New Geography

Author: Joel Kotkin

  • Book Review: ‘The End of the Suburbs,’ by Leigh Gallagher

    Suburbia has been a favorite whipping boy of urbane intellectuals, who have foretold its decline for decades. Leigh Gallagher’s “The End of the Suburbs” is the latest addition to this tired but tireless genre. The book lacks the sparkling prose and original insights one could find in the works of, say, Jane Jacobs or Lewis Mumford. Indeed, Ms. Gallagher’s book is little more than a distillation of the conventional wisdom that prevails at Sunday brunch in Manhattan.

    The author restages many of the old anti-suburban claims, and her introduction’s section headings easily give away the gist of the argument: “Millennials hate the burbs”; “Our households are shrinking”; “We are eco-obsessed”; “The suburbs are poorly designed to begin with”; and so on.

    Ms. Gallagher, an editor at Fortune magazine, fails to persuade. For starters, her focus on the recent past distorts her argument. She starts with reporting about a dismal home-building conference in Orlando in early 2012, when the housing market was still close to its post-bubble nadir. She portrays those dark times as the harbinger of a new reality that will see suburban living fade away. She quotes real-estate economist Robert Schiller saying that suburban home prices won’t recover “in our lifetime.” But given that prices have indeed risen, and are now reaching precrash levels in some markets, such predictions should be viewed skeptically.

    There isn’t much room for contrarian viewpoints here. All the usual anti-suburbanite suspects are marshaled to support the book’s thesis: Al Gore suggests suburbs will die because they aren’t green enough; the critic James Howard Kunstler makes exaggerated claims about how “peak oil”—the notion that we are running out of fossil fuels and that their cost will skyrocket—will bankrupt suburbanites; other experts claim that young people will desert suburbia for their entire lifetimes and that empty-nesters will abandon their stale suburban lives in favor of urban density.

    Today barely 11% of Americans live in densities of more than 10,000 people per square mile, which is about the level of an inner-ring San Fernando Valley suburb, one-seventh of the Manhattan level and almost one-third of the five boroughs. Four out of five prospective home buyers in the U.S. prefer single-family houses, according to a 2011 survey conducted by the National Association of Realtors and the advocacy group Smart Growth America. In short, most of America isn’t about to densify itself along Gothamite, or even Los Angeles, lines.

    The author ignores most of these findings. She believes cities are poised to become the main beneficiaries of the suburban decline she projects. “To see that cities are resurgent centers of wealth and culture, all you need to do is set foot in one,” she writes. To be sure, some American urban centers, most notably New York, San Francisco and Washington, have experienced modest population growth over the past decade or two, although still well below the national average. And even in these cities, there are many neighborhoods that sophisticated urbanites wouldn’t really want to “set foot in.” In newly hip, and now increasingly expensive, Brooklyn, nearly a quarter of residents live below the poverty line. The borough’s artisanal cheese shops and trendy restaurants are charming, but one in four Brooklynites receives food stamps. The urban renaissance is even less obvious in places like St. Louis, Cleveland and Detroit, which have lost residents in significant numbers over the past decade and whose gentrified zones are tiny.

    Having misunderstood the past, Ms. Gallagher is likely off in her predictions of a high-density future. She insists that young people overwhelmingly want to live “in urban areas and don’t want to own a car.” But most millennials entering their 30s, according to surveys, are likely to get married and eventually have children. That is when they will start to seek out single-family houses in lower-density areas. They may well experience suburbia differently than their parents. More of them will work at home or close to home, or drive fuel-efficient cars on their commutes. Even so, most aging millennials can be expected to seek out homes in affordable areas with decent schools, meaning either the suburbs of older cities or lower-cost, economically vibrant regions like the Southeast, the Gulf Coast or the Mountain West.

    Much the same can be said about the other key emerging demographic group, immigrants and their offspring. Nationwide over the past decade, the Asian population in suburbs grew by almost 2.8 million, or 53%, while that of core cities grew 770,000, or 28%. In Los Angeles, the region with the nation’s largest Asian population, the suburbs added roughly five times as many Asians as the core city.

    One reason: Immigrants are more likely to have families than the native-born. They don’t share the conviction, held by many anti-suburbanites such as Ms. Gallagher, that we are seeing “the end of the nuclear family.” The family, like suburbia, has been written off numerous times. But as Margaret Mead once observed, it “always comes back.” High-density cities generally repel families, and they aren’t conducive to middle-class aspirations. In New York City and Los Angeles, for example, the homeownership rate is 20% less than the national figure of 65%. Things are even worse for working-class and minority households. Metropolitan Atlanta’s African-American homeownership rate is approximately 40% above those of San Jose and Los Angeles, approximately 50% higher than Boston’s, San Francisco’s and Portland’s, and nearly 60% higher than New York’s.

    Many of those migrating to Atlanta, Houston, Dallas-Fort Worth and other low-density, lower-cost cities come from denser, more expensive areas. Between 2000 and 2010, 1.9 million net domestic migrants left the New York area, 1.3 million left Los Angeles and 340,000 left San Francisco, while 230,000 left San Jose and Boston, according to Census Bureau data. The death of the suburbs may suggest a pleasant prospect for the New York and D.C. urbanist crowd, but for most, the American dream remains a suburban one. As long as the American family and the national aspiration for a better life persist, the suburbs are likely to retain their pre-eminent role.

    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.

    This piece originally appeared at The Wall Street Journal.

  • Americans’ Family Feud

    In this bizarrely politicized environment, even the preservation of the most basic institution of society – the family – is morphing into a divisive partisan issue. Increasingly, the two parties are divided not only along lines of economic and social philosophy, but over the primacy of traditional familialism.

    Increasingly, large portions of the progressive community are indifferent or hostile to the idea of the nuclear family, while many on the right argue that it’s key to a Republican revival. Observers such as the Weekly Standard’s Jonathan Last see familialism as key to the demographically challenged GOP. “Start a family, vote Republican,” he suggests. Long-term, Republicans can look forward to the rise of what New York Times columnist David Brooks cleverly calls “red diaper babies.”

    In the long term, the logic seems impeccable. Salt Lake City is creating a new generation of what may tend to be more conservative voters; when San Francisco’s largely single and childless populace passes, their legacy ends with them – game over. Indeed virtually all areas of the country with the fastest projected growth in households are located in red states. Houston, Atlanta and Dallas are expected to add more households than true-blue New York City, Los Angeles or Chicago. New York, California and Illinois are losing children as a share of population, while deep-red Texas, Utah, Idaho, as well as Nevada, have increased their tyke population.

    Others on the right take a more racially oriented tack. Linking lower fertility rates, particularly among Caucasians, Pat Buchanan warns of “the end of white America.” Steven Sailer, a staunchly anti-immigrant conservative theoretician, links Republican fortunes to “white fertility rates,” pointing out where whites choose to have children, particularly those who are married. George W. Bush, Sailer points out, won all 19 states with the highest rates of white fertility, as well as the 25 states where white women have been married the longest, on average.

    This politicization threatens the building of a broad consensus on how to promote the family. The related issue of America’s sagging birth rate – the lowest since the 1920s, by some measurements – should not be seen as a matter of political expediency but as an existential issue concerning the health of society and the long-term prosperity of the United States. No matter what happens with immigration, minorities are going to be a growing portion of our population and will soon represent the majority of children. Unless conservatives seek to secede and form their own Republic, they need to favor familialism among all ethnic groups.

    Yet for now, partisan concerns remain primary, and are compelling, if for narrow, political reasons. In the past two national elections, the differences in voting patterns between married couples and those who are not has become obvious. Democratic pollsters like Stan Greenberg now hail single women as “the largest progressive voting bloc in the country,” Ruy Texeira, a leading political scientist, calls singletons critical to the “emerging Democratic majority.”

    The mainstream “progressive” view on families can be seen in the “Life of Julia” slideshow produced last year by the Obama campaign and designed to appeal to single, unmarried women. In this rather pathetic portrayal, the fictional Julia is helped by federal programs from early in life. When she finally “decides to have a child,” it’s on her own, a sort of an immaculate conception since no man seems to be involved. Then, her offspring is sent off to federally funded early childhood education programs and never heard of again.

    Out of fashion

    Familialism is deeply unpopular with many in two key Democratic constituencies – greens and feminists. Many feminists have long derided the traditional family and see child-raising as something that tends to reinforce sexual stereotypes by reducing the career prospects of women.

