New Geography

Author: Joel Kotkin

  • Possible Sign of Trouble for Los Angeles

    A quarter century ago, the Los Angeles-Orange County area seemed on the verge of joining the first tier of global cities. As late as 2009, the veteran journalist James Flanigan could pen a quasiserious book, “Smile Southern California: You’re the Center of the Universe,” which maintained that L.A.’s port, diversity and creativity made it the natural center of the 21st century.

    A very different impression comes from a newer report, The Los Angeles 2020 Commission, which points out that, in reality, the region “is barely treading water while the rest of the world is moving forward.” The report, which focuses on the city of Los Angeles, points to many of the problems – growing poverty, a shrinking middle class, an unbalanced city budget, an underachieving economic and educational system – that have been building for decades.

    Sadly, “the 2020” report more accurately reflects L.A.’s current situation than Flanigan’s more optimistic view. All the more remarkable – and, perhaps, ironic – is that the signatures on the report come from many of the same political figures, union leaders and political advocates who have done so much to create this very sad situation. Disappointingly, the L.A. City Council already has started making its excuses, while the report’s authors, as the Daily News’ Rick Orlov notes, have already started “softening” their sometimes-harsh assessment.

    It is difficult, for example, to take seriously a report that, on the one hand, worries over pension costs but is signed, and supported, by the likes of County Labor Federation boss Maria Elena Durazo and L.A. Department of Water and Power union head Brian D’Arcy. For the most part, the commission was made up of lawyers and others who feed off the very pattern of insider deals and misdirected investment strategies that have so humbled a great city, and region. No surprise, then, that their biggest concrete recommendations were to speed up the pouring of concrete for their various pet projects, some of which make sense, while other don’t.

    Nevertheless, the report suggests that, perhaps, at last, even the most comfortably entrenched leaders are finally waking up to the predicament they and their colleagues have helped create. What they need now is a strategy that restores to Los Angeles the global status that is a prerequisite for progress.

    Why does being a global city matter so much? In large part, it is the best way to compete in a globalizing economy where the successful cities are defined not by size or population, but by the unique services they offer the world. In an ongoing study I am directing for the Chapman University Center for Demographics and Policy, with the assistance of the Singapore Civil Service College, we identified the leading world cities. We focused on such things as financial services, industrial specialization, media and culture.

    Size doesn’t always matter

    In the business of global cities, many of the biggest urban areas – in fact, all the largest ones, excluding Tokyo – failed to make the top 30. Instead, New York and London did best, along with such Asian cities as Tokyo, Hong Kong and Singapore. Perhaps our most surprising finding was that California’s two great metropolitan areas, the San Francisco Bay Area and Los Angeles, ranked sixth and seventh, respectively.

    Why, despite all its problems, is Southern California ranked so high? This is largely a reflection of several factors – notably, a still-sizeable tech sector, a huge port and strong cultural diversity – but, most importantly, because of Hollywood. Great global cities, by our calculations, are often what can be seen as “necessary cities.” They dominate economic niches to an extent that someone from outside the region is compelled to do business there.

    Hooray for Hollywood

    This is true, for example, for finance and media in New York and London, while the Bay Area dominates tech. Similarly, Hollywood is nearly synonymous with the American entertainment industry, which is by far the largest in terms of revenue and influence in the world. Last year, the industry enjoyed a trade surplus of roughly $12 billion; film and television industry exports totaled nearly $15 billion. Every major global movie studio in the world is located in Los Angeles, which is also a key hub of the music industry.

    So dominant is Los Angeles’ entertainment industry that many countries, trying to preserve their own cultural industries, have placed strict quotas on the number of English-language films that can be shown and songs that can be played on the radio. Los Angeles-Orange County once also enjoyed a dominant position in aerospace, but this industry has dramatically faltered, as the sector shrank by some 240,000 jobs as companies moved elsewhere, taking with them much of the region’s technical talent.

    The port of Los Angeles, another economic linchpin, remains somewhat dominant but the trade sector faces growing competition and suffers from the kind of institutional malaise that affects so much of business here. The region retains a foothold in the auto sector as the U.S. base for some Asian makers. Even here, however, there are clouds, as Nissan relocated to Nashville, Tenn., and Honda moved top executives to Ohio in order to be nearer to its manufacturing. More promising, the new Hyundai U.S. headquarters in Fountain Valley signals that global carmakers still see L.A.-Orange County as a “necessary” place.

    The region has held on to a leading, if somewhat smaller, share of entertainment, but L.A.’s other traditional industrial strengths, such as aerospace and defense, have badly eroded. One bright spot is technology. Somewhat surprisingly, the Startup Genome project ranked Los Angeles as having the second-strongest startup ecosystem in the United States. Yet, overall, L.A. has been losing ground in terms of employment, technology employment and net migration to other ascendant regions.

    Tech titans

    Perhaps the most critical factor affecting L.A.’s global status revolves around technology. It was shocking to me, at least, with L.A.’s focus on global ties, that the Bay Area has now slightly nosed out Southern California in our study’s rankings, largely due to that region’s technological preeminence. The region hosts the largest concentration of cutting-edge tech firms in the world. This fact alone allows the Bay Area to play a profound role in how globalization works, notes analyst Aaron Renn (www.urbanophile.com), particularly since innovations coming from that region arguably are a more primal enabler than advanced producer services. Indeed, according to one study, three Bay Area counties – San Francisco, San Mateo and Santa Clara – rank as the top three for concentration of tech jobs, and are among the leaders in growth.

    More serious still, Silicon Valley’s technological push is threatening to upend the structure of Hollywood and media. Over the past decade, Internet and software publishing, which are heavily centered in the Bay Area, have added close to 100,000 new jobs, while traditional media – based largely in New York and Los Angeles – have lost almost three times as many jobs.

    Google and Yahoo already are ranked among the largest media companies in the world. (Yahoo refers to itself as a digital media, rather than a technology, company.) Apple now has a great deal of control over consumer distribution of entertainment products like music and video. The entrance of Netflix, and other tech firms, into the television production business could further undermine L.A.’s entertainment dominance. To the new-tech oligarchs, older industries are prisoners to what one venture capitalist derisively called “the paper economy,” soon to be swept aside by the rising digital aristocracy.

    These issues, and challenges, are what the 2020 Commission people should be addressing in their search for solutions to the L.A. region’s relative decline. As our research indicates, Los Angeles-Orange County remains a major world city, but its upward trajectory is threatened by changes in technology and the rise of other regions in the U.S. and abroad. Now that members of the L.A. establishment have acknowledged “the truth,” perhaps it’s time for them to come up with ideas that can make the truth more pleasant.

    This story originally appeared at The Orange County Register.

    Joel Kotkin is executive editor of NewGeography.com and Distinguished Presidential Fellow in Urban Futures at Chapman University, and a member of the editorial board of the Orange County Register. He is author of The City: A Global History and The Next Hundred Million: America in 2050. His most recent study, The Rise of Postfamilialism, has been widely discussed and distributed internationally. He lives in Los Angeles, CA.

    Photograph: Downtown Los Angeles from Echo Park (by Wendell Cox)

  • How a Few Monster Tech Firms are Taking Over Everything from Media to Space Travel and What it Means for the Rest of Us

    The iconic view of tech companies almost invariably stress their roots in people’s garages, plucky individual entrepreneurs ready to challenge all comers. Yet increasingly the leading tech firms – Amazon, Apple, Facebook, Amazon and especially Google – have morphed into vast tech conglomerates, with hands in ever more numerous, and sometimes not obvious, fields of endeavor.

    Ironically, the very entrepreneurial form that defeated Japan’s bid for global technological dominance is morphing into an American version of the famed keiretsu that have long dominated the Japanese economy. The keiretsu,epitomized by such sprawling groups as Mitsubishi, Sumitomo and even Toyota, spread across a vast field of activities, leveraging their access to finance as a means to expand into an ever-increasing number of fields. The can best be understood, notes veteran Japan-based journalist Karel van Wolferen, as a series of “intertwined hierarchies.”

    Increasingly, American technology is dominated by a handful of companies allied to a small but powerful group of investors and serial entrepreneurs. These firms and individuals certainly compete but largely only with other members of their elite club. And while top executives and investors move from one firm to another, the big companies have constrained competition for those below the executive tier with gentleman’s agreements not to recruit each other’s top employees.

    At the top of the American keiretsu system stands a remarkably small group whose fortunes depend in part on monetizing invasions of privacy to use the Internet as a vehicle for advertising. These are not warm and cuddly competitors. Both Google and Microsoft have been accused of using anti-competitive practices to keep out rivals, in part by refusing to license technology acquiring of potential competitors.

    “Tech is something like the new Wall Street,” notes economist Umair Haque,“Mostly white mostly dudes getting rich by making stuff of limited social purpose and impact.”  

    Like their soul brothers on Wall Street , America’s elite tech firms – and their owners – have become fantastically cash rich.  Besides GE, a classic conglomerate, the largest cash hordes now belong to Apple, Microsoft, Cisco, Oracle and Google, all of whom sometimes have more dollars on hand than the US government.  Seven of the eight biggest individual winners from stock gains in 2013 were tech entrepreneurs, led by Jeff Bezos who added $12 billion to his paper wealth, Mark Zuckerberg who ranked in an additional $11.9 billion while Google founders, Sergey Brin and Larry Page, had their wallets expanded by roughly $9 billion.

    This wealth reflects in large part the oligopolistic nature of many key tech sectors, for example, the Apple-Google duopoly on mobile phone software, Microsoft’s dominant position in operating systems for PCs, Google’s utter control of search, and Facebook’s domination of social media. In most cases, these fields are controlled at levels of eighty percent or more.    

    America’s new gilded age giants are similar to Japan’s keiretsu but they also share a lineage with the early 20th Century trusts that controlled railroads, cotton, silver and other commodities. Those early fortunes helped provide the foundation for such banking firms as J.P. Morgan, Goldman Sachs, Oppenheimer, and Lehman Brothers, as well as the basis for the Rockefeller and Hearst empires. Their wealth, in the era before income taxes, was immense; by the 1880s the revenues of Cornelius Vanderbilt’s railroad empire were greater than those of the federal government.

    The control of immense resources by a small group of tech firms, like the oligopolies of the earlier industrial magnates, produces a steady cash-flow them to look further afield for new opportunities and expand into potentially huge new markets. But even more importantly, it gives them the opportunity to fail and still live to acquire another day.

