New Geography

Author: Joel Kotkin

  • America’s Fastest- and Slowest-Growing Cities

    Since the housing crash of 2007, the decline of the Sun Belt and dispersed, low-density cities has been trumpeted by the national media and by pundits who believe America’s future lies in compact, crowded, mostly coastal and northern, cities. But apparently, most Americans have not gotten the memo — they seem to be accelerating their push into less dense regions of the Sun Belt.

    An analysis of population data by demographer Wendell Cox, including the Census report for the most recent year released late last week, shows that since 2000, virtually all the 10 fastest-growing metropolitan areas in the United States are located in Sun Belt states. The population of the Raleigh, N.C., metropolitan statistical area has expanded a remarkable 47.8% since 2000, tops among the nation’s 52 metro areas with over 1 million residents. That is more than three times the overall 12.7% growth of those 52 metro areas.

    Austin, Texas, and Las Vegas also expanded more than 40%, putting them second and third on our list. The populations of the other metro areas in the top 10 all expanded by at least 25%, or twice the national average. This jibes nicely with domestic migration trends and growth in the foreign-born population, both of which have been strongest in many of these same cities.

    The most recent numbers, covering July 2011 to July 2012, also reveal some subtle changes in the Sun Belt pecking order. Over the 2000-2012 period, the growth winners   included places like Las Vegas, Riverside-San Bernardino and Phoenix, all of which suffered grievously in the housing bust. Although they all clocked population growth better than the national average over the past year, none, besides Phoenix, ranked in the updated top 10.

    Growth momentum has shifted decidedly toward Texas. Austin’s population expanded a remarkable 3% last year, tops among the nation’s 52 largest metro areas. Three other Lone Star metropolitan areas — Houston, San Antonio and Dallas-Ft. Worth — ranked in the top six and all expanded at roughly twice the national average. The other fastest-growing metros over the past year include Raleigh, Orlando, Phoenix, Charlotte and Nashville. One unexpected fast-growth area has been Oklahoma City, which ranked 20th between 2000 and 2012, but notched the 12th spot last year, with a growth rate 60% above the national average.

    What explains these subtle shifts? Some of it can be traced, of course, to the stronger growth in energy-rich areas such as Texas as well as Oklahoma City. The differences are particularly striking when looking at varying economic growth rates among the country’s largest regions. In 2011 the Houston metro area, whose population is up by 1.4 million since 2000, also enjoyed the fastest GDP growth, at 3.7%, of any of the nation’s top 20 regions. Dallas-Fort Worth clocked a respectable 3.1%.

    In contrast, the GDP growth rates for the hip, dense metro areas lagged behind. Among the elite cities, the tech hubs of San Francisco , Seattle and Boston have done the best, posting GDP growth around 2.5%. But the economies of New York, Los Angeles, Philadelphia and, surprisingly, Washington D.C., grew at roughly half the rate of Houston.

    But it’s not just economic factors at play. One remarkable similarity in all the fastest-growing areas is their relatively low population densities. Although Raleigh and Austin are held out as “hip” cities, they have very low-density urban cores. Not one of the top 10 growth cities for 2010 to the present, or last year, had urban core densities more than a half of those of places like Boston (40th for 2000 to the present), New York (41st),  Los Angeles (42nd) or Chicago (43rd).

    At the same time, we have to consider the issue of housing affordability, something that rarely comes up among proponents of “cool” cities. In contrast to slower-growing San Francisco, New York and Los Angeles, most of the fastest-growing cities have lower housing prices relative to income. Particularly notable are the low prices in areas such as Austin, Raleigh, Houston and Dallas-Fort Worth, where housing costs are half or less than in the more highly regulated “cool” cities.

    Lower housing costs also seem to impact another critical growth component: family formation. Immigrants and domestic in-migrants are important to population growth but equally critical is whether longtime residents in a region choose to have children. Virtually all the top 10 metro areas, both last year and since 2000, have also ranked among the fastest growing in terms of the population under 15; Raleigh’s child population alone has expanded by almost 45% since 2000, compared to 2% nationally;  Austin’s toddler population surged a remarkable, 38%. The child populations of Houston, Dallas-Fort Worth, Atlanta, Phoenix, Las Vegas and Orlando all  increased by 20% or more.

    In contrast, none of the hip cities posted under 15 population growth better than 5%. The number of children has actually declined in many, including New York, Los Angeles, Boston, San Francisco and Chicago. Even with substantial influxes from abroad, particularly in New York, it’s difficult for these areas to sustain population increases when the number of children keeps dropping.

    The problem may be even more intense in Los Angeles and Chicago, whose economies continue to lag further behind. But the demographic challenges of the Big Orange and the Windy City pale compared to those faced by many cities in the old industrial Rust Belt, which have either lost population or posted only weak increases.

    Cleveland’s population is down 3.9% since 2000, the worst performance among the nation’s biggest metro areas apart from disaster-struck New Orleans. Cleveland lags in both family formation and has seen strong outmigration, but also attracts few foreign-born residents. Much the same can be said of Providence, R.I., Pittsburgh, Buffalo and Detroit. Nor do things seem to be improving with time; these areas continued to inhabit the nether regions in the most recent Census reports.

    So what do these trends tell us about the demographic evolution of our major metropolitan areas? Certainly sustained economic growth, low density and more affordable housing all clearly continue to push the center of population gravity toward certain Sun Belt cities, primarily in the Southeast and Texas. It turns out that neither the Great Recession, the housing bust or a much hyped preference for dense urbanity is turning this around.

    Major Metropolitan Areas (Over 1,000,000) Population
    Ranked by Population Change Percentage: 2000-2012 (2013 Geography)
    Rank Metropolitan Area 2000 2012 2000-2012 Growth 2000-2012 % 2011-2012 %
    1 Raleigh, NC           804,436        1,188,564        384,128 47.8% 3.3%
    2 Austin, TX        1,265,715        1,834,303        568,588 44.9% 3.1%
    3 Las Vegas, NV        1,393,370        2,000,759        607,389 43.6% 3.1%
    4 Orlando, FL        1,656,835        2,223,674        566,839 34.2% 2.5%
    5 Charlotte, NC-SC        1,729,023        2,296,569        567,546 32.8% 2.4%
    6 Riverside-San Bernardino, CA        3,277,578        4,350,096     1,072,518 32.7% 2.4%
    7 Phoenix, AZ        3,278,661        4,329,534     1,050,873 32.1% 2.3%
    8 Houston, TX        4,716,964        6,177,035     1,460,071 31.0% 2.3%
    9 San Antonio, TX        1,719,262        2,234,003        514,741 29.9% 2.2%
    10 Dallas-Fort Worth, TX        5,239,149        6,700,991     1,461,842 27.9% 2.1%
    11 Atlanta, GA        4,297,419        5,457,831     1,160,412 27.0% 2.0%
    12 Nashville, TN        1,387,274        1,726,693        339,419 24.5% 1.8%
    13 Jacksonville, FL        1,126,224        1,377,850        251,626 22.3% 1.7%
    14 Sacramento, CA        1,808,442        2,196,482        388,040 21.5% 1.6%
    15 Denver, CO        2,194,022        2,645,209        451,187 20.6% 1.6%
    16 Washington, DC-VA-MD-WV        4,862,582        5,860,342        997,760 20.5% 1.6%
    17 Salt Lake City, UT           942,666        1,123,712        181,046 19.2% 1.5%
    18 Portland, OR-WA        1,936,108        2,289,800        353,692 18.3% 1.4%
    19 Tampa-St. Petersburg, FL        2,404,273        2,842,878        438,605 18.2% 1.4%
    20 Oklahoma City, OK        1,097,874        1,296,565        198,691 18.1% 1.4%
    21 Seattle, WA        3,052,379        3,552,157        499,778 16.4% 1.3%
    22 Richmond, VA        1,058,816        1,231,980        173,164 16.4% 1.3%
    23 Indianapolis. IN        1,664,431        1,928,982        264,551 15.9% 1.2%
    24 Columbus, OH        1,681,865        1,944,002        262,137 15.6% 1.2%
    25 Miami, FL        5,025,806        5,762,717        736,911 14.7% 1.1%
    26 San Diego, CA        2,824,987        3,177,063        352,076 12.5% 1.0%
    27 Minneapolis-St. Paul, MN-WI        3,044,901        3,422,264        377,363 12.4% 1.0%
    28 Kansas City, MO-KS        1,818,073        2,038,724        220,651 12.1% 1.0%
    29 Louisville, KY-IN        1,123,966        1,251,351        127,385 11.3% 0.9%
    30 Memphis, TN-MS-AR        1,216,293        1,341,690        125,397 10.3% 0.8%
    31 San Jose, CA        1,739,669        1,894,388        154,719 8.9% 0.7%
    32 Birmingham, AL        1,053,394        1,136,650          83,256 7.9% 0.6%
    33 San Francisco-Oakland, CA        4,136,658        4,455,560        318,902 7.7% 0.6%
    34 Baltimore, MD        2,557,501        2,753,149        195,648 7.6% 0.6%
    35 Grand Rapids, MI           934,388        1,005,648          71,260 7.6% 0.6%
    36 Virginia Beach-Norfolk, VA-NC        1,584,042        1,699,925        115,883 7.3% 0.6%
    37 Cincinnati, OH-KY-IN        1,999,787        2,128,603        128,816 6.4% 0.5%
    38 Philadelphia, PA-NJ-DE-MD        5,693,275        6,018,800        325,525 5.7% 0.5%
    39 Hartford, CT        1,150,915        1,214,400          63,485 5.5% 0.4%
    40 Boston, MA-NH        4,402,611        4,640,802        238,191 5.4% 0.4%
    41 Los Angeles, CA      12,398,950      13,052,921        653,971 5.3% 0.4%
    42 New York, NY-NJ-PA      18,976,899      19,831,858        854,959 4.5% 0.4%
    43 Chicago, IL-IN-WI        9,117,732        9,522,434        404,702 4.4% 0.4%
    44 St. Louis,, MO-IL        2,678,224        2,795,794        117,570 4.4% 0.4%
    45 Milwaukee,WI        1,502,305        1,566,981          64,676 4.3% 0.4%
    46 Rochester, NY        1,066,335        1,082,284          15,949 1.5% 0.1%
    47 Providence, RI-MA        1,586,744        1,601,374          14,630 0.9% 0.1%
    48 Pittsburgh, PA        2,429,023        2,360,733        (68,290) -2.8% -0.2%
    49 Buffalo, NY        1,169,159        1,134,210        (34,949) -3.0% -0.3%
    50 Detroit,  MI        4,457,471        4,292,060      (165,411) -3.7% -0.3%
    51 Cleveland, OH        2,147,948        2,063,535        (84,413) -3.9% -0.3%
    52 New Orleans. LA        1,336,795        1,227,096      (109,699) -8.2% -0.7%