    For their part, greens often disdain familialism since they see extra humans as a threat to the environment. The notion that depopulation, and too-rapid aging, at least in higher-income countries, could well become a greater issue than growth seems not to have sunk in, yet. Instead, people like Lisa Hymas, with the environmentalist website Grist, suggest that the “childfree” are something of a persecuted group that are in need of more societal understanding. Environmentalists also tend to be in favor of slow economic growth, which, in turn, tends to further depress birth rates.

    These worldviews represent a break from the progressive politics of the entire era stretching from Teddy Roosevelt to Bill Clinton. In the past, the basic emphasis has been to make families stronger by backing such institutions as public schools and parks, as well as creating the basis for broad-based economic growth. Support for single-family homes that most families require was part of this.

    But today, many “progressives” disdain the suburbs, which were built largely with the help of New Deal and successor programs. Now, most planners, according to the American Planning Association survey, believe accommodating families is simply not worth the cost of the services, notably schools, that they engender.

    Rather than looking at housing that fits families, many progressives now want to promote an urbanism that has little place for families. Some real estate sites, such as Estately, rank cities not by being child-friendly, but those most accommodating to the “childfree” – reminds me of gluten-free – a term which for some reason is deemed preferable to childless. Virtually all cities so ranked, such as ultralow-fertility San Francisco, Portland, Seattle, New York and Madison, Wis., are all places that increasingly are Republican-free as well.

    Most still want kids

    Since most people, including millennials, likely will choose to have children – and settle in suburbs – embracing familialism does offer an opportunity for conservatives and Republicans. Most millennials, note generational chroniclers Morley Winograd and Mike Hais, place high priority on being good parents and having a strong marriage.

    The potential political benefit, however, is being squandered by profamily activists who tend to focus on a Manichean worldview that sees anything other than traditional arrangements as inimical to core religious values about what is defined as a “natural family.” Rather than try to accommodate modernity, many family activists contend, as one leader told me, that we need to “march back to the ’50s.”

    Unfortunately for more hard-line social conservatives, history may go in waves, with each shift engendering a reaction, but it does not generally go backward. To remain relevant, and not to, so to speak, throw the baby out with the bathwater, some agenda items need to be laid aside. This is particularly true on issues such as gay marriage, where millennial opinion is shifting toward ever-greater acceptance, with roughly two in three in favor. By forcing allegiance to increasingly unpopular views, social conservatives are in danger of losing touch with the next generation.

    At the same time, many conservatives are so wedded to the market economy as to ignore the negative pressures on family formation imposed by our relentlessly competitive society. Some thought has to be given to mechanisms – such as free or subsidized child care and extended parental leave – that might make it easier for young families to survive, particularly in tough economic times. Conservatives, if they value family, should look at ways to support them, even if, sometimes, it’s done through government.

    In the end, the issue of family is too important to leave to the mercilessness of narrow partisan political forces. The country – and its future generations – needs both parties to focus not just on pro-family rhetoric, but on how we can make it easier for young people both to create, and nurture, the next generation.

    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.

    This piece originally appeared at The Orange County Register.

    Baby photo by Bigstock.

  • Southern California’s Road Back

    If the prospects for the United States remain relatively bright – despite two failed administrations – how about Southern California? Once a region that epitomized our country’s promise, the area still maintains enormous competitive advantages, if it ever gathers the wits to take advantage of them.

    We are going to have to play catch-up. I have been doing regional rankings on such things as jobs, opportunities and family-friendliness for publications such as Forbes and the Daily Beast. In most of the surveys, Los Angeles-Orange County does very poorly, often even worse than much-maligned Riverside and San Bernardino. For example, in a list looking at “aspirational cities” – that is places to move to for better opportunities – L.A.-Orange County ranked dead last, scoring well below average in everything from unemployment to job creation, congestion and housing costs relative to incomes.

    Yet, Southern California possesses unique advantages that include, but don’t end at, our still-formidable climatic and scenic advantages. The region is home to the country’s strongest ethnic economy, a still-potent industrial-technological complex and the largest culture industry in North America, if not the world.

    In identifying these assets, we have to understand what we are not: Silicon Valley-San Francisco, or New York, where a relative cadre of the ultrarich, fueled by tech IPOs or Wall Street can sustain the local economy. Unlike the Bay Area, in particular, our economy must accommodate a much larger proportion of poorly educated people – almost a quarter of our adult population lacks a high school degree. This means our economy has to provide opportunities for a broader range of skills.

    Nor are we a corporate center such as New York, Houston, Dallas or Chicago. We remain fundamentally a hub for small and ethnic businesses, home to a vast cadre of independent craftspeople and skilled workers, many of whom work for themselves. In fact, our region – L.A.-Orange and Riverside-San Bernardino – boasts the highest percentage of self-employed people of any major metropolitan area in the country, well ahead of the Bay Area, New York and Chicago.

    Policy from Washington has not been favorable to this grass-roots economy. The “free money for the rich” policy of the Bernanke Federal Reserve has proven a huge boom to stock-jobbers and venture firms but has not done much to increase capital for small-scale firms. Yet it is to these small firms – dispersed, highly diverse and stubbornly individualistic – that remain our key long-term asset, and they need to become the primary focus on regional policy-makers.

    Ethnic Networks

    Immigration has slowed in recent years but the decades-long surge of migration, largely from Asia and Mexico, has transformed the area into one of the most diverse in the world. More to the point, Southern California has what one can call diversity in depth, that is, huge concentrations of key immigrant populations – Korean, Chinese, Mexican, Salvadoran, Filipino, Israeli, Russian – that are as large or larger than anywhere outside the respective homelands. Foreigners also account for many of our richest people, with five of 11 of L.A.’s wealthiest being born abroad.

    These networks are critical in a place lacking a strong corporate presence. Our international connections come largely as the result of both the ethnic communities as well as our status as the largest port center in North America, which creates a market for everything from assembly of foreign-made parts to trade finance and real estate investment. Southern California may be a bit of a desert when it comes to big money-center banks, but it’s home to scores of ethnic banks, mainly Korean and Chinese, but also those serving Israeli, Armenian and other groups.

    For the immigrants, what appeals about Southern California is that we offer a diverse, and dispersed, array of single-family neighborhoods. Both national and local data finds immigrants increasingly flocking to suburbs. Places like the San Gabriel Valley’s 626 area, Cerritos, Westminster, Garden Grove, Fullerton and, more recently, Irvine, have expanded the region’s geography of ethnic enclaves.

    These enclaves drive whole economies, such as Mexicans in the wholesale produce industry or the development of electronics assembly and other trade-related industry by migrants largely from Taiwan. Global ties are critical here. Korean-Americans started largely in ethnic middleman businesses, but have been moving upscale, as their children acquire education. They, in turn, have helped attract investment from South Korea’s rising global corporations, including a new $200 million headquarters for Hyundai in Fountain Valley, as well as a $1 billion, 73-story new tower being built by Korean Air in downtown Los Angeles.

    Tech Industrial Base

    During the Cold War, Southern California sported one of the largest concentrations of scientists and engineers in the world. The end of the Cold War, at the beginning of the 1990s, severely reduced the region’s technical workforce, a process further accelerated by the movement out of the region of such large aerospace firms as Lockheed and Northrop. The region has roughly 300,000 fewer manufacturing jobs than it had a decade ago, largely due to losses in aerospace as well as in the garment industry.

    Yet, despite the decades-long erosion, Southern California still enjoys the largest engineering workforce – some 70,000 people – in the country. It also graduates the most new engineers, although the vast majority of them appear to leave for greener pastures. One looming problem: a paucity of venture capital, where the region lags behind not just the Bay Area, but also San Diego and New York. This can be seen in the relative dearth of high-profile start-ups, particularly in fields like social media, now dominated by the Bay Area.

    But the process of recovery in Southern California does not require imitating Silicon Valley. Instead we need to leverage our existing talent base – and recent graduates – and focus on the region’s traditional strength in the application of technology. A recent analysis of manufacturing by the economic modeling firm EMSI found strong growth in some very promising sectors, including the manufacturing of surgical and medical equipment, space vehicles and a wide array of food processing, an industry tied closely to the immigrant networks.