    Google’s recent sale of Motorola’s mobile division, at a paper loss of nearly $10 billion, would have led to bankruptcy head-rolling at many firms but for Google it hardly left a scratch. A $10 billion failure barely threaten a company whose last quarterly revenues neared $17 billion, has cash on hand of over $56.5 billion and whose market cap is now nearly $380 billion.

    Indeed, if any of the tech powers on track to become a full-fledged keiretsu, it’s likely to be Google. Over the past year the company has ventured into a host of fields, such as robotics, energy, mapping, and driverless cars – fields that have great potential but are only tangentially related to their core business. The recentacquisition of Nest, a company founded by Apple alum Tony Fadell , brings Google into the “smart home” marketplace, part of the so-called “internet of things”. This gives these firms a new capacity to harvest ever greater information hauls from your once “dumb,” but at least private, household appliances.

    These investments and cross-industry ties are changing firms like Google in fundamental ways.  As industry veteran Michael Mace observes, Google has stopped being a “unified product company” and is turning instead into what he calls “a post-modern conglomerate.” Its goal, he notes, is no longer to dominate search, or even the internet, but to invest, and hopefully, control anything that uses information technology, including everything from logistics and medical devices to the most mundane household devices.

    By investing widely and eating up developing markets, the “the Gang of Four” internet companies—Microsoft, Apple, Facebook and Google—have two key advantages: almost unlimited capital resources, and tech expertise and credibility. Allied with venture firms, and a vast reservoir of technical experts, the tech oligarchies, for example, already  dominate such promising fields robotics, with Silicon Valley home to half of all venture invested in the field, over 70 percent of employees, and a whopping 90 percent of market cap.  

    Others are turning to space, a field once dominated by NASA, once a key contractor for the Valley. Headquartered in the old aerospace center of Los Angeles, Space X, the largest of the space startups, was founded by billionaire Elon Musk, who previously founded PayPal and Tesla. By 2013, Space’s X’s total employment, including contractors, topped 3800.

    Musk is not alone in the space game. Amazon CEO Jeff Bezos founded his own private space exploration company, Blue Origin, which has launched two vehicles into space, Charon and Goddard. It intends to build orbital space stations, and serves as a contractor for NASA. Like the nascent space industry’s third new player, Richard Branson’s ‘Virgin Galactic,’ these firms are all the pet projects of billionaires fascinated by space. If NASA continues to retreat from many areas of space exploration, it is likely that in the future the heavens too may end up belonging to the oligarchs.

    The Media power-shift

    A Google or Amazon space-ship may still be in the distant future, but we can already see the impact of the new keiretsu on information and culture. In the past, more hardware-oriented companies provided the “pipelines” through which traditional media disseminated their product. But increasingly, it’s the tech oligarchs who control the news and information industry.

    Google, by some estimates, already enjoys more advertising revenues than either the newspaper or magazine industry. And they’re positioned to take over the the hardware side by supplanting the traditional telecommunications companies with their own series of global pipelines.

    This big tech takeover also previews a geographic shift from traditional centers of power like New York and Los Angeles to the new seats of influence, most notably Silicon Valley, San Francisco and the Puget Sound area.

    The transitions of power and influence have come at heavy costs. 

    As the new software-based media expanded over the last decade, massive losses have pummeled newspapers, music, book and magazine publishing Since 200. The paper publishing industry, traditionally concentrated in the New York area, has lost some 250,000 jobs, while internet publishing and portals generated some 70,000 new positions, many in the Bay Area or Seattle.

    To the new oligarchs, the old media are just part of what one venture capitalist derisively called “the paper economy” destined to be swept away by the new digital aristocracy. As relatively young people who have already amassed fortunes, the tech giants have the time to disseminate their views to the public, both the mass and the influential higher echelons. Another $200 million new venture with a mission to support largely left of center investigative reporting, is being backed by eBay founder Pierre Omidyar.

    Buying up prestigious media outlets, an old tactic for consolidating influence that was previously used by gilded age moguls like William Randolph Hearst, has surfaced among the new tech giants, exemplified in the recent purchase of the venerable New Republic by Facebook co-founder, and Obama tech guru, Chris Hughes, who is reportedly worth $850 million.

    But perhaps more critical than buying old outlets will be the growth of their own oligarch controlled news media. Yahoo is now the #1 news sites in the U.S. with 110,000,000 monthly viewers, and Google News isn’t far behind at #4 with 65,000,000 users. The Valleyites are also moving into the culture business with both YouTube (owned by Google) and Netflix now creating original entertainment content.

    The tech firms control over media is likely to become even more pervasive as the millennial generation grows and the older cohorts begin to die off. Among those over 50 only 15 percent, according to a Pew report get their news over the internet; among those under 30, the number rises to 65 percent.   

    Impact on Innovation

    Is this concentration of tech power a good thing? To some extent, the country benefits from having a Google, Amazon, Microsoft or Apple at the forefront of such fields as healthcare, robotics and space. They possess the resources and the technical know-how to develop and market new product lines that smaller, more specialized start-ups might lack.

    Indeed the shift of resources from social media and advertising to robotics or space travel has to be considered a basically positive development. Unlike the social media revolution, which appears to have done relatively little to benefit the overall economy, the developments in space travel or driverless cars, may provide advantages that are more widely shared.

    Yet, there is also a major problem with over-rich and over-confident oligopolies. It’s a lesson demonstrated by Japan’s arc over the past two decades and in the story of the big three US automakers and their era of domination – both examples show how concentration of power can stifle innovation and positive growth. Already some economists see a slowing in the pace of technical breakthroughs. In the 1980s personal computer boom, scores of companies competing across a broad array of tech sectors resulted in few long-term winners but a rapid evolution of technology. In contrast, it is not easy to argue that Google’s search function or Microsoft’s code are any better today than they were three or even five years ago.

    As the tech firms move further from their entrepreneurial roots, one critic notes,many take on “a timid, bureaucratic spirit” that responds to the needs of investors and focuses on preserving already established business lines.

    Would we be better off with say, a garage-bound Steve Jobs developing the software for robotics, rather than having development managed in a corporate structure that answers the demands of Wall Street analysts? Trusting a small, often closely knit group of investors, to oversee critical industries of the future, does not seem to be the best strategy to maintain and deepen our technological lead.

    Digital innovation should be spurring the creation of new competitive companies. Yet,  instead it is fostering an American version of the Japanese keiretsu, where firms like Amazon, Google, Apple and Microsoft try to use their unfathomable riches to dominate the entire technological future. This is not a step forward but one that can limit Americans’ ability to renew the entrepreneurial genius at the heart of our national character.

    This story originally appeared at The Daily Beast.

    Joel Kotkin is executive editor of NewGeography.com and Distinguished Presidential Fellow in Urban Futures at Chapman University, and a member of the editorial board of the Orange County Register. He is author of The City: A Global History and The Next Hundred Million: America in 2050. His most recent study, The Rise of Postfamilialism, has been widely discussed and distributed internationally. He lives in Los Angeles, CA.

    Facebook photo by BigStockPhoto.com.

  • America’s Future Cities: Where The Youth Population Is Booming

    To identify economic hot spots in the making, we often look for where immigrants, young people or entrepreneurs are clustering. But perhaps nothing is a better indicator than those who truly make up generation next — America’s children.

    Several major factors determine where the most children are being born, and more importantly, raised, says demographer Wendell Cox. Three key ones are economic growth, affordability and lower population densities.

    Using the Census Bureau’s 2012 American Community Survey, Cox looked at the under 14 populations of the nation’s 51 metropolitan statistical areas with over a million residents, and also traced the changing numbers in this age group since the onset of the Great Recession in 2007. Finally he broke down each of these metro areas between their core cities and suburbs to determine where within the region children are the most predominant.

    Thesuburbs have sometimes been described as the nurseries of the nation, but surprisingly the outer rings generally did not outperform core cities in terms of births over the period we examined. In the core cities of our 51 largest MSAs, newborns to 4-year-olds made up 6.9% of the population in 2012, compared to 6.3% in the suburbs. But even here, it’s not the “hip and cool” cities leading the way – San Francisco, Seattle and Boston were all well below the average. Generally the highest proportions of young children were in lower-density cores of such cities as Oklahoma City, Dallas, Charlotte, N.C., and Houston. (Two metro areas with denser urban cores, Milwaukee and Hartford, also made the top  10.)

    But something dramatic happens as children age: They and their parents start moving to the suburbs in massive numbers. In both the 5-to-9 and 10-to-14 cohorts, suburbs easily surpass core cities in virtually every major metropolitan area. So while the popular perception that many downtowns are now overrun by baby strollers is not necessarily an urban myth, it ignores what happens to families as children get older and ambulatory, requiring more space, needing to go to school and more susceptible to getting into trouble.

    In addition, Cox notes, not only are there higher concentrations of children in suburbs in the vast majority of metro areas, the overall greater population on the periphery makes the suburbs home to the preponderance of families. This is one reason that most of the fastest-growing counties in the U.S. are either suburbs or exurbs. Roughly 23.9 million children below the age of 14 live in the suburbs of our 51 largest metro areas compared to 8.6 million in the core cities.

    Families and Opportunity

    Perhaps nothing attracts families on the move more than economic opportunity. The old adage “the rich get richer and the poor have babies” may no longer fit in the United States. In fact, in most high-income societies, the birth rate is shaped increasingly by economic conditions. The Great Recession, for example, reduced fertility in most major countries, including the United States, which traditionally has enjoyed somewhat higher birth rates than its high-income competitors in East Asia and Europe.

    But with the gradual economic recovery in the United States, the decline in birthrates has endedand could return to the levels of the more prosperous 1990s and early 2000s.  This dynamic plays out as well on the local level. Birthrates tend to have remained stable in metro areas with stronger economies during the recession. In booming North Dakota, births actually increased.

    Not surprisingly, metropolitan areas with the consistently strongest economies in terms of job creation and income growth dominate our list of the cities with the highest share of children under 14 in their populations. In our top-ranked metro area, Salt Lake City, children make up 24.7% of the population, and in second place Houston, they account for 23.0%.