    Analysis by Wendell Cox, Demographia

    Joel Kotkin is executive editor of NewGeography.com and a 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.com.

  • California Needs More Immigrants

    Southern California, just a few decades ago the fastest-growing region in the high-income world, is hitting a demographic tipping point. With a decade or more of domestic out-migration and a sharp fall in immigration, the region is morphing from a destination that attracts dreamers and builders into a place increasingly dominated by those born or bred here.

    To some demographers, this transition from a magnet for migrants to a more native-born population represents something of a boon. As for migrants, one USC demographer wrote that California acts like "a gold pan that sifts through aspiring talent and keeps the best." Our new steady state is a good thing, the argument goes, since it offers a respite from the travails of rapid growth. All we need to focus on is spending more money on schools, and, not surprisingly, universities, and everything will turn out alright.

    There may be some truth to all these points, but, historically, a decline in new migration also suggests something else: a picture oddly reminiscent of the kind of demographic stagnation long associated with places like Cleveland, Buffalo, N.Y., Pittsburgh and Detroit. A more native-dominated region may be both more socially stable but increasingly hidebound and lacking innovation.

    For cities, demographic stagnation is not a recipe for success. Over the past decade, notes demographer Wendell Cox, the Los Angeles-Orange County area has seen the fifth-highest growth in the percentage of locally born people in its population, among nation’s 51 largest metropolitan areas. The concern is not so much that people are leaving these places in droves; the real issue is that not enough new people, with new ideas and great ambition, are coming in.

    Already, notes economist Bill Watkins, large parts of the state, particularly along the coast, are evolving into "geriatric ghettos" populated by aging, often-affluent baby boomers. And, as for keeping the "best," the steady decline in California’s relative educational ranking, particularly in the younger cohorts, should convince us that we cannot reasonably rely on native-born residents to meet the challenges of the future.

    Domestic Outmigration

    Watkins also points out that California has been losing domestic migrants for 10 of the past 15 years. It’s been worse in this region; over the past decade the Los Angeles-Orange County area suffered the third-highest rate in the country of net outmigration, slightly above New York’s. Amazingly, on a per capita basis, people are leaving our sun-drenched metropolis more rapidly than from Rust Belt disaster areas such as Cleveland and Detroit.

    In recent decades, this shortfall has been more than made up by foreign immigration. But in a stunning reversal of the trends in past decades, the number of foreign-born in our region has started to stagnate. Indeed, over the most-recent decade, the Southland has experienced the slowest rate of growth in its foreign-born population of any major region in the country. Los Angeles-Orange County gained 110,000 immigrants over the decade, one-sixth as many as New York City and only a quarter as many as Houston. Our immigrant population has grown less than that of much smaller regions such as Minneapolis-St. Paul, Austin, Texas, Atlanta and Dallas-Fort Worth.

    These patterns suggest a dangerous shift in our demographic DNA and a decline in our historic archetype as one of the world’s most culturally and economically innovative regions. Throughout history, the movement of newcomers has accented the rise of great cities at their peak, from ancient Athens, Rome and Baghdad to early 20th century London, Berlin, New York and Chicago. Similarly, the ascendency of the great cities of modern Asia – from Tokyo to Shanghai to Hong Kong and Singapore – resulted from mass migration, usually from the countryside to the urban centers.

    Pioneering Migrants

    Southern California’s evolution into one of the world’s premier urban regions has been, for the most part, propelled by outsiders, people who came to this place in search of a better life. Starting in the 1880s, these tended to be other Americans, including Los Angeles Times publisher Harrison Gray Otis (Marietta, Ohio), and railway magnate Henry Huntington (Oneonta, N.Y.), and, later, Walt Disney (Kansas City, Mo.), Howard Ahmanson Sr. (Omaha, Neb.) and Dr. Jerry Buss (Kemmerer, Wyo.).

    For such newcomers – including James Irvine, a native of Ireland – Southern California provided an opportunity to create new things of every type. Everything distinctive developed in Southern California was created largely by outsiders. The creators of the movie business were mostly Jews from Eastern Europe, while the aerospace industry was largely populated by Midwestern emigres. Even the people who built our cities came from elsewhere. Consider Ahmanson, who funded much of it. Developers like Eli Broad, a native of Detroit, or Nathan Shapell, a holocaust survivor from Poland, built many of the region’s suburban communities.

    In recent decades, L.A.’s outsiders have come increasingly from abroad. Most have come from Mexico and Asia, but also from the Middle East, the former Soviet Union and, increasingly, Africa. Their influence is everywhere, from the food trucks to the ethnic malls, at the universities and in the music scene. A large number of the smaller banks in the region are tied to immigrant communities.

    Nowhere is the influence greater than in the entrepreneurial arena. In the 1980s and 1990s, when Los Angeles-Long Beach frequently led in new immigration, newcomers from abroad fueled the rise of industries from garments to international trade and food processing. They are the primary creators of our food truck culture and often the chefs and owners of our finest restaurants.

    Business Starters

    Simply put, immigrants provided the critical oxygen for our economy, which, as a group, they are still doing. Even in the midst of the recession, newcomers continued to form businesses at a record rate, while the start-up rate for native-born entrepreneurs declined. The immigrant share of new businesses, notes a Kauffman Foundation survey, more than doubled, from 13.4 percent in 1996 to 29.5 percent, in 2010.

    Nationally, immigrants are responsible for roughly a quarter of all high-tech start-ups. Asians, who constitute more than 40 percent of newcomers, now account for roughly 20 percent of tech workers, four times their percentage of the population.

    How much is this dynamism, which once blessed the Southland, is now heading to Houston, Dallas-Fort Worth or even Charlotte, N.C.? It seems likely that, without the economic push from the immigrants and their countries, the reinvention of our economy will be far slower. Southern California natives seem far less likely to take the risks, and create the new industries, the region desperately needs.