    Cultural Complex

    For most Americans, and even more so among foreigners, the image of Southern California is shaped by its cultural exports, not only in film and television but in fashion and design. This third sector epitomizes the uniqueness of the region, and provides an economic allure that can withstand both the generally poor business climate and the incentives offered by other regions.

    After a period of some stagnation, Hollywood again is increasing employment. Roughly 130,000 people work in film-related industries in Los Angeles, which is now headed back to levels last seen a decade earlier but still well below the 146,000 jobs that existed in 1999.

    At the same time, the sportswear and jeans business in Los Angeles, and the surfwear industry in Orange County, remain national leaders. Overall, the area’s fashion industry has retained a skilled production base – over twice that of rival New York’s – and has been aided, in part, by access to Hollywood, lower rents and labor costs than in New York.

    Taken together, these sectors – ethnic business, sophisticated manufacturing and culture – could provide the basis for a renaissance in the local economy. The smaller firms in these fields, in particular, need a friendlier business climate, a more evolved skills-training program from local schools and a better-maintained infrastructure. More than anything, though, they require an understanding on the part of both government and business that their success remains the best means to reverse decades of relative decline.

    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.

    This piece originally appeared at The Orange County Register.

  • Rust Belt Chic And The Keys To Reviving The Great Lakes

    Over four decades, the Great Lakes states have been the sad sack of American geography. This perception has been reinforced by Detroit’s bankruptcy filing and the descent of Chicago, the region’s poster child for gentrification, toward insolvency.

    Yet despite these problems, the Great Lakes’ future may be far brighter than many think. But this can only be accomplished by doubling down on the essential DNA of the region: engineering, manufacturing, logistics, a reasonable cost of living and bountiful natural resources. This approach builds off what some local urbanists, notably Jim Russell, have dubbed “rust belt chic.”

    With a population of 58 million, the Lakes region boasts a $2.6 trillion economy equal to that of France and far larger than the West Coast’s. (We define the region geographically as comprising the western ends of New York and Pennsylvania, northeastern Minnesota, and Ohio, Indiana, Illinois, Michigan and Wisconsin.) Despite the growth in auto manufacturing in the South, the Great Lakes region still accounts for the vast majority of jobs in the resurgent industry, now operating at record levels of capacity.

    Since 2007, Michigan, Indiana, Ohio and Wisconsin have ranked among the top five states for growth in industrial jobs, adding a half million new manufacturing jobs since 2009.

    To build on this progress the region needs to focus on its human assets. This starts with by far the nation’s largest concentration of engineers, some 318,000, which stems from the oft unappreciated fact that manufacturing employs the majority of scientists and engineers in the nation. It also accounts for almost 70% of corporate research and development. This includes disciplines such as mechanical engineering, which according to a recent EMSI study, has enjoyed steady job and income growth over the past 20 years.

    Another critical asset is the concentration of skilled trades, the workers most sought after by employers, according to a recent Manpower survey. To keep this advantage, the area needs to focus on educating its workforce — particularly in neglected inner city neighborhoods — with skill training for jobs that actually exist and are expected to grow. This is already occurring in some states, such as Ohio.

    To be sure, traditional manufacturing jobs, particularly for the unskilled and semi-skilled, likely will never come back in large numbers. But the earnings level for skilled workers will remain well above the national average, and may increase even further as shortages develop.

    Some dismiss such blue-collar strengths as a critical weakness. They suggest that area residents might decamp for places like Silicon Valley where they can find livelihoods cutting hair and providing other personal services for the digerati.

    Of course, no sane Great Lakes leader would endorse this approach in public, but many, instead of embracing “rustbelt chic” prefer to recreate a faux version of America’s left coast. This obsession goes back at least a decade, reaching its most risible level during the time of former Michigan Gov. Jennifer Granholm. Her strategy focused on turning its cities — including Detroit — into “cool” burgs.

    This clearly did little to turn around either already beleaguered state or cities; “cool” did not save Detroit from bankruptcy. Indeed cool represents just one variation in a myriad of Rust Belt elixirs, including casinos, convention centers, “and creative class oriented arts districts. Virtually all the strategies being adopted in Detroit have already been applied in Cleveland, including by the same entrepreneur, Quicken Loans Chairman Dan Gilbert, with very little tangible economic benefit.

    Yet despite this history, Detroit — the poster child of public malfeasance — once again is pinning its hopes on luring the “creative class” to Motor City. It starts with the usual stab at subsidizing housing, office and retail around the central core. This is being jump-started by taking Quicken Loans jobs already in the area’s suburbs, meaning little net regional advantage.

    Even more absurd, Michigan taxpayers are being asked to pony up to as much as $440 million for a new stadium in Detroit for the Red Wings hockey team. In contrast to this beneficence, many remaining established, older smaller neighborhood businesses — many of them deeply entrenched in the Rust Belt economy — get stuck with ever higher tax bills and reduced levels of public service.

    To be sure, this approach can succeed in building hipster cordon sanitaire — a miniaturized but utterly derivative urban district — that can be shown to investors and visiting, and usually core-centric, journalists. It also can enrich speculators and those politicians who service them, but represents a marginally effective means of reviving the city, much less the regional, economy.

    Instead of chasing hipsters , Cleveland urban strategist Richey Piiparinen suggests cities such as his rebuild their economies from the ground up, tapping the strong industrial skills, work ethic and resilient culture deeply embedded in the region. Large factories may not return en masse to Cleveland, Detroit or Chicago, but a strong industrial economy and a culture embracing hard work could stir growth in service-related fields as well.

    Geography and location provide other opportunities . The area’s natural resources — the Great Lakes contain one-fifth of the world’s supply of fresh water — constitute a profound competitive advantage against drought stricken economies in the Inland West, the southern Great Plains and parts of the Southeast. Water is an essential element in many industrial processes, including fracking, a serious issue in parts of the Rust Belt. Miles of attractive coastline could be used to lure not only factories, but high-tech businesses, tourists and educated professionals who can choose their location.

    The Great Lakes also are a natural conduit for the $250 billion trade with Canada, with its vast resource-based economy and growing population . Instead of funding better bars, art galleries and sports venues, or hoping to attract tourists and conventioneers to traipse to Cleveland in December, what the region really needs, noted a recent Brookings report, is better infrastructure, such as bridges, ports, freight rail and roads.

    Critical too are the region’s strong engineering schools. Of the nation’s top 10, four — Carnegie Mellon, Purdue, the University of Michigan, and the University of Illinois at Champagne-Urbana — are located in the Rust Belt. The Great Lakes may not be home to the Ivy League, but it remains the nursery of practical applied intelligence.

    Emerging demographic trends could also play a positive role. The millennial generation will soon be approaching the age when they wish to start businesses, get married, have children and buy homes. A good target would be those seeking a single-family home and a reasonable cost of living; both are increasingly difficult to attain in much of the Northeast and coastal California where the cost of housing, even adjusted to income, can be easily two to three times higher.

    Indeed, despite decades of demographic stagnation, the region already boasts higher percentages of people under 15 than the Northwest, the Northeast (including New York) and has about the same percentage of kids as the rapidly growing Southeast. For a new generation, the Great Lakes could emerge as a destination, not a place to avoid.

    This requires the region becoming more attractive to newcomers, whether from abroad or within the country. As urban analyst Aaron Renn suggests, the Great Lakes has to become more culturally open to outsiders and immigrants. Cities such as Cleveland, Chicago, and Detroit were once magnets for immigrants from Europe and people coming from America’s rural hinterlands, notably the south.

    Restoring appeal to outsiders does not mean denying the region’s proud past, and throwing away its historic assets, but instead focusing on its core values. For many reasons — geography, weather, history — the region cannot remake itself into California, the Pacific Northwest or the Northeast Corridor. Instead the Great Lakes can best restore its legacy as an aspirational region by focusing on the very real things that constitute its historic DNA.

    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.

    This piece originally appeared at Forbes.

    Great Lakes map by BigStock.

  • America Hanging in There Better Than Rivals

    To paraphrase the great polemicist Thomas Paine, these are times that try the souls of optimists. The country is shuffling through a very weak recovery, and public opinion remains distinctly negative, with nearly half of Americans saying China has already leapfrogged us and nearly 60 percent convinced the country is headed in the wrong direction. Belief in the political leadership of both parties stands at record lows, not surprisingly, since we are experiencing what may be remembered as the worst period of presidential leadership, under both parties, since the pre-Civil War days of Franklin Pierce and James Buchanan.