    Affordability

    The second major factor driving child demography is the cost of housing, which is the principal driver of the cost of living. Virtually all the areas with high proportions of children have median home price to annual income ratios of three to four. In some cases, low home prices seem to trump economic malaise. This may help explain the relatively high under 14 population in No. 4 Riverside-San Bernardino, Calif.

    Conversely high housing prices can also limit the ability of even prospering areas to grow families. This is most obvious in the relatively low ranking of the New York metro area (41st), with a median home price to income multiple of 6.2.  San Francisco-Oakland, home to the highest housing prices in the nation with a median multiple rapidly approaching 9, ranks 45th place. Pricey Boston ranks 46th. Policies designed to prevent the construction of single-family homes, particularly in the Bay Area, all but guarantee that housing prices will remain high, and toxic for all but wealthy households.

    Density

    Despite the hopes of some urbanists, most families prefer lower-density living, particularly single-family houses. Between 2000 and 2011, detached house accounted for 83% of the net additions to the occupied housing stock in the United States. A survey sponsored by the National Association of Realtors suggests that roughly 80% of Americans prefer a single-family house to either an apartment or townhouse.

    Correspondingly, expansion in the number of families and children has been occurring overwhelmingly in less dense areas. The fastest growth in the under 14 population since 2007 has been almost entirely in what can be described as heavily suburbanized low-density areas, led by greater New Orleans, Raleigh, San Antonio, Charlotte, Nashville, and Houston. In contrast, the biggest drop off in the number of children has been in metropolitan areas with higher urban densities, with the most dense, Los Angeles, also suffering the largest decline. The 10 metropolitan areas with the largest declines in their youth populations had urban densities averaging 45 percent more than the 10 with the greatest gains.

    The Urban Future and Fertility

    What does this tell us about the future of our urban regions? Since families are a critical component of growth in any metropolitan areas, those with higher percentages of children are likely to grow far faster than those that are made up increasingly of childless households. This trend should accelerate as the millennials, now entering their 30s, begin to form families. Children boost the demand for certain goods, notably houses and certain kinds of retail, and also increase demand for many services, notably schools.

    Given the current economy, most of our top metropolitan areas can be expected to continue growing, particularly those, like Houston and Dallas, that have become increasingly hospitable to immigrants; the foreign-born account for one out of every four women giving birth in the country. Minorities overall are the ones driving population growth; last year  there weremore white deaths than births.

    But some traditionally fertile metropolitan areas might see a real slowdown, notably Riverside-San Bernardino, where income and job growth is lagging well behind housing costs.  At the same time, we can expect continued slow growth in the populations in those areas towards the bottom of the list. To be sure, migration of older people from cold climates will keep Miami (47th on our list) and Tampa-St. Petersburg (second from last) growing, particularly as the boomers age. Such a movement can not anticipated in many other low-ranked cities ranging from relatively prosperous Pittsburgh (last place) to less affluent Buffalo, Providence and Cleveland.

    We can also anticipate the evolution of some metropolitan areas with low percentages of children — such as Boston, San Francisco, New York and Los Angeles — will slow not just demographically, but also economically as younger workers look to establish families elsewhere.  This may be somewhat counterbalanced by foreign immigration, but these newcomers, particularly those without huge financial resources, are also increasingly migrating to lower-density cities.

    Having children in your region certainly does not guarantee success, but without them, metro areas will face a more rapid aging of their populations and workforces, something that historically does not produce robust economies but gradual decline.

    YOUNG POPULATION: MAJOR METROPOLITAN AREAS: 2012
    Ages 0-14
    MMSA MMSA% Core City % Suburban %
    Atlanta, GA 21.6% 15.9% 22.1%
    Austin, TX 21.2% 18.9% 23.1%
    Baltimore, MD 18.6% 18.3% 18.8%
    Birmingham, AL 19.7% 19.0% 19.9%
    Boston, MA-NH 17.3% 14.4% 17.7%
    Buffalo, NY 17.1% 19.5% 16.4%
    Charlotte, NC-SC 21.4% 19.6% 22.8%
    Chicago, IL-IN-WI 20.2% 19.0% 20.6%
    Cincinnati, OH-KY-IN 20.3% 19.5% 20.5%
    Cleveland, OH 18.3% 19.4% 18.0%
    Columbus, OH 20.4% 19.6% 21.1%
    Dallas-Fort Worth, TX 22.9% 22.0% 23.1%
    Denver, CO 20.5% 19.0% 21.0%
    Detroit,  MI 19.1% 20.7% 18.8%
    Hartford, CT 17.4% 21.1% 17.0%
    Houston, TX 23.0% 21.8% 23.6%
    Indianapolis. IN 21.6% 21.2% 22.0%
    Jacksonville, FL 19.3% 19.7% 18.6%
    Kansas City, MO-KS 21.1% 20.8% 21.2%
    Las Vegas, NV 20.4% 20.1% 20.6%
    Los Angeles, CA 19.4% 18.7% 19.7%
    Louisville, KY-IN 19.5% 19.3% 19.7%
    Memphis, TN-MS-AR 21.6% 20.9% 22.2%
    Miami, FL 17.3% 16.2% 17.4%
    Milwaukee,WI 20.1% 22.9% 18.4%
    Minneapolis-St. Paul, MN-WI 20.4% 19.5% 20.7%
    Nashville, TN 20.1% 18.7% 20.9%
    New Orleans. LA 19.2% 18.3% 19.6%
    New York, NY-NJ-PA 18.4% 17.9% 18.9%
    Oklahoma City, OK 21.0% 22.1% 20.1%
    Orlando, FL 18.8% 20.2% 18.6%
    Philadelphia, PA-NJ-DE-MD 18.8% 18.9% 18.7%
    Phoenix, AZ 21.4% 22.9% 20.7%
    Pittsburgh, PA 16.0% 12.9% 16.5%
    Portland, OR-WA 19.2% 16.5% 20.2%
    Providence, RI-MA 17.2% 18.3% 17.0%
    Raleigh, NC 21.6% 19.8% 22.7%
    Richmond, VA 18.8% 17.0% 19.2%
    Riverside-San Bernardino, CA 22.8% 23.9% 22.7%
    Rochester, NY 17.6% 19.2% 17.3%
    Sacramento, CA 19.9% 19.9% 19.8%
    Salt Lake City, UT 24.7% 18.5% 25.9%
    San Antonio, TX 21.7% 21.8% 21.6%
    San Diego, CA 19.0% 17.1% 20.3%
    San Francisco-Oakland, CA 17.4% 13.6% 18.8%
    San Jose, CA 20.0% 20.5% 19.4%
    Seattle, WA 18.7% 13.4% 19.8%
    St. Louis,, MO-IL 19.2% 17.9% 19.3%
    Tampa-St. Petersburg, FL 17.1% 18.7% 16.8%
    Virginia Beach-Norfolk, VA-NC 19.1% 18.0% 19.3%
    Washington, DC-VA-MD-WV 19.5% 14.8% 20.1%
    Calculated from American Community Survey Data

    This story originally appeared at Forbes.com.

    Joel Kotkin is executive editor of NewGeography.com and Distinguished Presidential Fellow in Urban Futures at Chapman University, and a member of the editorial board of the Orange County Register. He is author of The City: A Global History and The Next Hundred Million: America in 2050. His most recent study, The Rise of Postfamilialism, has been widely discussed and distributed internationally. He lives in Los Angeles, CA.

    Crossing the street photo by Bigstock.

  • America’s Glass Half-empty, or Half-full?

    The stock market is high, real estate prices have resurged, even the unemployment rate is dropping, yet Americans still feel pretty down about the future. A survey released in January by the AP-NORC Center for Public Affairs Research had 54 percent of respondents expecting American life to go downhill over the coming decades. In a December survey, 23 percent of respondents said things will improve over time.

    Yet, in reality, there are several huge trends – economic, environmental, demographic – working in favor of the United States. Despite 13 straight years of underwhelming leadership, the U.S. can emerge extraordinarily blessed from the Great Recession and lackluster recovery, if Americans take advantage of our current situation.

    Why, then, so glum? One explanation clearly is the shape of the economic recovery, which, due in part to Federal Reserve monetary policy, has favored the rich by primarily promoting stock market and other asset growth. “Qualitative easing,” notes one former high-level Fed official, essentially constituted a “too big to fail” windfall for the largest Wall Street firms. Executives at these same firms set new compensation records in 2011, just three years after the financial “wizards” left the world economy on the brink of economic catastrophe.

    As people on Wall Street, and their hipper counterparts in Silicon Valley, celebrate their good fortune, most people are not doing well, and they know it. Unemployment may have dropped officially, but the percentage of Americans in the workforce is now at the lowest level since December 1977. Huge parts of our society now face long-term unemployment or, at best, a marginal existence at the low end of the job market.

    This trend is most disturbing because it has been going on for a long time and, generally, has been getting worse. Since 1973, for example, the rate of growth of the “typical family’s income” in the United States has slowed dramatically; for males, it has actually gone backward when adjusted for inflation, at least until the early 1980s. In contrast, in 2012, the top 1 percent of earners accounted for one-quarter of all American income, the highest percentage in the past century.

    So, given these problems, why should anyone be optimistic? After all, by 2020, the CIA suggested in 2005, the U.S. world position will have eroded because of the rise, most notably, of India and China; many business leaders share this assessment.

    Nevertheless, here are five reasons for optimism.

    Everyone else is in worse shape

    Looking for a global hot spot that’s doing better? Look again. Virtually all America’s much-vaunted competitors of yesterday – notably, Japan and the European Union – have suffered slow economic and demographic growth. The much-ballyhooed winner of tomorrow, China, also appears to be slowing. Political corruption, soaring local debt and massive levels of pollution are creating a crisis of confidence, reflected by the growing exodus of the educated and affluent from China and Hong Kong , with many ending up in the United States.

    The other members of the so-called BRIC countries – a term coined by one of the geniuses at Goldman Sachs – also are stagnating. Brazil’s successful bids to host the 2016 Summer Olympics and this summer’s soccer World Cup have made ever more obvious the country’s massive poverty and political incompetence, made all the worse by a slowing economy. India, too, is experiencing weak growth and increased political instability. Russia’s uncrowned czar, Vladimir Putin, may be outmaneuvering our gullible, indecisive president but the country Putin controls is going nowhere, with the population stagnating and its weakening economy utterly dependent on extractive resources. Turkey, another favorite of the investment banks, is also showing signs of distress and instability.