    Regaining our allure to newcomers is now arguably our biggest challenge. We have some fine assets, such as great weather, universities and a strong entrepreneurial legacy. Critically, despite the stagnant past decade, the Los Angeles-Orange County region still remains the second-largest repository of immigrants, at 4.4 million, behind only the greater New York area’s 5.5 million. Virtually any ethnic group can find schools, shops and banks tied to their home countries; for some, like Chinese, Vietnamese, Mexicans and Iranians, Southern California remains a critical ethnic bastion and beacon.

    Shift Focus

    In this process, immigration reform could prove helpful, although most attention has been paid to legalizing undocumented immigrants already in the country. This may well be justified on moral ground but, in some ways, that debate is fighting the last war, as the flow of illegal immigration from Mexico has slowed, and may even be reversing. Legal immigration from Mexico also has declined markedly in recent years.

    A far more strategic concern would be easing the flow of Asian immigrants, who, according to a recent Pew study, are generally better educated and affluent than other newcomers. Asian immigrants are also more likely to start business; a 2012 Kauffman study notes that close to 40 percent of immigrant entrepreneurs come from India or China. We should be looking to capture all such skilled and entrepreneurial newcomers, from any country and, hopefully, also from within this country.

    To accomplish this we need to convince prospective migrants that this region, for all its faults, deserves to become, once again, a preferred destination for ambitious outsiders. It’s a task that our local leaders, both in the business world and government, need to take seriously, rather than take comfort in the prospect of a more stable, and fundamentally stagnant, demographic future.

    Joel Kotkin is executive editor of NewGeography.com and a 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.

    Photo by telwink

  • Wall Street’s Hollow Boom: With Small Business And Startups Lagging, Job Recovery Unlikely

    On Wall Street, even as layoffs mount, the upper echelons are clinking champagne glasses for good reason. The stock market is hitting new highs, propelled largely by Bernanke dollars and strong corporate profits. Big financial institutions like Wells Fargo and JPMorgan have announced record profits.

    But on Main Street, for the most part, the mood is far more subdued. Big business may be flourishing, but small business is still in recession. The number of startup jobs per 1,000 Americans over the past four years fell a full 30% below the levels of the Bush and Clinton eras. The Ewing Marion Kauffman Foundation, a nonprofit that studies startups, estimates that the rate of new business formation in the U.S. has fallen to a record low. The number of startups in 2011 was lower than in 1994, when the economy was smaller, as was the workforce and population.

    According to the BLS, smaller firms accounted for two thirds of all net jobs added between 1992 and 2007, a figure much cited by small business advocates. (This is hotly disputed by labor-backed economists, who have traditionally downplayed entrepreneurial ventures since they are not amenable to organizing.)

    But whatever the actual percentages, the weakness of smaller, and particularly newer firms, is one key reason for our current, persistent job shortfall. This time around, as a recent Brookings study reveals, larger businesses came out of the recovery stronger, not their beleaguered smaller counterparts.

    Big businesses often drive the economy but newer, smaller ones, historically, have created the jobs. If the U.S. had come out of the recession maintaining the same rate of startup formation as in 2007, notes McKinsey, we would today have almost 2.5 million more jobs.

    The problem is that in many ways, the recession never ended for small business. The reductions in small business employment during the fourth quarter of 2008 and in 2009 were the largest ever recorded in the history of the National Federation of Independent Business data series. And now, as we enter the sixth year since the onset of the Great Recession, more than four years after the “recovery” officially began, small business remains in a largely defensive mode. Hiring and startup rates have been far less dynamic than in the aftermath of the downturns of 1976 and 1983.

    Since big companies largely have recovered, and government employment has grown, at least at the federal level, clearly the real problem lies with the poor performance of smaller, and most critically newer, firms. In the past, young businesses bailed out the economy and spurred innovation. Yet today fewer than 8% of U.S. companies are five years old or younger, down from between 12% and 13% in the early 1980s, another period following a deep recession.

    It’s difficult to predict a rapid turnaround. In sharp contrast to the Fed-inspired boomlet on Wall Street, Gallup polling has found that one in five small firms expect to drop their employee count, one in three expect to decrease capital spending and almost as many expect to be in more severe cash flow troubles by the end of the year.

    Why is this small business recession persisting? The causes are diverse. Certainly the prospect of Obamacare scares some smaller firms, who lack the resources of larger companies to deal with the new health regime. This is leading some to reduce full-time staff to avoid new mandates. In states such as California, New York, Massachusetts, Minnesota and Illinois, higher taxes on incomes directly threatens the cash flow of smaller firms.

    Another source of trouble could be the decline of community banks, which traditionally have focused on smaller businesses. New regulations and Federal Reserve giveaways to “too big to fail” financial institutions have fostered an unprecedented concentration of financial assets in the hands of a few banks. In 2013 the top four banks controlled over 40% of the credit markets in the top 10 states, up 10% from 2009 and roughly twice their share in 2000. At the same time, since the passage of Dodd-Frank, there are some 330 fewer small banks. In the four years following June 2007, the volume of business loans under $1 million fell 13%.

    But perhaps most important has been the weak GDP growth that has kept consumer spending at a low level, a particularly rough condition for smaller, start-up businesses. A growing economy and marketplace is critical for newer firms; without a sustained economic expansion many will suffer or never even come into existence.

    Small business’ future is further obscured by political shifts. The Obama years have been golden for “crony” capitalists with good connections in Washington or in the various statehouses. As larger firms readjust to the realities of the Obama-Bernanke regime, they seem more willing to accommodate themselves, for example, to the new health care law, and also have better opportunities to feed off the federal trough; federal subsidies for renewable energy , for example, largely benefit bigger firms or well-heeled investors. Absent real tax reform, they also have less to fear from higher income taxes than smaller businesses, which are often sole proprietorships.

    The emerging alliance of the “bigs” — big business, government and labor — represents a return to a kind of dirigiste economy not well suited to smaller firms. Former Clinton Administration advisor Bill Galston openly urges Democrats to cement what he considers a a natural alliance with larger firms, including the financial industry, while denouncing small business lobbies as “a building-block of the Republican base.”

    In the long run, this new corporatism threatens not only small business — less able to lobby for itself and adjust to regulations than giant firms – it also also represents something of a threat to the very justification for a capitalist economy. Today large banks and big companies have public approval ratings down around 20%, according to Gallup. In contrast, small business has retained positive ratings of over 60%, as it has for decades. Another survey, conducted by Frank Magid and Associates, found large businesses approaching “the netherworld” inhabited by Congress — almost two-to-one unfavorable. Wall Street fared even worse. Small business, in contrast, was viewed positively 10 times as much as unfavorably.

    This is not just entrepreneurial romanticism. The notion of reasonably widespread entrepreneurial opportunity underpins basic faith in the free-market system. Small enterprises, and expanded business ownership, justify capitalism by showing it is still open to competition, and that anyone, however humble, can participate and gain from the system. “Wherever there is small business and freedom of trade,” noted V.I. Lenin, founder of the Soviet Union, “capitalism appears.”

    Without the innovative and job-creating potential of new small businesses, capitalism devolves into a fixed game dominated by big money and insider influence, as long portrayed by socialists, before Lenin and since. And, if the economic picture does not change soon, they will have been proven right, at least about that.

    Joel Kotkin is executive editor of NewGeography.com and a 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.com.

    Wall Street photo by flickr user Manu_H.

  • Should California Governor Jerry Brown Take a Victory Lap?

    "Memento Mori" – "Remember your mortality" – was whispered into the ears of Roman generals as they celebrated their great military triumphs. Someone should be whispering something similar in the ear of Gov. Jerry Brown, who has been quick to celebrate his tax and budget "triumph" and to denounce as "declinists" those who threaten to rain on the gubernatorial parade.

    Brown speaks about California’s "rendezvous with destiny" and the state’s "special destiny… more vibrant and more stunning in its boldness." His pitch certainly has persuaded much of the mainstream media to add their horns to the triumph.

    Yet right now, despite its many blessings, our state remains more on a collision course with mediocrity – at best– than with any such manifest destiny. California may not be a "death-spiral state" as some conservatives suggest, but Brown’s triumphs – the Proposition 30 tax increases, the marginalization of the GOP as well as his Democratic rivals – have been more political than substantial and have done little to address the state’s major long-term challenges.

    Let’s check this out. Unemployment remains the third-highest among the states; we still have one-third of the nation’s welfare recipients; the highest poverty rate in the country, with one in five of California’s diminishing ranks of children living in poverty, including more than a third of children in Fresno. Our education system, with new dollars or not, continues to fail young people and our economy.