    Yet, despite the many challenges facing the United States, this country remains, by far, the best-favored part of the world, and is likely to become more so in the decade ahead. The reasons lie in the fundamentals: natural resources, technological excellence, a budding manufacturing recovery and, most important, healthier demographics. The rest of the world is not likely to cheer us on, since they now have a generally lower opinion of us than in 2009; apparently the "bounce" we got from electing our articulate, handsome, biracial Nobel laureate president is clearly, as Pew suggests, "a thing of the past."

    But as the Romans used to say, don’t let the bastards get you down. After all, it’s not like our competitors are stealing the march on us. Start with Europe. Just a few years ago, writers like Jeremy Rifkin and Steven Hill were telling us that Europe was the "model" for the world. Expand the welfare state, curtail capitalist excess, provide a comfortable partner to the rising nations of the world, and, well, enjoy a long and comfortable early retirement.

    Now, that early retirement is quickly turning into a kind of senility. Not only is Europe continuing to age – particularly along its Southern rim – but the fiscal pressures of ultrahigh unemployment, approaching 30 percent or above, among the young and the costs of maintaining a strong welfare state could create what urban analyst Aaron Renn has labeled "a demographic Lehman Brothers."

    At the same time the near-collapse of the Southern-rim countries threatens the viability of Europe’s banks, including those in Germany. Increasingly, Germany lives largely so the rest of Europe can die more quickly. Like a prototypical science-fiction villain, Germany – with fewer children than it had in 1900 – relies increasingly on the blood taken from the decaying Southern rim countries. By 2025, Germany’s economy will need 6 million additional workers, likely from such countries as Spain, Italy, Greece and Portugal, to keep its economic engine humming, according to government estimates.

    Asian anemia

    What about our prime Asian competitors? Japan has been the sick man of Asia for more than two decades. It’s now desperate enough to unleash Bernanke-like money-printing policies to supply some desperately needed economic Viagra. With a weaker currency, and more money from the Tokyo exchange, there could be a temporary recovery, but Japan’s long term prognosis is not good.

    What Japan really needs is more animal spirits – particularly the kind that produce offspring. By 2050, according to UN estimates, Japan will have 3.7 times as many people at least age 65 than 15 and younger. By then, there will be 10 percent more Japanese over 80 than under 15. Without an unlikely embrace of immigration, Japan is destined to become the nation in wheelchairs.

    China poses a more serious challenge, but the Middle Kingdom appears headed toward what one analyst calls "the end" of its amazing and profound economic miracle. Growth, once projecting Chinese global preeminence, is slowing precipitously. The country now faces a growing rank of competitors from lower-wage countries poised to take market share from the Middle Kingdom.

    China faces growing political instability at the grass-roots level, a mountain of state-issued bad debt and a festering environmental crisis, which threatens long-term food supplies and could create massive health problems. China is rapidly aging. It will have 60 million fewer people under age 15 by 2050, while gaining nearly 190 million people at least 65, approximately the population of Pakistan, the world’s fourth-most populous country.

    The so-called BRICS (Brazil, Russia, India, China and South Africa), once the darlings of the investment banking set, all are facing slowing growth and rising political instability. It doesn’t help that most are either total or partial kleptocracies, dependent on commodity exports or cheap labor. This is not a solid foundation for ascendency as newer emerging nations – Myanmar, Indonesia, Vietnam – ramp up.

    ENERGY SHIFT

    On all these accounts, North America, including our Canadian and Mexican neighbors, looks best-positioned. The first, and, arguably, most important game-changer is the energy revolution that could realign the economic stars for decades to come. The shale oil and natural gas boom, as the Economist recently noted, is as illustrative of America’s future, and genius at reinvention, "as the algorithms being generated in Silicon Valley."

    The energy boom’s best aspect, besides the emergence of relatively cleaner natural gas, is making global tyrants, such as those ruling Saudi Arabia and Russia, nervous about their future place in the world. These worries alone should send a three-word message to our leaders: Go for it.

    But North America is not, like Russia, a one-trick pony. The U.S. remains the world’s leading food producer and exporter, sending out more of such critical commodities as soybeans, corn and wheat than any other country. After decades of decline, the U.S. industrial base is growing again, and, although job growth is likely to be limited, our manufacturing sector is already the most productive in the world. With the advantages of a decent legal order, a huge domestic market and available workforce, the U.S. has remained the largest recipient of foreign investment on the planet, roughly five times that so far accumulated in China.

    Technology can be a fickle industry, but at this point of the game, it’s fair to say the U.S. is winning that race. As potentially dangerous as the tech giants may become over time, the U.S. dominance in everything from software code (Microsoft) and design (Apple), search (Google), e-retailing (Amazon), and social networking (Facebook) is nothing short of astounding. We even lead in the coffee business (Starbucks) that keeps all those nerds typing code late into the night.

    Cultural influence

    Then there’s the matter of culture. For years, Asian, Third World and European cultural warriors have plotted to knock the U.S. off its pre-eminent perch. But the European film industry is a shadow of its once-glorious efflorescence; much the same can be said about the once-splendid Japanese cinema. To be sure, Chinese films, Korean pop stars and Bollywood are rising forces, but U.S. exports more than $14 billion annually in film and television. On a global level, no one can compete with Hollywood as a packager of images and dreams – and Silicon Valley’s control of new distribution technology could further boost this advantage.

    Finally, there’s the matter of demographics. The United States, like its competitors, is aging, but not as quickly as our prime rivals. The birth rate has slowed with the recession, but it’s likely to come back toward replacement levels in the years ahead as millennials enter their thirties en masse, and immigrants continue coming to the country. America should be the only one of the top five economies with a growing workforce over the next few decades.

    So, if things are so good, why do they seem so bad? Sixteen years of lackluster leadership has not helped – a succession of two spendthrift presidents, one a too-happy warrior with a weak sense of the limits of even an imperial power, and the other, a posturing and arrogant academic oddly disconnected from the fundamental grass-roots drive that moves his country’s economy. Yet I prefer to see it in a more positive light: If we can do better than our major competitors under such leadership, how great a country is this?

    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.

    This piece originally appeared at The Orange County Register.

    USA map image by BigStockPhoto.

  • California Homes Require Real Reach

    In the 1950s and 1960s, Southern California was ground zero for the “American Dream” of owning a house. From tony Newport Beach and Bel-Air to the more middle-class suburbs of the San Fernando Valley and Garden Grove to working-class Lakewood, our region created a vast geography of opportunity for prospective homeowners.

    Today, with house prices again skyrocketing, Southern California is morphing into something that more resembles a geography of inequality. Now, even the middle class is forced into either being “house poor” or completely shut out of homeownership, or may simply be obliged to leave the area. Even more troubling is that the working class and the poor suffer from the kind of crowded, overpriced housing conditions sadly reminiscent of those experienced during the Depression and the Second World War.

    Judged by the “median multiple” – the median income divided by the median house price – California’s prices for a generation have soared well above the national averages. Demographer Wendell Cox notes that, until the early 1970s, California’s house prices were similar to those in the rest of the United States. National Association of Realtors data indicate that the median house price in California at that time was 7 percent above the national average. By 2013, the price differential had risen to 109 percent.

    This has little to do with such things as construction costs, which have not risen as quickly in most of California as elsewhere, but are largely the result of soaring land costs and stiff fees imposed on housing. Attributable largely to regulatory factors that restrict building in many areas, the cost of finished land for comparably priced houses has increased nine times as much in California as in the rest of the nation since 1970. Portland State University economist Gerald Mildner refers to this as “Economics 101,” indicating that “as the demand for property in a region grows, the increase in demand translates into some combination of more space and high prices, depending upon the elasticity of supply.”

    Beside regulatory restraints, California housing prices are driven up by the highest impact fees in the nation. An annual survey by Duncan and Associates shows that the average impact fee in California for single-family residence in 2012 was $31,100 per unit, nearly 90 percent higher than the next most expensive state and 265 percent higher than the norm among jurisdictions that levy such fees, which typically pay for capital improvements, like water and wastewater facilities, required by a new development. Many states and localities on the other side of the Sierras do not.

    These fees also impact multifamily housing; the state’s fees on multifamily units averaged $18,800, 290 percent above the average outside the state.