    Energy revolution

    Barack Obama has tried to take credit for America’s huge shift toward self-sufficiency in oil and gas, a movement driven largely by wildcatters and independents. Of course, it would have never happened if he had his druthers; under his administration, energy production on federal lands has dropped steadily. Nevertheless, the president seems smart enough not to shut off this amazing development on private and state lands, despite incessant pressure from his environmentalist supporters.

    The energy revolution, notably in natural gas, changes everything. It allows us to tell many of the world’s leading malefactors – Russia, Venezuela, Iran and Saudi Arabia – to keep their oil. It also is driving continued improvement in air quality and reduced levels of greenhouse gases. American natural gas, rapidly replacing coal as an energy source, has turned this country into what one green think tank, the Breakthrough Institute, called “the global climate leader.” We are lowering our emissions far more rapidly than are the Europeans, people widely praised by some U.S. greens for having superior policies.

    Manufacturing resurgence

    For all the concern expressed about the “end of the car era,” the U.S. auto industry is doing pretty well, in fact, selling vehicles at about the levels experienced before the Great Recession. General Motors, nearly dead five years ago, is now investing $1.3 billion to upgrade five Midwest factories. New auto plants, particularly those of European and Asian carmakers, are being erected across the South. But the resurgence of U.S. manufacturing is about more than cars; there also is huge investment in other industries, notably in pharmaceuticals and refining, notably tied to the energy revolution.

    Critically, the vast supplies of oil and, most importantly, natural gas, are pushing down manufacturing costs well below those imposed on Asian and European firms. This is where industrial jobs have been growing the fastest, and are likely to expand in years ahead. In fact, U.S. industrial and energy production has driven U.S. exports to a record level, one clear sign that the nation’s competitiveness is beginning to move beyond our traditional strengths in entertainment, services and agriculture.

    Demographic advantages

    As in other countries, The U.S. birth rate fell during the recession, but this decline has now stopped as the economy has crawled back. Over the past decade, the U.S., through somewhat high birth rates and immigration, has avoided the kind of demographic implosions that afflict most of our key competitors. In the next few decades, the working population of Americans is expected to grow substantially, while those in Japan, Korea, Europe and China all taper off.

    America’s relative youth helps not only fiscally – with more young people to carry the burden of a swelling retiree population – but also culturally. Despite the rise of entertainment and media in other countries (for example, Bollywood films or Korean pop music), the domination of new culture remains overwhelmingly American. Critically, this applies not only to Hollywood but even more so to digital media, where U.S. domination is both overwhelming and terrifying our competitors, particularly the autocrats in Moscow and Beijing.

    Blessings of federalism

    Perhaps America’s greatest strength lies in its constitutional order. Unlike other countries, the U.S. was defined by a separation of powers that accommodates regional differences. The calls from Washington by both Left and Right for more national solutions is misplaced; whether used to promote conservative or liberal policies, one size does not fit nearly all in a country as diverse and differentiated as the United States.

    Instead, we need to let our states and regions seek out the approaches that work best for them. If Ohio and Pennsylvania allow fracking, and it creates significantly better results than those in anti-fossil-fuel states like New York and California, that would send a message to other states, but does not have to reflect a national policy.

    America’s regions have enormous assets and advantages in the global economy. If we allow them to exploit what they have, there may be more hope for the future than many now believe.

    This story originally appeared at The Orange County Register.

    Joel Kotkin is executive editor of NewGeography.com and Distinguished Presidential Fellow in Urban Futures at Chapman University, and a member of the editorial board of the Orange County Register. He is author of The City: A Global History and The Next Hundred Million: America in 2050. His most recent study, The Rise of Postfamilialism, has been widely discussed and distributed internationally. He lives in Los Angeles, CA.

    USA map image by BigStockPhoto.

  • Blue-Collar Hot Spots: The Cities Creating The Most High-Paying Working-Class Jobs

    It’s a common notion nowadays that American blue-collar workers are doomed to live out their lives on the low-paid margins of the economy. They’ve been described as “bitter,” psychologically scarred and even an “endangered species.”  Americans, noted one economist, suffered a “recession” but those with blue collars endured a “depression.”

    Yet in recent years, according to research by Mark Schill of the Praxis Strategy Group, there’s been a strong revival in higher-paid blue-collar industries in many of our largest metropolitan areas, and the momentum is, if anything, building. Schill analyzed employment changes from 2007 to 2013  among a group of higher-paying blue-collar industries: oil and gas and mining; construction; manufacturing; and wholesale trade, transportation, warehousing and waste handling. Compensation in these sectors average $58,000 a year; in oil and gas, pay tops $100,000. In any case, these fields pay far better than alternative sources of employment for people without college degrees, such as retailing ($27,500), food service ($16,000), hospitality, or the arts ($31,000). Nationally, this cross section of higher-value blue-collar industries employs 31.3 million people, just more than a fifth of the nation’s workforce, up 1.3 million jobs since 2010.

    This blue-collar resurgence seems likely to be  more than a merely cyclical phenomenon. The U.S. edge in energy and manufacturing, increasingly linked, has sparked major new investments by both domestic and foreign producers. The new energy finds have created employment in the construction and operation of such things as pipelines and refineries, and have also led manufacturers to plan new factories here due to electricity and feedstock costs that are now well below those in Europe or East Asia.

    The Boston Consulting Group suggests other factors sparking this revival. This includes  rising wages in China as well as sometimes unpredictable business conditions that are leading some large U.S. companies to move some production to America from China.

    Overall, since 2010 the number of high-value manufacturing jobs is up 167,000 in the 52 largest metropolitan areas while energy extraction added 50,000 positions. (Heavily subsidized renewables enjoyed a much smaller increase.) The wholesale trade and material handling sectors have added almost 300,000 jobs in  that time. And as the economy has recovered somewhat, demand for housing, including in some once distressed exurban areas, has sparked a nascent revival in higher-paying construction employment. This key blue-collar sector, devastated by the recession, has gained roughly 200,000 jobs since 2010.

    This revival is not evenly spread. The big winner is the Houston metro area, in large part due to the energy industry, which has added 23,000 jobs since 2010. It also reflects local growth in the high-wage manufacturing (up 30,000 jobs) and trade and transport sectors (up 26,000), while construction employment has surged nearly 20,000, a number matched only by the much larger New York metro area. Houston tops our list of the cities creating the most good blue-collar jobs. (Our ranking is based 50-50 on growth from 2007-13 and 2010-13.) Not far behind in second place is Oklahoma City, which has clocked a similarly broad increase, led by 28% growth in energy employment, 6% in construction and 15% in manufacturing.

    Many of the other metro areas in our top 10 fit the same mold — traditionally business-friendly Sun Belt locales with strong energy sectors, and expanding manufacturing.

    A Surge In The West

    The Intermountain West also continues to create manufacturing and trade jobs at a rapid rate. This region’s blue-collar star is Salt Lake City, which places seventh on our list, led by a strong expansion in energy sector employment and trade and transport, with decent growth in manufacturing.

    It’s not merely a “red state” phenomena. Progressive-dominated Denver places 11th on our list, with 32% growth in energy jobs as well as a 10% increase in construction employment. Similarly Portland (9th) and Seattle (10th) have produced more opportunities for blue-collar workers. This has been paced largely by strong growth in manufacturing, aided by low energy costs from hydro. Intel INTC +0.2% is building a large new factory near Portland, while Boeing BA -2.5% has continued to add jobs in the Seattle area – its headcount in Washington State is up 17% since 2010. Construction has also been healthy, in part due to migration from more expensive California, as well as trade, which ties into the region’s close ties to the Pacific Rim.

    In contrast the “big enchilada” economies of California have lagged, and overall employment in high-paying blue collar sectors remains well below 2007 levels. But since 2010, there has been a modest uptick in manufacturing and construction in San Jose/Silicon Valley, which ranks 13th on our list, while San Francisco (16th) has seen some recovery in the transportation and trade sectors.

    The Revival Of The Rust Belt

    No part of the country is more associated with high-paid blue-collar work, and its decline, than the Rust Belt. Employment in most Rust Belt cities is well below 2007 levels, but since 2010 there has been a resurgence in high-paying manufacturing industries, led by the third-ranked Detroit area, which added 37,000 jobs.

    This is clearly tied to the recovery of the U.S. auto industry. The East and West Coast media love to yammer about the demise of the car, but the industry’s production has returned to 2007 levels and automakers are investing in the region. GM has committed to spend over $1.3 billion to upgrade five factories in Ohio, Indiana, Detroit and the nearby Michigan cities of Flint and Romulus.

    It’s more than an autos story in the region. Grand Rapids, which has a highly diverse manufacturing sector, including many furniture companies,  has increased industrial employment 16% since 2010, putting it fourth on our list. Other Rust Belt metro areas making a blue-collar comeback  are Louisville, Ky. (12th), Minneapolis (15th), Columbus, Ohio (18th), and Pittsburgh (19th).

    The Laggards

    Some metro areas have continued to lose high-wage blue-collar jobs, led by Las Vegas (down 4.2% since 2010), Orlando (-13.6% since 2007), Providence, Rochester and Philadelphia. Our two largest industrial metro areas, Chicago and Los Angeles, have seen slow growth, ranking 25th and 28th, respectively. Rapidly de-industrializing New York ranks 35th, despite the metro area’s surge in construction employment.

    Yet overall, demand is rising for highly skilled workers at U.S. industrial and energy companies.

    At a time when the wages of college graduates have been falling, it might behoove more young people to realize that, in many cases, a degree in art is not worth as much as a certificate for machining, welding, plant management or plumbing. Some metro areas are bolstering their efforts in this area, notably New Orleans, Columbus, Nashville and even creative class-oriented Portland.

    To be sure, the golden days for working-class employment are over, but the future may prove to be a lot less dismal, particularly in some regions, than generally proclaimed by those who have rarely seen in the inside of factory or a refinery.