    Critically, the three key elements typically invoked to promote the comeback meme – budget relief, the genius of Silicon Valley alchemists and "green" jobs – are themselves suspect. Even Brown, who suggested that we could create 500,000 jobs from his climate change agenda, isn’t speaking much about it. In California, and across the nation, "green jobs" have failed to materialize enough to offset the higher costs imposed on the rest of the economy, the high public subsidies and parade of failed ventures associated with these policies.

    Yet, Brown is so dogmatically loyal to this agenda that he remains committed to massive regulation of the economy, which is slowing growth. And he shows – despite his occasional bouts of fiscal sanity – no signs of backing away from his financially troubled bullet-train fantasy.

    If green economics are failing, can Silicon Valley bail out the state? Reporters anxious to celebrate our deep-blue state’s comeback almost always genuflect to the tech industry. They rarely bother to look at the fact that, even with considerable growth in the tech sector over the past two years, the valley has not even recovered the job levels of a decade ago.

    More troubling still, Silicon Valley is becoming less an exemplar of capitalism than the beneficiary of an insider game that relies on access to capital and contacts more than on innovation. It is also becoming increasingly dependent on government largesse: No one bet more on subsidized "green" companies than the venture-capital elite. Prospects are also dimming for social media, the valley’s latest signature industry. User interest in Facebook is slipping, notes Pew, and the industry now sees its next great opportunity, of all socially worthless things, in online gambling.

    Even under the best of circumstances, Silicon Valley is neither robust enough nor predisposed to help solve the state’s long-term fiscal challenges. In fact, the high-tech darlings of the progressives, such as Google and Apple, are turning out to be as adept in not paying taxes as are Mitt Romney or General Electric. For its part, Facebook now appears to have paid no income taxes at all last year.

    In fact, the only thing bailing out California is not growing tech firms, but the enormous legacy of wealth, including inherited wealth, that has built up in our state over the past 30 years. California is still rich in rich people, whose stock and real estate holdings are gaining value. As long as Uncle Ben’s printing press hands out free money, California could collect enough in state income taxes to perhaps balance its annual budget for a spell.

    None of this places, to say the least, California on a firm footing. So at the risk of engendering some gubernatorial ire, here’s my memento mori suggestions for restoring California’s promise. This starts with the assumption that the elements of a true revival exist and that, if Brown would shed some of his dogma, he may end up deserving his current plaudits.

    • Get real on the budget.Asset bubbles may rescue the state from annual budget woes, but the state’s long-term prospects remain cloudy, due largely to mounting government employee pension costs. Attempts to revise the game for new employees are not sufficient to scale the state’s mounting "wall of debt"; Californians per capita now owe almost five times as much to Wall Street as residents of our chief rival, Texas. Analyst Joe Matthews suggests we need more drastic fixes, such as cutting off retirees’ health benefits after they reach Medicare age.

    • Redirect the climate-change jihad. California can keep leading in conservation but needs to adopt a more pragmatic people-friendly approach, such as by encouraging telecommuting and energy-saving technologies. In contrast, the current high-density housing diktats and ultra-expensive "green" energy will force up prices for housing and electricity rates way out of proportion to national norms. This damages the middle and working class even if it won’t impinge on the lifestyles of Brown’s rich and famous friends.

    • Focus on basic industry. Tech and entertainment can never drive enough jobs or wealth to support this huge state. But California is blessed with the country’s richest soil and huge fossil-fuel reserves. These could bring in new revenue to the state and create new jobs for a broad number of Californians, particularly in the hard-pressed interior. Particularly critical is the state of the water system, which once again faces large cutbacks because of pressure from environmentalists. Brown has spoken in favor of a peripheral canal; solving the water problem may leave him with a greater legacy than the dodgy bullet train.

    • Reform the education system. More money alone won’t save the schools, but may be used only to prop up the pensions of teachers and administrators. Some kind of radical reform – perhaps school choice, vouchers, mass use of charters – must be the price of any increase in money to education. Brown has made some reformist noises with the University of California, but he remains tethered to the teachers unions on K-12 schools.

    • Invest in economically needed infrastructure. Besides the peripheral canal, Brown should look at expanding the state’s energy supply by permitting the construction of low-polluting, economically efficient gas-fired power plants. Rather than waste money on a "train to nowhere," he should be looking at fixing roads, bridges, ports – the sinews of a modern economy – and improving existing inter-city trains (and buses), particularly in high-volume corridors in the Bay Area/Sacramento and across Southern California.

    • Prioritize blue-collar opportunities. California’s greatest challenges lie with a widening class divide. Bolstering manufacturing, which is in a secular decline here, and restarting construction could create new opportunities for blue-collar workers. Port expansion would create lots of jobs in everything from warehousing to assembly and business services. This can be meshed with revitalized training programs for the skilled trades. In simple terms: California needs more skilled machinists, electricians and irrigation technicians and likely fewer marginally employable ethnic-studies or humanities grads from second- and third-tier schools.

    One can understand why our governor, at age 74, wants to enjoy his triumph. But to deserve the laurel wreath, he first needs to make the major changes that can bring this greatest of states back to its historic potential.

    Joel Kotkin is executive editor of NewGeography.com and a 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.

    Jerry Brown photo by Bigstock.

  • The Real Winners Of The Global Economy: The Material Boys

    Something strange happened on the road to our much-celebrated post-industrial utopia. The real winners of the global economy have turned out to be not the creative types or the data junkies, but the material boys: countries, states and companies that have perfected the art of physical production in agriculture, energy and, remarkably, manufacturing.

    The strongest economies of the high-income world (Norway, Canada, Australia, some Persian Gulf countries) produce oil and gas, coal, industrial minerals or food for the expanding global marketplace. The greatest success story, China, has based its rise largely on manufacturing. Brazil has been powered by a trifecta of higher energy production, a strong industrial sector and the highest volume of agricultural exports after the United States.

    Things are really looking up for the material boys here in North America. Over the past decade, the strongest regional economies (as measured by GDP, job and wage growth) have overwhelmingly been those that produces material goods. This includes large swaths of the Great Plains, the Gulf Coast and the Intermountain West, three regions that, as I point out in a recent Manhattan Institute study, have withstood the great recession far better than the rest of the country.

    Today virtually all the “material boy” states now boast unemployment well below the national average; the lowest are the Dakotas, Wyoming and Nebraska. Texas, the biggest of the U.S. material boys, boasts an unemployment rate around 6%, well below California (nearly 10%) and New York (8%). One key reason: While Texas has created over 180,000 generally well-paid energy jobs over the past decade, California, with abundant energy reserves, has generated barely one-tenth as many. New York, despite ample potential in impoverished upstate areas, largely has disdained developing its energy sector.

    These realities contrast greatly with the conventional wisdom that with the rise of the information age, the application of “brains” to abstract concepts, images and media would come to trump the “brawn” of producers, a thesis advanced influentially in 1973 by Daniel Bell in The Coming of Post Industrial Society. More recently Thomas Friedman has cited the East Asian countries such as Taiwan and Japan as suggesting that a lack of natural resources actually sparks innovation and economic health, while too great a concentration generally hinders progress.

    So how is it that the rubes, with their grease-stained hands, reeking of the smell of manure or chemical fertilizers, have outperformed the darlings of the information age? The answer lies largely in the forces that are reshaping the world. This includes, most portentously, rising demand for fuel, food and fiber in developing countries, notably in East Asia and Latin America.

    In the past commodity-based economies suffered frequent cyclical recessions whenever a handful of wealthy consuming countries — the EU, Japan and North America — experienced a recession or slow growth. Now a set of new consumers are fuelling strong demand even when high-income countries tank; this is keeping prices up far more reliably than in the past. Of course, a major global economic catastrophe, or some new breakthrough in energy or agricultural technology, could bring prices down precipitously, but for the most part demographic trends seem likely to favor commodity producers over the coming decade or two.

    Arguably the biggest surprise has been the United States’ strong advantages in the resource race. America has a far richer endowment of raw materials than its primary competitors, including the European Union, India, China and Japan. Only the Russian Federation is equally well-endowed: The Siberian periphery that was first conquered in the great period of Russian expansion between the 16th and mid-19th centuries remains one of the greatest resource regions on the planet and the base of that country’s economy.

