and local politicians who are known as big thinkers will always be strong candidates for a “public official of the year” award from Governing magazine or singled out as one of “America’s 11 Most Interesting Mayors” by Politico. New York and DC-based reporters from national publications are naturally attracted to mayors who can speak the language of urbanism.

    But too much of urbanists’ advice for small and mid-sized cities consists of trying to impose lessons from successful top tier cities such as New York, Washington, San Francisco and Boston. Poor small and mid-sized cities should spend more time comparing themselves to other poor, small, and mid-sized cities. If you’ve lost half your population since 1950, you probably don’t have an affordable housing crisis; you’re not grappling with the challenges of density but rather a lack of density. If you have no wealth to redistribute in the first place, then Bill de Blasio can teach you little about the joys of redistribution.

    ….

    “Flexibility,” like “innovation,” may be a core value in Silicon Valley, but it’s frequently a bad thing in the world of municipal finance. Remember all the encomiums to “boring banking” in the wake of the 2008 financial crisis? Often enough, the same principle applies for how to run a city.

    Click through to read the whole thing.

    This piece originally appeared on Urbanophile.

    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.

    Photo: CT Senate Democrats, CC BY-NC-ND 2.0

  • Superstar Effect: Venture Capital Investments

    This is the latest in my “superstar effect” series. Richard Florida posted an interesting analysis of venture capital investments over at City Lab.

    Four cities dominate the charts: San Francisco Bay Area, New York, Boston, and Southern California. Call them the Big Four. No place else is even close.

    It’s not just that they dominate in total dollars as in the above graph. They also dominate in total number of deals, with 52% of the national total. So it’s not just a handful of big deals making the Big Four standout.

    Florida points out that the data don’t back up the idea of the rise of the rest. The superstars account remain in a league apart as far as VC investment goes.

    That doesn’t mean the interior is getting nothing. Certainly plenty of cities now have tech startups where there were none before. That’s reason to celebrate. But it’s too early to declare a major decentralization of VC activity.

    Also, tech has historically been a very cyclical industry. The last crash wiped out almost all emerging startup clusters – even New York’s Silicon Alley. We’ll have to see how things shake out in the next crash when it comes.

    In the meantime, there remains a superstar bias in VC funding.

    This piece originally appeared on Urbanophile.

    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.

    Photo: Vik Waters [CC BY-SA 2.0], via Wikimedia Commons

  • Local Empowerment Should Be About Local Matters

    I’ve generally been someone who wants to see local governments have more power and flexibility to meet local needs. My rationale is simple. States are full of diverse communities that are a bad fit for one size fits all policies. Chicago, Danville, Peoria, Cairo, etc. are radically different places. They have different circumstances, needs, and local priorities. Hence it makes sense for them to have the ability to chart their own course to some degree. Some states have accommodated this to some extent through classes of cities with different powers based on size. Others give even more flexibility through home rule or individualized city charters.

    A good example of responding to local needs was Austin’s regulation of Uber. They were responding to specific local complaints about sexual assault by Uber drivers. And they put in place regulatory requirements including fingerprint background checks directly targeted at this problem.

    Similarly Oklahoma City used its sales tax powers to put forth a series of referendums to approve temporary tax hikes to fund capital improvements like parks, sidewalks, and school renovations. (This was their Metropolitan Area Projects (MAPS) initiative).

    Today though we are seeing cities abuse their local authority. Rather than using them for bona fide local matters, they are deploying them to politically grandstand and/or affect federal or state policy.

    For example, we hear about cities and mayors being the locus of the “Resistance” to Trump. We also see explicit strategies like the “Fight for $15” minimum wage effort that is attempting to create a new national minimum wage through bottoms up change at the local level. Note at the $15/hr minimum wage has little to do with local economic conditions, but is the target in all kinds of places. It may well be that people can’t get the full $15/hr through, but it’s being promoted as the new base.

    Regardless of the merits or lack thereof of any of these items, when cities explicitly state their desire to, for example, subvert US foreign policy, this weakens the case against state preemption laws and for local empowerment generally. When local leaders get outside the areas where they are clearly chartered to do business (infrastructure, education, sanitation, etc) and get into areas traditionally more heavy on state or federal rulemaking and not nearly so obvious a local function (economic regulation, climate policy, etc), don’t be surprised when the other levels of government who see themselves running the show in those matters swoop in and drop the hammer.

    Obviously, this won’t necessarily protect you. Austin was not trying to tell the state or national government or any other city how to regulate Uber. The Texas legislature, wrongly in my view, override their ordinance anyway. But it’s still not a good idea to gratuitously invite trouble.

    Mayors do not in fact rule the world. In the US, municipalities are structurally weak entities in most cases. We can debate all day long whether things should be different, but at this point that’s reality. To earn the right to go to legislatures to get more authority, or even to just keep the authority that they have, cities should be good stewards of that authority and use it for matters and reasons they make very clear are local, not national or state in scope.

    This piece originally appeared on Urbanophile.

    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.

    Photo: w:en:User:Soonerfever [Public domain], via Wikimedia Commons

  • Too Many Rust Belt Leaders Have Stockholm Syndrome

    One of the criticisms leveled at Richard Florida is that many of the Rust Belt cities that tried to cater to the creative class ended up wasting their money on worthless programs.

    What this illustrates instead is that leaders in the Rust Belt have taken the contours of the current economy as a given, and attempted to find a way to adapt their community to that.

    This is actually a smart way to approach it. The fact is, local leaders are market takers not market makers in most places. They don’t have much leverage. With a global economy and dominance by knowledge industries, trying to create a more favorable environment to tap into those is a rational decision. If that hasn’t turned around those places yet, then nothing else has either.

    However, what I’ve noticed is that civic leaders in these places have gone beyond trying to adapt to the global economy, and have become cheerleaders for the status quo – the same status quo that has wrecked in their community.