    Blue Collar Industry Growth Index
    Rank Region (MSA) Score Growth, 2010-2013 Growth, 2007-2013 2013 Avg Earnings Concentration, 2013
    1 Houston 97.3 12.6% 6.6% $102,726 1.41
    2 Oklahoma City 95.2 12.6% 4.4% $68,526 1.00
    3 Detroit 80.5 13.5% -12.3% $80,964 1.10
    4 Grand Rapids 80.2 11.3% -6.5% $66,157 1.30
    5 Nashville 80.1 12.1% -8.7% $64,217 1.01
    6 Austin 78.6 10.0% -4.7% $84,780 0.88
    7 Salt Lake City 71.7 8.3% -6.5% $67,794 1.09
    8 Dallas 70.3 7.2% -5.2% $79,645 1.15
    9 Portland 68.8 8.4% -9.7% $78,439 1.13
    10 Seattle 66.7 7.6% -9.5% $84,921 1.06
    11 Denver 66.1 6.9% -8.3% $77,652 0.94
    12 Louisville 64.4 6.3% -8.3% $66,783 1.26
    13 San Jose 62.2 5.4% -8.1% $148,369 1.20
    14 Charlotte 61.7 7.2% -13.5% $67,555 1.05
    15 Minneapolis 61.4 6.0% -10.2% $80,834 0.99
    16 San Francisco 60.2 6.3% -12.3% $96,017 0.82
    17 San Antonio 60.1 3.8% -5.7% $57,763 0.80
    18 Columbus 59.7 5.9% -11.7% $67,612 0.91
    19 Pittsburgh 59.0 4.0% -7.4% $70,676 0.96
    20 Phoenix 58.5 8.7% -20.3% $73,253 0.95
    21 Birmingham 57.4 5.6% -13.2% $68,810 1.08
    22 Milwaukee 54.5 4.1% -11.9% $74,417 1.18
    23 Virginia Beach 53.8 3.4% -10.9% $64,353 0.79
    24 Indianapolis 52.2 2.7% -10.5% $72,993 1.13
    25 Chicago 51.8 3.6% -13.3% $81,077 1.06
    26 Kansas City 51.4 2.7% -11.3% $67,777 0.98
    27 Baltimore 51.3 2.6% -11.1% $75,899 0.77
    28 Los Angeles 51.1 3.5% -13.8% $73,019 0.98
    29 New Orleans 50.4 1.0% -7.7% $78,854 1.06
    30 Raleigh 50.1 3.9% -15.8% $71,675 0.83
    31 Memphis 49.9 2.0% -10.8% $74,353 1.24
    32 Boston 49.1 1.9% -11.3% $91,328 0.78
    33 Miami 49.0 4.5% -18.3% $60,559 0.82
    34 San Diego 47.7 2.7% -14.6% $79,572 0.77
    35 New York 47.5 1.5% -11.7% $83,900 0.73
    36 Atlanta 47.4 2.6% -14.9% $73,156 1.01
    37 Cincinnati 47.1 1.8% -13.0% $71,311 1.12
    38 Tampa 46.9 4.5% -20.4% $60,296 0.76
    39 Buffalo 46.3 1.3% -12.4% $68,672 0.90
    40 St. Louis 46.1 2.5% -15.8% $72,353 0.96
    41 Hartford 44.5 0.6% -12.3% $82,968 0.96
    42 Richmond 44.4 2.4% -17.1% $66,079 0.85
    43 Riverside 44.4 4.0% -21.6% $56,220 1.06
    44 Cleveland 43.9 1.7% -15.7% $70,419 1.09
    45 Jacksonville 38.7 2.0% -21.6% $64,006 0.85
    46 Sacramento 37.9 2.3% -23.2% $68,535 0.69
    47 Washington 37.5 -0.4% -16.2% $75,597 0.50
    48 Philadelphia 37.2 -1.1% -14.7% $81,843 0.83
    49 Rochester 35.1 -1.6% -15.3% $70,776 0.96
    50 Providence 32.8 -1.2% -18.6% $68,235 0.91
    51 Orlando 31.7 0.3% -23.7% $60,493 0.70
    52 Las Vegas 1.0 -4.2% -41.1% $66,445 0.60

    Data source: QCEW Employees, Non-QCEW Employees & Self-Employed – EMSI 2013.4 Class of Worker. Analysis by Mark Schill, Praxis Strategy Group, mark@praxissg.com. The analysis covers 37 "blue collar" industry sectors at the 3-digit NAICS classification level, each averaging at least $40,000 in average annual pay (including benefits). Industries include oil and gas extraction, utilities, heavy and specialty construction, most manufacturing, merchant wholesale industries, most transportation sectors, warehousing and storage, and waste management.

    This story originally appeared at Forbes.com.

    Joel Kotkin is executive editor of NewGeography.com and Distinguished Presidential Fellow in Urban Futures at Chapman University, and a member of the editorial board of the Orange County Register. He is author of The City: A Global History and The Next Hundred Million: America in 2050. His most recent study, The Rise of Postfamilialism, has been widely discussed and distributed internationally. He lives in Los Angeles, CA.

    Auto manufacturing photo by BigStockPhoto.com.

  • Selfies Replace Focus on Big Picture

    Maybe it’s my age, but, somehow, the future does not seem to be turning out the way I once imagined. It’s not just the absence of flying cars, but also the lack of significant progress in big things, like toward space colonization, or smaller ones, like the speed for most air travel or the persistence of poverty.

    Indeed, despite the incessant media obsession with technology as the driver of society, it seems we are a long way from the kind of dramatic change that, say, my parents’ generation experienced. Born at the end of the horse-and-buggy age, they witnessed amazing changes – from the development of nuclear power and the jet engine to the first moon landing.

    In contrast, my children’s experience with technological change is largely incremental – a shifting of digital platforms, from desktops to laptops to tablets and iPhones. The new raft of minidevices are ingenious and much more powerful than even the high-end desktop computers of a decade ago. But this wave of technology is not doing much except, perhaps, to make us ever more distracted, disconnected and obsessed with trivia.

    As one former Facebook employee put it succinctly: “The best minds of my generation are thinking about how to make people click ads. That sucks.”

    One clear sign of our technological fail: the stagnant, or even declining, living standards for most Americans. New technology is not creating much-cheaper and better housing, nor is it reducing poverty or creating a new wave of opportunity for grass-roots businesses. In fact, the current “tech boom” has done little to improve incomes much outside a few stretches of the Bay Area, a handful of college towns, and overhyped city media districts.

    Even Silicon Valley’s proud tradition of truly ground-breaking innovation in engineering has slowed as the tech hub has become dominated by media and advertising-driven software companies. The prospect of the easy score in social media, notes longtime entrepreneur Steven Blank, “marks the beginning of the end of the era of venture capital-backed big ideas in science and technology.”

    Worse of all, the stagnating tech world is steadily reducing our own dreamscape. Zohar Liebermensch, a student from my “history of the future” class at Chapman University, compared the initial visions of Disneyland’s Tomorrowland with later concepts. Over each generation since the park opened in 1955, she found, designers had to ratchet down the more ambitious projections – such as a manned mission to Mars – as the prospects dropped for their actually occurring.

    Disneyland, she noted, also cut back on refurbishment in the “Carousel of Progress” exhibit, focused on the future “typical” American family. In the early years of the park, updates were needed every three years. That became six years, then nine. The attraction now hasn’t been significantly modified in 18 years. “This increased changeless period,” she notes, “waves another flag of concern, as it demonstrates Disney’s view that there has been no noteworthy progress in almost two decades.”

    Science fiction testifies most strongly about our technological underachievement. Stanley Kubrick’s “2001: A Space Odyssey,” notes author David Graeber, assumed that a 1968 movie audience would find it “perfectly natural” that, by 2001 – now, more than a decade ago – there would be regular commercial flights to the moon, advanced space stations and hyperadvanced computers with human personalities.

    Essentially, our new tech doesn’t offer anything like the revolutionary and broadly felt changes brought about by electricity, jet travel or, for that matter, indoor plumbing. Meanwhile, the major productivity enhancements spawned by the computer and Internet revolutions, notes Northwestern University economist Robert J. Gordon, have already taken place, while the new social-media technology has done very little for productivity.

    This trend has long-term implications for our society and economy. Increasingly, economists, such as Tyler Cowen, suggest that are we seeing a slowing of breakthroughs, with benefits increasingly accruing to a relative handful. We may hope to create a terrestrial “Star Trek” reality, but the society we are creating looks increasingly more like something out of the Middle Ages.

    Can this decline in our dreamscape somehow be reversed? First, we need to look at the basic causes for our current narrow-casted view of technology. One is a relative lack of competition. In the 1980s personal computer boom, there were scores of companies competing across a broad array of tech sectors, resulting in a few winners, but a rapid evolution of technology.

    Today most of the large new niches – mobile software, Web search, social media – are dominated by a handful of companies. The model has shifted from fierce competition to what might be seen as a series of oligopolies dominated by a handful of sometimes shifting companies, largely controlled by a small but powerful group of investors and entrepreneurs. Job creation, even in the boom, has been much slower than in previous booms as tens of thousands of the people engaged in building the backbone of the information age – telecom, semiconductor and computer product firms – are being replaced by numbers of younger, cheaper and often foreign workers.

    At the top of this system stands a remarkably small group whose fortunes depend largely on using the Internet as a vehicle for advertising, often based on gross invasion of privacy. “Tech is something like the new Wall Street,” notes economist Umair Haque, “Mostly white, mostly dudes, getting rich by making stuff of limited social purpose and impact.”

    Perhaps the biggest loss here may be psychological, the decline of what historian Frederick Jackson Turner called “the expansive character of American life.” Instead of exploring new frontiers, we now obsess over mobile apps, and our Big Picture has devolved into a procession of “selfies.” If anything, in most critical areas, such as housing and transport, we seem to be looking backward, to the days of small apartments, trolley cars or trains. A crowded, poorer future, not a tech nirvana, beckons.

    If it’s not prosperity for more people, what is the end game of the new tech model? Much of it is profoundly narcissistic, seeking to replace the physical world with a digital one and making most of humanity superfluous. Inventor Ray Kurzweil, now director of engineering at Google, advocates a path to “transhumanism,” with the ultimate aim of creating a kind of immortality by imprinting our brain patterns as software. This “transhumanist” vision also reflects an almost obsessive concern of the 65-year-old inventor, who takes about 150 vitamin supplements a day in hopes of delaying his own demise.

    The potential class implications of Kurzweil’s transhumanist agenda are particularly troubling. It is likely that much of the new biological technology for many years, perhaps for decades, will not be easily accessed except by the very rich. Those left behind, Kurzweil believes, will end up as what he dubbed MOSHs – Mostly Original Substrate Humans. “Humans who do not utilize such implants are unable to meaningfully participate in dialogues with those who do,” he writes.