    Agriculture is perhaps the least appreciated of the new drivers of the U.S. economy. Farm exports have been surging; in 2011 the U.S. exported a record $135 billion worth of agricultural goods, with a net favorable balance of $47 billion, the highest in nominal dollars since the 1980s.What accounts for this boom? One key driver is China, which consumes almost 60% of the world’s soybean exports and 40% of its cotton.

    Perhaps even more transformative has been the energy boom, largely sparked by new technologies such as fracking and deepwater drilling. This has transformed the Great Plains alone into the world’s 14th largest oil producer, roughly on a par with Nigeria and Norway. Unless stopped by regulatory constraints, this expansion may only be in its infancy. We can expect large increases in production not only in North Dakota; Texas’ Eagle Ford shale oil is expected to quintuple its daily production by 2014 . New finds in the Wattenberg Field north of Denver alone could contain more than a billion barrels of recoverable oil and natural gas, essentially matching the huge Eagle Ford or the Bakken Field in western North Dakota. Another find, the Green River formation in Wyoming, could contain an astounding 1.4 trillion barrels of oil shale.

    The energy revolution already has been transformative in the material states. Between 2010 and 2011, according to an analysis by EMSI, all six of the fastest-growing job classifications were related to energy development. Since 2009 the industry, according to EMSI, has added some 430,000 jobs, with the largest share going to Texas, Oklahoma, and Pennsylvania.

    Perhaps even more important, the expansion of the energy sector is galvanizing manufacturing, hitherto the weakest link in the material boy economy. The energy boom could create more than a million industrial jobs nationwide over the decade both to supply the industry and as a result of lower energy costs, according to a recent PricewaterhouseCoopers study.This new industrial economy is already evident in those parts of the country embracing the energy revolution, notably Texas, Oklahoma, Louisiana, Pennsylvania, and Ohio.

    Some see the rise of the material boys as just another “bubble” soon to collapse. Derek Thompson at the Atlantic suggests that the North Dakota boom may have already crested. And to be sure, labor and infrastructure limits may slow the rate of growth compared to past years, but projections by JPMorgan Chase suggest that North Dakota will continue to enjoy GDP growth two to three times the national average for the next few years. And as for the labor shortages, help is also on the way; North Dakota now boasts the highest rate of domestic in-migration in the country.

    To be sure, the material boys will face real challenges in the years ahead. The need to train skilled blue-collar workers — something the country has neglected for generations — presents a major challenge in places like Louisiana and Texas, where education levels remain below the national average, as well as the more literate but less populous Dakotas. Infrastructure needs like pipelines and electrical transmission lines will become more evident as production increases.

    But even the most effete coastal denizens should appreciate what the rise of the “material boys” means for America’s future. The growth of basic industries also creates demand for high-end business services — everything from architects and investment bankers to data-miners, advertising, and public relations firms — concentrated in such places as San Francisco, Seattle, New York, and Boston.

    But clearly the biggest beneficiaries will be the cities of the commodity belt, starting with Houston, the epicenter of the energy industry, as well as Oklahoma City, Dallas-Ft. Worth, Omaha, Salt Lake City and Denver. Rapid growth is even evident in smaller places in the Dakotas such as Sioux Falls, Bismarck, and Fargo.

    Most importantly, the rise of the material boys expands the nation’s geography of opportunity in ways rarely imagined just a decade ago. It is a process that all Americans should appreciate and encourage.

    Joel Kotkin is executive editor of NewGeography.com and a 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.

    Welder photo by Bigstock.

  • The Age of Bernanke

    To many presidential idolaters, this era will be known as the Age of Obama. But, in reality, we live in what may best be called the Age of Bernanke. Essentially, Obamaism increasingly serves as a front for the big-money interests who benefit from the Federal Reserve’s largesse and interest rate policies; progressive rhetoric serves as the beard for royalist results.

    Overall, the impacts of ultralow interest rate, cash-machine policies of Fed Chairman Ben Bernanke trump everything else. The presidential stimulus was, at best, modestly effectively, and certainly did little to turn around the fortunes of most Americans or spark much economic growth. Unemployment remains stuck at around 8 percent and 8.5 million workers have exited the labor force.

    But the Bernanke policies have succeeded in reshaping the economic landscape in ways that, while good for the plutocracy and Wall Street, are not particularly positive for the vast majority of Americans.

    Economic Losers

    Many of the biggest losers in the Bernanke era are key Democratic constituencies, such as minorities and the young, who have seen their opportunities dim under the Bernanke regime. The cruelest cuts have been to the poor, whose numbers have surged by more than 2.6 million under a president who has promised relentlessly to reduce poverty.

    Things, of course, have not too great for the middle-age and middle-class – more of them now supporting both aging parents and underemployed children. Median income in America is down 8 percent from 2007, and dropping. Things, in reality, are not getting better for anyone but the most affluent.

    A particular loser has been small business. As we enter the sixth year since the onset of the Great Recession, and nearly four years after the "recovery" officially began, small business remains in a largely defensive mode. Critically, start-up rates are well below those than following previous downturns in 1976 and 1983. The number of startup jobs per 1000 – a key source of job growth in the past – over the past four years is down a full 30 percent from the Bush and Clinton eras. New firms – those five years or younger – now account for less than 8 percent of all companies, down from 12 percent to 13 percent in the early 1980s, another period following a deep recession.

    With demand and growth still weak, small business enters the new year with among the lowest expectations of any large economic sector. As Gallup points out, one in five small companies expects to lower its employee count, one in three expect to decrease capital spending and almost as many expect to be in more severe cash-flow troubles by the end of the year.

    This decline of small-business sentiment constitutes arguably the biggest reason for our poor job-creation numbers. If small business had come out of the recession maintaining just the rate of start-ups generated in 2007, notes McKinsey, the U.S. economy would today have almost 2.5 million more jobs than it does.

    Smaller Banks

    One source for this decline lies in the difficulties faced by smaller community banks, which tend to be those most likely to lend to entrepreneurial firms. Jeff Ball, chairman-elect of the California Bankers Association and founder of Whittier-based Friendly Hills Bank, suggests the Fed’s policies – as well as growing regulatory policies – has led to an unprecedented concentration of financial assets in the hands of a few large "too big to fail banks" while the number of smaller community banks has been shrinking.

    "Everywhere you turn there’s a ‘gotcha’ from the regulators," Ball notes. "The big banks can deal with the regulations far more easily than the community banks. And because some banks are perceived as ‘too big to fail,’ there’s easier access to credit, and they are perceived to be better to invest in."

    So, who have been the big winners in the Age of Bernanke? The very people who were supposed to be the bête noires of the age of Obama: the large financial institutions. In 2013, the top four banks controlled more than 40 percent of the credit markets in the top 10 states, up by 10 percent from 2009 and roughly twice their share in 2000. At the same time, since the passage of the Dodd-Frank financial regulations, there are some 330 fewer small banks. Under the current regime, the oligopolization of the credit markets will continue apace, as much, or even more, than if Mitt Romney had won the presidency.

    Higher Profits

    Under these circumstances, it’s not surprising that large financial institutions and hedge fund have enjoyed close-to-record profits under Obama. This fall, for example, Wells Fargo and JP Morgan announced record profit. And despite widespread condemnation their executives have continued to enjoy outsized compensation, often greater than under George W. President Bush.

    Unlike smaller firms, or the middle class, the big financial institutions have feasted like pigs at the trough, with the six largest banks borrowing almost a half-trillion dollars from Uncle Ben Bernanke’s printing press. While millions of Americans have lost homes and much of their net worth, there has been not a single high-level prosecution by the Obama administration of the grandees of the very financial giants at the heart of the mass misery.

    Even the nascent housing recovery – which could create wealth for the middle class – appears largely to be creating opportunities for wealthy investors. In California, as well as other hard-hit real estate markets, such as in Florida, Arizona and Nevada, private investors constitute a large portion of buyers. The big private-equity firm Blackstone recently announced plans to buy $100 million in homes every week.

    These wildly divergent results between the hoi polloi and the financial elites do not seem to bother our "organizer in chief," particularly with re-election behind him. Instead, the Bernanke regime seems to be cementing a strong alliance of convenience between the government sector – which needs low interest rates to keep funding itself – and those with the easiest access to cheap money.

    Some observers, such as former Clinton Administration advisor Bill Galston, suggest we could see the emergence of a closer political alliance between big business and the public sector interests. Democrats, he suggests, have a natural alliance with larger firms, not only in the financial industry, while small-business lobbies remain "a building-block of the Republican base."