    To be sure, much of deindustrialization resulted from simple productivity and technology improvements. But globalization played a role, both in tearing these cities down and in building up the coastal capitals.

    In the second edition of her book The Global City, Saskia Sassen wrote:

    What comes out of this book is that the globalization of manufacturing activity and of key service industries has been a crucial factor in the growth of the new industrial complex dominated by finance and producer services. Yes, manufacturing matters, but from the perspective of finance and producer services, it does not have to be national. This is precisely, as this book sought to show, one of the discontinuities (between major cities and nations) in the operation of the economy today compared with two decades ago, the period when mass production of consumer goods was the leading growth engine. One of the key points in this book is that much of the new growth rests on the decline of what were once significant sectors of the national economy, notably key branches of manufacturing, that were the leading force in the national economy and promoted the formation and expansion of strong middle class [emphasis added]

    In other words, deindustrialization and the rebirth of cities like New York are linked via globalization.

    Given this, you might think urban leaders in post-industrial cities would be advocates for some type of macroeconomic policy changes. That doesn’t really seem to be the case though. Certainly they do not want to see any form of rollback or material alteration in the current globalization schema, apart from perhaps arguing for more of the same.

    I noticed this after the election last year when I observed leaders from some of America’s most economically bleak locales bemoaning Trump’s win. That in and of itself wouldn’t be a problem. But it was also clear that they loved the status quo and wanted to preserve and extend it. It is there any reason whatsoever to think that Hillary Clinton would have done anything for Youngstown? I don’t think so. Yet they were enthusiastic about her entire agenda, a more or less stay the course approach that would continue to pile more and more success into existing superstar cities.

    I wouldn’t expect them to embrace Trumpism. But one would think that flyover America’s leadership class would be promoting a reform agenda of its own, one which would benefit their cities and regions. But they don’t seem to have one. All of their ideas are more or less adaptions of things people in coastal cities came up with. And they don’t have a national policy change agenda to speak of other than “give cities more money.”

    For the younger, educated Millennial types, this is somewhat understandable. Many of them hope aspire to actually be in a coastal city. But much of the leadership class of these places is older and deeply rooted in their community.

    As along as these folks remain enthusiasts and staunchly committed to the global status quo that helped ruinate their city, economic policy will continue to be made in ways that disproportionately benefits the coastal, global city elite at their expense.

    This piece originally appeared on Urbanophile.

    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.

    Photo: Jack Pearce from Boardman, OH, USA [CC BY-SA 2.0 or CC BY-SA 2.0], via Wikimedia Commons

  • How Much Value Do Economists Assign to Having Married Parents Who Aren’t on Drugs?

    Yesterday I posted my new column from the September issue of Governing magazine in which I write:

    “There are a number of people in the national media who make the argument that things aren’t so bad, that if you look at the numbers this idea that things are horrible in much of America just isn’t true. It’s easy for me to believe this is actually the case in a quantitative sense. But man does not live by bread alone. When you have an iPhone but your community is disintegrating socially, it’s not hard to see why people think things have taken a turn for the worse.”

    Conveniently the Wall Street Journal published an op-ed last week by Harvard economist Martin Feldstein called “We’re Richer Than We Realize” that makes the kind of argument I was talking about, right down to talking about iPhones:

    “Government statistics paint an excessively grim picture of what is happening to real wages and the growth of real national income. Although most households’ take-home cash has been rising very slowly for decades, their standard of living is increasing more rapidly because those wages can now buy new and better products at little or no extra cost. The government’s measure of real incomes gives too little weight to this increase in what take-home pay can buy….First, government statisticians grossly understate the value of improvements in the quality of existing goods and services. More important, the government doesn’t even try to measure the full contribution of new goods and services.

    …

    The other source of underestimation of growth is the failure to capture the benefit of new goods and services. Here’s how the current procedure works: When a new product is developed and sold to the public, its market value enters into nominal gross domestic product. But there is no attempt to take into account the full value to consumers created by the new product per se.

    …

    Or consider consumer electronics. New York University economist William Easterly recently tweeted an image of a 1991 RadioShack newspaper ad and noted that all the functions of the devices on sale—clock radio, calculator, cellphone, tape-recorder, compact-disk player, camcorder, desktop computer—are “now available on a $200 smartphone.” The benefits to consumers from these advances don’t show up in GDP.”

    I don’t dispute anything Feldstein says in the article, which to me sounds completely correct. If you’re a Journal subscriber, you should read it. But it’s very incomplete.

    Feldstein says we should consider the full value of the product innovations we’ve created. He cites improvements in health, for example.

    But where is the expansive treatment of the economic value – the negative economic value – of declines in social conditions? Is the fully expansive impact of violence in some of Chicago’s neighborhoods fully counted? Is the quality of life impact of having a mother strung out on opioids, or having a father who is just plain gone? What’s the impact of going from being able to leave your keys in your car and your house unlocked to realizing that burglary is a very real possibility? And speaking of health, what is the all in effect on a community of the declining life expectancy we’ve experienced? What’s the community impact of an HIV crisis?

    The truth is that along with real economic progress there has been a parallel big degradation in the lived experience of life in much of America, a part of America largely invisible to and certainly not relatable to on a visceral level by most of those in booming sections of global cities. I’m all in favor of understanding the very real way that technology and other innovations have made our lives better, and fully capturing that in statistics. But we need to be equally as diligent in capturing and measuring the downsides of those trends, an effort I’ve read much less about in the papers.

    This piece originally appeared on Urbanophile.

    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.

    Photo: The house Aaron grew up in.

  • Trouble in Trump County, USA

    By rights, Scott County, a rural Indiana community of 24,000, should be flourishing. It’s in a pro-business state. It’s part of the large, successful 1.2 million-person Louisville, Kentucky, metro area that’s been growing total jobs (75,300, or 12.9 percent) and manufacturing positions (19,600, or 31.6 percent) in the last five years. Scott County is an easy half-hour commute from downtown Louisville.