    Construction penalized

    California’s emerging housing crisis, then, is not, as some suggest, a reflection of the state’s constrained geography or economic superiority. The two most-recent spikes in housing costs have occurred as the state’s median income has dropped from well above to just about the national average. Neither can we blame a huge surge of new residents, since California’s once-buoyant population growth has slowed to levels similar to those of the rest of the country.

    Instead, the roots of our state’s massive social regression lie in political choices made by the state, counties and cities. This trend likely will intensify, as regulators interpret the state’s climate-change legislation to further penalize construction of single-family houses preferred by most California families. Particularly vulnerable will be the starter-home market, once the engine of California’s egalitarian middle-class culture.

    Some “new urbanists” and greens argue that such restrictions will eliminate wasteful “McMansions” and spur construction of more “sustainable” dense housing for the working masses. Yet, in reality, the impact of highly restrictive housing polices tend to be felt most by both middle-class families and the least-affluent, who find themselves unable to buy housing or, in some cases, are forced to spend huge percentages of their income on rent.

    The growing affordability crisis seems likely to worsen as the housing market recovers. Given the paucity of new home construction, and ever-tightening regulation, California’s housing market is particularly vulnerable to wild swings in prices; the year-on-year median house price increase as of May 2013 was the greatest since 1980, even greater than in any of the past decade’s “bubble” years. Overall, price gains in the state were two to three times stronger than that in the rest of the nation.

    This process has been further accelerated by the presence of investors in the local market. Investors, many from Asia, now account for upward of one in four home purchasers in the state.

    Among the biggest losers here is California’s middle class, particularly young families without large family endowments. Some 60 percent of U.S. households can now afford to buy a house, according to the National Association of Home Builders / Wells Fargo Housing Opportunity Index, but that percentage has dropped even in the Riverside-San Bernardino (40 percent) and Sacramento (50 percent) metropolitan areas, while San Jose, Los Angeles and San Diego had affordability levels of 20 percent to 30 percent. The lowest level, 17 percent, was found in the San Francisco metropolitan area. We can expect these numbers to worsen in the immediate future.

    These numbers will impact a wide range of people, including many with skills desired by employers. According to an analysis of Orange County average salaries for National Core, a nonprofit housing developer based in Rancho Cucamonga, even a biomedical engineer or a nurse in O.C. does not earn enough to buy a house there. As economist and author Claude Gruen has suggested, more restrictive land-use regulation “is to the middle class what the economic disaster of slum clearance was to the poor.”

    Renters don’t escape

    Nor will the poor, or renters, benefit from these policies. The nation, and the state, have had programs to help lower-income residents, but these programs meet only a fraction of the need. Los Angeles County had a waiting list 17 times its potential supply of housing, according to a 2004 report by the National Low Income Housing Coalition. With relatively little new product being produced, it’s unlikely this situation can improve, as potential homeowners are shoved into the rental market, boosting rents higher.

    The net result is that more Californians are becoming house poor or “rent” poor. According to American Community Survey data analysis done for National Core by this author and demographer Wendell Cox, this state has four of the six major metropolitan areas with the largest share of renters spending more than 30 percent of their income on rent – led by Riverside-San Bernardino, Los Angeles-Orange County, Sacramento and San Diego – are located in the Golden State. This includes a majority of renter household in the cities of Los Angeles, Glendale, Anaheim and Santa Ana.

    Even more troubling is a growing percentage of working households suffering housing-expense burdens of 50 percent or more of income. California again leads the way, according the National Housing Conference, with Los Angeles and San Diego among the top five major metro areas.

    This emerging social disaster has received little attention from the so-called progressives, whose policies in part are responsible for the state’s growing housing crisis. In large part due to housing, and lack of good middle-class jobs, California now has the highest poverty rate (when adjusted for the cost of housing) of any state.

    Not only are working-class Californians poorer, they also are subject to ever-higher levels of overcrowding. On a percentage basis, four California major metropolitan areas are in the 10 regions in the country with the most families doubling up. The top two are Riverside-San Bernardino and Los Angeles, followed by San Jose and San Diego.

    Overcrowding is particularly tough on children, who suffer greater problems with health and academic performance. Another study associated psychological problems with children from overcrowded housing.

    Long drives to work

    Finally, the housing crisis also creates significant environmental problems. The unaffordability of housing has forced many Californians to seek shelter far from work. Among commuters traveling 60 minutes or more to work, Riverside-San Bernardino is third-highest, followed by Los Angeles, eighth, and San Francisco, ninth. Among major metropolitan areas with the highest share of commuters traveling 90 or more minutes one way, Riverside-San Bernardino ranks second, in a virtual tie with New York, followed by Sacramento, seventh, and Los Angeles, eighth.

    For both California’s middle- and working-class, our housing regulatory regime serves as a kind of tax – a nearly confiscatory one – that works particularly against families, the poor and those who do not possess considerable family wealth. The result is a California that is increasingly out of sync with the very dream that has brought millions from all over the country.

    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.

    This piece originally appeared at The Orange County Register.

    Photo of Los Angeles housing by Wendell Cox.

  • Young Tech Tycoons Pushing Left Coast Ahead Of East In Democratic Power Structure

    There are two deep-blue regions that are critical to the Obama administration: the Northeast and the coastal region between San Jose and Seattle that truly deserves the moniker of the Left Coast. They dominate the Democratic donor list, and provide the administration with most of its appointees and much of its ideological moorings.

    Yet this common ground conceals a shift in the balance of power between these two blue strongholds. The power of the high-tech heavy Left Coast is waxing while the old Boston-to-Washington corridor is waning. Jeff Bezos’ purchase of The Washington Post simply confirms this movement of the political tectonic plates.

    The Rise of the Tech Oligarchs

    Wall Street was the star of the 1980s, but today, it’s the tech industry that offers “the same heady mix of mystery, power and money,” as Om Malik puts it. The Left Coast’s ascendency is based largely on its increased domination of this critical sector. Thirty years ago, East Coast giants such as ITT and Eastman Kodak ranked among the largest tech firms, with little representation from the Left Coast. Today the region accounts for seven of the top 10 tech companies.

    The Left Coast is also home to four of the world’s top seven software companies. The software for most of the world’s computers comes from either Microsoft in Seattle or Google and Apple in the Bay Area. Search is almost completely dominated by Google, social media by Facebook. Bezos’ Amazon overwhelms its e-tailing competitors.

    This has generated an enormous shift in the geography of American wealth. In 1990 most of the richest Americans lived in the Northeast or were part of the old energy/agriculture economy in the middle of the country. Today five of the nation’s 15 wealthiest people reside in the Bay Area or the Puget Sound; only two, Michael Bloomberg and George Soros, come from Wall Street. More importantly, the Left Coast oligarchs tend to be much younger than their East Coast counterparts; six of the world’s 29 billionaires under 40 hail from the Left Coast, three from Wall Street.

    Seizing the Means of Communications

    The best historical analogy can be found at the turn of the 20th century as entrepreneurs from America’s industrial expansion — John D. Rockefeller, Andrew Carnegie, E.H. Harriman and JP Morgan — moved to influence government and politics, first by buying political influence and later through foundations. Many of the great newspaper tycoons of the time, for example William Randolph Hearst, heir of a great Colorado mining fortune, also used their money in influence mass opinion, a pattern repeated, ironically in 1933, when Wall Street financier Eugene Meyer bought the moribund Washington Post, greatly enhancing his family’s influence for decades.

    But these newbies come with an extra media advantage: they dominate virtually all the emerging transmission systems for information. Google, Apple and Facebook all are emerging as major disseminators of entertainment as well. This shift promises to inflict collateral damage on both Hollywood and the Manhattan-centered advertising industry. The recent shotgun merger of Omnicom and Plublicis reflects the weakened position of traditional ad firms at a time that Google alone has more ad revenues than the entire print publishing industry combined.

    Reshaping the Political Landscape

    Once largely divorced or distant from politics, the Left Coasters such as Amazon, Apple, Facebook and Google have all greatly expanded their lobbying operations. Many tech firms, notably Facebook and Apple, pay minimal taxes, meaning they have a strong stake in defending their current privileges . They also have reason to work to make it difficult to protect the privacy of netizens since so much of their profit depends on selling personal information to corporations.

    This fluency with data has also made the Left Coasters critical contributors of campaign expertise for President Obama and other Democrats. Now they are starting to fund the next generation of pliable favorites, most recently Newark Mayor and senatorial aspirant Cory Booker.