    Sun Microsystems co-founder Bill Joy suggests that the focus on human-machine interface will end up with “the elite” having greater control over the masses. And, because human work no longer will be necessary, most of us will become superfluous, a useless burden on the system. “If the elite consists of softhearted liberals,” he suggests, they may play the role of “good shepherds to the rest of the human race.” But, under any circumstances, he predicts, the mass of humanity “will have been reduced to the status of domestic animals.”

    Clearly, as a society, we need to start thinking about how technology can serve broader human purposes. This is not an impingement on private enterprise: The Internet, and the microprocessor, were developed largely at taxpayer expense, notably through the Defense Department and NASA. Digital technology should be spurring the creation of new competitive companies, not, as we see now, fostering an American version of the Japanese cartels called keiretsu, where firms like Amazon, Google, Apple and Microsoft use their unfathomable riches to dominate a host of fields, from robotics and space travel to health care, even publishing.

    Instead of allowing technology to promote oligopoly, we need to spark competition to speed up innovation that could benefit the majority of people, as opposed to creating a class of fabulously rich superhumans. We also need again to expand our physical frontiers – both in space and, with intelligence, on Earth – so more people can live comfortably, with privacy and maximum freedom of action. Let’s make Tomorrowland again a place we would like to have our children inhabit.

    This story originally appeared at The Orange County Register.

    Joel Kotkin is executive editor of NewGeography.com and Distinguished Presidential Fellow in Urban Futures at Chapman University, and a member of the editorial board of the Orange County Register. He is author of The City: A Global History and The Next Hundred Million: America in 2050. His most recent study, The Rise of Postfamilialism, has been widely discussed and distributed internationally. He lives in Los Angeles, CA.

    Creative Commons photo "Engineers" by Flickr user ensign_beedrill

  • California’s Potholed Road to Recovery

    California’s economy may be on the mend, but prospects for continued growth are severely constrained by the increasing obsolescence of the state’s basic infrastructure. Once an unquestioned leader in constructing new roads, water systems, power generation and building our human capital, California is relentlessly slipping behind other states, including some with much lower tax and regulatory burdens.

    The indications of California’s incipient senility can be found in a host of reports, including a recent one from the American Society of Civil Engineers, which gave the state a “C” grade. Roads, in particular, are in bad shape, as many drivers can attest, and, according to another recent study, are getting worse. The state’s shortfall for street repair is estimated at $82 billion over the next 10 years.

    Remarkably, given how Californians spend and tax ourselves, we actually bring up the rear in terms of road conditions. Indeed, one recent survey placed California 47th among the states in road quality. In comparison, low-tax Texas notched No. 11, showing that willingness to spend money is not the only factor.

    Greater Los Angeles is particularly affected; L.A. roads have been ranked by one Washington-based nonprofit as the worst in the nation. Bad roads cost L.A. drivers an average $800 a year in vehicle repairs, and a full quarter of roadways were graded “F,” meaning barely drivable. The region that gave birth to the freeway and the dream of quick, efficient travel, now has worse roads than some much poorer, less-important, lower-tax cities, such as Houston, Dallas or Oklahoma City. Not surprisingly, Los Angeles has been ranked has having the worst traffic congestion in the nation, but San Francisco and San Jose also make it to the 10 metros with the worst traffic.

    But it’s not just the roads that are in bad shape. Other basic sinews of the state’s infrastructure – ports, water systems, electrical generation – are increasingly in disrepair. Conditions are so poor at Los Angeles International Airport, admits new L.A. Mayor Eric Garcetti, that “there’s nothing world class” about the aging facility. This is critical for a city and region with significant global pretensions. Since 2001, LAX traffic has declined by more than 5 percent, while double-digit gains in passenger traffic have been logged by such competitors as New York, Miami, Atlanta and Houston.

    Meanwhile the Los Angeles-Long Beach port system, facing greater competition from the Gulf Coast, as well as other Pacific Coast ports, has been beleaguered by regulations that, among other things, mandate moving heavy loads with zero-emission but expensive, underpowered electric trucks that further undermine port productivity. Rather than see the ports as job and wealth generators, ports also have become increasingly sources for revenue for hard-hit city budgets.

    Overall, the bills are mounting; California faces an enormous shortfall in infrastructure. One study, conducted by California Forward, puts the bill for the next 10 years at $750 billion.

    The case for addressing infrastructure needs should be compelling on its own but, given fiscal limitations, it’s critical first to set some sense of priority. California, particularly under the current governor’s father, the late Edmund G. “Pat” Brown, spent upward of a fifth of its budget on basic infrastructure; today that share is under 5 percent. Rather than build the infrastructure that might spark the economy, as the elder Brown did, we have chosen, instead, to spend on government salaries and pensions, which, however well-deserved, require a transfer of wealth from the private sector to the public sector that brings only minimal benefits.

    These shortfalls are made even worse by ideological considerations that, in this one-party-rule state, overcome even the most rational approach to infrastructure development. The ruling class in Sacramento speaks movingly about the Pat Brown legacy, but has little interest in mundane things like roads, bridges, port facilities and other economically useful infrastructure. Instead, the powerful green and planning clerisy is focused on transforming the state into a contemporary ecotopia, where people eschew cars, live in crowded apartment towers and ride transit to work. Economic considerations, upward mobility and the creation or retention of middle-class jobs are, at best, secondary concerns.

    This ideological bent leads to grossly misplaced priorities. Consider, for example, the billions of dollars being proposed for building Gov. Jerry Brown’s signature project, a $68 billion, 800-mile high-speed rail system, even as state highways erode. The bullet train, which even liberals such as Kevin Drumm at Mother Jones magazine have pointed out, has devolved into a boondoggle with costs far above recent estimates and, given the lack of interest from private investors, something unlikely to offer much of an alternative to commuters for decades to come. Unlike many liberal commentators, who tend to favor crony-capitalist projects with a “green” cast, Drumm denounced the entire project as being justified with projections, such as for ridership, that are “jaw-droppingly shameless.”

    In addition, the project’s future has been clouded by legal challenges from a host of complainants stretching from Central Valley farmers to suburbanites on the San Francisco peninsula. In December, Superior Court Judge Michael Kenny in Sacramento County accused the state high-speed rail authority of ignoring provisions in the authorizing legislation for the project designed to prevent “reckless spending.”

    Public support for this misguided venture has been fading, thankfully. Even before Judge Kenny’s decision, a USC/Los Angeles Times poll showed statewide voter opposition rising to 53 percent, while 70 percent would like to have a new vote on the legislation that authorized the project.

    At the same time, federal funding, critical to keeping this failing project afloat, grows increasingly unlikely. California Congressman Jeff Denham, also a former supporter of the project, joined with Congressman Tom Latham to ask the federal Government Accountability Office if further federal disbursements could be illegal, given the uncertainty of the state funding needed to “match” the federal dollars. With Republicans likely to retain the House after the 2014 elections, it seems all but certain that high-speed rail – at least the statewide system proposed by its advocates – is heading to a less-than-spectacular denouement.

    This tendency to allow ideological considerations to overcome logic suffuses virtually the entire planning process across the board. For example, devotion to alternative energy sources leads the state to reject the expanded use of clean, cheap and plentiful natural gas in favor of extremely expensive renewable fuels, notably wind and solar. This may have much to do with the investments by crony capitalists close to Democratic politicians – think Google or a host of venture-capital firms – as with anything else. Under the right circumstances, such as government mandates, even unsound investments can make some people rich, or, in this case, even richer.

    But the cost to the rest of society of such Ecotopian policies can be profound, and could cost as much as $2,500 a year per California family by 2020. High energy prices will severely affect the state’s already-beleaguered middle- and working-class families, particularly in the less-temperate interior of the state.

    The commitment to expensive energy also makes bringing new industry – such as manufacturing or logistics – that can provide jobs ever more problematical. Similarly, money poured into follies like high-speed rail also weaken the state’s ability to fund, directly or through bonds, more-critically needed, if less-politically correct, transport infrastructure.

    Given these clear abuses of the public purse, it is not surprising that some Californians may simply want to close their wallets. Yet this would be a disservice to future generations, who will need new roads, ports, bridges and electrical generation. California needs to rediscover its historic commitment to being an infrastructure leader, but only after acquainting ourselves once again with the virtues of common sense.

    This story originally appeared at The Orange County Register.

    Joel Kotkin is executive editor of NewGeography.com and Distinguished Presidential Fellow in Urban Futures at Chapman University, and a member of the editorial board of the Orange County Register. He is author of The City: A Global History and The Next Hundred Million: America in 2050. His most recent study, The Rise of Postfamilialism, has been widely discussed and distributed internationally. He lives in Los Angeles, CA.

  • The Divisions In The One Percent And The Class Warfare That Will Shape Election 2014

    There’s general agreement that inequality will be the big issue of this election year. But to understand how this will play out you have to go well beyond the simplistic “one percent” against everyone else mantra that has to date defined discussion of inequality.

    Instead our politics increasingly are being shaped by a complex interplay of class interests across the electorate; class, not merely inequality, is emerging as the driving force of our politics. As Marx among others recognized, class structures can be complicated and contain many separate tendencies. For example, even the much-discussed “one percent” is hardly a cohesive group, but one deeply divided in ideology, geography and industry.

    For example, out of the 20 richest Americans on the 2013 Forbes 400 list, six have a record of favoring the Democrats in political donations, including the top two, Bill Gates and Warren Buffett. Eleven reliably back Republican candidates and causes, while Google founder Larry Page has only donated to his company’s PAC, Larry Ellison has funded both sides and Michael Bloomberg defies easy categorization.

    All three of the top individual political contributors last year — the Soros family, Jets owner Fred Wilpon and Facebook co-founder Sean Parker — also lean to the “party of the people.”

    The Democrats’ new and ascendant oligarchy, based in Silicon Valley, Hollywood, Wall Street and the media, are generally concentrated in the country’s most unaffordable cities, places with high degrees of inequality.

    This alliance is based not solely on attitude, but also sometimes self-interest. Hedge funds siphon up money from public pension funds desperate for the large gains necessary to meet the extravagant, unfunded benefits increases of Democratic politicians. Venture capitalists and companies and core Democratic supporters invest in “green” technology, made profitable largely by mandates, subsidies and government-backed loans.