    Yet for years, Scott has struggled with severe economic and social challenges. Changes to the economy from automation and globalization eliminated many jobs and sent employers elsewhere. The Great Recession made things worse. The county is also grappling with a major public-health crisis, driven by drugs and HIV. It made national headlines in 2016 after recording 203 new cases of HIV in only about a year and a half. National media—NPR, the Wall Street Journal, and the New York Times—swooped in to cover the story. The HIV outbreak resulted from needle-sharing among drug addicts, particularly to inject the prescription opioid Opana.

    Last November, Donald Trump, who stressed economic stagnation and the drug crisis during his campaign, won two-thirds of the vote in Scott—a substantial improvement on Mitt Romney’s 52 percent take in 2012 and even more impressive in a county that often votes Democratic in state and local elections. Thus, Scott makes a good case study for understanding the working-class dynamics that drove Trump to victory—and what prospects these places have for renewal.

    Located about 30 miles north of the Ohio River, along I-65 between Indianapolis and Louisville, Scott dates its origins to 1820, when the young state of Indiana created it from portions of five other counties. Southern Scott County includes a section of the original land grant that Virginia gave to George Rogers Clark and his men for their service in capturing what became the Northwest Territory from the British during the Revolutionary War. Lexington, one of the towns originally considered for Indiana’s first capital, became the county seat. The county jail briefly held members of the infamous Reno Gang, perpetrators of the nation’s first train robbery, after the Pinkerton Detective Agency captured them. Throughout the nineteenth century, Scott remained small, with the principal excitement being frequent debates and litigation involving moving the county seat to a more central location. Ultimately, the county seat did move, to land adjacent to Centerville, along the Jeffersonville Railroad. This became Scottsburg, today the county’s largest municipality, with 6,700 people.

    Agriculture anchored Scott’s economy. The area’s plentiful produce attracted several canning companies, especially in the northern part of the county, where Austin became a quasi-company town for Morgan Foods, founded there in 1899 and still family-controlled and operating in the city today. Morgan remains a major employer, with workers making private-label soups and other products.

    Scott County was never especially prosperous and suffered repeated economic reversals. Agriculture has always been a high-risk affair. In the postwar years, automation and improved efficiency dramatically reduced local farm employment. Farmers had once worried about keeping their children on the farm after they finished school—but by the 1950s, that concern was obsolete, since there were fewer farming jobs for them to come back to. Economic changes affected other areas, too. In the early days of the car, Scott’s economy flourished along the US 31 corridor, but the construction of I-65 in the late 1950s transformed everything. William Graham, a Republican who has served as Scottsburg’s mayor since 1988, worked originally as a civil engineer and spent a decade helping build the interstate system. He says that within five years of I-65’s opening, half the businesses that had lined US 31 through town were gone; within ten years, 90 percent of them had closed. Yet it took about 20 years for the interstate interchange to develop as a commercial location.

    The community took another blow in the 1980s, when Public Service Indiana canceled its Marble Hill nuclear power-plant project in adjacent Jefferson County. The move, made in the aftermath of the Three Mile Island accident, ended construction after $2.5 billion had already been spent—the costliest U.S. nuclear power-plant project ever abandoned. Many Scott County residents had worked on it. Graham believes that as much as a quarter of the community wound up unemployed as a result.

    Like many working-class communities, then, Scott County was no stranger to economic hardship—and the Great Recession delivered more of it. The local American Steel plant, which made steel cords for tires, closed. Auto-parts supplier Freudenberg-NOK also shuttered, moving its jobs to Mexico. In 2009, Scott County unemployment soared into double digits and stayed there for four years, peaking at 15.3 percent in 2010.

    The county has since rebounded somewhat. Unemployment declined sharply, to 4.8 percent in 2016; jobs are up 16.1 percent in the last five years. But the jobless rate has dropped so substantially partly because Scott’s labor force has declined by more than 800 people, or 7 percent, since peaking in 2006. And Scott County’s per-capita income of $34,400 is only 82.1 percent of the statewide average and 71.6 percent of the national average.

    Economic woes are only part of the gloomy picture. Scott County is also reeling from a drugs and HIV crisis, fueled by the increasing availability of hard drugs. As Indiana State Health Commissioner Dr. Jerome Adams puts it, whereas people once self-medicated with moonshine, now they use drugs such as Opana.

    Changes in medical-industry practices and government policy played an important role in making such drugs more widely available. Until the 1990s, the prescribing of pain medication had been tightly regulated, but that changed as pain management became a key medical goal. In 1996, the American Pain Society declared pain “the fifth vital sign.” The federal standard hospital-patient satisfaction survey asked patients questions, including: “How well was your pain controlled?” And: “How often did the hospital staff do everything they could to help you with your pain?”

    “Only 12.2 percent of the population holds a bachelor’s degree or higher—and that’s up from just 7.3 percent in 2000.”

    The result was a major rise in the quantity of opioid pain prescriptions. Indiana is one of only a few states averaging more than one opioid prescription per resident per year. “Before, you wouldn’t give anyone any Vicodin for a dental procedure,” observes Adams. “Now we’re sending them home with 90 Vicodin. The patient takes nine, leaving 81 in the bottle in the medicine cabinet.” As a consequence, he says, “It’s actually harder [for minors] to get alcohol than it is to get pills in the community.”

    Another problem is family dysfunction. Previous eras of economic hardship took place against the backdrop of a largely intact social structure and stable homes. Divorce and out-of-wedlock births are now far more widespread. As recently as 1990, only about 20 percent of Scott County births were out of wedlock. By 2002, this figure had doubled to more than 40 percent. The causes and effects of these shifts are subject to debate, but it is indisputable that legal reforms facilitated divorce and changing social mores dramatically reduced the stigma associated with out-of-wedlock births. Americans broadly want divorce and even single motherhood to remain socially acceptable choices—yet these behaviors are associated with poor life outcomes.