    The rise of the Left Coast oligarchs will likely accelerate the extinction of the traditional working-class Democratic Party. Bezos and other Left Coasters tend to be progressive on social issues, but vehemently opposed to unions, here and abroad.

    Bezos and other online retailers will need to defend themselves against attacks on the job-destroying aspects of their shops; since 2003 there has been a loss of roughly 800,000 retail jobs while the electronic side of the industry has generated less than 180,000.

    Mark Zuckerberg and others leading the charge for immigration reform also have an interest in assuring a steady supply of lower cost, lower hassle “techno-coolies” for their software shops.

    This may not endear the oligarchs to a large part of American middle class who would prefer those jobs go to themselves, or their children. Left Coasters also embrace green policies that entail high energy prices, arguably more acceptable in the mild, if a bit, wet climate of the Left Coast but economically disadvantageous to far less temperate middle America.

    Conservatives, for their part, hope that the Left Coast moguls prove more libertarian than statist. But they may miss the fundamental law of oligarchy: when a company dominates a sector, they usually seek to use the government to consolidate their position. Google and other tech firms, for example, have been more than happy to feed off the crony capitalist trough — for example in backing renewable energy schemes — when opportunity strikes.

    What’s the Future?

    Demography is working against the East Coast, now the oldest part of the country, with the smallest population under 20. The region’s aging population will likely blunt innovation there. In contrast, despite high housing prices, the Left Coast’s population grew 10%  in the last decade compared to 6% for the Northeast; Census projections to 2023 suggest the Northeast will continue to lag as well over the next ten years.

    As urban analyst Aaron Renn has noted, Seattle, Portland and San Francisco also boast a very politically incorrect advantage. Despite their worship at the altar of diversity, these cities have smaller populations of African-Americans and Latinos, who tend to be more economically disadvantaged. The Northeast is three times as black as the Left Coast. In contrast, the Left Coast’s largely upwardly mobile Asians account for 15% of the local population, three times their proportion on the East Coast.

    The Left Coast also enjoys by far the highest concentration of people engaged in STEM jobs — roughly 50% higher the national average. Since 2005 STEM employment has expanded by double-digit percentages in Seattle, San Jose and San Francisco, compared to much more modest gains in New York and Boston. In some fields like e-tailing, the Left Coast, not surprisingly, dominates, with Seattle and San Jose leading the way.

    Given the current economic trajectory, more traditional East Coast dominated-industries — from brick and mortar retail to publishing and media — can be expected to crumble before the onslaught of the Bay Area and Seattle. The old cities of the East may hold their social prestige and legacy well into the current century, but the blue balance of power seems destined to keep tilting toward the Left Coast.

    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.

    This piece originally appeared at Forbes.

    Facebook photo by BigStockPhoto.com.

  • Entrepreneurs Turn Oligarchs

    For a generation, most Americans, whatever their politics, have largely admired Silicon Valley as an exemplar of enlightened free-market capitalism. Yet, increasingly, the one-time folk heroes are beginning to appear more like a digital version of President George W. Bush’s “axis of evil.” In terms of threats to freedom and privacy, we now may have more to fear from techies in Palo Alto than the infinitely less-competent retro-Reds in North Korea.

    Once, we saw the potential unsurpassed human liberation available through information technology. However, Silicon Valley, as shown in the NSA scandal, increasingly has become intimately tied to the surveillance state. Technology has enabled powerful firms – including Verizon, Apple, Facebook, Microsoft and Google – to channel everyone’s email and cellphone calls to the national security apparatus.

    “It’s as bad as reading your diary,” Joss Wright, a researcher with the Oxford Internet Institute, recently told the Associated Press, adding, “It’s far worse than reading your diary. Because you don’t write everything in your diary.”

    Nor does the snooping relate only to national security. If my emails to friends and family arguably constitute a potential threat to national security, that’s one thing. The massive monitoring and largely unapproved tapping into our data for profit is quite another.

    Google, which, in the first half of 2012, took in more advertising dollars than all U.S. magazines and newspapers combined, has amassed an impressive list of privacy violations, notes the Huffington Post. Even the innocent-seeming Gmail service is used to collect and sell information; Google’s crew in Palo Alto may know more about the casual user than most of us suspect.

    Even Apple, arguably the most iconic Silicon Valley firm, has been hauled in front of courts for alleged privacy violations. For its part, Consumer Reports recently detailed Facebook’s pervasive privacy breaches, including misuse of information as detailed as health conditions, details an insurer could use against you, when someone is going out of town (convenient for burglars), as well as information pertaining to everything from sexual orientation to religious and ethnic affiliation.

    Despite ritual denials about such invasions of privacy, the new communications moguls have little reason to stop, and lots of financial reasons to continue. As for concerns over privacy, the new oligarchs take something of a blasé attitude. Eric Schmidt, Google’s chairman, in 2009 responded to concerns over privacy with this gem: “If you have something that you don’t want anyone to know, maybe you shouldn’t be doing it in the first place.”

    First came the engineers

    These autocratic sentiments have evolved over time. Initially, Silicon Valley was dominated by engineers whose primary obsession was using information technology to make the physical world work better. Many of them from Midwestern schools, that early workforce came to the Santa Clara Valley for the same suburban, middle-class lifestyle that earlier brought millions to the aerospace hubs of the Los Angeles Basin and Long Island. They may have been nerds, but not a class apart.

    The early Valley deserved our admiration for taking new technologies – semiconductors, in particular – and applying them to practical concerns ranging from machine tools to spacecraft and defense. The Internet itself was not invented by swashbuckling entrepreneurs but evolved from the Pentagon’s Defense Advanced Research Projects Agency – DARPA. Eric Schmidt and Mark Zuckerberg did not pay to build the Internet; the taxpayers did.

    The new Valley elite are simply the latest to refine and exploit information technology for their own, often enormous, personal benefit. Nothing wrong with making money, to be sure, but this ambition is no different than those of Cornelius Vanderbilt, E.H. Harriman, J.P. Morgan, Andrew Carnegie, John D. Rockefeller, Henry Ford and Thomas Watson. Each innovated in a key industry, established oligarchic control and became fantastically rich.

    But even by the standards of bygone moguls, the new oligarchs’ wealth has not been widely shared. Big Oil and the Big Three automakers created hundreds of thousands of jobs for a wide range of workers. In contrast, the tech oligarchs’ contributions to American employment are relatively negligible.

    Google, for example, employs 50,000 people; Facebook, 4,600; Twitter, less than a thousand, while GM employs 200,000; Ford, 164,000; and Exxon, more than 100,000. Even in the current boom, new job creation has been relatively insipid. From 1959-71, Silicon Valley produced 100,000 tech jobs; by 1990 it generated an additional 150,000 and, in the 1990s boom, another 170,000. After losing more than 108,000 high-tech jobs from 2000-08, there has been a net gain of no more than 20,000 to 30,000 positions since 2007.

    The geographical area enriched by the oligarchs has also narrowed. In previous Silicon Valley booms, outlying areas such as Sacramento and Oakland also benefited; not so much this time. Nor is the population expanding much, as one would expect from an economic boom. Although the massive outflow of domestic migrants over past decade – more than 20,000 annually – has slowed, still, more domestic migrants are leaving than coming. Part of this has to do with having the nation’s highest housing prices relative to income, more than twice that of competitor regions like Austin, Texas, Raleigh, N.C., or Salt Lake City.

    Rather than a place of aspiration, the Valley increasingly resembles an extremely expensive gated community, with prices set impossibly high particularly for all but the most affluent new entrants.

    What Needs to Be Done?

    Americans need to wake up to the reality of this new, and increasingly ambitious, ruling class. “The sovereigns of cyberspace,” like the all-powerful Skynet computer system in the “Terminator” series, are only recently focused on politics, and have concentrated largely in the Democratic Party (where the price of admission tends to be cheaper than in the old-money-dominated GOP). And it’s not just money they are throwing at the game, but also the skillful political use of technology, as amply demonstrated in President Obama’s re-election.

    Like the moguls of the early 20th century, who bought and sold senators like so many cabbages, the new elite constitute a basic threat to democracy. They dominate their industries with market shares that would make the old moguls blush. Google, for example, controls some 80 percent of search, while Google and Apple provide the operating system software for almost 90 percent of smartphones. Similarly, more than half of Americans, and 60 percent of Europeans, use Facebook, making it easily the world’s dominant social media site. In contrast, the world’s top 10 oil companies account for barely 40 percent of the world’s oil production.