    These oligarchs represent very different interests than the more traditional plutocracy, based largely in such mainstream endeavors as fossil fuel energy, agribusiness, manufacturing and suburban home development. These worthies, too, are obviously not slum-dwellers, but also live in more dispersed locations such as Houston, Dallas-Fort Worth, Atlanta, Oklahoma City and a host of much more obscure places, at least part of the time. They reflect the somewhat more conservative, fiscally particularly, world view of the broader 1% than their more left-leaning counterparts.

    With the power of money and access to media (particularly the new oligarchs), the two competing factions of the “one percent” will pour millions into trying to win over the other classes. The two key ones are what I call the yeomanry — the small property-owning, private-sector middle class — and America’s modern-day “clerisy”: university professors and administrators, government bureaucrats and those business interests tied closest to the governmental teat.

    One can expect with fair assurance that the clerisy will strongly support the president and the progressive wing of the Democratic Party. There are few groups as lock-step liberal as the universities, particularly the most important and influential ones. In 2012, A remarkable 96 percent of all donations from Ivy League employees went to the president, something more reminiscent of Soviet Russia than a properly functioning pluralistic academy. Public employee unions, charter members of the clerisy, have been among the biggest contributors to federal candidates, overwhelmingly Democrats over the past decade.

    Less certain are the political leanings of the yeomanry. These are not the people who generally benefit from the expansion of government; they are basically stuck being taxpayers. Their distaste for regulation varies, but is most strongly felt when it impacts their businesses or their communities. In 2008, rightfully disgusted by the failures of the Bush administration, they were divided, but in 2012 small business shifted decisively to the right — not enough to save the awful Romney campaign, but they still helped maintain the GOP majority in the House.

    The political calculus of the yeomanry, however, is very complex. Those who are older, and those who already own property, are likely to keep shifting toward the right, as long as the Republican lunatic fringe is kept under control. Obamacare taxes and the cancellations of individual insurance plans hit this group directly in the bottom line, and may do so even more in the future. But for younger members of this group, struggling to buy property or launch proper careers, may look to Washington to provide their health care and provide breaks on their student loans.

    Arguably the yeomanry will determine the winners in 2014. The big issue here may be over expectations for the future. Today there are many, on both right and left, who are telling the yeomanry that their day in the sun is over. Tyler Cowen suggests in the future “the average” skilled worker can expect to subsist on rice and beans. If they stay on the East or West Coast, they also may never be able to buy a house. On the left, particularly among greens and urban aesthetes, the message is not so different except they tend to think abandoning property ownership is a good thing, since multi-unit rental housing is more environmental friendly and communal.

    Sadly many member of the yeoman class — the vast majority of Americans today — believe that the pessimists are correct, and expect their children, will fare worse in the future. If they accept this conclusion, they may be tempted to join the third of Americans who consider themselves “lower” class. With increasingly little prospect of upward mobility, these voters understandably look to Washington and state capitals to redistribute wealth up to them.

    How this class politics plays out this year will determine the 2014 results, and likely politics for the generation to come. Oligarchs favoring Republicans will focus on how redistribution takes from the yeomanry to give to the poor and associated crony capitalists. The failings of Obamacare, the rise in taxes and regulations all play to their advantage. This will play well with the income categories – $50,000 to $200,000 annually — that now constitute the class base of the GOP.

    In opposition, the new oligarchs, and their allies in the clerisy, will seek to convince enough of the yeoman class that they need the government to enjoy anything like a middle-class life. The Obama cartoon The Life of Julia, with its emphasis on the helping hand of government , is not directed at the poor but what used to be an upwardly mobile class. Julia implicitly rejects traditional American middle-class values such as property ownership, marriage and family and embraces a new vision tied to growing dependency to both the Democratic Party and the state.

    Sadly, neither of these approaches addresses the key issue: weak economic growth and a decline in upward mobility. Republicans, in particular, do not tend to associate these things. They seem to believe that faster GDP growth will rebalance our inequality, or at least make it palatable. This misses the fact that we have just gone through one of the most unequal recoveries in history, accelerating the concentration of wealth in ever fewer hands. Growth, clearly, is not enough; what kind of growth must be part of the discussion.

    This perspective is critical if we are to address our class divide. Simply put we need to go beyond both “trickle down” economics — which both sets of oligarchs are understandably fine with — and a redistributionist approach, something that strengthens the hand of the clerisy and the politically connected at the expense of the yeomanry. What we need is something that combines largely free-market, libertarian economics with something like the traditional goal of social democracy.

    “We can have democracy in this country, or we can have great wealth concentrated in the hands of a few,” noted Justice Louis Brandeis,“but we can’t have both.” Over time, even conservatives and libertarians have to recognize that a republic irrevocably divided between the rich and the dependent poor can not turn out well. And for their part, progressives need to realize that the middle class can not be expected to serve as a piggy bank to assuage their delicate consciousness.

    The real issue before us is not inequality per se, but how to spread the ownership of property and improve opportunity; without this America devolves from the world’s exemplar into a second-rate Europe, with less charm, more division, and a national dream finally extinguished.

    This story originally appeared at Forbes.com.

    Joel Kotkin is executive editor of NewGeography.com and Distinguished Presidential Fellow in Urban Futures at Chapman University, and a member of the editorial board of the Orange County Register. He is author of The City: A Global History and The Next Hundred Million: America in 2050. His most recent study, The Rise of Postfamilialism, has been widely discussed and distributed internationally. He lives in Los Angeles, CA.

    Creative Commons photo “Income Inequality” by Flickr user mSeattle.

  • Build It, Even Though They Won’t Come

    The recent decision by Los Angeles County Superior Court Judge Allan J. Goodman to reject as “fatally flawed” the densification plans for downtown Hollywood could shake the foundations of California’s “smart growth” planning clerisy. By dismissing Los Angeles’ Hollywood plan, the judge also assaulted the logic behind plans throughout the region to construct substantial high-rise development in “transit-oriented developments” adjacent to rail stations.

    In particular, the judge excoriated the buoyant population-growth projections used to justify the plan, a rationalization for major densification elsewhere in the state. The mythology is that people are still flocking to Los Angeles, and particularly, to dense urban areas, creating a demand for high-end, high-rise housing.

    The Hollywood plan rested on city estimates provided by the Southern California Association of Governments, which estimated that Hollywood’s population was 200,000 in 2000 and 224,000 in 2005, and would thus rise to 250,000 by 2030. All this despite the fact that, according to the census, Hollywood’s population over the past decade has actually declined, from 213,000 in 1990 to 198,000 today. Not one to mince words, Judge Goodman described SCAG’s estimates as “entirely discredited.”

    This discrepancy is not just a problem in the case of Hollywood; SCAG has been producing fanciful figures for years. In 1993, SCAG projected that the city of Los Angeles would reach a population of 4.3 million by 2010. SCAG’s predicted increase of more than 800,000 residents materialized as a little more than 300,000. For the entire region, the 2008 estimates were off by an astounding 1.4 million people.

    Similar erroneous estimates run through the state planning process. In 2007, California’s official population projection agency, the Department of Finance, forecast that Los Angeles County would reach 10.5 million residents in just three years. But the 2010 U.S. Census counted 9.8 million residents.

    Such inflated estimates, however, do serve as the basis for pushing through densification strategies favored by planners and their developer allies. In fact, SCAG’s brethren at the Association of Bay Area Governments, seeking to justify their ultradense development plan, recently went beyond even population estimates issued by the Department of Finance.

    The problem here is not that some developers may lose money on projects for which there is inadequate demand, but that this densification approach has replaced business development as an economic strategy. Equally bad, these policies often threaten the character of classic, already-dense urban neighborhoods, like Hollywood. Indeed, the Los Angeles urban area is already the densest in the United States, and a major increase in density is sure to further worsen congestion.

    Not surprisingly, some 40 neighborhood associations and six neighborhood councils organized against the city’s Hollywood plan. Their case against the preoccupation with “transit-oriented development” rests solidly on historical patterns. Unlike in New York City, much of which was built primarily before the automobile age, Los Angeles has remained a car-dominated city, with roughly one-fifth Gotham’s level of mass-transit use. Despite $8 billion invested in rail lines the past two decades, there has been no significant increase in L.A.’s transit ridership share since before the rail expansion began.

    The Hollywood plan is part of yet another effort to reshape Los Angeles into a West Coast version of New York, replacing a largely low-rise environment with something former Mayor Antonio Villaraigosa liked to call “elegant density.” As a councilman, new Mayor Eric Garcetti proclaimed a high-rise Hollywood as “a template for a new Los Angeles,” even if many Angelenos, as evidenced by the opposition of the neighborhood councils, seem less than thrilled with the prospect.

    If the “smart growth” advocates get their way, Hollywood’s predicament will become a citywide, even regional, norm. The city has unveiled plans to strip many single-family districts of their present zoning status, as part of “a wholesale revision” of the city’s planning code. Newly proposed regulations may allow construction of rental units in what are now back yards and high-density housing close to what are now quiet residential neighborhoods.

    “They want to turn this into something like East Germany; it has nothing to do with the market,” suggests Richard Abrams, a 40-year resident of Hollywood and a leader of Savehollywood.org. “This is all part of an attempt to worsen the quality of life – to leave us without back yards and with monumental traffic.”

    Of course, it is easy to dismiss community groups as NIMBYs, particularly when it’s not your neighborhood being affected. But here, the economics, too, make little sense. New, massive “luxury” high-rise residential buildings were not a material factor in the huge density increases that made the Los Angeles urban area more dense than anywhere else in the nation during the second half of the 20th century. Even in New York City, the high-rise residential buildings where the most affluent live are concentrated in the lower half of Manhattan; they house not even 20 percent of the city’s population.

    Under any circumstances, the era of rapid growth is well behind us. In the 1980s, the population of Los Angeles grew by 18 percent; in the past decade, growth was only one-fifth as high. Growth in the core areas, including downtown, overall was barely 0.7 percent, while the population continued to expand more rapidly on the city’s periphery. Overall, the city of Los Angeles grew during the past decade at one-third the national rate. This stems both from sustained domestic outmigration losses of 1.1 million in Los Angeles County and immigration rates that have fallen from roughly 70,000 annually in the previous decade to 40,000 a year at present.