    Scott County and places like it are dealing with the fallout. Conditions in the county now sometimes resemble stereotypes of the inner city, where parents are unfit or unable to raise their own kids. Graham observes: “One of the biggest changes is grandparents raising grandchildren, where you used to never see that—never.” These social changes occurred nationally but have hit communities like Scott hardest, leaving a sizable segment of the eligible population unemployable, regardless of how many jobs might be available. The problem in many working-class American communities today is as much social as economic.

    But even if they stay off drugs and graduate high school, people in these kinds of communities still face employment hurdles. Today’s jobs require increasingly sophisticated skills, but, like many rural communities, Scott County has low rates of college-degree attainment. Only 12.2 percent of the population holds a bachelor’s degree or higher—and that’s up from just 7.3 percent in 2000. Even many blue-collar jobs—from welding to computer-drive manufacturing—now require significant postsecondary-school training. The skill shortage limits access to jobs, both locally and regionally, and poses an obstacle to business recruitment.

    Taken together, the employment crisis and the social dysfunction produce a sense of malaise in some places. People almost always wave, smile, and say hello in small-town Indiana; but in Austin, for instance, only one person I saw even acknowledged my presence while I drove around. The rest just shambled about with blank stares. One local assured me that had my wife not been with me in the car, prostitutes would surely have approached me, soliciting for money to buy drugs. Scottsburg looks much better, with a healthy business district centered on its interstate interchange, but it, too, has troubles, such as significant retail-storefront vacancy on its courthouse square.

    The difficulties of communities like Scott are all the more striking, considering the region’s economic strengths. Scott is part of the federally defined Louisville metro area. The inclusion of rural areas within metro regions is not unusual. America’s metro areas are defined by commuting patterns, and they include large rural zones. To say that America is a metropolitan nation—86 percent of the country lives in metro areas—doesn’t mean that it all looks like Chicago or New York. Most of the metropolitan population is in suburban and even rural areas, and many rural areas, like Scott, are within easy commuting distance of a city. In Scott’s case, that city is the center of a bustling regional economy that is home to major corporations like Brown-Forman, Humana, and Yum! Foods (parent company of Kentucky Fried Chicken, Pizza Hut, and Taco Bell). In the last five years, the Louisville metro area added 75,300 jobs—a growth rate of 12.9 percent. Manufacturing grew 31.6 percent, adding 19,600 jobs. Ford maintains a major auto-assembly plant there, and General Electric still manufactures appliances in the city. Louisville is also the site of UPS’s primary global air hub. The shipping firm employs more than 20,000 people and supports a major distribution infrastructure.

    The state of Indiana is economically strong, too, enjoying a budget surplus—with savings equivalent to 14 percent of the state’s annual budget—and an AAA credit rating. It has the eighth-best business-tax climate in the nation, according to the Tax Foundation. It’s a right-to-work state that has implemented nearly the full panoply of state-level conservative best practices for boosting business, and it has seen solid results in many places. But smaller, working-class communities without assets like a university have continued to struggle. Even within thriving Indianapolis, working-class neighborhoods and less educated residents have also lagged behind. These results pose a philosophical challenge for conservatives, who have typically assumed that economic prosperity will follow from implementing such business-friendly policies. For Indiana, a favorable tax and regulatory climate may be a virtue, but it hasn’t been sufficient to help everyone.

    Other factors have played a role in making places like Scott County especially vulnerable to pathology and stagnation. Scott was always a more hardscrabble place than some surrounding areas. One suggestive way to compare small towns is to look at their infrastructure, especially the existence of sidewalks and the quality of the houses. More historically prosperous small towns often have sidewalks through much of the city. Sidewalks are scarce in Austin; in Scottsburg, they line the courthouse square but are otherwise not prevalent. In many surrounding towns, by contrast, sidewalks stretch throughout much of their historic areas. Nearby Seymour, hometown of John Mellencamp, doesn’t just have sidewalks but also alleys and landscaped medians in some sections. Similarly, Scottsburg and Austin boast fewer grand old Victorian houses than one often finds even in many small towns; instead, small workers’ cottages predominate.

    Demographics are another drag on the county. Much of southern Indiana, like the Ohio River Valley in general, was heavily settled by German immigrants. To this day, 24 percent of the people in Clark County, to the immediate south, list their ancestry as German. To the immediate north, in Jackson County, that figure is nearly 29 percent; there’s even a Lutheran high school in Seymour. Scott County, by contrast, is only 15.6 percent German, being more Scotch-Irish-dominated. The area saw a heavy influx of Appalachian migration, with former residents of Hazard, Kentucky, flocking to Austin, in particular, drawn by jobs at Morgan Foods. Scott’s largest listed ethnicity, at 20 percent, is “American”—an appellation commonly used by the Scotch-Irish. Appalachia has long been known for its entrenched poverty and social dysfunction. The Centers for Disease Control recently released a list of counties at high risk for HIV and hepatitis C infections, and Appalachian areas were heavily represented. J. D. Vance’s best-selling book Hillbilly Elegy describes the tragic struggles of Appalachians in the modern world. Thus, communities like Scott County have a smaller reservoir of economic and social capital to recover from the big technological, economic, and social forces acting on them.

    Still, for all its drawbacks, Scott County is working hard to improve its circumstances. The first priority was to address the HIV outbreak, and here, the state has played a vital part. The tight-knit Austin community had a long history of believing that it could solve its own problems, but the outbreak was too much to handle on its own. Even in this rural area, it turns out, many people didn’t drive or own a car, making effective treatment a struggle. So the state set up a “one-stop shop” in an Austin community center. The national media focused almost exclusively on the needle-sharing dimension. But the facility also provided HIV testing and treatment, addiction-recovery counseling, health-insurance enrollment, state identification cards, and birth certificates. The result: a dramatic decline in the rate of new infections. The drug crisis isn’t over, but tremendous progress has been made in stopping the spread of HIV.