    Like the Gilded Age moguls, the tech oligarchs also personally dominate their companies. Sergey Brin, Larry Page and Eric Schmidt, for example, control roughly two-thirds of the voting stock in Google. Brin and Page each is worth more $20 billion. Larry Ellison, the founder of Oracle, owns just under 23 percent of his company; worth $41 billion, Forbes ranked him the country’s third-richest person. Bill Gates, the richest, is worth a cool $66 billion and still controls 7 percent of his firm. Newcomer Mark Zuckerberg’s 29.3 percent stake in Facebook was worth $16 billion as of July 25, according to Bloomberg.

    This combination of market and ownership concentration needs to be curbed. Taking a page from the Progressive Era, author and historian Michael Lind suggests that companies like Google, given their enormous market share, should be regulated like utilities. Others, within the European Union and elsewhere, look to apply antitrust legislation, once used to break up Standard Oil. One innovative approach, as Jaron Lanier suggests in his new book, “Who Owns the Future,” includes forcing companies to pay for the privilege of using your data, thereby “spreading the wealth” from a few hegemons to the wider populace.

    Threat is bipartisan

    These changes will require both Left and Right to change their attitudes. Progressives, for example, have tended to embrace the Valley’s population for its generally “liberal” views on social issues and the environment. They have largely ignored the industry’s poor record on hiring non-Asian minorities and the lavish, energy-consuming lifestyles of the oligarchs themselves.

    Some on the left are seeing the light. Britain’s left-leaning Guardian newspaper has been in the forefront unveiling the NSA scandals and the complicity in them of the tech giants. Credit belongs to the EU, which, particularly in contrast with our government, has been asking the toughest questions about loss of privacy and the dangers of oligopolistic control. With Barack Obama secure in the White House, some American leftists have also begun to recognize the extreme inequality that has accompanied, and likely been worsened by, the ascendency of the digital aristocracy.

    Conservatives, for their part, can only face up to the new “axis of evil” by stepping outside their ideology strictures and instinctive embrace of wealth. The increasingly monopolistic nature of the high-tech community, and its widespread disregard for the privacy of the individual, should concern conservatives, as it would have the framers of the Constitution.

    What needs to be accepted, by both conservatives and liberals, is that privacy matters, as does the threat posed to democracy by oligarchy. Until people focus on the potential for evil before us and discuss ways to curb abuses, this small and largely irresponsible class, likely in league with government, will usher in not the promised cornucopia but a gilded-age reign of Big Brother.

    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.

    This piece originally appeared in The Orange County Register.

    Official White House Photo by Pete Souza.

  • How Can We Be So Dense? Anti-Sprawl Policies Threaten America’s Future

    Among university professors, government planners and mainstream pundits there is little doubt that the best city is the densest one. This notion is also supported by a wide number of politically connected developers, who see in the cramming of Americans into ever smaller spaces an opportunity for vast, often taxpayer-subsidized, profiteering.

    More recently density advocates cite a much-discussed study of geographic variations in upward mobility as suggesting that living in a spread-out city hurts children’s prospects in life. “Sprawl may be killing Horatio Alger,” quipped economist and New York Times columnist Paul Krugman.

    Yet the study actually found the highest rates of upward mobility not in dense cities, but in relatively spread-out places like Salt Lake City, small cities of the Great Plains such as Bismarck, N.D.; Yankton, S.D.; and Pecos, Texas — all showed bottom to top mobility rates more than double New York City. And we shouldn’t forget the success story of Bakersfield, Calif., a city Columbia University urban planning professor David King wryly labeled “a poster child for sprawl.” Rather than an ode to bigness, notes demographer Wendell Cox, the study found that commuting zones (similar to metropolitan areas) with populations under 100,000 — smaller cities that tend to be sprawled by nature  —  have the highest average upward income mobility.

    “Sprawl” did not kill Detroit, as Krugman suggests in his previously mentioned column, the city did that largely to itself. Another like-minded critic, historian Steven Conn,  blames the auto industry for the city’s problems, perhaps not recognizing Detroit would be little more than a more southerly Duluth without it.

    There are at least three major problems with the thesis that density is an unabashed good. First, and foremost, Census and survey data reveal that most people do not want to live cheek to jowl if they can avoid it. Second, most of the attractive highest-density areas also have impossibly high home prices relative to incomes and low levels of homeownership. And third, and perhaps most important, dense places tend to be regarded as poor places for raising families. In simple terms, a dense future is likely to be a largely childless one.

    Let’s start with something few density advocates consider: what people want and what they would choose if they could. Roughly four in five buyers, according to a 2011 study commissioned by the National Association of Realtors, prefer a single-family home. This preference can be seen in the vastly greater construction of single-family houses in the past decade: Between 2000 and 2011, detached houses accounted for 83% of the net additions to the occupied U.S. housing stock.  The percentage of single-family homes in the total housing mix last decade was more than one-fifth higher than in the 1960s, 1970s and 1980s.

    Contrary to the conventional wisdom, the pattern is not likely to end, barring a longer-term recession or government edict. As the number of households once again begins to rise and birthrates tick up, single-family homes are once again leading housing growth.

    Buyers of single-family homes are not necessarily embracing exurban lifestyles so much as reacting to basic economic factors. In many cases the nicest single-family districts closest to work and amenities are prohibitively expensive — think Beverly Hills or Studio City in the L.A. area, Bethesda near Washington, or Evanston outside Chicago. People move further out in order to afford something better than an apartment.

    The last decennial Census shows us definitively that people tend to head toward the periphery. Barely 6% of Americans live in densities of over 10,000 per square mile, and the fastest-growing central cities between 2000 and 2010 — such as Raleigh, Charlotte and Austin — have average densities less than a third as intense as places like New York, Chicago, Or Los Angeles.

    Overall, domestic migrants tend to be moving away from these denser metropolitan areas. Between 2000 and 2010, a net 1.9 million people left New York, 1.3 million left Los Angeles, 340,000 left San Francisco, while 230,000 left San Jose and Boston. In contrast, some of the largest in-migration has taken place over the past decade, as well as since 2010, in relatively sprawling cities, including Houston, Dallas, Ft. Worth, Tampa-St. Petersburg and Nashville.

    Our perceptions of density are often distorted by media coverage, which tends to revolve around city centers. To be sure many downtown areas have experienced impressive growth, but this accounted for less than 1% of the 27 million expansion in the U.S. population between 2000 and 2010. In reality virtually all net population growth in the nation took place in counties with under 2,500 persons per square mile. The total population increase in counties with under 500 people per square mile was more than 30 times that of the growth in counties with densities of 10,000 and greater.

    Some inner suburbs may be struggling adjacent to some hard-pressed cities, as is often highlighted by density advocates, but they are thriving in areas where prices are reasonable and the economy is strong. In Houston, arguably America’s most economically vibrant big metro area, over 80% of homes sales in 2012 were outside Beltway 8, the city’s second ring. The city’s inner ring, inside the 610 loop, has experienced an impressive revival, but still it only accounted for 6% of home sales last year.

    There is clearly a growing chasm between affordable, family-friendly cities and those that, frankly, are not. Until the 1970s, in virtually all American metropolitan areas, a median-priced home cost roughly three years’ median income. This equilibrium was smashed by the imposition in some states of “smart” land-use policies that seek to limit or even prohibit suburban building, huge impact fees, as well as in some markets,  massive investment from speculators.

    As a result, many of the metro areas beloved by density advocates, such as New York and San Francisco, now have median home price multiples well over 6 or 7; if current trends continue, they could, as occurred during the last housing boom, reach upward of 10. Not surprisingly, these areas all have low rates of homeownership compared to the national average.  For example, in New York and Los Angeles, the homeownership rate is half or less than the national figure of 65%. This is particularly true among working class and minority households. Atlanta’s African-American home ownership rate is approximately 40% above those of San Jose and Los Angeles, approximately 50% higher than Boston, San Francisco and Portland, and nearly 60%  higher than New York.

    All these factors are particularly relevant to one group: families. Much of contemporary urban theory rests on the idea of weakening family connections: fewer marriages and lower birthrates will decrease the appetite for lower-density housing. Families do not make up the prime market for dense housing; married couples with children constitute barely 10% of apartment residents, less than half the percentage for the population overall.