    New Corporatism

    This new corporatism that is becoming an integral part of the supposedly middle-class oriented Democratic Party. Close Obama advisers, like disgraced investment banker and political fixer Steven Rattner, Obama’s czar for the auto bailout, justify collusional capitalism, both in China and in America’s "too big to fail" regime.

    The reality remains that, rhetoric aside, corporate cronyism remains at the core of this administration and, sadly, the once-proudly populist Democratic Party. After his confirmation, we can expect former Citigroup profiteer Jacob Lew to follow Treasury Secretary Timothy Geithner, working along with Bernanke, to make sure the big Wall Street firms continue to thrive – even if the rest of us don’t.

    All this is reminiscent of something out of the declining days of the Roman Empire. The masses get bread (food stamps) and circuses, with virtually all of Hollywood and much of the media ready to perform on cue. The majority, losers in the Bernanke economy, lack the will and, maybe, the attention span to realize what is happening to them.

    "The Roman people are dying and laughing," the fifth-century Christian writer Salvian wrote. Like America today, entertainment-mad Rome suffered from a declining middle class, mass poverty and domination by a few wealthy patricians, propped up by a compliant government. Unless Americans of both left and right wake up to reality, our civilization could suffer a similar inexorable decline in the Age or Bernanke.

    Joel Kotkin is executive editor of NewGeography.com and a 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.

  • America’s Growth Corridors: The Key to a National Revival – A New Report

    In the wake of the 2012 presidential election, some political commentators have written political obituaries of the "red" or conservative-leaning states, envisioning a brave new world dominated by fashionably blue bastions in the Northeast or California. But political fortunes are notoriously fickle, while economic trends tend to be more enduring.

    These trends point to a U.S. economic future dominated by four growth corridors that are generally less dense, more affordable, and markedly more conservative and pro-business: the Great Plains, the Intermountain West, the Third Coast (spanning the Gulf states from Texas to Florida), and the Southeastern industrial belt.

    Read or download the full report from the Manhattan Institute.

    Overall, these corridors account for 45% of the nation’s land mass and 30% of its population. Between 2001 and 2011, job growth in the Great Plains, the Intermountain West and the Third Coast was between 7% and 8%—nearly 10 times the job growth rate for the rest of the country. Only the Southeastern industrial belt tracked close to the national average.

    Historically, these regions were little more than resource colonies or low-wage labor sites for richer, more technically advanced areas. By promoting policies that encourage enterprise and spark economic growth, they’re catching up.

    Such policies have been pursued not only by Republicans but also by Democrats who don’t share their national party’s notion that business should serve as a cash cow to fund ever more expensive social-welfare, cultural or environmental programs. While California, Illinois, New York, Massachusetts and Minnesota have either enacted or pursued higher income taxes, many corridor states have no income taxes or are planning, like Kansas and Louisiana, to lower or even eliminate them.

    The result is that corridor states took 11 of the top 15 spots in Chief Executive magazine’s 2012 review of best state business climates. California, New York, Illinois and Massachusetts were at the bottom. The states of the old Confederacy boast 10 of the top 12 places for locating new plants, according to a recent 2012 study by Site Selection magazine.

    Energy, manufacturing and agriculture are playing a major role in the corridor states’ revival. The resurgence of fossil fuel–based energy, notably shale oil and natural gas, is especially important. Over the past decade, Texas alone has added 180,000 mostly high-paying energy-related jobs, Oklahoma another 40,000, and the Intermountain West well over 30,000. Energy-rich California, despite the nation’s third-highest unemployment rate, has created a mere 20,000 such jobs. In New York, meanwhile, Gov. Andrew Cuomo is still delaying a decision on hydraulic fracturing.

    Cheap U.S. natural gas has some envisioning the Mississippi River between New Orleans and Baton Rouge as an "American Ruhr." Much of this growth, notes Eric Smith, associate director of the Tulane Energy Institute, will be financed by German and other European firms that are reeling from electricity costs now three times higher than in places like Louisiana.

    Korean and Japanese firms are already swarming into South Carolina, Alabama and Tennessee. What the Boston Consulting Group calls a "reallocation of global manufacturing" is shifting production away from expensive East Asia and Europe and toward these lower-cost locales. The arrival of auto, steel and petrochemical plants—and, increasingly, the aerospace industry—reflects a critical shift for the Southeast, which historically depended on lower-wage industries such as textiles and furniture.

    Since 2000, the Intermountain West’s population has grown by 20%, the Third Coast’s by 14%, the long-depopulating Great Plains by over 14%, and the Southeast by 13%. Population in the rest of the U.S. has grown barely 7%. Last year, the largest net recipients of domestic migrants were Texas and Florida, which between them gained 150,000. The biggest losers? New York, New Jersey, Illinois and California.

    As a result, the corridors are home to most of America’s fastest-growing big cities, including Charlotte, Raleigh, Atlanta, Houston, Dallas, Salt Lake City, Oklahoma City and Denver. Critically for the economic and political future, the growth corridor seems particularly appealing to young families with children.

    Cities such as Raleigh, Charlotte, Austin, Dallas and Houston enjoy among the country’s fastest growth rates in the under-15 population. That demographic is on the wane in New York, Los Angeles, Chicago and San Francisco. Immigrants, too, flock to once-unfamiliar places like Nashville, Charlotte and Oklahoma City. Houston and Dallas already have more new immigrants per capita than Boston, Philadelphia, Seattle and Chicago.

    Coastal-city boosters suggest that what they lose in numbers they make up for in "quality" migration. "The Feet are moving south and west while the Brains are moving toward coastal cities," Derek Thompson wrote a few years ago in The Atlantic. Yet over the past decade, the number of people with bachelor’s degrees grew by a remarkable 50% in Austin and Charlotte and by over 30% in Tampa, Houston, Dallas and Atlanta—a far greater percentage growth rate than in San Francisco, Los Angeles, Chicago or New York.

    Raleigh, Austin, Denver and Salt Lake City have all become high-tech hubs. Charlotte is now the country’s second-largest financial center. Houston isn’t only the world’s energy capital but also boasts the world’s largest medical center and, along with Dallas, has become a major corporate and global transportation hub.

    The corridors’ growing success is a testament to the resiliency and adaptability of the American economy. It also challenges the established coastal states and cities to reconsider their current high-tax, high-regulation climates if they would like to join the growth party.

    Read or download the full report from the Manhattan Institute.

    Joel Kotkin is executive editor of NewGeography.com and a 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 first appeared in the Wall Street Journal.

  • In California, Don’t Bash the ‘Burbs

    For the past century, California, particularly Southern California, nurtured and invented the suburban dream. The sun-drenched single-family house, often with a pool, on a tree-lined street was an image lovingly projected by television and the movies. Places like the San Fernando Valley – actual home to the "Brady Bunch" and scores of other TV family sitcoms – became, in author Kevin Roderick’s phrase, "America’s suburb."

    This dream, even a modernized, multicultural version of it, now is passé to California’s governing class. Even in his first administration, 1975-83, Gov. Jerry Brown disdained suburbs, promoting a city-first, pro-density policy. His feelings hardened during eight years (1999-2007) as mayor of Oakland, a city that, since he left, has fallen on hard times, although it has been treated with some love recently in the blue media.

    As state attorney general (2007-11) Brown took advantage of the state’s 2006 climate change legislation to move against suburban growth everywhere from Pleasanton to San Bernardino. Now back as governor, he can give full rein to his determination to limit access to the old California dream, curbing suburbia and forcing more of us and, even more so our successors, into small apartments nearby bus and rail stops. His successor as attorney general, former San Francisco D.A. Kamala Harris, is, if anything, more theologically committed to curbing suburban growth.

    Sadly, much of the state’s development "community" has enlisted itself into the densification jihad. An influential recent report from the Urban Land Institute, for example, sees a "new California dream," which predicts huge growth in high-density development based on underlying demographic trends – like shifts in housing tastes among millennials or empty-nesters rushing to downtown condos.

    Yet it’s not enough for the planners, and their developer allies, to watch the market shift and take advantage of it. That would be both logical and justified. But the planning clerisy are not content to leave suburbia die; it must, instead, be cauterized and prevented, like some plague, from spreading.