    The one-stop shop was created by then-governor Mike Pence’s executive order. Results suggest that it could be a model for how to deal with disease outbreaks in communities similar to Scott. Adopting it might be politically contentious in red states because it would involve spending more money to open field-office locations rather than relying on regional or countywide service centers; states have preferred service consolidation in rural areas, on efficiency grounds. But that old approach might not work anymore for deeply troubled communities.

    Other developments offer hope on the addiction front. Medical and government officials are taking steps to reduce prescription opioid abuse. Last year, the American Medical Association recommended that the “pain is the fifth vital sign” concept be dropped. Washington is planning to eliminate the pain questions from the patient-satisfaction survey form. In March 2017, an FDA panel concluded that the benefits of Opana no longer outweighed the drug’s risks; the FDA is now considering whether to take regulatory action. This is just a start, though. The drug epidemic in America goes beyond Opana or OxyContin—it involves many illegal substances, including meth, fentanyl, and heroin. While reducing the scourge of legal-painkiller abuse is a worthy goal, stopping the flow of drugs like heroin will be much tougher.

    Beyond fighting back against drugs and HIV, Scott County has also made a good start on retraining workers to help them find jobs and offering inducements to attract employers. The main effort on both counts is Scottsburg’s new $10 million Mid-America Science Park, financed half from stimulus funds and half from reserves in the local Tax Increment Financing district. Despite its own serious troubles, the county generously delayed the science park’s planned 2012 opening so that it could be used as a temporary high school after a tornado destroyed nearby (Clark County) Henryville’s building. Today the science park hosts training facilities for workers and high school students. IvyTech, Indiana’s community-college system, has opened a campus there.

    Some training is employer-specific. For example, Jeffboat in nearby Jeffersonville, America’s largest inland shipbuilder, donated a special welding training machine to help people learn how to perform the extra-thick welds needed on the barges that it constructs. The science park’s goal is to become, in effect, an outsourced training department for employers—albeit one they don’t have to pay for. Mayor Graham tells local companies: “My goal is that if you need any training done, I’ll do it. You won’t have to do it.” This wouldn’t just be for new hires. “It’s also for our incumbent workers,” Graham says. “If they need to get their skills upgraded—and they do—they can come here and take some training.”

    In a community that needs jobs, Graham’s can-do attitude is admirable. But it prompts the question: Why can’t companies do their own training, as they did before? The answer, in part, has to do with globalization. Businesses still manufacturing in the U.S. face such stiff competition from foreign firms that they often can’t afford to invest in workforce development. Nor can they always pay their workers much, which helps explain the low personal incomes in Scott County. (It’s notable that Jeffboat is protected from global competition by the notorious Jones Act, which requires domestic water transportation to be done using only American-made boats.) Scottsburg did lose one major employer, Freudenberg-NOK, to Mexico, but Graham is reluctant to blame trade deals like NAFTA. “I’m not sure that any of us here are qualified to say. I question it, but I’m not going to say it’s a bad thing.” Railing against trade may play well politically, but Graham would rather focus on what he can do with the tools available to him.

    The outcome, so far, is encouraging. Globalization gave back some of what it took away when the Japanese firm Tokusen bought the shuttered wire plant and reopened it. Electronics firm Samtec merged two regional locations into one facility at the science park that will employ 300—a big jobs number in a community the size of Scott County.

    These local business expansions are important because the purpose of Mid-America Science Park isn’t only training local workers for jobs but also attracting employers. Indiana local governments rely heavily on property taxes. The state’s tax-cap system limits single-family-home taxes to 1 percent of property value; commercial property is capped at 3 percent of value. This puts a premium on attracting commercial development. So the science park includes infrastructure targeted at business attraction, including generous meeting space, ultrahigh-quality videoconferencing capabilities, and rooms certified as secure enough for secret military-related teleconferences.

    State and local government have had some success in adjusting to globalization and technology-driven disruption, but they’re weak actors in the face of broad economic forces. Only the federal government can hope to shape them fundamentally. Donald Trump was elected in part because he promised to change the status quo on globalization and the economy. The challenge will be reforming the system to help working-class communities without harming the aggregate economy. That’s not likely to be a simple task.

    Even favorable federal policies will make little difference if communities like Scott can’t do something to address their crippling social problems—especially family breakdown, which enables all the others. Job openings go unfilled in communities with high proportions of drug addicts and dropouts. If changing economic conditions is hard, reversing negative social trends is even harder. A sense of humility about what can be accomplished is wise.

    Scott County has made a good start on retraining workers to help them find jobs while offering inducements to attract employers. (MARK CORNELISON/KRT/NEWSCOM)

    Does Scott County have a long-term future? “Give me two to three years,” says Scottsburg’s Graham, on his plans to improve the struggling downtown. One key area of focus in these localities is preserving historic downtown architecture, which even hardened urbanites love. Local leaders in Scott County understand the importance of these unique districts, not only to their community’s identity but also to the long-term viability of attracting and retaining residents. But they have little money to spend on such efforts. Overall, Graham is realistic but hopeful. “Do we have a terrible situation?” he asks, referring to the HIV outbreak. “We certainly do. We’re doing something about it.”

    His confidence may seem unwarranted to outsiders, but Scott County does have a track record of coming through crises. It survived agricultural automation, the disruption of the interstate highway, the closure of Marble Hill, and other setbacks. More recently, when businesses threatened to leave over poor Internet quality in the early 2000s, small-town Scottsburg built one of America’s first wireless municipal broadband systems to provide web service after the local providers refused to upgrade the community’s capacity. And Scott County retains its significant geographic advantages.