    Families also generally settle in less dense parts of cities, suburban or exurban areas;  the places with the lowest percentage of households with children include favored abodes of the  density lobby such as New York (particularly Manhattan), as well as Chicago, San Francisco and Seattle. In contrast the metropolitan areas with the strongest growth in their child populations — Raleigh, Austin, Charlotte, Dallas, Houston, Oklahoma City — have much lower densities and far smaller urban cores.

    This flight from density among families is not merely an American phenomena. There are far higher percentages of families with children in the suburbs of Tokyo, London and Toronto than within the inner rings. The ultra dense cities of East Asia — Hong Kong, Singapore and Seoul — have among the lowest fertility rates on the planet. Tokyo and Seoul now have fertility rates around 1 while Shanghai’s has fallen to 0.7, among the lowest of any city ever recorded, well below China’s “one child” mandate and barely one-third the number required simply to replace the current population.

    Some have suggested that the Obama administration is conspiring to turn American cities into high-rise forests. But the coalition favoring forced densification — greens, planners, architects, developers, land speculators — predates Obama. They have gained strength by selling densification, however dubiously, as what planner and architect Peter Calthorpe calls “a climate change antibiotic.” Not surprisingly, there’s less self interest in promoting more effective greenhouse gas reduction policies such as boosting  work at home and lower-emissions cars.

    The density agenda need to be knocked off its perch as the summum bonum of planning policy. These policies may not hurt older Americans, like me, who bought their homes decades ago, but will weigh heavily on the already hard-pressed young adult population. Unless the drive for densification is relaxed in favor of a responsible but largely market-based approach open to diverse housing options, our children can look forward to a regime of ever-higher house prices, declining opportunities for ownership and, like young people in East Asia, an environment hostile to family formation. All for a policy that, for all its progressive allure, will make more Americans more unhappy, less familial, and likely poorer.

    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.

    This piece originally appeared in Forbes.

  • California’s Blue-on-Blue Battle

    Perhaps nothing more illustrates the evolving inner class conflict within the progressive political movement than the recent embrace of California as a role model for the rest of the country. The Golden State, maintains John Judis of the New Republic, should provide the game plan for the Obama administration as it seeks a path back to relevance.

    As an old-style, and increasingly marginal, Democrat, my response is “say what?” After all, even by the standards of the tepid national recovery, California, for all the celebration, still lags. The state has consistently suffered among the highest unemployment rates in the country – now ranking around sixth at 8.5 percent – and now, according to the U.S. Census, the highest rate of poverty in the country.

    Nor is California, as is often alleged, recovering faster than nation overall. Since January 2007, California has ranked 42nd among the 50 states and the District of Columbia. Even today, it has roughly 3.5 percent – over a half-million – fewer jobs than it had five years ago. In contrast, arch-rival Texas, second after North Dakota in percentage jobs growth, has added close to 1 million positions. The recovery has been particularly slow in Southern California; in a recent analysis of U.S. metropolitan job-growth data since 2007, the Los Angeles-Orange County region ranked 39th, while the San Bernardino-Riverside area rated 37th.

    Growing split

    If anything, what’s really emerging in California is a widening demographic and geographic divide between the hard-hit largely minority inner-city areas, such as Oakland and Los Angeles, as well as much of the entire inland part of the state (with the exception of oil-rich Bakersfield) and the wealthy coastal sliver that is home to the rich, famous, predominately white (and aging). One longtime conservative California observer, Victor Davis Hanson, wryly has dubbed this a form of “liberal apartheid.”

    Whatever one calls it, under the current progressive regime, California is accomplishing the exact opposite of the putative progressive egalitarian agenda. Rather than spread the wealth in the old social democratic model of Roosevelt and Truman, and even Clinton, this recovery, such as it is, has been largely centered among the asset-owning classes. They have benefited from, first, the stock market resurgence and a hypocritically pro-Wall Street regime in Washington and, now, an emerging housing bubble, largely promoted by the Federal Reserve. Meanwhile, vast portions of the middle and working classes have continued to languish.

    This division, notes historian Fred Siegel in his upcoming history “Revolt Against the Masses,” reflects a long-standing elitist tendency within progressivism that extends to at least the beginning of the 20th century. Starting with such luminaries as Herbert Croly and H.G. Wells, there has been a thread of progressive thought that rejects the essential notion of democracy and supports the notion of a guided economic system administered by a disinterested caste of highly educated “supermen.”

    In California, this progressive trend has been given full rein, as political power in the state has flowed increasingly to its most affluent corners – notably, San Francisco and Silicon Valley – where social-media hype and environmental management dominate the political agenda. To date, this agenda has been facilitated by an alliance among the minority political warlord class and the extremely well-organized public sector unions, along with rent-seeking crony capitalists, notably those who have benefited from “green” policies.

    ‘Blue-on-blue conflict’

    Yet, there are some tentative signs that this political alliance could be endangered, as representatives of more working- and middle-class areas begin to recognize the vast chasm between their interests – largely more and better-paying jobs, and more affordable housing – and those of the reigning gentry liberals. This “blue-on-blue conflict,” as the ever-perceptive Walter Russell Mead has dubbed it, may become, given the declining relevance in California of the Republican Party, the most relevant political divide in the state today.

    Caught in the middle is the ever-unpredictable but wily Gov. Jerry Brown. In many ways Brown has epitomized the ruling progressive alliance, particularly on issues such as green energy, which has essentially served to transfer money to rich investors, such as Google, from manufacturers, middle- and working-class consumers. At a time when European model countries, such as Germany and Spain, are rethinking their expensive green-energy programs as wasteful and economically damaging, Brown seems determined to stay his course.

    Also not likely to be altered, at least for the time being, is Brown’s dream of a state high-speed rail network. If ever built, given a funding shortfall of at least $45 billion, it will benefit primarily wealthy travelers and tourists, while the roads, bridges and buses depended on by the masses continue to deteriorate. Recently, a separate proposal for a Victorville-to-Las Vegas “bullet train” failed to win a federal loan, likely dooming it.

    Brown may be basking in the temporary glow of the state’s short-term budget surplus, but he must know that the long-term pension obligations, at both the state and local levels, and the costs of a vast welfare class are, to use the overused phrase, not sustainable. Without some new engine of economic growth beyond social media, capital gains and property bubbles, the state recovery will never spread to the vast majority of Californians and could nudge the interior parts of the state more toward either penury or even the Republican Party.

    Oil and water

    In this respect, Brown has made two tentative, but potentially critical, moves toward addressing the health of an increasingly Hispanic interior. First, he has embraced the possibility of oil production using hydraulic fracking, to the alarm of Bay Area gentry liberals, as a means of sparking desperately needed high-wage blue-collar employment. He has found some allies among largely Latino and African American Democrats from working-class districts who recently blocked coastal gentry efforts to prohibit the practice.

    The second relates to the all-important issue of water. Western lore has it that, in this historically dry part of the world, whiskey may be for drinking but water is for fighting. By embracing the notion of a peripheral canal up north to assure water supplies to the central and southern parts of the state, Brown has taken on the core concerns of the Bay Area green constituencies. (The fact that San Francisco also relies almost entirely on water from the Sierras is not often acknowledged.)

    In the water wars as well, Brown will be able to build a coalition between pro-business Republicans and Democrats who represent the generally more working- and middle-class areas dependent on affordable and reliable water supplies. The imperative to back Brown’s efforts will be even greater in the Central Valley and other agricultural areas.

    Changing attitudes

    Another possible sign of change can be seen in a new effort, supported by business and labor, to begin providing some tax breaks and incentives to firms interested in expanding in the state. In the recent past, budget constraints and a largely anti-business Legislature has limited such incentives, which are used routinely by competitor states such as Texas, Utah and Louisiana. Whether such efforts will make a big difference is questionable, but they are signs of a slowly changing attitude toward enterprise in California.

    Yet, such efforts may not be enough, particularly if the current asset bubble propping up state government begins to falter. At the same time, Brown’s efforts to circumvent the green lobby on water and energy run the risk of endless lawsuits. Being an economic “Nixon in China” may hold great opportunities for Brown, but at the risk of discord with some of the very interests who have been his political bulwarks. It happened in Brown’s original second term – 1979-83 – and could emerge again this time around.

    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.

    This piece originally appeared at The Orange County Register.

    Photo by Randy Bayne; California Governor Jerry Brown