    Ironically, it turns out that the "new California dream" is more widely shared by planners and rent-seeking developers than by the consuming public. During the past decade, when pro-density sentiment has supposedly building, some 80 percent of the new construction in the state was single-family, a rate slightly above the national average. Over time, Californians continue to buy single-family houses, mostly in the suburban and exurban periphery. They do it because they are like most Americans, roughly four of five of whom prefer single-family houses, preferably closer to work but, if that proves unaffordable, further out.

    This includes both working-class and upper middle-class markets. The more-affluent, including many largely Asian immigrants, have been willing to buy high-priced homes closer to employment centers in places like Irvine or Cupertino, near San Jose. Meanwhile, the less-affluent of all ethnicities continue to move further out, to places like the Inland Empire or the further reaches of the Bay Area. These peripheral areas have continued to represent the vast majority of growth in both greater Los Angeles and around the Bay Area.

    Meanwhile, some of the urban-centric residential construction now being put up will, as occurred in the housing bust, may be fashionable but, in some cases, not so profitable over time. Construction is being driven mostly by tax breaks, Uncle Ben’s essentially ultralow-interest money for wealthy investors and, in some cases, subsidies. Overall, the Wall Street Journal notes, the rental market is beginning to "lose steam," as people again start looking into buying homes. This may suggest that new speculative building in places like downtown Los Angeles – where there’s good evidence that rents and occupancy levels are, if anything, getting weaker – may end up in tears.

    To date, the anti-suburb jihad has been somewhat constrained by the recession and the collapse of the housing bubble about five years ago. But now that there’s an incipient housing recovery in parts of the state, including Orange County, the constraints could be problematical, particularly for younger buyers about to start a family or for people migrating into the state.

    The impact may be felt first in Silicon Valley and its environs. The planners now dominating the Bay Area want only highly dense bus-stop- or train-oriented development in the valley. Yet, notes real estate consultant John Burns, this does not reflect market realities marked by what they describe "as a resilient and ongoing preference for single-family homes."

    Even more fanciful, they are promoting high density in areas, far distant from current employment centers, in dreary locales like Newark, south of Oakland, claiming workers there will take public transit to jobs in the Valley. The belief among planners and some gullible developers that aging millennials will choose to live in high density, far from costly San Francisco or Palo Alto, and commute to work by transit is somewhat north of absurd; today, a bare 3 percent of workers in Silicon Valley get to work by transit, and downtown San Jose, the logical terminus of any transit strategy, is home to barely 26,000 of the region’s 860,000 workers.

    Some tech workers may put up with a few years of high rents and shared apartments in San Francisco or Palo Alto, but not many will want to live in expensive towers far from both Silicon Valley’s primary employers and the amenities of the big city. Apple’s plans for a new headquarters in Cupertino has drawn criticism from green-minded urbanists precisely because they rest on the sensible presumption that Apple’s workforce will remain largely suburban and car-oriented. One can also wonder the effect on the start-up culture when workers have been forced to live in places lacking the proverbial garage or extra bedroom that historically have nurtured new firms.

    More important still, forced densification, by denying single-family alternatives, is likely, and in some places, already is, spiking prices, which are up $85,000 in Silicon Valley in a year. This, over time, will force millennials, as they age, to look for other locales to meet their longtime aspirations. Generational chroniclers Morley Winograd and Mike Hais, in their surveys, have found more than twice as many millennials prefer suburbs over dense cities as their "ideal place to live." The vast majority of 18-to-34-year-olds do not want to spend their lives as apartment renters; a study by TD Bank found that 84 percent of them hope to own a home.

    Much the same can be said of Asian immigrants, who are now driving much of the new-home sales, particularly in desirable places like Orange County or Silicon Valley. Nationwide, over the past decade, the Asian population in suburbs grew by almost 2.8 million, or 53 percent, while the Asian population of core cities grew 770,000, 28 percent. In greater Los Angeles, there are now three times as many Asian suburbanites as their inner-city counterparts.

    If California is not willing to meet the needs of its own emerging middle class, there’s no doubt that other states, from Arizona and Texas to Tennessee – although not as fundamentally alluring – will be, and are already, more than happy to oblige.

    Rather than seeking to destroy our suburbs, California leaders should expend their energy figuring out how to make them better. Rather than some retro-1900s urbanist vision, they need to embrace the multipolarity of our urban agglomerations. They could look to preserve open space nearby, when possible, or cultivate natural areas, parks, walking and biking trails that would appeal to families as well as to singles.

    Instead of attempting to force employment into the center city, it would make more sense to expand home-based and dispersed work in order to cut down or eliminate commuting times. These moves would create both healthier suburbs and reduce carbon emissions without devastating the natural aspirations of most California families.

    Joel Kotkin is executive editor of NewGeography.com and a 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.

    Suburb photo by BigStockPhoto.com.

  • Why The Red States Will Profit Most From More U.S. Immigration

    In recent years, the debate over immigration has been portrayed in large part as a battle between immigrant-tolerant blue states and regions and their less welcoming red counterparts. Yet increasingly, it appears that red states in the interior and the south may actually have more to gain from liberalized immigration than many blue state bastions.

    Indeed an analysis of foreign born population by demographer Wendell Cox reveals that the fastest growth in the numbers of newcomers are actually in cities (metropolitan areas) not usually seen as immigrant hubs. The fastest growth in population of foreign born residents–more than doubling over the decade was #1 Nashville, a place more traditionally linked to country music than ethnic diversity. Today besides the Grand Old Opry, the city also boasts the nation’s largest Kurdish population, and a thriving “Little Kurdistan,” as well as growing Mexican, Somali and other immigrant enclaves.

    Other cities are equally surprising, including #2 Birmingham, AL; #3 Indianapolis, IN; #4 Louisville, KY and#5 Charlotte, NC, all of which doubled their foreign born population between 2000 and 2011. Right behind them are #6 Richmond,VA, #7 Raleigh,NC , #8 Orlando, Fl, #9 Jacksonville,Fl and #10 Columbus, OH. All these states either voted for Mitt Romney last year or have state governments under Republican control. None easily fit the impression of liberally minded immigrant attracting bastions from only a decade ago.

    Although the New York metropolitan area still has the greatest numeric growth in immigrants since 2000, a net gain of more than 600,000, there’s no question that the momentum lies with these fast growing immigrant hubs.The reasons are not too difficult to fathom. In the modern global economy, migrants represent the veritable “canaries in the coalmine”. They go to economic opportunities are often the greatest, which often means thriving places like Nashville, Raleigh, Charlotte, Columbus or #11 Austin, TX. Housing prices and business climate also seem to be a factor here; all these areas have lower home prices relative to income than many traditional immigrant hubs.

    As a result, many immigrants are moving from their traditional “comfort zone” cities with historical larger immigrant populations — New York, Los Angeles, San Francisco and Chicago — to generally faster growing, more affordable cities.

    This is drastically reshaping the demographic future of the country. Over the past decade the increase in foreign born residents accounted for 44% of the nation’s overall population growth rate. With the U.S. birthrate heading downwards, at least for now, immigration represents perhaps the one way regions can boost their populations and energize their economies. It may be America’s biggest hope  as well in keeping Social Security and Medicare from collapse.

    Ironically, even as they migrate elsewhere, immigrants also may prove particularly critical in some of our older cities. Newcomers have been vital to maintaining population growth or at least fending off stagnation. Los Angeles, Miami, New York, Chicago and San Francisco metros have maintained enough growth among the foreign born to keep going negative due to significant losses in net domestic migration. Yet even among biggest metros the biggest growth has been among lower-cost, until fairly recently largely native-born, regions such as Houston, Dallas-Fort Worth and Atlanta.

    The impact on these areas is likely to be profound over time. Urbanists like to speak about the “great inversion” of upper-class professionals to cities, but it’s really the immigrants who provide the demographic and economic momentum for our largest metros. This point may be missed because many times immigrants — unlike the much cherished (and much publicized) hip, cool, largely white professionals — often do not choose to live in the overpriced, crowded urban core (although some may have businesses there).

    Instead immigrants tend to cluster in the less dense, more affordable and spacious periphery, where their “American dream” of a single family house is often far more achievable. In Southern California, for example, decidedly exurban #25 San Bernardino Riverside added three times as many foreign born than long-time immigrant hub Los Angeles, despite having only one-third the total popoulation. Los Angeles actually recorded the smallest percentage growth in foreign born of any major U.S. metro.

    Over time, the immigrant impact may prove greatest in terms of economics. Immigrants, in a word, tend to be resilient, and opportunistic by nature. Although many immigrants and their offspring still lag behind economically, over time they appear to be integrating. Overall their rate of home ownership still lags that of native born Americans, but appears to have held up better since the recession.