    While Scott and other working-class American communities may never be highly prosperous or glamorous, they might yet pull through this trial, as they have through others in the past. “What makes Scott County unique?” Adams asks. “My honest answer is: absolutely nothing. There are Scott Counties all throughout the country. All of the ingredients exist in many communities.” How Scott and its brethren fare will tell us a lot about America’s fate in the Trump years.

    This piece originally appeared in City Journal.

    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.

    Photo source: https://www.healthline.com/health-news/opioids-problems-for-chronic-pain-patients

  • Back Office Decentralization

    In my “superstar effect” series I’ve been presenting examples of where superstars (whether individuals or cities) are generating a disproportionate share of the rewards these days.

    I mentioned that I had some counter-examples and wanted to share one today. Namely that backoffice decentralization, or the move of less-than-superstar functions out of superstar cities, has benefitted a certain class of places like Denver and Salt Lake City.

    The Wall Street Journal, for example, recently wrote about the decentralization of West Coast finance out of San Francisco:

    Traditional finance hubs have yet to recover all the jobs lost during the recession, but the industry is booming in places like Phoenix, Salt Lake City and Dallas. The migration has accelerated as investment firms face declining profitability and soaring real estate costs.

    The market’s shift to low-cost passive investing compounds those difficulties, pushing firms to look for new ways to cut costs.

    Charles Schwab is emblematic. Since announcing its relocation strategy in early 2013, the company has shrunk its San Francisco headquarters to fewer than 1,300 people, a 45% decrease. Its 47-acre campus south of Denver is now Schwab’s largest office, employing almost 4,000 people. An expanded office in Austin, Texas, will be completed next year, and construction is under way on a new location near Dallas.

    Surely high end finance around tech is still in the Bay Area. But more workaday firms like Charles Schwab can’t justify a huge labor force there.

    They name some of the places benefitting from this exodus, what I’ve previous labeled “horizontal” cities (in contrast to the “vertical” superstar cities). It’s part of the sorting of the economy that has been going on.

    In some respects its better to be a horizontal than a vertical city. The costs are lower. You’re more likely to get large scale employment. And you can be more diverse.

    The problem is that there are only a limited number of these successful horizontal cities. There are plenty of places that are succeeding in neither model.

    But for places like Salt Lake City, Denver, Austin, Nashville, Columbus, etc. they don’t need to be Manhattan or San Francisco. They can still have great success without being superstar oriented.

    This piece originally appeared on Urbanophile.

    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.

    Photo: Mike Mozart, CC BY 2.0

  • Columbus, Ohio Is Stuck in Branding Neutral

    Columbus, Ohio is a Midwest city that has really turned it on in the last few years. It is a big economic and demographic success story in the region. Having recently crossed over to reach the two million threshold in population, the region is expecting as many as another million people by 2050. The city is basically rocking and rolling by Midwest standards.

    The Columbus Dispatch has been doing a major, multi-month series on Columbus’ future called CbusNEXT. One of the featured pieces was a look at Columbus’ brand called “Does Columbus have an identity crisis?”

    For better or for worse, Columbus has had its share of reputations. It’s known for being the seat of state power, the capital city where Ohio’s legislative sausage is made. And, of course, much of Columbus’ notoriety comes from that little university of more than 66,000 students and its powerhouse football team. There’s been some name-calling through the years, too. Columbus has been called a “Cowtown” on more than one occasion. Meh, sticks and stones.

    But other than its status as a capital city and the home of Ohio State University, Columbus “has not developed a persistent and consistent identity” over the years, said Ed Lentz, local historian and executive director of the Columbus Landmarks Foundation.

    Columbus has been seen as neither good nor bad, according to studies conducted over the past two decades, said Amy Tillinghast, vice president of marketing for Experience Columbus. “We heard it all the time,” she said. ”‘Oh, it’s vanilla. It’s neither good nor bad. Just very bland.’” But city leaders, tourism officials and economic development proponents have been working to shed that vanilla image, to spread the word about what they think makes Columbus great.

    The Dispatch also has a revealing 15 minute podcast on the topic.

    What I find most telling about this is that an article written in 2017 is basically the same as one from the New York Times in 2010.

    Quick, what do you think about when you hear the words “Columbus, Ohio”? Still waiting. … And that’s the problem that civic leaders here hope to solve.

    This capital city in the middle of a state better known, fairly or not, for cornfields and rusting factories has a low cost of living, easy traffic and a comparatively robust economy. It variously has been pronounced to have the nation’s best zoo, best science museum and best public library. For sports fans, “Ohio State Buckeyes” says it all.

    What Columbus does not have, to the despair of its leaders, is an image. As home to major research centers, it has long outgrown its 1960s self-concept as a cow town, and its distinction as the birthplace of the Wendy’s hamburger chain does not quite do the trick these days. The city lacks a shorthand way to sell itself — a signature like the Big Apple or an intriguing tagline like Austin’s “Live Music Capital of the World.”

    In other words, Columbus has made no progress in understanding its identity or creating a marketplace brand in the last seven years.

    A few points jump out at me from the latest Dispatch piece that hit on things I’ve addressed before:

    • The Dispatch didn’t speak to a single person outside of Columbus. They allowed the heads of various local agencies to effectively filter the marketplace perspective on their city. For all its talk about being “smart and open”, this lack of any outside perspective reveals an insular mindset.

    • They are ashamed of historic identity markers such as Ohio State football and “Cowtown” even though these are the seeds of their most powerful potential identity in the market (cf: Nashville and country music).