    Nor can L.A. expect much of a huge infusion of the urban young talent, a cohort said to prefer high-density locales. In a recent study of demographic trends since 2007, L.A. ranked 31st as a place for people aged 20-34, behind such hot spots as Milwaukee, Oklahoma City and Philadelphia. It does even worse, 47th among metro areas, with people ages 35-49, the group with the highest earnings.

    In reality, there is no crying need for more ultradense luxury housing – what this area needs more is housing for its huge poor and working-class populations. More important, we should look, instead, at why our demographics are sagging so badly. The answer here, to borrow the famous Clinton campaign slogan: It’s the economy, stupid. In contrast with areas like Houston, where dense development is flourishing along with that on the city’s periphery, Southern California consistently lands near the bottom of the list for GDP, income and job growth, barely above places like Detroit, Cleveland or, for that matter, Las Vegas.

    Despite many assertions to the contrary, densification alone does not solve these fundamental problems. The heavily subsidized resurgence of downtown Los Angeles, for example, has hardly stemmed the region’s relative decline.

    Instead of pushing dense housing as an economic panacea, perhaps Mayor Garcetti should focus on why the regional economy is steadily falling so far behind other parts of the nation. One place to start that examination would be with removing the regulatory restraints that chase potential jobs and businesses – particularly better-paying, middle class ones – out of the region. It should also reconsider how the “smart growth” planning policies have helped increase the price of housing, particularly for single-family homes, preferred by most families.

    At the same time, the mayor and other regional leaders should realize that L.A.’s revival depends on retaining the very attributes – trees, low-rise density, sunshine, as well as entrepreneurial opportunity – that long have attracted people. People generally do not migrate to Los Angeles to live as they would in New York or Chicago. Indeed, Illinois’ Cook County (Chicago) and three New York City boroughs – Manhattan, Queens and Brooklyn – are among the few areas from which L.A. County is gaining population. Where are Angelinos headed? To relatively lower-density places, such as Riverside-San Bernardino, Phoenix and Houston.

    Under these circumstances, pushing for more luxury high-rises seems akin to creating structures for which there is little discernible market. Once demographic and economic growth has been restored broadly, it is possible that a stronger demand for higher-density housing may emerge naturally. Until then, the higher density associated with “smart growth” neither addresses our fundamental problems, nor turns out to be very smart at all.

    This story originally appeared at The Orange County Register.

    Joel Kotkin is executive editor of NewGeography.com and Distinguished Presidential Fellow in Urban Futures at Chapman University, and a member of the editorial board of the Orange County Register. He is author of The City: A Global History and The Next Hundred Million: America in 2050. His most recent study, The Rise of Postfamilialism, has been widely discussed and distributed internationally. He lives in Los Angeles, CA.

  • How Silicon Valley Could Destabilize The Democratic Party

    Much has been written, often with considerable glee, about the worsening divide in the Republican Party between its corporate and Tea Party wings. Yet Democrats may soon face their own schism as a result of the growing power in the party of high-tech business interests.

    Gaining the support of tech moguls is a huge win for the Democrats — at least initially. They are not only a huge source of money, they also can provide critical expertise that the Republicans have been far slower to employ. There have always been affluent individuals who backed liberal or Democratic causes, either out of conviction or self-interest, but the tech moguls may be the first large capitalist constituency outside Hollywood to identify almost entirely with the progressives.

    This alliance of high tech and Democrats is relatively new. In the 1970s and 1980s the politics of Silicon Valley’s leaders tended more to middle-of-the-road Republican. But the new generation oligarchs are very different from the traditional “propeller heads” who once populated the Valley. More media savvy and less dependent on manufacturing, the new leaders have less interest in the kind of infrastructure and business policies generally favored by more traditional businesses. They also tend to have progressive views on gay marriage and climate change that align with the gospel of the Obama Democratic Party.

    In the process, the Bay Area, particularly the Silicon Valley – San Francisco corridor, has become one of the most solidly liberal regions in the country. The leading tech companies, mostly based in the area, send over four-fifths of their contributions to Democratic candidates.

    This tech alliance is creating a pool of potential business-tested candidates for the party, including Twitter co-founder Jack Dorsey, who has said he wants to run for mayor of New York someday, even if he now resides in San Francisco.

    The tech oligarchs are also poised to reinforce the media dominance enjoyed by the Democrats. Over the past two years we have seen one tech entrepreneur and Obama ally, Chris Hughes, take over the venerable New Republic, while another, Amazon’s Jeff Bezos, bought the Washington Post.More important, pro-Democratic tech firms such as Microsoft, Yahoo and Google now dominate the online news business, while others, such as Netflix and Amazon, are moving aggressively into music, film and television.

    Yet for all the advantages of this burgeoning alliance with tech interests, it threatens to create tensions with the party’s traditional base — minorities, labor unions and the public sector — as the party tries accommodate a constituency that combines social liberalism and environmentalist sentiments withvaguely libertarian instincts. The fact that this industry has a pretty awful record on labor and equity issues is something that could prove inconvenient to Democrats seeking to adopt class warfare as their primary tactic.

    Indeed, despite its counter-cultural trappings and fashionably progressive leanings, Silicon Valley has turned out to be every bit as cutthroat and greedy as any gaggle of capitalists. Leftist journalists like John Judis may rethink their support for the Valley agenda once they realize that they have become poster children for overweening elite power and outrageous inequality.

    Privacy is one issue that should divide liberals from the tech oligarchs. Historically liberals have been on the front line of the battle to protect personal information. But now tech interests have worked hard, with considerable Democratic support, to block privacy protections that would damage their profits in Europe, and closer to home.

    Another inevitable flashpoint regards unions, a core progressive constituency. Venture capitalist Mark Andreesen recently declared that “there doesn’t seem to be a role” for unions in the modern economy because people are “marketing themselves and their skills.” Amazon has battled unions not only in the United States, but in more union-friendly Europe as well.

    Avatars of equality? Valley boosters speak of the “glorious cocktail of prosperity” they have concocted, but have been very slow to address, or even seek to ameliorate, the vast social chasm that exists under their feet.

    Many core employees at firms like Facebook and Google enjoy gourmet meals, childcare services, even complimentary house-cleaning in an effort to create, as one Google executive put it, “the happiest most productive workplace in the world.”  Yet the reality is less pleasant for other workers in customer support or retail, like the Apple stores, and even more so for contracted laborers in security, maintenance and food service jobs.

    Indeed over the past decade the Valley itself has grown almost entirely in ways that have benefited the affluent, largely white and Asian professional population. Large tech firms are notoriously skittish about revealing their diversity data, but one recent report found the share of Hispanics and African-Americans, already far below their percentage in the population, declined in the last decade; Hispanics, roughly one quarter of the local workforce, held 5.2% of the jobs at 10 of the Valley’s largest companies in 2008, down from 6.8% in 1999, according to the San Jose Mercury News. The share of women in management also has declined, despite the headlines generated by the rise of high-profile figures like Yahoo’s Marissa Mayer and Facebook’s Sheryl Sandberg.

    The mostly male white and Asian top geeks in Palo Alto or San Francisco should celebrate their IPO windfalls, but wages for the region’s African-Americans and Latinos, roughly a third of the local population, have dropped, down 18% for blacks and 5% for Latinos between 2009 and 2011, according to a 2013 Joint Venture Silicon Valley report. Indeed as the Valley has de-industrialized, losing over 80,000 jobs in manufacturing since 2000, some parts of the Valley, notably San Jose, where manufacturing firms were clustered, look more like a Rust Belt city than an exemplar of tech prosperity.

    Overall, most new jobs in the Valley pay less than $50,000 annually, according to an analysis by the liberal Center for American Progress, far below what is needed to live a decent life in this ultra-high cost area. Part-time security workers often have no health or retirement benefits, no paid sick leave and no vacation. Much the same applies to janitors, who clean up behind the tech elites.

    The poverty rate in Santa Clara County has climbed from 8% in 2001 to 14%, despite the current tech boom; today one out of four people in the San Jose area is underemployed, up from 5% a decade ago. The food stamp population in Santa Clara County has mushroomed from 25,000 a decade ago to almost 125,000. San Jose is also home to the largest homeless camp in the continental U.S., known as “the Jungle.” As Russell Hancock, president of Joint Venture Silicon Valley, admitted: “Silicon Valley is two valleys. There is a valley of haves, and a valley of have-nots.”

    These realities suggest that the tech oligarchs, despite their liberal social views, are creating an environment for the “one percent” every bit as stratified as that associated with Wall Street. Google maintains a fleet of private jets at San Jose airport, making enough of a racket to become a nuisance to their working-class neighbors. Google executives tout its green agenda but have burned the equivalent of upwards of tens of millions of gallons of crude oil, which seems somewhat less than consistent.

    At the same time, the moguls have a record of tax evasion — a persistent progressive issue — that would turn castigated plutocrats like Mitt Romney green with envy. Individuals like Bill Gates have voiced public support for higher taxes on the rich, yet Microsoft, Facebook and Apple have all saved billions by exploiting the tax code to shelter profits offshore. Twitter’s founders creatively exploited various arcane loopholes to avoid paying taxes on some of the proceeds of their IPO that they set aside for heirs.

    The set of differing rules for oligarchs and everyone else extends even to the most personal issues. Yahoo’s Mayer, a former Google executive, banned telecommuting for employees — particularly critical for those unable to house their families anywhere close to ultra-pricey Palo Alto. Yet Mayer, herself pregnant at the time, saw no contradiction in building a nursery in her own office.

    This model of economic development seems it would be more appealing to those who believe in “the survival of the fittest” than people with more traditional liberal values. The alliance with tech may well be a critical boon to the progressive cause and its champions for the time being, but at some time even the most deluded progressives will begin to realize with whom they have chosen to share their bed.

    This story originally appeared at Forbes.

    Joel Kotkin is executive editor of NewGeography.com and Distinguished Presidential Fellow in Urban Futures at Chapman University, and a member of the editorial board of the Orange County Register. He is author of The City: A Global History and The Next Hundred Million: America in 2050. His most recent study, The Rise of Postfamilialism, has been widely discussed and distributed internationally. He lives in Los Angeles, CA.

    Official White House Photo by Pete Souza.