    Nowhere is the impact greater than in the entrepreneurial sector. Between 1982 and 2007, the number of businesses owned by the primary immigrant groups, Asian Americans and Hispanics grew by 545% and 696% respectfully. In contrast businesses owned by whites grew by only 81%.

    Perhaps more important still, even in the midst of the recession, newcomers continued to form businesses at a record rate, even as those by native-born entrepreneurs declined. The immigrant share of all new businesses, notes Kauffman, more than doubled from from 13.4% in 1996 to 29.5% in 2010.

    Some emerging tech centers are particularly dependent on foreign born migration as evidenced by rapid growth in Raleigh, Austin and Columbus. Established tech centers like San Jose, San Francisco and Seattle also all have large foreign born populations. Overall immigrants are responsible for roughly a quarter of all high-tech start ups .

    Much of this can be attributed to Asians, who constitute over 40%of all newcomers andnow stand as the fastest growing immigrant group. They now account for roughly twenty percent of all tech workers, four times their percentage of the population.

    Yet these impacts will be felt well beyond the tech community. Professionals of all kinds are moving in record numbers from the riskier political environment and pollution of China, seeking places where they can use their skills most effectively. Immigrants also play an increasingly important role in such less tech oriented industries, from the garment, carpet and furniture industries as well as small scale retail enterprise.

    Newcomers also are playing a major role in the reviving housing market, particularly in places such as New York, Los Angeles, Miami, Phoenix and the Bay Area. A house that might seem outrageously overpriced to the average American family might seem rather a bargain if you are coming from Hong Kong, Beijing or Shanghai.

    It is likely that, if sensible reform is passed, these impacts will begin to extend to other parts of country — such as Cleveland, Milwaukee and Memphis — that still get very little new foreign immigration. Like Houston in the 1990s, these areas have affordable housing to attract newcomers and, with any resurgence of economic growth, could provide opportunities for up and coming immigrants. A decade ago, after all, who would have seen Nashville, the ultimate symbol of our country heritage, as a rising immigrant hub?

    Joel Kotkin is executive editor of NewGeography.com and a 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.

    Photo by telwink

  • U.S. Late to the Party on Latin America, Africa

    President Barack Obama’s proposed tilt of U.S. priorities toward the Pacific – and away from the historical link to Europe – represents one of the most encouraging aspects of his foreign policy. Although welcome, we should recognize that this shift comes about three decades too late and that it may miss the rising geopolitical centrality of sub-Saharan Africa and Latin America. The emergence of these longtime historically impoverished backwaters has been largely missed as American policy-makers and businesses are now obsessed with the challenges and opportunities posed by the emergence of China and, to a lesser extent, India. Sub-Saharan Africa, for example, over the past decade has produced six of the world’s 10 fastest-growing economies. Through 2011-15, according to the International Monetary Fund, seven of the fastest-growing countries will be African, and Africa as a whole will surpass the slowing growth rates in Asia, particularly China.

    This growth has caused the region’s poverty rates, still unacceptably high, to fall from 56.5 percent in 1990 to 47 percent today. Further growth will likely push poverty levels down further.

    Outgrowing U.S.

    With 600 million people, including a middle class of some 400 million, Latin America represents one of the world’s great growth markets. Over the past two years the growth rate in Latin America has been twice – and more in some countries – that in the United States, Europe and Japan. Latin America’s unemployment rate is reaching historic lows. A decade ago, it was 11 percent. Today it is 6.5 percent, well below levels in the U.S. or Europe.

    As in Africa, growth has worked to reduce Latin America’s historic high rate of poverty by 17 percent since 1990. Overall, Latin America’s combined gross domestic product is already larger than that of Russia and India combined – larger, in fact, than any nation or region besides the U.S., the E.U. and China.

    Demographic trends are likely to accelerate this process. Rapidly aging populations in Europe, Japan and East Asia threaten both workforce growth and fiscal stability. Today, people at least age 60 account for 13 percent of the population in China, 15 percent in east Asia, 32 percent in Japan and 22 percent in Europe, but barely one in 10 residents in Latin America; only 6 percent of Africa’s population is made up of seniors. By 2050, one-third of people in east Asia, Europe and China will be over 60, while Japan will pass 40 percent. In contrast, Latin America’s over-60 population will be 20 percent, and Africa’s half that.

    Indeed, over the next decade, Africa is slated to add more people than all of Asia, while Latin America’s growth will far exceed that of Europe, East Asia or North America. A surprising percentage of the residents in these regions will be middle class. From 2000-14, according to a McKinsey survey, the number of African households with annual incomes of at least $5,000 will grow from roughly 59 million to well over 106 million. Africa already has more middle-class households (defined as those with incomes of at least $20,000) than India.

    This demographic vibrancy is helping spark industrial growth, both for export and domestic consumption. Latin American countries, led by Brazil, have emerged as industrial centers while Mexico is rapidly replacing China as the preferred foreign manufacturing platform for American firms hailing from California to Texas. Manufacturing growth – particularly in textile and garments – has also begun to grow in parts of sub-Saharan Africa, following in many ways the patterns earlier seen in Japan, China, Southeast Asia and Bangladesh.

    Hunt for Resources

    But much of the importance of these regions lies with their enormous natural resources.

    Conventional wisdom in our chattering classes holds that, in the "information age," raw materials no longer represent an advantage for economic growth. Yet as the world’s population grows, and its middle class expands, there seems to be a cascading demand for raw materials, either for direct consumption or for use in manufactured goods. Energy consumption itself, according to the International Energy Agency, could rise as much as 50 percent by 2030, with more than 84 percent of that increase coming from fossil fuels.

    Increasingly the competition over Latin America and Africa reflects something of a reprise of what was once seen as "the great game," where European colonial powers struggled for control of resources and land masses in regions as diverse as Central Asia, Africa, South America and the Middle East. Today, this struggle includes many more protagonists, including Japan, Korea and, most powerfully, China, all of whom are targeting investments in the continent.

    One result has been growing interest in Africa, where foreign direct-investment projects grew by 27 percent in 2011 alone. American companies like Wal-mart and Google are expanding there, but much of the big investment comes from China. China’s former vice-minister of commerce, Wei Jianguo, recently told China Daily that Africa eventually will surpass the U.S. and the E.U. to become China’s largest trading partner. Last year, Latin America reaped a record $145 billion in FDI, an increasing share from China.

    Resource-hungry China has reason to focus on Africa and Latin America, which hold much of the world’s diminishing supply of not-yet-developed farmland, as well as tremendous reserves of precious minerals and energy. Africa, by current accounts, possesses 10 percent of the world’s reserves of oil, 40 percent of its gold, and 80 percent to 90 percent of the chromium and the platinum metal group.

    These supplies, notes a recent McKinsey report, may be grossly undercounted, since much of the continent has not been thoroughly explored. But, to date, Africa has a proven stock of $13 trillion to $14.5 trillion worth of energy resources (oil, coal, gas, uranium); South Africa alone is estimated to have $2.5 trillion in mineral wealth.

    Latin America, too, enjoys ample natural resources, to go with its rapidly developing industrial sector. Brazil is the world’s third-leading food exporter, and other Latin countries, such as Chile and Mexico, have been emerging as major producers of commodities.

    Latin America also seems well-positioned to benefit from the shift of world energy production from the Middle East and Russia to the Americas. Brazil has already made large strides in offshore oil development; possible future offshore oil finds in Mexico and Cuba create an energy boom through the entire Caribbean Basin.

    U.S. Needs to Shift

    Clearly, the rise of these two regions signals that we need to adjust our foreign policy priorities. American business is already becoming more engaged with these two continents; over the past decade trade growth there has more than tripled, compared with a doubling of trade with Asia and Europe. We need to move not only beyond our old strategic ties with Europe, and embroilment with the volatile Middle East, and look to engage in the places where our primary rivals, notably China, already see the future of the world economy.

    Will America, finally awakening from its European slumbers and no-win Middle Eastern involvements, get with the new program? It took three decades for the foreign policy establishment to acknowledge the reality of the Pacific era. Hopefully it won’t take nearly as long to acknowledge the growing influence of both our southern neighbors and emergent powerhouse that is Africa.

    Joel Kotkin is executive editor of NewGeography.com and a 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.

    World image by BigStockPhoto.com.