    • They are playing buzzword bingo with how they want to be perceived in the marketplace: optimism, collaboration, art scene, research, LBGT, immigrants, beer, etc. The people saying these things don’t seem to realize that they are basically commodities today, at least in terms of civic self-perception. You’re not likely to get too many people from cities similar in size to Columbus to agree that Columbus is so much better on these points, certainly not as a package. They are all basically trying to pitch themselves to the market using virtually identical language.

    • They are afraid to take a stand in the marketplace. I was very pleased to see at least one person who was self-aware about this, saying, “It’s a very scary thing for a city to put a stake in the ground. It takes real vision to put a stake in the ground. You have to see past election cycles and those people that you alienate.”

    Until these points are addressed, I would not expect the city to make any progress on branding and identity. The fact that they haven’t done this in the last seven years prompts an important question:

    Does the city really want to have a strong identity in the market?

    Maybe not. That’s something to consider.

    The premise that Columbus lacks an identity seems suspect to me. It might not have a well-articulated identity, but it has one. The civic feel is radically different from Cleveland and Cincinnati. The differences are like a cold bucket of water in the face. I feel the differences even vs. somewhat similar cities like Indianapolis. So the identity is there. Maybe people just don’t want to face up to what it is.

    What’s more, it’s working in the marketplace. Whatever Columbus is and is doing, it’s working. So that’s great. So another question I might ask:

    Does Columbus actually need to articulate its brand or identity in order to succeed?

    Maybe not.

    It may well be that the city’s DNA is just not ideal for this kind of branding exercise. And it’s not like the city hasn’t gotten real input on this. I have written about this multiple times in the past, going back to 2010. See here, here, and here. I’ve also spoken to large audiences as the Columbus Metropolitan Club twice on this topic. The first one was in 2010. And here’s my talk from last year. If the video doesn’t display for you, click over to watch on You Tube.

    But the city isn’t doing anything with it, neither with my insights nor anyone else’s. In this, Columbus’ profile is similar to other Midwest cities, which embrace trends when they are rendered safe to do so. Perhaps this is one reason why it’s the nation’s leading test market. If Columbus embraces it, then it’s ready for the mass market. Otherwise, nope.

    Again, I’m bullish in Columbus and its future. I’ve been writing positive things about it since at least 2009. But when you’ve been trying to make progress on your identity and branding for seven years and are spinning your wheels, maybe its time to take a serious gut check on the project and make some changes.

    This piece originally appeared on Urbanophile.

    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.

    Photo: Stephen Wolfe, via Flickr, using CC License.

  • Amazon’s HQ2 Is a Golden Opportunity for the Heartland

    The Wall Street Journal is reporting that Amazon is seeking bids for a second headquarters location that will be equal in size to its current Seattle base. (You can read their RFP here). It would ultimately employ 50,000 people in eight million square feet of office space at an average salary of over $100,000.

    This is going to be the feeding frenzy of the century.

    This seems to suggest that Amazon thinks they are about capped out in Seattle. To give a sense of Amazon’s place in Seattle, the Seattle Times recently labeled it “America’s biggest company town.” The company has over eight million square feet of office space and accounts for nearly 20% of the city’s total office space. They have a graphic that illustrates this. The next biggest footprint of any user in any city is Citi in New York with only about 3.7 million square feet. (Interestingly, Columbus, Ohio is in second place when it comes to being dominated by a single office user; Nationwide Insurance has 16% of the total market. It looks like these may be city, not regional totals).

    The impact of Amazon on Seattle has been huge. The pressure Amazon growth has put on things like housing availability and pricing is tough to measure, but surely huge. Amazon appears to have concluded that the city can’t take anymore.

    Seattle is the 15th largest metropolitan area in the US, with 3.8 million people. It’s also a highly attractive region with no trouble luring people to move there. So while Amazon says that they are open to metro areas of over a million people, realistically, if you want to be as big as Amazon is in Seattle toady, you probably need to be in a market as big as Seattle or bigger.

    50,000 is a huge number of workers, especially when they are high skill white collar ones. Very few cities could easily supply that labor force. Which ones might? Let’s game this out.

    Well, the usual coastal suspects probably can. But they have the problem of already having very high costs and hot labor markets for exactly the skills Amazon is seeking – and building restrictions that make growth hard. The Bay Area would be an obvious choice for an HQ, but can they really accommodate it? (A better question might be, do they want to)? I would suggest similar questions apply to Boston.

    Los Angeles/SoCal, New York, and Washington could accommodate an employer that big. Again, high costs, etc. But especially LA and NYC are so huge, they can do things other cities can’t. Washington is by its DNA a government town. It’s high tech, but a lot of that tech is government related.

    One intriguing option for Amazon would be Hudson Yards. Amazon is putting a huge premium on real estate in this RFP, and assuming they want an urban location, this is one that’s nearly pre-baked. Right now it’s only planned for six million square feet of office, with some of that already leased. But I would guess changes could be made and/or other real estate in the area added to the mix. Newark might be a dark horse here.

    What then are the other cities that could potentially compete. I see four strong contenders: Chicago, Dallas, Philadelphia, and Atlanta. (Houston is very energy focused and dealing with bigger problems right now. Miami and Phoenix are big enough, but could they attract the quantity of tech workers needed?) All of these are large markets with good air service. Chicago and Philly have genuine urban options with genuine urban transit. (I should note Amazon hasn’t ruled out a suburban location). All of them would surely clear the decks of any obstacles to construction, etc. All of them have much more affordable housing than coastal cities. All have an ability to draw college grads from a large footprint.

    I would expect these cities to bid aggressively. Dallas and Atlanta really don’t need Amazon, though they would surely want it. For Chicago and Philly this represents a transformational opportunity.

    Rahm Emanuel in Chicago says he’s already had conversations with Bezos. If I were making the choice, Chicago would be at the top of my list. It’s an established urban center a reasonably flight distance from Seattle (cf Boeing decision), with transit, a huge airline, etc. It’s also a slam dunk draw for every Big Ten school. You can bet that Illinois political dysfunction would mysteriously disappear to get a deal done here. One person says Amazon’s staunchly anti-union stance rules out Chicago. We’ll see, but Seattle has strong unions too, and unions are less applicable to a while collar workforce. Chicago has been looking for a transformational event, and this could be it.

    Possibly Amazon could also take a chance on scaling some smaller places, like Denver or Minneapolis. I expect everybody to be all over this. And yes, there will be huge government money on the table. Not even the most ardent anti-subsidy person out there is going to take a pass on this.

    To me this is a big test of the thesis that the coasts are capped out, which will force growth into the interior. If Amazon picks a big, established, high cost coastal center, that will tend to undercut it. We will see.

    This piece originally appeared on Urbanophile.

    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.

    Photo: Rober Scoble, CC BY 2.0

  • Post-Work Won’t Work

    Proposals to institute a basic income are increasingly popular, especially in Silicon Valley. Philippe Van Parijs and Yannick Vanderborght make their case for it in Basic Income: A Radical Proposal for a Free Society and a Sane Economy. A basic income—an annual, unconditional cash grant to every adult, regardless of need, and without a work requirement to obtain it—would be non-taxable and total about 25 percent of GDP. The amount of the grant could vary depending on the age of the recipient, but it would start at birth. It would supplement existing safety-net programs and replace only those whose benefits are less than the basic income amount; thus, the grant would establish a floor, but not a ceiling, on government income transfers. (Publicly financed health care would remain outside the system, for example.)

    The overarching goal of the basic-income proposal is to ease economic distress stemming from the structural disappearance of work and declining real incomes for lower-skilled workers. Technology has eliminated countless jobs, and there’s no reason to believe that this process won’t continue. Researchers from MIT and Oxford have estimated that technology already in development, such as driverless cars, could eliminate nearly half of all current jobs in the United States. One does not have to accept this particular analysis to recognize the anxieties that exist—one reason why Silicon Valley supports the idea.

    Another goal of the basic income is to redirect the negative incentives created by current welfare systems. When you pay people for being poor or unemployed, unsurprisingly, they’re often motivated to remain poor. Welfare benefits get phased out as income rises; the poor and lower-income workers can face effective marginal tax rates as high as 85 percent, according to the Congressional Budget Office. Working longer hours or seeking out a higher-paying but more difficult job doesn’t make much sense in a system that punishes good behavior and traps people at the bottom of the income ladder.

    Unfortunately, the authors’ version of basic income has several critical practical and philosophical flaws. A more controlled, restricted immigration system would be essential if everyone in the United States were entitled to a significant basic income just for being here. To their credit, the authors say that eligibility for basic income “excludes tourists and other travelers, undocumented migrants, and employees of supranational organizations [emphasis added].” While they would prefer a global basic income with open borders, they understand that, “if generous national (or, more generally, subglobal) basic incomes are to be made sustainable in the era of globalization, it will therefore not be possible to dispense with some version of the exclusionary [immigration] strategy.”

    This would likely be a showstopper for basic income in the United States. Championing de facto unlimited immigration and the rights of illegal migrants is arguably the highest priority of a significant portion of the American political class. Chicago Mayor Rahm Emanuel closed 50 schools, shuttered half the city’s mental-health clinics, and cut library hours, but still found $1 million to pay for legal aid for illegal migrants. Until America reestablishes control over immigration and limits the number of poor migrants it accepts, basic income will be completely unworkable—as the authors concede.

    Some humility from the authors would have been welcome about the risks of the radical restructuring that basic income would entail; Van Parijs and Vanderborght see only upside. To illustrate the downside potential, consider the poor results from annual per-capita payments of casino revenues to American Indian tribes (not discussed in the book). Some tribes enjoy a very high “basic income”—sometimes as high as $100,000 per year— in the form of these payments. But as the Economist reports, “as payment grows more Native Americans have stopped working and fallen into a drug and alcohol abuse lifestyle that has carried them back into poverty.” The magazine contrasts this fate with that of more successful tribes like Washington State’s Jamestown S’Klallam, which eliminated poverty by investing in tribal-owned small businesses instead of handing out cash grants.

    Another major problem with the basic-income thesis is that its intrinsic vision of society is morally problematic, even perverse: individuals are entitled to a share of social prosperity but have no obligation to contribute anything to it. In the authors’ vision, it is perfectly acceptable for able-bodied young men to collect a perpetual income while living in mom’s basement or a small apartment and doing nothing but play video games and watch Internet porn. A basic income “differs from conditional minimum-income schemes in having no strings attached,” the authors concede. “It carries no obligation for its beneficiaries to work or be available on the labor market. In this precise sense, we shall say that a basic income is obligation free.” Their attempts to address the problems implicit in their asymmetric view of society are some of the weakest arguments in the book.

    As is often the case with social reformers, Van Parijs and Vanderborght are making an argument that is fundamentally moral, not empirical or practical. “An unconditional basic income is what we need, we argued, if what we care about is freedom, not just for a few but for all,” they write. “We thereby appeal to an egalitarian conception of distributive justice that treats freedom not as a constraint on what justice requires but as the very stuff that justice consists in distributing fairly.” Make no mistake about what this means: if justice requires a basic income, then there is no moral right to dissent from it, and thus all disagreement with their position must ultimately be exiled from the realm of politics, democracy, and polite society. If a basic income were ever implemented, any attempt to remove it would be treated by its advocates as not just a bad policy idea, but evil, regardless of public support.

    Basic income sounds to many like an attractive idea—but closer examination reveals that it’s also a dangerous one, based on dubious social and moral logic. Though it surely wasn’t their intention in writing this book, Van Parijs and Vanderborght have made the dangers clearer.

    This piece first appeared on City Journal.

    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.

    Photo: http://401kcalculator.org, via Flickr, using CC License.